Trinity Merger to acquire Broadmark for $1.2B in cash, stock transaction
Trinity Merger and Broadmark announced that they have entered into a definitive merger agreement for a business combination transaction to create an internally-managed, mortgage real estate investment trust, or REIT, with an expected equity value of $1.5B, assuming no redemptions by Trinity stockholders or Broadmark members. It is expected that Broadmark will have no debt outstanding at closing. Under the terms of the merger agreement, Trinity and Broadmark will combine to form 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. Broadmark is a 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, Broadmark had approximately $992.2M in total committed loans in target geographic regions that exhibit favorable demographic trends. Under the terms of the merger agreement, Trinity will acquire Broadmark for $1.2B in total consideration, comprised of 92%, or $1.1B, in Broadmark Realty stock and 8%, or $98M, 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 $75M private placement of Broadmark Realty's common stock with affiliates of 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 Pyatt, president of Pyatt Broadmark Management, will become the CEO of Broadmark Realty, and Joseph 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. 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 $100M 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.