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RP

Rithm Property Trust Inc. (RPT)·Q4 2024 Earnings Summary

Executive Summary

  • Rithm Property Trust delivered GAAP net income of $2.9 million and $0.06 diluted EPS, its first positive quarterly result in three years; non-GAAP Earnings Available for Distribution (EAD) was $0.3 million ($0.01 per diluted share) .
  • Book value per common share was $5.44 (essentially flat vs Q3’s $5.47), and the company paid/declared a $0.06 common dividend for Q4 .
  • Management accelerated the pivot to commercial real estate, acquiring $154 million UPB of CMBS to bring CMBS UPB to $244 million; cash and equivalents ended Q4 at $64.3 million .
  • Management plans to raise preferred equity in Q1 to bolster capital and fund growth; they target low double-digit returns on debt-focused CRE investments, with an active M&A lens as a growth lever .

What Went Well and What Went Wrong

What Went Well

  • Returned to profitability: “GAAP net income attributable to common stockholders of $2.9 million, or $0.06 per diluted share” and positive EAD ($0.3 million; $0.01 per diluted share) .
  • Balance sheet repositioning and CRE pivot: Sold legacy residential assets and reinvested in higher-quality CRE; acquired $154 million UPB of CMBS in Q4 (total CMBS UPB now $244 million) .
  • Stable book value despite rate headwinds: CEO noted rates rose ~60 bps across the curve while book value held at $5.44; dividend maintained at $0.06 per share .

What Went Wrong

  • Core earnings still modest: EAD only $0.3 million ($0.01/share), highlighting early-stage earnings power post-transition .
  • Revenue and mark-to-market volatility persisted: Q3 “Total revenue/(loss), net” was negative, driven by MTM losses, illustrating ongoing earnings variability as the portfolio is repositioned .
  • Need for capital to scale: Management emphasized preferred equity issuance to shore up capital and retire higher-cost notes, reflecting limited current scale and desire to improve ROE .

Financial Results

Quarterly Overview vs Prior Quarter

MetricQ3 2024Q4 2024
Total revenue/(loss), net ($000s)$(2,783) $5,633
Net income attributable to common ($000s)$(8,029) $2,914
Diluted EPS ($)$(0.18) $0.06
EAD ($000s, non-GAAP)$(5,360) $323
EAD per diluted share ($)$(0.12) $0.01
Book value per common share ($)$5.47 $5.44
Common dividend per share ($)$0.06 $0.06

Income Statement Components

Component ($000s)Q3 2024Q4 2024
Interest income$12,348 $12,873
Interest expense$(8,660) $(9,239)
Net interest income$3,688 $3,634
Net change in allowance for credit losses$(857) —
Net interest after ACL$2,831 $3,634
MTM gain/(loss) on mortgage loans held-for-sale, net$(1,712) $970
Other income/(loss)$(3,278) $1,029
Total revenue/(loss), net$(2,783) $5,633

Non-GAAP Reconciliation (EAD)

MetricQ3 2024Q4 2024
GAAP net income/(loss) to common ($000s)$(8,029) $2,914
Adj: NCI$72 $(1,157)
Adj: Unrealized gains/(losses)$1,640 $(1,516)
Adj: Strategic transaction expenses$1,010 —
Adj: Other (incl. amortization, taxes, SBC)$(53) $82
EAD ($000s)$(5,360) $323
EAD per diluted share ($)$(0.12) $0.01

Balance Sheet Snapshot (YoY)

Metric ($000s unless noted)Dec 31, 2023Dec 31, 2024
Cash and cash equivalents$52,834 $64,252
Mortgage loans HFI, net$864,551 $396,052
Investments in securities AFS (FV)$131,558 $308,783
Investments in securities HTM$59,691 $46,043
Investment in equity securities (FV)— $21,918
Total assets$1,336,291 $977,339
Total liabilities$1,025,396 $730,571
Total equity$310,895 $246,768
Book value per common share ($)—$5.44
Common shares outstanding27,460,161 45,420,752
CMBS UPB—$244,000

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Dividend per common shareQ4 2024$0.06 (paid in Q3) $0.06 declared Jan 29; payable Feb 28; record Feb 14 Maintained
Capital plan (preferred equity raise)Q1 2025Not previously quantifiedIntends to issue preferred equity in Q1 to bolster capital and fund growth New
Investment return targetsOngoingNot previously quantifiedTarget low double-digit returns on CRE debt; selectively higher in opportunistic cases New/Reiterated strategic focus
Portfolio strategy2025Transition from legacy residential loansContinue reallocating to CRE (CMBS, loans), focus on debt vs equity; pursue M&A Reaffirmed transition

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2 and Q-1)Current Period (Q4 2024)Trend
CRE pivot and portfolio repositioningQ2: Net loss of $12.7m referenced; start of repositioning under new management . Q3: GAAP loss $(8.0)m; EAD $(5.4)m as transition progressed .Executed $154m CMBS purchases; total CMBS UPB $244m; first positive quarter; targeting CRE debt .Improving execution and earnings trajectory
Capital raisingLimited scale noted; no specific prior quarter capital raise disclosed in filings reviewedPlans preferred equity issuance in Q1; may retire high-yield notes; bolster balance sheet and fund growth .Accelerating
Macro ratesNo detail in earlier filings; transition period contextCEO: rates up ~60 bps; book value stable; expects “higher for longer,” pressuring CRE and creating opportunities .Rates headwind but opportunity set expanding
Office CRE and underwriting stanceEarly-stage commentary during transitionPrefer debt over equity; highly selective on office; emphasize credit-first underwriting .Conservative posture maintained
Financing and ROETransitioning away from legacy residential; building funding linesAmple financing via manager’s platform; will avoid first-loss; seek term financing/partners to meet ROE hurdles .Infrastructure leverage improving
M&A as growth leverNot specified previouslyActive exploration of M&A to grow capital base and accretive assets; leveraging manager’s track record .Increasing focus

Management Commentary

  • “We… repositioned the balance sheet, stabilized book value and grew earnings into positive territory from a loss of $12.7 million in Q2’24 to a net income of $2.9 million this quarter.” — Michael Nierenberg, CEO .
  • “Cash and liquidity on balance sheet at the end of Q4 is $64 million and total shareholder equity is $247 million… book value $5.44 essentially unchanged from Q3… rates… up approximately 60 basis points.” — CEO remarks .
  • “We’re going to turn this vehicle into… an opportunistic vehicle focused on commercial real estate… targeting low double-digit returns.” — CEO .
  • “We’ll likely be in the market in Q1 with a preferred equity deal… [to] shore up our capital base… and create more earnings for our shareholders.” — CEO .

Q&A Highlights

  • CRE opportunity set and strategy: Management sees more bank-driven opportunities (B/mezz notes) as rates stay higher for longer; selective focus on debt and opportunistic situations .
  • Preferred equity issuance: Intent to raise preferred in Q1; addresses unsecured covenants, funds growth, and avoids issuing common at depressed levels; potential to retire high-yield notes .
  • Financing approach and ROE: Will pair originations with financing and avoid first-loss positions; ample access via the external manager’s broader platform to meet return hurdles .
  • Office market stance: Extensive pipeline but “a lot of it doesn’t work”; prefer debt, be highly selective, significant CapEx needs in buildings .
  • Pipeline and M&A: ~$1 billion pipeline under review; use M&A to scale capital base and find more accretive assets than AAA CMBS .

Estimates Context

  • S&P Global consensus estimates for Q4 2024 EPS and revenue were unavailable at the time of access due to data limits. As a result, we cannot quantify beats/misses versus Street expectations today. Values would be retrieved from S&P Global when accessible.
  • Actual results: Diluted EPS $0.06 and Total revenue/(loss), net $5.6 million, with positive EAD ($0.01/share) .

Key Takeaways for Investors

  • The first positive GAAP quarter in three years and stabilized book value indicate early success of the CRE pivot; however, core EAD remains modest, underscoring a need for scale .
  • Capital raise is the near-term catalyst: preferred equity in Q1 could fund higher-return deployments and retire costlier debt, improving earnings trajectory and ROE .
  • Portfolio transition is advancing: legacy residential assets are being reduced; CRE debt investments (CMBS, senior/mezz) aim for low double-digit returns with credit-first underwriting .
  • Rate environment creates both headwinds and opportunities; management expects “higher for longer,” potentially expanding distressed/structured lending opportunities .
  • M&A optionality could accelerate scaling and earnings power, leveraging the external manager’s track record and financing access .
  • Dividend maintained at $0.06 supports yield while growth plans mature; watch preferred issuance terms and deployment pacing as stock catalysts .
  • With Street estimates unavailable today, monitor consensus updates and revisions post-print; once accessible, compare realized EPS/EAD to assess needed estimate adjustments (values would be sourced from S&P Global).