REIT Wrecks » DX http://gdmig-reitwrecks.com High Yield REITs And Commercial Real Estate Thu, 28 Apr 2016 02:18:47 +0000 en-US hourly 1 https://wordpress.org/?v=4.2.30 Dynex Looks Like a Mortgage REIT That’s Built to Last http://gdmig-reitwrecks.com/2009/08/mortgage-reit-built-to-last-dynex.html http://gdmig-reitwrecks.com/2009/08/mortgage-reit-built-to-last-dynex.html#comments Mon, 10 Aug 2009 08:19:00 +0000 http://reitwrecks.com/wordpress/?p=300

Dynex Capital Inc. is a rather small US-based Mortgage REIT that invests in securitized residential and commercial mortgage loans and non-agency MBS. Management has a significant stake in the common stock, so it shouldn’t be surprising that the company made almost no new investments in 2006 and 2007.

As of June 30, 2009, Dynex Capital had carrying assets of $245.1 million in non-Agency MBS, which was financed with $192.5 million in securitizations and short term debt repurchase agreements. Shareholders’ equity amounted to $52.6 million or 21.5% of the total portfolio.

The most recent quarter benefited from historically wide spreads, resulting from costs of funds that are near zero. “The story of this quarter is the performance of our Agency MBS investment portfolio. We earned a net interest spread of 3.70% on Agency MBS as our borrowing costs continued to decline. Our highly seasoned non-Agency investments continue to generate solid earnings and cashflow for the Company.” In the year earlier quarter the spread was much smaller, only 1.45%. The conditional prepayment rate (CPR) also decreased from 27.3% a year earlier to 19.9% during the last quarter.

Delinquencies on Dynex’s securitized mortgage loans increased from April to June of 2009 to $15.0 million from $9.1 million at December 31, 2008, but the company incurred no credit loss during the quarter.

Shareholder equity was $136.3 million during the quarter, or 20.2% of the $672.4 million of the commercial and single family loan collateral combined. During the summer of 2006 non-Agency portfolio leverage of equity capital was therefore about 5 times, essentially unchanged to the most recent quarter, despite the horrible conditions in CRE.

There will be more on Dynex here in the coming months. Mortgage REITs are not for the faint of heart, but this is definitely one worthy of additional time and research.

REIT Investments



]]> http://gdmig-reitwrecks.com/2009/08/mortgage-reit-built-to-last-dynex.html/feed 0 9 REITs That Had to be Destroyed in Order to be Saved http://gdmig-reitwrecks.com/2009/06/9-reits-that-had-to-be-destroyed-in.html http://gdmig-reitwrecks.com/2009/06/9-reits-that-had-to-be-destroyed-in.html#comments Sat, 20 Jun 2009 19:18:00 +0000 http://reitwrecks.com/wordpress/?p=268

In 1968 at the height, so to speak, of the Vietnam War, U.S. Air Force Major Chet Brown was fresh out of ideas and common sense. Tired, frustrated and on the wrong end of a microphone after a battle for the provincial capital of Ben Tre, he famously allowed that it had become necessary to destroy the town in order to save it. Such is the logic surrounding 9 REIT stock offerings in the first half of 2009.

Undercapitalized and over-leveraged, many REITs had no choice but to enter into dilutive transactions in order to survive. But Like Ben Tre, these 9 REITs have been flattened by massively dilutive equity offerings, and nobody can predict when they will be able to meaningfully grow their dividends again.

Most of these “re-equitizations” were completed overnight within hours of being announced, which is no wonder as they were priced at a huge discount (over 10%) to the previous day’s close. Many of these REIT offerings more than doubled the amount of shares outstanding.

The decision to sell massive amounts of discounted stock at a time when rents are declining across the board is tantamount to destroying these REITs. Indeed, dividends were cut almost immediately after these offerings closed. While it’s unclear how the new shareholders felt about this little welcoming gift, what is clear is that these stock deals were hugely dilutive, and that will make it extremely difficult to show any meaningful dividend growth for at least the next several years:


NINE NOT SO GOOD REIT DEALS
REIT Name Increase In Shares Outstanding Dividend Cut News
Brandywine Realty Trust +34% -67% BDN
Cogdell Spencer +74% –51% CSA
Camden Living +13% -36% CPT
Duke Realty +40% -32% DRE
Kilroy Realty +27% -40% KRC
Kimco Realty +39% -86% KIM
Prologis +65% -40% PLD
Regency Centers +14% -36% REG
Weingarten Realty +30% -52% WRI

There are many good reasons to invest in REITs right now. REITs typically lead property markets into and out of recessions, and these successful equity offerings indicate that the market is anticipating a recovery. Nevertheless, these 9 REITs are best avoided in favor of others that have not had to conduct such radical recapitalizations.

Suggestions: the adventurous could take a look at Simon Property Group (SPG). SPG also just closed a large equity offering, but dividends were not cut and management said recently that SPG would resume paying all cash dividends in early 2010 (SPG is currently paying dividends in stock, click here for a complete list of REITs paying dividends in stock). SPG owns a portfolio quality assets in good locations, and they have cash to pick up more.

Apartment REITs will benefit from tighter single family lending standards, very favorable long-term demographic trends, and a precipitous drop in the construction of new apartment stock. Check out Mid-America Apartments (MAA), which will definitely be the best performing Apartment REIT for 2009. Equity Residential (EQR) is another Apartment REIT that reported solid Q1 earnings. The Fed’s plunge into CMBS via TALF is causing lots of intrigue in the Mortgage REIT world, particularly with Dynex (DX) which invests in both agency and non-agency RMBS and CMBS. Data: Piping Rock Partners

REIT Investments

Disclosures: None at the time of publication





]]> http://gdmig-reitwrecks.com/2009/06/9-reits-that-had-to-be-destroyed-in.html/feed 2 REITs Queuing Up To TALF Trough By the Dozen; Debt is the New Equity http://gdmig-reitwrecks.com/2009/06/reits-queuing-up-at-talf-trough-by.html http://gdmig-reitwrecks.com/2009/06/reits-queuing-up-at-talf-trough-by.html#comments Thu, 18 Jun 2009 23:59:00 +0000 http://reitwrecks.com/wordpress/?p=265

REITs cracked the capital markets code this quarter. What looked like one of the biggest incipient financial train wrecks since the Great Depression has turned into a scramble for REIT scrip of almost any stripe. The MSCI US REIT index is up 55% from it’s March lows, and $15 billion in credit lines have been issued and refinanced with equity faster than slum dog can phone a friend.

This is not be entirely surprising: REITs always lead the private market into and out of real estate recessions, but the alacrity of this recovery probably has champagne corks ready to fly at the Fed. While the Fed’s first deadline for issuers seeking TALF funds for CMBS passed this last Tuesday without any takers, all of this REIT stock activity has been in anticipation of REITs being able to borrow again, finally…even if it’s from a government-subsidized bailout fund.

Gushers of TALF cash cannot arrest the inevitable bust in commercial real estate prices, but government liquidity can and may already be averting massive, wholesale defaults in REITs and commercial real estate.

And that is the goal. William Dudley, president of the New York Fed, on June 4 underscored the importance of the CMBS TALF program, noting that a continued lack of funding would increase loan defaults and further pressure the capital positions of banks that are holders of commercial real estate assets. Reiterating this, Dudley said the CMBS roll-out is key for the overall success of the TALF program.

So it shouldn’t come as any surprise that the availability of TALF cash has creditworthy REITs scrambling to hock every last speck of unencumbered dirt in search of fresh liquidity, even if (ironically) it’s in the form of even more debt.

There are at least a dozen REITs working on TALF deals, including a number of Mortgage REITs ready to re-pledge AAA CMBS collateral. One such Mortgage REIT, Dynex Capital (DX) estimates that it can re-pledge existing AAA CMBS to the Fed through TALF and get a funding pickup of 800 bps in the process.

Developers Diversified Realty Corp. (DDR), an Ohio-based retail REIT, could be one of the first REITs to reliquify physical assets through TALF. According to the Cleveland Plain Dealer, DDR is working with Goldman Sachs and Citibank to prepare two groups of properties — each worth about $800 million — as collateral for new TALF loans.

The properties DDR has identified are either unencumbered or have near term debt maturities. The latter is obviously be a big, big problem for many highly-leveraged REITs, but the new TALF money now looks like it will alleviate at least some of that risk, as is intended.

Developers Diversified hopes to borrow about $300 million against each of these groups and use the money to repay unrelated debt and/or refinance existing mortgages. Simon Property Group (SPG), another retail REIT, is also in line. Either way you cut it, the ability to swap old debt for new debt makes new debt the new equity, and the first deal should close by early September.

REIT Investments





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