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Benefit Street Partners Realty Trust to Merge with Publicly Traded REIT

Benefit Street Partners Realty Trust Inc., a publicly registered non-traded real estate investment trust focused on commercial mortgage loans, plans to merge with Capstead Mortgage Corporation.

Benefit Street Partners Realty Trust Inc., a publicly registered non-traded real estate investment trust focused on commercial mortgage loans, plans to merge with Capstead Mortgage Corporation (NYSE: CMO), a publicly traded residential mortgage REIT.

The combined company will be renamed Franklin BSP Realty Trust and is expected to be the fourth largest commercial mortgage REIT with nearly $2 billion of pro forma equity.

The REIT’s common stock will trade on the NYSE under the new ticker symbol “FBRT” upon closing, which is expected in the fourth quarter of 2021.

Under the terms of the merger agreement, Capstead stockholders will receive a cash payment equal to a 15.75 percent premium to Capstead’s diluted book value per share and shares of Benefit Street Partners Realty Trust common stock calculated on an adjusted “book-for-book” basis.

The book values for Capstead and Benefit Street Partners Realty Trust used to calculate the cash consideration and exchange ratio will be set before the transaction closes.

Based on the June 30 adjusted book values per share, the implied cash payment would be $0.99 per share and the total value would be $7.30 per share, representing an implied 20 percent premium to the last reported sale price of Capstead common stock on the New York Stock Exchange on July 23, 2021.

The combined company will be externally managed by Benefit Street Partners, a credit-focused alternative asset manager with approximately $32 billion of assets under management as of June 30, 2021.

“Coupled with [Benefit Street Partners’] 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,” said Richard Byrne, president and chief executive officer.

A $100 million common stock repurchase program will be available post-closing to support the combined company’s common stock trading level, the company said.

Benefit Street 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 Benefit Street Partners Realty Trust.

In addition, the REIT 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.

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 passthrough 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.

Shares of Capstead closed at $6.45 on Monday, up 6.09 percent from the previous close.

Formerly known as Realty Finance Trust and managed by AR Global, Benefit Street took over as the company’s new advisor at the end of September 2016. Benefit Street is a wholly-owned subsidiary of Franklin Templeton, an independent asset manager with more than $1.5 trillion of assets under management as of June 30, 2021. As of June 30, 2021, the REIT had more than $3 billion of assets.

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