Chimera Investment Corporation Completes Acquisition of Palisades Group

Rhea-AI Summary

Chimera Investment (NYSE: CIM) has completed the acquisition of Palisades Group, a U.S.-based alternative asset manager specializing in residential real estate credit. The transaction, closed on December 2, 2024, involved a $30 million cash payment at closing, with a potential additional earnout of up to $20 million over five years tied to financial performance targets. Chimera has the option to pay 50% of the earnout in common shares. As part of the deal, Palisades' co-founder and Chief Investment Officer, Jack Macdowell, Jr., has assumed the role of CIM's Chief Investment Officer.

Positive

• Acquisition expands CIM's asset management capabilities in residential real estate credit
• Flexible payment structure with $30M upfront and performance-based earnout up to $20M
• Option to pay 50% of earnout in shares helps preserve cash and align interests

Negative

• Significant initial cash outlay of $30M impacts liquidity
• Potential future dilution if earnout payments are made in common shares
• Additional contingent liability of up to $20M over five years

Insights

Financial Analyst

This strategic acquisition marks a significant shift in Chimera's operational capabilities. The $30 million upfront payment with a potential $20 million earnout structure demonstrates a thoughtful approach to M&A, balancing immediate investment with performance-based incentives. The option to pay half the earnout in shares creates strong alignment with shareholder interests.

Palisades' expertise in residential real estate credit should enhance Chimera's asset management capabilities and potentially diversify revenue streams. The appointment of Jack Macdowell, Jr. as CIO suggests a deeper integration strategy beyond mere portfolio acquisition. This move could strengthen Chimera's market position in the residential mortgage space and potentially lead to improved returns through enhanced asset selection and management capabilities.

M&A Integration Specialist

The deal structure reveals careful consideration of post-merger integration and risk management. The five-year earnout period creates a strong retention mechanism for key Palisades personnel while protecting Chimera's interests. The relatively modest upfront payment of $30 million suggests a conservative valuation approach, with performance incentives tied to value creation.

The integration of Palisades' alternative asset management expertise could transform Chimera's business model, potentially enabling expansion into new revenue streams through third-party asset management. This vertical integration strategy could reduce external management costs and create new fee-based income opportunities.

NEW YORK--(BUSINESS WIRE)-- Chimera Investment Corporation (NYSE: CIM) (“Chimera”) announced today that it has completed the previously announced acquisition of Palisades Group (“Palisades”), a U.S.-based alternative asset manager founded in 2012 that specializes in residential real estate credit. Upon closing, which occurred on December 2, 2024, Jack Macdowell, Jr., co-founder and Chief Investment Officer of Palisades, became Chimera’s Chief Investment Officer.

Pursuant to the terms of the agreement, Chimera acquired Palisades for cash consideration of $30 million at closing, plus an additional potential earnout of up to $20 million over five years contingent upon achieving certain financial targets, with the option for Chimera to pay 50% of the earnout payments in common shares, aligning interests with those of Chimera’s shareholders.

Advisors

Houlihan Lokey acted as the exclusive financial advisor to Chimera and Hunton Andrews Kurth LLP served as legal counsel to Chimera. Mayer Brown LLP served as legal counsel to Palisades Group.

About Chimera Investment Corporation

Chimera is a publicly traded real estate investment trust, or REIT, that is primarily engaged in the business of investing directly or indirectly, on a leveraged basis, in a diversified portfolio of real estate assets, including mortgage loans, Agency RMBS, Non-Agency RMBS, Agency CMBS, business purpose and investor loans, and other real estate assets.

Forward-Looking Statements

This press release includes “forward-looking statements” within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995, including as related to the expected impact (including as related to Chimera’s future earnings) of Chimera’s acquisition of Palisades Group. Actual results may differ from expectations, estimates and projections and, consequently, readers should not rely on these forward-looking statements as predictions of future events. Words such as “goals,” “expect,” “target,” “assume,” “estimate,” “project,” “budget,” “forecast,” “anticipate,” “intend,” “plan,” “may,” “will,” “could,” “should,” “believe,” “predicts,” “potential,” “continue,” and similar expressions are intended to identify such forward-looking statements. These forward-looking statements involve significant risks and uncertainties that could cause actual results to differ materially from expected results, including, among other things, those described in our most recent Annual Report on Form 10-K, and any subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, under the caption “Risk Factors.”

Factors that could cause actual results to differ include, but are not limited to: the potential that Chimera may not fully realize the expected benefits of the acquisition of Palisades Group, including the potential financial impact; our business and investment strategy; our ability to accurately forecast the payment of future dividends on our common and preferred stock, and the amount of such dividends; our ability to determine accurately the fair market value of our assets; availability of investment opportunities in real estate-related and other securities, including our valuation of potential opportunities that may arise as a result of current and future market dislocations; our expected investments; changes in the value of our investments, including negative changes resulting in margin calls related to the financing of our assets; changes in inflation, interest rates and mortgage prepayment rates; prepayments of the mortgage and other loans underlying our mortgage-backed securities, or MBS, or other asset-backed securities, or ABS; rates of default, forbearance, deferred payments, delinquencies or decreased recovery rates on our investments; general volatility of the securities markets in which we invest; our ability to maintain existing financing arrangements and our ability to obtain future financing arrangements; our ability to effect our strategy to securitize residential mortgage loans; interest rate mismatches between our investments and our borrowings used to finance such purchases; effects of interest rate caps on our adjustable-rate investments; the degree to which our hedging strategies may or may not protect us from interest rate volatility; the impact of and changes to various government programs; the impact of and changes in governmental regulations, tax law and rates, accounting guidance, and similar matters; market trends in our industry, interest rates, the debt securities markets or the general economy; estimates relating to our ability to make distributions to our stockholders in the future; our understanding of our competition; our ability to find and retain qualified personnel; our ability to maintain our classification as a REIT for U.S. federal income tax purposes; our ability to maintain our exemption from registration under the Investment Company Act of 1940, as amended; our expectations regarding materiality or significance; and the effectiveness of our disclosure controls and procedures.

Readers are cautioned not to place undue reliance upon any forward-looking statements, which speak only as of the date made. Chimera does not undertake or accept any obligation to release publicly any updates or revisions to any forward-looking statement to reflect any change in its expectations or any change in events, conditions or circumstances on which any such statement is based. Additional information concerning these, and other risk factors, is contained in Chimera’s most recent filings with the Securities and Exchange Commission (SEC). All subsequent written and oral forward-looking statements concerning Chimera or matters attributable to Chimera or any person acting on its behalf are expressly qualified in their entirety by the cautionary statements above.

Readers are advised that any financial information in this press release is based on company data available at the time of this presentation and, in certain circumstances, may not have been audited by Chimera’s independent auditors.

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Chimera Investment Corporation

Investor Relations

888-895-6557

www.chimerareit.com

Source: Chimera Investment Corporation

FAQ

How much did Chimera Investment (CIM) pay for Palisades Group?

Chimera paid $30 million in cash at closing, with potential additional earnout payments of up to $20 million over five years based on achieving certain financial targets.

When did Chimera Investment complete the Palisades Group acquisition?

Chimera completed the acquisition of Palisades Group on December 2, 2024.

Who is the new Chief Investment Officer of Chimera Investment (CIM)?

Jack Macdowell, Jr., co-founder and former Chief Investment Officer of Palisades Group, became Chimera's Chief Investment Officer upon closing of the acquisition.

What are the earnout payment terms for CIM's acquisition of Palisades Group?

The earnout payments of up to $20 million are spread over five years, contingent on meeting financial targets, with Chimera having the option to pay 50% in common shares.