REITs Enter New Asset Classes with Sustainable Returns, Less Interest Rate Risk and Less Reliance on Short-Term Funding: Douglas Harter, Expert Analyst, Discusses the Mortgage REIT Space

Wall Street Transcript

67 WALL STREET, New York - June 20, 2013 - The Wall Street Transcript has just published its REITs Report offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with public company CEOs and Equity Analysts. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Acquisition and Financing Costs - Pricing Power Outlook - Residential and Commercial REITs - Inexpensive Access to Capital - Apartment, Lodging, Self-Storage and Office REITs

Companies include: Newcastle Investment Corp. (NCT), National Semiconductor Corpora (NSM) and many more.

In the following excerpt from the REITs Report, an expert analyst discusses the outlook for the sector for investors:

TWST: What kind of returns are the mortgage REITs delivering right now? Are they still in the double-digits range?

Mr. Harter: In the low double-digit range are the yields that are available in the market today. The agency side you can probably do low teens, again with a little bit more volatility there around rates and around the thought on the Fed. Nonagency bonds have continued to fare very well, and as a result those yields are probably more high single-digit, but probably a little less volatility to those.

And then I'd say there are some newer asset classes, like the securitization of new production loans, where you're starting to see more REITs go into. Those are probably low double-digit returns today, but I feel pretty good about the sustainability of those returns; less interest rate risk, less reliance on short-term funding, so all in all, I think that's a pretty attractive low double-digit return.

TWST: What were the highlights from the most recent quarterly earnings announcements?

Mr. Harter: I think you saw the divergence in book value performance in the quarter, with the agency-only names faring worse in the quarter as you had significant spread widening, versus players that had nonagency exposure where they continue to see stronger book value performance as nonagency bonds continue to increase.

I think that, coupled with this most recent rise in rates, has really shifted the focus back to book value preservation as being a central theme to the mortgage REITs.

TWST: What are your recommendations right now? What are your top picks?

For more of this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

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