Real estate investment trust Rithm Capital, the parent of multichannel lender Newrez, has agreed to issue a one-year loan, purchase common stock and become the external manager of its peer Great Ajax Corp.
New York-based Rithm Capital engaged in acquisitions last year to become a global asset manager focused on real estate. This year, it restructured its distributed retail business in a shrinking mortgage market, cutting managers and reducing compensation at NewRez, a top 10 mortgage lender and servicer.
Michael Nierenberg, CEO, chairman and president of Rithm Capital, said in a statement that the company’s transaction with Great Ajax represents ”another step forward in our evolution as a global alternative asset manager.”
“We believe Great Ajax will be well-positioned to execute on a commercial real estate-focused strategy and generate significant value for shareholders,” Nierenberg said.
According to the deal announced Tuesday, Great Ajax will borrow $70 million in a one-year term loan agreement with one of Rithm’s subsidiaries. The proceeds are expected to repay Great Ajax’s outstanding convertible notes.
The companies noted that Great Ajax will also issue five-year warrants to Rithm, exercisable for its common stock, based on the amounts drawn under the loan facility.
Meanwhile, Rithm will purchase $14 million of Great Ajax common stock to be issued in a securities purchase agreement subject to stockholder approval. Great Ajax has entered into support and exchange agreements with certain institutional stockholders representing more than 40% of the shares of its common stock.
As part of the deal, Rithm will also replace Thetis Asset Management LLC as Great Ajax’s external manager, which will enable Great Ajax to “shift its strategic direction and capitalize on commercial real estate investment opportunities,” the companies stated.
Citi is the financial adviser for Rithm, while Piper Sandler & Co. is advising Great Ajax. Meanwhile, BTIG LLC is the financial adviser for the special committee of the Great Ajax board of directors.
