A Maryland real estate investment trust plans to raise up to $1.8 billion in a secondary stock offering, using the proceeds to buy agency MBS.

The stock sale by American Capital Agency, Bethesda, is slated to close shortly, and marks the REIT's seventh secondary offering since going public in 2008. In October, the REIT raised $1 billion.

American Capital Agency invests only in securities backed by Fannie Mae, Freddie Mac and Ginnie Mae.

Speaking at a conference in New York last week, ACA CEO Gary Kain told investors and analysts that now is a good time to invest in MBS. He predicted that even if conditions worsen and the Federal Reserve has to stimulate the economy with another round of bond purchases, American Capital could see a “big pop” in its book value by selling securities to the Fed, Kain said.

“The Fed is going to buy hundreds of billions of dollars worth of agency mortgages, which is what we own,” said Kain at the conference hosted by Citigroup.

American Capital said it would issue 62.1 million shares in the offering. It did not disclose an offering price, but its existing shares have been trading between $29 and $30 the past month.
American Capital said that underwriters would be granted a 30-day option to buy up to 9.1 million shares to cover any overallotments.

Banc of America Merrill Lynch, Citigroup, Goldman Sachs, JPMorgan Securities and UBS Securities are joint book-running managers for the offering. Barclays Capital and Nomura Securities International are co-lead managers for the offering.

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