CharterMac acquires Related Capital

Real Estate Weekly, Dec 25, 2002

Charter Municipal Mortgage Acceptance Company announced that, nearly a year after forming a special committee of the board of trustees to explore strategic alternatives for managing the company, the company has entered into an agreement to acquire 100% of the ownership interests of Related Capital Company and substantially all of the businesses operated by RCC.

RCC is one of the nation's leading full-service financial services providers for the multifamily housing industry. The acquisition will enable CharterMac to terminate its outside management agreement with Related Charter, LP, an affiliate of RCC, and to become a self-advised and self-managed company.

Commenting on the acquisition, Stephen M. Ross, chairman of CharterMac, stated: "The combination of CharterMac and Related Capital will create one of the largest, streamlined multifamily finance platforms in the nation.

I am truly excited that a company I founded over 30 years ago will become an integral part of CharterMac and will continue to grow and prosper under the leadership of Related Capital's current management team."

The acquisition will be structured so that the ownership interests held by the RCC principals in both RCC and the other entities which control other aspects of RCC's business will be contributed into a newly-formed, wholly-owned subsidiary of CharterMac. The selling principals of RCC include the four executive managing partners (Stuart J. Boesky, Alan P. Hirmes, Marc D. Schnitzer and Denise L. Kiley) and an affiliate of The Related Companies, L.P., which is majority owned by Stephen M. Ross. Messrs. Boesky, Hirmes and Schnitzer and Ms. Kiley have managed RCC over the past 15 years.

CharterMac will pay total consideration to the RCC Principals of up to $338 million. The consideration will be paid as follows:

* The Initial Payment -- $210 million consisting of $160 million in special common units of the CharterMac Sub and $50 million in cash (with the cash portion being paid only to TRCLP). The Initial Payment SCUs will be issued at $17.78 per unit, which was the average closing price of CharterMac's common shares for the 30 calendar days prior to this announcement;

* The Contingent Payment -- Up to $128 million of additional SCUs, following the determination of RCC's adjusted audited earnings before interest, taxes, depreciation and amortization, as well as certain other adjustments, for the year ending Dec. 31. The Contingent Payment SCUs will be issued in an amount equal to 7.73x RCC 2002 Adjusted Earnings minus $210 million, subject to a cap of $338 million of total consideration. The Contingent Payment SCUs are expected to be issued at the same price as the Initial Payment SCUs, subject to a 17.5% symmetrical collar.

In connection with the acquisition, CharterMac will establish a restricted share program and will broadly issue to employees of RCC, other than the RCC Principals, $15 million of CharterMac Common Shares. Following the completion of the acquisition, TRCLP's economic interest in CharterMac will equal approximately 19% and management and RCC employees' economic interest in CharterMac will equal approximately 11%.