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The latest mortgage REIT seeking to complete an initial public offering hopes its flexible, hybrid investing strategy will place it at the forefront of an evolving U.S. mortgage market.
Five Oaks Investment Corp., with substantial backing provided by a subsidiary of XL Group Plc and members of its external manager's management, is seeking to raise gross proceeds of as much as $98.3 million from new and existing investors to deploy into investments in agency and nonagency RMBS, including securities that are legacy and new-issue in nature.
The company began operations in May 2012 after raising $26.5 million in a private placement and ended the year with slightly more than $97 million in assets and an RMBS portfolio of $81 million at fair value on a GAAP basis. Agency 30-year fixed securities accounted for approximately 82% of the portfolio, nonagency RMBS represented approximately 14% and 15-year fixed agencies accounted for 4%. Net asset value increased by 23.3%, the company said, between the time of its initial funding and year-end 2012.
Five Oaks maintained master repurchase agreements with 13 different counterparties as of Dec. 31, 2012, and it had borrowed $63.4 million at that point to finance its purchase of agency and nonagency RMBS.
"We felt it really important to establish the company, build a portfolio, set up those funding relationships and really road-test the infrastructure before seeking to take the company public," said Five Oaks Treasurer, Secretary and CFO David Oston, speaking during a road-show presentation.
Chief Investment Officer Paul Chong said the company is focusing on prepayment-protected agency pools and "deeply...