By Atif Hameed Khan
B. Riley & Co. LLC analyst Richard Eckert downgraded his investment opinion of ARMOUR Residential REIT Inc. to "sell" from "neutral," with a price target of $6.60.
The analyst wrote in a research report: "ARR reported preliminary estimates of Q4 2011 operating results. Well below Street consensus and our own estimates, these were, to say the least, disappointing. Particularly disturbing was the continued erosion in book value, notwithstanding falling interest rates—even if one is to make allowances for the pricing of increased prepayments into agency MBS. We have updated our model for the preliminary estimates of Q4 results and new shares, assuming the overallotment option is exercised and that the entire deal prices at $6.75 a share. However, by our computations, the deal is dilutive in the short term, especially when paired with the smaller equity base resulting from the Q4 shortfall vis-à-vis our expectations. Although the dividend yields we project under both the assumptions of 9x and 8x leverage would render ARR fairly valued at current market prices, we believe ARR shares will come under additional pressure in the weeks and months ahead."
Real estate investment trusts that buy U.S. mortgage debt rose, erasing losses that had reached the steepest since December 2008 amid concern that their main source of financing could be roiled by European bank woes…Declines in mortgage REIT’s may have also reflected concern about the companies’ investment opportunities, said Richard Eckert, an analyst at B. Riley & Co.
Continue Reading >“If the SEC were to regulate [mortgage REITs], to make their strategies unprofitable or unable to generate the necessary returns, they would be stanching a good bit of the flow of private capital to the housing and housing finance markets,” said analyst Rich Eckert of B. Riley & Co., LLC.
He said mortgage REITs can play “an even larger role in the post-Fannie and Freddie world when you are eventually able to privatize the mortgage market. Why would you want to shut these players out?”
Eckert, who covers real-estate companies including American Capital Agency Corp., Anworth Mortgage Asset Corporation and Hatteras Financial Corp., said he does not think the SEC will ultimately remove the exemption for all mortgage REITs.
Continue Reading >For investors who still tremble at the thought of investing in companies that rely on mortgage-backed securities to earn a buck, fear not, says Rich Eckert, an analyst for B. Riley & Co. LLC who initiated coverage of six agency mortgage REITs on Aug. 2. As the former CFO and risk manager of the hedge fund Lahde Capital Management, which shut its doors shortly after making investors a bundle in the subprime mortgage meltdown, Eckert watched the MBS market collapse in 2007 and 2008 but now sees an opportunity for MBS REIT investors, he tells SNL.
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