RPT - NYSE

Thank you for standing by. At this time, I would like to welcome everyone to the Rithm Property Trust Fourth Quarter 2025 Earnings Call. [Operator Instructions] Thank you. I would now like to turn the call over to Emma Hoelke, Deputy General Counsel. You may begin.

Thank you, and good morning, everyone. I would like to thank you for joining us today for Rithm Property Trust's fourth quarter and full year 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, including any statements regarding illustrative portfolios or earnings. 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.

Thanks, Emma. Good morning, and happy Friday, the 13th. Thanks for joining us on Rithm Property Trust, our fourth quarter earnings call. Just a few things. While investment activity remained light away from a small investment that Rithm Property Trust made in the Paramount transaction that our parent, Rithm announced in December, the balance sheet, cash, the company remains in great shape. During the fourth quarter, we also announced a reverse split of our shares on a 6:1. So when you look at it today, obviously, with the stock trading something between $15 and $16 versus where it was, I think it was something around $2, right? We feel like it's going to hopefully attract more interest in the stock with a higher -- obviously, a higher share price, recognizing that we did do a reverse split. As many of you know, and we've said this repeatedly, we took over the management contract of what was formerly known as Great Ajax in June of 2024 with the intent of making it a dedicated commercial real estate vehicle as well as an opportunistic investment vehicle. What we did then is we repositioned the company. We cleaned up the balance sheet. We raised capital. And today, we remain focused on what I would say is a potential recap of the company along with earnings and dividend growth. We have a clear path, which depends on capital formation to be clear, to take the company from flat earnings to a future state where the company is earning something between $1.60 and $1.70 per share and trades, give or take, about a 9% dividend yield with a book value of approximately $20. That all depends on; one, the recap; and two, where you actually raise the capital. The plan for the vehicle would be to acquire multifamily loans from our operating business, Genesis, which we have already identified those -- that pool of loans along with other commercial real estate investments, so there will be no J-curve as we think about earnings growth and where we're going with the vehicle. Today, as we know, many REITs, BDCs and other capital vehicles are not trading well. And while we will be patient, we hope to accomplish this when the markets stabilize. I'll now refer to the supplement, which we have posted online, and I'm going to begin on Page 3. So when you look at the company today, obviously, there's a pretty active investment pipeline. The company today sits with, give or take, about $100 million of cash and liquidity. Total equity in the vehicle is $300 million. And when you look at our trading price, which I think is something around $15, the company is trading at roughly, give or take, something around 50% of book. When we look at the vehicle, it is externally managed by Rithm. So when you look across the firm, we have a ton of real estate investment professionals and others, which are here to support the vehicle and support the growth. As you all know, we've done this before when we started New Residential back at Fortress in 2013, and we hope to achieve the same level of growth and success from an earnings perspective and a growth perspective in this vehicle as we go forward. When you look at financial highlights, earnings were flat. We took over this thing, as I pointed out in June of '24, where the company wasn't making any money. You look at Q4, GAAP earnings, $2.5 million. EAD is kind of $500,000 to the negative, which leads to a per diluted share of $0.06 negative. Book value, as we pointed out, was about $300 million or $31 per diluted share. Common stock dividend that we pay, we're going to continue to pay that dividend is 8.7% from a dividend yield perspective. And then as I pointed out, cash and liquidity is, give or take, about $100 million. Really, the whole play here is you have a clean balance sheet, you have a clean company, you have a dislocated sector in the real estate space. You have many commercial REITs, which are underwater because they have either liquidity issues, or they have a balance sheet that continues to need to get cleaned up. For us, we're going to be patient. We're not going to keep this vehicle outstanding forever. But while saying that having a clean vehicle where we want to recap this similar to what Blackstone did around BXMT with Cap Trust, I think it was -- that is our ultimate goal here as we look to grow the vehicle. And it's not just about growth; it's how do we make our shareholders' money. We do think that this and then some of -- a lot of the capital vehicles, including Rithm and RPT are trading at extremely low valuations. So hopefully, they write themselves. But as we think about this vehicle, we will be patient. We are sitting on cash and liquidity. We do want to do a recap. And we think from an opportunistic standpoint, we have the assets that will now take this business to grow earnings to something between $1.60 and $1.70 per share, assuming that we do a recap of the vehicle. When you look at the portfolio on Page 6, what are we going to do with it? We speak about multifamily loans, our Genesis business, which we bought from Goldman in 2022. At that time, they were doing $1.7 billion of production. This year, I think we're projecting we're going to do something between $6 billion and $7 billion of production. We're going to be growing our multifamily lending business. We are seeing some potential opportunities in that space even around acquiring licenses to become a Fannie, Freddie servicer or originator in the multifamily space. So that's something that we're currently working on. Obviously, we're making a big push in the commercial real estate space. We announced the acquisition of Paramount. We love that transaction. It will take a little bit of time, but we're really excited about where we sit there, our entry level, our basis and where we're going to go with that company. And then when we think about opportunistic investments, we've been very good at identifying them and acquiring them through the course of our careers, but taking the company back to 2013 on the New Residential/Rithm level. When you look at Page 7, we talk about our ability to source, whether it be at the Rithm parent level, whether it be at Genesis, whether it be at Paramount. Obviously, we announced the closing of Crestline who -- in December. And then along with our partners at Sculptor, we have a lot of opportunity to source product. Looking ahead at the opportunity on Page 8, Commercial real estate, we love the office story. I know there's -- yesterday, obviously, with the AI story, a lot of the commercial real estate REITs got hit. The one thing I want to point out from a company perspective, both at the Rithm level and at RPT, we have a very diversified business. If you look at Rithm's earnings in the fourth quarter, we produced north of $400 million in earnings available for distribution. We have certain things that performed extremely well, other things where we had, for example, higher amortization in our mortgage company. But net-net, when you look at that business and you look at our diversified earnings streams, whether it would be at Rithm, Rithm Property Trust, we're very good at -- in my opinion, at creating diversified earnings streams that if one lever is not being working great, another lever will work great. So when you look -- when we look at the opportunity here for RPT, obviously, commercial real estate, we like a lot. There will be other things in the opportunistic space that we think are going to be highly accretive to what we're going to do in this vehicle as well, and we look forward to executing around that. So with that, I'll turn it back to the operator. We'll open up for some Q&A.

[Operator Instructions] And your first question comes from Craig Kucera with Lucid Capital Markets.

I think the Paramount transaction at Rithm Capital closed for about $1.6 billion and was generating about $300 million in NOI. Will RPT be receiving a slice of that NOI going forward? Or how should we think about the earnings impact or accretion from that investment?

You should -- I would think about it more as something that's probably -- it's back-ended. It's a pro rata share of what Rithm did on the balance sheet. So when you look at it, RPT has $50 million of the Paramount deal in -- on its balance sheet, and it will be pro rata versus Rithm.

Okay. That's helpful. And just thinking about the loans that you're originating at Genesis, which I believe would be accretive to Rithm relative to where you raised capital last year. Are you exploring -- feeding Rithm with more of those types of loans? And I guess when you talk about your future state on a larger capital base, is that sort of a wait for the common to kind of get closer to book value? Or kind of where -- what's the path there?

So Genesis, which I pointed out is going to do roughly $6 billion to $7 billion of production we expect this year. There's obviously plenty of loans that go into both the Rithm balance sheet. Obviously, if we're successful around a capital raise for RPT, there'll be loans that we've identified. So as I pointed out, there is no J-curve. The loans would go right on to the balance sheet, and you'd see a real pop in earnings at the RPT level. We also source third party. I mean we're actually developing more and more channels around sourcing third-party loans in that very same space, whether it would be on multifamily or in some of the very -- the kind of sponsored type loans that Genesis does. The other thing I would point out there, we have a funds business, obviously, and we have either funds or SMAs with -- whether it be with sovereigns around the globe or we also have a vehicle. We launched a fund on one of the wirehouses that's actually taking some of that product. So we have a number of different capital vehicles that are actually acquiring, whether it be Genesis loans and/or similar type loans from other originators, and we expect that to continue. Regarding your question on the capital side, Rithm sits with anywhere from typically $1.5 billion to $2.5 billion of cash and liquidity on balance sheet at most times. Obviously, our stock is trading at a discount to book. I don't anticipate us issuing equity here. Unless there's something that's highly accretive for what we're trying to do as an organization. So -- yes, that would be my comment around the equity side.

Okay. That's helpful.

Thank you.

Your next question comes from the line of Henry Coffey with Wedbush.

It's good to be on the phone with you all. So timing, I mean, I think that's the only question at this point. Getting RPT over book value, that's a big jump. Is there a tolerance for finding other sources of capital, be they preferred or common that would allow you to move ahead with the recap plan? Or are we just going to have to kind of wait?

I think timing is a good one. I would respond to markets. So you say timing, I say markets. The answer is -- the short answer is yes. I mean there's third-party capital that wants to be part of the vehicle. Is it possible at some point that we bring in third-party capital alongside the vehicle as it exists today? I think the short answer is yes. But while saying that, we're not going to leave this vehicle outstanding trading as where it does forever. So it's a timing thing. We want to make sure that we don't want to do something that's highly dilutive. If you recall last year, we did a pref in and around this. The company is sitting with some cash and liquidity. We also have what I would call liquid floaters on balance sheet. So to the extent that we found something more accretive, it's likely that we would sell those down and then invest in something else. But it's a timing thing. It's a market thing, and it's also -- I would expect us to continue to add more third-party capital to our lives.

And then basically, just to kind of reiterate, the primary source of loans is going to be multifamily and what Genesis generates mainly higher-yielding repositioning loans? Or you'll be doing some more traditional multifamily lending as well inside of RPT?

I think it's -- right now, what we've identified as a pool of assets, I think it's something around $1 billion of assets that would go right into the vehicle, obviously, subject to Board approvals. And once that happened, you'd see an immediate pop in earnings. So that's the way I would view it. Could there be other types of loans? The answer is yes. But for now, you look at the Genesis loans from a levered perspective, they're well north of 15%, and I think they'll be highly accretive to what we're doing in the vehicle.

All right. I look forward to moving forward with you on this.

Good to hear your voice, Henry. Have a good weekend.

[Operator Instructions] And your next question comes from the line of Jason Stewart with Compass Point.

Interesting opportunity at Genesis. Obviously, Genesis is not a forced seller. You do know the quality of the loans you're familiar with them. But could you talk about the pros and cons of buying from a Genesis versus a third party who might be more of a motivated or forced seller in the market?

We do both is what I would say. The short answer is the more we could do, the better. Based on our third-party fundraising, we have -- I'm not going to call it insatiable demand, but we have a tremendous amount of demand for this product, both in our funds business on the Rithm balance sheet because obviously, there are higher coupon earners as well as into the Rithm Property Trust. So it's going to be a combination of everything. We've already set up flow agreements with a number of originators. We are -- the one thing I would point out is we're extremely mindful of credit as we source product from other third parties. And one thing I like about our Genesis business is that the gentleman who runs at Clint Arrowsmith, as you've probably spoken with in the past, does a great job around credit, his background, he comes from a bank as a credit officer. That's really, really important. So while we could turn on the jets and grow origination, we got to be mindful of our credit box, and that's something that we also have to think about as we source from third parties because you see this in this business, once things get -- and I'm not singling anybody else, but once things get a little bit where this product is probably the most in demand from what I would call our LPs and what we want to do on balance sheet. You just have to make sure you don't have any missteps around the credit side, and that's something that we're extremely mindful of. But the long-winded -- my short answer to my long-winded explanation is we are going to source from third parties wherever we can as long as we're comfortable with the credit.

Got it. Okay. And you mentioned banks. I would have expected banks to have been sort of rate dislocated sellers in this market. Is that something you're seeing an opportunity to acquire, especially since it's multi? Or is that opportunity past?

You're not seeing a lot of bank selling is what I would say when I talk about the banks, we launched a fund on one of the wirehouses on the bank platform. And that's -- again, that's creating more demand for the product that Genesis is making and some of our non-QM products. So I think the banks are probably better buyers. What you've seen from the banks, the regional banks pulling back, right? We've seen that over the course of the past couple of years, which has created this great opportunity for Genesis and some of our other lending businesses to grow production.

Okay. Got it. One big picture question. You mentioned the Fannie, Freddie licensing. Is the ultimate goal here to be able to go end-to-end sort of from an intermediate loan to permanent financing through the GSEs? Is that the vision for RPT down the road to have that license and create the customer relationship end-to-end?

Yes, if we could do it, for sure. I mean when you think about the power of the franchise, look at Genesis. Genesis could go and they can make a loan to a builder in, let's just say, in the build-to-rent space. The mortgage company, Newrez, can then put a -- work in conjunction with Genesis and provide loans, for example, to those -- to that community of builders or it could be in either a builder that's buying, building and selling on a go-forward basis. So a lot of our thesis and what we're trying to do across the board is to be able to capture as much wallet as we can from our customer base. You look even at the mortgage company, which has over 4 million customers, are there other products that we could offer them that are going to generate earnings for our shareholders, and we're working on cards and other things that we hope to roll out here in the near future. So that is an example, but end-to-end is something that we're trying to do for sure.

Appreciate it.

Thanks, Jason.

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

Have a great holiday weekend, everyone. Thanks for your support. Thanks for dialing in and be safe. Speak to you soon.