Two Harbors Investment Corp. Announces Tax Basis Information for the Special Stock Dividend of Granite Point Mortgage Trust Inc. Common Stock
New York, November 6, 2017 – Two Harbors Investment Corp. (NYSE: TWO), a leading hybrid mortgage real estate investment trust, today announced certain tax basis information concerning the special stock dividend (the “Stock Dividend”) of common stock of Granite Point Mortgage Trust Inc. (NYSE: GPMT) (“Granite Point”). On November 1, 2017, the company distributed the 33,071,000 shares of Granite Point common stock it had acquired in connection with the contribution of its commercial real estate portfolio to Granite Point. Two Harbors common stockholders who were entitled to take part in the Stock Dividend received 0.094765 shares of Granite Point common stock for each share of Two Harbors common stock outstanding on October 20, 2017, subject to the liquidation of fractional shares for which stockholders received a payment of cash in lieu of such fractional shares.
Tax Treatment of the Stock Dividend
Two Harbors intends to report the Stock Dividend of Granite Point common stock as a dividend distribution for U.S. federal income tax purposes. Common stockholders will be treated as receiving a dividend distribution equal to the fair market value of the Granite Point common stock received in the Stock Dividend and will take an adjusted basis, for federal income tax purposes, in such shares equal to the “fair market value” of such shares based on the market price on Dividend Date. Cash in lieu of fractional shares of Granite Point common stock will be treated as a short-term capital sale of such common stock in exchange for cash. For federal income tax purposes, the fair market value of the Granite Point common stock is the closing price on November 1, 2017, which was $18.78 per share.
The company intends to distribute cash in 2017 that is equal to its current and accumulated earnings and profits through December 31, 2017 (which includes the company’s annual 2017 taxable income), in addition to the Stock Dividend. The company expects that the cumulative quarterly 2017 distributions of cash and Granite Point common stock that are in excess of the current and accumulated earnings and profit will be treated as a “nondividend distribution” for U.S. federal income tax purposes, which will have the effect of reducing the basis of a stockholder’s shares of Two Harbors common stock. If a stockholder has fully recovered his, her or its basis in their Two Harbors common stock, a nondividend distribution may be treated as a capital gain.
The company expects that each distribution during 2017 will be characterized for tax purposes as having the same percentage allocation that is designated as ordinary, capital gain, and nondividend distribution. The percentage allocation is based on the total cash and the fair market value of property distributed relative to the annual 2017 taxable income and the current and accumulated earnings and profits through December 31, 2017. Therefore, the nondividend distribution component will be allocated on a Form 1099 for federal income tax purposes to each dividend paid during 2017.
Consult Your Tax Advisor
The tax laws require stockholders to retain records with respect to the Stock Dividend, including information regarding the amount, basis and fair market value relating to the Granite Point common stock distributed. Stockholders may have additional reporting obligations to the Internal Revenue Service and/or other tax authorities.
The U.S. federal income tax treatment of holding Two Harbors common stock to any particular stockholder will depend on the stockholder’s particular tax circumstances. You are urged to consult your tax advisor regarding the U.S. federal, state, local and foreign income and other tax consequences to you, in light of your particular investment or tax circumstances, of acquiring, holding and disposing of Two Harbors common stock.
Two Harbors Investment Corp.
Two Harbors Investment Corp., a Maryland corporation, is a real estate investment trust that invests in residential mortgage-backed securities, mortgage servicing rights and other financial assets. Two Harbors is headquartered in New York, New York, and is externally managed and advised by PRCM Advisers LLC, a wholly owned subsidiary of Pine River Capital Management L.P. Additional information is available at www.twoharborsinvestment.com.
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 with respect to tax matters related to the Stock Dividend. 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 “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.
Readers are cautioned not to place undue reliance upon any forward-looking statements, which speak only as of the date made. Two Harbors 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 Two Harbors’ most recent filings with the Securities and Exchange Commission. All subsequent written and oral forward looking statements concerning Two Harbors or matters attributable to Two Harbors or any person are qualified by these cautionary statements.
Stockholders of Two Harbors and other interested persons may find additional information regarding the company at the Securities and Exchange Commission’s Internet site at www.sec.gov or by directing requests to: Two Harbors Investment Corp., 590 Madison Avenue, 36th floor, New York, NY 10022, telephone 612-629-2500.
Margaret Field, Investor Relations, Two Harbors Investment Corp., 212-364-3663, email@example.com.