MFResidential IPO: Mortgage REITs Perking Up

MFResidential Investments (MFR) is a newly organized REIT that will invest primarily in mortgage-backed securities.

All quotations are from the company’s most recent S-11 filing.

Business Overview (from prospectus)

We are a newly organized Maryland corporation that will invest primarily, on a leveraged basis, in residential mortgage-backed securities (or MBS), residential mortgage loans and other real estate-related financial assets. Our objective is to provide attractive risk-adjusted returns to our stockholders over the long term, primarily through dividend distributions and secondarily through capital appreciation. We intend to achieve this objective by investing in a broad range of real estate-related financial assets and by efficiently financing those assets primarily through repurchase agreements, warehouse facilities and other secured and unsecured forms of borrowing. We will generate income principally from the difference between the yields earned on our investments and our cost of borrowing and hedging activities.

Offering: 16.7 million shares at $15 per share. Net proceeds of approx. $233.4 million to be used primarily to invest in Target Assets.

IPO Underwriters: UBS Investment Bank (UBS), Deutsche Bank Securities (DB), Morgan Stanley (MS)

Financial Highlights

As of the date of this prospectus, we have not commenced any significant operations because we are in our organization stage. We will not commence any significant operations until we have completed this offering. We are not aware of any material trends or uncertainties, other than national economic conditions affecting mortgage loans, mortgage-backed securities and real estate, generally, that may reasonably be expected to have a material impact, favorable or unfavorable, on revenues or income from the acquisition of real estate-related investments, other than those referred to in this prospectus.

Competitors

In acquiring our Target Assets, we will compete with a variety of institutional investors, including other REITs, public and private funds, commercial and investment banks, commercial finance and insurance companies and other financial institutions. Many of our competitors are substantially larger and have considerably greater financial, technical, marketing and other resources than we do. Several other REITs have recently raised, or are expected to raise, significant amounts of capital, and may have investment objectives that overlap with ours, which may create additional competition for investment opportunities. Some competitors may have a lower cost of funds and access to funding sources that are not available to us. Many of our competitors are not subject to the operating constraints associated with REIT tax compliance or maintenance of an exemption from the 1940 Act. In addition, some of our competitors may have higher risk tolerances or different risk assessments, which could allow them to consider a wider variety of investments and establish more relationships than us. Furthermore, competition for investments of the types and classes which we will seek to acquire may lead to the price of such assets increasing, which may further limit our ability to generate desired risk-adjusted returns for our stockholders.

Resources

• Online roadshow
• Patrick Harden: Mortgage REITS Rise From Ashes
• 24/7 Wall St: MFA Mortgage Ready To Go Vulture Investing In Mortgages