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Mortgage REIT Insider: Agencies Ascending

Perhaps the only subsector of the mortgage REIT universe to bring any holiday cheer, the agency-backed mortgage REITs had plenty to be thankful for this past week -- especially the Federal Reserve’s initative to buy $500 million in agency-backed MBS. That announcement sent the agency mREITs higher, led by resurgent April IPO Hatteras Financial (HTS). Hatteras declared a $1.00/share fourth quarter dividend, which CEO Michael Hough called “satisfying,” especially in light of the considerable increase in LIBOR rates that Hatteras experienced early in the quarter. Despite being a nickel lower than the previous dividend, the fat payout sets the bar pretty high for the other players in the field, who have yet to declare their dividend payments for the fourth quarter. Few survivors for FBR conference This week marked the annual FBR Capital Markets Fall Investor Conference, normally a raucous REIT road show in classic Eric Billings style. This year, however, big colorful charts with ever-growing dividends were replaced with liquidity tables and complex covenant calculations. Despite the few festivities for Fall Investors, Cohen-controlled companies RAIT Financial Trust (RAS) and Resource Capital Corp. (RSO) were joined by NorthStar Realty Finance (NRF) and Anthracite Capital (AHR) in presenting at the conference. Falling from grace If the pace of delistings continues, I’m going to turn this column into a Big Board graveyard. As you read Wednesday, embattled Thornburg Mortgage lost its listing despite a 1 for 10 reverse split back in late September. The massive dilution of the common equity was too much for the stock price to bear. Hard to believe that Thornburg was nearly back on its feet this time last year, having reinstated its common dividend and having funded its jumbo loan pipeline again. Thornburg is joined on the pink sheets by fellow REIT Crystal River Capital, which also failed to meet the market capitalization requirements for listing. Crystal River came public in July 2006, one of the last commercial mortgage REITs to do so before the tide fully turned against specialty finance companies. 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 RAS and held no other positions in any of the stocks mentioned when this story was published. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.

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