AAIC Stock

Rising interest rates pose challenges for many REITs by impacting debt rollovers and investor alternatives. Higher rates will add around $2 billion to the national debt over the next decade. Even more if they create a recession. Apartment construction is declining, affecting rental unit supply and potentially leading to increased rental rates. Pretty obvious when you think about it.

Arlington Asset Investment Corp. invests in mortgage-backed assets and has not paid dividends since the start of the COVID pandemic. Arlington has been able to generate consistent operating income and has a debt-to-equity ratio of 2.67. Ellington Financial LLC has entered into a merger agreement to acquire Arlington, offering a premium to Arlington shareholders and expecting to benefit from Arlington's assets.

Bond prices tumble as PPI exceeds expectations, raising the 10y US T-Note yield to 4.15%. Arlington Asset Investment Corp.'s Series C Fixed-to-Floating Rate Cumulative Redeemable Preferred presents an opportunity in the changing environment. AAIC.PC has a low number of shares outstanding and a potential 13% net return over the next eight months.

We take a look at the action in preferreds and baby bonds through the second week of July and highlight some of the key themes we are watching. Preferreds rallied this week, buoyed by a disinflationary theme that has supported markets recently. We take a look at a couple of metrics outside of leverage to gauge debt quality.

We take a look at the action in preferreds and baby bonds through the first week of July and highlight some of the key themes we are watching. Preferreds were down on the week as higher Treasury yields took their toll. We discuss some of the differences between preferreds and funds with a case study of floating-rate NLY.PF and JBBB.

We take a look at the action in preferreds and baby bonds through the third week of June and highlight some of the key themes we are watching. Preferreds were roughly flat as higher Treasury yields were offset by tighter credit spreads. We take a look at a couple of pricing discrepancies in the B. Riley Financial senior security suite, which are indicative of broader market inefficiencies.

Ellington Financial (EFC) enters into an agreement to acquire Arlington (AAIC) in a stock-and-cash transaction. This deal is likely to increase scale and provide greater access to capital markets.

Rates Up, REITs Down? Whether fundamentally justified or not, commercial and residential real estate markets continue to bear the brunt of the Federal Reserve's historically swift monetary tightening cycle. Commercial real estate, in particular, has been the boogeyman that bank executives have blamed for unrelated distress. While there are pockets of distress, actual default rates remain historically low. The pockets of distress are almost entirely debt-driven, with the notable exception of coastal urban office properties. Nearly every property sector reported "same-store" property-level income above pre-pandemic levels.

Big yields and even bigger discounts on each share here. A buyout drove one of our positions up about 40% in a day. The REITs we're highlighting here don't unusually trade at such large discounts to book value.