Company: RWT-PA
Filing Date: 2025-01-16
Form Type: 424B5
Source: 0001104659-25-004099
Chunk: 109

Company: REDWOOD TRUST INC
Filing Date: 2025-01-16
Form: 424B5
Chunk 109
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 a qualifying real estate asset in an amount equal
to the lesser of: (1) the greater of (a) the fair market value of the real property securing the loan determined as of the
date the REIT committed to acquire the loan or (b) the fair market value of the real property securing the loan on the relevant
quarterly REIT asset testing date; or (2) the fair market value of the loan on the date of the relevant quarterly REIT asset testing
date. We intend to invest in mortgage loans in a manner consistent with satisfying the asset tests and maintaining our qualification
as a REIT.

The proper classification
of an instrument as debt or equity for U.S. federal income tax purposes may be uncertain in some circumstances, which could affect the
application of the REIT asset tests. Accordingly, there can be no assurance that the IRS will not assert that our interests in subsidiaries
or in the securities of other issuers caused a violation of the REIT asset tests.

In addition, we intend to
enter into repurchase agreements under which we will nominally sell certain of our assets to a counterparty and simultaneously enter
into an agreement to repurchase the sold assets. We believe that we will be treated for U.S. federal income tax purposes as the owner
of the assets that are the subject of any repurchase agreement and that the repurchase agreement will be treated as a secured lending
transaction notwithstanding that we may transfer record ownership of the assets to the counterparty during the term of the agreement.
It is possible, however, that the IRS could successfully assert that we did not own the assets during the term of the repurchase agreement,
in which case we could fail to qualify as a REIT.

The asset tests must be satisfied
at the close of each calendar quarter of our taxable year in which we (directly or through any qualified REIT subsidiary or subsidiary
partnership) acquire securities in the applicable issuer, and also at the close of each calendar quarter in which we increase our ownership
of securities of such issuer (including as a result of an increase in our interest in any partnership that owns such securities). For
example, our indirect ownership of securities of each issuer may increase as a result of our capital contributions to, or the redemption
of other partners’ or members’ interests in, a partnership in which we have an ownership interest. However, after initially
meeting the asset tests at the close of any quarter, we will not lose our status as a REIT for failure to