Annaly Capital Management entered into a definitive agreement to sell its commercial real estate business to Slate Asset Management, a global investment and asset management firm focused on real estate.

The transaction is valued at $2.33 billion and represents substantially all of the assets that comprise Annaly’s commercial real estate business, which includes equity interests, loan assets and commercial mortgage-backed securities. Certain Annaly employees who primarily support the commercial real estate business are expected to join Slate upon completion of the sale, including Timothy Gallagher, head of commercial real estate; and Michael Quinn, head of commercial investments.

“The commercial real estate business has been an important component of Annaly’s differentiated investment model since 2013,” David Finkelstein, CEO and chief investment officer for Annaly Capital Management, said. “This transaction delivers compelling execution for our shareholders and will provide additional capacity to further expand our leadership and operational capabilities across all aspects of the residential mortgage finance market, which has been the cornerstone of Annaly’s strategy since our founding. On behalf of our entire company and board of directors, I want to sincerely thank all of the employees who have supported and built our commercial real estate business over the years.”

Annaly expects the transaction to have an immaterial impact on financial metrics, including book value, core earnings and the company’s dividend. Upon closing of the transaction, Annaly intends to use proceeds from the sale to repay its financing facilities related to the commercial real estate assets being sold and to purchase targeted assets in accordance with its capital allocation policy, which may include investments in agency assets as well as residential and corporate credit assets. Annaly anticipates maintaining limited exposure to the commercial real estate sector through strategies within its securities portfolio.

Subject to customary closing conditions, including applicable regulatory approvals, the transfer of the commercial real estate business is expected to be completed by Q3/21.

Evercore is serving as financial advisor and Ropes & Gray is serving as legal advisor to Annaly. BMO Capital Markets is serving as financial advisor and Goodwin Procter and McCarthy Tétrault are serving as legal advisors to Slate.