Formation of $1.5 billion internally-managed
commercial mortgage REIT
Combined company well-positioned to capitalize
on strong nationwide demand for flexible real estate financing
solutions
Current Broadmark management team to lead
combined company
Joint investor conference call scheduled for
Tuesday, August 13 at 10:00 am EST
Trinity Merger Corp. (“Trinity”) (Nasdaq: TMCX, TMCXU, TMCXW), a
special purpose acquisition company, and the Broadmark real estate
lending companies and management companies (“Broadmark”), specialty
commercial real estate finance companies providing construction,
land and development financing for commercial and residential
properties, announced today that they have entered into a
definitive merger agreement for a business combination transaction
to create an internally-managed, mortgage real estate investment
trust (“REIT”) with an expected equity value of $1.5 billion
(assuming no redemptions by Trinity stockholders or Broadmark
members). It is expected that Broadmark will have no debt
outstanding at closing. With greater financial strength and
additional resources, the combined company will be well-positioned
to capitalize on strong nationwide demand for flexible real estate
financing solutions.
Under the terms of the merger agreement, Trinity and Broadmark
will combine to form Broadmark Realty Capital Inc. (“Broadmark
Realty”), a new Maryland corporation that will elect to be taxed as
a REIT under the tax code. In connection with the transaction,
Broadmark Realty intends to apply for listing of its securities on
the New York Stock Exchange under a new ticker symbol.
Founded in 2010 and headquartered in Seattle, Broadmark is a
leading provider of financing to real estate investors and
developers across the United States. Broadmark originates short
term, first deed of trust mortgages with conservative loan-to-value
collateral support. As of March 31, 2019, Broadmark had
approximately $992.2 million in total committed loans in target
geographic regions that exhibit favorable demographic trends. Since
its inception, Broadmark has established a significant network of
borrowers, many of whom have become repeat borrowers. As a
complement to its core lending business, Broadmark has cultivated a
broad national network of real estate investors and registered
investment advisors through which it has successfully raised over
$820 million to fund its loan portfolio from its inception in 2010
through March 31, 2019. Broadmark believes that its conservative
lending approach, strict underwriting and high collateral
requirements have significantly contributed to Broadmark’s minimal
realized loan losses since inception. To date, Broadmark has
consistently delivered monthly unlevered distributions representing
annual returns of 10-11% based on invested capital in its lending
companies. The combined company will seek to continue to capitalize
on these borrower and real estate investor relationships to
continue to grow its business and further diversify its overall
access to capital.
Under the terms of the merger agreement, Trinity will acquire
Broadmark for $1.2 billion in total consideration, comprised of
92%, or $1.1 billion, in Broadmark Realty stock and 8%, or $98
million, in cash. The cash component of the purchase price will be
paid to the equity owners of Broadmark’s real estate management
companies as part of an internalization transaction and will be
funded by Trinity’s cash held in trust. The remainder of the
purchase price to be paid will be paid in newly issued shares of
Broadmark Realty’s common stock. In addition, Broadmark Realty has
entered into a subscription agreement for a $75.0 million private
placement of Broadmark Realty’s common stock with affiliates of
Farallon Capital Management, L.L.C. (“Farallon”), a global asset
management firm. The proceeds from Farallon’s investment will be
used to fund transaction-related expenses and the ongoing business
operations of Broadmark Realty following the consummation of the
business combination, including funding new loan origination
opportunities in existing and new markets.
Upon closing of the proposed transaction, Jeffrey B. Pyatt,
President of Pyatt Broadmark Management, LLC, will become the Chief
Executive Officer of Broadmark Realty, and Joseph L. Schocken,
Founder and President of Broadmark Capital, will serve as Chairman
of the board of directors. The rest of Broadmark’s executive team
will continue in their respective roles in the combined
company.
Sean Hehir, Trinity’s Chief Executive Officer, commented: “When
we launched this endeavor, we sought to consummate a transaction
with an established and successful business where we could apply
our decades of real estate investing experience, longstanding
relationships and access to the capital markets to create a highly
complementary combination.”
Steve Haggerty, a Managing Partner of Trinity Investments, an
affiliate of the sponsor of Trinity, said: “This transaction with
Broadmark presents a unique opportunity to create a scalable public
platform aimed at capitalizing on a niche real estate lending space
where most others aren’t able to operate efficiently. There is
tremendous national demand for this type of real estate financing,
which had previously been provided by commercial banks, and we
expect that combining Trinity’s financial strength and resources
with Broadmark’s proven platform and deep expertise will fuel
significant growth and create value for stockholders. Importantly,
Broadmark has no debt on its balance sheet, which made this a
particularly compelling opportunity for us.”
Mr. Pyatt stated: “Combining with Trinity allows us to create a
formidable platform with access to substantial capital in the
public markets, which will position the combined entity to leverage
significant growth opportunities to rapidly scale our real estate
lending business. Moreover, we expect to continue to work with our
longstanding and growing network of real estate investors in the
private real estate lending markets through the formation of one or
more private REITs following the closing of the transaction, which
will be organized and externally managed by a subsidiary of
Broadmark Realty.”
Mr. Schocken added: “Our team identified a white space in the
commercial lending industry where there was significant demand but
minimal access to capital, and we’ve built a strong reputation,
sustainable competitive advantage and highly profitable platform
providing borrowers with this much-needed product. As Broadmark
Realty, we will continue to leverage our extensive proprietary
network of borrowers to source high-quality loans.”
The board of directors of Trinity and the boards of directors
and managers of the Broadmark entities have unanimously approved
the proposed transaction. Completion of the proposed transaction is
subject to Trinity stockholder approval; Broadmark equity holder
approval; obtaining an amendment to Trinity’s outstanding public
warrants to remove certain anti-dilution provisions relating to the
payment of ordinary periodic cash dividends customary for a REIT;
Broadmark Realty retaining at least $100 million in cash following
the consummation of the transactions, the redemption of Trinity
shares, if any, and the payment of expenses and indebtedness
required to be paid at the closing; and other customary closing
conditions. The parties expect that the proposed transaction will
be completed in early November.
For additional information on the proposed transaction, see
Trinity’s Current Report on Form 8-K, which will be filed promptly
and can be obtained, without charge, at the website of the U.S.
Securities and Exchange Commission (“SEC”) at www.sec.gov.
B. Riley FBR, Inc. is acting as capital markets advisor and
private placement agent to Trinity, Gibson, Dunn & Crutcher LLP
is acting as Trinity’s legal advisor, and Raymond James &
Associates, Inc. is acting as Trinity’s financial advisor. CS
Capital Advisors, LLC is acting as financial advisor to Broadmark,
and Bryan Cave Leighton Paisner LLP is acting as Broadmark’s legal
advisor.
Investor Conference Call Information
Trinity and Broadmark will host a joint investor conference call
to discuss the proposed transaction on Tuesday, August 13 at 10:00
am EST.
Interested parties may listen to the call via telephone by
dialing 1-844-400-9700, or for international callers,
1-470-279-3859 (confirmation code: PIN: 21163#). A telephone replay
will be available shortly after the call and can be accessed by
dialing 1-855-454-6212, or for international callers,
1-941-999-2091 (confirmation code: PIN: 21163#).
The conference call webcast and a related investor presentation
with more detailed information regarding the proposed transaction
will be furnished to the SEC, and can be viewed at the SEC’s
website at www.sec.gov.
About Trinity Merger Corp.
Trinity Merger Corp. is a special purpose acquisition company
formed by HN Investors LLC, an affiliate of Trinity Real Estate
Investments LLC, for the purpose of effecting a merger, capital
stock exchange, asset acquisition, stock purchase, reorganization
or similar business combination with one or more businesses.
About Broadmark
Based in Seattle, Washington, and operating in multiple regions
throughout the United States, Broadmark offers short-term, first
deed of trust loans secured by real estate to fund the acquisition,
renovation, rehabilitation or development of residential or
commercial properties. Broadmark also manages and services its loan
portfolio across a variety of market conditions and economic
cycles. From its inception in 2010 through March 31, 2019,
Broadmark has originated approximately 960 loans with an aggregate
face amount in excess of $1.8 billion. As of March 31, 2019,
Broadmark’s combined portfolio of active loans had approximately
$1.0 billion of principal commitments outstanding across 263 loans
to 200 borrowers in nine states, of which approximately $0.7
billion was funded.
Important Information About the Proposed Transaction and
Where to Find It
In connection with the proposed transaction, Broadmark Realty
intends to file a Registration Statement on Form S-4, which will
include a preliminary joint proxy and consent solicitation
statement/prospectus of Trinity. Trinity and Broadmark will mail
the definitive joint proxy and consent solicitation
statement/prospectus and other relevant documents to its
stockholders and members, respectively. Investors and security
holders of Trinity and Broadmark are advised to read, when
available, the preliminary joint proxy and consent solicitation
statement, and amendments thereto, and the definitive joint proxy
and consent solicitation statement in connection with Trinity’s
solicitation of proxies for its special meeting of stockholders and
Broadmark’s solicitation of proxies for its special meeting of
members, in each case to be held to approve the proposed
transaction because the joint proxy and consent solicitation
statement/prospectus will contain important information about the
proposed transaction and the parties to the proposed transaction.
The definitive joint proxy and consent solicitation
statement/prospectus will be mailed to stockholders of Trinity and
members of Broadmark as of a record date to be established for
voting on the proposed transaction. Stockholders of Trinity and
members of Broadmark will also be able to obtain copies of the
Registration Statement and joint proxy and consent solicitation
statement/prospectus, without charge, once available, at the
Securities and Exchange Commission’s (“SEC”) website at www.sec.gov
or by Trinity stockholders by directing a request to: Trinity
Merger Corp., 55 Merchant Street, Suite 1500, Honolulu, HI 96813,
or by Broadmark members by directing a request to Pyatt Broadmark
Management, LLC, 1420 Fifth Avenue, Suite 2000, Seattle, WA 98101,
Attn: Adam Fountain, Managing Director.
Participants in the Solicitation
Trinity and Broadmark Realty and their respective directors,
executive officers, other members of management, and employees,
under SEC rules, may be deemed to be participants in the
solicitation of proxies of Trinity’s stockholders in connection
with the proposed transaction. Investors and security holders may
obtain more detailed information regarding the names and interests
in the proposed transaction of Trinity’s directors and officers in
Trinity’s filings with the SEC, including Trinity’s Annual Report
on Form 10-K for the fiscal year ended December 31, 2018, which was
filed with the SEC on March 15, 2019 and such information will also
be in the Registration Statement to be filed with the SEC by
Broadmark Realty, which will include the joint proxy and consent
solicitation statement/prospectus of Trinity for the proposed
transaction.
Forward Looking Statements
Certain statements made herein are not historical facts but are
forward-looking statements for purposes of the safe harbor
provisions under The Private Securities Litigation Reform Act of
1995. Forward-looking statements generally are accompanied by words
such as “may”, “should”, “would”, “plan”, “intend”, “anticipate”,
“believe”, “estimate”, “predict”, “potential”, “seem”, “seek”,
“continue”, “future”, “will”, “expect”, “outlook” or other similar
words, phrases or expressions. These forward-looking statements
include statements regarding Trinity’s and Broadmark’s industry,
future events, the proposed transaction between Trinity, Broadmark
Realty and Broadmark, the estimated or anticipated future results
and benefits of the combined company following the transaction,
including the likelihood and ability of the parties to successfully
consummate the proposed transaction, future opportunities for the
combined company, and other statements that are not historical
facts. These statements are based on the current expectations of
Trinity’s management and are not predictions of actual performance.
These statements are subject to a number of risks and uncertainties
regarding Trinity’s and Broadmark’s businesses and the transaction,
and actual results may differ materially. These risks and
uncertainties include, but are not limited to, changes in the
business environment in which Trinity and Broadmark operate,
including inflation and interest rates, and general financial,
economic, regulatory and political conditions affecting the
industry in which Trinity and Broadmark operate; changes in taxes,
governmental laws, and regulations; competitive product and pricing
activity; difficulties of managing growth profitably; the loss of
one or more members of Trinity’s management teams; the inability of
the parties to successfully or timely consummate the proposed
transaction or the expected benefits of the transaction or that the
approval of the stockholders of Trinity or the equity holders of
Broadmark or the contemplated amendment to Trinity’s outstanding
warrants is not obtained; failure to complete the Farallon
investment; failure of Broadmark Realty to qualify as a REIT;
failure of Broadmark Realty to obtain approval to list its common
stock and/or warrants on the NYSE or maintain its listing on the
Nasdaq Capital Market; failure to realize the anticipated benefits
of the transaction, including as a result of a delay in
consummating the transaction or a delay or difficulty in
integrating the businesses of Trinity and Broadmark; uncertainty as
to the long-term value of Broadmark Realty’s common stock; and
those discussed in the Trinity’s Annual Report on Form 10-K for the
year ended December 31, 2018 under the heading “Risk Factors”, as
updated from time to time by Trinity’s Quarterly Reports on Form
10-Q and other documents of Trinity on file with the SEC or in the
joint proxy and consent solicitation statement that will be filed
with the SEC by Broadmark Realty. There may be additional risks
that Trinity and Broadmark presently do not know or that Trinity
and Broadmark currently believe are immaterial that could also
cause actual results to differ from those contained in the
forward-looking statements. In addition, forward-looking statements
provide Trinity’s and Broadmark’s expectations, plans or forecasts
of future events and views as of the date of this communication.
Trinity and Broadmark anticipate that subsequent events and
developments will cause Trinity’s and Broadmark’s assessments to
change. However, while Trinity may elect to update these
forward-looking statements at some point in the future, Trinity and
Broadmark specifically disclaim any obligation to do so. These
forward-looking statements should not be relied upon as
representing Trinity’s and Broadmark’s assessments as of any date
subsequent to the date of this communication.
No Offer or Solicitation
This press release shall not constitute a solicitation of a
proxy, consent or authorization with respect to any securities or
in respect of the proposed transaction. This press release shall
also not constitute an offer to sell or the solicitation of an
offer to buy any securities, nor shall there be any sale of
securities in any states or jurisdictions in which such offer,
solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such jurisdiction.
No offering of securities shall be made except by means of a
prospectus meeting the requirements of section 10 of the Securities
Act of 1933, as amended.
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version on businesswire.com: https://www.businesswire.com/news/home/20190812005165/en/
Jason Chudoba or Megan Kivlehan Jason.Chudoba@icrinc.com |
646.277.1249 Megan.Kivlehan@icrinc.com | 646.677.1807
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