The joint venture aims to reshape US residential lending landscape
CPP Investments has unveiled a US$750m US capital partnership with California-based Redwood Trust Inc., aiming to invest in residential investor bridge and term loans.
This venture is structured around a US$500m asset joint venture and a US$250m corporate secured financing facility provided by CPP Investments to Redwood.
CPP Investments will supply 80 percent of the equity for the asset joint venture, aiming for over $4bn in total acquisitions.
This move aligns with CPP Investments' strategy to deploy capital into the residential mortgage sector alongside a known US mortgage credit sector with a “30-year proven track record,” according to David Colla, CPP Investments’ managing director and head of capital solutions.
Colla emphasized the partnership as an opportunity to invest in “US housing and other asset-backed credit opportunities,” expressing confidence in Redwood's growth strategy and the strength of its origination franchise.
The agreement further allows CPP Investments the opportunity to acquire Redwood stock. Redwood and its subsidiaries will manage the assets, earning fees and bonuses if certain “specified return hurdles” are met or exceeded.
CPP Investments will receive warrants to purchase up to US$51m in Redwood common stock, contingent upon meeting joint venture deployment targets, with the pricing for these warrants set at a 25 percent premium to the trailing 30-day average stock price.
Christopher Abate, the CEO of Redwood, celebrated the strategic partnership, highlighting it as a key initiative in evolving Redwood's investment approach.
