Real Estate Leadership Guides 5
For mortgage REITs such as the Bethesda, MD-based AGNC Investment Corp., the Federal Reserve is the sun, moon, wind and rain, at least at this pivotal point in time. Namely, there is
a new Fed chair, Jerome Powell, who, although well known, is still
untested by the rigors of his new position. The industry widely
assumes that Powell will hold the course for two strategies the
market has been expecting: the gradual raising of the benchmark
interest rate and the unwinding of the Fed’s $4.5-trillion portfolio
of Treasury bonds and mortgage-backed securities.
AGNC plans to benefit from the latter and keep a careful eye
on the former, says Gary Kain, the company’s CEO, president and
chief investment officer.
As part of its quantitative easing initiative, the Fed bought up
much of the mortgage securities available on the market—
securities that AGNC and its counterparts in the business would
have liked to acquire. When the market began to price in the
Fed’s reduction in their purchase activity over the past year, Kain
explains, pricing on agency mortgages began to look less expensive relative to other assets. AGNC has the dry powder and is
ready to invest as the Fed starts to sell off its holdings.
“The Fed is in play and that’s going to have a real impact on
what people do and how they do it,” says CRE Finance Council
executive director Lisa Pendergast.
There is much in play now that could affect
the commercial real estate capital markets.
Fortunately, most of these events are
trending in favor of the industry.
Year of Liquidity
BY ERIKA MORPHY