Leading the mREIT sector (REM +0.2%) higher this session are American Capital Agency (AGNC +1.9%) and American Capital Mortgage (MTGE +1%) after the two maintained their $0.65 per share quarterly payout last night. Neither move should have been a surprise as both comfortably out-earned their dividend last quarter.
Also maintaining its payout ($0.30 per shares) after the bell yesterday was Annaly Capital (NLY +0.8%).
The sector is also getting a break from rising rates with the 10-year Treasury yield lower by four basis points to 2.58%
Jay WIntrob's exit from AIG (AIG -1.9%) could hardly be considered a surprise after he was passed over to lead the company in favor of Peter Hancock. Nevertheless, leadership continuity stands for something, and Wintrob played a big role in the bounce in profits at AIG's Life and Retirement unit.
The new management structure, says Wells Fargo, suggests the insurer sees itself less as a P&C and Life firm, and more of a commercial segment and consumer segment firm.
"Why not throw in the kids' private tuitions," says compensation expert Graef Crystal. "Where is the line between your wallet and the company's?"
The need for a "family office' to manage one's billions is what's known as a high-class concern, and Fortress Investment (NYSE:FIG) helped out with that issue for principals Wes Edens, Peter Briger, Randal Nardone, and Mike Novogratz, taking care of $902K in expenses connected with family office staff in 2012 and 2013.
A little less egregious than at first glance, the $902K does not actually represent checks cut to the group, but that money instead is the share of company overhead used by family office staff - it seems they do at least some of their work at the Fortress offices and on Fortress computers. "To be clear," says a Fortress spokesman, "most of these costs would be incurred by Fortress, even in the absence of employees serving in family office roles.”
Representatives for Blackstone, Carlyle Group, and KKR said those P-E firms do not cover family office costs for executives.
Citigroup (NYSE:C) CEO Michael Corbat's last trip to Asia in March was cut short after a pre-dawn telephone call from New York told him the bank had failed the Fed's stress tests. Six months later, Corbat is back - meeting with heads of state, regulators, clients, and bank employees. His message is one of regional growth even as Citi pares back its global operations.
“Opportunities for further growth include the commercial banking opportunity - being the bank of choice of the champions of tomorrow and sustaining our retail, cards and wealth management leadership in Asia,” he says.
Citi, of course, is considering the sale of its Japanese retail unit - "just one part of restructuring by a thousand cuts,” says a bullish Mike Mayo, also in Asia this week. “Citi is committed to Asia ... but it doesn’t mean it has to be in every market ... Citi in the past would take food from every part of the buffet. At least now they are passing over certain sections.”
"A dilutive portfolio transition and lease expirations drive our Street-low FFO estimates," says analyst Brad Burke, starting Columbia Property Trust (NYSE:CXP) with a Sell and $22 price target. "Exposure to soft suburban and second-tier CBD office markets (Cleveland, Baltimore, Newark) would further appear to limit upside."
Burke acknowledges the stock's apparent cheap valuation, but says the stock looks a lot more expensive if one assumes - which he does - two years of little or no FFO growth.
"We are steadfastly working toward the goal of One AIG," says new CEO Peter Hancock. "We have learned that a federated business model exposes us to the weakest link in the chain."
Exiting AIG after a 25-year career is Jay Wintrob, president and CEO of AIG LIfe & Retirement, and once thought to be the heir apparent to Bob Benmosche. Out after five years with the insurer is Michael Cowan, EVP and Chief Administrative Officer.
Among those serving on the newly established Operating Committee is just-hired Chief Information Officer Philip Fasano. Hancock has made clear his belief that investments in technology will yield a big payoff for the company.
Following meetings with management, Sandler O'Neill analyst Richard Repetto says Interactive Brokers (NASDAQ:IBKR) will name a new president during its Q3 earnings call in October. The new president will be "heir apparent" to current Chairman, President, and CEO Thomas Peterffy, though Peterffy - appearing to still enjoy his role, says Repetto - has no immediate plans to step down.
Looking for more firepower with which to originate and purchase commercial loans and other targeted assets, Blackstone Mortgage Trust (NYSE:BXMT) is selling 8M shares in a secondary offering, with an underwriter greenshoe of 1.2M shares.
Although all three - American Campus Communities (ACC -1.3%), Campus Crest Communities (CCG -1.2%), and Education Realty Trust (EDR -1.1%) - have performed broadly in line with the broad REIT universe, the trio consistently score low in the Markit REIT model.
Said model ranks REITs on things like balance sheet strength, operational strategy, and price momentum, and those ranking near the bottom have underperformed the REIT sector by more than 25% over the past five years. CCG and EDR have typically been in the worst-ranked group, and ACC has recently joined them, mostly thanks to the stock price's premium to NAV.
Another red flag (or buying signal depending on how you look at it): The shorts are circling, with short interest up 41% YTD, particularly at EDR, where the ratio of shares on loan has jumped six-fold this year as of the end of July.
In addition to the 90/10 joint venture with Northstar Realty on the purchase of a $3.2B hotel portfolio (Chatham's investment will be $29M), Chatham Lodging Trust (CLDT -0.7%) announces the purchase of the recently re-opened 194-room Hyatt Place Denver/Cherry Creek for $32M, or $165K per room.
Back to the NorthStar deal - Chatham is also in talks with NorthStar for the outright purchase of four hotels comprising 575 rooms from that portfolio.
The entire sector is in the red, but the biggest declines are being seen in the industry giants, about the only spots large investors can move a lot of shares quickly: Annaly Capital (NLY -1.6%), American Capital Agency (AGNC -1.6%).
Yesterday's FOMC statement may have left in the "considerable period" language, but the committee remains on course to begin a rate hike cycle in less than a year.
Further, the selloff on the long end of the curve can has reached the sizable stage - the 10-year yield is up 32 basis points in a month, and has now erased about all of the summer's decline. Book values could take a hit (though hedging is likely to ease the pain).
Banks, insurers, brokerages and anything else starved for yield continue to gain following yesterday's FOMC news. Among the gainers are Bank of America (BAC +1.9%) - which breaks above $17 for the first time since April - Citigroup (C +2.7%), Wells Fargo (WFC +1.1%), PNC (PNC +1.1%), Fifth Third (FITB +1.7%), SunTrust (STI +1.2%), Schwab (SCHW +2.3%), Prudential (PRU +2.5%), and Lincoln National (LNC +2.4%).