Mortgage Funds Unable To Go REIT Route
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18 October 2011
Securitization Intelligence
Amelia Granger
Mortgage market participants at an ABS East panel Tuesday bemoaned the sudden turn the market has taken against real estate investment trusts. Bob Magee, cio, Shellpoint Partners, said while his fund initially contemplated being a REIT, it has decided against the structure for now. "We're a panel on REITs but we are REIT-less," Magee said. "It's difficult to imagine being a REIT and coming up here and having a public dialogue right now."
REITs were a hot topic earlier in 2011, as a steep yield curve and a bullish attitude in the wider markets had as many as nine REITs filing for initial public offerings. "In the beginning of the year I thought, 'this is the way out,'" said Daniel Nigro, investor at Warfield Consultants, on his hopes for a starring role for REITs' in the recovery of the housing market.
"But then securities prices went south. Net-net, it's a vehicle that has an opportune time. But I'm amazed at the change in the market in the past few months," Nigro said. Other panelists pointed to the flattening yield curve, increasing levels of prepayments and gloomy economic data making it difficult for new REITs to find investor backing, or complete IPOs.
Magee said broader market disruptions stopped Shellpoint from going the REIT route. "You're beholden to public markets [as a REIT]. In 2003, 2004 and 2005, we saw the public markets can be very generous at supplying capital to the REITs market. But they can also be ungenerous," he said. Magee said his firm was still active in the residential mortgage market, and recently acquired an agency mortgage lender, New Penn Financial, with an eye to begin originating non-agency loans. |
