Mortgage REIT Insider: Chimera Clocked Over Capital

It was yet another black eye for rookie mREIT Chimera Investment Corp. (CIM) last week. Chimera hasn’t celebrated the first anniversary of its IPO, but it’s nonetheless headed back to the equity markets for another follow-on offering of 250 million shares. The secondary offering is intended to help Chimera soak up $123.5 million in losses from the sales of non-agency RMBS and related interest-rate swaps. Declining asset values and a reduction in available financing forced Chimera to sell $432.5 million (about 40%) of its entire MBS portfolio. Fortunately for Chimera, the only debt left on the balance sheet is securitized or is from a repurchase agreement with its sponsor, Annaly Capital Management (NLY). Although Chimera announced the 250 million share offering last Tuesday, pricing for the offering has been postponed until this Thursday. Probably not a bad idea, too, since CIM shares tanked 25 percent after the news of the asset sales and the dilutive secondary hit the market. CapitalSource gets cold feet While Chimera’s secondary offering was poorly received, at least it has a decent chance of being received at all. That’s not the case for CapitalSource’s (CSE) healthcare REIT spinoff, CapitalSource Healthcare REIT (CHR). The healthcare REIT was expected to debut on Wednesday in a price range of $18 – $21/share; it would have been the first IPO to hit the market since early August. However, “unprecedented market volatility” caused CapitalSource to hit the brakes on its spinoff entity. The IPO has been temporarily delayed for an unspecified amount of time, though CapitalSource intends to go ahead with the offering when “appropriate.” Good luck picking an hour, much less a day, when the equity markets are behaving “appropriately.” PMC makes a personal bet PMC Commercial Trust (PCC) popped higher after the Company announced that it was laying off 25% of its workforce and spending $10 million on a share buyback. PMC management believes that the combination of cost and share count reductions will allow the company to maintain its $0.225 / share dividend throughout 2009. PMC’s payout confidence was a small ray of hope in a sea of decreasing dividends. Fellow mREITs RAIT Financial (RAS) and Anworth Mortgage (ANH) both announced a reduction in their quarterly payouts this week – 24 percent and 14 percent reductions, respectively. NYSE puts Alesco on notice The latest mortgage REIT to get a nastygram from the NYSE was Alesco Financial (AFN), which was warned that its listing was in jeopardy after shares of AFN stock closed below $1 / share for 30 consecutive trading days. Alesco is “currently exploring alternatives for curing the deficiency and restoring compliance with the continued listing standards,” according to a company statement. They’ll likely join Thornburg Mortgage (TMA) and Deerfield Capital (DFR) in reverse splitsville very soon. Editor’s note: Patrick Harden is a Certified Public Accountant with three years of experience in auditing publicly-traded real estate investment trusts. For the past few years, he has been involved in the mortgage finance industry as a member of the financial reporting group at a publicly-traded mortgage bank. His column covering mortgage REITs runs every Friday. Disclosure: The author owned shares of RAS and held no other positions in any of the stocks mentioned when this story was published. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.