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RP

Rithm Property Trust Inc. (RPT)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 comprehensive income was $1.1M ($0.02 per diluted share) and EAD was $0.7M ($0.02 per diluted share); book value per share was $5.40. Management maintained the $0.06 quarterly common dividend and ended the quarter with $97.4M of cash .
  • The company deployed ~$64M into CRE debt (including $47M UPB of AAA CMBS at ~11% levered yield and a $17.5M SOFR+800 mezz/senior subordinate loan) and issued $52M of 9.875% Series C preferred, bolstering liquidity for accretive deployment .
  • Versus consensus, “Primary EPS” of $0.02 beat $0.015*, while revenue of -$0.89M missed $4.83M*, driven by realized losses on legacy RMBS sales and mark-to-market impacts; management emphasized patience and focus on high-teens unlevered opportunities to grow EAD .
  • Strategic narrative: no legacy CRE downside, robust pipeline (~$1B), and tight capital discipline; valuation disconnect cited with stock near ~$2.85 vs $5.40 book value as a potential catalyst when earnings scale improves .
  • Governance/organizational update: Nicola Santoro, Jr. appointed CFO/CAO; the company continues as an externally managed REIT under Rithm Capital .

Values retrieved from S&P Global for estimate comparisons (*).

What Went Well and What Went Wrong

What Went Well

  • Capital deployment and liquidity: ~$64M UPB in CRE debt, including $47M AAA CMBS (~11% levered) and a $17.5M SOFR+800 subordinated loan; $52M preferred issuance lifted cash to $97.4M .
  • Positive EAD and comprehensive income: EAD of $0.7M ($0.02/share) and comprehensive income of $1.1M ($0.02/share) supported dividend maintenance and book value stability .
  • Strategic clarity and team depth: “We have no legacy commercial real estate exposure… the company is in really good shape… sitting on almost $100 million of cash,” with seasoned CRE credit capabilities across Rithm’s platform .

What Went Wrong

  • GAAP net loss and revenue miss: Q1 GAAP diluted EPS was -$0.08; total revenue/(loss), net was $0.25M, reflecting realized losses on legacy RMBS sales and fair value impacts on securities .
  • Legacy asset runoff constraints: Management noted limited remaining ability to sell certain low-coupon legacy residential assets due to retained interests and risk-retention requirements .
  • Dividend coverage timing: EAD improved but still below dividend; management highlighted growing earnings through redeployment into higher-return CRE assets to reach breakeven coverage .

Financial Results

Multi-period comparison (oldest → newest)

MetricQ3 2024Q4 2024Q1 2025
Total revenue/(loss), net ($USD Millions)-$2.783 $5.633 $0.249
GAAP diluted EPS ($)-$0.18 $0.06 -$0.08
EAD per diluted share ($)-$0.12 $0.01 $0.02
Book value per share ($)$5.47 $5.44 $5.40
Net interest income ($USD Millions)$3.688 $3.634 $3.814

Segment breakdown (Q1 2025)

SegmentInterest income ($USD Thousands)Interest expense ($USD Thousands)Net interest income ($USD Thousands)Income/(loss) before taxes ($USD Thousands)
Residential8,462 (3,654) 4,808 3,080
Commercial4,082 (1,831) 2,251 272
Corporate656 (3,901) (3,245) (6,879)
Total13,200 (9,386) 3,814 (3,527)

KPIs and balance sheet (Q1 2025)

KPIQ1 2025
Cash and cash equivalents ($USD Millions)$97.4
CMBS at fair value ($USD Millions)$275.5
RMBS AFS at fair value ($USD Millions)$48.9
Investments in beneficial interests, net ($USD Millions)$90.6
Equity investments in affiliates ($USD Millions)$17.6
Total assets ($USD Millions)$1,028.3
Repurchase transactions ($USD Millions)$367.0
Secured borrowings, net ($USD Millions)$250.9
Notes payable, net ($USD Millions)$107.9
Common dividend per share ($)$0.06

Guidance Changes

  • The company did not issue formal quantitative guidance for revenue, margins, OpEx, OI&E, or tax rate. Dividend policy was maintained.
MetricPeriodPrevious GuidanceCurrent GuidanceChange
Common dividend per shareQ1 2025$0.06 (Q4 2024 paid) $0.06 (declared Apr 25; paid May 30) Maintained

Earnings Call Themes & Trends

TopicQ3 2024 (Previous Mentions)Q4 2024Q1 2025 (Current Period)Trend
CRE strategy/pipelineInitiated CRE shift; sold legacy resi; ~$102M UPB CRE debt closed; net interest income ramp ~$50M deployed; targeting low-double-digit returns; plan preferred raise ~$64M deployed in CRE; $52M preferred issued; ~$1B+ pipeline; prioritizing opportunistic loans/bonds Strengthening deployment and funding
Legacy asset runoffMajor sales of resi loans/RMBS Continued sales; balance sheet cleaner Remaining sales limited by retained interests and regulatory constraints Diminishing optionality
Capital structureImproving financing terms and liquidity Preferred contemplated to avoid common dilution; focus on accretive growth Preferred executed; corporate notes at 9.875% pending potential upgrade lowering rate by 100 bps Executed preferred; monitoring debt costs
Dividend coverageInitial positive GAAP/EAD after multi-year losses Dividend maintained; pathway via accretive redeployment EAD improved; still below dividend; plan to grow earnings via higher-return assets Gradual improvement
Banks/market conditionsAlternative lenders favored; banks pulling back Expect more problem assets at higher-for-longer rates Wider spreads; single-property deals; partner with money-center banks on mezz/B-notes More opportunities with caution

Management Commentary

  • “The company is in great shape… about $300 million of equity, almost $100 million of cash… no legacy commercial real estate exposure… ability to create real shareholder value” .
  • “We deployed $47 million of AAA CMBS… roughly 11% type yield… $35 million loan at SOFR plus 800 on a Midtown office building… a 12% or 13% unlevered return” .
  • “Stock trades… about $2.85 versus a $5.40 book value… we think the equity is extremely undervalued” .
  • “Growth… likely from third-party partners… prefer preferred over common to avoid dilution; will be patient given volatility” .

Q&A Highlights

  • Market volatility and opportunities: Spreads wider with stability emerging; more single-property deals at wider spreads; management emphasizes careful underwriting .
  • Portfolio mix and diversification: Balanced approach across bonds and loans; underwriting asset-by-asset with bank partnerships .
  • Capital structure discipline: 2027 notes at ~9.875% likely remain outstanding until scale/upgrade; preferred favored for equity treatment without common dilution .
  • Dividend coverage pathway: Grow earnings by redeploying into accretive higher-coupon assets; legacy low-coupon assets constrain immediate coverage .
  • Legacy asset sales: Limited further disposals; retained interests and regulatory constraints remain, though equity tied up is small .

Estimates Context

  • Q1 2025 “Primary EPS” $0.02 vs $0.015 consensus; revenue -$0.89M vs $4.83M consensus*.
  • Drivers: OCI gains from RMBS AFS (+$4.42M) supported comprehensive income; realized losses on legacy RMBS sales and fair value marks pressured “revenue” and GAAP EPS .
MetricQ4 2024Q1 2025Q2 2025
Primary EPS Consensus Mean ($)-0.0250.0150.01
Primary EPS Actual ($)0.010.020.00
Revenue Consensus Mean ($)3,594,0004,829,0005,640,500
Revenue Actual ($)5,410,000-885,0004,694,000
Primary EPS – # of Estimates223
Revenue – # of Estimates222

Values retrieved from S&P Global*.

Key Takeaways for Investors

  • Near-term: Expect continued CRE deployment (CMBS and senior/subordinated loans) at double-digit unlevered returns; EAD should improve as legacy resi runoff moderates .
  • Watch list: Dividend coverage trajectory, cost of corporate debt (potential 100 bps improvement upon upgrade), and pace of third-party partnerships/M&A to build scale .
  • Risk management: No legacy CRE exposure; careful underwriting amid wider spreads; partner-led origination enhances pipeline quality .
  • Valuation: Book value per share $5.40 vs management-noted market price near $2.85 highlights potential upside as earnings scale and EAD coverage improve .
  • Legacy cleanup: Realized losses on RMBS sales weighed on Q1 “revenue” and GAAP EPS; remaining disposal optionality is limited but equity tied up is small .
  • Liquidity and funding: $97.4M cash and $52M preferred issuance provide dry powder; focus remains on accretive redeployment vs common dilution .
  • Trading implications: Monitor subsequent quarter EAD, OCI impacts, and deployment cadence; positive EPS/EAD beats vs consensus can re-rate shares if sustained*.

Values retrieved from S&P Global for estimate comparisons (*).