Rithm Property Trust's Q3 2025: Contradictions Emerge on Pipeline Growth, Investment Strategy, Credit Risk, and Capital Deployment

Guidance:

• Consider recapitalizing the vehicle via an equity offering or fixed‑income instruments tied to a pool of assets to provide income for investors.
• Could explore an orderly liquidation/auction to realize book value given the share price discount.
• Continue to operate opportunistically rather than maintaining status quo; will pursue material actions to grow earnings.
• Expand direct lending platform and deploy capital into higher‑yield CRE loans (example: $21M grocery‑anchored loan yielding mid‑teens).
• Potential participation in the Paramount acquisition (subject to Board approval).
• Prefer minimizing dilution; will evaluate rights/preferred structures backed by asset pools where appropriate.

Business Commentary:

• Financial Stability and Dividend Maintenance:
• Rithm Property Trust stabilized from losing $10 million a quarter to being flat with a $0.06 dividend.

• The stabilization was achieved by liquidating residential assets and adding higher-yielding commercial real estate floaters.

• Direct Lending Business Expansion:

• The company is growing its direct lending business, which is expected to reach $5 billion in production this year.

• The expansion is driven by the success of Residential Transition Loan Organization (Genesis) and a focus on opportunistic investing.

• Paramount Transaction and Office Portfolio:

• Rithm Property Trust is excited about the Paramount deal, which involves taking private a large office REIT in New York City and San Francisco.

• The acquisition will likely provide outsized returns and is seen as an opportunity to invest in dislocated markets.

• Equity Mispricing and Growth Opportunities:

• The company's equity is trading at a discount to book value, potentially providing growth opportunities.

• Rithm Property Trust is exploring options such as a recapitalization, liquidation, or growing the vehicle, with a focus on not diluting shareholders.

• Credit Market Optimism and Opportunistic Investing:

• Michael Nierenberg expressed optimism about the credit markets being wide open, indicating strong commercial real estate demand.
• The company is focusing on creating diversified pools of assets and direct lending opportunities, wary of one-way risk on single property types.

Sentiment Analysis:

Overall Tone: Positive

• Management repeatedly emphasized stabilization and optimism: “we stabilized the company” and “the company essentially is flat,” maintained the $0.06 dividend, called the Paramount deal a high‑return opportunity and said “we're extremely optimistic” while noting equity is “fundamentally mispriced.”

Q&A:

• Question from William Catherwood (BTIG, LLC, Research Division): Michael, obviously, you laid out a bunch of different avenues that you could go forward with, with the 3 that you laid out at the beginning. But maybe just take the stay the course one for this question. You talked last quarter about $50 million of loans kind of being pretty close to the finish line. You did $21 million this quarter. What does that kind of pool in closing look like right now?
  Response: Core takeaway: They completed a $21M loan this quarter, remain focused on building a direct‑lending pipeline (targeting ~ $50M previously discussed), are selectively passing on deals (e.g., NYC rent‑stabilized loans, Rosewood Dallas) and are sitting on ~ $100M cash to deploy into direct lending and opportunistic situations.

• Question from William Catherwood (BTIG, LLC, Research Division): And then on Paramount more specifically, and I know the deal is still coming together, obviously, hasn't closed, so all options are on the table. But when we think of that company, it had historically had a part of its business that was dedicated to making opportunistic commercial real estate loans, whether that was mezz positions, preferred positions, so be it. Is the potential thought to carve off whatever may be remaining of that or whatever capacity that exists within their funds? Or is this potentially RPT taking a position somewhere else in the capital stack as you go towards that closing? And again, if you can't talk about it, I fully understand, just trying to get ideas of what this might look like.
  Response: Core takeaway: Any RPT participation would likely be a pari‑passu property‑level equity/position alongside the parent in the 13 gateway‑city assets rather than involving legacy Paramount funds.

• Question from William Catherwood (BTIG, LLC, Research Division): Got it. Got it. And then last one for me, Michael, you make this comment about the discount to book value and all of that, and it makes sense. But when we look across kind of all of the commercial real estate mortgage space, the discounts are huge have gotten more so, obviously, since Tricolor since their bankruptcy since first brands, since we had the regional banking issue a couple of weeks ago. In general, commercial mortgage REITs have just been lumped together with this existential fear about credit. Now you sit kind of at the nexus of a bunch of different credit vehicles. What's your view right now on kind of what's real out there risk‑wise for credit, be it real estate or otherwise? And what's kind of overdone right now? Because I think that's -- it's not just hitting RPT, its hitting everybody. What are your thoughts on the market right now?
  Response: Core takeaway: Market is bifurcated; many legacy REITs have problematic/underwater loans, but Rithm/RPT have no legacy problem loans, see wide open CMBS/credit markets, and view opportunistic office (e.g., Paramount) and diversified direct‑lending pools as attractive while avoiding one‑way single‑property risks.

• Question from Craig Kucera (Lucid Capital Markets, LLC, Research Division): I wanted to circle back to the Paramount transaction. Can you give us a sense of what the economics of that might look like for RPT? I mean, is that sort of in the ballpark of what you've done this year with the, call it, the office senior sub deal of maybe 12% or the retail asset at 11%?
  Response: Core takeaway: Paramount is an equity‑centric, high‑upside play — acquisition price ~$6.60/share (~$1.6B–$1.8B pre‑adjustments); Rithm parent ~ $300M equity, Paramount ~ $50M, third‑party fundraise for remaining; a ~$50M RPT equity check could target ~2x MOIC and 20%+ returns on management assumptions (exit cap rates ~6% NY, 6.5–6.75% SF).

• Question from Craig Kucera (Lucid Capital Markets, LLC, Research Division): I appreciate the color. That was very thorough. I'd like to think about the flip side of that, though. Could you envision a scenario where Rithm Capital could potentially deploy capital into RPT in order to sort of jumpstart the scale of the company?
  Response: Core takeaway: Management is evaluating options (equity/preferred/rights offerings possibly backed by asset pools) and has discussed bank‑backed deals, but no definitive plan today; they prefer solutions that avoid undue dilution and are exploring structures where Rithm could back an offering.

• Question from Craig Kucera (Lucid Capital Markets, LLC, Research Division): Got it. And just one more for me. Just in the process of raising capital around this Paramount transaction, I know you're looking for other third‑party sources of capital. Has that opened up any potential partners for RPC? Because I believe like in the past, you've said that you are looking for a third party to sort of jumpstart the company.
  Response: Core takeaway: Paramount fundraising has broadened LP/partner conversations across the firm, opened up new third‑party capital channels and potential partners; they could fund Paramount entirely with third‑party capital but must balance maximizing shareholder returns.

Contradiction Point 1

Pipeline Growth and Strategy

It involves changes in the company's strategy regarding pipeline growth, which is crucial for investors' understanding of Rithm Property Trust's future prospects.

What changed between Q1 and Q2 to enable the pipeline's growth? - William Thomas Catherwood(BTIG)

2025Q3: The pipeline has grown due to increased team activity, more conversations with banking partners, and a stronger Rithm Property Trust brand. There has been a shift in focus to source deals directly, rather than competing for assets with low cap rates. The company is selective about the deals it pursues. - Michael Nierenberg(CEO)

What is the current status of the $50 million loan pool? - William Thomas Catherwood(BTIG)

2025Q2: The market is bifurcated. Many legacy REITs still have issues with underwater loans, but we have none. The capital markets for commercial real estate are wide open, with good opportunities for us. We're optimistic about future growth. However, the current discount to book value makes growing the company challenging without diluting shareholders. - Michael Nierenberg(CEO)

Contradiction Point 2

Capital Deployment and Investment Strategy

It involves changes in the company's approach to capital deployment and investment strategy, which are critical for investors' understanding of Rithm Property Trust's capital allocation decisions.

How is capital being allocated each quarter and where is it being invested? - Timothy Egan D'Agostino(B. Riley Securities)

2025Q3: Capital will be deployed in retail, multifamily, office, and industrial opportunities. Approximately $50 million is expected to be deployed in the third quarter, assuming certain loans close. Future capital deployment will focus on high-return investment opportunities without diluting shareholders. - Michael Nierenberg(CEO)

Could Rithm Capital invest in RPT to expand the company's scale? - Craig Kucera(Lucid Capital Markets, LLC)

2025Q2: We've had discussions about rights offerings, but nothing concrete. It's important to consider the impact on both Rithm Property Trust and Rithm the parent. We prefer a clean structure, but we're open to exploring options. - Michael Nierenberg(CEO)

Contradiction Point 3

Credit Risk Perception

It involves differing views on the credit risk in the current market, which is crucial for understanding the company's risk management and investment strategies.

How do you assess credit risk in the current market? - William Catherwood (BTIG, LLC, Research Division)

2025Q3: The market is bifurcated. Many legacy REITs still have issues with underwater loans, but we have none. The capital markets for commercial real estate are wide open, with good opportunities for us. We're optimistic about future growth. However, the current discount to book value makes growing the company challenging without diluting shareholders. - Michael Nierenberg(CEO)

Were you surprised by the slower pace of bank loan sales in 2024? - Tom Catherwood (BTIG)

2024Q4: We have no underwater loans. Any underwater loans are with large REITs that have raised capital from banks. We do not have one. We're very excited about where the business is heading. - Michael Nierenberg(CEO)

Contradiction Point 4

Investment Strategy and Opportunities

It shows differing views on the types of investment opportunities the company is pursuing, which impacts its strategic direction and potential returns for investors.

What is the current status of the $50 million loan portfolio? - William Catherwood (BTIG, LLC, Research Division)

2025Q3: We're also working on growing our direct lending presence. We've passed on some opportunities like rent-stabilized loans in New York City and a Rosewood Hotel in Dallas. We're sitting with around $100 million in cash and liquidity. - Michael Nierenberg(CEO)

How do you view the shift in office market sentiment? - Jason Stewart (Janney)

2024Q4: We're underwriting newer CMBS transactions. We're underwriting and doing the underwriting work. We're underwriting each transaction on a credit basis and going after the best asset at the best price. - Michael Nierenberg(CEO)