PMC Commercial Trust, a real estate investment trust which provides commercial real estate loans to small businesses, has agreed to merge with CIM Urban REIT LLC, an owner of Class A office properties. The deal calls for CIM to receive 22 million newly issues shares of PMC common stock and 65 million newly issues shares of PMC preferred stock.
Each share of the preferred stock is convertible into seven shares of common stock. As a result, CIM in essence will end up with nearly 98% of PMC’s common shares.
PMC’s closing price on July 5, the last trading day before the deal was announced, was $8.44 per share.
CIM will contribute its portfolio of $2.39 billion worth of property investments. The combination will have an implied valuation of $2.44 billion.
As part of the transaction, PMC shareholders as of the business day prior to closing of the deal will get a special dividend of $5.50 per share.
After closing, the merged company is expected to invest in “substantially stabilized real estate” in high density urban markets, as well as continue to originate real estate loans to small businesses.
"This transaction offers an efficient program to provide our institutional partners with liquidity over time while maintaining their ability to hold their investment and continue to benefit from expected quarterly dividends and capital appreciation from the portfolio of exceptionally attractive properties assembled by CIM Urban REIT over the last eight years," said Richard Ressler, principal of CIM Group.
"The merged company will be a well-capitalized owner of top-tier real estate assets located in some of the best performing real estate markets in North America. Additionally, we believe that the merged company will be an attractive investment for a broad array of investors, including some that have been precluded from investing in CIM Urban REIT because of restrictions against private investments or because of the large minimum investment required to participate in CIM Group's private institutionally focused funds."
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