Rithm Property Trust's Q3 2025 Performance: A Cautionary Tale for Income Investors?

For income investors, few metrics are as critical as dividend sustainability. Yet Rithm Property Trust's (NYSE: RPT) Q3 2025 results raise troubling questions about its ability to maintain payouts amid deteriorating core earnings and opaque asset performance. While the company continued its $0.06-per-share common dividend-despite reporting negative earnings available for distribution of $(0.7) million-the disconnect between its financials and distribution strategy warrants closer scrutiny.

Core Earnings and Dividend Mismatch

Rithm's Q3 2025 earnings available for distribution (EAD) fell to $(0.7) million, or $(0.02) per diluted share, a stark decline from prior periods, according to the company's press release. This metric, which excludes realized/unrealized gains and non-operational expenses, is often used by REITs to gauge cash flow. However, the company's GAAP comprehensive loss of $(0.4) million, or $(0.01) per share, underscores the fragility of its financial position, as noted in the press release. The divergence between EAD and GAAP results highlights the risks of relying on non-GAAP metrics to justify dividends.

Despite these losses, Rithm maintained its dividend, paying $2.7 million to common shareholders-a payout ratio of over 386% based on EAD. For context, a healthy payout ratio for REITs typically falls between 70–80%, as funds from operations (FFO) or adjusted FFO (AFFO) are better indicators of cash flow. The absence of FFO/AFFO data in Rithm's Q3 report-a metric critical for assessing REIT sustainability-leaves investors in the dark about its true liquidity.

Asset Performance Gaps

Compounding concerns is the lack of transparency around Rithm's asset performance. While property occupancy rates, revenue trends, and expense ratios are essential for evaluating a REIT's health, Rithm's Q3 disclosures provided little insight into these areas. What is known is that the company incurred $3.965 million in expenses, including $485,000 in related-party loan servicing fees and $1.603 million in management fees-costs that could erode returns if not offset by strong asset performance.

Without data on occupancy or rental income growth, it's difficult to assess whether Rithm's portfolio is generating sufficient cash flow to support its dividend. This opacity is particularly concerning given the company's strategic shift to commercial real estate (CRE) debt investments in 2024, a move that hinges on the resilience of sectors like industrial and multifamily real estate.

Analyst Commentary: Caution and Cautious Optimism

Analysts remain divided. Lucid Capital recently initiated a "Buy" rating on Rithm, citing its long-term potential in CRE debt markets. However, this optimism is tempered by near-term risks, including the dividend's lack of coverage and the company's reliance on non-GAAP metrics. Meanwhile, others warn that Rithm's dividend sustainability hinges on its ability to improve FFO/AFFO, which were not disclosed in Q3.

The October 31 earnings call may provide clarity, but investors should approach with caution. A healthy FFO payout ratio would typically allow for reinvestment in growth opportunities or buffer against market downturns. If Rithm's FFO/AFFO falls short of covering its dividend, the company may be forced to tap reserves or restructure its capital stack-moves that could signal deeper financial strain.

Conclusion

Rithm Property Trust's Q3 2025 results present a cautionary tale for income investors. While the company's commitment to dividends is commendable, its negative earnings, opaque asset metrics, and lack of FFO/AFFO transparency raise red flags. For now, the dividend appears to be propped up by book value and strategic optimism rather than sustainable cash flow. Investors should await the October 31 FFO/AFFO data before committing, as the coming months will likely determine whether Rithm can bridge the gap between its payout promises and its financial reality.