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Annaly Capital Management, Inc. Message Board

  • PHAGE1998_99 PHAGE1998_99 Feb 21, 1999 11:42 PM Flag

    REITS/ Mortgage Reits

    My own investment background is in income real
    estate. Last year, I got interested in the property
    owning REITS. After looking through a bunch of analyses
    and
    financial statements, I concluded that
    these companies
    were just to difficult
    for me to understand: they
    have been
    building and/or buying so much and
    have
    entered into so many complicated deals with so many
    different parties that I
    just kept losing track of the
    basics.
    I would rather approach these companies through a
    fund.

    The mortgage REITs, on the other hand,
    are
    very different business: they are basically engaged in
    working simple interest spreads under enormous
    leverage.
    In terms of their possiblilities and liabilities,
    they seem more like financial
    companies--for
    example--banks than anything else.

    As it happens, we will
    be selling out the
    bulk of our financial stocks
    this year, due to mergers. We need to find
    replacements to maintain good diversification, so the mortgage
    REIT article came along at the right
    time.

    (Don't get me wrong. There is nothing
    wrong with the
    property business at all.
    It seems strange to be buying
    interests
    in properties and projected properties so
    late in
    the cycle, when they have become
    so expensive; but
    what the hell do I know?)

    SortNewest  |  Oldest  |  Most Replied Expand all replies
    • We run MNRTA and UMH. Have for thirty years.
      Believe in REITS but not these reits you cant read the
      financials. A portfolio of properties and a long term outlook
      is what we like.We are investing in other reits
      because its a lot cheaper than buying properties. In 1988
      we took mnrta out of overvalued equities and into
      mortgages. In1991 we went back into equities.

      • 1 Reply to ecnerp
      • Had a look at those two REITS: interesting,
        especially the one with the 19% return
        on
        equity.

        Hey, but what do you think about Annaly?
        What
        happens to them if we get another sharp liquidity
        contraction? (How strong are they
        relative to other
        mortgage REITS?)

        Found another interesting wrinkle
        on the income
        hunt. The Liberty All Star Fund
        (USA) is now
        yielding something like 10.88. Right
        now, it
        is selling at larger-than-usual discount
        to
        its NAV. But, get this: a 10% payout is a matter of
        policy. If they don't make it for the year on NAV, they
        pay as a "return of
        capital," reducing your cost
        basis in the shares.

        I looked through a report
        from late last year.
        They have a good portfolio,
        similar to the
        S&P but not cap weighted. So, its
        probably
        overvalued but not so grossly as the index.

        Kind of
        an interesting idea--a way to take
        part in all
        this common stock craziness, while
        "hedged" by an
        above-average yield.

        I believe that the five-year total
        return has
        been around 19%. They periodically
        offer
        "warrants" for discounted share purchase that
        have given
        quite a kick to that average
        if
        exercised.

        Worth a look anyway.

    • Phage,
      I,too, became interested in the company
      after reading the Grant article. I am looking for some
      yield investments as I feel I have enough money in
      equities and too much cash.
      In doing some further
      research on the company I found that NLY has a web site at
      www.analy.com - you might check it out. Since you are in a
      related business, any further comments you have regarding
      NLY would be appreciated.

      • 1 Reply to JakSiemas
      • I was wondering if they had a site but didn't see
        anything on Yahoo.

        As to being in a related
        business, I don't
        know. I was a small landlord and, at
        one
        time, an employee of larger landlords.
        Even so, the
        residential REITS left me scratching my head: they're
        functioning
        on a whole different level of
        complexity.

        Like I said, NLY is a whole different type of
        business--exclusively paper. If you
        look at the design of the
        business and
        at the kinds of people who were selling
        it
        last summer, you get the picture of something that is
        bound to be volatile.
        (If someone sees this
        differently, I wish
        they would say why.)

        If you can
        live with the ups-and-downs of
        the share price, you
        get a relatively
        attractive return with a
        relatively high
        degree of certainty. (The market value
        of
        the stock is inconsequential, so long as
        you
        aren't under pressure to sell.)

        As long as NLY
        can survive and prosper, this situation ought to
        remain about the
        same. You could buy this stock on
        high
        yields for years and sell whenever it's
        bid up by
        large investors.

        Want to see a bizarre and
        somewhat similar
        situation? Take a look at Great
        Northern
        Iron, an income producing property trust.
        The trust
        goes out of existence at some
        point in the
        not-too-distant future, so
        it may not be a good investment;
        but large
        investors, Mario Gabelli for one, were
        moving in and out of this stock for years.

        These
        guys tend to think in terms of relative opportunity.

 
NLY
10.68+0.01(+0.09%)9:44 AMEST

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