UPDATED: Trinity Merger Corp. (TMCX) Announces Merger with Broadmark


UPDATED: Trinity Merger Corp. (TMCX) Announces Merger with Broadmark

Aug 12, 2019 INTEL by Kristi Marvin


Trinity Merger Corp. (TMCX), announced this morning that they have entered into a definitive merger agreement with the Broadmark real estate lending companies and management companies (“Broadmark”),  to create an internally-managed, mortgage real estate investment trust (“REIT”) with an expected equity value of $1.5 billion. It is expected that Broadmark will have no debt outstanding at closing.

Broadmark, which was founded in 2010 and headquartered in Seattle, is a specialty commercial real estate finance company providing construction, land and development financing for commercial and residential properties. Broadmark originates short term, first deed of trust mortgages with conservative loan-to-value collateral support. As of March 31, 2019, Broadmark had approximately $992.2 million in total committed loans in target geographic regions that exhibit favorable demographic trends. To date, Broadmark has delivered monthly unlevered distributions representing annual returns of 10-11% based on invested capital in its lending companies.


Under the terms of the merger agreement, 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 the 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 remainder of the purchase price to be paid will be paid in newly issued shares of Broadmark Realty’s common stock.

UPDATED: The Company Common Consideration is approximately $64.34 million in shares of Broadmark Realty Common Stock at a price per share equal to the Reference Price.

The Management Company Consideration is an amount equal to approximately $98.16 million in cash, subject to adjustment for certain transaction expenses and indebtedness.

The “Reference Price” is the value of the funds held by Trinity in the account established for the benefit of its stockholders, net of certain taxes and determined as of the close of business on the business day immediately preceding the date of Closing, divided by the outstanding number shares of Trinity Class A common stock.  The Reference Price is estimated to be approximately $10.47 as of the date of the Agreement.


In addition, Broadmark Realty has entered into a subscription agreement for a $75.0 million private placement of Broadmark Realty’s common stock with affiliates of Farallon Capital Management, L.L.C. (“Farallon”), a global asset management firm at a price per share equal to the Reference Price ($10.47). The proceeds from Farallon’s investment will be used to fund transaction-related expenses and the ongoing business operations of Broadmark Realty following the consummation of the business combination, including funding new loan origination opportunities in existing and new markets.

UPDATE:  In addition, the PIPE Investors will have an option to purchase up to $25.0 million of additional Broadmark Realty Common Stock, exercisable during the 365 day period following the Closing, at the Reference Price. 

  • In connection with the PIPE Investment, Broadmark Realty will issue to the PIPE Investors warrants in an amount equal to the number of shares of Broadmark Realty Common Stock purchased by the PIPE Investors pursuant to their initial $75.0 million investment (note: at $10.47 this equals 7,163,324 warrants to be issued which is the exact same amount as the sponsor private placement warrants that will be cancelled).  Such warrants to be on substantially the same terms as the warrants that will be held by public stockholders of Broadmark Realty upon consummation of the business combination transaction.



The Sponsor shall surrender to Trinity, for no consideration and as a contribution to the capital of Trinity:

  • 3,801,360 shares of Class B common stock of Trinity (founders shares)
  • 7,163,324 outstanding private placement warrants of Trinity (Sponsor at-risk warrants)



  • Broadmark Realty having at least $100 million in cash following Closing after payment of expenses and indebtedness 
  • Consummation of the PIPE Investment 



The Agreement may be terminated if:

  • The Closing has not occurred on or prior to November 17, 2019 (the “Outside Date”)
  • The Outside Date may be extended to not later than December 31, 2019



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



Trinity and Broadmark will host a joint investor conference call to discuss the proposed transaction on Tuesday, August 13 at 10:00 am EST.

Interested parties may listen to the call via telephone by dialing: 1-844-400-9700, or for international callers, 1-470-279-3859 (confirmation code: PIN: 21163#). A telephone replay will be available shortly after the call and can be accessed by dialing 1-855-454-6212, or for international callers, 1-941-999-2091 (confirmation code: PIN: 21163#).

Quick takes:  REITs are not exactly in my wheelhouse, but REITs issuing dividends (which Broadmark intends to do at $1.21 for their first calendar year) are typically associated with interest rate sensitivity. However, low interest rates can make dividend-paying REITs more attractive.  The flip side is a contracting economy can make them unattractive.  Having said that, I’m not strong enough in this sector to really comment on this. If there are any REIT experts out there, please weigh in on the comments below.  This is way outside of my comfort zone.