Author: Innovative Income Investor

In the last couple of weeks we have had a couple of fixed-to-floating rate mREITs move into their floating rate periods.

The New York Mortgage Trust 7.875% (NYMTM) issue is now trading with at 3 month SOFR+.2616% plus a spread of 6.429% for a very juicy +10% yield. Additionally Two Harbors Investment has an issue that just went into the floating period with their 7.25% issue (TWO-C) which will float at 3 month SOFR+.2616% plus a spread of 5.011% for a +9% yield.

I hold a few of the mREIT floating rate preferreds–in the current environment they trade very steady and almost always around $25 as they become redeemable at the same time as they become floating which means there is always a call threat.

Watch all of the floating rate issues here.

Actually I did own this term preferred when it had a yield to maturity in the 8% area, but sold it all for $24.98 on 11/24/2024. The issue I am talking about is the Gladstone Lane 5% Term Preferred (LANDM) issue. Currently slated to be redeemed on 1/31/2026 and trading at $24.80–a less than 6% (more or less) yield to maturity is simply too little from a pretty marginal REIT.

Gladstone Land reported earnings for the quarter ending 9/30/2024 that were poor–a net loss of almost $6 million, although funds from operations of around $3 million. While the company is likely safe the reward of the term preferred is simply inferior to many other term preferred that are available.

If I was going to own a term preferred it would be at a current yield of around 7.75% to 8% of which there are a number available which are likely as safe as Gladstone Land. I do understand some of the attraction of the LAND issue–it is easy to understand versus a CLO owner like Eagle Point Credit Company (ECC). Maybe folks want to hold it as a ‘cash equivalent’?