We are a real estate investment trust, or REIT, for federal income tax purposes,
in the business of acquiring, investing in, financing and managing primarily
mortgage-related assets and financial assets. Our objective is to deliver long-term
stable distributions to our stockholders over changing economic conditions through
a combination of net interest margin and net realized capital gains from a diversified
investment portfolio. Our portfolio includes credit sensitive assets and investments
sourced from distressed markets in recent years that create the potential for
capital gains, as well as more traditional types of mortgage-related investments
that generate interest income.
Our investment portfolio includes residential mortgage loans, including second
mortgages and loans sourced from distressed markets, multi-family CMBS, mezzanine
loans to and preferred equity investments in owners of multi-family properties,
equity and debt securities issued by entities that invest in residential and
commercial real estate and commercial real estate-related debt investments,
and Agency RMBS. Subject to maintaining our qualification as a REIT, we also
may opportunistically acquire and manage various other types of mortgage-related
and financial assets that we believe will compensate us appropriately for the
risks associated with them, including, without limitation, non-Agency RMBS (which
may include IOs and POs), collateralized mortgage obligations and securities
issued by newly originated residential securitizations, including credit sensitive
securities from these securitizations.
We seek to achieve a balanced and diverse funding mix to finance our assets
and operations. We currently rely primarily on a combination of short-term borrowings,
such as repurchase agreements with terms typically of 30 days, longer term repurchase
agreement borrowing with terms between one year and 18 months and longer term
structured financings, such as securitizations with terms longer than one year.
We internally manage a certain portion of our portfolio, including Agency ARMs,
Agency fixed-rate RMBS, non-Agency RMBS, CLOs, residential securitized loans
and second mortgage loans. In addition, as part of our investment strategy,
we also contract with certain external investment managers to manage specific
asset types targeted by us. We are a party to separate investment management
agreements with Headlands Asset Management, LLC, or Headlands, RiverBanc, LLC,
or RiverBanc, and The Midway Group, L.P., or Midway, with Headlands providing
investment management services with respect to our investments in certain distressed
residential loans, RiverBanc providing investment management services with respect
to our investments in multi-family CMBS and certain commercial real estate-related
debt investments, and Midway providing investment management services with respect
to our investments in Agency IOs.
We have elected to be taxed as a REIT for federal income tax purposes and have
complied, and intend to continue to comply, with the provisions of the Internal
Revenue Code of 1986, as amended (the “Internal Revenue Code”),
with respect thereto. Accordingly, we do not expect to be subject to federal
income tax on our REIT taxable income that we currently distribute to our stockholders
if certain asset, income, distribution and ownership tests and recordkeeping
requirements are fulfilled. Even if we maintain our qualification as a REIT,
we expect to be subject to some federal, state and local taxes on our income
generated in our TRSs.
Our strategy is to construct a residential portfolio that includes elements
of both interest rate and credit risk. Our investment strategy focuses on the
acquisition and management of (i) “credit residential” assets, which
we define as residential mortgage loans, including distressed residential loans
and second mortgage loans, multi-family investments, including CMBS, mezzanine
loans to and preferred equity investments in owners of multi-family properties
and equity and debt securities issued by entities that invest in commercial
real estate and commercial real estate-related debt investments, (ii) leveraged
Agency RMBS, which may include Agency ARMs, Agency fixed-rate and Agency IOs
and (iii) the opportunistic acquisition of other types of mortgage-related and
financial assets that meet our investment criteria.
Prior to deploying capital to any of our targeted asset classes or determining
to dispose of any of our investments, our management team will consider, among
other things, the amount and nature of anticipated cash flows from the asset,
our ability to finance or borrow against the asset and the terms of such financing,
the related capital requirements, the credit risk related to the asset or the
underlying collateral and future general market conditions. Consistent with
our strategy to produce returns through a combination of net interest margin
and net realized capital gains, we will seek, from time to time, to sell certain
assets within our portfolio when we believe the combination of realized gains
on an asset and reinvestment potential for the related sale proceeds are consistent
with our long-term return objectives.
We seek to identify credit sensitive assets, primarily relating to residential
housing, including multi-family housing, from which we can extract value through
a combination of current yield and/or capital appreciation. Our portfolio of
credit residential assets is currently comprised of residential mortgage loans,
including distressed residential loans and second mortgage loans, multi-family
CMBS, mezzanine loans to and preferred equity investments in owners of multi-family
properties and equity and debt securities issued by entities that invest in
residential and commercial real estate and commercial real estate-related debt
investments. Our portfolio also includes distressed residential mortgage loans
held in securitization trusts and prime ARM loans held in securitization trusts
(which we refer to as residential securitized loans).
0.98% 