A definitive agreement has been secured
Real estate investment trusts Western Asset Mortgage Capital (WMC) and Terra Property Trust (TPT) have reached a definitive agreement to merge to form a commercial real estate-focused REIT.
Under the terms of the agreement, TPT stockholders are expected to own 76% of the combined REIT, with the remainder 24% owned by WMC stakeholders. The companies haven’t set a purchase price yet, but Terra Property said it would value Western Asset at 100% of its adjusted book value of roughly $106 million as of March 31 instead of its market capitalization of $57 million as of June 27. Upon completion, the combined REIT is projected to have roughly $1.2 billion in assets and $436 million of adjusted book value.
“This transaction provides for a valuation of WMC’s equity based on its adjusted book value per share, which is significantly greater than WMC’s market capitalization based on recent trading levels,” Western Asset CEO Bonnie Wongtrakool said in a press release. “It will also enable WMC shareholders to benefit from increased operational scale and cost synergies and represents an attractive long-term investment opportunity in a diversified, credit-oriented platform positioned for growth.”
Terra Property’s main business is investing in commercial real estate loans. Meanwhile, Western Asset finances and manages a portfolio of residential real estate loans and assets. The companies plan to sell off WMC’s assets and redeploy capital into floating-rate, low-LTV commercial loans.
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“This compelling combination is a unique opportunity to establish a diversified REIT that prioritizes capital preservation, maintains a robust balance sheet, and consistently generates attractive risk-adjusted returns for its shareholders,” said Vik Uppal, who will be the chairman and CEO of the combined REIT.
“With reduced leverage levels and increased liquidity as a combined company, we believe WMC shareholders will greatly benefit from the partnership of a well-capitalized institutional partner in TPT, which brings a proven track record and has developed broad and deep expertise investing across cycles, property types, and markets,” Wongtrakool added.
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