Saturday, March 23, 2013

REIT of the Year

As usual, REITs continue to dominate the headlines in one way or another.  Whether it's a disparate business converting to a REIT or privately-held REITs being bought out, the casual reader need not go further than the real-estate section of your favorite news site to find out more.  Today however, we at The CRE Review want to cover an mREIT that has done a fantastic job of turning their ship around since the nadir of 2009.  Now, there is no doubt that a rising tide lifts all boats but the way that Newcastle Investment Corp. has been able to survive and thrive since 2009 is fascinating. Backed by Fortress, it's been interesting to watch how NCT's real-estate strategy has been mirroring that of its sponsor.

While smarter money was going long resi and CMBS back in 2009, 2010 and 2011, NCT has been going beyond the usual mandate of buying odd-lots and AJs.  Here's what they've been up to.
  1. Cleaning up the balance sheet by reducing liabilities via collapsing CDOs.  Check.
  2. Becoming more transparent with it's quarterly and annual filings.  Check.  
    1. 2008 3Q vs. 2012 3Q.  They have become more transparent with the composition of their portfolio.  Back in 2009 I would read their 10Qs and could not understand why someone would invest money in this company.
  3. Expanding it's business by acquiring servicing rights.  Check
  4. Expanding it's business by acquiring different pools of loans.  Check
  5. Restructuring it's business by splitting up into two. Check.
    1. NCT is spinning off it's residential side into a separate business and keeping exposure of CRE and other assets on NCT's books.
      1. New Residential (NZR) 
        1. Excess MSRs, RMBS, Non-performing Loans, Adjacent Assets
      2. New NCT (NCT)
        1. CDOs, Senior Housing, Other Real Estate Debt, Opportunistic Restructurings
    2. Read this presentation to find out more.  It's also a great way to calibrate your assumptions on CRE and RMBS; if you're into that kind of thing.
At Fortress' behest, NCT has gone from another almost-bankrupt and opaque mREIT to a diversified business with a much healthier balance sheet.  Props to FIG and NCT for turning it around and not throwing in the towel a few years back.  Kudos to those who went long resi/CMBS in 2009 and 2010 but I'd give more credit to NCT's management team for going long and strong in a big way that will likely outlast this rally in credit and real-estate.

Disclaimer:  I do not have any positions in NCT or FIG.

~Jingle Male

Edit: Changed the quarterly filings used to 2008 3Qand 2012 3Q as I thought they were better examples than comparing the 2011 and 2009 annual reports.

Monday, March 4, 2013

Key ASF boardmembers resign over dispute

Key ASF board members resign over dispute with Tom Deutsch, the executive director. My favorite quote from the Bloomberg article was the "who spoke on condition of anonymity because the dispute isn't public"... mmmkay.

He had to know this was coming, and has already faced a prior defections from other board members who were concerned with things such as transparency, executive pay, and supervision over executive decisions. At some point you need to step aside when key members of your organization are quitting over a failure to communicate effectively with you. I'd be interested in others' thoughts, but from my outsider point of view, it seems like it might time for Deutsch to pull the golden parachute and float to safety.

Is the conference canceled?