Redwood Trust, Inc. (NYSE: RWT), a leader in housing credit solutions, has teamed up with Canada Pension Plan Investment Board (CPP Investments) in a monumental capital partnership totaling $750 million. This strategic alliance, announced from Mill Valley, California, and Toronto, is poised to reshape the landscape of residential mortgage investments.
The partnership comprises two significant components: a $500 million Asset Joint Venture and a $250 million corporate secured financing facility extended by CPP Investments to Redwood. Under the terms of the Joint Venture, a robust investment strategy targets Redwood’s residential investor bridge and term loans, with aspirations to surpass $4 billion in acquisitions. Redwood and its affiliated entities will oversee asset management for the Joint Venture, with equity contributions reaching up to $500 million. CPP Investments will provide 80% of the equity, with Redwood contributing the remaining 20%. Notably, Redwood stands to gain administrative fees and potential performance-based incentives from this collaboration.
The financing facility, structured with a two-year term and the option for a one-year extension, features revolving capacity crafted to fuel the expansion of Redwood’s mortgage banking platforms. As part of the deal, CPP Investments will be granted warrants to acquire Redwood common stock, initially valued at approximately $15 million, with the potential for an additional $36 million subject to specific conditions.
Christopher Abate, CEO of Redwood, conveyed excitement about the partnership, emphasizing its alignment with the company’s growth trajectory and its potential to amplify the scale of its mortgage banking operations. David Colla, representing CPP Investments, echoed this sentiment, highlighting the strategic opportunity to invest in U.S. residential mortgage assets alongside Redwood.
This landmark collaboration between Redwood Trust and CPP Investments marks a significant milestone in the realm of housing credit solutions, setting the stage for innovative ventures and sustainable growth within the residential mortgage market.
