Redwood Trust buying real estate investment lender CoreVest for $490 million

For the second time this year, Redwood Trust, a real estate investment trust that specializes in buying and securitizing jumbo mortgages, is growing its real estate investor loan business through an acquisition.

Earlier this year, Redwood Trust paid $50 million to acquire 5 Arches, an originator and asset manager of investor-focused loans and the parent company of 5 Arch Funding.

But that was just the appetizer. Now comes the main course.

Redwood Trust announced Monday that it is acquiring CoreVest American Finance Lender, the real estate investment lender formerly known as Colony American Finance for $490 million.

CoreVest was founded in 2014 and specializes in lending to real
estate investors who want to purchase single-family rental homes, townhomes,
condos, and small multifamily properties.

The company was known as Colony American Finance until 2017, when Colony American was acquired by Fortress Investment Group. At the time, the company rebranded to CoreVest American Finance Lender.

Since its founding in 2014, CoreVest has funded more than $4
billion in loans, including more than $1.1 billion in 2019 so far. The
company is also an experienced securitization issuer, having recently completed
its ninth single-family rental securitization.

In a release, Redwood states that it views the acquisition as
a significant boost to its real estate investor lending business.

“Collectively, the platform and assets will significantly
expand Redwood’s presence in the BPL market, furthering its position as a
leading private-sector source of housing-market liquidity,” Redwood Trust said
in a release. “Importantly, the transaction also advances several of Redwood’s
key corporate strategic initiatives, including broadening and diversifying its
revenue streams, significantly expanding its capacity to create proprietary
credit investments, and profitably scaling its infrastructure and operations.”

According to Redwood Trust, the acquisition includes the
CoreVest operating platform and more than $900 million of related financial
assets.

Under the terms of the agreement, Redwood will acquire
CoreVest’s operating platform and assets, including its business-purpose loan
portfolio and subordinate bonds from CoreVest-sponsored securitizations, from Fortress
for approximately $490 million.

Redwood plans to fund this deal with a mix of cash on hand
and shares of Redwood stock, which are payable to the CoreVest executive
management team and vest over a two-year period.

“Today we are pleased to announce the acquisition of the
CoreVest operating platform,” Redwood CEO Christopher Abate.

“CoreVest is a best-in-class operator in the
business-purpose lending sector, an area of residential lending that increases
liquidity in the housing market by enabling investors to efficiently finance
purchases of both single-family and multifamily investment properties,” Abate
continued.

“Additionally, CoreVest is the standard-bearer for BPL
securitizations, having completed more such transactions than any other issuer,”
Abate added. “Integrating the CoreVest operations and suite of products with
our own market-leading consumer mortgage banking and securitization platform
will create the preeminent specialty finance operator in our industry.”

Dashiell Robinson, Redwood’s president, said the acquisition
builds on the 5 Arches deal from earlier in the year and will allow the company
to capitalize on the “rapidly growing segment” of lending to real estate
investors.

As for CoreVest, CEO Beth O’Brien said the company is excited to be joining Redwood Trust.

“Our team has built an amazing platform and brand, and we’re poised to enter a new phase of growth by leveraging Redwood’s significant, permanent capital base and deep residential credit expertise,” O’Brien said. “Our clients will continue to experience our high level of service, but with an even greater commitment to delivering customized funding solutions at highly competitive rates.”

The companies expect the deal to close within the next two
to three business days.

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