Rithm Property Trust Q2 Earnings Call Highlights

Rithm Property Trust Q2 Earnings Call Highlights

Rithm Property Trust reported essentially flat second-quarter earnings , with book value per share declining to $30.17 from $30.33 and a $0.36 quarterly dividend, equating to a stated 10% yield. The company acquired $117 million of Genesis Capital-originated transition loans , featuring a 9.1% weighted-average coupon and an estimated 14% levered return. Management highlighted the high-coupon, short-duration senior loans and the absence of legacy commercial real estate exposure. Rithm withdrew a planned equity offering after its share price and short interest made the proposed pricing unattractive to shareholders. If it cannot raise capital on acceptable terms, the board may consider share repurchases, tender offers, mergers and acquisitions, or retiring the vehicle, with a strategic decision expected by the end of 2026.

Rithm Property Trust NYSE: RPT said it is evaluating ways to grow its capital base and earnings while also considering alternatives including share repurchases, mergers and acquisitions, tender offers or potentially retiring the vehicle if it cannot raise capital on acceptable terms. Chief Executive Officer Michael Nierenberg said the company has substantially repositioned the business since Rithm assumed management of the entity formerly known as Great Ajax. The company changed its name, reduced legacy assets, improved liquidity and cleaned up its balance sheet, he said.

Nierenberg said second-quarter earnings were essentially flat. Book value per share was $30.17, compared with $30.33 in the prior quarter, while the company paid a quarterly dividend of $0.36 per share, representing a stated dividend yield of 10%. During and after the second quarter, Rithm Property Trust invested in multifamily transitional loans originated by affiliate Genesis Capital. The company acquired $117 million of residential transition loan and multifamily transition loan assets during the quarter, according to Nierenberg. Gross weighted-average coupon: 9.1% Estimated levered return: about 14% Advance rate on underlying assets: 75% Cost of funds: about 5.65% Nierenberg described the assets as high-coupon, short-duration senior loans. He said potential future funding commitments would mean the company is not under pressure to replace assets as they amortize. The CEO also emphasized that Rithm Property Trust has no legacy commercial real estate exposure, which he said differentiates the company from other commercial real estate mortgage REITs.

Rithm Property Trust recently attempted to raise public equity but withdrew the offering. Nierenberg said the decision was driven by the stock’s trading performance and short positions established by hedge funds, which would have required the company to issue shares at a price management considered unfavorable to existing shareholders. He said the stock had been trading around $14, but an offering would have needed to price below $10. Rithm had considered backstopping an offering, but Nierenberg said the proposed transaction would not have been an appropriate outcome for Rithm Property Trust shareholders. “We’re extremely sensitive about taking a $14 stock, issuing equity at $9, and then seeing the stock pop a few dollars,” Nierenberg said. “That doesn’t work for shareholders.” While Rithm Property Trust has liquidity to make additional investments, management said meaningful growth will require additional capital. Nierenberg said the company has more than $5...