Core Insights - The article emphasizes the importance of preferred shares and baby bonds for achieving strong risk-adjusted returns, alongside the positive performance of Business Development Companies (BDCs) [1][19] - It highlights the irrational behavior of the market, where some investors continue to buy underperforming stocks despite deteriorating fundamentals [2] - The article discusses the current favorable environment for agency mortgage REITs to issue new shares due to high price-to-book ratios, while hybrid mortgage REITs are struggling [3][6] Agency Mortgage REITs - AGNC Investment (AGNC) maintains a high price-to-book ratio, allowing it to issue new shares effectively [3] - The top three agency mortgage REITs, Dynex Capital (DX), Annaly Capital (NLY), and AGNC, have the highest price-to-book ratios and are expected to capitalize on this by issuing additional shares [4] - A projection indicates that agency mortgage REITs will see a decline in book value in Q2 2025, affecting their price-to-book ratios [5] Hybrid Mortgage REITs - The environment is unfavorable for hybrid mortgage REITs, with only Ellington Financial (EFC) trading close to its projected book value [6] Business Development Companies (BDCs) - Main Street Capital (MAIN) is recognized as a leading BDC, but it is challenging to find it at a bargain valuation [7] - MAIN's Total Economic Return (TER) reflects its performance through changes in book value and dividends, with share issuance above NAV enhancing its value [7][9] - The article notes that MAIN's ability to drive NAV per share higher is attributed to successful investments and effective management [13] Preferred Shares - There are emerging opportunities in preferred shares, which have historically provided strong risk-adjusted returns [14] Market Outlook - The year 2025 is identified as a prime opportunity for investing in REITs, preferred shares, and BDCs due to increasing demand and insufficient supply in key real estate sectors [19]

Company Overview - Sachem Capital Corp. is a mortgage REIT that specializes in originating, underwriting, funding, servicing, and managing a portfolio of loans secured by first mortgages on real property [3] - The company offers short-term secured, nonbanking loans to real estate investors for property acquisition, renovation, development, rehabilitation, or improvement [3] - The primary underwriting criteria of the company is a conservative loan-to-value ratio, with properties typically classified as residential or commercial real estate [3] Dividend Announcements - The Board of Directors declared a quarterly dividend of $0.05 per common share, payable on June 30, 2025, to shareholders of record as of June 16, 2025 [1] - Additionally, a quarterly dividend of $0.484375 per share was declared for holders of the 7.75% Series A Cumulative Redeemable Preferred Stock, payable on June 30, 2025, to shareholders of record as of June 15, 2025 [2]

Group 1 - Dynex Capital, Inc. (NYSE: DX) is a mortgage REIT currently yielding near 17% [1] - The analysis focuses on Dynex's strategy, the context of its yield, and investment ideas [1] - The firm conducting the analysis, Pearl Gray, specializes in systematic analysis of Bonds, Preferreds, and REITs, primarily in the Financials and Real Estate sectors [1] Group 2 - The mission of Pearl Gray is to discover actionable total return ideas that combine academic theories, practical experience, and common sense [1]

Core Insights - The article discusses the anticipated decline in book value for mortgage REITs during Q1 2025, indicating a negative trend in the sector [1][4][6] - Two Harbors is highlighted as a significant underperformer among agency mortgage REITs, facing legal challenges that could further impact its book value [4][5] - The overall volatility in the mortgage REIT market is contributing to the decline in book values, with most companies projected to see decreases ranging from 1.4% to 14.5% [6][7] Mortgage REITs - The article notes that volatility in the market, including tariff issues and bond market fluctuations, is detrimental to mortgage REITs [6] - Most mortgage REITs are expected to experience declines in book value per share, with only one REIT estimated to have a slight increase of less than 1% [7] - ARMOUR Residential REIT is mentioned as one of the larger projected losers in terms of book value [8] Business Development Companies (BDCs) - In contrast to mortgage REITs, BDCs are showing more stability in book value, with gains of about 1% for the top performers and declines of around 2% for the worst performers [9] Legal and Management Issues - Two Harbors' management faced criticism for their performance during the pandemic, leading to a legal battle that may result in significant financial losses for shareholders [4][5] - The potential legal loss for Two Harbors could allow the former external manager to collect approximately $140 million, raising concerns about corporate governance and accountability [4][5] Investment Strategy - The article emphasizes a preference for lower-risk shares due to the current volatility in the market, suggesting a cautious approach to investment in mortgage REITs [10]

Financial Data and Key Metrics Changes - For calendar Q1, the company reported a net loss of $0.23 per share and adjusted distributable earnings of $0.26 per share [10] - The overall net interest margin increased by 20 basis points to 5.27, supported by a growing capital allocation to CLOs [10][11] - The economic return for the quarter was negative 3.2%, with book value per share at $6.08 [11] Business Line Data and Key Metrics Changes - The CLO portfolio increased by 46% to $250 million, while capital allocated to CLOs expanded to 81% from 72% [12] - The agency mortgage portfolio decreased slightly to $504 million from $512 million at the end of the previous quarter [12] - The portfolio P&L by strategy showed a negative $0.24 per share from CLOs and a positive $0.08 from agency [10] Market Data and Key Metrics Changes - The market experienced turbulence in March, with credit spreads widening and prices declining across high yield, investment grade, and CLO debt tranches [8] - Significant tariff de-escalations in May led to credit spreads and prices reversing course, retracing a significant portion of the March and April moves [9] Company Strategy and Development Direction - The company successfully completed its conversion to a registered closed-end fund and changed its fiscal calendar to begin on April 1 [5][6] - The strategy focuses on increasing the CLO portfolio while maintaining liquidity and flexibility in response to market conditions [23][30] - The company plans to add corporate debt to its liability structure later this year, which should be accretive to net investment income [30] Management's Comments on Operating Environment and Future Outlook - Management noted that while there were mark-to-market losses in calendar Q1, most price declines were driven by credit spread widening rather than realized credit losses [23] - The company is optimistic about deploying capital in a compelling market and believes it is well-positioned to drive strong earnings moving forward [30] Other Important Information - The company plans to issue monthly updates on portfolio metrics and net asset value on its website [27] - The company maintained high levels of liquidity, with approximately 18.8% of the total portfolio in cash and cash equivalents as of April 30 [28] Q&A Session Summary Question: How does the yield on newly acquired CLOs compare to the previous $250 million? - Management indicated that the weighted average yield varied from slightly wider to potentially hundreds of basis points back, depending on the type of assets purchased [34][35] Question: Do you have dry powder to deploy? - Management confirmed that they still have good dry powder available for deployment [37] Question: What are the latest thoughts on the ADE trajectory? - Management stated that they might be a little short this quarter but are on track for coverage in the third quarter [56]

Financial Data and Key Metrics Changes - For calendar Q1, the company reported a net loss of $0.23 per share and adjusted distributable earnings of $0.26 per share [9] - The overall net interest margin increased by 20 basis points to 5.27, supported by a growing capital allocation to CLOs [9] - The economic return for the quarter was negative 3.2%, with book value per share at $6.08 [10][11] Business Line Data and Key Metrics Changes - The CLO portfolio increased by 46% to $250 million, while capital allocated to CLOs expanded to 81% from 72% at the end of the previous quarter [11] - The agency RMBS holdings decreased slightly to $504 million from $512 million at the end of the previous quarter [11] - The portfolio P&L by strategy showed a negative $0.24 per share from CLOs and a positive $0.08 from agency [10] Market Data and Key Metrics Changes - The market experienced strong performance in January and February, followed by turbulence in March due to fears of tariffs, slowing growth, and persistent inflation [7] - Credit spreads widened significantly in March, impacting CLO mezzanine debt and equity tranches, leading to meaningful price declines [7][8] - Recent tariff de-escalations have led to credit spreads and prices reversing course in May, recovering a significant portion of the declines [8] Company Strategy and Development Direction - The company successfully completed its conversion to a registered closed-end fund and changed its fiscal calendar to begin on April 1 [4][5] - The strategy focuses on increasing the CLO portfolio while maintaining liquidity and flexibility in response to market conditions [22][29] - The company plans to add corporate debt to its liability structure later this year, which should be accretive to net investment income [29] Management's Comments on Operating Environment and Future Outlook - Management noted that while there were mark-to-market losses in calendar Q1, most price declines were driven by credit spread widening rather than realized credit losses [22] - The company is optimistic about deploying capital in a compelling market and believes it is well-positioned to drive strong earnings moving forward [29] - Management expects to be slightly short on dividend coverage in the second quarter but is on track for recovery in the third quarter [56] Other Important Information - The company disposed of all remaining mortgage positions shortly after April 1, which allowed for increased liquidity and buying power [8][25] - As of April 30, approximately 18.8% of the total portfolio, or about $59 million, was in cash and cash equivalents, providing ample dry powder for deployment [27] Q&A Session Summary Question: How does the yield on newly acquired CLOs compare to the previous $250 million? - Management indicated that the weighted average yield varied from slightly wider to potentially hundreds of basis points back, depending on the type of assets purchased [34] Question: Is there still dry powder available for deployment? - Management confirmed that there is still good dry powder available and that cash reserves are maintained to allow for increased portfolio size [37][39] Question: What are the latest thoughts on the ADE trajectory? - Management stated that they might be slightly short on covering the dividend in the second quarter but are on track for recovery in the third quarter [56]

Core Viewpoint - Real estate investment trusts (REITs) can provide significant dividend yields, with AGNC Investment and Healthpeak Properties being highlighted for their monthly dividends, but their sustainability and growth potential differ significantly [1]. Group 1: AGNC Investment - AGNC Investment is a mortgage REIT that invests in Agency MBS, which are protected against credit risk by government agencies, and it employs leverage to enhance returns, resulting in a high monthly dividend yield of 15.7% [3]. - The CEO noted that the outlook for agency MBS investments remains favorable, with potential returns in the low-20% range, which exceeds the company's total cost of capital of approximately 18% [4]. - However, AGNC has previously cut its dividend when returns fell below costs, indicating that it may not be the best option for investors seeking a highly sustainable income stream [5]. Group 2: Healthpeak Properties - Healthpeak Properties is a healthcare REIT with a diversified portfolio that includes outpatient medical, lab, and senior housing properties, providing stable cash flow with contractual annual rental increases [7]. - The REIT's adjusted funds from operations (FFO) have grown by 19% over the past three years, and it expects to generate between $1.81 and $1.87 per share of FFO this year, comfortably covering its $1.22-per-share dividend [9]. - Healthpeak has a strong balance sheet with $500 million to $1 billion available for new investments, and it recently raised its dividend payout by 2%, indicating a capacity for future dividend increases [10][12].

Group 1 - Mortgage REITs have a long history, gaining popularity in the late 1960s and early 1970s as large banks and mortgage brokers established their own [1] - The iREIT® Tracker provides comprehensive data on over 250 tickers, including quality scores, buy targets, and trim targets, aimed at enhancing investment research [1] - The introduction of the iREIT Buy Zone Ratings Tracker allows members to screen for value, enhancing investment decision-making [2] Group 2 - A promotional offer includes a 2-week free trial and a complimentary book, aimed at attracting new members to the iREIT® platform [4]

Q1 2025 SUPPLEMENTAL REPORTING INFORMATION Table of Contents | Press Release | Page | 1 | | --- | --- | --- | | Highlights | Page | 7 | | Commercial and Residential Lending Segment | Page | 10 | | Infrastructure Lending Segment | Page | 18 | | Property Segment | Page | 19 | | Investing and Servicing Segment | Page | 22 | | Capitalization | Page | 24 | | Appendix | Page | 30 | (i) Cover photo: $190M first mortgage participation in The Perigon, Miami Beach PRESS RELEASE – Closed $1.3 Billion After Quarter End ...

Core Insights - Starwood Property Trust, Inc. reported a GAAP net income of $112.3 million and Distributable Earnings of $156.3 million for Q1 2025, continuing its trend of paying a quarterly dividend of $0.48 per share for over a decade [1][11]. Financial Performance - The company achieved a significant financial flexibility with commercial lending originations in 2025 already surpassing the total for the previous year [2]. - Starwood Property Trust raised $18 billion since its IPO, demonstrating strong access to capital markets [3]. - The company reported a current liquidity of $1.5 billion and has no corporate debt maturities for over a year [3][11]. Investment Activities - In Q1 2025, Starwood Property Trust invested $2.3 billion, including $1.4 billion in commercial lending and a record $0.7 billion in infrastructure lending [11]. - The company closed $1.3 billion in transactions after the quarter, with $0.9 billion in commercial lending [11]. Portfolio and Assets - As of March 31, 2025, Starwood Property Trust manages a portfolio exceeding $26 billion across debt and equity investments [7]. - The company holds $4.9 billion in unencumbered assets and $1.5 billion in unrealized property gains that can be utilized to enhance distributable earnings [3]. Earnings and Dividends - The Distributable Earnings per diluted share for Q1 2025 was reported at $0.45, while the GAAP earnings per diluted share stood at $0.33 [11][15]. - The company continues to focus on generating attractive and stable returns for shareholders primarily through dividends [7].