Ready Capital and Broadmark Realty Capital to Merge

Ready Capital Corp. and Broadmark Realty Capital Inc. announced that they have entered a definitive merger agreement. Broadmark will merge into Ready Capital, after which the latter “is expected to have a pro forma equity capital base of $2.8 billion.”

Ready Capital is a “multi-strategy real estate finance company that originates, acquires, finances and services small-to-medium balance commercial loans.” Broadmark is as “specialty real estate finance company that specializes in originating and servicing residential and commercial construction loans.”

Each Broadmark share will convert to 0.47233 shares of Ready Capital common stock, or 63 million shares. The closing price on February 24, 2023, implies a $5.90 per share offer price, which is a 41% premium. The expected value at closing will be $787 million.

After the deal’s close, Ready Capital shareholders will have 64% of the combined entities shares, while Broadmark’s shareholders will have about 36%. Ready Capital is also assuming Broadmark’s senior outstanding unsecured notes.

“Based on the closing price of Ready Capital’s common stock on February 24, 2023, the market capitalization of the combined company is approximately $2.2 billion,” the companies said. “The combined company will operate under the name ‘Ready Capital Corporation’ and its shares will trade on the NYSE under the existing ticker symbol ‘RC.’ Waterfall Asset Management, LLC will continue to manage the combined company.”

The companies say that they have “highly synergistic business models with natural alignment across geographies, products, sponsors, and credit philosophies with the “ability for the combined company to capture economics throughout the full lifecycle of a property and retain sponsor relationships beyond construction and/or bridge stages.” So, even after making construction and bridge loans as a project is underway, there is ongoing room to provide longer-term mortgages.

The companies claim that the combination creates the fourth largest commercial mortgage REIT, and so creates “significantly increased scale and opportunities for operational efficiency.”

After the merger, Ready Capital chairman, CEO, and chief investment officer Thomas Capasse will continue to be in charge of the merged entity. Ready Capital executives Jack Ross, Andrew Ahlborn, Gary Taylor and Adam Zausmer will remain in their current roles and the company will remain headquartered in New York City. The nine-person Ready Capital board will expand to 12, with Broadmark naming the additional three directors.

It is unclear from the announcement what, if any, position Broadmark executives or staff will play in the new combined entity.