Cantor Fitzgerald analysts said in a report today that they expect Redwood Trust will be able to fund its growing pipeline and retained subordinate RMBS without having to raise equity anytime soon.
The analysts said that the REIT will likely utilize a warehouse line, securitize its mezzanine commercial real estate loans, and sell its remaining senior RMBS.
"This should suffice until there is a break-out, probably sometime in 2012," Cantor analysts said in the report. "With a proven business model and an emerging environment seemingly suited for that business model, we believe that Redwood deserves to trade at least in line with peers."
In an Aug. 5 statement, Redwood Trust said it plans to issue two additional Jumbo securitizations in 2011 despite the challenging economic environment. See related story here.
The REIT posted a net profit of just $9 million in 2Q11, half of what it earned in 1Q11. It told investors that there is a lack of quality mortgages to buy at the right price.
Its conduit bought $152 million of prime Jumbo loans in the second quarter. The REIT also oiginated $29 million of commercial mortgages while purchasing $33 million of residential securities.
The firm noted that although it is not satisfied with its quarterly results, it continues to sign up mortgage lenders that will sell to the REIT.