RMR Mortgage Trust, Tremont Mortgage Trust to Merge

The combined REIT will focus on middle-market transitional bridge loans, with the total value of invested assets anticipated to reach $1 billion.
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Under a definitive agreement announced on Monday, Tremont Mortgage Trust will merge with and into RMR Mortgage Trust. The combined firms will operate under the name of RMR Mortgage Trust, the surviving entity.

The result of the merger is expected to be a more diversified commercial mortgage real estate investment trust, with a focus on middle-market transitional bridge loans and with assets anticipated to reach $1 billion when fully invested.

The merger is estimated to be accretive to distributable earnings in 2022, with an annual expense savings potential ranging from $1.4 million to $1.6 million, or $0.10 to $0.11 per common share, as certain duplicative public company costs will be eliminated. The deal is expected to close in the third quarter of 2021, subject to customary closing conditions.  

Under the terms of the merger agreement, each Tremont Mortgage Trust common share will be converted into 0.520 of the newly issued RMR Mortgage Trust common share. Based on the closing prices of RMRM’s and TRMT’s common shares on Friday, April 23rd, 2021, the implied offer price is roughly $6.55 per Tremont Mortgage Trust common share. This represents a premium of 6 percent and 9 percent to the closing price and the volume weighted average price, respectively, for the 30 trading days ending on April 23rd, 2021.

Upon closing, RMR Mortgage Trust shareholders are expected to own some 70 percent of the combined company’s outstanding common shares and Tremont Mortgage Trust shareholders are expected to own the rest of the combined company’s outstanding common shares, meaning roughly 30 percent.

Loan Portfolio Details    

The loan portfolio of the new entity will have the following characteristics:

  • 22 first mortgage loans with aggregate loan commitments of $519 million
  • Average funded loan size of $21 million
  • Weighted average maximum maturity, which assumes all borrower extension options have been exercised, of 3.2 years
  • Weighted average interest rate of LIBOR plus 3.91 percent and a weighted average loan-to-value of 66 percent.

UBS Investment Bank serves as exclusive financial adviser to the RMR Mortgage Trust special committee, while Skadden, Arps, Slate, Meagher & Flom LLP serves as legal advisor to the trust, but acting through the special committee.

Additionally, Citigroup Global Markets Inc. serves as exclusive financial adviser to the Tremont Mortgage Trust special committee and Sullivan & Worcester LLP is serving as legal adviser to Tremont Mortgage Trust, acting through the special committee.

Last November, The RMR Group closed a $680 million industrial private capital investment vehicle. The fund focused on the purchase of industrial and logistics assets in the U.S.