ARMOUR Residential REIT, Inc. (ARR), a real estate investment trust (REIT) that invests in residential mortgage backed securities (RMBS), has recently closed its secondary offering of 17 million shares at $7.40 each. The equity offer included 1 million shares sold to the underwriters pursuant to a partial exercise of the over-allotment options. The underwriters also retain an option to purchase an additional 1.4 million shares until May 8, 2011.
Deutsche Bank Securities Inc. – the U.S. investment banking and securities arm of Deutsche Bank AG (DB) acted as the sole book-running manager for the offering. ARMOUR Residential has currently raised net proceeds of $121.4 million from the equity offer. The company intends to utilize the proceeds to purchase additional financial assets in accordance with its investment objectives and strategies.
The equity offer is part of the Dividend Reinvestment and Share Purchase Plan of the company, which would enable the stockholders to automatically reinvest their dividends in the common stock, as well as purchase additional shares directly from the company from time to time.
The residential mortgage market in the U.S. has experienced defaults, credit losses and liquidity concerns in the recent past. These factors have impacted investor perception of the risk associated with real estate related assets, including high-quality RMBS assets.
As a result, values for RMBS assets, including some agency securities and other AAA-rated RMBS assets, have experienced a certain amount of volatility. Increased volatility and deterioration in the broader residential mortgage and RMBS markets may adversely affect the performance of ARMOUR Residentialin the future.
However, we currently have an ‘Outperform’ rating on ARMOUR Residential, which presently has a Zacks #2 Rank that indicates a short-term ‘Buy’ rating.
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