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• | “Amendment No. 1” means that certain Amendment No. 1 to the Merger Agreement, dated September 22, 2021, by and among BSPRT, Merger Sub, Capstead and the BSPRT Advisor, a copy of which is attached as Annex E to this supplement. |
• | “BSPRT Common Stock” refers to the common stock, par value $0.01 per share, of BSPRT. |
• | “BSPRT Series F Preferred Stock” refers to BSPRT’s Series F convertible preferred stock, par value $0.01 per share, which will be created in connection with the BSPRT Recapitalization. |
• | “BSPRT Series F Preferred Stock Articles Supplementary” refers to the Articles Supplementary concerning the BSPRT Series F Preferred Stock, a copy of which is attached as Annex F to this supplement. |
• | “BSPRT Stock Dividend” refers to the stock dividend of nine shares of BSPRT Series F Preferred Stock to be distributed to each holder of one share of BSPRT Common Stock, which will be completed prior to the Merger. |
• | “Merger Agreement” refers to the Agreement and Plan of Merger, dated as of July 25, 2021, by and among BSPRT, Merger Sub, Capstead and the BSPRT Advisor, as amended by Amendment No. 1 (a copy of which is included as Annex E to this supplement), and as it may be amended or modified from time to time, a copy of which is attached as Annex A to this proxy statement/prospectus. |
Q: | Following the Merger, what percentage of BSPRT Common Stock will current BSPRT stockholders and Capstead stockholders own? |
A: | Immediately following the completion of the Merger, based on the number of issued and outstanding shares of BSPRT Common Stock and Capstead Common Stock (excluding Cancelled Shares) as of July 31, 2021, the assumed conversion of all of the shares of BSPRT Series A Preferred Stock as of the Closing, the assumed conversion of all of the shares of BSPRT Series C Preferred Stock, BSPRT Series D Preferred Stock and BSPRT Series F Preferred Stock (as if such shares had converted on the Closing) and an assumed Exchange Ratio of 0.3521: |
• | the shares of BSPRT’s common stock held by the BSPRT stockholders as of immediately prior to Closing are expected to represent in the aggregate approximately 62.8% of the Combined Company’s outstanding shares of common stock; and |
• | Capstead stockholders as of immediately prior to Closing are expected to own in the aggregate the remaining approximately 37.2% of the Combined Company’s outstanding shares of common stock. |
Q: | How will BSPRT stockholders be affected by the Merger and the BSPRT Common Stock Issuance? |
A: | Prior the consummation of the Merger, and as contemplated by the Merger Agreement, BSPRT has agreed to take necessary corporate actions to effect the BSPRT Reverse Stock Split. In connection with the BSPRT Reverse Stock Split, BSPRT will file with the State Department of Assessments and Taxation of Maryland (the “SDAT”) Articles of Amendment (the “Articles of Amendment”) to the BSPRT Charter, and each outstanding share of BSPRT Common Stock as of the effective date of the Articles of Amendment will automatically combine into 1/10th of a share of BSPRT Common Stock. |
• | the shares of BSPRT’s common stock held by the BSPRT stockholders as of immediately prior to Closing are expected to represent in the aggregate approximately 62.8% of the Combined Company’s outstanding shares of common stock; and |
• | Capstead stockholders as of immediately prior to Closing are expected to own in the aggregate the remaining approximately 37.2% of the Combined Company’s outstanding shares of common stock. |
• | the BSPRT Recapitalization will have been effectuated by the filing with and acceptance for record by the SDAT of (i) articles of amendment in a form reasonably acceptable to Capstead to effect the BSPRT Reverse Stock Split, and (ii) the BSPRT Series F Preferred Stock Articles Supplementary in a form reasonably acceptable to Capstead; |
• | July 31, 2021; |
• | as adjusted to reflect the BSPRT Recapitalization and the automatic conversion of BSPRT’s Series A Preferred Stock into shares of BSPRT Common Stock upon the listing of the BSPRT Common Stock, assuming each had occurred on July 31, 2021; and |
• | as further adjusted to reflect the BSPRT Common Stock and BSPRT Series E Preferred Stock expected to be issued in the Merger based on the book values per share of BSPRT Common Stock and Capstead Common Stock as of June 30, 2021. |
| | As of July 31, 2021 | | | After BSPRT Recapitalization/Preferred Stock Conversions | | | Merger Closing | |
BSPRT Common Stock | | | 44,148,122 | | | 12,064,458 | | | 46,174,343(1) |
BSPRT Series A Preferred Stock | | | 25,567 | | | 0 | | | 0 |
BSPRT Series C Preferred Stock | | | 1,400 | | | 1,400 | | | 1,400 |
BSPRT Series D Preferred Stock | | | 17,950 | | | 17,950 | | | 17,950 |
BSPRT Series E Preferred Stock | | | 0 | | | 0 | | | 10,329,039 |
BSPRT Series F Preferred Stock | | | 0 | | | 39,733,310 | | | 39,733,310 |
(1) | Actual amounts will be determined based on the final Exchange Ratio (as determined and publicly announced at least three business days before the Capstead special meeting). |
• | from BSPRT (A) a number of shares of BSPRT’s common stock, $0.01 par value per share (“BSPRT Common Stock”) equal to the quotient (rounded to the nearest one ten-thousandth) (the “Exchange Ratio”) determined by dividing (i) Capstead’s adjusted book value per share by (ii) BSPRT’s adjusted book value per share (the “Per Share Stock Consideration”), and (B) a cash amount equal to the product of (rounding to the nearest cent) (x) Capstead’s adjusted book value per share multiplied by 15.75%, multiplied by (y) 22.5%, without any interest thereon (the “Per Share Cash Consideration” and together with the Per Share Stock Consideration, the “Per Common Share BSPRT Consideration”); |
• | the BSPRT Reverse Stock Split and Reclassification will have been effectuated by the filing of (i) articles of amendment in a form reasonably acceptable to Capstead to effect the BSPRT Reverse Stock Split and (ii) the BSPRT Series F Preferred Stock Articles Supplementary in a form reasonably acceptable to Capstead; |
• | Immediately prior to the Closing, as a result of the BSPRT Recapitalization, BSPRT expects to have authorized 900,000,000 shares of BSPRT Common Stock and 100,000,000 shares of BSPRT Preferred Stock; |
(1) | senior to all classes or series of BSPRT’s common stock, the BSPRT Series F Preferred Stock and to all other equity securities issued by BSPRT other than equity securities referred to in clauses (2) and (3) below; |
| | Rights of BSPRT Stockholders (which will be the rights of common stockholders of the Combined Company following the Merger) | | | Rights of Capstead stockholders | |
Authorized Capital Stock | | | BSPRT is authorized to issue 1,000,000,000 shares, consisting of (i) 950,000,000 shares of common stock, $0.01 par value per share, and (ii) 50,000,000 shares of preferred stock, $0.01 par value per share. Following the BSPRT Recapitalization, BSPRT will be authorized to issue 1,000,000,000 shares, consisting of (i) 900,000,000 shares of common stock, $0.01 par value per share, and (ii) 100,000,000 shares of preferred stock, $0.01 par value per share. As of July 31, 2021, 44,148,122 shares of BSPRT Common Stock were issued and outstanding (which includes 16,005 shares of restricted BSPRT Common Stock), 25,567 shares of BSPRT Series A Preferred Stock were issued and outstanding, 1,400 shares of BSPRT Series C Preferred Stock were issued and outstanding, 17,950 shares of BSPRT Series D Preferred Stock were outstanding, and zero shares of BSPRT Series E Preferred Stock and BSPRT Series F Preferred Stock were issued and outstanding. Following the BSPRT Recapitalization, and the consummation of the Merger, the Combined Company is expected to have approximately 46,174,343 shares of BSPRT Common Stock, 1,400 shares of Series C Preferred Stock, 17,950 shares of Series D Preferred Stock, 10,329,039 shares of newly classified BSPRT Series E Preferred Stock and 39,733,310 shares of BSPRT Series F Preferred Stock issued and outstanding. | | | Capstead is authorized to issue 350,000,000 shares, consisting of (i) 250,000,000 shares of common stock, $0.01 par value per share, and (ii) 100,000,000 shares of preferred stock, $0.10 par value per share. As of July 31, 2021, 96,875,560 shares of Capstead Common Stock were issued and outstanding (which includes 822,780 shares of Capstead Restricted Stock) and 10,329,039 shares of Capstead Series E Preferred Stock were issued and outstanding. |
• | each of BSPRT’s executive officers and directors; and |
• | all of BSPRT’s executive officers and directors as a group. |
| | Prior to BSPRT Recapitalization and Closing | | | Following Closing | |||||||||||||
Beneficial Owner(1) | | | Number of Shares of Common Stock Beneficially Owned | | | Percent of Class | | | Number of Shares of Common Stock Beneficially Owned | | | Percent of Class | | | Number of Shares of Preferred Stock Beneficially Owned† | | | Percent of Class |
Richard J. Byrne | | | 130,855 | | | * | | | 13,086 | | | * | | | 117,770 | | | * |
Jerome S. Baglien | | | 2,784 | | | * | | | 278 | | | * | | | 2,506 | | | * |
Elizabeth K. Tuppeny | | | 21,333(2) | | | * | | | 2,133(2) | | | * | | | 19,200 | | | * |
Buford H. Ortale | | | 18,547(3) | | | * | | | 1,855(3) | | | * | | | 16,692 | | | * |
Peter J. McDonough | | | 18,586(4) | | | * | | | 1,859(4) | | | * | | | 16,727 | | | * |
Jamie Handwerker | | | 18,562(5) | | | * | | | 1,856(5) | | | * | | | 16,706 | | | * |
All directors and executive officers as a group (6 persons) | | | 210,667 | | | * | | | 21,067 | | | * | | | 189,600 | | | * |
* | Less than 1%. |
† | Reflects shares of BSPRT Series F Preferred Stock to be received prior to the Closing in the BSPRT Recapitalization (representing 90% of the shares of BSPRT Common Stock held by each holder prior to the BSPRT Recapitalization). |
(1) | The business address of each individual or entity listed in the table 1345 Avenue of the Americas, Suite 32A, New York, New York 10105. |
(2) | Includes 2,796 unvested restricted shares (280 following the BSPRT Reverse Stock Split). |
(3) | Includes 2,796 unvested restricted shares (280 following the BSPRT Reverse Stock Split). |
(4) | Includes 2,796 unvested restricted shares (280 following the BSPRT Reverse Stock Split). |
(5) | Includes 2,796 unvested restricted shares (280 following the BSPRT Reverse Stock Split). |
| | Prior to Closing | | | Following Closing† | |||||||||||||||||||
| | Number of Shares of Common Stock Beneficially Owned | | | Percent of Class | | | Number of Shares of BSPRT Preferred Stock Beneficially Owned | | | Percent of Class | | | Number of Shares of Common Stock Beneficially Owned | | | Percent of Class | | | Number of Shares of BSPRT Preferred Stock Beneficially Owned | | | Percent of Class | |
Security Benefit Life Insurance Company(1) | | | — | | | — | | | 17,949 | | | 40.0% | | | — | | | — | | | 17,949 | | | * |
Delaware Life Insurance Company(2) | | | — | | | — | | | 3,989 | | | 8.9% | | | 1,193,508 | | | 2.6% | | | — | | | — |
Newport Global Equity Fund(3) | | | — | | | — | | | 3,378 | | | 7.5% | | | 1,010,697 | | | 2.2% | | | — | | | — |
Penn Mutual Life Insurance Company(4) | | | — | | | — | | | 2,997 | | | 6.7% | | | 597,502 | | | 1.3% | | | 1,000 | | | * |
Textron Inc. Master Trust(5) | | | — | | | — | | | 2,992 | | | 6.7% | | | 895,206 | | | 1.9% | | | — | | | — |
Selective Insurance Company of America(6) | | | — | | | — | | | 2,992 | | | 6.7% | | | 895,206 | | | 1.9% | | | — | | | — |
† | Upon listing of the BSPRT Common Stock on the NYSE at Closing, each outstanding share of BSPRT Series A Preferred Stock will convert into 299.2 shares of BSPRT Common Stock. |
(1) | The business address of Security Benefit Life Insurance Company is One SW Security Benefit Place, Topeka, KS 66636. |
(2) | The business address of the Delaware Life Insurance Company is 1601 Trapelo Road, Waltham, MA, 02451. |
(3) | The business address of Newport Global Equity Fund is 469 King Street West, 4th Floor, Toronto, Ontario, Canada, M5V1K4 |
(4) | The business address of Penn Mutual Life Insurance Company is 600 Dresher Road, Suite 100, Horsham, PA 19044. |
(5) | The business address of Textron Inc. Master Trust is 40 Westminster St., Providence, RI 02903 |
(6) | The business address of Selective Insurance Company of America is 10 Waterside Drive, Suite 306, Farmington, CT 06032. |
(in thousands) | | | Historical BSPRT | | | Historical Capstead | | | Transaction Accounting Adjustments | | | | | BSPRT Pro- Forma Combined | |
Assets: | | | | | | | | | | | |||||
Cash and cash equivalents | | | $63,277 | | | $207,392 | | | $(21,453) | | | (E) | | | $249,216 |
Restricted Cash | | | 14,323 | | | — | | | — | | | | | 14,323 | |
Commercial mortgage loans, held for investment, net | | | 3,109,111 | | | — | | | — | | | | | 3,109,111 | |
Commercial mortgage loans, held for sale, measured at fair value | | | 77,031 | | | — | | | — | | | | | 77,031 | |
Real estate securities, available for sale, measured at fair value | | | — | | | 7,429,792 | | | — | | | | | 7,429,792 | |
Derivative instruments, measured at fair value | | | 5 | | | — | | | — | | | | | 5 | |
Other real estate investments, measured at fair value | | | 2,547 | | | — | | | — | | | | | 2,547 | |
Receivable for loan repayment | | | 128,333 | | | — | | | — | | | | | 128,333 | |
Accrued interest receivable | | | 17,411 | | | — | | | — | | | | | 17,411 | |
Prepaid expenses and other assets | | | 4,400 | | | 134,316 | | | 51,503 | | | (A)(E) | | | 190,219 |
Intangible lease asset, net of amortization | | | 13,134 | | | — | | | — | | | | | 13,134 | |
Real estate owned, held for sale | | | 26,111 | | | — | | | — | | | | | 26,111 | |
Cash collateral receivable from derivative counterparties | | | — | | | 78,161 | | | — | | | | | 78,161 | |
Total Assets | | | $3,455,683 | | | $7,849,661 | | | $30,050 | | | | | $11,335,394 | |
Liabilities and Stockholders’ Equity | | | | | | | | | | | |||||
Liabilities: | | | | | | | | | | | |||||
Collateralized loan obligations | | | $1,960,090 | | | $— | | | $— | | | | | $1,960,090 | |
Repurchase agreements - commercial mortgage loans | | | 287,462 | | | — | | | — | | | | | 287,462 | |
Repurchase agreements and secured borrowings - real estate securities | | | 46,510 | | | 6,809,883 | | | — | | | | | 6,856,393 | |
Mortgage note payable | | | 29,167 | | | — | | | — | | | | | 29,167 | |
Other financing and loan participation - commercial mortgage loans | | | 37,105 | | | — | | | — | | | | | 37,105 | |
Unsecured borrowings | | | — | | | 98,544 | | | — | | | | | 98,544 | |
Derivative instruments, measured at fair value | | | 2,285 | | | 33,335 | | | — | | | | | 35,620 | |
Interest payable | | | 1,044 | | | — | | | — | | | | | 1,044 | |
Distributions payable | | | 16,099 | | | 15,289 | | | — | | | | | 31,388 | |
Accounts payable and accrued expenses | | | 7,739 | | | 19,597 | | | 30,047 | | | (A)(G) | | | 61,383 |
Due to affiliates | | | 12,691 | | | — | | | — | | | | | 12,691 | |
Total Liabilities | | | 2,400,192 | | | 6,976,648 | | | 34,047 | | | | | 9,410,887 |
(in thousands) | | | Historical BSPRT | | | Historical Capstead | | | Transaction Accounting Adjustments | | | | | BSPRT Pro- Forma Combined | |
Redeemable convertible preferred stock Series A, $0.01 par value, 60,000 authorized and 25,567 issued and outstanding | | | 127,579 | | | — | | | (127,579) | | | (F) | | | — |
Redeemable convertible preferred stock Series C, $0.01 par value, 20,000 authorized and 1,400 issued and outstanding | | | 6,966 | | | — | | | — | | | | | 6,966 | |
Redeemable convertible preferred stock Series D, $0.01 par value, 20,000 authorized and 17,950 issued and outstanding | | | 89,670 | | | — | | | — | | | | | 89,670 | |
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Stockholders’ Equity: | | | | | | | | | | | |||||
Preferred stock, $0.01 par value, 100,000,000 authorized and none issued and outstanding | | | — | | | — | | | — | | | | | — | |
Preferred stock - $0.01 par value; 10,329,039 shares authorized: 7.50% Cumulative Redeemable Preferred Stock, Series E, 10,329,039 shares issued and outstanding | | | — | | | 250,946 | | | (250,946) | | | (B) | | | — |
Preferred stock - $0.01 par value, 40,000,000 shares authorized: Series F convertible preferred stock, $0.01 par value | | | — | | | — | | | 399 | | | (H) | | | 399 |
Common stock - $0.01 par value | | | 444 | | | 968 | | | (947) | | | (C)(F) | | | 465 |
Series E Preferred stock - $0.01 par value; 10,329,039 shares authorized: 7.50% Cumulative Redeemable Preferred Stock, Series E, 10,329,039 shares issued and outstanding (formerly Capstead Series E Preferred Stock) | | | — | | | — | | | 264,526 | | | (B) | | | 264,526 |
Additional paid-in capital | | | 908,689 | | | 1,269,599 | | | (527,653) | | | (B)(C)(D)(F) (H) | | | 1,650,635 |
Accumulated other comprehensive income | | | — | | | 6,906 | | | (6,906) | | | (D) | | | — |
Accumulated deficit | | | (77,857) | | | (655,406) | | | 645,109 | | | (D)(G) | | | (88,154) |
Total stockholders’ equity | | | 831,276 | | | 873,013 | | | 123,582 | | | | | 1,827,871 | |
Total liabilities, redeemable convertible preferred stock and stockholders’ equity | | | 3,455,683 | | | 7,849,661 | | | 30,050 | | | | | 11,335,394 |
($ in thousands, except per share amounts) | | | Historical BSPRT | | | Historical Capstead | | | Transaction Accounting Adjustments | | | | | BSPRT Pro- Forma Combined | |
Interest Income: | | | | | | | | | | | |||||
Interest income | | | $91,222 | | | $46,966 | | | $— | | | | | $138,188 | |
Less: Interest expense | | | 24,006 | | | 10,789 | | | — | | | | | 34,795 | |
Net interest income | | | 67,216 | | | 36,177 | | | — | | | | | 103,393 | |
Revenue from real estate owned | | | 1,432 | | | — | | | — | | | | | 1,432 | |
Total Income | | | $68,648 | | | $36,177 | | | $— | | | | | $104,825 | |
Expenses | | | | | | | | | | | |||||
Management, general and administrative expense | | | 25,283 | | | 6,188 | | | 3,037 | | | (B)(C) | | | 34,508 |
Total expenses | | | $25,283 | | | $6,188 | | | $3,037 | | | | | $34,508 | |
Other income/(loss): | | | | | | | | | | | |||||
Benefit for credit losses | | | (3,839) | | | — | | | — | | | | | (3,839) | |
Realized (gain)/loss on sale of real estate securities | | | 1,375 | | | — | | | — | | | | | 1,375 | |
Realized (gain)/loss on sale of real estate owned assets, held-for-sale | | | (1,112) | | | — | | | — | | | | | (1,112) | |
Realized (gain)/loss on sale of commercial mortgage loan, held for sale, measured at fair value | | | (13,150) | | | — | | | — | | | | | (13,150) | |
Unrealized (gain)/loss on commercial mortgage loans, held for sale, measured at fair value | | | (1,104) | | | — | | | — | | | | | (1,104) | |
Unrealized (gain)/loss on other real estate investments, measured at fair value | | | (26) | | | — | | | — | | | | | (26) | |
Unrealized loss on derivatives | | | 1,054 | | | — | | | — | | | | | 1,054 | |
Realized gain on derivatives | | | (2,259) | | | (4,482) | | | — | | | | | (6,741) | |
Total other (income)/loss | | | $(19,061) | | | $(4,482) | | | $— | | | | | $(23,543) | |
Income before taxes | | | 62,426 | | | 34,471 | | | (3,037) | | | | | 93,860 | |
Provision/(benefit) for income tax | | | 2,270 | | | — | | | — | | | | | 2,270 | |
Net income/(loss) | | | $60,156 | | | $34,471 | | | $(3,037) | | | | | $91,590 | |
Preferred dividends | | | (7,236) | | | (9,684) | | | 7,236 | | | (D) | | | (9,684) |
Undistributed earnings allocated to preferred stock | | | (6,518) | | | — | | | 6,518 | | | (D) | | | — |
Net income/(loss) applicable to common stockholders | | | $46,402 | | | $24,787 | | | $10,717 | | | | | $81,906 | |
Basic and diluted net income per share — As Previously Reported | | | $1.05 | | | | | | | | | ||||
Basic and diluted net income per share — Pro Forma | | | $ | | | | | | | $(A) | | | $0.89 |
($ in thousands, except per share amounts) | | | Historical BSPRT | | | Historical Capstead | | | Transaction Accounting Adjustments | | | | | BSPRT Pro- Forma Combined | |
Interest Income: | | | | | | | | | | | |||||
Interest income | | | $179,872 | | | $186,735 | | | $— | | | | | $366,607 | |
Less: Interest expense | | | 66,556 | | | 75,511 | | | — | | | | | 142,067 | |
Net interest income | | | 113,316 | | | 111,224 | | | — | | | | | 224,540 | |
Revenue from real estate owned | | | 4,299 | | | — | | | — | | | | | 4,299 | |
Total Income | | | $117,615 | | | $111,224 | | | $— | | | | | $228,839 | |
Expenses | | | | | | | | | | | |||||
Management, general and administrative expense | | | 49,156 | | | 13,430 | | | 66,947 | | | (A)(C)(D)(E) | | | 129,533 |
Total expenses | | | $49,156 | | | $13,430 | | | $66,947 | | | | | $129,533 | |
Other income/(loss): | | | | | | | | | | | |||||
Provision/(benefit) for credit losses | | | 13,296 | | | — | | | — | | | | | 13,296 | |
Impairment losses on real estate owned assets | | | 398 | | | — | | | — | | | | | 398 | |
Realized (gain)/loss on extinguishment of debt | | | (3,678) | | | — | | | — | | | | | (3,678) | |
Realized (gain)/loss on sale of real estate securities | | | 10,137 | | | 67,820 | | | — | | | | | 77,957 | |
Realized (gain)/loss on sale of commercial mortgage loan, held for sale | | | (184) | | | — | | | — | | | | | (184) | |
Realized (gain)/loss on sale of real estate owned asset, held for sale | | | (1,851) | | | — | | | — | | | | | (1,851) | |
Realized (gain)/loss on sale of commercial mortgage loan, held-for-sale, measured at fair value | | | (15,931) | | | — | | | — | | | | | (15,931) | |
Unrealized (gain)/loss on commercial mortgage loans, held-for-sale, measured at fair value | | | 75 | | | — | | | — | | | | | 75 | |
Unrealized loss on other real estate investments, measured at fair value | | | 32 | | | 32 | | | | | | | |||
Unrealized loss on derivatives | | | 995 | | | — | | | — | | | | | 995 | |
Realized loss on derivatives | | | 12,486 | | | 159,547 | | | — | | | | | 172,033 | |
Total other (income)/loss | | | $15,775 | | | $227,367 | | | $— | | | | | $243,142 | |
Income before taxes | | | 52,426 | | | (129,573) | | | (66,947) | | | | | (143,836) | |
Provision/(benefit) for income tax | | | (2,062) | | | — | | | — | | | | | (2,062) | |
Net income/(loss) | | | $54,746 | | | $(129,573) | | | $(66,947) | | | | | $(141,774) | |
Preferred dividends | | | (14,920) | | | (19,368) | | | (10,907) | | | (F) | | | (45,195) |
Net income/(loss) applicable to common stockholders | | | $39,826 | | | $(148,941) | | | $(52,634) | | | | | $(186,970) | |
Basic and diluted net income per share — As Previously Reported | | | $0.90 | | | | | | | | | ||||
Basic and diluted net income per share — Pro Forma | | | $ | | | | | | | $(B) | | | $(2.82) |
1. | Description of the Transaction |
2. | Preliminary Estimate of Sources |
Issuance of 34,319,789 shares of BSPRT Common Stock, at an offering price of $17.91 | | | 614,787 |
Issuance of BSPRT Series E Preferred Stock | | | 264,526 |
Cash | | | 21,453 |
Total Sources | | | 900,766 |
3. | Fair value of assets acquired, liabilities assumed, and calculation of premium paid |
Assets Acquired | | | As of June 30, 2021 |
Cash and cash equivalents | | | 207,392 |
Real estate securities, available for sale, measured at fair value | | | 7,429,792 |
Prepaid expenses and other assets | | | 134,316 |
Cash collateral receivable from derivative counterparties | | | 78,161 |
Assets Acquired | | | As of June 30, 2021 |
Liabilities Assumed | | | |
Repurchase agreements and secured borrowings - real estate securities | | | 6,809,883 |
Unsecured borrowings | | | 98,544 |
Derivative instruments, measured at fair value | | | 33,335 |
Distributions payable | | | 15,289 |
Accounts payable and accrued expenses | | | 19,597 |
Net Assets Acquired | | | 873,013 |
Total Purchase Price | | | (924,518) |
Preliminary estimate of the fair value of the net assets acquired | | | 873,013 |
Premium allocated to certain assets not measured at fair value | | | (51,503) |
4. | Pro Forma Adjustments |
(A) | This adjustment represents the estimated capitalized additional third party costs allocated to the other assets acquired, such as merger and acquisition fees, as well as legal, accounting and other third party due diligence costs of approximately $10.6 million for BSPRT and $13.2 million for Capstead which would not be a recurring expense. |
(B) | This adjustment represents the issuance, at fair value of shares of BSPRT Series E Preferred Stock in exchange for the retirement of shares of Capstead Series E Preferred Stock. |
(C) | This adjustment represents the issuance of 34,319,789 shares of BSPRT Common Stock as merger consideration for the 97,513,808 shares of Capstead common stock. |
(D) | This adjustment represents the elimination of Capstead’s additional paid-in-capital balance of $1,270.0 million, accumulated deficit of $655.4 million, and accumulated other comprehensive income of $6.9 million. |
(E) | This adjustment represents the cash consideration transferred by BSPRT to the common shareholders of Capstead as part of the acquisition, and the allocation of the excess of the cost of the acquisition over the fair value of Capstead’s acquired assets. |
(F) | This adjustment represents the issuance, at par value, of 7,649,646 shares of BSPRT Common Stock, in |
(G) | This adjustment represents the increase in compensation costs due to expected severance payment to Capstead officers as a result of the acquisition which would not be a recurring expense. |
(H) | This adjustment represents the one-for-ten reverse stock split of the BSPRT Common Stock and issuance of a stock dividend of nine shares of newly created BSPRT Series F Preferred Stock to each holder of BSPRT Common Stock which will result in an issuance of 39,856,350 shares of BSPRT Series F Preferred Stock. |
(A) | Represents the pro forma combined earnings per share of BSPRT Common Stock, including the impact of the 34,319,789 shares of BSPRT Common Stock assumed to be issued per adjustment C & H above and the issuance of 53,295,516 shares of BSPRT Common Stock, in exchange for the assumed conversion of the BSPRT Series A Preferred Stock, BSPRT Series C Preferred Stock, BSPRT Series D Preferred Stock and BSPRT Series F Preferred Stock. Per its terms, the BSPRT Series A Preferred Stock will automatically convert into BSPRT Common Stock upon the listing of the BSPRT Common Stock in connection with the Merger, BSPRT Series C Preferred Stock will convert into BSPRT Common Stock upon the one year anniversary of the listing and the BSPRT Series D Preferred Stock will automatically convert into BSPRT Common Stock upon the one year anniversary of the listing or up to six months sooner at the election of the holders. BSPRT Series F Preferred Stock will be issued in the BSPRT Stock Dividend prior to the consummation of the Merger and will convert into BSPRT Common Stock upon the six month anniversary of the listing. |
(B) | This adjustment represents the increase in the management fees paid as a result of the acquisition. |
(C) | This adjustment represents the reduction of compensation costs as a result of the acquisition as BSPRT does not have any employees. |
(D) | Per its terms, the BSPRT Series A Preferred Stock will automatically convert into BSPRT Common Stock upon the listing of the BSPRT Common Stock in connection with the Merger, the BSPRT Series C Preferred Stock will automatically convert into BSPRT Common Stock upon the one year anniversary of the listing, the BSPRT Series D Preferred Stock will automatically convert into BSPRT Common Stock upon the one year anniversary of the listing or up to six months sooner at the election of the holders, and the BSPRT Series F Preferred Stock will automatically convert into BSPRT Common Stock upon the six month anniversary of the listing. This adjustment represents the reduction of preferred dividends paid and undistributed earnings as a result of the acquisition and conversion of the BSPRT Series A Preferred Stock, BSPRT Series C Preferred Stock, BSPRT Series D Preferred Stock and BSPRT Series F Preferred Stock. |
(A) | This adjustment represents the estimated additional total third party costs and related liabilities, such as merger and acquisition fees, as well as legal, accounting, and other third party due diligence costs of approximately $10.1 million for BSPRT and $13.2 million for Capstead. |
(B) | Represents the pro forma combined earnings per share of BSPRT Common Stock, including the impact of the 34,319,789 shares of BSPRT Common Stock assumed to be issued per adjustment C & H above and the issuance of 47,505,996 shares of BSPRT Common Stock upon the assumed conversion of BSPRT Series A Preferred Stock and BSPRT Series F Preferred Stock to the unaudited pro forma combined balance sheets. Per its terms, the BSPRT Series A Preferred Stock will automatically convert into BSPRT Common Stock upon the listing of the BSPRT Common Stock in connection with the Merger and Series F Preferred Stock will automatically into BSPRT Common Stock upon six month anniversary of the listing. |
(C) | This adjustment represents the expense of acquired assets that were allocated excess consideration paid in the unaudited pro forma combined financial statements. |
(D) | This adjustment represents the increase in compensation costs due to expected severance payment to Capstead officers as a result of the acquisition which would not be a recurring expense. |
(E) | This adjustment represents the increase in the management fees paid as a result of the acquisition. |
(F) | Per its terms, the BSPRT Series A Preferred Stock will automatically convert into BSPRT Common Stock upon the listing of the BSPRT Common Stock in connection with the Merger. Per its terms, the BSPRT Series F Preferred Stock issued prior to the consummation of the Merger will be converted into shares of BSPRT Common Stock upon the six month anniversary of the listing. This adjustment represents the reduction of preferred dividends paid as a result of the acquisition and conversion of the BSPRT Series A Preferred Stock and BSPRT Series F Preferred Stock. |
| | BENEFIT STREET PARTNERS REALTY TRUST, INC. | |||||||
| | | | | | ||||
| | | | | | ||||
| | | | | | ||||
| | By: | | | /s/ Jerome S. Baglien | ||||
| | | | Name: | | | Jerome S. Baglien | ||
| | | | Title: | | | Chief Financial Officer and Treasurer | ||
| | | | | | ||||
| | | | | | ||||
| | RODEO SUB I, LLC | |||||||
| | | | | | ||||
| | | | | | ||||
| | | | | | ||||
| | By: | | | /s/ Jerome S. Baglien | ||||
| | | | Name: | | | Jerome S. Baglien | ||
| | | | Title: | | | Chief Financial Officer | ||
| | | | | | ||||
| | | | | | ||||
| | CAPSTEAD MORTGAGE CORPORATION | |||||||
| | | | | | ||||
| | | | | | ||||
| | | | | | ||||
| | By: | | | /s/ Phillip A. Reinsch | ||||
| | | | Name: | | | Phillip A. Reinsch | ||
| | | | Title: | | | President and Chief Executive Officer | ||
| | | | | | ||||
| | | | | | ||||
| | BENEFIT STREET PARTNERS L.L.C., solely for the purposes set forth in the Agreement | |||||||
| | | | | | ||||
| | | | | | ||||
| | | | | | ||||
| | By: | | | /s/ Bryan Martoken | ||||
| | | | Name: | | | Bryan Martoken | ||
| | | | Title: | | | Chief Financial Officer |
| | FRANKLIN BSP REALTY TRUST, INC. | |||||||
| | | | | | ||||
| | | | | | ||||
| | By: | | | |||||
| | | | Name: | | | Jerome S. Baglien | ||
| | | | Title: | | | Chief Financial Officer and Treasurer |
ATTEST: | | | |||||||
| | | | | | ||||
By: | | | | | |||||
| | Name: | | | Micah Goodman | | | ||
| | Title: | | | Secretary | | |
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