Adamas Trust's Attractive Preferred Shares: A High-Yield Opportunity at a Material Discount

In the current landscape of value investing, distressed real estate investment trusts (REITs) have emerged as a compelling niche for income-focused investors. Among these, Adamas Trust, Inc. (NYSE: AT) stands out for its preferred shares, which offer a rare combination of high yields and significant discounts to liquidation value. For investors willing to navigate the risks of a volatile sector, Adamas Trust's preferred shares-particularly its Series G-present a compelling case for capital appreciation and income generation.

A Resilient Earnings Foundation

Adamas Trust's third-quarter 2025 results underscore its ability to generate durable earnings despite broader market headwinds. Earnings available for distribution per share rose to $0.24, marking the sixth consecutive quarter of growth and a 9% increase from the prior quarter. This momentum is driven by a robust net interest income of $36,586, supported by a 1.50% net interest spread and a diversified investment portfolio now valued at $10.4 billion. The company's strategic acquisition of the remaining 50% interest in Constructive Loans, LLC-a mortgage banking platform-added $14.1 million in income, further solidifying its earnings base.

Preferred Shares: High Yields and Deep Discounts

The most attractive aspect of Adamas Trust's capital structure lies in its preferred shares. The Series G preferreds, for instance, offer a 7.000% dividend yield and trade at a 28% discount to liquidation value. This discount, combined with a fixed dividend of $0.7032991 per share, creates a compelling risk-rebalance for income investors. According to a report by Seeking Alpha, Series G's 9.7% current yield-among the highest in the REIT sector-reflects its appeal to investors seeking capital preservation and income.

Other series, such as Series D, E, and F, also provide attractive yields ranging from 6.875% to 7.286%, with dividends recently declared for October 15, 2025. These offerings are particularly valuable in a high-interest-rate environment, where traditional fixed-income assets struggle to compete.

Broader Market Dynamics and Sector Resilience

The broader REIT market in 2025 is shaped by divergent subsector performance. While commercial office properties face challenges from remote work trends, multifamily and industrial real estate remain resilient. According to CBRE's U.S. Real Estate Market Outlook 2025, industrial and data center sectors are benefiting from e-commerce growth and AI-driven demand. Adamas Trust's focus on agency residential mortgage-backed securities (RMBS)-now 57% of its total capital-positions it to capitalize on these trends.

However, the market for distressed REIT preferreds remains cautious. Elevated interest rates have increased borrowing costs, and lenders are avoiding holding distressed assets on their books, opting instead to sell loans at a discount. This creates opportunities for investors like Adamas Trust to acquire assets at favorable terms, particularly in markets with strong demand-supply imbalances.

Risk Considerations and Liquidity Position

Adamas Trust's leverage ratios-5.0x for company recourse and 4.7x for portfolio recourse-suggest a conservative capital structure. While the company reported a 31.79% revenue decline in 2024 compared to 2023, its Q3 2025 results indicate a recovery in earnings and portfolio diversification. Investors should monitor macroeconomic risks, including inflation and potential recessionary pressures, which could delay broader market recovery.

Conclusion: A Value-Driven Case for Preferred Shares

For value investors, Adamas Trust's preferred shares represent a high-conviction opportunity. The combination of elevated yields, deep discounts, and a resilient earnings model aligns with the principles of margin of safety and long-term value creation. While the REIT sector remains fragmented, Adamas Trust's strategic positioning in agency RMBS and its disciplined capital rotation strategy make its preferred shares a standout play in the distressed REIT space.

As the market continues to navigate macroeconomic uncertainties, Adamas Trust's preferreds offer a rare blend of income and upside potential-a testament to the enduring appeal of value investing in real estate.