Trinity Merger will merge with real estate lender Broadmark to create a commercial mortgage real estate investment trust (REIT) with an expected equity value of $1.5 billion.
Under the terms of the merger, Trinity, a special purpose acquisition company, and Broadmark will combine to form Broadmark Realty Capital. Trinity will pay $1.2 billion, comprised of 92% in stock, or $1.1 billion in Broadmark Realty stock, and the remaining 8%, or $98 million, in cash.
As of March 31, 2019, Broadmark had bout $992.2 million in total committed loans in target geographic regions that exhibit favorable demographic trends.
“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,” said Sean Hehir, Trinity’s CEO.
The new Maryland Corporation will elect to be taxed as an internally-managed REIT, under the tax code. In connection with the transaction, Broadmark Realty intends to apply to list its securities on the New York Stock Exchange under a new ticker symbol.
It is expected that Broadmark will have no outstanding debt at closing. The combined company will be well-positioned to capitalize on strong nationwide demand for flexible real estate financial solutions, according to Monday’s statement.
“There is tremendous national demand for this type of real estate financing, which has 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,” said Steve Haggerty, managing partner of Trinity Investments.“Importantly,” he added, “Broadmark has no debt on its balance sheet, which made this a particularly compelling opportunity for us.”
“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,” said Jeffrey B. Pyatt, president of Pyatt Broadmark Management.
Pyatt will become the CEO of Broadmark Realty, and Joseph L. Schocken, founder, and president of Broadmark Capital, will serve as chairman of the board.
The rest of Broadmark’s executive team will continue in their respective roles in the newly-combined company.
The deal is expected to close in early November.