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Redwood (RWT), CPP Investments Enter a $750M Partnership
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Redwood Trust, Inc. (RWT - Free Report) has announced a $750-million strategic capital partnership with the Canada Pension Plan Investment Board or CPP Investments. This consists of $500 million in Asset Joint Venture and a $250-million corporate secured financing facility that CPP Investments will provide to RWT.
CPP Investments will contribute 80% of the $500 million, whereas Redwood will contribute the remaining 20%.
The partnership will initially invest in Redwood’s residential investor bridge and term loans, targeting more than $4 billion in total acquisitions. The company will earn ongoing fees for overseeing the administration of the investment and is entitled to earn additional performance fees if a specified return hurdle is realized.
The $250-million corporate secured financing facility will carry a two-year term, with an extension option of a year. The facility is structured with revolving capacity to aid continued growth and scale of Redwood’s mortgage banking platforms.
CPP Investments will also get warrants to buy Redwood’s common stock in an initial amount of $15 million and an option to acquire up to an additional $36 million if certain targets are achieved.
Christopher Abate, chief executive officer of Redwood, noted, “Last year, we unveiled a key initiative to evolve our investment approach, deploying capital side-by-side with strategic investing partners and driving organic scale within our operating platforms. Today’s announcement is a critical step forward in that evolution, one which we believe supports the unprecedented growth opportunities in front of us to scale our mortgage banking businesses and generates attractive earnings streams for our shareholders.”
“This investment partnership with Redwood provides an attractive opportunity to deploy capital at scale into residential mortgage assets alongside a well-established leader in the U.S. mortgage credit sector with a 30-year proven track record,” remarked David Colla, managing director, head of Capital Solutions, CPP Investments.
Over the past six months, RWT shares have declined 13% compared with the industry’s fall of 2.9%.
Image Source: Zacks Investment Research
Currently, Redwood Trust carries a Zacks Rank #4 (Sell).
Stocks to Consider
Some better-ranked bank stocks are Ladder Capital Corp (LADR - Free Report) and Ellington Residential Mortgage REIT (EARN - Free Report) .
Ladder Capital’s 2024 earnings estimates have been revised 1.6% upward in the past 30 days. The company’s shares have gained 5.6% over the past six months. At present, LADR has a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Ellington Residential’s 2024 earnings estimates have moved north by 2% in the past 30 days. The stock has gained 6.1% over the past six months. Currently, EARN carries a Zacks Rank #2.
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Redwood (RWT), CPP Investments Enter a $750M Partnership
Redwood Trust, Inc. (RWT - Free Report) has announced a $750-million strategic capital partnership with the Canada Pension Plan Investment Board or CPP Investments. This consists of $500 million in Asset Joint Venture and a $250-million corporate secured financing facility that CPP Investments will provide to RWT.
CPP Investments will contribute 80% of the $500 million, whereas Redwood will contribute the remaining 20%.
The partnership will initially invest in Redwood’s residential investor bridge and term loans, targeting more than $4 billion in total acquisitions. The company will earn ongoing fees for overseeing the administration of the investment and is entitled to earn additional performance fees if a specified return hurdle is realized.
The $250-million corporate secured financing facility will carry a two-year term, with an extension option of a year. The facility is structured with revolving capacity to aid continued growth and scale of Redwood’s mortgage banking platforms.
CPP Investments will also get warrants to buy Redwood’s common stock in an initial amount of $15 million and an option to acquire up to an additional $36 million if certain targets are achieved.
Christopher Abate, chief executive officer of Redwood, noted, “Last year, we unveiled a key initiative to evolve our investment approach, deploying capital side-by-side with strategic investing partners and driving organic scale within our operating platforms. Today’s announcement is a critical step forward in that evolution, one which we believe supports the unprecedented growth opportunities in front of us to scale our mortgage banking businesses and generates attractive earnings streams for our shareholders.”
“This investment partnership with Redwood provides an attractive opportunity to deploy capital at scale into residential mortgage assets alongside a well-established leader in the U.S. mortgage credit sector with a 30-year proven track record,” remarked David Colla, managing director, head of Capital Solutions, CPP Investments.
Over the past six months, RWT shares have declined 13% compared with the industry’s fall of 2.9%.
Image Source: Zacks Investment Research
Currently, Redwood Trust carries a Zacks Rank #4 (Sell).
Stocks to Consider
Some better-ranked bank stocks are Ladder Capital Corp (LADR - Free Report) and Ellington Residential Mortgage REIT (EARN - Free Report) .
Ladder Capital’s 2024 earnings estimates have been revised 1.6% upward in the past 30 days. The company’s shares have gained 5.6% over the past six months. At present, LADR has a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Ellington Residential’s 2024 earnings estimates have moved north by 2% in the past 30 days. The stock has gained 6.1% over the past six months. Currently, EARN carries a Zacks Rank #2.