Thank you for standing by. At this time, I would like to welcome everyone to the Rhythm Property Trust second quarter 2026 earnings 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 one on your telephone keypad. If you would like to withdraw your question, press star 1 again. I would now like to turn the call over to Emma Holke, Deputy General Counsel. You may begin.

Thank you and good evening, everyone. I would like to thank you for joining us today for Rhythm Property Trust's second quarter 2026 earnings call. Joining me today are Michael Nirenberg, Chief Executive Officer of Rhythm Capital and Rhythm Property Trust, and Nick Santoro, Chief Financial Officer of Rhythm Capital and Rhythm Property Throughout the call, we're 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 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're going to chat about Rhythm Property Trust. I'll give you my opening comments, then we'll go through the supplement, and then we'll open up for some Q&A. Thanks for joining the call. Since Rhythm took over the management of the contract, which was formerly known as Great Ajax, we've transformed this company pretty dramatically. We changed the name from Great Ajax to Rhythm Property Trust, set out on a mission to actually grow this into a dedicated commercial real estate vehicle. During that time, we have We've improved liquidity, we've cleaned up the balance sheet, and we grew earnings so the company no longer loses money. During the quarter in Q2 and subsequent to Q2, we've 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've also attempted during the quarter, up a couple 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 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'll need to raise capital. In the event we're not able to do so, we'll explore different avenues, which could include buying back equity, M&A, 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 can actually either grow the company, but more importantly, make money for our shareholders. So with that, I'll refer to the supplement, which has been posted online. We'll start on page three. 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've gotten a company from where it was not making any money and actually losing money to where today it's breakeven. And now the path forward has to be where we could grow earnings and grow the capital base. When you think about Rhythm Property Trust, it's managed by an affiliate of Rhythm, which is quite frankly us. Rhythm has $9 billion of permanent capital north of a hundred billion of assets. It's led by our seasoned team here who've been working together for many, many years at both Rhythm and going back to the Great Age Acts, when we took over Great Age Acts. 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 you know the origination business of Genesis supplies loans to funds to third-party funds to different SMAs we have as well as to the rhythm balance sheet and now we're doing it with rhythm property trust these loans are very high coupon short duration senior loans which which we think are great for this vehicle and hopefully we could figure out a way to raise capital to grow the vehicle when we look at our dividend yield we're 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 comparable to where it was the quarter before, which I think was $30.33, so overall flat. dividend paid is 36 cents 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 on a quarterly basis to where it's breakeven. We've taken actions to position the vehicle for growth. We've sold down the legacy assets that we don't 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 or 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 six talks about what we've done in Q2. This is just the profile of the assets purchased by Rhythm Property Trust, 117 million of RTL and MTL loans, 9.1% gross WAC, very, very short duration, levered return of about 14%. Could have future funding down the road so what that effectively means is where we're not in any chase to actually replace the assets as they amortized down. Advanced rate on the underlying assets are 75%, and the dollar price paid a little bit under 101 with a cost of funds of about 565. So that really is the story here. It's the story of resetting this vehicle, raising capital so we could actually deploy capital and grow earnings to the extent that we can. and we'll have to explore alternative avenues to figure out a way to maximize shareholder value. One of the main reasons we did not do the equity offering was it was substantially below the dollar price where the equity is trading today. So with that, I'll turn it back to the operator. We'll open up for Q&A, and hopefully we can figure out a way to reset the vehicle.

At this time, I would like to remind everyone, in order to ask a question, press star, then the number one 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 five, the future state, you added this comment about explore opportunities to enhance shareholder value, which was different than the wording you've used in the past. What exactly does that entail? And why not follow Apollo and KKR in their CMRED 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 can't speak for their leadership team, is probably a little bit different. We're still in a position where we'd like to see us reset or grow this vehicle as we look at KKR the you know that vehicle is 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's you know this will be a board decision as far as what you know the direction of what we do here whether this thing gets cleaned up whether we tender for shares whether we do we try to do M&A deals etc I think when we did this initially we did this with the intent of trying to grow the vehicle clearly we haven't been able to do that and obviously that's been illustrated by the rate of the latest attempt to raise equity and there's no lack of effort on this so it'll be a board thing in the meantime if we can raise some equity here that would be great but if not you We'll go back to the board, and we'll try to figure out the best way to clean this thing up.

Got it. I appreciate it. And then maybe sticking on that whole concept of growing the vehicle, we're trying to figure out how much more investment capacity the balance sheet can support. And I think you've 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's the minimum cash balance you're comfortable carrying and how much equity is left in the $84 million of CMBS loans that could be redeployed into these Genesis loans?

There's something north of $50 million, I believe, in common right now, or I shouldn't say in common, in equity that remains in the vehicle. Quite frankly, we could do a preferred if we wanted to. We could do another debt deal if we wanted to. So, you know, we're not fussed about that. Obviously, these things pay down in turnover. So we feel that there's enough liquidity in the vehicle today to take care of any potential draws that we may see, you know, over the next couple of years.

So if it's $50 million of equity, $28 million is already sort of committed to that $111 million.

So that leaves you with $20, $22 million. after the deployment of the 20-odd million of the loans that I believe funded today.

Okay. So with that, again, thinking 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, or are you holding that liquidity for something else?

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

Got it. Appreciate the answers. Thanks, Michael.

Thank you.

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

Hey, good evening, guys. you made mention in the deck that you're 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're not, you know, I think we've sold everything that we can. We got to hold on to a number of these, these retained interests for, you know, for purposes of Dodd-Frank. You know, there's some stuff that we could potentially call and then, and then liquidate. That would create a a little bit of a loss here, but I think for now we should assume that whatever has been able to be sold has been sold from the legacy side. I think the total equity remaining, and Nick, correct me if I'm wrong, on the resi side is give or take about $100 million. Is that right?

It's $170 million after the last transactions.

So this is not that much there. But most of the branches retain interest that we have to hold for because they were securitized years ago, and the coupons are low, and they're 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'll have another hard look at those. But for now, I would assume they sit here until we figure something different out. Okay, got it.

In changing gears, I mean, just given the highly accretive nature of the residential transition loans and the multifamily transition loans, was there any thought to selling ownership in Paramount back to Rhythm to deploy more of a higher current yielding product, or do 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. Honestly, we were extremely excited about the so-called Paramount slash Ellicor investment. While saying that, I don't know that that gets us over the hump, no matter what we do here, because you still need to raise capital. The challenge in raising equity, and this is our second bout of trying to raise equity over the course of the past six months or so, is once you go out with a potential equity offering, and we've had just a ton of conversations and supported by 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. We started when the stock was at $14, and to do a deal would have had to be south of $10, and it wouldn't have been distributed, and we went out where Rhythm was going to backstop it, and it just wouldn't have been a good solution for, what I would say, Rhythm Property Trust shareholders. So, yeah, there's the $50 million that sits there. We can deploy a little bit more capital, but we should assume unless we raise equity that this vehicle, and we'll go back to the board and make recommendations, obviously it'll 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 the fact that 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's, we got plenty, I mean, if you looked at the rhythm earnings today, as of the end of 630, we had 2.1 billion of cash and liquidity. It's more about, I think, where the equity comes. You know, we're extremely sensitive about taking a $14 stock, issuing equity at $9 and then seeing the stock pop a few dollars. That doesn't work for shareholders. And that's, you know, that's not who we are. Okay.

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, putting more on assets, the answer is no, we're not going to, you know, ramp up our leverage beyond anything that's reasonable. well, we need more capital. 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 one front or the other? And B, what does the final clock look like in terms of how you're thinking about this business, whether it should be acquired and folded back into rhythm, whether you should tender for the stock or however you want to ultimately resolve the thing. But, you know, it's kind of like, A, you're going to get some form of capital in here, or B, you're going to take it private.

Yeah, I think it's a 26 event. We're in, you know, we begin August here. It'll be something that will, you know, we'll continue to work with our board to the extent that we can bring in a sleeve of capital. You know, the stock is trading a little bit better here. Great. But I would assume it's a 26 event.

All right. 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, you know, how would a raise 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 rhythm backstop. Is there any other option on the table that you're considering in terms of structural enhancement?

You know, if you have an idea, call me. I don't know. You know, we've tried to bring in third-party capital alongside this. We've tried to obviously, you know, work through a backstop. You know, the equity is fundamentally extremely cheap. It's just one of these things that there's no flow. It's trading a little bit more volume these days. But, you know, with a stated book value of $30, and we do need to reset the vehicle, but you don't want to reset it with $25 or $50 million because you're going to 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. Rhythm would participate because we believe in it. We believe in what we do. But we need to get real participation from others away from Rhythm. We've had a ton of conversations. There is some participation away. It's a question of where does the equity come?

Yeah, okay. And then I think from the beginning here, we've talked about the potential for, you know, like a transformative commercial real estate transaction outside of the Genesis book. Is it your feeling now that there's just too much capital chasing those opportunities and that's unlikely to happen? Or do you think it's still based on the flow you're seeing possible?

Yeah, you know, we're doing some different debt deals. I think if you go back to the rhythm earnings call that we did this morning and you look at some of the monetizations we we're in the middle of or things that we've done um you know we had put out prior to you know and we did that off rhythm we put out a couple hundred million those returns have been very good on both the debt and equity stuff that we've done there um we're hunting and it doesn't have to be specific to office quite frankly we're looking at some public company stuff we're looking at some private company stuff and i think the runway alone even in the Genesis business gives us plenty plenty of ability to create kind of mid teens levered assets with real cash flow that hopefully we can figure out ways to fund those in our PT you know some of that stuff goes in funds now some of it you know September than balance sheet but that's what we're working towards so I think there's plenty of stuff to look at banks are back in lending I think that's very healthy for the market but there's opportunities you know we work with our broker friends we see it we see a ton of different things we just got to figure out what's right okay thank you thanks jason there are no further questions at this time i'll now turn the call back over to michael nirenberg for closing remarks um appreciate everybody's uh thoughtful questions uh if you have any real good ideas that we're not thinking about um quite frankly give us a buzz and we're always happy to listen um we want to protect our shareholders in this one and not just you know come out and do a deal that doesn't make any sense to the extent that we could get a deal done we will and if not we'll 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-bye ladies and gentlemen that concludes today's call.

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