Toggle SGML Header (+)


Section 1: 8-K (8-K)

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

 

Date of Report (Date of earliest event reported)
November 7, 2018

 

READY CAPITAL CORPORATION

(Exact Name of Registrant as Specified in its Charter)

 

Maryland

 

001-35808

 

90-0729143

(State or Other Jurisdiction
Of Incorporation)

 

(Commission File Number)

 

(IRS Employer
Identification No.)

 

1140 Avenue of the Americas,

7th Floor

New York, NY 10036

(Address of principal executive offices))
(Zip Code)

 

Registrant’s telephone number, including area code: (212) 257-4600

 

 

(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

x          Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

o            Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

o            Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

o            Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging Growth Company x

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   x

 

 

 


 

Item 7.01. Regulation FD Disclosure

 

On November 7, 2018, Ready Capital Corporation (“Ready Capital”), a multi-strategy real estate finance company that originates, acquires, finances and services small- to medium-sized balance commercial loans, announced it has entered into a definitive agreement to combine in a stock-for-stock merger with Owens Realty Mortgage, Inc. (“ORM”), a specialty finance real estate investment trust that focuses on the origination, investment and management of small-balance and middle-market commercial real estate loans.  The combination will enhance shareholder liquidity and provide for operating leverage across the larger equity base.

 

On November 7, 2018, Ready Capital, a Maryland corporation, ORM, a Maryland corporation, and ReadyCap Merger Sub, LLC, a Delaware limited liability company and a wholly owned subsidiary of Ready Capital (“Merger Sub”), entered into an Agreement and Plan of Merger (the “Merger Agreement”), pursuant to which, subject to the terms and conditions therein, ORM will be merged with and into Merger Sub, with Merger Sub continuing as the surviving company (the “Merger”).

 

On November 7, 2018, Ready Capital issued a press release announcing the execution of the Merger Agreement. A copy of the press release is furnished as Exhibit 99.1 hereto and incorporated herein by reference.

 

On November 7, 2018, Ready Capital made available an investor presentation in connection with the proposed Merger. A copy of the investor presentation is furnished as Exhibit 99.2 hereto and incorporated herein by reference.

 

The information in this Item 7.01 of Form 8-K (including Exhibit 99.1 and Exhibit 99.2) shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of such section, nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended (the “Securities Act”) or the Exchange Act, regardless of the general incorporation language of such filing, except as shall be expressly set forth by specific reference in such filing.

 

Item 8.01. Other Events

 

Item 7.01 above is incorporated herein by reference in this Item 8.01.

 

ADDITIONAL INFORMATION ABOUT THE MERGER

 

In connection with the proposed Merger, Ready Capital expects to file a registration statement on Form S-4 with the Securities and Exchange Commission (the “SEC”) containing a joint proxy statement/prospectus and other documents with respect to the proposed Merger. The joint proxy/prospectus will contain important information about the proposed transaction and related matters. STOCKHOLDERS ARE URGED TO READ THE REGISTRATION STATEMENT AND THE JOINT PROXY STATEMENT/PROSPECTUS (INCLUDING ALL AMENDMENTS AND SUPPLEMENTS THERETO) AND OTHER RELEVANT DOCUMENTS FILED BY READY CAPITAL WITH THE SEC CAREFULLY IF AND WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT READY CAPITAL, ORM AND THE PROPOSED MERGER.

 

Stockholders of Ready Capital and ORM may obtain free copies of the registration statement, the joint proxy statement/prospectus and other relevant documents filed by Ready Capital with the SEC (if and when they become available) through the website maintained by the SEC at www.sec.gov. Copies of the documents filed by Ready Capital with the SEC are also available free of charge on Ready Capital’s website at www.readycapital.com.

 

This communication shall not constitute an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offering of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the U.S. Securities Act of 1933, as amended.

 

2


 

PARTICIPANTS IN SOLICITATION RELATING TO THE MERGER

 

Ready Capital, ORM and their respective directors, executive officers and certain other members of management and employees of Ready Capital and ORM may be deemed to be participants in the solicitation of proxies from Ready Capital’s and ORM’s stockholders in respect of the proposed Merger. Information regarding Ready Capital’s directors and executive officers can be found in Ready Capital’s definitive proxy statement filed with the SEC on April 30, 2018 and Ready Capital’s most recent Annual Report filed on Form 10-K for the fiscal year ended December 31, 2017. Information regarding ORM’s directors and executive officers can be found in ORM’s definitive proxy statement filed with the SEC on June 8, 2018 and the ORM’s most recent Annual Report filed on Form 10-K for the fiscal year ended December 31, 2017. Additional information regarding the interests of such potential participants will be included in the joint proxy statement/prospectus and other relevant documents filed with the SEC in connection with the proposed Merger if and when they become available. These documents are available free of charge on the SEC’s website and from Ready Capital or ORM, as applicable, using the sources indicated above.

 

Forward-Looking Statements

 

This report contains statements that constitute “forward-looking statements,” as such term is defined in Section 27A of the the Securities Act and Section 21E of the Exchange Act and such statements are intended to be covered by the safe harbor provided by the same. These statements are based on current expectations and beliefs of Ready Capital and ORM and are subject to a number of trends and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements; neither Ready Capital nor ORM can give any assurance that its expectations will be attained.

 

Factors that could cause actual results to differ materially from expectations include, but are not limited to, the risk that the merger will not be consummated within the expected time period or at all; the occurrence of any event, change or other circumstances that could give rise to the termination of the Merger Agreement; the inability to obtain stockholder approvals relating to the Merger and issuance of shares in connection therewith or the failure to satisfy the other conditions to completion of the Merger; fluctuations in the adjusted book value per share of the shares of both Ready Capital and ORM; risks related to disruption of management attention from the ongoing business operations due to the proposed Merger; the effect of the announcement of the proposed Merger on Ready Capital’s and ORM’s operating results and businesses generally; the outcome of any legal proceedings relating to the Merger; changes in future loan acquisition and production; the ability to retain key personnel; availability of suitable investment opportunities; changes in interest rates; changes in the yield curve; changes in prepayment rates; the availability and terms of financing; general economic conditions; market conditions; conditions in the market for small balance commercial loans and other investments; legislative and regulatory changes that could adversely affect the businesses of Ready Capital and ORM; and other factors, including those set forth in the Risk Factors section of Ready Capital’s and ORM’s most recent Annual Reports on Form 10-K and other reports filed by Ready Capital and ORM with the SEC, copies of which are available on the SEC’s website, www.sec.gov. Neither Ready Capital nor ORM undertakes any obligation to update these statements for revisions or changes after the date of this report, except as required by law.

 

Item 9.01 Financial Statements and Exhibits

 

(d) Exhibits.

 

99.1

 

Press Release dated November 7, 2018

 

 

 

99.2

 

Investor Presentation by Ready Capital Corporation dated November 7, 2018

 

3


 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

Ready Capital Corporation

 

 

 

 

 

 

 

By:

/s/ Frederick C. Herbst

 

Name:

Frederick C. Herbst

 

Title:

Chief Financial Officer

 

 

 

Dated: November 7, 2018

 

 

 

4


(Back To Top)

Section 2: EX-99.1 (EX-99.1)

Exhibit 99.1

 

 

READY CAPITAL ANNOUNCES MERGER WITH OWENS REALTY MORTGAGE

 

- Approximately $200M of Additional Capital Raised to Support Targeted Growth in Small Balance Commercial Assets -

- Combined Company Will Enhance Shareholder Liquidity -

- Transaction Expected to be Accretive to Earnings in 2019 -

- Transaction Expected to Create Cost and Operating Efficiencies -

 

New York, New York, November 7, 2018 / PRNewswire / — Ready Capital Corporation (NYSE:RC) (“Ready Capital”), a multi-strategy real estate finance company that originates, acquires, finances and services small- to medium-sized balance commercial loans, today announced it has entered into a definitive merger agreement to combine in a stock-for-stock merger with Owens Realty Mortgage, Inc., (NYSEAM:ORM) (“ORM” or “Owens Realty Mortgage”) a specialty finance REIT that focuses on the origination, investment and management of small-balance and middle-market commercial real estate loans. The combined company, which will operate under the name Ready Capital, is expected to have pro forma equity capital in excess of $750M. The combination will enhance shareholder liquidity and provide for operating leverage across the larger equity base.

 

Under the terms of the agreement, each ORM share will be converted into 1.441 Ready Capital shares, based on a fixed exchange ratio. The exchange ratio is subject to certain adjustments if either company’s book value per share, as defined in the merger agreement, declines by more than 3%. The all-stock merger is intended to be a tax-free transaction. Upon the closing of the transaction, Ready Capital stockholders are expected to own approximately 72% percent of the combined company’s stock, while Owens Realty Mortgage stockholders are expected to own approximately 28% percent of the combined company’s stock.

 

Based on the closing prices of ORM common shares and Ready Capital’s common stock on November 7, 2018, the equity market capitalization of the combined company would be approximately $678 million. The combined company’s shares are expected to continue trading on the New York Stock Exchange under the ticker symbol for Ready Capital (NYSE: RC).

 

“This merger highlights our continued commitment to driving shareholder value and liquidity. We believe the transaction raises incremental capital with minimal tangible book value dilution and is accretive to forward looking earnings per share,” stated Ready Capital Chairman and Chief Executive Officer Thomas Capasse. “The combined company will be in a stronger position to execute our business plan, improve operating and cost efficiencies and continue growth in a profitable manner.”

 

Bryan Draper, President of ORM, commented “We are excited to have reached an agreement for the sale of Owens Realty Mortgage to Ready Capital and believe that our shareholders will benefit from the better access to financing, larger size and greater resources of the combined company.”

 

Anticipated Benefits to Ready Capital and Owens Realty Stockholders from the Merger

 

·                  Increased share float

 


 

·                  Incremental capital to support continued growth across Ready Capital’s platform

 

·                  Increased cost efficiencies from larger equity base

 

·                  Transaction is expected to be accretive to Ready Capital’s earnings per share in 2019 and less than 1% dilutive to initial tangible book value per share

 

Management, Governance and Corporate Headquarters

 

Upon completion of the transaction, Ready Capital Chairman and Chief Executive Officer Thomas Capasse will lead the company, and Frederick C. Herbst, Chief Financial Officer of Ready Capital, will remain CFO. The combined company will be headquartered in New York, New York. The combined Board is expected to have seven directors, consisting of one director from ORM’s existing Board and six directors appointed by Ready Capital.

 

Timing and Approvals

 

The transaction has been unanimously approved by the Board of Directors of Ready Capital and approved by the Board of Directors of ORM upon the unanimous recommendation of the Special Committee of the Owens Realty Mortgage’s Board of Directors, which is comprised entirely of independent directors. The transaction is expected to close by the end of the first quarter of 2019, subject to approval by Owens Realty Mortgage and Ready Capital stockholders and other customary closing conditions.

 

Advisors

 

Keefe, Bruyette & Woods, a Stifel company is acting as financial advisor, Clifford Chance US LLP is acting as legal advisor and ICR, LLC is acting as communications advisor to Ready Capital. Barclays is acting as financial advisor and Vinson & Elkins LLP is acting as legal advisor to the Special Committee of the Board of Directors of Owens Realty Mortgage.

 

Additional Information about the Merger

 

In connection with the proposed merger, Ready Capital expects to file a registration statement on Form S-4 with the Securities and Exchange Commission (the “SEC”) containing a joint proxy statement/prospectus and other documents with respect to the proposed merger. The joint proxy/prospectus will contain important information about the proposed transaction and related matters. STOCKHOLDERS ARE URGED TO READ THE REGISTRATION STATEMENT AND THE JOINT PROXY STATEMENT/PROSPECTUS (INCLUDING ALL AMENDMENTS AND SUPPLEMENTS THERETO) AND OTHER RELEVANT DOCUMENTS FILED BY READY CAPITAL WITH THE SEC CAREFULLY IF AND WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT READY CAPITAL, ORM AND THE PROPOSED MERGER.

 

Stockholders of Ready Capital and ORM may obtain free copies of the registration statement, the joint proxy statement/prospectus and other relevant documents filed by Ready Capital with the SEC (if and when they become available) through the website maintained by the SEC at www.sec.gov. Copies of the documents filed by Ready Capital with the SEC are also available free of charge on Ready Capital’s website at www.readycapital.com. Copies of the documents filed by ORM with the SEC are also available free of charge on ORM’s website at www.owensmortgage.com.

 

This communication shall not constitute an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offering of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the U.S. Securities Act of 1933, as amended.

 


 

Participants in Solicitation Relating to the Merger

 

Ready Capital, ORM and their respective directors, executive officers and certain other members of management and employees of Ready Capital and ORM may be deemed to be participants in the solicitation of proxies from Ready Capital’s and ORM’s stockholders in respect of the proposed merger. Information regarding Ready Capital’s directors and executive officers can be found in Ready Capital’s definitive proxy statement filed with the SEC on April 30, 2018 and Ready Capital’s most recent Annual Report filed on Form 10-K for the fiscal year ended December 31, 2017. Information regarding ORM’s directors and executive officers can be found in ORM’s definitive proxy statement filed with the SEC on June 8, 2018 and the ORM’s most recent Annual Report filed on Form 10-K for the fiscal year ended December 31, 2017. Additional information regarding the interests of such potential participants will be included in the joint proxy statement/prospectus and other relevant documents filed with the SEC in connection with the proposed merger if and when they become available. These documents are available free of charge on the SEC’s website and from Ready Capital or ORM, as applicable, using the sources indicated above.

 

Forward-Looking Statements

 

This press release contains statements that constitute “forward-looking statements,” as such term is defined in Section 27A of the Securities Act and Section 21E of the Exchange Act and such statements are intended to be covered by the safe harbor provided by the same. These statements are based on current expectations and beliefs of Ready Capital and ORM and are subject to a number of trends and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements; neither Ready Capital nor ORM can give any assurance that its expectations will be attained.

 

Factors that could cause actual results to differ materially from expectations include, but are not limited to, the risk that the merger will not be consummated within the expected time period or at all; the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement; the inability to obtain stockholder approvals relating to the merger and issuance of shares in connection therewith or the failure to satisfy the other conditions to completion of the merger; fluctuations in the adjusted book value per share of the shares of both Ready Capital and ORM; risks related to disruption of management attention from the ongoing business operations due to the proposed merger; the effect of the announcement of the proposed merger on Ready Capital’s and ORM’s operating results and businesses generally; the outcome of any legal proceedings relating to the merger; changes in future loan acquisition and production; the ability to retain key personnel; availability of suitable investment opportunities; changes in interest rates; changes in the yield curve; changes in prepayment rates; the availability and terms of financing; general economic conditions; market conditions; conditions in the market for small balance commercial loans and other investments; legislative and regulatory changes that could adversely affect the businesses of Ready Capital and ORM; and other factors, including those set forth in the Risk Factors section of Ready Capital’s and ORM’s most recent Annual Reports on Form 10-K and other reports filed by Ready Capital and ORM with the SEC, copies of which are available on the SEC’s website, www.sec.gov. Neither Ready Capital nor ORM undertakes any obligation to update these statements for revisions or changes after the date of this press release, except as required by law.

 


 

Merger Announcement Conference Call and Third Quarter 2018 Earnings Results

 

In separate press releases, ORM and Ready Capital each announced their respective results for the third quarter of 2018. Ready Capital will host an earnings conference call that will also address the merger on Thursday, November 8th at 8:30 am Eastern Time.

 

Interested parties in the United States can access the call by dialing 877-407-0792 (domestic) or 201-689-8263 (international), fifteen minutes prior to the start time. A link to access the conference call will be available on the Investor Relations section of Ready Capital’s website at http:/ir.readycapital.com..

 

About Owens Realty Mortgage, Inc.

 

Owens Realty Mortgage, Inc., a Maryland corporation, is a specialty finance mortgage company organized to qualify as a real estate investment trust (“REIT”) that focuses on the origination, investment, and management of commercial real estate mortgage loans. ORM provides customized, short-term acquisition and transition capital to small balance and middle-market investors that require speed and flexibility. ORM’s primary objective is to provide investors with attractive current income and long-term shareholder value. Owens Realty Mortgage, Inc. is headquartered in Walnut Creek, California, and is externally managed and advised by Owens Financial Group, Inc.

 

About Ready Capital Corporation

 

Ready Capital Corporation (NYSE: RC) is a multi-strategy real estate finance company that originates, acquires, finances and services small- to medium-sized balance commercial loans. Ready Capital specializes in loans backed by commercial real estate, including agency multifamily, investor and bridge as well as SBA 7(a) business loans. Headquartered in New York, New York, Ready Capital employs over 400 lending professionals nationwide. The company is externally managed and advised by Waterfall Asset Management, LLC.

 

Contact

 

Investor Relations
Ready Capital Corporation
212-257-4666

InvestorRelations@readycapital.com

 


(Back To Top)

Section 3: EX-99.2 (EX-99.2)

Exhibit 99.2

READY CAPITAL CORPORATION TO ACQUIRE OWENS REALTY MORTGAGE, INC NOVEMBER 7, 2018

GRAPHIC

 

DISCLAIMER FORWARD LOOKING STATEMENTS T hi s presentati on contai ns statements that consti tute “forward-looki ng statements,” as such term is defi ned in Secti on 27A of the Securi ti es Act of 1933, as amended, and Secti on 21E of the Securi ti es Exchange Act of 1934, as amended, and such statements are intended to be covered by the safe harbors provi ded by the same. T hese statements are based on current expectati ons of Ready Capi tal Corporati on (“RC”) and Owens Real ty Mortgage, Inc. (“ORM”) and are subj ect to a number of trends and uncertai nties that coul d cause actual resul ts to di ffer materi all y from those descri bed in the forward-looki ng statements; nei ther RC nor ORM can gi ve any assurance that expectati ons wi l l be attained. Factors that coul d cause actual resul ts to di ffer materi all y from expectati ons i nclude, but are not l imi ted to, the ri sk that the merger will not be consummated wi thin the expected ti me period or at al l; the occurrence of any event, change or other ci rcumstances that coul d gi ve ri se to the termi nati on of the merger agreement; the i nabi li ty to obtain stockholder approval s relati ng to the merger or the fai lure to sati sfy the other condi ti ons to compl eti on of the merger; fluctuati ons in the adj usted book value per share of the shares of both RC and ORM ; ri sks rel ated to di srupti on of management attenti on from the compani es’ ongoi ng busi ness operati ons due to the proposed merger; the effect of the announcement of the proposed merger on RC's and ORM’s operating resul ts and busi nesse s generall y; the outcome of any l egal proceedi ngs rel ati ng to the merger; changes in future loan acqui si ti on and production; the abili ty to retai n key personnel ; availabil ity of sui tabl e i nvestment opportuni ties; changes in i nterest rates; changes in the yi eld curve; changes in prepayment rates; the avai labili ty and terms of financing; general economi c condi ti ons; market condi ti ons; conditions in the market for mortgage-rel ated i nvestments; legi sl ati ve and regul atory changes that coul d adversel y affect the businesse s of RC and ORM; and other factors, i ncl uding those set forth in the Ri sk Factors secti on of RC and ORM’s most recent Annual Reports on Form 10-K and Quarterl y Report on Form 10-Q fil ed wi th the U.S. Securi ti es and Exchange Commi ssi on (the “SEC”), and other reports fil ed by RC and ORM with the SEC, copi es of whi ch are avail abl e on the SEC’s websi te, www.sec.gov. Nei ther RC nor ORM assumes any responsi bili ty for i nformati on rel ati ng to the other, and nei ther ORM nor RC undertakes any obl i gation to update these statements for revi si ons or changes after the date of thi s presentati on, except as requi red by l aw. ADDITIONAL INFORMATION REGARDING THE MERGER In connection wi th the merger, RC expects to fil e a regi strati on statement on Form S-4 wi th the SEC that i ncludes a preli mi nary j oi nt proxy statement/prospectus, and will fil e other rel evant documents concerni ng the proposed merger. T he regi strati on statement filed wi ll be subject to revi sions pri or to bei ng decl ared effecti ve by the SEC, some of whi ch revi si ons may be si gnifi cant. T he regi strati on statement and j oi nt proxy statement/prospectus wi ll contain important i nformation about the proposed merger and related matters. Before making any v oting or investment decisions, investors are urged to read the definitiv e j oint proxy statement / prospectus and any other documents to be filed w ith the SEC in connection with the merger or incorporated by reference in the definitiv e j oint proxy statement / prospectus because they w ill contain important information about ORM, RC and the merger. Stockholders of ORM and RC may obtai n free copies of the regi strati on statement and other rel evant documents fil ed by RC with the SEC (as they become avail able) through the websi te mai ntained by the SEC at www.sec.gov. Copi es of the documents fi l ed by RC wi th the SEC are al so avai l able free of charge on RC’s websi te at www.readycapi tal .com. T hi s communi cati on shall not consti tute an offer to sell or the soli ci tati on of an offer to buy any securi ti es, nor shall there be any sale of securi ti es in any juri sdi ction in whi ch such offer, sol i ci tation or sal e would be unlawful pri or to regi strati on or quali fi cati on under the securities l aws of any such j uri sdi cti on. No offeri ng of securi ti es shal l be made except by means of a prospectus meeti ng the requirements of Secti on 10 of the U.S. Securi ti es Act of 1933, as amended. 2

GRAPHIC

 

TRANSACTION SUMMARY • Estimated to be $20 million to $27 million in excess of 9/30/18 carrying value t Note: Figures on the Transaction Summary are calculated using an exchange ratio of 1.441x prior to any adjustments that may be made in certain circumstances, as outlined in the Agreement and Plan of Merger dated November 7, 2018 (1) (2) (3) (4) Based on an RC stock price of $14.94 (as of November 7, 2018) and 8,482,880 ORM shares outstanding (as of September 30, 2018) As defined in the Agreement and Plan of Merger as Company Book Value Per Share and Parent Book Value Per Share for ORM and RC, respectively Based on an ORM closing price and a 30-day volume-weighted average price (VWAP) of $14.96 and $15.56 as of November 7, 2018, res pectively 3 RC’s estimated range based on RC’s underwriting efforts and its assessment of the fair value of ORM’s assets under current market conditions, including RC’s review of third party valuations and appraisals, assessment of original loan files, physical inspection of real estate, and review of transactions with key employees. There can be no assurance that the proceeds received from any financing, sale or other disposition of assets will yield the estimated fair value ascribed to these assets within RC’s estimated range CONSIDERATION • 100% Ready Capital Corporation (NYSE:RC) common stock •For each Owens Realty Mortgage, Inc. (NYSEAM:ORM) share, ORM shareholders will receive 1.441 shares of RC common stock •Represents a current value of $21.53 per share, or $182.6 million in aggregate consideration, based on an 11/7/18 RC closing price(1) • The exchange ratio is subject to certain adjustments, as outlined in the Agreement and Plan of Merger, if the book value per share(2) of either RC or ORM falls bellow a 3% threshold PRICE / BOOK & PREMIUM MULTIPLES •0.96x ORM 9/30/18 GAAP book value per share • 43.9% and 38.4% premium to closing price and 30-day volume-weighted average price as of 11/7/18, respectively(3) PRO FORMA OWNERSHIP • 72.4% current RC shareholders / 27.6% current ORM shareholders FAIR VALUE OF ORM’S REAL ESTATE ASSETS (4) FINANCIAL IMPACT •Expected to be accretive to RC’s 2019 EPS and less than 1.0% dilutive to RC’s initial tangible book value per share EXTERNAL MANAGER •RC’s external manager will remain the external manager of the combined company •ORM’s external manager, Owens Financial Group, Inc., will be terminated in connection with the transaction at no cos GOVERNANCE & SOCIAL MATTERS •RC’s senior management team will remain the senior management team of the combined company •RC’s board of directors will be increased by one member and one designated ORM director will join RC’s board •RC and/or its affiliates intend to offer employment to certain employees of ORM’s external manager REQUIRED APPROVALS •Approvals of both RC and ORM stockholders; customary regulatory consents and approvals ANTICIPATED CLOSING •Q1 2019

GRAPHIC

 

AN INTRODUCTION TO OWENS REALTY MORTGAGE, INC. • ORM is a specialty finance REIT that focuses on the origination, investment, and management of small-balance and middle-market commercial real estate loans • Provides customized, short-term acquisition, and transition capital to commercial real estate investors that require speed and flexibility • Invests in US-based commercial real estate loans ranging from $500 thousand to $20 million in value for terms of 1 to 3 years and rates ranging from 7% to 10% (fixed, hybrid, and floating) • Externally managed by Owens Financial Group, Inc., a specialized commercial real estate management company that has originate d, serviced, and managed alternative commercial real estate investments since 1951 • Following the financial crisis, ORM held an illiquid real estate portfolio due to borrower defaults • ORM converted into a REIT in 2013 in order to provide liquidity to LPs and provide the opportunity to resume commercial mortgage lending activities • ORM’s subsequent strategy has been to develop, position, and enhance real estate assets while increasing liquidity for lendin g activities through the strategic disposition of real estate assets • Though operating under the constraints of REIT tax rules to avoid incurring tax penalties, ORM has sold a significant portion of its real estate assets and expects the disposition of remaining real estate assets to be substantially complete by the end of 2019 • Real estate is currently held at depreciated carrying values that do not reflect enhancements in value from the development a nd repositioning of assets since their acquisition 4 ORM’S HISTORY OVERVIEW OF ORM

GRAPHIC

 

SIGNIFICANT BENEFITS TO READY CAPITAL SHAREHOLDERS • Less than 1.0% dilutive to initial tangible book value per share Much more cost effective than a stock issuance COST-EFFECTIVE CAPITAL RAISE • • Larger mark et capitalization may benefit the company as smaller commercial mortgage REITs trade at a price/book discount to larger commercial mortgage REITs POSITIVE FINANCIAL IMPACT POTENTIAL MULTIPLE EXPANSION • Accretive to 2019 EPS • Incremental capital to grow platform and execute strategy Ability to raise incremental debt capital to further increase scale REAL ESTATE VALUE REALIZATION • Estimated $20 million to $27 million fair value in excess of 9/30/18 carrying value(1) GROWTH OPPORTUNITIES • • Increased float will improve liquidity of shares and reduce impact of certain technical dynamics that drive volatility and pressure on price IMPROVED TRADING TECHNICALS COST EFFICIENCIES • Potential cost efficiencies from increased scale (1) RC’s estimated range based on RC’s underwriting efforts and its assessment of the fair value of ORM’s assets under current market conditions, including RC’s review of third party valuations and appraisals, assessment of orig inal loan files, physical inspection of real estate, and review of transactions with key employees. There can be no assurance that the proceeds received from any financing, sale or other disposition of assets will yield the estimated fair value ascribed to these assets within RC’s estimated range 5

GRAPHIC

 

COMPELLING TRANSACTION FOR OWENS SHAREHOLDERS • 43.9% and 38.4% premium to 11/7/18 closing price and 30-day volume-weighted average price, respectively(1) MEANINGFUL PREMIUM • More liquid stock: pro forma float and mark et cap would be $450 million and $678 million vs. $122 million and $127 million as of 11/7/18 on a stand alone and pro forma basis, respectively(2) Increased sellside attention INCREASED SCALE AND LIQUIDITY • Ready Capital’s diversified, multi-cylinder operating model mitigates risk and allows the combined company to benefit from a broader suite of lending products and investment opportunities Waterfall Asset Management has over $7.3 billion assets under management(3) across high yield ABS, consumer loans, and small balance commercial loans Waterfall and Ready Capital have existing expertise in ORM’s portfolio assets and could manage ORM’s legacy real estate and loan portfolios to maximize their values • • ORM shareholders will benefit from cost efficiencies resulting from a larger pro forma capital base and more investor-friendly management fee structure (1% base fee on incremental capital and ~1.3% pro forma weighted-average base fee) COST EFFICIENCIES DIVERSE OPERATING MODEL WITH SIGNIFICANT PLATFORM RESOURCES • • • Ability to increase debt financing on ORM’s loan portfolio through existing lending relationships Proven access to capital markets: RC has raised $345 million debt capital and completed 6 securitizations since October 2016 ACCESS TO INCREMENTAL FINANCING AND CAPITAL • (1) Based on an ORM closing price and a 30-day volume-weighted average price (VWAP) of $14.96 and $15.56 as of November 7, 2018, respectively (2) Refer to footnotes on pag e 7 (3) As of July 2018 6

GRAPHIC

 

COMBINED COMPANY LIQUIDIT Y BENEFIT S FROM INCREASED SCALE & SHARE >$750m m    Increased Capital Base $569m m Increased Float $191m m Increased Market Capitalization Implied Market Cap Total Equity Implied Market Cap Total Equity Implied Market Cap Total Equity Float Float Float Source: S&P Capital IQ; Market data as of November 7, 2018; RC stock price of $14.94; ORM standalone stock price of $14.96 (1) Implied market capitalization based on share count as of September 30, 2018, includes 1,117,169 OP units; Total Equity includes NCI; Float excludes shares owned by Waterfall Asset Manag ement, LLC, OP units, and individuals employed by Waterfall Asset Manag ement, LLC and/or RC Implied market capitalization based on 8,482,880 million share count as of September 30, 2018; Total Equity as of September 30, 2018; Float excludes shares owned by strategic investors and individuals employed by OFG and ORM Pro forma market capitalization and share counts based on a 1.441x exchange ratio per the Agreement and Plan of Merger dated November 7, 2018; Total Equity is an estimate (2) 7 (3) The pro forma company will benefit from additional capital and an increased float as w ell as the incremental resources and improved financing terms RC and Waterfall Asset Management could provide to ORM’s current portfolio $678mm market cap. with 66% float $127mm market cap. with 96% float $496mm market cap. with 55% float $127m m $122m m $496m m $275m m $678m m $450m m BENEFITS PRO FORMA(3) ORM STANDALONE(2) RC STANDALONE(1)

GRAPHIC

 

A MULTIDIMENSIONAL PLATFORM TO DRIVE GROWTH SBA ORIGINATION, ACQUISITIONS, AND SERVICING RESIDENTIAL MORTGAGE BANKING SBC ORIGINATIONS LOAN ACQUISITIONS Invested Equity Allocation 43% 22% 15% 20% (1) Employees of Waterfall Asset Management 8 Ready Capital’s business is supported by over 500 professionals across four offices in New York, New Jersey, Texas, and Louisiana, across a variety of functions including:  Originations Underwriting Asset Management Loan Servicing  Surveillance Finance / Inv. Relations Capital Markets/ Trading Treasury/ Risk Management Employees (~500)8294127(1)248 ProductsSBC Investor PropertySBC Owner-Occupied; 1 Acquisitions of non-and-Residential mortgage loan originator; stabilized andof 14 SBA non-bankre-performing loans from originations and servicing transitional lender/servicersbanks 1 of 11 Freddie Mac SBC multi-family lenders

GRAPHIC

 

GENERAT ION OF SHAREHOLDER VALUE SINCE REVERSE MERGER WIT H ZAIS FINANCIAL CORP. 60.0% 50.0% 40.0% 33.9% 30.0% 29.6% 20.0% 10.0% 0.0% (10.0%) Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Apr-18 Jul-18 Oct-18 Peer Median (1) RC Origination Volume between Source: S&P Capital IQ; Market data as of November 7, 2018 (1) Peer g roup includes ABR, ACRE, ARI, BXMT, LADR, STAR, STWD, and XAN (2) Between October 2016 and November 2018 9 The contemplated transaction would provide additional scale and capital to continue the execution of RC’s business strategy 485% Growth in Quarterly Q3’16 and Q2’18 18.3% Growth in Book Value Per Share between Q3’16 and Q2’18 $345 million Debt Capital Raised and 6 Securitizations Completed(2) TOTAL RETURN SINCE READY CAPITAL / ZFC REVERSE MERGER (OCTOBER 31, 2016)

GRAPHIC

 

APPENDIX 10

GRAPHIC

 

OWENS REALTY MORTGAGE, BALANCE SHEET BY QUARTER INC As s e ts Loans, net of Allow ance f or Loan Losses 134,917 144,344 156,344 167,289 144,212 Other Assets, net of Accumulated Depreciation and Amortization 827 725 622 545 431 Def erred Tax Asset, net 5,159 3,207 3,024 3,042 2,941 Real Estate Held f or Sale 56,809 56,110 41,900 44,915 37,026 Total As s e ts $ 255,659 $ 239,011 $ 240,034 $ 247,687 $ 231,261 Dividend Payable $ 1,013 $ 1,572 $ 1,449 $ 1,747 $ 1,697 Accounts Payable and Accrued Liabilities 1,737 1,390 1,315 1,201 1,348 Forw ard Contract Liability – Share Repurchases - 2,731 - - - Notes and Loans Payable on Real Estate 29,781 30,192 25,239 19,952 15,808 Stock holde rs ' Equity Additional Paid-in Capital 182,438 182,438 182,438 182,438 182,438 Retained Earnings 56,083 50,095 49,282 49,878 50,431 Total Liabilitie s and Stock holde rs ' Equity $ 255,659 $ 239,011 $ 240,034 $ 247,687 $ 231,261 Source: ORM’s SEC filings 11 Book Value per Share$22.12$22.10 $22.04 $22.32 $22.54 Total Stock holde rs ' Equity$222,584$200,990$199,634$194,937$191,227 Treasury Stock – Common(16,049)(31,655)(32,198)(37,491)(41,753) Common Stock – Par Value$112$112 $112 $112 $112 Total Liabilitie s$33,075 $38,022 $40,400$52,750$40,033 Line of Credit Payable-1,55512,08529,61320,943 Def erred Gains on Sales of Real Estate210303---Due to Manager335278312237239 Liabilitie s Real Estate Held f or Investment, net of Accumulated Depreciation25,56024,35628,80522,87022,710 Investment in Limited Liability Company2,1882,1412,1722,1402,284 Def erred Financing Costs, net of Accumulated Amortization6727--413 Interest and Other Receivables2,2642,4301,2651,2801,083 Cash and Cash Equivalents, Restricted Cash$27,868 $5,671 $5,902 $5,607 $20,162 (In Thousands, except share data)9/30/201712/31/20173/31/20186/30/20189/30/2018

GRAPHIC

 

OWENS REALTY MORTGAGE, INC STATEMENT OF INCOME QUARTER BY Re ve nue s Rental and Other Income f rom Real Estate Properties 1,266 1,113 1,070 1,210 1,140 Total Re ve nue s $ 4,277 $ 3,851 $ 3,992 $ 4,346 $ 4,724 Management Fee to General Partner $ 827 $ 765 $ 737 $ 730 $ 718 General and Administrative Expenses 511 694 529 391 651 Depreciation and Amortization 303 222 217 206 174 Reversal of Provision For Loan Losses (397) (138) (80) 115 (242) Settlements Expense - 2,627 - - - Ope rating Incom e (Los s ) $ 850 $ (2,741) $ 498 $ 1,368 $ 1,027 Incom e (Los s ) Be fore Incom e Taxe s $ 1,432 $ (2,472) $ 653 $ 2,325 $ 2,400 Ne t incom e (los s ) $ 156 $ (4,424) $ 469 $ 2,343 $ 2,249 Baisc and Diluted Weighted Average Shares Oustanding 10,173,448 9,984,352 9,089,270 8,922,280 8,572,614 Source: ORM’s SEC filings 12 Dividends Declared per Share of Common Stock$0.10$0.10 $0.16 $0.20 $0.20 Basic and Diluted Earnings per Common Share$0.02$(0.44) $0.05 $0.26 $0.26 Provision f or Income Tax(1,276)(1,952)(183)18(151) Gain on Sale of Real Estate, Net5822691559571,373 Total Expe ns e s$3,428$6,592 $3,494 $2,978 $3,696 Impairment Losses on Real Estate Properties368774--746 Interest Expense472467536587711 Rental and Other Expenses on Real Estate Properties1,2511,0901,459950939 Servicing Fees to Manager939295--Expe ns e s Other Income48493249145 Interest and Related Income f rom Loans$2,963$2,689 $2,890 $3,087 $3,438 (In Thousands, except share data)Q3 2017Q4 2017Q1 2018Q2 2018Q3 2018

GRAPHIC

 

OWENS REALTY MORTGAGE, INC LOAN PORTFOLIO SEPTEMBER 30, 2018 AS OF Portfolio Size $145.7 m illion TX 11.5% Allowance for Loan Los s es $1.5 m illion MI 6.2% PA 3.8% Com m ercial Loans $133.1 m illion Res idential Loans $7.7 m illion CO 3.3% Other 5.5% Land Loans $4.9 m illion CA 69.7% Office 19.6% Apartment 13.4% Hotel 6.7% Junior Loans 2.5% Storage 6.2% Senior Loans 97.5% Other 15.1% Retail 39.0% Source: ORM’s earning s press release for the q uarterly period ending September 30, 2018 13 COLLATERAL TYPE (COMMERCIAL LOANS) SENIORITY Property Class GEOGRAPHIC LOCATION PORTFOLIO OVERVIEW

GRAPHIC

 

OWENS REALTY MORTGAGE, INC REO PORTFOLIO SEPTEMBER 30, 2018 AS OF Held for Investment 38.0% Held for Sale 62.0% Retail 20.7% Land 26.2% Marina 4.1% Land 28.9% Office 5.3% Retail 71.1% Residential 43.7% Source: ORM’s earnings press release for the quarterly period ending September 30, 2018 Note: REO portfolio above excludes ORM’s investment in limited liability company of $2.3 million as of September 30, 2018 (1)Aggregate book value of real estate held for sale and real estate held for investment, net of $2.5 million in accumulated depreciation 14 HFI REO: $22.7 million HFS REO: $37.0 million PROPERTY TYPE (HELD FOR INVESTMENT) PROPERTY TYPE (HELD FOR SALE) Total REO: $59.7 million(1) HELD FOR SALE (“HFS”) VS. HELD FOR INVESTMENT (“HFI”)

GRAPHIC

 

[LOGO]

GRAPHIC

 

(Back To Top)