Earnings Call Transcript - RPT Q1 2026

Operator, Operator

Thank you, and good morning, everyone. I would like to thank you for joining us today for Rithm Property Trust's First Quarter 2026 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. 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. And with that, I will turn the call over to Michael.

Michael Nierenberg, Chief Executive Officer (CEO)

Thanks, Emma. Good morning, everyone, and thanks for joining us. For the quarter, the company had a pretty uneventful quarter as we continue to look for opportunities that could be a game changer for this capital vehicle. With asset manager valuations under pressure, downward pressure on equity valuations in the public markets, we're going to continue to remain patient and work towards creating value for shareholders. While the geopolitical events affecting the world, credit spreads have remained actually in a relatively tight range and markets in general are performing well away from the headline risk we've seen in some of the retail private credit. Even there, if you take out the retail component, private credit is still performing well. The softer headlines you've been reading about will take a while to play out and the earlier vintages in the private credit world where companies borrowed money at large multiples of revenue will likely be the ones affected negatively in the future. And a lot of those deals were originated back in the 2020–2021 vintage. For RPT, we positioned the company for success by doing the following. When we took over this vehicle in 2024, we made a decision to clean up the balance sheet, liquidate a lot of the residential assets and reposition the company in the commercial space using this as an opportunistic vehicle to deploy capital in the commercial world. Today, the company has just a little under $100 million of cash and liquidity. The balance sheet is extremely clean. There's no problem loans and again, is in great shape. While we continue to wait for the opportunity to transform the company, we'll continue to pay the dividend. From an optionality standpoint, at some point, it's likely if we can't grow the vehicle from an overall capital standpoint, we'll be looking at different opportunities in the M&A world. And at some point, we may consider even buying back a little bit of stock here. With that, I'll refer to the supplement that we posted online. I'm going to start on Page 3. And again, this is just really the summary of what Rithm is, Rithm Property Trust. Today, the pipeline is, approximately, about $2 billion. It's always fairly robust. We're looking at large opportunities in the multifamily space. We also evaluate things that we could potentially do around our Genesis business, where we continue to grow our multifamily lending there. The equity is a little bit under $300 million. It's about $287 million. The commercial real estate portfolio, this is all post‑2024 vintage things that we've done, is $236 million, and we have, a little under $100 million of cash and liquidity. When you look at the financial highlights for the quarter, not a lot of activity. We sold down a few CRE floaters in the quarter to create a little liquidity, looking for better opportunities to increase earnings. As I pointed out in my opening remarks, the credit markets have continued to perform well. The CMBS markets perform well. But while saying that, we'll continue to monitor opportunities to turn over the portfolio and deploy capital in higher-yielding assets. GAAP income, negative $3.2 million or $0.42 per diluted share. Keep in mind, we did a reverse split in Q4. Earnings available for distribution, negative $300,000 or $0.04 per diluted share. Again, not a lot of activity. A lot of this relates to either the G&A or the dividend paid. Dividend paid in the quarter, $0.36 per diluted share, which correlates to about a 10.8% dividend yield based on where the equity is trading today. Book value, $236.2 million or $30.83. And then as I pointed out, cash and liquidity a little under $100 million. When you look at RPT, I mentioned again earlier, the strategic transformation. Going back to when we took over this vehicle, we cut G&A dramatically. We cleaned up the balance sheet. We sold down a lot of the residential portfolio where we could. And I'll talk a little bit about the equity that's remaining in the book. We've made some new CRE investments, and that was mostly done in floating rate AAA CMBS. We made a few loans on the debt side. We deployed $50 million in equity alongside Rithm in the Paramount transaction, which we closed in December of 2025. We continue to renegotiate our repo agreements, and we continue to improve liquidity. So overall, the company is in, as much as there's very little activity, in great shape, and we look for an opportunity to deploy capital or create more capital on something that's going to be a game changer. I'd like to go back and refer to what Blackstone did with BXMT many years ago or what we did with Rithm, which was going back to 2013, where we started that with $1 billion of capital. And today, the company has about $8 billion of capital. So we need to be patient here. As I pointed out, we'll continue to pay the dividend. At some point, we need to make a move in either clean up the vehicle or figure out a way to grow it. And obviously, we're actively trying to grow the vehicle. When you look at Page 6, the repositioning of the portfolio, where we can go here. I pointed out on the Genesis side, we're doing more lending in the multifamily space. There could be some opportunities to work together with that company. We continue to look for opportunities to put our capital in the debt markets on the CRE side, and then we'll continue to evaluate opportunistic investments and figure out different ways that we can increase shareholder value. And then on Page 7, it really just talks about how Rithm Property Trust benefits from the overall Rithm ecosystem, and that includes the Paramount transaction that we closed in December and then our asset management businesses, Sculptor and Crestline. So with that, I'll turn it back to the operator. We could open up for Q&A and then get on with our Friday.

Operator, Operator

And your first question comes from the line of Craig Kucera with Lucid Capital Markets.

Craig Kucera, Analyst

Optically, it looks like the strategy this quarter was to reduce your CMBS holdings and deleverage. Are you expecting to lever back up in the near term by investing in other asset classes such as loans from Genesis? Or should we expect leverage to be a little bit diminished for the near term?

Michael Nierenberg, Chief Executive Officer (CEO)

Yes. We looked during the quarter, the market felt—despite performing well, the market felt or the world feels horrible. So when you think about that in credit spreads, and we saw high‑yield widen a little bit, but then it came in about 50 basis points to where it is today. So we used that as an opportunity to say, if the world doesn't feel as good, let's sell down some of our levered AAA CMBS, which is yielding about 10% with the thought that we might be able to deploy more capital in higher-yielding assets. For now, we'll continue to sit on the cash and look for those opportunities. I mentioned in my opening remarks, we're looking at a large portfolio now of multifamily assets that will be coming at some point in May. And we're seeing some opportunities on the debt side that I think we'll be able to deploy capital at higher yields than where we are on some of the AAA CMBS. But for now, it wasn't really just to reduce leverage. It was to create more capital for opportunistic investing. At some point, that capital will get redeployed where that goes back into debt, some kind of lending, multifamily, or even buying back some equity here.

Craig Kucera, Analyst

Got it. And I guess if the market or at least how you feel about the world continues to be sort of miserable, do you think you'll continue to harvest proceeds from CMBS? Or do you think you'll work through what you wanted?

Michael Nierenberg, Chief Executive Officer (CEO)

We're in a really interesting period of time. Because when you read the headlines or you think about the headlines, there's been a lot of negativity around private credit, yet you look at a lot of firms that are in the private equity business, and they're still sitting on a lot of these portfolios that go back many, many years. You look at the equity markets were at all‑time highs. So if you think about private credit, private credit sits on top of equity. So what's going to go first, the equity. So when you look at the public markets in general, the markets feel—as much as the world feels terrible, the markets are performing extremely well. We look across RMBS, we look across CMBS, we look at the liquidity that we're seeing in all these different lending markets, things are actually okay. The geopolitical side just feels horrible though. Obviously, there's a lot of headline risk coming out of the administration and other places. So I think we're just looking for better opportunities to actually create more earnings.

Craig Kucera, Analyst

Got it. Changing gears, there was a pretty decent pickup in professional fees this quarter. Was that more just a onetime event? Or should we expect to see something similar going forward?

Nick Santoro, Chief Financial Officer (CFO)

That was a onetime event in the quarter. It had to do with us looking at various capital options.

Craig Kucera, Analyst

Okay. Fair enough. And this quarter, you closed on the Paramount transaction in the fourth quarter and at the Rithm parent, and of course, Rithm Property put in $50 million. Was there any impact to the income statement this quarter from Paramount?

Nick Santoro, Chief Financial Officer (CFO)

Paramount for the quarter was essentially flat.

Craig Kucera, Analyst

Okay. That's helpful. Will that ramp up at any point? Or should we expect that to be really more of a backloaded type of investment?

Nick Santoro, Chief Financial Officer (CFO)

No, it will ramp up as the investment continues to accrete and as we make progress on Paramount.

Michael Nierenberg, Chief Executive Officer (CEO)

Just a little color on that. When we closed the transaction on December 20, we've had really just a quarter of working on that. We've taken G&A from $65 million down to about $30 million. The performance, the lease-up activities is at the highest levels we've seen in 20-plus years. When you look at the properties, you have New York and San Francisco. We're in the middle of doing a few refinancings. We have some potential JV equity investments. So we're excited about that. We've had a ton of conversations with different LPs. The initial thought there was it's an opportunistic situation. Around that, we're going to raise capital either from third parties or just bring in JV partners with the intent of trying to make 2x and 20-plus percent on our money. So some of it will be back-ended. As Nick pointed out, as we accrete up over time, that should be a good one. You look at our New York portfolio, it's—for the most part—essentially leased up. So things are good on that one.

Operator, Operator

Your next question comes from the line of Jason Stewart with Compass Point.

Jason Stewart, Analyst

On the Genesis loans, are those likely to be more portfolio-based or chunky? Or is there an opportunity for flow? And then a follow-up on Craig's liquidity questions. Is there an opportunity to do anything with the unsecured debt just given how much liquidity is on the balance sheet?

Michael Nierenberg, Chief Executive Officer (CEO)

So the unsecured debt is like a 9% and 7%–8% kind of coupon. If we could get the company rated a little better, that drops to 8% and 7%–8%. When you think about that in the debt markets for this type of company, it's not a horrible cost of capital. Obviously, we want to make it more accretive and make sure the investments are more accretive, thus selling down some of the CMBS and looking for an opportunity to deploy in higher-yielding assets. When we think about Genesis, we bought this company in late 2021/2022. At that time, they were doing $1.7 billion of production. The company was making about $40 million of EBITDA. We've taken that where this year, we think we're going to do something between $6 billion and $7 billion of production, and the company should make between $150 million and $200 million of EBITDA. So it's been a very successful acquisition, and it's been a great feeder for our business. From Genesis, we've established a couple of things. One is we have a nontraded REIT we launched with one of the large money center banks where we're raising capital alongside some of the production that comes out of Genesis. That's gone extremely well. We've also done a large separately managed account (SMA) around some of the Genesis flow with one of the sovereigns overseas. So when we look at what we've done there, that's been a great one. Now we're actually looking at, is there a way to take these assets into the securitization market that could be north of 15% to 20% yields. Can we actually use this vehicle to—either around multifamily or some of the other stuff that's not going into these flow programs—to actually grow earnings at RPT. So that's something that we're extremely focused on. Hopefully, we get there, and that business continues to grow. That's really the thought around the Genesis side.

Operator, Operator

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

Henry Coffey, Analyst

Obviously, a lot of progress here and you cut your losses. And if we go with Nick's comments, we're almost at the point of breakeven on an EAD basis. If the environment or the political environment is bad, it's probably not going to get worse. So it's fair to say that the debt and credit markets, whatever they are, aren't going to get worse. What's the holdup in terms of deploying assets? Are there opportunities that don't show up until May? Are there enough opportunities out there where you could, if you wanted to push hard, leverage this thing up now? What is the overall temper of the market right now in terms of opportunities?

Michael Nierenberg, Chief Executive Officer (CEO)

This vehicle, on a relative basis, is extremely small. We need to create a large pool of capital to make a difference in the earnings and profile of the company as we go forward. And I think to your point on the equity or the debt and credit markets, there's a ton of capital still out there in the markets being deployed. When you look at all the headline risk, and you've heard some of the other folks that run some of the larger asset managers, the real headlines around private credit were really the redemptions that came about from retail. Anybody that has institutional money is typically going to be in longer-dated locked-up funds. So that's not really the problem in the credit markets. If somebody comes out—I use this example, I was in Asia last week speaking—most documents have redemption limits for a specific reason. To the extent that retail wants 10% or 15% out of some funds, a lot of funds have 5% limits. They have those limits because you don't want to liquidate good assets for the sake of liquidating because retail needs the money back. So my view on the private credit markets is that it's really an education process: how does a private wealth client buy into a private debt fund or private credit fund, making sure they understand the liquidity functions. You're seeing demand for evergreen type funds. We have an evergreen fund related to the Genesis business and you need to make sure there's an ample amount of liquidity. It's a different thing when you have assets secured by cash flow, as we do in Genesis and in the ABS space. The gist is that you're not seeing a lot of selling; you're seeing more capital that continues to get deployed, and you haven't seen a huge gap in spreads. Overall, there are going to be opportunities, but we wanted to create a little liquidity during the quarter in the event that we could deploy at a much higher level. Quite frankly, we just haven't seen it come to fruition. On the multifamily opportunity, it's a reasonable size deal we're looking at. Rithm Property Trust cannot do the entire thing alone. So it could be a combination of third-party capital, Rithm Property Trust and Rithm. That's similar to the way many larger asset managers have grown, using different capital vehicles and funds to share in the upside of a great investment.

Henry Coffey, Analyst

On the capital side, there's a chicken or egg thing. We have a lot of confidence in you as investors. There seems to be a point where you have to do it, accept some near-term dilution, and then grow RPT into a bigger business. What does that pain threshold look like for you?

Michael Nierenberg, Chief Executive Officer (CEO)

I think as long as we think that we could do something that's accretive longer term for shareholders, we'll do it. The notion of the asset management arbitrage is that REITs can trade at lower multiples relative to asset managers. Our larger company trades at around 5x EBITDA while many larger asset managers trade at 10x to 30x. If we can raise pools of capital and deploy them accretively so earnings start moving, we'll do it in a heartbeat. We've been disciplined around maintaining book value in our REIT vehicles because we have a lot of expertise across the firm. As it relates to this vehicle, to the extent we can raise a large pool of capital that gets deployed accretively and earnings start moving, we'll pursue it aggressively.

Henry Coffey, Analyst

The stock is at half of book value; issuing stock here would be painful, but perhaps temporary if the market recognizes the change. I'm just thinking about timing and pain tolerance.

Michael Nierenberg, Chief Executive Officer (CEO)

You need to do it around an accretive transaction. It's not just to raise capital. If there's something that's hugely accretive, we'll come back into the market, work with our investor base, our capital formation groups and our banks, and get it done. Someone asked about the onetime charge; that was part of what we were working on in the quarter—figuring out a way to raise a pool of capital.

Operator, Operator

Your next question comes from the line of Jade Rahmani with KBW.

Jade Rahmani, Analyst

The commercial mortgage REIT sector has been under pressure for several years, and there only seem to be a few companies successfully emerging from the recent downturn in values and credit with scale being a big differentiator. There's been one interesting deal in the space, which is the ARI sale to Athene of its entire loan portfolio. At the same time, we're seeing real estate transaction activity pick up and LP investors start to increase their real estate allocations. Are you seeing any change in engagement from perhaps public commercial mortgage REITs, the smaller ones, or private vehicles about potential combination scenarios?

Michael Nierenberg, Chief Executive Officer (CEO)

We've been very focused on differentiating ourselves. Over the years we've helped build or grow many businesses—Mr. Cooper, OneMain, Newrez, and Genesis Capital. We've been acquisitive, which has enabled us to grow. We'll continue to look at M&A, particularly in the environment you described. It's not easy to combine with many of the smaller, broken REITs. Our REIT is not broken—the balance sheet is crystal clean. There's about $100 million of equity tied up in residential deals that are marked well and are reperforming loan deals created by the prior management team. We're open to combinations and M&A and the Paramount transaction has opened doors, generating many conversations with LPs and other market participants. Our asset management business at Sculptor raised $4.6 billion on their last fund, and they're active in the real estate space. Smaller businesses are difficult to grow without capital, so you're likely to see more M&A in the space. But again, our balance sheet is clean and we're very different than some of the legacy REITs that suffered from earlier vintage lending.

Operator, Operator

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

Michael Nierenberg, Chief Executive Officer (CEO)

Thanks so much for your questions. Have a great weekend. Look forward to updating you throughout the quarter.

Operator, Operator

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.