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Trinity Merger to acquire Broadmark in $1.2B cash-and-stock deal

Trinity Merger Corp., a special purpose acquisition company, and the Broadmark real estate lending companies and management companies agreed to merge to form an internally managed commercial mortgage REIT with an expected equity value of $1.5 billion.

Seattle-based Broadmark comprises specialty commercial real estate finance companies providing construction, land and development financing for commercial and residential properties. As of March 31, Broadmark had approximately $992.2 million in total committed loans in target geographic regions.

Per the terms of the transaction, Trinity and Broadmark will combine to form Broadmark Realty Capital Inc., a new Maryland corporation that will elect to be taxed as a REIT. Broadmark Realty intends to apply for listing of its securities on the NYSE under a new ticker symbol.

Trinity will acquire Broadmark for $1.2 billion in total consideration, comprised of 92%, or $1.1 billion, in Broadmark Realty stock and 8%, or $98 million, in cash. The cash component of the purchase price will be paid to 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 remaining purchase price will be paid in newly issued Broadmark Realty common stock.

It is expected that Broadmark will have no outstanding debt at the closing of the transaction.

Broadmark Realty also entered into a subscription agreement for a $75.0 million private placement of its common stock common shares with affiliates of Farallon Capital Management LLC. The proceeds from Farallon's investment will be used to fund transaction-related expenses and Broadmark Realty's ongoing business operations.

Jeffrey Pyatt, president of Pyatt/Broadmark Management LLC, will become the CEO of Broadmark Realty upon closing, and Joseph Schocken, founder and president of Broadmark Capital LLC, will become chairman of the board. Othre Broadmark executive team members will continue in their respective roles in the combined company.

The transaction is expected to be completed in early November.

B. Riley FBR Inc. is serving as the capital markets adviser and private placement agent to Trinity, Gibson Dunn & Crutcher LLP is serving as Trinity's legal adviser, and Raymond James & Associates Inc. is its financial adviser. CS Capital Advisors LLC is acting as financial adviser to Broadmark, while Bryan Cave Leighton Paisner LLP is acting as its legal adviser.