TPG Mortgage Buys Cherry Hill, Forms $9B REIT

TPG Mortgage Investment Trust Inc. (MITT) has agreed to acquire Cherry Hill Mortgage Investment Corp. (CHMI) in a cash-and-stock transaction valued at approximately $117.5 million. This acquisition is set to establish a significant residential mortgage real estate investment trust (REIT) platform with a combined investment portfolio of $9 billion. The deal, announced on Monday, aims to enhance MITT's scale and create a more robust residential mortgage platform by integrating two complementary portfolios. Under the terms of the definitive merger agreement, Cherry Hill stockholders will receive 0.3063 shares of TPG Mortgage Investment Trust common stock and $0.93 in cash for each share of Cherry Hill common stock they hold. This consideration, based on MITT's closing price on the preceding Friday, represents a premium of 29% for Cherry Hill shareholders, equating to $3.10 per Cherry Hill share. T.J. Durkin, President, CEO, and board member of TPG Mortgage Investment Trust, stated that the acquisition is a "transformational, value-creating opportunity" designed to yield operational efficiencies and deliver accretive earnings to stockholders. Durkin will continue in his leadership roles within the combined entity. Cherry Hill will contribute two independent directors to MITT's board, increasing its total membership to eight. The combined company's $9 billion investment portfolio will be diversified, comprising approximately 72% non-agency residential credit, 14.4% agency residential mortgage-backed securities and mortgage servicing rights (MSRs), 12.6% in home equity investments, and 1% in other investments. The transaction is anticipated to generate annual operating efficiencies ranging from $7 million to $9 million, stemming from a more favorable expense ratio and other cost-saving measures. On a pro forma basis, MITT stockholders are projected to hold approximately 73% of the combined company, with Cherry Hill stockholders retaining about 27%. Approximately 30% of the total merger consideration will be settled in cash. This strategic move follows MITT's acquisition of Western Asset Mortgage Capital Corp. in 2023, indicating a pattern of consolidation and expansion within the mortgage REIT sector. The integration of Cherry Hill's operations and portfolio is expected to strengthen MITT's market position and competitive advantage in the residential mortgage market. Cherry Hill CEO and board member Jay Lown commented that the deal "will deliver immediate cash consideration to CHMI stockholders, together with an opportunity to participate in the future growth and success of the combined company."