The deal includes an option for Redwood to acquire the remaining interest in the company
Redwood Trust, which invests in residential mortgage and in securities collateralized by real estate loans, has agreed to purchase a 20% minority interest in 5 Arches, an originator and asset manager of business-purpose residential mortgage loans.
Under the agreement, Redwood will have exclusive access to 5 Arches' single-family rental loan production, which includes up to four properties. 5 Arches’ loan offerings include those for single-family rental, multifamily bridge, and fix-and-flip residential real estate. In connection with the investment, Redwood has a one-year option to acquire the remaining 80% interest in 5 Arches.
"We have admired the 5 Arches platform for some time, and could not think of a better partner to help jumpstart our business-purpose loan initiative," Redwood President Christopher Abate said. "The opportunity for us is clear. Capital needs in this still-emergent sector of housing finance continue to rise, and through our partnership with 5 Arches, we have the opportunity to address this demand while creating significant growth potential and accretive investments for our portfolio."
5 Arches has originated more than $1.3 billion of business-purpose residential mortgage loans since it was founded in 2012. The Irvine, Calif.-based firm has grown its production from approximately $150 million in 2015 to $470 million in 2017. Its first-quarter production totaled more than $175 million.
"This transaction represents a pivotal moment in the evolution of 5 Arches, and together with Redwood, we are poised to take a leadership position in the single-family rental business and continue the accelerated growth of our multifamily and fix-and-flip businesses, respectively," 5 Arches CEO and co-founder Shawn Miller said.
