MITT agrees to buy Cherry Hill, creating $9B residential mortgage REIT

TPG Mortgage Investment Trust Inc. on Monday agreed to acquire Cherry Hill Mortgage Investment Corp. in a cash-and-stock deal that values Cherry Hill at about $117.5 million and will create a $9 billion residential mortgage real estate investment trust (REIT) platform.

Under the definitive merger agreement, Cherry Hill stockholders will receive 0.3063 shares of TPG Mortgage Investment Trust (MITT) common stock and $0.93 in cash for each share of Cherry Hill (CHMI) common stock. Based on MITT’s Friday closing price, that equals $3.10 per Cherry Hill share, a 29% premium.

In 2023, MITT acquired Western Asset Mortgage Capital Corp. President, CEO and board member T.J. Durkin said in a statement that the deal represents a “transformational, value-creating opportunity” that will generate operational efficiencies and deliver accretive earnings to stockholders.

“We are excited to bring together two highly complementary portfolios to significantly enhance the scale of MITT’s residential mortgage platform,” said Durkin, who will continue as president and CEO. Cherry Hill will designate two independent directors to join MITT’s board, expanding the board to eight members.

The combined company will have a $9 billion investment portfolio, consisting of approximately 72% nonagency residential credit, 14.4% agency residential mortgage-backed securities and mortgage servicing rights (MSRs), 12.6% home equity and 1% other investments.

The transaction is projected to generate $7 million to $9 million in annual operating efficiencies through a more favorable expense ratio and other cost savings, the companies said.

On a pro forma basis, MITT stockholders are expected to own about 73% of the combined company, while Cherry Hill stockholders will own about 27%. About 30% of the merger consideration will be paid in cash.

Cherry Hill CEO and board member Jay Lown said the deal “will deliver immediate cash consideration to CHMI stockholders, together with an opportunity to participate in the potential upside of the combined company.”

Lown pointed to Cherry Hill’s diversified portfolio of agency RMBS and MSRs, combined with TPG’s mortgage expertise and integration track record, as positioning MITT to drive long-term value.

MITT will continue to leverage the resources of its manager, AG REIT Management LLC, an affiliate of TPG Inc., which reported $327 billion in assets under management. The companies highlighted access to TPG’s securitization platform, an expanded investor base and improved liquidity as additional benefits to the combined REIT.

The boards unanimously approved the transaction, which is expected to close in the fourth quarter, subject to shareholder approvals, regulatory sign-offs and other customary closing conditions.

The combined company will operate as TPG Mortgage Investment Trust Inc. and remain listed on the New York Stock Exchange under the MITT ticker. The headquarters will stay in New York.

This article was written by Flávia Furlan Nunes and generated with the assistance of HousingWire Automation, then reviewed by a HousingWire editor before publication.