Banking & Finance

PIMCO Close to Mortgage REIT Market IPO (PIMR, IVR, NLY, CIM)

PIMCO is about to compete as a real estate investment trust in the world of mortgage REITs.  It only makes sense considering that PIMCO is in the group of fund managers that get first look on any sort of fixed income securities it wants to.  The fund management group is going to have an offering called PIMCO REIT, Inc. and it has applied to list its common stock on the New York Stock Exchange under the “PIMR” ticker.  In short, PIMCO is going to be among the mortgage REIT players such as Invesco Mortgage Capital Inc. (NYSE: IVR), Annaly Capital Management, Inc. (NYSE: NLY), Chimera Investment Corporation (NYSE: CIM), and others.

The PIMCO REIT, Inc. has filed its third amended S-1 with the SEC, meaning it is very close to coming public as long as market conditions hold up.  It has tapped J.P.Morgan, Goldman Sachs, and Credit Suisse to conduct the underwriting.  Terms are still not set in stone but the offering is for up to $600 million.

The target assets to be purchased ar as follows: Agency MBS, Non-Agency RMBS, CMBS, residential and commercial real estate loans, other commercial real estate debt, residential and commercial real estate and other real estate-related assets.

Invesco Mortgage Capital Inc. (NYSE: IVR) recently sold 17 million shares in a secondary offering of its common stock at a public price of $20.15 per share. It recently traded at $20.97 and its market cap is roughly $1.5 billion per Yahoo! Finance data.

Annaly Capital Management, Inc. (NYSE: NLY) is the one we have branded as “the safest of high-yield mortgage REITs” and it has a market capitalization of more than $14 billion.  Chimera Investment Corporation (NYSE: CIM) is the one we have dubbed as “Annaly’s mortgage vulture REIT” and while it has had very mixed performance and may have “vultured” a bit too early it still has a market cap of over $3.5 billion.

What draws investors to Mortgage-REITs is the above-market dividend yields.  Chimera, Annaly, and Invesco Mortgage Capital all sport double-digit dividend yields.  Investors understand what can happen here.  When rates rise, or if bad mortgage bets are made, or if market conditions in the mortgage market worsen… Suddenly those dividends can dry up and the funds can have real losses.  That can be magnified because of leverage.

As of December 31, 2010, PIMCO managed total assets of more than $1.2 trillion.  It listed securitized holdings of over $372.1 billion, out of which $46.9 billion were in dedicated mortgage and real estate-related strategies. As of December 31, 2010, PIMCO’s mortgage-related assets under management consisted of $268.6 billion in Agency MBS and $81.6 billion in mortgage credit holdings such as Non-Agency RMBS and CMBS.

PIMCO REIT, Inc.’s full amended filing is here.


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