US property lender Redwood Trust and Canada Pension Plan Investment Board (CPP Investments) have set up a $750m (€690.8m) partnership to initially invest across Redwood’s residential investor bridge and term loans.
The NYSE-listed speciality finance company and the Canadian investor’s subsidiary CPPIB Credit Investments have created the partnership whereby the pair will contribute up to $500m of equity to the venture in an expected split of 80% from CPP Investments and 20% from Redwood.
CPP Investments is providing a $250m corporate secured financing facility to Redwood as part of the deal which also involves CPP Investments receiving warrants to acquire an initial $15m worth of Redwood common stock with the option to acquire up to an additional $36m subjects to certain targets being met.
Redwood and its subsidiaries will administer the assets on behalf of the joint venture which targets more than $4bn in total acquisitions initially.
Christopher Abate, CEO of Redwood, said: “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.”
David Colla, managing director and head of capital solutions at CPP Investments, said: “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 US mortgage credit sector with a 30-year proven track record.
“We have confidence in Redwood’s long-term growth strategy and the strength of their origination franchise. This transaction expresses our positive thesis on US housing and other asset-backed credit opportunities.”
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