Combined company, Franklin BSP Realty Trust, to
become fourth largest commercial mortgage REIT
Benefit Street Partners Realty Trust, Inc. (“BSPRT”), a
publicly-registered, non-listed real estate investment trust
(“REIT”), and Capstead Mortgage Corporation (NYSE: CMO)
(“Capstead”), a REIT, today announced they have entered into a
definitive merger agreement. Under the terms of the agreement,
Capstead common stockholders will receive a cash payment equal to a
15.75% premium to Capstead’s diluted book value per share and
shares of BSPRT common stock calculated on an adjusted
“book-for-book” basis. The book values for Capstead and BSPRT used
to calculate the cash consideration and exchange ratio will be set
on a date prior to the closing of the transaction. Based on the
June 30 adjusted book values per share,1 the implied cash payment
would be $0.99 per share and the total value would be $7.30 per
share, representing an implied 20% premium to the last reported
sale price of Capstead common stock on the New York Stock Exchange
(“NYSE”) on July 23, 2021.
The combined company, to be called “Franklin BSP Realty Trust”
post-close, will transition the capital base of Capstead, a
residential mortgage REIT, into commercial mortgage loans where
BSPRT is focused. BSPRT’s external manager, Benefit Street Partners
L.L.C. (“BSP”), a wholly-owned subsidiary of Franklin Resources,
Inc. (“Franklin Templeton”), will manage the combined company
following the completion of the transaction. Upon closing the
transaction, which is expected in the fourth quarter of 2021, the
combined company will become the fourth largest commercial mortgage
REIT with nearly $2 billion of pro forma equity and its common
stock will trade on the NYSE under the new ticker symbol FBRT.
Highlights of the Merger
- Transaction provides Capstead common stockholders with a
cash payment at closing equal to a 15.75% premium to diluted book
value per share and an ongoing ownership interest in Franklin BSP
Realty Trust with the potential for higher returns and dividend
yields.
- Franklin BSP Realty Trust will be the 4th largest commercial
mortgage REIT with nearly $2 billion of pro forma equity.
- Transition to BSPRT’s strategy of originating commercial
mortgage loans, which has delivered returns on equity in excess of
10%, is expected to generate higher returns with less volatility
and lower leverage than Capstead’s current strategy.
- Franklin BSP Realty Trust will be externally managed by an
experienced team of approximately 60 real estate credit investment
professionals at BSP, led by Michael Comparato, BSP’s Head of
Commercial Real Estate, and Franklin Templeton with significant
investment and risk management expertise across the credit
spectrum.
- Franklin BSP Realty Trust will be publicly traded on the
NYSE under the ticker FBRT, providing existing BSPRT stockholders
greater access to liquidity.
- A $100 million common stock repurchase program will be
available post-closing to support the combined company’s common
stock trading level.
Richard J. Byrne, President and Chief Executive Officer of
BSPRT, said, “With the combined capital of BSPRT and Capstead, we
are well positioned to capture opportunities ahead of us and create
superior value for our stockholders. We believe our differentiated
investment strategy, marked by a focus on middle market commercial
real estate mortgages, provides us a significant competitive
advantage with a large-scale, diverse portfolio that has delivered
strong growth and attractive returns over the long term. Coupled
with BSP’s strong deal sourcing and underwriting capabilities
supported by Franklin Templeton’s world class sponsorship, the new
Franklin BSP Realty Trust will be poised to benefit from the large
and compelling commercial real estate lending market opportunity
resulting from a significant volume of upcoming commercial real
estate debt maturities.”
Phillip A. Reinsch, Chief Executive Officer of Capstead, said,
“This transaction provides Capstead common stockholders with an
immediate and sizable cash premium and significant opportunity to
participate in the upside of the combined company as it establishes
itself as one of the larger publicly-traded commercial mortgage
REITs. After conducting a thorough strategic review, our Board
concluded redirecting Capstead’s capital into commercial real
estate lending by combining with a highly respected originator that
has a strong track record and best-in-class sponsorship is an
exciting opportunity. Combining with BSPRT will allow Capstead’s
stockholders to transition into an ownership position in a leading
commercial mortgage REIT capable of generating 10%-plus returns on
equity that we believe has significant long-term growth
potential.”
The combined company will be externally managed by BSP, a
leading credit-focused alternative asset manager with approximately
$32 billion of assets under management as of June 30, 2021. BSP is
a wholly-owned subsidiary of Franklin Templeton, one of the largest
independent asset managers in the world with over $1.5 trillion of
assets under management as of June 30, 2021.
External manager BSP will fund approximately $75 million of the
cash merger consideration to be paid for each share of Capstead
common stock. The remaining cash consideration will be funded by
BSPRT, which will also issue shares of the combined company’s
common stock for each share of Capstead common stock based on an
adjusted book-for-book exchange. The merger will be a taxable
transaction for U.S. federal income tax purposes.
In addition to the above consideration, BSPRT will assume
Capstead’s $100 million in unsecured borrowings maturing in 2035
and 2036 and $258 million of issued and outstanding 7.50% Series E
cumulative redeemable preferred stock, which will be exchanged for
new preferred shares of the combined company with the same
terms.
BSPRT and BSP have committed to certain structural and market
protections to support the combined company’s common stock
performance following completion of the merger, including a 6-month
lock-up for approximately 94% of the current shares of BSPRT common
stock and a committed common stock repurchase plan of up to $100
million to support the combined company’s stock price beginning
four weeks after closing, up to $35 million of which will be funded
by BSP and Franklin Templeton.
The transaction has been unanimously approved by both companies’
Boards of Directors and is subject to customary closing conditions,
including the approval of Capstead’s stockholders.
Credit Suisse is serving as financial advisor and Hunton Andrews
Kurth LLP is serving as legal advisor to Capstead. Houlihan Lokey
served as lead financial advisor, and Barclays served as financial
advisor, to BSPRT. Hogan Lovells US LLP served as legal advisor to
BSPRT.
Investor Conference Call
Capstead and BSPRT will hold a joint investor conference call on
Monday, July 26, 2021 at 8:30 A.M. ET to discuss the merger. To
access the conference call, dial toll free (877) 505-6547 in the
U.S., (855) 669-9657 for Canada, or (412) 902-6660 for
international callers and ask to join the Capstead Mortgage
Corporation conference call. Please dial in approximately 10
minutes prior to the above start time. The audio replay will be
available one hour after the end of the conference call. The replay
can be accessed by dialing toll free (877) 344-7529 in the U.S.,
(855) 669-9658 for Canada, or (412) 317-0088 for international
callers and entering conference number 10159055. A live audio
webcast of the conference call can be accessed through a link in
the investor relations section of Capstead’s website at
www.capstead.com and BSPRT’s website at www.bsprealtytrust.com.
Please allow extra time prior to the call to download and install
audio software, if needed. An audio archive of the webcast will be
available on each company’s website.
About Capstead
Formed in 1985 and based in Dallas, Texas, Capstead is a
mortgage REIT that earns income from investing in a leveraged
portfolio of residential adjustable-rate mortgage pass-through
securities, referred to as ARM securities, issued and guaranteed by
government-sponsored enterprises, either Fannie Mae or Freddie Mac,
or by an agency of the federal government, Ginnie Mae.
About Benefit Street Partners Realty Trust
Benefit Street Partners Realty Trust, Inc. (“BSPRT”) is a
publicly-registered, private real estate investment trust that
originates, acquires and manages a diversified portfolio of
commercial real estate debt secured by properties located in the
United States. As of June 30, 2021, BSPRT had over $3 billion of
assets. BSPRT is externally managed by Benefit Street Partners
L.L.C. For further information, please visit
www.bsprealtytrust.com.
About Benefit Street Partners
Benefit Street Partners L.L.C. (“BSP”) is a leading
credit-focused alternative asset management firm with over $32
billion in assets under management as of June 30, 2021. BSP manages
assets across a broad range of complementary credit strategies,
including private/opportunistic debt, structured credit, high
yield, special situations, and commercial real estate. Based in New
York, the BSP platform was established in 2008. BSP is a wholly
owned subsidiary of Franklin Templeton. For further information,
please visit www.benefitstreetpartners.com.
About Franklin Templeton
Franklin Resources, Inc. (NYSE:BEN) is a global investment
management organization with subsidiaries operating as Franklin
Templeton and serving clients in over 165 countries. Franklin
Templeton’s mission is to help clients achieve better outcomes
through investment management expertise, wealth management and
technology solutions. Through its specialist investment managers,
the company brings extensive capabilities in equity, fixed income,
multi-asset solutions and alternatives. With offices in more than
30 countries and approximately 1,300 investment professionals, the
California-based company has over 70 years of investment experience
and over $1.5 trillion in assets under management as of June 30,
2021. For more information, please visit franklinresources.com.
Forward-Looking Statements
This communication includes forward-looking statements. These
forward-looking statements generally can be identified by phrases
such as “will,” “should,” “expects,” “anticipates,” “foresees,”
“forecasts,” “estimates” or other words or phrases of similar
import. Similarly, statements herein that describe the proposed
transaction, including its financial and operational impact, and
other statements of management’s beliefs, intentions or goals also
are forward-looking statements. It is uncertain whether any of the
events anticipated by the forward-looking statements will transpire
or occur, or if any of them do, what impact they will have on the
results of operations and financial condition of the combined
company or the price of Capstead or BSPRT stock. These
forward-looking statements involve certain risks and uncertainties,
many of which are beyond the parties’ control, that could cause
actual results to differ materially from those indicated in such
forward-looking statements, including but not limited to the
ability of the parties to consummate the proposed transaction on a
timely basis or at all and the satisfaction of the conditions
precedent to consummation of the proposed transaction, including
the approval of the proposed transaction by holders of Capstead’s
common stock; business disruption following completion of the
merger; fluctuations in the adjusted book value per share of both
Capstead and BSPRT; and the other risks and important factors
contained and identified in Capstead’s and BSPRT’s filings with the
Securities and Exchange Commission (“SEC”), including their
respective Quarterly Reports on Form 10-Q and Annual Reports on
Form 10-K, any of which could cause actual results to differ
materially from the forward-looking statements. The forward-looking
statements included in this communication are made only as of the
date hereof. Neither Capstead nor BSPRT undertakes any obligation
to update the forward-looking statements to reflect subsequent
events or circumstances, except as required by law.
Additional Information about the Proposed Merger Transaction
and Where to Find It
This communication relates to the proposed merger transaction
pursuant to the terms of the Agreement and Plan of Merger, dated
July 25, 2021, by and among BSPRT, Rodeo Sub I, LLC, Capstead and
BSP. In connection with the proposed merger transaction, BSPRT
expects to file with the SEC a registration statement on Form S-4
that will include a proxy statement of Capstead that also
constitutes a prospectus of BSPRT, which proxy statement/prospectus
will be mailed or otherwise disseminated to Capstead’s common
stockholders when it becomes available. BSPRT and Capstead also
plan to file other relevant documents with the SEC regarding the
proposed merger transaction. INVESTORS ARE URGED TO READ THE PROXY
STATEMENT/PROSPECTUS AND OTHER RELEVANT DOCUMENTS FILED WITH THE
SEC IF AND WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN
IMPORTANT INFORMATION ABOUT THE PROPOSED MERGER TRANSACTION. You
may obtain a free copy of the proxy statement/prospectus and other
relevant documents (if and when they become available) filed by
BSPRT or Capstead with the SEC at the SEC’s website at www.sec.gov.
Copies of the documents filed by BSPRT with the SEC will be
available free of charge on BSPRT’s website at
www.bsprealtytrust.com or by contacting BSPRT’s Investor Relations
at (844) 785-4393. Copies of the documents filed by Capstead with
the SEC will be available free of charge on Capstead’s website at
www.capstead.com or by contacting Capstead’s Investor Relations at
(214) 874-2339.
Certain Information Regarding Participants
BSPRT and Capstead and their respective directors, executive
officers and other members of management and employees may be
deemed to be participants in the solicitation of proxies in respect
of the proposed merger transaction. You can find information about
BSPRT’s executive officers and directors in BSPRT’s definitive
proxy statement filed with the SEC on April 8, 2021, in connection
with BSPRT’s 2021 annual meeting of stockholders. You can find
information about Capstead’s executive officers and directors in
Capstead’s definitive proxy statement filed with the SEC on April
1, 2021, in connection with its 2021 annual meeting of
stockholders. Additional information regarding the interests of
such potential participants will be included in the proxy
statement/prospectus and other relevant documents filed with the
SEC if and when they become available. You may obtain free copies
of these documents from BSPRT or Capstead using the sources
indicated above.
No Offer or Solicitation
This communication shall 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 jurisdiction 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.
1 Based on June 30, 2021 Capstead book value per share of $6.35
and BSPRT expected book value per share of $18.28.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210726005385/en/
Investor: Capstead Mortgage Corporation Lindsey Crabbe, Investor
Relations (214) 874-2339 lcrabbe@capstead.com Benefit Street
Partners Realty Trust Amy Theaumont Vice President, Investor
Relations (617) 433-2543 a.theaumont@benefitstreetpartners.com
Media for Capstead Sard Verbinnen & Co Stephen Pettibone
Cameron Seligmann (212) 687-8080 Capstead-SVC@sardverb.com
Media for Benefit Street Realty Trust: Prosek Partners: Kate
Dillon (518) 859-2892 kdillon@prosek.com
Franklin Templeton Corporate Communications Rebecca Radosevich
(212) 632-3207 rebecca.radosevich@franklintempleton.com
Capstead Mortgage (NYSE:CMO)
Historical Stock Chart
From Dec 2024 to Jan 2025
Capstead Mortgage (NYSE:CMO)
Historical Stock Chart
From Jan 2024 to Jan 2025
