Redwood Trust and CPP Investments Announce $750 Million Strategic Capital Partnership

Redwood Trust, Inc. (NYSE: RWT; “Redwood” or the “Company”), a leader in expanding access to housing for homebuyers and renters, and Canada Pension Plan Investment Board (“CPP Investments”), through subsidiaries of CPPIB Credit Investments Inc., today announced a $750 million strategic capital partnership.

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The partnership consists of a newly formed $500 million Asset Joint Venture and a $250 million corporate secured financing facility that CPP Investments is providing to Redwood.

The Joint Venture will initially invest across the broad suite of Redwood’s residential investor bridge and term loans, targeting more than $4 billion in total acquisitions. Redwood and its subsidiaries will administer the assets on behalf of the Joint Venture. Together, CPP Investments and Redwood will contribute up to $500 million of equity to the Joint Venture, with an anticipated split of 80% from CPP Investments and 20% from Redwood. Redwood will earn ongoing fees to oversee the administration of the Joint Venture and is entitled to earn additional performance fees upon realization of specified return hurdles.

The secured corporate financing will have total capacity of up to $250 million and carry a two-year term, with a one-year extension option. The facility is structured with revolving capacity to support the continued growth and scale of Redwood’s mortgage banking platforms.

To further promote long-term strategic alignment, CPP Investments will also receive warrants to acquire Redwood common stock in an initial amount of approximately $15 million with the option to acquire up to an additional $36 million if certain joint venture deployment targets are achieved¹. The warrants are struck at a 25% premium to the trailing 30-day average stock price and have anti-dilution mechanics including a mandatory conversion feature.

“We are thrilled to announce this strategic partnership with CPP Investments, whose experienced team sees the power of Redwood’s franchise and the financial assets we procure,” said Christopher Abate, Chief Executive Officer of Redwood. “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.”