Rithm Property Trust Inc. (RPT) Q2 2026 Earnings Report, Transcript and Summary

Thank you for standing by. At this time, I would like to welcome everyone to the Rithm Property Trust Second Quarter 26 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to withdraw your question, press 1 again. Thank you. I would now like to turn the call over to Emma Bolla, Deputy general counsel. You may begin.

Thank you, and good evening, everyone. I would like to thank you for joining us today for the Rithm Property Trust Second Quarter 26 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 afternoon to the Rithm Property Trust website, www.rhythmpropertytrust.com. If you have not already done so, I would 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.

Good evening, everyone. So we are going to chat about Rithm Property Trust I will give you my opening comments, and we will talk we will go through the supplement, and then we will open for some Q&A. Thanks for joining the call. Since Rithm took over the management of the contract, which was formerly known as Great Ajax, We have transformed this company pretty dramatically. We changed the name from Great Ajax to Rithm Property Trust and set out an admission to actually grow this into a dedicated commercial real estate vehicle. During that time, we have improved liquidity We have cleaned up the balance sheet. We grew earnings so the company no longer loses money. During the quarter, in Q2 and subsequent to Q2, we have invested in multifamily transitional loans, which have been originated by our affiliate Genesis Capital with the intent to grow earnings and transform the business further. We have also attempted during the quarter, up a few a couple of weeks back, to raise equity in the public markets. And based on the stock performance at the time, and some of the shorts that were put into the in the market by the hedge funds, we decided it was in the best interest of shareholders to pull the offering. To grow the company, quite frankly, we will need to raise capital. In the event we are not able to do so, we will explore different avenues which could include buying back equity, M&A, or as well as tendering for the shares of the underlying company. Our whole goal here is to protect our shareholders figure out ways that we could actually either grow the company, but more importantly, make money for our shareholders. So with that, I will refer to this supplement, which has been posted online. We will start on page 3. We have a few short pages. But I think the real story is here, we have a very, very clean balance sheet, which is very different than a lot of mortgage REITs out there. We have gotten the company from where it was not making any money and actually losing money to where today it is breakeven. And now the path forward has to be where we could grow earnings and grow the capital base. When you think about Rithm Property Trust, it is managed by an affiliate of Rithm, which is quite frankly us. Rithm has 9 billion of permanent north of $100 billion of assets. it is led by our seasoned team here who have been working together for many, many years. At both Rithm and going back to the Great Ajax when we took over Great Ajax. When we look at the pipeline, we have a world class origination business in Genesis Capital that makes these residential transition loans as well as multifamily transition loans Currently, today, we have, and the origination business at Genesys supplies loans to funds to third party funds, to different SMAs we have as well as to the Rithm balance sheet, and now we are doing it with Rithm Property Trust. These loans are very high coupon, short duration, senior loans, which we think are great for the vehicle, and, hopefully, we could figure out a way to raise capital to grow the vehicle. When we look at our dividend yield, we are currently at 10%. And, again, we have no legacy commercial real estate exposure, which differentiates us, I think, from the pack in the commercial real estate space. When you look at Q2 financial highlights, essentially, earnings were flat. Book value is $30.17, which is comp to where it was the quarter before, which I think was $30.33 So overall, flat Dividend paid is $0.36 for dividend yield at 10%. Priorities, how do we unlock shareholder value? How do we create real value out of this vehicle? How do we reset the vehicle? That is truly what our goal is. When we look at page 5, the strategic evolution I pointed out, how we took over the management contract from Great Ajax We took it from where it was losing a little under $10 million for on a on a quarterly basis to where it is breakeven We have taken actions to position the vehicle for growth. We have sold down a the legacy assets that we do not think we can make money on here. And then, again, the future state of this is to actually figure out a way to either grow capital at some point potentially retire the vehicle. Bottom part of the page, you can look at the balance sheet between Q2 of 24 and Q2 of 26. Very, very clean. And I would tell you that we have a world class investment team managing this vehicle. Page 6 talks about what we have done in Q2. This is just the profile of the assets purchased by Rithm Property Trust, $117 million of RTL and MTL loans, 9.1% gross WAC, very, very short duration levered return of about 14%. To that future funding down the road. So what that act effectively means is we are not in any chase to actually replace the assets as they amortize down. Advance rate on the underlying assets are 75%. And the dollar price paid a little bit under 101 with a cost of funds of about $5.65. So that really is the story here. it is the story of resetting this vehicle growing raising capital so we could actually deploy capital and grow earnings. To the extent that we can, we will have to explore alternative avenues to figure out a way to maximize shareholder value. 1 of the main reasons we did not do the equity offering was it was substantially below the dollar price where the equity is trading So with that, I will turn it back to the operator. We will open up for Q&A and hopefully, we could figure out a way to reset the vehicle.

At this time, I would like to remind everyone in order to ask a question, press * on your telephone keypad. And your first question comes from Tom Catherwood with BTIG. Please go ahead.

Thanks, and good afternoon, Michael. Just wanted to touch on so you added on Slide 5, the future state you added to this comment about explore opportunities to enhance shareholder value, which is different than the wording you have used in the past. What exactly does that entail? And why not follow Apollo and KKR in their CME vehicles and conduct a formal strategic review.

So here's what I would say. Apollo's vehicle is different. It was a much larger capital base And I think the direction of that organization, and I cannot speak for their leadership team, it is probably a little bit different. We are still in a position where we would like to see us reset or grow this vehicle. As we look at KKR, that vehicle was definitely not as clean as anything that we have on ours. You know, our whole goal here is how do we create real shareholder value We took over this thing. Book value is substantially higher than where the equity is trading. But while saying that, it is you know, this will be a board decision as far as what the direction of what we do here, whether this thing gets cleaned up, whether we tender for shares, whether we try to do M and a deals, etcetera. I think when we did this initially, we did this with the intent to trying to grow the vehicle. Clearly, we have not been able to do that, and, obviously, that is been illustrated by the latest attempt to raise equity. And there is no lack of effort on this. So, it will be a board thing In the meantime, if we can raise some equity here, that would be great. But if not, we will go back to the board, and we will try to figure out the best way to clean this thing up.

Got it. Got it. Appreciate it. And then maybe sticking on that whole concept of growing the vehicle, we are trying to figure out how much more investment capacity the balance sheet can support. And I think you have got $111 million of future funding for the Genesis loans that you took on this quarter, which at a 75% advance rate is roughly $28 million of equity. what is the minimum cash balance you are comfortable carrying? And how much equity is left in the $84 million of CMBS loans that could be redeployed into these Genesis loans?

there is something north of $50 million, believe, in common right now or I should not say in common. In equity that remains in the vehicle. You know, we could, quite frankly, we could do a preferred if we wanted to. We could do another debt deal if we want to. So know, we are not fussed about that. Obviously, these things pay down in turn over, so we feel that there is enough liquidity in the vehicle today to take care of any potential draws that we may see over the next couple of years.

Alright. So if it is $50 million of equity, 28 million is already sort of committed to that $111 million so that leaves you with $22 million. it is $50 million after the deployment of the $20-odd million of the loans that I believe funded today. Okay. So with that, again, think of the same 75% advance rate that you used to take the loans on this past quarter, you could take down another $200 million of loans from Genesis. Is that the near term plan? Are you holding that liquidity or something else?

Yeah. We will keep we will keep more liquidity. We might deploy a little bit more a little bit more capital into more loans to try to grow earnings. But the net of it is if we cannot raise equity here or capital, in the near term, we will go back to the board, and we will have to make a board decision to do something different.

Got it. Appreciate the answers. Thanks, Michael.

Thank you.

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

You would mentioned in the deck that you are looking to sell some subordinate positions in several securitizations. Can you give us a sense of how much capital that might free up?

Yeah. We are not-- I think we have sold everything that we can. We got to hold on to a number of these retained interests for purposes of Dodd Frank. there is some stuff that we could potentially call and then and then liquidate that would create a little bit of a loss here. But I think for now, we should assume whatever has been able to be sold has been sold from the legacy side. Think the total equity remaining, and Nick, correct me if I am wrong, on the resi side, it is give or take about a $100 million. Is that right? it is a 100 million after Yeah. Last transaction. So the so this is not this is not that much there. But most of them are just retained interest that we have to hold for because they were securitized years ago, and the coupons are low. And they are not in the money now to be called. I think some of them actually come up here in the fall just based on time and factors. And we will have another hard look at those. But for now, I would assume they sit here until, until we figure something different out.

Okay. Got it. And changing gears, I mean, just given the highly accretive nature of the residential transition loans, multifamily transition loans, was there any thought to sell an ownership in Paramount back to Rithm to deploy more of a higher current yielding product? Or you feel that investing in Paramount is best for the vehicle?

I think we did that at a time when we thought we were going to be able to raise capital for the vehicle. And we honestly, we were extremely excited about the so called Paramount slash Sculptor investment. While saying that, I do not know that gets us over the hump no matter what we do here. Because you still need to raise capital. The challenge of raising equity, and this our second bout of trying to raise equity, over the course of the past 6 months or so. Is once you go out with a potential equity offering, and we have had a ton of conversations and supported by the, you know, what I would say our large money center bank friends who have actually given it all they can to try to help us raise equity is that as soon as you do that, the stock gets hit. You know, we started when the stock was at $14 and a deal would have would have had to be south of $10. It would not have been distributed. And we went out where Rithm was gonna backstop it, and it just would not have been a good solution for, what I would say, Rithm Property Trust shareholders. So, yeah, there is the 50 million that sits there, and we can deploy a little bit more capital. But we should assume unless we raise equity, that vehicle, and we will go back to the board and make a recommendation. Obviously, it will be a board decision. The vehicle will get cleaned up some way somehow. Going back to the earlier comments from Tom, what Apollo did with ARI. Okay.

Got it. And, just a fact you had the you were willing to put $200 million in as a backstop I think a mix of common and convertible preferred. Is some capital raise similar to that a possibility, or would you need the market's involvement?

No. it is we got plenty yeah. I mean, if you looked at the Rithm earnings today, as of the end of sixthirty, we had $2.1 billion of cash and liquidity. it is more about, I think, where the equity comes. We are extremely sensitive about taking a $14 stock issuing equity at $9 and then seeing the stock pop a few dollars. That does not work for shareholders. And that is, you know, that is not who we are.

Okay. Thanks. that is it for me.

Thank you.

Your next question comes from the line of Henry Coffey with Wedbush Securities. Please go ahead.

Good afternoon, everyone. Mike, it seems however hard we push you on the idea of, you know, putting on more assets,, The answer is no. We are not going to ramp up our leverage beyond anything that is reasonable. We need more capital. So and that could come in a lot of different forms. I think we all know that. So I guess, a is how quickly would you move on 1 front or the other And b, what is the final clock look like in terms of how you are thinking about this business, whether it should be acquired and folded back into Rithm, whether it you know, you should tender for the stock, or however you want to ultimately resolve the thing.

But it is kind of like, a, you are gonna get some form of capital in here or b, you are gonna take it private? Yeah. I think it is a 2026 event. We are in-- we begin August here. It will be something that will we will continue to work with our board to the extent that we could bring in a sleeve of capital. You know, the stock is trading a little bit better here. Great. But, I would assume it is a 26 event.

Alright. Thank you.

Thank you, Henry.

Your next question comes from the line of Jason Stewart with Compass Point. Please go ahead.

Thank you. Michael, you started to, I think, address part of my question which is, how would arrays look different next time? Is there a way to structurally address the perceived market concerns like a wrap or a backstop. And I think you started to address that with the Rithm back Is there any other option on the table that you are considering? In terms of structural enhancement?

You know, if you have an idea, call me. I do not I do not I do not know You know, we have we have tried to bring in third party capital alongside this. We have tried to obviously, you know, work through a backstop. The equity is fundamentally extremely cheap. it is just 1 of these things that there is no float. it is trading a little bit more volume these days, but you know, with the book value stated book value of $30 and we do need to reset the vehicle, but you do not wanna reset it with $2.55 billion because you are gonna be in the same boat, you know, as we look down the road. So the idea initially was to go out with a reasonable size offering, Rithm and would Rithm would participate because we believe in it. We believe in what we do. But we need to raise-- we need to get real participation from others away from, Rithm. We have had a ton of conversations. There is some participation away. it is a question of where does the equity come.

Yeah. Okay. Then I think from the beginning here, we have talked about the potential for, like, a transformative commercial real estate transaction. Outside of the Genesis book. Is it your feeling now that there is just too much capital chasing those opportunities, and that is unlikely to happen? Or do you think it is still, based on the flow you are seeing, possible?

Yeah. You know, we are we are doing some different debt deals. I think if you go back to the Rithm earnings call that we did this morning, and you look at some of the monetizations we are in the middle of or things that we have done. You know, we had put out prior to-- and we did that off Rithm. Put out a couple hundred million. Those returns have been very good on both the debt and equity stuff that we have done there. We are hunting, and it does not have to be specific to office, quite frankly. Looking at some public company stuff. We are looking at some private company stuff. And I think the runway alone even in the Genesis business gives us plenty of ability to create kind of mid-teens levered assets with real cash flow that, hopefully, we could figure out ways to fund those in RPT. You know, some of that stuff goes in funds now. Some of it sits down within balance sheet, but that is what we are working towards. So I think there is plenty of stuff to look at. Banks are back in lending. I think that is very healthy for the market, but there is opportunities. You know, we work with our broker friends. We see we see a ton of different things. We have to figure out what is right.

Okay. Thank you.

Thanks, Jason.

There are no further questions at this time. I will now turn the call back over to Michael Nierenberg for closing remarks.

Appreciate everybody's thoughtful questions. If you have any real good ideas that we are not thinking about quite frankly, give us a buzz, and we are always happy to listen. We want to protect our shareholders in this 1 and not-- you know, come out and do a deal that does not make any sense. To the extent that we could get a deal done, we will. And if not, we will try to figure out what plan b is. And our intent is to have all that stuff done by the end of the year. No later than the end of the year. With that said, have a great rest of the summer, and appreciate your thoughtful questions. Take care. Bye.

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