Annaly Capital to Acquire Net Leased Assets - Analyst Blog

As part of its efforts to diversify and expand its commercial real estate business, Annaly Capital Management, Inc. NLY recently announced its net lease initiative with Inland Real Estate Group. Annaly's shares were up 0.96% in Friday's regular trading session on the NYSE.

In particular, the company's subsidiary, Annaly Commercial Real Estate Group, will purchase net leased commercial real estate assets spanning a broad range of markets and industries. These properties would comprise industrial, office, retail and restaurant assets and would be of a specific size and profile sourced and managed solely for Annaly by The Inland Real Estate Group of Companies' affiliates.
 
Through this initiative Annaly can leverage Inland's expertise in this business as it tries to expand its commercial platform into ownership of real property. Inland has aquired over $35 billion of commercial properties including $11 billion of net leased acquisitions since 2002 and the company has more than $20 billion in commercial real estate assets under management.

As a matter of fact, amid the continued Fed tapering of bond purchases and anticipation of rising interest rates in the long term, Annaly is making concerted efforts to lower its leverage level. However, the US Treasury 10-year note yield fell in the first quarter and spread compression in the quarter affected its results.    

Amid this volatility, the company's diversifying efforts and expansion of its commercial real estate portfolio is a strategic fit. The company, which owned $1.0 billion in commercial real estate assets as of Jun 30, 2013, has grown its business and owned around $1.7 billion of such assets as of Mar 31, 2014. Going forward, we believe that the diversification of Annaly into the commercial assets space would help enhance the company's top line.

Annaly currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the same industry include AG Mortgage Investment Trust, Inc. MITT, Arbor Realty Trust Inc. ABR and Anworth Mortgage Asset Corporation ANH. All these stocks hold a Zacks Rank #2 (Buy).