Ready Capital and United Development Funding IV Announce Definitive Agreement for Ready Capital to Acquire United Development Funding IV

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Ready Capital Corporation
Ready Capital Corporation

Adds scale and extends Ready Capital’s core platform with UDF IV’s proven land development lending platform

Diversifies Ready Capital’s portfolio and offers land development solution to borrowers and investors

Expected to be accretive to Ready Capital’s earnings and book value in 2025

UDF IV shareholders may receive up to $5.89 per UDF share through a combination of: (i) pre-closing distributions of UDF IV’s own cash from its balance sheet valued at up to $75 million, or $2.44 per share, (ii) shares issued at closing by Ready Capital for UDF IV shares valued at $94 million, or $3.07 per share, and (iii) contingent value rights with estimated future value of up to $12 million, or $0.38 per share

NEW YORK and IRVING, Texas, Dec. 02, 2024 (GLOBE NEWSWIRE) -- Ready Capital Corporation (NYSE:RC) ("Ready Capital"), a multi-strategy real estate finance company that originates, acquires, finances and services lower-to-middle-market investor and owner-occupied commercial real estate loans, and United Development Funding IV (“UDF IV” or the “Trust”), a real estate investment trust providing capital solutions to residential real estate developers and regional homebuilders, announced today that they have entered into a definitive merger agreement pursuant to which Ready Capital will acquire UDF IV. Upon completion of the transaction, Ready Capital is anticipated to have a pro forma equity capital base in excess of $2.2 billion.

Under the terms of the merger agreement, UDF IV will be permitted to distribute up to $75 million of cash on its pre-closing balance sheet to its shareholders prior to the transaction closing (the “Pre-Closing Distribution”), representing value distributed by UDF IV to its shareholders of up to $2.44 per share.

Following such distribution, as part of the merger consideration, each share of UDF IV common stock will then be converted into 0.416 shares (the “Exchange Ratio”) of Ready Capital common stock, with UDF IV shareholders receiving a total of approximately 12.8 million shares of Ready Capital common stock. The Exchange Ratio was negotiated to reflect an adjustment for the expected Pre-Closing Distribution, as well as other valuation adjustments. Based on Ready Capital’s closing share price on November 29, 2024, the implied value of the Ready Capital shares expected to be issued in connection with this closing is approximately $94 million or $3.07 per UDF IV share. At closing, UDF IV shareholders are expected to own approximately 7% of Ready Capital’s outstanding shares.

In addition, as part of the merger consideration, UDF IV shareholders will be entitled to receive additional stock consideration after closing under contingent value rights (“CVRs”) to be issued by Ready Capital, which UDF IV management estimates will generate payments of up to $0.38 per UDF IV share over time before any accrued dividends related to such Ready Capital shares are paid.