Mortgage REIT Insider: Betting on a Bottom?

The holiday week was largely quiet for the mortgage REIT sector, but a few noteworthy items managed to surface here and there.

Annaly Capital (NLY: 15.18 +0.60%) seems to be calling a bottom in the real estate market. The Wall Street Journal reported that NLY is looking to expand into the commercial-property debt market, through its wholly-owned investment advisory unit, Fixed Income Discount Advisory Company (“FIDAC”). Led by TIAA-CREF’s former CMBS chief, Kevin Riordan, FIDAC is exploring raising capital to invest in debt used to finance office towers, shopping malls, hotels and other types of commercial property. No word yet on how much capital FIDAC is looking to raise.

Meanwhile, another Annaly-sponsored venture, Chimera Investment Corporation (CIM: 3.31 +1.22%) filed a $750 million mixed shelf on Christmas Eve, its third offering in just over a year as a public company. The proceeds of the offering, when completed, are expected to be used for non-agency RMBS, agency RMBS, prime and Alt-A mortgage loans, CMBS, CDOs and other consumer or non-consumer ABS — in other words, just about anything that can be packaged up and sold off.

Chimera shares were recently changing hands at $3.10/share, well below their $19.79 52-week high.

More dividend winners & sinners

Continuing last week’s trend of year-end dividend declarations, the mortgage REITs brought a combination of surprises and disappointments in declaring their fourth-quarter dividends. American Capital Agency (AGNC: 21.88 +1.67%) was the clear winner, declaring a fourth-quarter dividend of $1.20/share, a 20 percent increase. AGNC continued to benefit from a 100 percent investment in fixed-rate assets. The company was joined on the winners’ side by fellow agency investor Anworth Mortgage (ANH: 7.26 +1.26%), which nudged its quarterly payout up a penny to $0.26/share.

On the losing side were Newcastle Investment Trust (NCT: 0.56 +1.82%), Ashford Hospitality Trust (AHT: 2.61 +3.57%) and the aforementioned Chimera. Chimera slashed its common dividend by 75%, from $0.16/share to just $0.04/share. Meanwhile, Ashford completely suspended its common dividend, warning that it would make only the minimum required REIT distribution for 2009 – and that wouldn’t even come until the end of the year.

Newcastle’s situation appeared even more serious — NCT suspended both its common and preferred dividends to retain capital and pay down debt. The failure to pay the preferred dividend sent shares of Newcastle tumbling back below the $1.00/mark, putting its NYSE listing at risk.

Editor’s note: Patrick Harden is a Certified Public Accountant with three years of experience in auditing publicly-traded real estate investment trusts. For the past few years, he has been involved in the mortgage finance industry as a member of the financial reporting group at a publicly-traded mortgage bank. His column covering mortgage REITs runs every Friday.

Disclosure: The author was long shares of NCT and held no positions in any of the other stocks mentioned when this story was published. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.