Denahan: Annaly may allocate up
to 25% to real estate assets other
than agency MBS.

NEW YORK CITY-Already the owner of about 12.4% of the common stock of locally based REIT CreXus Investment Corp., Annaly Capital Management Inc. said Monday it plans to acquire the remaining 87.6% in an all-cash deal worth $12.50 per share, or approximately $840 million. The proposed buyout was announced in a letter to CreXus’ board made public on Monday. GlobeSt.com’s calls to CreXus were not returned by deadline early Monday afternoon.

Agency mortgage REIT Annaly, which already manages CreXus through its wholly owned Fixed Income Discount Advisory Co. subsidiary, says it has engaged Bank of America Merrill Lynch as its financial advisor and K&L Gates as legal counsel to assist in the proposed deal. In a statement, recently appointed chairman and CEO Wellington Denahan says the acquisition would be “part of a broad evolution of our capital allocation strategy.”

Denahan adds that although Annaly remains committed to the agency market, “given the current environment, we believe it is prudent to diversify a portion of our investment portfolio. Therefore, we may allocate up to 25% of our shareholders’ equity to real estate assets other than agency mortgage-backed securities.”

As a component of that strategy, Denahan says, wholly owning the commercial real estate platform that Annaly currently manages through FIDAC “is complementary to our existing business and return profile, and should provide stable and diversified risk-adjusted returns to our shareholders. CreXus’ capabilities and growth may be significantly enhanced when coupled with Annaly’s broad capital base.”

Since FIDAC manages CreXus, and two FIDAC employees are on CreXus’ board of directors, Annaly says it expects that CreXus’ board will create a special committee consisting entirely of directors who are independent of Annaly to consider the proposal. The buyout of common stock would represent a 13% premium to CreXus’ last reported share price, a 16% premium to the last three-month average price and a 5% premium to the common stock book value per share as CreXus reported last week in its third-quarter earnings release, according to Annaly.