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.
“We’ve gotten the company from where it was not making any money and actually losing money to where today it’s breakeven,” Nierenberg said. He added that the next step is to grow earnings and expand the capital base.
Second-Quarter Results and Portfolio Additions
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.
Equity Offering Withdrawn
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 $50 million of equity remaining in the vehicle after current loan deployments and could potentially use preferred equity or additional debt financing. However, he said management does not intend to increase leverage beyond what it views as reasonable.
Strategic Alternatives Under Consideration
Nierenberg said the company’s board will determine the appropriate path if a capital raise cannot be completed. Options discussed on the call included buying back equity, tendering for shares, pursuing M&A transactions and other steps to “clean up” the company.
He said the original goal was to build Rithm Property Trust into a dedicated commercial real estate vehicle, but the inability to raise equity has limited that effort. Management is continuing to explore opportunities in Genesis-originated loans as well as public- and private-company investments and other debt transactions.
Rithm Property Trust may deploy some additional capital into loans to increase earnings, but Nierenberg said the company would revisit strategic alternatives with its board if it cannot raise capital in the near term.
When asked about timing, Nierenberg characterized a decision as a 2026 event and said management intends to have its plan completed by the end of the year at the latest.
“We want to protect our shareholders in this one and not just come out and do a deal that doesn’t make any sense,” Nierenberg said in closing remarks. “To the extent that we can get a deal done, we will. If not, we’ll try to figure out what plan B is.”
About Rithm Property Trust (NYSE:RPT)
Rithm Property Trust Inc is a real estate investment trust (REIT) externally managed by an affiliate of Rithm Capital Corp. (Rithm). The company focuses on commercial real estate-focused investment, including originating, acquiring and managing portfolios of CMBS, commercial real property, commercial mortgage loans and other CRE investments. It has two reportable operating segments: Residential and Commercial. The majority of the company's revenue is derived from the Residential segment, which is focused on managing a portfolio that includes residential mortgage assets, including whole mortgage loans, RMBS and beneficial interests.
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