Business Context and Reporting Period
This Form 8-K filing by New York Mortgage Trust, Inc. (the "Company") is dated May 3, 2016. The report primarily announces the entry into a Material Definitive Agreement to acquire 100% of the membership interests of RiverBanc LLC, an investment management firm specializing in multifamily apartment properties. Additionally, the filing incorporates by reference the Company's financial results for the three months ended March 31, 2016, via a press release (Exhibit 99.1).
Key Financial Metrics and Transaction Details
- Acquisition Consideration: The Company will pay approximately $24 million in cash to the sellers (Donlon Family LLC, JMP Investment Holdings LLC, and Hypotheca Capital, LLC).
- Holdback Provision: $3 million of the cash consideration payable to Donlon Family LLC is subject to a holdback, contingent upon the acquisition of Company common stock with an aggregate purchase price of at least $3 million.
- Target Assets: As of March 31, 2016, RiverBanc manages approximately $371.5 million of the Company's capital. RiverBanc has historically sourced and managed over $400 million in direct and indirect multifamily investments.
- Existing Relationships: The Company holds an aggregate equity investment of $54.8 million in RB Multifamily Investors LLC (RBMI), a fund managed by RiverBanc.
- Financial Results: Specific revenue, profit, cash flow, margin, debt, and liquidity figures for the quarter ended March 31, 2016, are not provided in the text of this 8-K; they are contained in the referenced press release (Exhibit 99.1).
Material Changes and Transaction Status
The primary material change is the proposed acquisition of RiverBanc, which will consolidate the Company's relationship with its current investment manager. The Company currently indirectly owns 20% of RiverBanc through its subsidiary, Hypotheca. The transaction represents a shift from a partial ownership and management agreement to full ownership of the investment management firm.
Guidance, Outlook, and Risks
- Closing Timeline: The Company expects to close the acquisition in the second quarter of 2016, though there is no assurance regarding the timing or successful completion.
- Conditions Precedent: Closing is subject to customary requirements, including the execution of a mutually acceptable employment agreement with Kevin Donlon, the founder and CEO of RiverBanc.
- Related Party Transactions: The Company has engaged affiliates of JMP for financing and banking services in the past and may do so in the future. The Board unanimously approved the acquisition, with Douglas Neal (a Company director and RiverBanc President) abstaining from the vote.
- Indemnification: The Company is entitled to customary indemnification from the sellers for breaches of representations, warranties, and pre-closing taxes.
Investor Verification Checklist
- Review the full text of the Press Release (Exhibit 99.1) for specific Q1 2016 financial results (revenue, net income, FFO, liquidity).
- Verify the final closing date of the RiverBanc acquisition and confirm the execution of the employment agreement with Kevin Donlon.
- Monitor the status of the $3 million holdback payment contingent on stock acquisition by Donlon Family LLC.
- Assess the impact of the acquisition on the Company's capital allocation and future investment pipeline in multifamily properties.