SEC Form 424B5 filed by New Residential Investment Corp.
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• | the uncertainty and economic impact of the ongoing coronavirus (“COVID-19”) pandemic and of responsive measures implemented by various governmental authorities, businesses and other third parties, as well as the impact on us, our operations and personnel; |
• | our exposure to risks of loss resulting from adverse weather conditions, man-made or natural disasters, the effect of climate change, and pandemics, such as the COVID-19 pandemic; |
• | our ability to successfully execute our business and investment strategy; |
• | our ability to deploy capital accretively; |
• | reductions in the value of, cash flows received from, or liquidity surrounding, our investments, which are based on various assumptions that could differ materially from actual results; |
• | our reliance on, and counterparty concentration and default risks in, the servicers and subservicers we engage (“Servicing Partners”) and other third parties; |
• | the impact of current or future legal proceedings and regulatory investigations and inquiries involving us, our Servicing Partners or other business partners; |
• | the mortgage lending and servicing-related regulations promulgated by the Consumer Financial Protection Bureau and its enforcement of such regulations; |
• | the risks related to our origination and servicing operations, including, but not limited to, compliance with applicable laws, regulations and other requirements, significant increases in delinquencies for the loans, compliance with the terms of related servicing agreements, financing related servicer advances and the origination business, expenses related to servicing high risk loans, unrecovered or delayed recovery of servicing advances, foreclosure rates, servicer ratings, and termination of government mortgage refinancing programs; |
• | our ability to obtain and maintain financing arrangements on terms favorable to us or at all; |
• | changes in general economic conditions, in our industry and in the commercial finance and real estate markets, including the impact on the value of our assets or the performance of our investments; |
• | the relative spreads between the yield on the assets in which we invest and the cost of financing; |
• | impairments in the value of the collateral underlying our investments and the relation of any such impairments to the value of our securities or loans; |
• | risks associated with our indebtedness, including our senior unsecured notes, and related restrictive covenants and non-recourse long-term financing structures; |
• | adverse changes in the financing markets we access affecting our ability to finance our investments on attractive terms, or at all; |
• | changing market conditions could potentially lead to increased margin calls, lenders not extending our secured financing agreements or other financings in accordance with their current terms or not entering into new financings with us; |
• | changes in interest rates and/or credit spreads, as well as the success of any hedging strategy we may undertake in relation to such changes; |
• | the impact that risks associated with subprime mortgage loans and consumer loans, as well as deficiencies in servicing and foreclosure practices, may have on the value of our mortgage servicing rights (“MSRs”), excess mortgage servicing rights (“Excess MSRs”), servicer advance investments, residential mortgage-backed securities (“RMBS”), residential mortgage loans and consumer loan portfolios; |
• | the risks that default and recovery rates on our MSRs, Excess MSRs, servicer advance investments, servicer advance receivables, RMBS, residential mortgage loans and consumer loans deteriorate compared to our underwriting estimates; |
• | changes in prepayment rates on the loans underlying certain of our assets, including, but not limited to, our MSRs or Excess MSRs; |
• | the risk that projected recapture rates on the loan pools underlying our MSRs or Excess MSRs are not achieved; |
• | servicer advances may not be recoverable or may take longer to recover than we expect, which could cause us to fail to achieve our targeted return on our servicer advance investments or MSRs; |
• | cybersecurity incidents and technology disruptions or failures; |
• | our dependence on counterparties and vendors to provide certain services, which subjects us to various risks; |
• | our exposure to counterparties that are unwilling or unable to honor contractual obligations, including their obligation to indemnify us or repurchase defective mortgage loans; |
• | our ability to maintain our exclusion from registration under the Investment Company Act of 1940 (the “1940 Act”), and limits on our operations from maintaining such exclusion; |
• | our ability to maintain our qualification as a real estate investment trust (“REIT”) for U.S. federal income tax purposes, and limits on our operations from maintaining REIT status; |
• | competition within the finance and real estate industries; |
• | our ability to attract and retain highly skilled personnel; |
• | impact from our past and future acquisitions, and our ability to successfully integrate the acquired assets and assumed liabilities; |
• | the impact of any material transactions or relationships with FIG LLC (the “Former Manager”) or one of its affiliates, including the impact of any actual, potential or perceived conflicts of interest; |
• | risks relating to the Company entering into an Internalization Agreement (the “Internalization Agreement”) with the Former Manager and the impact on the Company’s management functions on business and operations; |
• | the legislative/regulatory environment, including, but not limited to, the impact of the Dodd-Frank Act, regulation of corporate governance and public disclosure, changes in accounting rules, U.S. government programs intended to grow the economy, future changes to tax laws, the federal conservatorship of the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”) and legislation that permits modification of the terms of residential mortgage loans; |
• | the risk that actions by Fannie Mae or Freddie Mac or other regulatory initiatives or actions may adversely affect returns from investments in MSRs and Excess MSRs and may lower gain on sale margins; |
• | adverse market, regulatory or interest rate environments or our issuance of debt or equity, any of which may negatively affect the market price of our common stock; |
• | our ability to pay distributions on our common stock; |
• | dilution experienced by our existing stockholders as a result of the conversion of the preferred stock into shares of common stock; and |
• | risks associated with the acquisitions of Caliber Home Loans Inc. and Genesis Capital LLC, potential adverse impacts on our business and operations from uncertainties associated with the acquisitions and our ability to successfully integrate the businesses and realize the anticipated benefits of the acquisitions. |
| | Ownership Before Offering | | | Shares Offered by this Prospectus Supplement | | | Ownership After Offering | |||||||
Name and Address of the Selling Stockholder3 | | | Shares of Common Stock4 | | | % of Common Stock(1) | | | Shares of Common Stock | | | Shares of Common Stock | | | % of Common Stock |
Canyon Capital Advisors LLC(2) | | | 24,591,929 | | | 5.3% | | | 24,591,929 | | | 0 | | | 0.0% |
CF NRS-E LLC(3) | | | 23,005,341 | | | 4.9% | | | 23,005,341 | | | 0 | | | 0.0% |
Total | | | 47,597,270 | | | 10.2% | | | 47,597,270 | | | 0 | | | 0.0% |
(1) | Based on 466,856,753 shares of common stock issued and outstanding as of July 29, 2022. |
(2) | With respect to the 24,591,903 shares of common stock, each of CBFVest Holdings Ltd., Canyon Distressed Opportunity Master Fund III, L.P., Canyon IC Credit Master Fund L.P., Canyon Distressed TX (B) LLC, Canyon Distressed TX (A) LLC, Canyon Finance (Cayman) Limited, The Canyon Value Realization Master Fund, L.P., Canyon ESG Credit Master Fund, L.P., Canyon-EDOF (Master) L.P., GRFVest Holdings Ltd., Canyon NZ-DOF Investing, L.P., EP Canyon Ltd. and Canyon Value Realization Fund, L.P. (the “Canyon Funds”) is currently a party to an investment advisory agreement (or similarly titled agreement) with Canyon Capital Advisors LLC (“Canyon”) pursuant to which Canyon is granted discretionary rights, power and authority to manage, and vote with respect to certain of, the investments of the Canyon Funds, including the investments of the Canyon Funds in our common stock and the related warrants (“Voting and Investment Power”). Canyon is an affiliate of CP Investments LLC, a registered broker-dealer. At the time of the acquisition of the related warrants, neither Canyon nor any of the Canyon Funds had any agreements, plans or understandings, directly or indirectly, with any person to distribute such warrants or our common stock. Each Canyon Fund was a lender under that certain Senior Secured Term Loan Facility Agreement, dated as of May 19, 2020 (the “2020 Term Loan”), among the Company, certain subsidiaries of the Company, the lenders party thereto and Cortland Capital Market Services LLC, as amended from time to time. On September 16, 2020, the Company voluntarily prepaid in full all outstanding principal and accrued and unpaid interest under the 2020 Term Loan, and all obligations, liens and security interests under the 2020 Term Loan, including guarantees issued by the subsidiary guarantors, were released, discharged and satisfied in full. Canyon is 90% owned by Canyon Partners, LLC. Canyon Partners, LLC and CPRE are ultimately owned and controlled by Joshua S. Friedman and Mitchell R. Julis (the “Principals”). Canyon, Canyon Partners, LLC, CPRE and each of the Principals disclaim beneficial ownership of the 24,591,929 shares of common stock and the related warrants, except to the extent of Voting and Investment Power. The address for each of the Canyon Funds for purposes hereof is c/o Canyon Capital Advisors LLC, 2000 Avenue of the Stars, 11th Floor, Los Angeles, California, 90067. |
(3) | FCOF V UB Investments L.P., a Cayman Islands exempted limited partnership (“FCOF V”), FTS SIP II L.P., a Jersey limited partnership (“FTS SIP”), FCO MA J5 L.P., a Cayman Islands exempted limited partnership (“FCO MAJ”), FCO MA V UB Securities LLC., a Delaware limited liability company (“FCO MA V”), SUP FCO MA III L.P., a Cayman Islands exempted limited partnership (“SUP FCO MA”), FCO V LSS Subco LP, a Delaware limited partnership (“LSS”), FCO MA MI II L.P., a Cayman Islands exempted limited partnership (“FCO MA MI”), FCO MA Centre Street II (ER) LP, a Delaware limited partnership (“Centre Street ER”), FCO MA Centre Street II (PF) LP, a Delaware limited partnership (“Centre PF”), FCO MA Centre Street II (TR) LP, a Delaware limited partnership (“Centre TR”), Fortress Lending I Holdings L.P., a Cayman Islands exempted limited partnership (“FLF”), Fortress Vintage Securities Fund L.P., a Cayman Islands exempted limited partnership (“Vintage”), DBSO TRG Fund (A) L.P., a Cayman Islands exempted limited partnership (“TRG”), Drawbridge Special Opportunities Fund LP, a Delaware limited partnership (“DBSO LP”), and Drawbridge Special Opportunities Fund LTD., a Cayman Islands exempted company (“DBSO Ltd”) collectively hold 100% of the equity interests in CF NRS-E LLC. |
• | on any national securities exchange or quotation service on which our common stock may be listed or quoted at the time of sale; |
• | in the over-the-counter market; |
• | in transactions otherwise than on these exchanges or systems or in the over-the-counter market; |
• | through the writing of options, whether such options are listed on an options exchange or otherwise; |
• | ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers; |
• | block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction; |
• | purchases by a broker-dealer as principal and resale by the broker-dealer for its account; |
• | an exchange distribution in accordance with the rules of the applicable exchange; |
• | privately negotiated transactions; |
• | short sales; |
• | broker-dealers may agree with the selling stockholder to sell a specified number of such shares at a stipulated price per share; |
• | a combination of any such methods of sale; and |
• | any other method permitted pursuant to applicable law. |
• | Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on February 17, 2022; |
• | Quarterly Reports on Form 10-Q for the quarter ended March 31, 2022, filed with the SEC on May 6, 2022, and for the quarter ended June 30, 2022, filed with the SEC on August 5, 2022; |
• | The portions of our Definitive Proxy Statement on Schedule 14A for the 2022 Annual Meeting of Stockholders, filed with the SEC on April 14, 2022, which are incorporated by reference into our above-mentioned Annual Report on Form 10-K; and |
• | The description of our common stock set forth in our Registration Statement on Form 10, as amended, filed with the SEC on April 29, 2013, including any amendment or report filed for the purpose of updating such description. |
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• | Annual Report on Form 10-K for the year ended December 31, 2021, filed with the Commission on February 17, 2022; |
• | Quarterly Reports on Form 10-Q for the quarter ended March 31, 2022, filed with the Commission on May 6, 2022, and for the quarter ended June 30, 2022, filed with the SEC on August 5, 2022; |
• | Current Reports on Form 8-K filed with the Commission on February 8, 2022, May 27, 2022, June 17, 2022 and August 2, 2022; |
• | The portions of our Definitive Proxy Statement on Schedule 14A for our 2022 Annual Meeting of Stockholders, filed on April 14, 2022, which are incorporated by reference in our above-mentioned Annual Report on Form 10-K; |
• | The description of our common stock set forth in our Registration Statement on Form 10, as amended, filed with the Commission on April 29, 2013, including any amendment or report filed for the purpose of updating such description; and |
• | The description of our Series A Preferred Stock included in our Registration Statement on Form 8-A, filed on July 2, 2019, including any amendment or report filed for the purpose of updating such description. |
• | The description of our Series B Preferred Stock included in our Registration Statement on Form 8-A, filed on August 15, 2019, including any amendment or report filed for the purpose of updating such description. |
• | The description of our Series C Preferred Stock included in our Registration Statement on Form 8-A, filed on February 14, 2020, including any amendment or report filed for the purpose of updating such description. |
• | The description of our Series D Preferred Stock included in our Registration Statement on Form 8-A, filed on September 17, 2021, including any amendment or report filed for the purpose of updating such description. |
• | the uncertainty and economic impact of the ongoing coronavirus (“COVID-19”) pandemic and of responsive measures implemented by various governmental authorities, businesses and other third parties, as well as the impact on us, our operations and personnel; |
• | our exposure to risks of loss resulting from adverse weather conditions, man-made or natural disasters, the effect of climate change, and pandemics, such as the COVID-19 pandemic; |
• | our ability to successfully execute our business and investment strategy; |
• | our ability to deploy capital accretively; |
• | reductions in the value of, cash flows received from, or liquidity surrounding, our investments, which are based on various assumptions that could differ materially from actual results; |
• | our reliance on, and counterparty concentration and default risks in, the servicers and subservicers we engage (“Servicing Partners”) and other third parties; |
• | the impact of current or future legal proceedings and regulatory investigations and inquiries involving us, our Servicing Partners or other business partners; |
• | the mortgage lending and servicing-related regulations promulgated by the Consumer Financial Protection Bureau and its enforcement of such regulations; |
• | the risks related to our origination and servicing operations, including, but not limited to, compliance with applicable laws, regulations and other requirements, significant increases in delinquencies for the loans, compliance with the terms of related servicing agreements, financing related servicer advances and the origination business, expenses related to servicing high risk loans, unrecovered or delayed recovery of servicing advances, foreclosure rates, servicer ratings, and termination of government mortgage refinancing programs; |
• | our ability to obtain and maintain financing arrangements on terms favorable to us or at all; |
• | changes in general economic conditions, in our industry and in the commercial finance and real estate markets, including the impact on the value of our assets or the performance of our investments; |
• | the relative spreads between the yield on the assets in which we invest and the cost of financing; |
• | impairments in the value of the collateral underlying our investments and the relation of any such impairments to the value of our securities or loans; |
• | risks associated with our indebtedness, including our senior unsecured notes, and related restrictive covenants and non-recourse long-term financing structures; |
• | adverse changes in the financing markets we access affecting our ability to finance our investments on attractive terms, or at all; |
• | changing market conditions could potentially lead to increased margin calls, lenders not extending our secured financing agreements or other financings in accordance with their current terms or not entering into new financings with us; |
• | changes in interest rates and/or credit spreads, as well as the success of any hedging strategy we may undertake in relation to such changes; |
• | the impact that risks associated with subprime mortgage loans and consumer loans, as well as deficiencies in servicing and foreclosure practices, may have on the value of our mortgage servicing rights (“MSRs”), excess mortgage servicing rights (“Excess MSRs”), servicer advance investments, residential mortgage-backed securities (“RMBS”), residential mortgage loans and consumer loan portfolios; |
• | the risks that default and recovery rates on our MSRs, Excess MSRs, servicer advance investments, servicer advance receivables, RMBS, residential mortgage loans and consumer loans deteriorate compared to our underwriting estimates; |
• | changes in prepayment rates on the loans underlying certain of our assets, including, but not limited to, our MSRs or Excess MSRs; |
• | the risk that projected recapture rates on the loan pools underlying our MSRs or Excess MSRs are not achieved; |
• | servicer advances may not be recoverable or may take longer to recover than we expect, which could cause us to fail to achieve our targeted return on our servicer advance investments or MSRs; |
• | cybersecurity incidents and technology disruptions or failures; |
• | our dependence on counterparties and vendors to provide certain services, which subjects us to various risks; |
• | our exposure to counterparties that are unwilling or unable to honor contractual obligations, including their obligation to indemnify us or repurchase defective mortgage loans; |
• | our ability to maintain our exclusion from registration under the Investment Company Act of 1940 (the “1940 Act”), and limits on our operations from maintaining such exclusion; |
• | our ability to maintain our qualification as a real estate investment trust (“REIT”) for U.S. federal income tax purposes, and limits on our operations from maintaining REIT status; |
• | competition within the finance and real estate industries; |
• | our ability to attract and retain highly skilled personnel; |
• | impact from our past and future acquisitions, and our ability to successfully integrate the acquired assets and assumed liabilities; |
• | the impact of any material transactions or relationships with FIG LLC (the “Former Manager”) or one of its affiliates, including the impact of any actual, potential or perceived conflicts of interest; |
• | risks relating to the Company entering into an Internalization Agreement (the “Internalization Agreement”) with the Former Manager and the impact on the Company's management functions on business and operations; |
• | the legislative/regulatory environment, including, but not limited to, the impact of the Dodd-Frank Act, regulation of corporate governance and public disclosure, changes in accounting rules, U.S. government |
• | the risk that actions by Fannie Mae or Freddie Mac or other regulatory initiatives or actions may adversely affect returns from investments in MSRs and Excess MSRs and may lower gain on sale margins; |
• | adverse market, regulatory or interest rate environments or our issuance of debt or equity, any of which may negatively affect the market price of our common stock; |
• | our ability to pay distributions on our common stock; |
• | dilution experienced by our existing stockholders as a result of the conversion of the preferred stock into shares of common stock; and |
• | risks associated with the acquisitions of Caliber Home Loans Inc. and Genesis Capital LLC, potential adverse impacts on our business and operations from uncertainties associated with the acquisitions and our ability to successfully integrate the businesses and realize the anticipated benefits of the acquisitions. |
• | the title and aggregate principal amount of the debt securities and any limit on the aggregate principal amount; |
• | whether the debt securities will be senior, subordinated or junior subordinated; |
• | any applicable subordination provisions for any subordinated debt securities; |
• | the maturity date(s) or method for determining same; |
• | the interest rate(s) or the method for determining same; |
• | the dates on which interest will accrue or the method for determining dates on which interest will accrue and dates on which interest will be payable and whether interest shall be payable in cash or additional securities; |
• | whether the debt securities are convertible or exchangeable into other securities and any related terms and conditions; |
• | redemption or early repayment provisions; |
• | authorized denominations; |
• | if other than the principal amount, the principal amount of debt securities payable upon acceleration; |
• | place(s) where payment of principal and interest may be made, where debt securities may be presented and where notices or demands upon the company may be made; |
• | whether such debt securities will be issued in whole or in part in the form of one or more global securities and the date as which the securities are dated if other than the date of original issuance; |
• | amount of discount or premium, if any, with which such debt securities will be issued; |
• | any covenants applicable to the particular debt securities being issued; |
• | any additions or changes in the defaults and events of default applicable to the particular debt securities being issued; |
• | the guarantors of each series, if any, and the extent of the guarantees (including provisions relating to seniority, subordination and release of the guarantees), if any; |
• | the currency, currencies or currency units in which the purchase price for, the principal of and any premium and any interest on, such debt securities will be payable; |
• | the time period within which, the manner in which and the terms and conditions upon which the holders of the debt securities or the company can select the payment currency; |
• | our obligation or right to redeem, purchase or repay debt securities under a sinking fund, amortization or analogous provision; |
• | any restriction or conditions on the transferability of the debt securities; |
• | provisions granting special rights to holders of the debt securities upon occurrence of specified events; |
• | additions or changes relating to compensation or reimbursement of the trustee of the series of debt securities; |
• | additions or changes to the provisions for the defeasance of the debt securities or to provisions related to satisfaction and discharge of the indenture; |
• | provisions relating to the modification of the indenture both with and without the consent of holders of debt securities issued under the indenture and the execution of supplemental indentures for such series; and |
• | any other terms of the debt securities (which terms shall not be inconsistent with the provisions of the TIA, but may modify, amend, supplement or delete any of the terms of the indenture with respect to such debt securities). |
• | 2,000,000,000 shares of common stock, par value $0.01 per share; and |
• | 100,000,000 shares of preferred stock, par value $0.01 per share, 6,210,000 of which are shares of Series A Preferred Stock, 11,300,000 of which are shares of Series B Preferred Stock, 15,928,000 of which are shares of Series C Preferred Stock and 18,600,000 of which are shares of Series D Preferred Stock. |
• | restricting dividends in respect of our common stock; |
• | diluting the voting power of our common stock or providing that holders of preferred stock have the right to vote on matters as a class; |
• | impairing the liquidation rights of our common stock; or |
• | delaying, deferring or preventing a change of control of us. |
• | All outstanding depositary shares to which it relates have been redeemed or converted. |
• | The depositary has made a final distribution to the holders of the depositary shares issued under the deposit agreement upon our liquidation, dissolution or winding up. |
• | the title of the warrants; |
• | the designation, amount and terms of the securities for which the warrants are exercisable; |
• | the designation and terms of the other securities, if any, with which the warrants are to be issued and the number of warrants issued with each other security; |
• | the price or prices at which the warrants will be issued; |
• | the aggregate number of warrants; |
• | any provisions for adjustment of the number or amount of securities receivable upon exercise of the warrants or the exercise price of the warrants; |
• | the price or prices at which the securities purchasable upon exercise of the warrants may be purchased; |
• | if applicable, the date on and after which the warrants and the securities purchasable upon exercise of the warrants will be separately transferable; |
• | if applicable, a discussion of the material U.S. federal income tax considerations applicable to the exercise of the warrants; |
• | any other terms of the warrants, including terms, procedures and limitations relating to the exchange and exercise of the warrants; |
• | the date on which the right to exercise the warrants will commence, and the date on which the right will expire; |
• | the maximum or minimum number of warrants that may be exercised at any time; and |
• | information with respect to book-entry procedures, if any. |
• | the price, if any, for the subscription rights; |
• | the number and terms of each share of common stock or preferred stock or debt securities which may be purchased per each subscription right; |
• | the exercise price payable for each share of common stock or preferred stock or debt securities upon the exercise of the subscription rights; |
• | the extent to which the subscription rights are transferable; |
• | any provisions for adjustment of the number or amount of securities receivable upon exercise of the subscription rights or the exercise price of the subscription rights; |
• | any other terms of the subscription rights, including the terms, procedures and limitations relating to the exchange and exercise of the subscription rights; |
• | the date on which the right to exercise the subscription rights shall commence, and the date on which the subscription rights shall expire; |
• | the extent to which the subscription rights may include an over-subscription privilege with respect to unsubscribed securities; and |
• | if applicable, the material terms of any standby underwriting or purchase arrangement entered into by us in connection with the offering of subscription rights. |
• | any breach of the director’s duty of loyalty to us or our stockholders, |
• | intentional misconduct or a knowing violation of law; |
• | liability under Delaware corporate law for an unlawful payment of dividends or an unlawful stock purchase or redemption of stock; or |
• | any transaction from which the director derives an improper personal benefit. |
• | Fortress and Fortress’s affiliates and their permitted transferees have the right to, and have no duty to abstain from, exercising such right to, engage or invest in the same or similar business as us, do business with any of our clients, customers or vendors or employ or otherwise engage any of our officers, directors or employees; |
• | if Fortress and Fortress’s affiliates and their permitted transferees or any of their officers, directors or employees acquire knowledge of a potential transaction that could be a corporate opportunity, they have no duty to offer such corporate opportunity to us, our stockholders or affiliates; |
• | we have renounced any interest or expectancy in, or in being offered an opportunity to participate in, such corporate opportunities; and |
• | in the event that any of our directors and officers who is also a director, officer or employee of Fortress or Fortress’s affiliates or their permitted transferees acquire knowledge of a corporate opportunity or is offered a corporate opportunity, provided that this knowledge was not acquired solely in such person’s capacity as our director or officer and such person acted in good faith, then such person is deemed to have fully satisfied such person’s fiduciary duty and is not liable to us if Fortress, or its affiliates, pursues or acquires the corporate opportunity or if such person did not present the corporate opportunity to us. |
• | financial institutions; |
• | insurance companies; |
• | broker-dealers; |
• | regulated investment companies; |
• | partnerships and trusts; |
• | persons who hold our stock on behalf of another person as a nominee; |
• | persons who receive our stock through the exercise of employee stock options or otherwise as compensation; |
• | persons holding our stock as part of a “straddle,” “hedge,” “conversion transaction,” “synthetic security” or other integrated investment; |
• | U.S. expatriates; |
• | persons whose functional currency is not the U.S. dollar; |
• | persons subject to the mark-to-market method of accounting for their securities; |
• | an accrual method taxpayer subject to special tax accounting rules as a result of its use of financial statements (within the meaning of Section 451(b)(3) of the Code); |
• | persons who own (actually or constructively) more than 10% of our stock; |
• | tax-exempt organizations; and |
• | foreign investors. |
• | a citizen or resident of the U.S., |
• | a corporation created or organized in the U.S. or under the laws of the U.S., or of any state thereof, or the District of Columbia, |
• | an estate, the income of which is includable in gross income for U.S. federal income tax purposes regardless of its source, or |
• | a trust if (1) a U.S. court is able to exercise primary supervision over the administration of such trust and one or more U.S. fiduciaries have the authority to control all substantial decisions of the trust or (2) the trust has a valid election in place to be treated as a U.S. person. |
• | We will be taxed at regular corporate rates on any undistributed net taxable income, including undistributed net capital gains. |
• | If we have net income from prohibited transactions, which are, in general, sales or other dispositions of property held primarily for sale to customers in the ordinary course of business, other than foreclosure property, such income will be subject to a 100% tax. See “—Prohibited Transactions,” and “—Foreclosure Property,” below. |
• | If we elect to treat property that we acquire in connection with a foreclosure of a mortgage loan or certain leasehold terminations as “foreclosure property”, we may thereby avoid the 100% tax on gain from a resale of that property (if the sale would otherwise constitute a prohibited transaction), but the income from the sale or operation of the property may be subject to corporate income tax at the highest applicable rate. |
• | If we derive “excess inclusion income” from an interest in certain mortgage loan securitization structures (i.e., a “taxable mortgage pool” or a residual interest in a real estate mortgage investment conduit (“REMIC”)), we could be subject to corporate level U.S. federal income tax at the highest applicable rate to the extent that such income is allocable to specified types of tax-exempt stockholders known as “disqualified organizations” that are not subject to unrelated business income tax. See “—Taxable Mortgage Pools and Excess Inclusion Income” below. |
• | If we should fail to satisfy the 75% gross income test or the 95% gross income test, as discussed below, but nonetheless maintain our qualification as a REIT because we satisfy other requirements, we will be subject to a 100% tax on an amount based on the magnitude of the failure adjusted to reflect the profit margin associated with our gross income. |
• | If we should fail to satisfy the asset tests (other than certain de minimis violations) or other requirements applicable to REITs, as described below, and yet maintain our qualification as a REIT because there is reasonable cause for the failure and other applicable requirements are met, we may be subject to a penalty tax. In that case, the amount of the penalty tax will be at least $50,000 per failure, and, in the case of certain asset test failures, will be determined as the amount of net income generated by the assets in question multiplied by the highest corporate tax rate if that amount exceeds $50,000 per failure. |
• | If we should fail to distribute during each calendar year at least the sum of (a) 85% of our REIT ordinary income for such year, (b) 95% of our REIT capital gain net income for such year, and (c) any undistributed taxable income from prior periods, we would be subject to a non-deductible 4% excise tax on the excess of the required distribution over the sum of (i) the amounts that we actually distributed, plus (ii) the amounts we retained and upon which we paid income tax at the corporate level. |
• | We may be required to pay monetary penalties to the IRS in certain circumstances, including if we fail to meet record keeping requirements intended to monitor our compliance with rules relating to the composition of a REIT’s stockholders, as described below in “—Requirements for Qualification—General.” |
• | A 100% tax may be imposed on transactions between us and a TRS (as described below) that do not reflect arm’s length terms. |
• | If we acquire appreciated assets from a corporation that is not a REIT (i.e., a corporation taxable under subchapter C of the Code) in a transaction in which the adjusted tax basis of the assets in our hands is determined by reference to the adjusted tax basis of the assets in the hands of the subchapter C corporation, we may be subject to tax on such appreciation at the highest corporate income tax rate then applicable if we subsequently recognize gain on a disposition of any such assets during a period of five years following their acquisition from the subchapter C corporation. |
• | The earnings of any subsidiary that is a subchapter C corporation, including any TRS, may be subject to U.S. federal corporate income tax. |
(1) | that is managed by one or more trustees or directors; |
(2) | the beneficial ownership of which is evidenced by transferable shares, or by transferable certificates of beneficial interest; |
(3) | that would be taxable as a domestic corporation but for its election to be subject to tax as a REIT; |
(4) | that is neither a financial institution nor an insurance company subject to specific provisions of the Code; |
(5) | the beneficial ownership of which is held by 100 or more persons; |
(6) | in which, during the last half of each taxable year, not more than 50% in value of the outstanding stock is owned, directly or indirectly, by five or fewer “individuals” (as defined in the Code to include specified tax-exempt entities); |
(7) | which meets other tests described below, including with respect to the nature of its income and assets; and |
(8) | that makes an election to be a REIT for the current taxable year or has made such an election for a previous taxable year that has not been terminated or revoked. |
(1) | the sum of |
(a) | 90% of our “REIT taxable income,” computed without regard to our net capital gains and the deduction for dividends paid, and |
(b) | 90% of our net income, if any, (after tax) from foreclosure property (as described below), minus |
(2) | the sum of specified items of noncash income. |
• | Excess MSRs, |
• | loans or MBS held as assets that are issued at a discount and require the accrual of taxable economic interest in advance of receipt in cash, |
• | loans on which the borrower is permitted to defer cash payments of interest, and distressed loans on which we may be required to accrue taxable interest income even though the borrower is unable to make current servicing payments in cash, |
• | real estate securities that are financed through securitization structures, and |
• | “residual interests” in REMICs or taxable mortgage pools. |
• | substantially all of its assets consist of debt obligations or interests in debt obligations, |
• | more than 50% of those debt obligations are real estate mortgages or interests in real estate mortgages as of specified testing dates, |
• | the entity has issued debt obligations (liabilities) that have two or more maturities, and |
• | the payments required to be made by the entity on its debt obligations (liabilities) “bear a relationship” to the payments to be received by the entity on the debt obligations that it holds as assets. |
• | cannot be offset by any net operating losses otherwise available to the stockholder, |
• | is subject to tax as unrelated business taxable income in the hands of most types of stockholders that are otherwise generally exempt from U.S. federal income tax, and |
• | results in the application of U.S. federal income tax withholding at the maximum rate, without reduction for any otherwise applicable income tax treaty or other exemption, to the extent allocable to most types of non-U.S. holders. |
• | income retained by the REIT in the prior taxable year on which the REIT was subject to corporate level income tax (less the amount of tax), |
• | dividends received by the REIT from TRSs or other taxable C corporations, or |
• | income in the prior taxable year from the sales of “built-in gain” property acquired by the REIT from C corporations in carryover basis transactions (less the amount of corporate tax on such income). |
• | employee benefit plans as defined in Section 3(3) of ERISA that are subject to Title I of ERISA, |
• | plans described in Section 4975(e)(1) of the Code that are subject to Section 4975 of the Internal Revenue Code, including individual retirement accounts and Keogh Plans, |
• | entities whose underlying assets include plan assets by reason of a plan’s investment in such entities including, without limitation, insurance company general accounts (each of the foregoing, a “Plan”), and |
• | persons who have certain specified relationships to a Plan described as “parties in interest” under ERISA and “disqualified persons” under the Internal Revenue Code. |
• | is freely transferable, |
• | is part of a class of securities that is owned by 100 or more investors independent of the issuer and of one another, and |
• | is either: |
(i) | part of a class of securities registered under Section 12(b) or 12(g) of the Exchange Act, or |
(ii) | sold to the Plan as part of an offering of securities to the public pursuant to an effective registration statement under the Securities Act and the class of securities of which such security is part is registered under the Exchange Act within the requisite time. |
• | whether the Plan’s investment could give rise to a non-exempt prohibited transaction under ERISA or Section 4975 of the Code, |
• | whether the fiduciary has the authority to make the investment, |
• | the composition of the Plan’s portfolio with respect to diversification by type of asset, |
• | the Plan’s funding objectives, |
• | the tax effects of the investment, |
• | whether our assets would be considered plan assets, and |
• | whether, under the general fiduciary standards of investment prudence and diversification an investment in the securities is appropriate for the Plan, taking into account the overall investment policy of the Plan and the composition of the Plan’s investment portfolio. |
• | directly to one or more purchasers; |
• | through agents; |
• | to or through underwriters, brokers or dealers; or |
• | through a combination of any of these methods. |
• | a block trade in which a broker-dealer will attempt to sell as agent, but may position or resell a portion of the block, as principal, in order to facilitate the transaction; |
• | purchases by a broker-dealer, as principal, and resale by the broker-dealer for its account; |
• | ordinary brokerage transactions and transactions in which a broker solicits purchasers; or |
• | privately negotiated transactions. |
• | enter into transactions with a broker-dealer or affiliate thereof in connection with which such broker-dealer or affiliate will engage in short sales of the common stock pursuant to this prospectus, in which case such broker-dealer or affiliate may use shares of common stock received from us to close out its short positions; |
• | sell securities short and redeliver such shares to close out our short positions; |
• | enter into option or other types of transactions that require us to deliver common stock to a broker-dealer or an affiliate thereof, who will then resell or transfer the common stock under this prospectus; or |
• | loan or pledge the common stock to a broker-dealer or an affiliate thereof, who may sell the loaned shares or, in an event of default in the case of a pledge, sell the pledged shares pursuant to this prospectus. |
• | on a national securities exchange; |
• | in the over-the-counter market; or |
• | in transactions otherwise than on an exchange or in the over-the-counter market, or in combination. |
• | at a fixed price or prices, which may be changed; |
• | at market prices prevailing at the time of sale; |
• | at prices related to the prevailing market prices; or |
• | at negotiated prices. |
• | transfer its equity securities in other ways not involving market maker or established trading markets, including directly by gift, distribution, or other transfer; |
• | sell its equity securities under Rule 144 or Rule 145 of the Securities Act rather than under this prospectus, if the transaction meets the requirements of Rule 144 or Rule 145; or |
• | sell its equity securities by any other legally available means. |