Annaly Capital Management (NLY) declared its bid to buy CreXus Investment (CXS), a commercial mortgage investor, to change-up its capital allocation strategy.
The real estate investment trust giant plans to buy the remaing CreXus shares it does not already own for $838.8 million in a soft takeover.
The REIT is willing to allocate up to 25% of shareholders equity to other investments. The proposed acquisition of CreXus is a way for Annaly to focus on real estate assets rather than mortgage-backed securities investments.
“Since our inception in 1997, Annaly has maintained the capacity to diversify its asset base to include real estate related assets in addition to Agency mortgage-backed securities if we determined that compelling other long-term investment opportunities exist relative to the Agency market,” said chairman and chief executive officer Wellington Denahan.
He added, “We believe that wholly owning the commercial real estate platform we currently manage through [Annaly subsidiary] FIDAC is complementary to our existing business and return profile and should provide stable and diversified risk-adjusted returns to our shareholders.”
Over the past year, the allocation strategy has consisted of expanding the duration of borrowings from 127 days to 220 days, repurchasing $447.1 million of convertible notes to restructure capital, announcing up to $1.5 billion in a common stock repurchase program and issuing $1.5 billion of preferred equity to lower capital cost.
