PIMCO launched a new real estate finance company, according to a filing with the Securities and Exchange Commission (SEC).
The firm is looking to raise up to $600 million in an IPO for the REIT. The REIT will be listed on the New York Stock Exchange under the symbol PIMR.
PIMCO REIT will acquire, manage and finance, directly or through its subsidiaries, RMBS and CMBS (agency and non-agency), residential and commercial real estate loans, other commercial real estate debt, residential and commercial real estate, other real estate-related assets and other financial assets, according to the filing.
The SEC filing indicated that PIMCO plans to acquire a portfolio of agency RMBS. The loans underlying its initial portfolio will comprise fixed-rate loans, ARMs and hybrid ARMs. The fund manager also said that it expects to sell not less than $10 million of its common stock in a separate private placement to certain members of its senior management team and other executives of PIMCO and its affiliates .
PIMCO stated in the filing that Chief Executive Officer Jennifer Bridwell, who leads PIMCO’s mortgage-related product development efforts will lead the new REIT's business affairs. The team will also include Dan Ivascyn and Scott Simon, both senior portfolio managers at PIMCO, who together will serve as co-chief investment officers.
As government involvement in mortgages begins to windown with GSEs reforms, REITs are likely to increasingly become the best solution for long-term assets in U.S. housing. "We believe that the U.S. mortgage finance system is undergoing historic change," said PIMCO in its filing. "Significant increases in regulation and public policy are influencing which investors will have the financial ability to hold real estate-related assets. We believe that private non-bank capital will represent an increasing share of these assets in the years to come."
A recent Barclays Capital report echoed this thought. According to Barclays' April 4 report, over the past few months, mortgage REITs have been aggressively raising equity. This, according to Barclays, should translate into considerable MBS demand.
Analysts noted that since December 2010, agency mortgage REITs have raised approximately $6.6 billion of new capital. They said that assuming a 6-10x leverage multiplier, this would mean $40 billion to $65 billion of agency MBS demand.
Although a considerable amount of REIT purchases have been made, analysts think that agency MBS REIT demand should continue into 2Q11.
Hybrid ARMs have typically been a popular investment with agency REITs, although limited supply and tight valuations are probabaly going to drive purchases in fixed-rate collateral and CMOs.
Barclays analysts find that 15-year and 30-year paper as well as CMOs seem to offer increased hedged carry versus hybrid ARMs under the current environment.
For a full copy of the filing, please click this link.