Ladies and gentlemen, thank you for standing by. My name is Krista and I will be your conference operator today. At this time, I would like to welcome everyone to the Rhythm Property Trust, Inc. 2nd Quarter 2025 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad. And if you'd like to withdraw your question, again, press star 1. Thank you. I would now like to turn the conference over to Emma Bola, Associate General Counsel. Emma, you may begin.

Thank you and good afternoon, everyone. I would like to thank you for joining us today for Rhythm Property Trust's second quarter 2025 earnings call. Joining me today are Michael Nirenberg, Chairman, CEO, and President of Rhythm Capital and CEO of Rhythm Property Trust, and Nick Santoro, Chief Financial Officer of Rhythm Capital and Rhythm Property Trust. Throughout the call, we are going to reference the earnings supplement that was posted this afternoon to the Rhythm Property Trust website, www.rhythmpropertytrust.com. If you've not already done so, I'd encourage you to download the presentation now. I would like to point out that some 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 afternoon. Thanks, Emma. Good afternoon, everyone. and thanks for joining the call. You know, the way one year ago, we took over the management contract of this REIT, which was formerly known as Great Ajax. The company was losing money, needed more liquidity, and quite frankly, a new leadership team and a new mission. We renamed the company to Rhythm Property Trust. We sold down legacy assets, which were not accreted for shareholders, and we repositioned the company to be an opportunistic commercial real estate REIT. Over the course of the past year, we went out and deployed $300 million or bought $300 million in commercial real estate assets. We raised a new pool of capital without diluting shareholders. We did that via a PREF offering, and we put the company on a path towards success and profitability. While the numbers this past quarter are similar to last, we have a ton of deals and investments in the pipeline. When we were at Fortress, we took a company at that time, which was known as New Residential, which is currently Rhythm Capital today, from $1 billion of equity in 2013. Today we stand at almost $8 billion of permanent capital or equity. We manage over $80 billion of assets across all of our various business lines. We intend to do the same here. Unfortunately, it takes some time. If you think about the company this way, I'm confident you will be rewarded well in the One, that we do not have any legacy commercial real estate assets. Two, the equity trades at a 50% discounted book. So we believe as we continue to execute on our plan, there'll be huge upside in the valuation of the equity. Three, with what's going on in the real estate market, whether it be on the equity or debt side, we have very large pipelines of deals we are currently evaluating. And then we also have a number of deals that should close here in the third quarter. So net-net, while we're not thrilled with the current stock price, obviously, I believe the value proposition here is a good one. I'll now refer to the supplement, which we have posted online. I'm going to start on page three. So, again, the way to think about this is an opportunistic equity investment in a publicly traded commercial real estate REIT. And it doesn't have to be commercial. It could be opportunistic as well. Current pipeline is in and around $2 billion. of assets that we're currently evaluating. We have a little under $300 million in total equity. Our real estate portfolio is $300 million, and we're sitting on approximately $100 million of cash and liquidity. As you flip to page four, earnings, kind of fairly similar to where it was last quarter, $1.4 million in gap income, or three cents per diluted share. The EAD is about $100,000, or effectively, you know, virtually zero. Second quarter common stock dividend is six cents per common share. We do not intend to reduce that anytime here soon. Cash in cash equivalents about $98.6 million and total equity of 295. Gap book value is $5.37 with the stock trading, I believe, something around $2.70, so about a 50% discount to book. The opportunity for Rhythm Property Trust. Why now? We're entering what we think the real estate market at a very attractive time. We've been pretty vocal about that. While saying that, not every real estate asset is the same, and we need to be extremely diligent and careful in our underwriting and how we deploy capital in this and every other vehicle that we manage. So why Rhythm Property Trust? One, again, no legacy commercial real estate exposure. Two, again, the company's trading at a sizable discount to book value. Three, the amount of employees and management team here at Rhythm, and this does not include our Green Barn subsidiary or Sculptor, there's approximately 75 to 100 folks in the house here that work on our various vehicles. When we think about the commercial real estate landscape, one, the repricing of commercial real estate assets, the continuous debt maturities and dislocations in the market are and will continue to create opportunities across the capital stack. As we look at changing capital structures, there's a huge need for PREP equity and a number of the different assets and things that we're looking at that'll continue to create what we think are extremely attractive opportunities to deploy capital. As we go forward, the pipeline as of the end of June was $2 billion of different types of real estate investments that include senior mortgages, subordinate loans, mezzanine loans, and other opportunistic investments. The emphasis, and finally, our emphasis on growth. As we achieve scale, that is something that's going to enable us, in our own opinion, to drive the valuation of the company higher. we have some profitability if you have a look at page six when we took over the company as i mentioned before the company was losing money q2 of 24 the company lost 35 cents per diluted share if you look at where we are now we made three cents per diluted share so continued risk discipline around one the asset side of the balance sheet and then two as we think about growing earnings like i pointed out in my opening remarks it will take some time because the equity base here is is $300 million. And we intend to take this same vehicle or this vehicle like we did at Fortress where we started new residential with a billion dollars of assets and we grew it to eight over time. When you look at seven, as we think about Q2 investment activities and you look at where we are today, one, the deal source of approximately $6.5 billion. And as I pointed out, we have a number of deals that we believe we're going to close here in the third quarter, and that should deploy about $50 million of equity here with double-digit returns. We look at the investment opportunities. There's a number of different things we look at. Again, as I pointed out, whether it be debt, PREP equity, MEZ, and opportunistic equity across the stack. Strength of the platform, you know, we are at rhythm. Obviously, we take our performance extremely seriously. You know, when you look at RITM as a whole from a parent perspective, typically our ROEs are anywhere from 15% to 20%. We'd like to try to position this company to be able to do the same thing over time. Page 8, just looking at the potential, excuse me, portfolio over the future between CMBS, senior loans, opportunistic investments, and subordinated and mezzanine loans, we believe that we're going to generate target yields of in around 15%. So, before I turn it over to Q&A, what I would say is we love the optionality in this platform. We're very happy with where the balance sheet stands. We are working on a number of situations that I believe will enable us to deploy significant amounts of capital. We do not intend to dilute shareholders to the extent that we don't need to, so that will likely be bringing in third-party partners on some of the larger things that we're looking up and with that I'll turn it back to the operator we'll open up for Q&A.

Thank you. We will now begin the question and answer session. If you would like to ask a question please press star one on your telephone keypad to raise your hand and join the queue and if you'd like to withdraw your question simply press star one again. Your first question comes from Jason Stewart with Janie.

Please go ahead okay thank you thank you Michael in terms of the near-term opportunities in the pipeline could you talk about how that splits up between the different sectors loans securities etc sure so most of the stuff you know when we look at securities today for example when you look at our portfolio most of its floating rate around the on the real estate side when we look going forward And most of that is up in the capital stack in AAA CMBS. We do have some loans on the balance sheet that we made. We did a small SRT deal with one of our larger bank counterparties. Going forward, looking at pipelines, we have anything from something that will fund, we're hopeful, in the next couple weeks, which is a retail asset up in Seattle, anchored by some very strong tenants, including Albertsons, Staples, et cetera. We're looking at stuff in the multifamily space. We have some nice opportunities, we believe, on the office side as well. And then we're looking at some larger M&A opportunities that we think could change the landscape of this organization for years to come.

Okay, that's helpful then. And then on the last point, and I think you started to perhaps talk about this in your comments, you said commercial and opportunistic, but not necessarily doesn't have to be commercial. Maybe you could elaborate a little bit more on what you meant there in terms of opportunistic?

You know, it's going to be right now the intent is for this vehicle to be focused on commercial opportunities. You know, I think back to our fortress days when we bought a little under $4 billion of consumer loans into our REIT, along with some other capital vehicles we had, and that was the beginning of what became one main financial. I'm just using that as an example. Right now, though, what I would say is I'd focus, the focus for all of us here at RITM is to build this as a dedicated opportunistic commercial read.

Got it. Thanks for taking the questions. Appreciate it. Thanks, Jason.

Your next question comes from the line of Randy Binner with B. Riley Securities. Please go ahead.

Thank you for taking the question. This is Tim D'Agostino on for Randy Binner. When we think about the go-forward plan for the portfolio, what should we think about in terms of capital being put to work per quarter and where we may see that capital be putting to work?

So, again, it's the capital that's going to, where it's going to go, it's going to be the very same assets that I just described. So you'll have, you know, the pipeline between retail multifamily office. We have some industrial things we're looking at. We did an SRT deal with one of our, like I pointed out, one of our larger bank counterparties. So it's going to be in those very same pockets. um when you think about capital deployment you know the good news is we're sitting with a with roughly 100 million of cash and liquidity on balance sheet um where as much as we want to deploy that capital yesterday and we could we want to make sure that we are we find the right opportunities to create what we're really striving to do which is going to you know be something with with teens type returns um so that 100 million that sits there i think our projections are we'll be deploying about 50 million this quarter uh here in the third quarter assuming that the all the different loan opportunities we're working on close here in the third quarter and then going forward you know obviously we'd like to stock to write itself um but we'll likely continue to tap into the pref market um as well so we don't delete shareholders okay great thank you so much that's all for me.

Thank you.

Your next question comes from the line of Tom Catherwood with BTIG. Please go ahead.

Thank you and good afternoon, everybody. So, Michael, I want to kind of try to tie a couple of ends together here. So, it really does sound like your pipeline of opportunities has scaled up and, you know, you took us through the cleanup that you did on, you know, legacy great Ajax over the past 12 months. But as far as that pipeline, and it seems like you've gotten to the point in time when it'll really be an execution opportunity right now, was it just a matter of time of building that? Or was there a shift in what you were looking at that helped that scale? Or were you missing out in deals and you've gotten more aggressive and some more is dropping to the bottom line? What's kind of changed between 1Q and 2Q that's helped that pipeline scale the way it has?

Yeah, no, I think those are great questions. One is the team is out, you know, hunting and having lots of conversations, whether it be with our large bank friends with some third-party origination platforms or just stuff that, you know, where we get calls directly from sponsors. So we're seeing a lot more of that. And I think part of it is building the, not the Rhythm brand, because I think the Rhythm brand resonates extremely well in the investment community, but the Rhythm Property Trust brand, which wasn't really as well known, you know, since, other than when we initially took over the platform. So the pipelines are building, the teams are having a ton of conversation. You know, what I would say, though, on the flip side of that is we're not going to compete for the last dollar um to drive cap rates extremely low on for example on office if we don't think it makes sense for the vehicle our goal here is to take what we have which is this clean in our opinion a clean balance sheet sitting on some liquidity we could use more um and deploy that capital prudently with teens type returns um we're not going to get into a bidding war with somebody at least at least for now on things that we don't think make a lot of sense. So I think it's a combination of one, we are seeing a lot more directly from sponsors. Two, we're having a lot more conversations with our banking partners, of which we have a lot of. And three, the brand is the Rhythm Property Trust brand overall with the great job the team is doing is getting out there. So the teams are getting the call on these, not just, for example, the largest real estate players in the industry.

I appreciate that color, Michael. And then if we think of sources and uses here, the opportunity set scales, there's more deals falling to the bottom line. You've obviously built this large book of CMBS securities. You did it over a period of time where spreads were wider. They've obviously tightened down towards record levels again. And how do you think about, you know, either taking on more debt, using the cash on your balance sheet, or even selling the securities, which, again, we assume you would have a gain on, in order to put them into more of this direct lending opportunity, which is what it sounds like that's more of that's in that pipeline right now.

How do you think of securities book as a funding source? it could easily be that right because one of the reasons why and thanks for leading me to the answer here one of the reasons why we stayed up in the cap stack was as we continue to grow this we wanted to deploy capital to create some earnings for the balance sheet as we look at some of the opportunities we're seeing and typically and the way we're going to grow this company honestly is by doing things that are a little bit more meaningful and larger over time yeah, we'll hit our singles, but we have to do something that's meaningful and be able to raise a bunch of capital around that. And the way that, you know, if you look, we did a, I think it was a $50 million PREF offering kind of, you know, a few months back. We don't want to dilute shareholders to the extent that we don't need to. I think what we're going to likely do is bringing third-party capital alongside a larger transaction, which is going to help get this platform off the ground. And then I think once we do that, you're going to see the stock really right itself. So I think the optionality in this company and the stock, I think, is extremely high and significant to the upside.

I appreciate that. And last one for me, if we think of kind of once you allocate that, let's assume the $50 million in opportunities that are near term close. If we do a quick back of the envelope that looks to us like just about maybe a little bit over a penny a share per quarter, does that check out? And is this the kind of thing where to get up to that dividend level, you're going to need to put out $300 million of incremental capital? Or are there other catalysts that help you kind of boost earnings back to that dividend level?

I think in your math, it's about two cents a quarter. You know, again, we're going to have to create some scale around our capital formation side. But I think we'll get to whatever our current dividend that we're paying. We came into this thing not looking to cut the dividend because folks have suffered a lot of pain prior to us acquiring the management contract here. So we're going to do all we can to maintain this dividend and continue to try to grow Appreciate all the answers.

That's it for me. Thanks, John.

Your next question comes from the line of Doug Harder with UBS. Please go ahead.

Hey, Doug. Thanks, Michael. I'm hoping you could just talk about kind of trying to square all the things you've said about a growing pipeline, lack of interest in diluting shareholders, and just how you think about, you know, kind of the patience that you have to try to scale the business while kind of looking at those two factors and, you know, and kind of how you think that plays out?

You know, I think the scale of the business is going to be around a larger scale transaction. That's how we're going to be able to raise capital to create a vehicle that's, you know, where we're going to start generating significant earnings. While saying that, you know, I I alluded to likely bringing third-party capital alongside us. I think you'll see that without going out to truly dilute the shareholders here that with the stock trading end, again, give or take $2.70. You know, quite frankly, you can't raise enough stock around that level to make a significant dent in this company. Pipeline-wise, you know, I'm looking at 11 different transactions on a sheet in front of me right here. They range anywhere from a large M&A opportunity to a retail loan that I pointed out. I gave you some color with Albertsons and Staples as some of the anchor tenants to looking at some multifamily stuff in Florida to some New Jersey office to some local office. So, you know, our pipelines are pretty robust. The one thing we want to make sure that we do, though, is obviously be extremely thoughtful on deploying the capital.

Great. Appreciate it. Thanks, Michael.

Thanks, Doug.

And that concludes our question-and-answer session, and I will now turn the conference back over to Michael Nirenberg for closing comments.

Thanks so much for the questions, guys. Look forward to updating you next quarter or during the quarter. You know, again, I do like where we sit. We're going to be patient, but we need to try to grow our stock price here, and we're extremely mindful of that. So have a great rest of the summer if we don't chat, and have a good weekend.