Annaly's Subsidiary Acquires Grocery-Anchored Retail Assets - Analyst Blog

Annaly Capital Management, Inc. (NLY) – a mortgage real estate investment trust (mREIT) – disclosed the acquisition of a portfolio of grocery-anchored shopping centers by its subsidiary, Annaly Commercial Real Estate Group, Inc. (ACREG). The move signifies the company's effort to diversify its business and capitalize on lines that offer stable cash flow.

The portfolio that is being acquired comprises 11 properties, spanning 1.48 million square feet of space. The portfolio will be owned jointly by Annaly Commercial Real Estate Group and JADD Management, which is a Rochester, NY-based commercial real estate company.

For Annaly, we believe that this acquisition of grocery-anchored shopping centers comes as a strategic fit. Such centers are usually necessity driven and Internet resistant in nature, thus driving a dependable traffic. Hence, the company will have the opportunity to generate steady cash flows at attractive yields from such quality necessity-driven retail real estate assets.

Amid the issues surrounding the interest rates and end of the Fed's bond purchases, this diversification into commercial assets comes with Annaly broadening its equity investment base. The company already boasts  around $1.6 billion investments in commercial real estate loans and properties as of Sep 30, 2014.

Earlier this month, Annaly Capital Management reported third-quarter 2014 core earnings of 31 cents per share, in line with the Zacks Consensus Estimate. The figure also came a cent ahead of the prior-quarter core earnings of 30 cents per share and 3 cents above the year-ago figure of 28 cents per share.

Annaly is making concerted efforts to enhance its book value and manage its leverage level. Moreover, going forward, we believe that the company's diversification into commercial assets would help enhance its top-line growth.

Investors interested in the mREIT industry may also consider stocks like American Capital Agency Corp. (AGNC), American Capital Mortgage Investment Corp. (MTGE) and Ares Commercial Real Estate Corporation (ACRE).