TPG buys Cherry Hill REIT to expand non-agency platform

TPG Mortgage Investment Trust is acquiring Cherry Hill Mortgage Investment Corp. in a deal that will create a larger non-agency portfolio.

The combined companies will run an investment portfolio of $9 billion, 72% of which will be composed of non-agency residential credit, they said Monday. The cash-and-stock deal by TPG, which trades under the MITT ticker symbol on the New York Stock Exchange, has an implied transaction value of $117.5 million for the Cherry Hill real estate investment trust. 

MITT CEO and board member T.J. Durkin, in a statement Monday, said his REIT hopes to replicate the success it realized with its acquisition of Western Asset Mortgage Capital Corp. in 2023. 

"We are excited to bring together two highly complementary portfolios to significantly enhance the scale of MITT's residential mortgage platform, which we believe will generate meaningful operational efficiencies and deliver accretive earnings growth for the benefit of all stockholders," he said. 

That combined portfolio would also comprise around 14.4% of agency residential mortgage-backed securities and mortgage servicing rights, 12.6% of home-equity assets and 1% in other investments. 

The deal also represents an end to the Cherry Hill saga, which began in 2024 when it explored a potential sale amid sluggish lending activity. The REIT was launched as a publicly traded company in 2013 through a partnership with Freedom Mortgage, and internalized its management two years ago. 

MITT is managed by AG REIT Management, itself an affiliate of the alternative asset management giant TPG. In an earnings report Monday, MITT reported a $7.7 billion portfolio and a total value of its investment in the non-qualified mortgage lender Arc Home of $46.4 million. It posted net income of $9 million, and as of the end of the second quarter had $111.6 million in total liquidity. 

Cherry Hill, in its own earnings report Monday, reported  $1.3 million in net income applicable to common stockholders for the recent period. The REIT reported an unpaid principal balance of $15.2 billion for its MSR portfolio at the end of the second quarter, and a weighted average coupon of 5.08% for its RMBS book. 

The deal, which was unanimously approved by each firm's board of directors, is expected to close in the fourth quarter. On a pro forma basis, CHMI's stockholders will receive approximately 30% of the merger consideration in cash — a $20 million payment from TPG and an approximate $15 million payment from MITT. 

The company will be led by MITT's existing management team, while CHMI will gain two seats on the board of directors. Piper Sandler & Co. acted as exclusive financial advisor to MITT, while BTIG acted in the same capacity for CHMI. 

MITT's stock dipped Monday to $6.22 per share midday, from an open of $6.45 per share, while CHMI was trading just above its open around midday at $2.76 per share. 

More industry transactions

The real estate industry continues to see a steady stream of mergers and acquisitions this year, including in the capital markets space. Ellington Financial, parent of reverse lender Longbridge Financial, on Friday teased a pending acquisition of a small servicer alongside a positive earnings report. 

Builders continue to consolidate, with Dream Finders Homes' recent $2.2 billion purchase of Beazer Homes. And while CrossCountry's pending buy of Two Harbors Investment is all but completed, smaller players continue to scoop up market share.