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Annaly Capital Management, Inc. Message Board

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  • jforuus jforuus Dec 27, 2011 9:24 PM Flag

    NLY and AGNC

    MY parting words is that don't take my word or his word.

    To help you with the slipper slope leverage rides on: The following is for Apartment REITS yet it illustrates it quite well.

    Read pg. 18 at least and 16 thru 17.

    Knowledge is power, don't be confused by other and if you are then walk AWAY from the deal. Otherwise you will be the weak hand that is selling when you should be buying.

    "On the other hand if property assets are financed by debt there is no direct effect. Only the indirect
    effect through FFO applies. Since on average a dollar of property assets financed by debt adds only
    $0.0075 to FFO (i.e., 1/10 the effect of equity on FFO), this indirect effect adds only about $0.02 to the
    shareholder value per dollar of assets financed by debt. This is an average effect, and it is economically
    very small. The implication is that it takes only slight changes in the characteristics of a REIT to make the
    impact of debt-financed acquisitions on shareholder value negative. In particular, if a REIT is smaller,
    less focused or not an apartment REIT, the marginal G&A expense will be higher and FFO correspondingly
    lower. If the REIT is more levered and less focused by property type, marginal interest costs will be
    higher. Again, debt will be more likely to have a negative impact on shareholder value."

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