June 2, 2009
Redwood Trust, Inc.
One Belvedere Place Suite
300 Mill Valley, CA
94941
Re:
Redwood Trust, Inc./Prospectus Supplement for Common Stock Offering
Ladies
and Gentlemen:
We have
acted as special tax counsel to Redwood Trust, Inc. (the “Company”) in connection with
the underwritten public offering (the “Offering”) of 17,240,000
shares of its common stock, par value $0.01 per share (the “Common Stock”) pursuant to
(i) the Registration Statement on Form S-3, dated November 23, 2007, (as amended
as of the date hereof, together with the documents incorporated therein by
reference, the “Registration
Statement”) including the Prospectus (the “Prospectus”), which forms a
part of the Registration Statement and (ii) the Prospectus Supplement, dated
May 27, 2009, (the
“Prospectus
Supplement”), each as filed by the Company with the Securities and
Exchange Commission (“SEC”) pursuant to the
Securities Act of 1933, as amended (the “Securities
Act”). In connection with the Offering, including the filing
of the Prospectus Supplement with the SEC, you have requested that we confirm
our opinion regarding the accuracy of certain descriptions of material U.S.
federal income tax consequences contained in the Registration Statement, the
Prospectus, and the Prospectus Supplement.
Scope
of Review
Our
opinions are based on the Internal Revenue Code of 1986, as amended to the date
hereof (the “Code”),
Treasury regulations issued
thereunder, administrative rulings, judicial decisions and other applicable
authorities, all as in effect and available on the date hereof. We
note that the statutory provisions, regulations, and interpretations on which
our opinions are based are subject to change, possibly
retroactively. In addition, there can be no complete assurance that
the Internal Revenue Service will not take positions contrary to the conclusions
stated in our opinions.
In formulating our opinions, we have
reviewed:
(i) the Registration Statement, the
Prospectus, the preliminary Prospectus Supplement covering the Common Stock to
be issued in the Offering, dated May 26, 2009 and filed by the Company with
the SEC on or about such date (the “Preliminary Prospectus”), and the Prospectus
Supplement;
(ii)
the Company’s articles of
incorporation and other organizational documents of the Company and its
subsidiaries, as amended and supplemented to the date
hereof;
(iii) a certificate from an officer of the
Company upon which we have relied, confirming various factual matters relevant
to establishing the status of the Company as a real estate investment trust
(“REIT”) under the Code and the Company’s
intentions regarding future methods of operation (the “Officer’s
Certificate”);
(iv) the opinion of Venable, LLP, dated the
date hereof, with respect to certain matters regarding Maryland corporate law; and
(v) such resolutions,
certificate, records, and other documents provided by the Company and/or its
subsidiaries as we have deemed necessary or appropriate as a basis for the
opinions set forth below.
Assumptions
In
rendering our opinions, we have made the following assumptions:
(a) the
factual records, reports and certifications of the Company provided to us as
evidence of the Company’s compliance with the stock ownership, income, asset and
distribution requirements applicable to REITs under the Code are correct and
complete in all material respects;
(b) each
of the Company and its subsidiaries has been and will continue to be organized,
capitalized and operated in the manner described to us, and as summarized in the
Officer’s Certificate and other periodic reports filed with the
SEC;
(c) each
of the Preliminary Prospectus and the Prospectus accurately describe the factual
information provided regarding the Company and its Common Stock;
(d) there
are and will be no changes in the applicable laws of the State of Maryland
regarding authorization for charter restrictions on ownership of the Company’s
shares and permitting enforcement of provisions intended to cure or prevent
violation of such limitations; and
(e) we
have assumed the legal capacity of all natural persons, the genuineness of all
signatures, the authenticity of all documents submitted to us as originals, the
conformity to original documents of all documents submitted to us as certified,
conformed or other copies, and the authenticity of the originals of such
copies.
With respect to these assumptions, it
should be noted that (x) the representations set forth in the Officer’s
Certificate are highly factual in nature and reflect an intention with respect
to the future conduct of the business of the Company and its subsidiaries that
may not be achievable if there are future changes in the circumstances of either
and (y) statutes,
regulations, judicial decisions, and administrative interpretations are subject
to change at any time and, in some circumstances, with retroactive
effect. Any material change after the date hereof of any of the
foregoing bases for our opinions could adversely affect our
conclusions.
Opinions
Subject
to the qualifications, assumptions and limitations set forth herein, we are of
the opinion that:
1. The
Company has been organized and operated in conformity with the requirements for
qualification and taxation as a REIT under the Code commencing with its tax year
ended December 31, 1994 and continuing through the fiscal quarter ended
March 31, 2009 (the date of its most recent interim financial statements
and REIT compliance reports), and it’s current and proposed methods of operation
in periods subsequent to such date, as represented to us by the Company in the
Officer’s Certificate and as described by the Company in the Preliminary
Prospectus and Prospectus, will enable it to continue to qualify as a REIT under
the Code; and
2.
Although the discussion set forth under the caption “Material U.S. Federal
Income Tax Considerations” in the Prospectus, as supplemented by the discussion
under such heading in the Prospectus Supplement, does not purport to discuss all
possible U.S. federal income tax consequences of the acquisition, ownership and
disposition of the Company’s common stock, such discussion constitutes an
accurate summary of the U.S. federal income tax considerations that are likely
to be material to an investor in the Company’s common stock as of the date
hereof.
Limitations
Other
than as specifically stated above, we express no opinion on any issue relating
to the Company or its
subsidiaries, or any investment in any other series or class of securities
issued by them, or under any law other than U.S. federal income tax laws.
We impose no limit on your disclosure of
this opinion or the tax treatment of the Company or its Common
Stock. However, we are furnishing this opinion to you solely in
connection with the filing of the Prospectus Supplement and it cannot be relied
upon by any person or for any other purpose without our express written
permission.
We hereby
consent to the filing of this opinion as an exhibit to the Prospectus
Supplement. In giving such consent, we do not hereby admit that we
are in the category of persons whose consent is required under Section 7 of the
Securities Act, as amended, or under the rules and regulations of the SEC
promulgated thereunder.
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Very
truly yours,
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/s/ Chapman and Cutler LLP
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