Redwood Trust announced its Board of Directors has unanimously approved a plan to revoke its Real Estate Investment Trust (REIT) election and transition to a taxable C corporation, effective for its 2027 taxable year. This strategic shift is accompanied by several related corporate actions, including a reverse stock split, a new stock repurchase authorization, and an agreement with a major investor to facilitate the transition.
Key Details
- C-Corp Conversion: The company will revoke its REIT status with an IRS filing expected by March 31, 2027, making the conversion effective January 1, 2027. It will maintain its REIT status for the 2026 tax year.
- Hildene Agreement: Entered into a Waiver and Repurchase Agreement with Hildene Capital Management to waive the company's REIT maintenance covenant. Redwood will repurchase $53.1 million liquidation amount of Trust Preferred Securities for $45.2 million (85% of face value) and pay a $500,000 fee.
- Reverse Stock Split: A one-for-five reverse stock split of its common stock will be effective at 5:00 p.m. ET on December 31, 2026. Trading on a split-adjusted basis will begin on January 4, 2027.
- Tax Benefits Preservation Plan: The company adopted a plan (a "poison pill") to protect its Net Operating Losses (NOLs) and other tax assets, triggered if a person or group acquires 4.9% or more of company securities.
- Strategic Updates: The company also expanded its partnership with CPP Investments, upsizing a secured financing facility to $500 million from $400 million and extending its term to March 2030.