Rithm Property Trust - Earnings Call - Q3 2025

Executive Summary

• Q3 2025 was essentially breakeven-to-slightly negative: GAAP comprehensive loss of $(0.4)M (−$0.01/share) and EAD of $(0.7)M (−$0.02/share), while the $0.06 dividend was maintained.
• EPS came in at −$0.03 (GAAP diluted), below a Wall Street consensus of $0.00*, a miss driven by lower other income and modestly lower net interest income versus Q2; EAD per share fell to −$0.02 from ~$0.00 in Q2. EPS consensus mean = $0.00*; actual EPS −$0.02 (EAD proxy in S&P)* [GetEstimates].
• Book value per share was $5.30 vs. $5.37 in Q2; the CEO repeatedly emphasized the roughly 50%+ discount to book and outlined strategic options: recapitalization with assets, potential liquidation/auction, or staying the course with scaled direct lending and potential participation in the Paramount office transaction.
• Liquidity remains solid ($81.4M cash), and deployment continues with a new $21M mid-teens yield grocery-anchored retail loan near Seattle; management is prioritizing higher-yield, upper-stack CMBS floaters and direct lending, while passing on less attractive opportunities (e.g., rent-stabilized NYC, a Dallas hotel).
• Potential stock catalysts: decision on a recapitalization vs. liquidation, participation alongside the parent in the Paramount transaction (management targets ~2x MOIC/20%+ returns on a $50M RPT check), and acceleration of direct-lending deployment without common-stock dilution.

What Went Well and What Went Wrong

What Went Well

• Opportunistic deployment: Originated a $21M loan on a grocery-anchored retail center outside Seattle, expected mid-teens yield, consistent with a strategic pivot to higher-yield direct lending.
• Portfolio positioning and liquidity: Company holds ~top-of-capital-stack CMBS floaters, viewed as liquid for reallocation to new opportunities; cash and equivalents of $81.4M support optionality.
• Strategic options underscore valuation gap: CEO highlighted BVPS $5.30 vs. stock ~$2.40 on call day, framing recap or potential auction/liquidation as paths to unlock value.

What Went Wrong

• Earnings softness: EAD fell to −$0.7M (−$0.02/share) from $0.1M (~$0.00/share) in Q2; GAAP comprehensive swung to a $(0.4)M loss from $1.4M profit, driven by lower other income (e.g., unrealized gains on mortgage loans fell to $0.2M from $2.5M).
• Modest net interest income step-down: Net interest income decreased to $4.0M from $4.2M in Q2, with expenses flat Q/Q; this muted core earnings momentum as deployment remains ramping.
• Tactical passes limited near-term volume: Management walked from rent‑stabilized NYC and a Dallas luxury hotel deal after diligence—prudent risk management, but it delayed converting pipeline to earnings this quarter.

Transcript

Operator (participant)

Hello, and thank you for standing by. My name is Tiffany, and I will be your conference operator today. At this time, I would like to welcome everyone to the Rithm Property Trust Third Quarter 2025 Earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during that time, simply press star, then the number one on your telephone keypad. I would now like to turn the call over to Emma Bolla, Associate General Counsel. Emma, please go ahead.

Emma Hoelke (Associate General Counsel)

Thank you, and good morning, everyone. I would like to thank you for joining us today for Rithm Property Trust Third Quarter 2025 Earnings Call. Joining me today are Michael Nierenberg, Chief Executive Officer of Rithm Capital and Rithm Property Trust, and Nick Santoro, Chief Financial Officer of Rithm Capital and Rithm Property Trust. Throughout the call, we are going to reference the earnings supplement that was posted this morning to the Rithm Property Trust website, www.rithmpropertytrust.com. If you've not already done so, I'd encourage you to download the presentation now. I would like to point out that certain statements made today will be forward-looking statements. These statements, by their nature, are uncertain and may differ materially from actual results.

I encourage you to review the disclaimers in our press release and earnings supplement regarding forward-looking statements and to review the risk factors contained in our annual and quarterly reports filed with the SEC. In addition, we will be discussing some non-GAAP financial measures during today's call. Reconciliations of these measures to the most directly comparable GAAP measures can be found in our earnings supplement. With that, I will turn the call over to Michael.

Michael Nierenberg (CEO)

Thanks, Emma. Good morning, and thanks for joining us today for the Rithm Property Trust call. During the quarter, we didn't have a ton of activity. What I would say is that when we took over this company last June, we stabilized the company, which at that time, I think, was losing in and around $10 million a quarter. Today, the company essentially is flat, you know, when you take into account earnings, and we're still paying a $0.06 dividend. Along the way, we've liquidated what I would say a bunch of resi assets. We've added some commercial real estate floaters, or CMBS floaters, which are higher yielding, top part of the capital stack, with some reasonable yield. The other thing about these assets, from a liquidity standpoint, they're very easy to create liquidity.

When we take a step back and we look at the assets that we've added, the assets that we've sold, to the extent that we find an interesting opportunity, and, you know, we're always on the hunt, as everybody knows, we'll be able to liquidate a number of these assets and then use some of that capital to redeploy into either higher yielding assets or something that's more strategic for the company. The real question for the company is, where do we go from here? We have a few options. One, we can recap the vehicle with an offering of equity associated with a pool of assets or other types of instruments that could be in the fixed income world that'll provide real income for investors. Two is we could explore some kind of liquidation of the company I bring that up because with book value at $5.30 and the stock trading at $2.40, clearly, there's a huge value play for equity investors in this. Three is stay the course. What I would say on three is we're not going to just stay the course and leave something outstanding for the sake of leaving something outstanding. If you listen to our Rithm Earnings Call yesterday, we discussed our most recent acquisition at Rithm and our affiliates, which is the Paramount Transaction where we agreed to take private one of the large office REITs here in New York City and San Francisco. Quite frankly, we're really excited about that deal and really excited about the returns on that deal. One of the questions we got on yesterday's call is, is it something that we consider adding some Paramount to the Rithm Property Trust?

The answer, you know, what I said was yes. Longer term, as we look at this vehicle, we are developing a direct lending business, and this platform would be perfect for Rithm Property Trust. As we think about that, we'll work in conjunction with our Genesis partners, which in Genesis, so everybody knows, is our residential transition loan organization where we make construction loans to kind of mid-tier type sponsors and not some of the larger players. When we look at that, our experience there, we grew a company that was doing $1.7 billion in production. Today, we're going to, this year, we'll probably do north of $5 billion. The asset yields on those are great, and we have a real business around it. What we'll likely do is grow that, and some of those products could be perfect for our direct lending business.

What I do think, one more time, as we look at the equity and where it trades relative to book value and some of the things that we do, it's, you know, just to reiterate, we're not going to leave this thing outstanding for the sake of leaving a company outstanding. We need to either figure out a way to grow it, or at some point, we'll likely think about an auction process for the company and realize what I think is going to be true book value. With that, I'll turn, we'll flip, we'll start. We have a small deck. There's not a ton in there, quite frankly. We'll start on page three, and then we'll have a Q and A, and then we'll go from there. As I mentioned earlier, Rithm Property Trust, it was formerly known as Great Ajax. It was a residential mortgage REIT.

Quite frankly, it was a little bit broken. We took over the management of that, rebranded it to Rithm Property Trust, set out on a mission to deploy more capital in the commercial real estate business. We did a small preferred offering, which helped us raise a bunch of cash. When you look at the company today, we're sitting with in and around $100 million in cash. The company has about $300 million in total equity, and the pipelines look great. The portfolio is about $308 million today. What I think this vehicle will do is afford us the ability to continue to hunt for things to try to grow the vehicle. I've used in the past what happened with BXMT, which is Blackstone's Mortgage, where they actually created a vehicle around a pool of assets and really grew it. Hopefully, we could do that.

If not, I gave you the other options before. Looking at on page four, your financial highlights, effectively, you know, the company was flat quarter-over-quarter, still maintained a $0.06 dividend, cash and cash equivalents on balance sheet at the end of the quarter, $81 million in total equities, $292 million. When you look at page five, you know, the opportunity we, you know, during the quarter, we actually originated a $21 million loan on a grocery-anchored retail center outside Seattle. The yield on that will likely be in the mid-teens. When we look at that and we think about our ability to grow in some of the lending activities, that's something that gets us excited here. Quite frankly, we have to execute on that plan.

When you look at Rithm Property Trust on this page, on page five, you might say, "Why Rithm Property Trust?" There's no legacy anything, quite frankly, in the company. I think it's truly. This is truly upside as we—to the extent that we could grow the vehicle. Page six just talks about how when we first took over the company, we stabilized earnings. As we go forward again. Earnings are pretty flat. We need to do something more material to actually generate earnings, and that's something we're keenly focused on. Page seven is our typical slide, which illustrates what the future state of the portfolio could be. I would look at this vehicle as more being opportunistic in nature than some of the other things out there. With that, I'll turn it back to the operator.

We'll open up for some Q&A, and if anybody has any questions, please don't hesitate to ask.

Operator (participant)

At this time, if you would like to ask a question, press star, then the number one on your telephone keypad. To withdraw your question, simply press star one again. We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of Tom Catherwood with BTIG. Please go ahead.

Thomas Catherwood (Managing Director and Analyst)

Thank you. Good morning, everybody. Michael, obviously, you laid out a bunch of different avenues that you could go forward with, with the three that you laid out at the beginning. Maybe just take the stay the course one for this question. You talked last quarter about $50 million of loans kind of being pretty close to the finish line. You did $21 million this quarter. What does that kind of pool in closing look like right now?

Michael Nierenberg (CEO)

You know, there's a couple of things here. One is I brought up the Paramount deal. That's a big deal. I mean, there's a, you know, they're $6.60 on 13 million square feet. It's likely this company, you know, depending upon board approval, could participate in that transaction. One thing we're working on in conjunction with our Genesis partners, when you think about that business, we make multifamily loans. We make residential transitional loans. At Rithm and Rithm Property Trust, we're doing more in the direct lending space. We'd really like to grow our direct lending presence. We've been adding some bodies around the house. I think this vehicle could be perfect for that. Some of the things, you know, when we mentioned last quarter and we spoke about $50 million in loans, we did this $21 million loan, which we like very much.

We have passed on what I would say more of. Some of this is, as you think about the mayoral election here. When we think about some rent-stabilized stuff that we were looking at, you know, we're not going to do rent-stabilized loans in New York City right now. We also passed, initially, we were down the path on a. We went down and did a bunch of diligence on that and just couldn't get comfortable on that. We passed on that. In the quarter, we did the, obviously, the $21 million loan. We're sitting with roughly $100 million in cash and liquidity. We look at what's sitting on balance sheet on the retained side. As we go forward, it's just really going to be about direct lending, the growth there, and some more opportunistic situations.

Thomas Catherwood (Managing Director and Analyst)

Great. Appreciate that. On Paramount more specifically, I know the deal's still coming together. Obviously, it hasn't closed, so all options are on the table. When we think of that company, it had historically had a part of its business that was dedicated to making opportunistic commercial real estate loans, whether that was mezz positions, preferred positions, so be it. Is the potential thought to carve off whatever may be remaining of that or whatever capacity that exists within their funds, or is this potentially RPT taking a position somewhere else in the capital stack as you go towards that closing? If you can't talk about it, I fully understand. Just trying to get ideas of what this might look like.

Michael Nierenberg (CEO)

Yeah. No, that's a good question. They had some legacy funds. I would assume for purposes of this discussion, there's nothing to do with Rithm Property Trust and those funds. It would likely be a position that would be Pari Passu alongside Rithm, the parent company, you know, our parent company, obviously, on the under prop goes. When you think about it, there's 13 assets between New York City and San Francisco, and it would be a position in those specific assets on the property side.

Thomas Catherwood (Managing Director and Analyst)

Got it. Got it. Kind of last one for Michael. You make this comment about the discount to book value and all of that, and it makes sense. When we look across all of the commercial real estate mortgage space, the discounts are huge and have gotten more so, obviously, since Tricolor, since their bankruptcy, since First Brands, since we had the regional banking issue a couple of weeks ago. In general, commercial mortgage REITs have just been lumped together with this existential fear about credit. You sit kind of at the nexus of a bunch of different credit vehicles. What's your view right now on what's real out there risk-wise for credit, be it real estate or otherwise? What's kind of overdone right now? I think that's not just hitting RPT. It's hitting everybody. What are your thoughts on the market right now?

Michael Nierenberg (CEO)

I think it's bifurcated. I think there's a couple of situations. One is a lot of the legacy commercial real estate REITs were still saddled with bad loans that need to get—I'm not saying bad loans. Let's just say underwater loans that need to get worked out. We do not have any of those here at our firm. That goes for both on the Rithm level and on the Rithm Property Trust level. When we set out on a mission to kind of rebrand this vehicle, we said we're going to get into the commercial real estate space again because we don't have any legacy issues. I think when you look across the spectrum, there's a number of REITs out there that are still working through some of their issues, and this vehicle's clean. I think that's one.

Two, when you think about credit and you think about, like, even when we think about this Paramount deal, why Office? Not everybody can do Office because a lot of folks are still reworking their existing Office portfolio. We looked at that as a real opportunity for us because, one, we as a company, we have a need for 100,000 square feet. We're in the market looking at Office pretty much every day, and we have a really good pulse on what's happening in the market. As we think about credit, the capital markets for commercial real estate are wide open. You're seeing more and more CMBS get done. Prior to us announcing this deal, the company did a CMBS deal on 1301 Sixth Avenue. I think the credit markets are wide open.

With the breadth of the Rithm team and our other affiliates, there's a ton of things to look at. I will say in commercial real estate, and I'm sure you know this, you got to be really, really careful, not just in commercial real estate and everything, but in commercial real estate, particularly when you have one-way risk on a single type of property. When we think about where we could go with this in the direct lending space and create more diversified pools of assets or diversified lending around the business, it gives us pretty good comfort that we're going to be able to do wonderful things here. What I would say on the discount to book, quite frankly, if we could all get paid in equity at these kind of levels, I think we'd love to do that.

The net of it is we're extremely optimistic on where we could go. The thing is you need capital to grow. With the stock trading, you know, whatever, 50-odd percent of book, it's very difficult. My view and our view is, you know, not to dilute shareholders. If there's a way to kind of grow out of this with something meaningful in some sizable offering associated with a pool of assets, we'll consider that.

Thomas Catherwood (Managing Director and Analyst)

Got it. Appreciate all those thoughts. Thanks, Michael.

Michael Nierenberg (CEO)

Thank you.

Operator (participant)

Your next question comes from the line of Craig Kucera with Lucid Capital Markets. Please go ahead.

Craig Kucera (Managing Director)

Yeah, hey, good morning, guys.

Michael Nierenberg (CEO)

Good morning.

Craig Kucera (Managing Director)

Good morning. I wanted to circle back to the Paramount transaction. Can you give us a sense of what the economics of that might look like for RPT? I mean, is that sort of in the ballpark of what you've done this year with the, call it the Office senior sub deal at maybe 12% or the retail asset at 11%?

Michael Nierenberg (CEO)

You know, the Paramount deal is more equity-based. We're playing around with a couple of different structures. Are there different ways to think about this? I don't have a specific answer. On the surface, when you look at the Paramount deal and the way that we're doing this, we paid $6.60 for the company. That equates to about $1.6 billion before some of the, you know, fees and noise around this. That gets you roughly $1.8 billion. The amount of cash that sits on balance sheets is a little south of $500 million, that gets you to $1.3 billion. Rithm, the parent, will put in, give or take, about $300 million of equity. The contemplation, again, subject to board approval, would be for Paramount to put in about $50 million. That gets you to a little under $1 billion.

Rithm, the parent, will then be raising, and we're in the market now, a fund around the remaining, call it, $1 billion. That's the so-called funding of the vehicle. When we look at economics, here's how to think about this. We are assuming going in a cap rate a little bit south of 7%. Our going in so-called cost per foot is about a little under $600 a foot. When you think about replacement costs, the replacement cost, including land in New York City, is likely something around $3,000 a foot. Effectively, you're going in to acquire Class A office buildings at a 75% discount-ish to replacement costs. When you look at the stabilized cost, you're in the low $700. We think our exit strategy here, just to give you a sense, is something around 6% on New York and 6.5% and 6.75% on San Fran.

What that does, based on a, you know, let's use Rithm Property Trust, a $50 million equity check gives you about a two times MOIC on that $50 million and a 20+% return based on our assumptions. We are extremely excited about this transaction. This is, in investing, and we like to think about us and our businesses in more opportunistic investing. You very rarely have the opportunity to deploy a large amount of capital in Class A office assets that are located in two of the gateway cities in the U.S., which are obviously here in New York and San Francisco, in a dislocated market where we think we're going to generate outsized returns for our investors. That's the investment thesis here. We'd love for Rithm Property Trust to participate in that, and hopefully we have a good result around it.

Craig Kucera (Managing Director)

Thanks. I appreciate the color. That was very, very thorough. I'd like to think about the flip side of that, though. Could you envision a scenario where Rithm Capital could potentially deploy capital into RPT in order to sort of jumpstart the scale of the company?

Michael Nierenberg (CEO)

You know, it's a really good question. I mean, I think that when you think about equity offerings or you think about preferred offerings or something like that. We've had a number of conversations, what I would say, our banking partners on the street about this, how to think about a potential rights offering where Rithm backs up that against a pool of assets. I don't know, quite frankly, those conversations go on all the time. I don't know that there's anything to do right now today. There is one deal that's happening in the marketplace, but it's small in nature. I think there's a—I don't have all the details, but I think it's between an $80 million and $100 million offering that one of the banks is doing, against either a pool of assets or that's guaranteed by a parent at a discount, I think, of 10%-15%.

The backstop, I think, is 10%-15% where the offering is coming. We have to be thoughtful about how this works for both Paramount and, I mean, Rithm Property Trust and how it would work for Rithm, the parent. I think, to keep it clean, we'd prefer to do something that's not like that. I don't know yet, just where we ultimately go.

Craig Kucera (Managing Director)

Got it. Just one more for me. In the process of raising capital around this Paramount transaction, I know you're looking for other third-party sources of capital. Has that opened up any potential partners for RPT? I believe, like, in the past, you've said that you are looking for a third party to sort of jumpstart the company.

Michael Nierenberg (CEO)

Yeah. I mean, the amount of conversations we as a firm have, and when you think about the firm, I can tell you whether it be at the Rithm level, whether it be at the, you know, even Crestline, which hasn't closed, we expect that deal to close on December 1st or even at the Sculptor level. There's a lot of what I would say cross-pollinization around the firm as we have a ton of conversations with LPs and other partners. This deal has opened up conversations that, truly, you know, we wouldn't have had six months ago. We're super excited about that. There's a ton of opportunity. If we wanted to fund this entire Paramount deal yesterday with third-party capital, we could do that in a heartbeat. It's just how do we think about, as an organization, maximizing returns for our shareholders?

Craig Kucera (Managing Director)

Okay, thanks. That's it for me.

Michael Nierenberg (CEO)

Super.

Operator (participant)

That concludes our question and answer session. I will now turn the call back over to Michael Nierenberg for closing remarks.

Michael Nierenberg (CEO)

Great, thanks for dialing in. Guys, appreciate the questions. Just to be clear, we are going to do anything and all we can to figure out a way to grow earnings in the company, not just grow the company, but grow earnings in this company. We do feel that the equity is fundamentally mispriced. I think, to some of the questions we heard, a number of these REITs have equity that's fundamentally mispriced. The difference here is we do not have any legacy issues. It should be onward and upward. We'll keep you posted throughout the quarter and other things that we're doing around the company. If you have any questions, don't hesitate to follow up. With that, happy Halloween. Have a great weekend and look forward to updating everybody soon. Thank you.

Operator (participant)

Ladies and gentlemen, this concludes today's call. Thank you all for joining. You may now disconnect.