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Redwood Trust completes acquisition of real estate investment loan originator 5 Arches

REIT acquires remaining 80% of parent company of 5 Arch Funding

Redwood Trust announced this week that it has completed its purchase of 5 Arches, an originator and asset manager of investor-focused loans and the parent company of 5 Arch Funding.

The companies initially announced the deal earlier this year.

Last year, Redwood Trust, a real estate investment trust that specializes in buying and securitizing jumbo mortgages, expanded its real estate investor loan business when it acquired a 20% stake in 5 Arches.

Part of that deal included a condition that Redwood Trust had the right to purchase the remaining 80% of 5 Arches within one year.

Redwood Trust exercised that right earlier this year, and now the deal is done.

According to Redwood Trust, 5 Arches has approximately 95 employees and has originated more than $1.8 billion of loans since its founding in 2012, focusing on single-family rental and bridge loans for single-family and small-balance multifamily properties.

The company has grown its loan production from approximately $150 million in 2015 to approximately $850 million in 2018.

And now, the company will operate as a wholly owned subsidiary of Redwood.

Redwood’s total outlay for the deal is $50 million. Of that, $10 million went to the purchase of the minority interest in 2018, and $40 million went to buy the rest of the company.

According to Redwood, the deal will help it grow its investor loan business.

“We are pleased to have completed the acquisition of 5 Arches,” Redwood Trust CEO Christopher Abate said.

“Our measured, incremental approach to this transaction allowed us to add a highly accretive and scalable platform while helping to ensure that the integration is a success for stakeholders of both Redwood and 5 Arches,” Abate added. “We welcome the 5 Arches team and look forward to the opportunities that the combination affords.”

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