Rithm Property Trust Inc.
For the period ended Mar 31, 2025. Filed May 2, 2025.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2025 · Filed May 2, 2025
RPT$11.00-0.9%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-09-30; filed 2024-11-01.
0001614806-24-000009
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-03-31; filed 2025-05-02.
0001614806-25-000020
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 157 previous paragraphs and 109 current paragraphs.
32 unchanged; 29 reworded; 45 added; 93 removed; 3 previous and 3 current paragraphs rearranged.
Tables are not compared: 21 previous and 14 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (45)
Current report
Through our Manager, we have access to Rithm’s extensive expertise and network, creating opportunities to source, underwrite, and structure credit investments in the commercial real estate sector.
Current report
Summary
Current report
The U.S. economy contracted during the first quarter of 2025 as real gross domestic product fell an annualized 0.3% due to a surge in imports at the start of the year ahead of the imposition of tariffs. Longer-term Treasury yields fell during the first quarter, primarily due to lower real yields from Treasury Inflation Protected Securities (“TIPS”). The unemployment rate increased slightly to 4.2% in March 2025 from 4.1% in December 2024. In addition to the low unemployment rate, other signs of labor market stability during the first quarter included solid payroll growth, continued low levels of claims for unemployment benefits and an only modestly lower ratio of job openings to unemployed job seekers. The outlook for the economy is more uncertain than usual given changes in policies related to global trade.
Current report
Inflation
Current report
Progress towards lower inflation resumed in the first quarter of 2025. The 12-month increase in the overall Consumer Price Index (“CPI”) was 2.4% in March 2025 versus 2.9% in December 2024, while core CPI price inflation (excluding food and energy prices) for March 2025 was at 2.8%, below the 3.2% core CPI inflation rate reported for December 2024. The moderation in CPI inflation was driven by a decline in energy prices and slower gains in services prices, including shelter.
Current report
Treasury Yields
Current report
The nominal 10-year Treasury yield fell to 4.23% at the end of March 2025 from 4.58% in December 2024. Most of this decline was due to lower real yields from TIPS, which dropped to 1.85% in March 2025 from 2.24% in December 2024. The 10-year breakeven inflation rate was 2.38% in March 2025 versus 2.34% in December 2024.
Current report
Labor Markets
Current report
Housing Market
Current report
The economic conditions discussed above influence our investment strategy and results. Following 100 basis points of rate cuts in the last four months of 2024, the Federal Open Market Committee (“FOMC”) has indicated that monetary policy is well positioned to wait for greater clarity on the effects of the trade, immigration, fiscal and regulatory policies of the new administration before making any further adjustments. The 30-year fixed mortgage rate fell to 6.65% at the end of the first quarter of 2025 from 6.85% at the end of 2024.
Current report
Commercial Real Estate
Current report
The commercial real estate (“CRE”) market entered 2025 with a mixed outlook, shaped by lingering 2024 challenges and new headwinds in the first quarter. Elevated interest rates and inflation had previously weighed on transaction volumes and kept capitalization rates flat. By the first quarter of 2025, inflation eased and confidence in potential FOMC rate cuts improved liquidity and sentiment, and the CRE markets began to experience a turnaround.
Current report
Given the tariff-induced volatility driven by renewed trade tensions, the turnaround has stalled. There is added uncertainty in industrial and retail sectors. Disruptions to global supply chains created short-term demand volatility, particularly for logistics and manufacturing tenants. While long-term industrial fundamentals remain sound, decision-making has slowed in trade-exposed markets. Multifamily remains resilient, supported by strong household formation and constrained supply. However, tariffs have driven up utility and material costs, pressuring operating expenses and capital expenditure budgets. The office sector continues to struggle with high vacancies and tenant downsizing, though select Class A submarkets are seeing signs of stabilization due to return-to-office trends and flight to quality.
Current report
Looking ahead to 2025, prospects of rate cuts could support modest cap rate compression and increased deal flow, though underwriting remains conservative given ongoing macro and trade-related risks. Distressed office assets may offer selective opportunities for well-capitalized investors. More broadly, the CRE sector is coming off 2-3 year lows in transaction activity as the market adjusted to higher rates, office challenges, and regional banking issues. Given the CRE sector is coming off an already depleted level and a lower baseline than the broader structured products environment, the recent uncertainty generated in today’s landscape may not be as impactful as it may have been in the past.
Current report
Critical Accounting Policies and Use of Estimates
Current report
The Company’s significant accounting policies are described detail in Note 2 — Basis of Presentation and Significant Accounting Policies to the consolidated financial statements included in our Annual Report. As disclosed in the Note 2, the preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions about future events that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ significantly from those estimates. The Company believes that the following discussion addresses the Company’s most critical accounting policies, which are those that are most important to the presentation of the Company’s financial condition and results of operations and require management’s most difficult, subjective and complex judgments.
Current report
Our critical accounting policies as of March 31, 2025, which represent our accounting policies that are most affected by judgments, estimates and assumptions, included all of the critical accounting policies referred to in our Annual Report.
Current report
The mortgage and financial sectors operate in a challenging and uncertain economic environment. Financial and real estate companies continue to be affected by, among other things, market volatility, heightened interest rates and inflationary pressures. We believe the estimates and assumptions underlying our consolidated financial statements are reasonable and supportable based on the information available as of March 31, 2025; however, uncertainty over the current macroeconomic conditions makes any estimates and assumptions as of March 31, 2025, inherently less certain than they would be absent the current economic environment. Actual results may materially differ from those estimates. Market volatility and inflationary pressures and their impact on the current financial, economic and capital markets environment, and future developments in these and other areas present uncertainty and risk with respect to our financial condition, results of operations, liquidity and ability to pay distributions.
Current report
See Note 2 — Basis of Presentation and Significant Accounting Policies to our interim consolidated financial statements included in this quarterly report on Form 10-Q.
Current report
Our net loss is primarily generated from net interest income offset by losses on mark-to-market adjustments on mortgage loans held for sale and CMBS, losses on the sale of our mortgage loans and securities, as well as servicing fee expense, management fee expense and general and administrative expenses. Changes in various factors such as market interest rates, prepayment speeds, estimated future cash flows and credit quality could affect the amount of net interest income for a given period. Changes in market interest rates directly impact the borrowing cost on our repurchase lines of credit.
Current report
Our operating results may also be affected by credit losses in excess of initial estimates or unanticipated credit events experienced by borrowers whose mortgage loans underlie our investments in mortgage loans, beneficial interests, CMBS and realization of losses or gains from our legacy RMBS portfolio.
Current report
Net interest income before the allowance for credit losses increased by $2.2 million from the prior year period, primarily as a result of reinvesting net proceeds from sales of residential mortgage loans and RMBS into higher yielding CMBS with lower cost financing.
Current report
We recorded no allowance for credit losses on our loans and beneficial interests’ portfolio in the three months ended March 31, 2025, as compared to allowance of $4.2 million for the three months ended March 31, 2024.
Current report
Our interest expense decreased for the three months ended March 31, 2025, versus the comparable period in 2024, due to lower average carrying balance of secured borrowings and borrowings under repurchase transactions, primarily due to paydowns and asset sales.
Current report
Total expenses decreased by $19.9 million for the three months ended March 31, 2025, versus the comparable period in 2024, primarily as a result of a decrease in management fee expense of $16.0 million due to the management termination fee of $15.5 million recorded in the three months ended March 31, 2024. The expenses further decreased as a result of a put option expense on our outstanding common stock warrants issued with our Series C Preferred Stock (as defined below), which were all exchanged for Common Stock during the three months ended March 31, 2024. We also incurred lower servicing fee, as well as lower other expenses as detailed in the table below ($ in thousands):
Current report
Our primary sources of funds are cash provided by net interest income, sales and repayments of our investments, debt financing sources, including secured borrowings and repurchase lines of credit, and the issuance of equity securities when feasible and appropriate. Our total cash and cash equivalents at March 31, 2025 was $97.4 million.
Current report
During the quarter ended March 31, 2025, we issued 2,084,232 shares of 9.875% Series C Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock, $0.01 par value per share, with a liquidation preference of $25.00 per share (the “Series C Preferred Stock”), with 400,000 of such shares of Series C Preferred Stock sold to certain affiliates of the Manager at the public offering price of $25.00 per share. Total net proceeds to the Company from the issuance of the Series C Preferred stock were $50.8 million, after deducting underwriting discounts and offering expenses.
Current report
Our primary uses of funds are the payment of interest, management and servicing fee and other operating expenses, repayment of borrowings and payment of dividends on our Common Stock and Series C Preferred Stock. We must distribute annually at least 90% of our REIT taxable income to maintain our status as a REIT under the Internal Revenue Code. A portion of this requirement may be able to be met through stock dividends, rather than cash, subject to limitations based on the value of our Common Stock.
Current report
Currently, our primary sources of financing are repurchase lines of credit and secured borrowings. As of March 31, 2025, our RMBS and CMBS portfolios had outstanding financing on repurchase lines of credit of $345 million which generally have 90-day terms and are subject to margin calls. Under secured borrowings agreements, we sell a security to a counterparty and concurrently agree to repurchase the same security at a later date for a higher specified price. The sale price represents financing proceeds and the difference between the sale and repurchase prices represents interest on the financing. The price at which the security is sold generally represents the market value of the security less a discount or “haircut,” which can range broadly. During the term of the secured financing agreement, the counterparty holds the security as collateral. If the agreement is subject to margin calls, the counterparty monitors and calculates what it estimates to be the value of the collateral during the term of the agreement. If this value declines by more than a de minimis threshold, the counterparty could require us to post additional collateral, or margin, in order to maintain the initial haircut on the collateral. This margin is typically required to be posted in the form of cash and cash equivalents. We seek to maintain adequate cash reserves and other sources of available liquidity to meet any margin calls or related requirements resulting from decreases in value related to a reasonably possible (in our judgment) change in interest rates.
Current report
Our mortgage loan portfolio is primarily financed through secured borrowings. Under our secured borrowings, we sell mortgage loans to a special purpose entity which then issues senior and subordinated notes secured by the mortgage loans. The notes are generally fixed rate and are non-recourse. The senior notes are subject to varying call provisions that we control. We hold the non-rated subordinate classes in all of our secured borrowings.
Current report
Our ability to obtain borrowings and to raise future equity capital is dependent on our ability to access borrowings and the capital markets on attractive terms. We continually monitor market conditions for financing opportunities and at any given time may be entering or pursuing one or more of the transactions described above. Our Manager has extensive long-term relationships with investment banks, brokerage firms and commercial banks, which we believe enhance our ability to source and finance asset acquisitions on attractive terms and access borrowings and the capital markets at attractive levels.
Current report
Our ability to fund our operations, meet financial obligations and finance acquisitions may be impacted by our ability to secure and maintain our secured financing agreements, credit facilities and other financing arrangements. Because secured financing agreements and credit facilities are short-term commitments of capital, lender responses to market conditions may make it more difficult for us to renew or replace, on a continuous basis, our maturing short-term borrowings and have imposed, and may continue to impose, more onerous conditions when rolling such financings. If we are not able to renew our existing facilities or arrange for new financing on terms acceptable to us, if we default on our covenants or are otherwise unable to access funds under our financing facilities or if we are required to post more collateral or face larger haircuts, we may have to curtail our asset acquisition activities and/or dispose of assets.
Current report
With respect to the next 12 months, we expect that our cash on hand, combined with our cash flow provided by our investments and our ability to roll our repurchase lines of credit will be sufficient to satisfy our anticipated liquidity needs with respect to our current investment portfolio, including related financings, potential margin calls, and operating expenses. Our ability to roll over short-term borrowings is critical to our liquidity outlook. We have a significant number of near-term maturities, which we expect to be able to refinance. If we cannot repay or refinance our debt on favorable terms, we will need to seek out other sources of liquidity. While it is inherently more difficult to forecast beyond the next 12 months, we currently expect to meet our long-term liquidity requirements through our cash on hand and, if needed, additional borrowings, proceeds received from secured financing agreements and other financings, proceeds from equity offerings and the liquidation or refinancing of our assets.
Current report
Cash Flows
Current report
The following table summarizes changes to our cash and cash equivalents for the periods presented:
Current report
Operating Activities
Current report
Net cash used in operating activities decreased by $6.6 million in the three months ended March 31, 2025, as compared to cash used in the three months ended March 31, 2024, primarily driven by lower interest expense and lower other expenses.
Current report
Investing Activities
Current report
Net cash from investing activities decreased by $108.7 million in the three months ended March 31, 2025, as compared to cash flow generated in the three months ended March 31, 2024, primarily due to increased purchases of investments in CMBS and equity method investments.
Current report
Financing Activities
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Removed paragraphs (93)
Previous report
Strategic Transaction
Previous report
We believe the Strategic Transaction will have a number of strategic benefits for our stockholders, including the opportunity to benefit from a shift in our strategic direction and the opportunity for our Company to benefit from Rithm’s real estate, financial services and capital markets expertise, as well as Rithm’s industry relationships. Under RCM GA’s management, we seek to capitalize on commercial real estate investment opportunities.
Previous report
We closely monitor the status of our mortgage loans and, through our Servicer, work with our borrowers to improve their payment records.
Previous report
The US economy expanded at a solid rate during the third quarter of 2024, as real gross domestic product (“GDP”) rose an estimated annualized 2.8% following an average annualized increase of 2.3% in the first half of the year. The 10-year breakeven inflation rate from Treasury Inflation Protected Securities was 2.19% on September 30, 2024, versus 2.29% on June 30, 2024, although this rate currently stands at 2.34% having risen from a low of 2.03% on September 10, 2024, the day before the release of August Consumer Price Index (“CPI”) data. The unemployment rate declined from July through September. The labor market appeared solid during the third quarter with low levels of unemployment claims, job growth that outpaced new labor market entrants and job openings that continued to exceed the number of unemployed job seekers.
Previous report
Inflation. Although overall inflation rates have been reduced by declining oil prices, progress towards lower underlying inflation has stalled in recent months. The 12-month increase in the core CPI was 3.3% in September 2024, the same rate as in June 2024. Headline CPI price inflation in September 2024 stood at 2.4%, down from a 2024 high of 3.5% in March, as CPI energy prices declined 5.5% over the last six months.
Previous report
Commercial Real Estate Markets. Commercial real estate capitalization rates are stabilizing and CMBS spreads are tightening. As of the third quarter of 2024, year to date both are tighter by about ten basis points at 6.3% on capitalization rates. Spread tightening has helped issuance volumes, which are 29% higher in CMBS on a year-over-year basis through the third quarter of 2024. Refinancings are dominating in this cycle. Commercial Real Estate fundamentals, except for office, are holding up. Oversupplied commercial sectors, notably industrials and multi-family, witness to peak deliveries and significant declines in forward pipelines. The dislocations in the office sector will take years to work through and the quality of sponsor and location are key in value considerations. Meanwhile, consumer resilience is supporting performance of retail and lodging. In private label CMBS, modifications are dominating in this cycle, while foreclosures are rising although they remain below the global financial crisis cycle.
Previous report
The economic conditions discussed above influence our investment strategy and results. The Federal Open Market Committee (“FOMC”) cut the federal funds rate target range by 50 basis points on September18, 2024, but has signaled that future interest rate adjustments are likely to be more gradual. Additionally, the 30-year fixed mortgage rate was 6.08% at the end of the third quarter as compared to 6.86% at the end of the second quarter.
Previous report
The economic conditions discussed above influence our investment strategy and results. On markets, bond yields and mortgage rates declined modestly between the end of the second quarter and the end of the third quarter. The Fed Open Market Committee cut the fed funds rate target range by 50 basis points on September 18 but has signaled that future interest rate adjustments are likely to be more gradual. The 30-year fixed mortgage rate was 6.08% at the end of the third quarter compared to 6.86% at the end of the second quarter.
Previous report
Critical Accounting Policies and Estimates
Previous report
Various elements of our accounting policies, by their nature, are inherently subject to estimation techniques, and other subjective assessments. In particular, we have identified six policies that, due to the judgment and estimates inherent in those policies, are critical to understanding our consolidated financial statements. These policies relate to (i) the allowance for credit losses, (ii) accounting for Interest income on our mortgage loan portfolio; (iii) accounting for Investments in securities available-for-sale and Investments in securities held-to-maturity (“HTM”); (iv) accounting for Investments in beneficial interests; (v) accounting for Interest expense on our secured borrowings, repurchase facilities, 2024 Notes and 2027 Notes; and (vi) fair values. We believe that the judgment and estimates used in the preparation of our consolidated financial statements are appropriate given the factual circumstances at the time. However, given the sensitivity of our consolidated financial statements to these critical accounting policies, the use of other judgments or estimates could result in material differences in our results of operations or financial condition. For further information, please refer to the Critical Accounting Policies and Estimates in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, as there have been no changes to these policies.
Previous report
Refer to the notes to our interim financial statements for a description of relevant recent accounting pronouncements.
Previous report
Quarter Overview
Previous report
Key items for the three months ended September 30, 2024, include:
Previous report
•GAAP net loss attributable to common stockholders of $(8.0) million, or $(0.18) per diluted common share
Previous report
•Common dividend of $2.7 million, or $0.06 per common share
Previous report
We generated a consolidated net loss attributable to common stockholders under U.S. Generally Accepted Accounting Principles (“U.S. GAAP” or “GAAP”) for the three months ended September 30, 2024, of $(8.0) million or $(0.18) per diluted common share after preferred dividends. Comparatively, our GAAP net loss attributable to common stockholders for the three months ended September 30, 2023, was $(6.1) million or $(0.25) per common share.
Previous report
Table 1: Results of Operations
Previous report
Three Months Ended September 30, 2024 versus Three Months Ended September 30, 2023
Previous report
Net interest income before the allowance for credit losses increased $0.6 million versus the prior year quarter as we sold assets with a negative interest rate spread and redeployed capital into higher-yielding CMBS in the third quarter of 2024.
Previous report
Nine Months Ended September 30, 2024 versus Nine Months Ended September 30, 2023
Previous report
Net interest income before the allowance for credit losses decreased $4.2 million versus the prior year period primarily as a result of lower average balances on our investment portfolio and lower yields on our investments in beneficial interests.
Previous report
Three Months Ended September 30, 2024 versus Three Months Ended September 30, 2023
Previous report
Our allowance for credit losses increased $0.5 million versus the year ago period due to higher impairment on our investment in beneficial interests as the expected cash flows declined quarter over quarter on lower expected loan prices at liquidation.
Previous report
Nine Months Ended September 30, 2024 versus Nine Months Ended September 30, 2023
Previous report
Loss from Equity Method Investments
Previous report
Our loss from equity method investments for three and nine months ended September 30, 2024 versus the three and nine months ended September 30, 2023, was relatively unchanged. During the quarter ended September 30, 2024, we paid the final management fee to our Former Manager. Also during the quarter ended September 30, 2024, we liquidated our investments in two additional equity method investments and reclassified our investment in Gaea out of equity method investments to investments in equity securities at fair value on our consolidated balance sheets. We no longer have substantial influence over Gaea and as a result are no longer able to account for our investment using the equity method of accounting. We expect to liquidate our remaining investment in our Former Manager during the fourth quarter of 2024 or the first quarter of 2025.
Previous report
Loss on Joint Venture Refinancing on Beneficial Interests
Previous report
During the three and nine months ended September 30, 2023, we recorded a $1.2 million and $11.0 million loss, respectively on the redemption of several of our joint ventures. While the underlying loans from the joint ventures were re-securitized into new joint ventures where we continued to own the same proportionate interest of each class of securities, the transactions are treated as the redemption of the notes and certificates from the original trust. The redemptions proceeds were not sufficient to recover our carrying value of the beneficial interests. As a result, we recorded a loss on the redemptions. Comparatively, no joint ventures were redeemed during the three and nine months September 30, 2024.
Previous report
Total expenses for the three months ended September 30, 2024, decreased as compared to the three months ended September 30, 2023 driven by lower loan servicing fee as the average balance of our mortgage loan portfolio declined year over year, lower other expenses and fair value losses on warrants that did no reoccur during the current quarter period.
Previous report
Total expenses increased for the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023, primarily as a result of the management termination fee paid to the Former Manager in shares of our stock, the duplicate management fee paid to our New Manager and the Former Manger from June 10, 2024, through August 26, 2024, and borrowing costs related to the Strategic Transaction. These increases were offset by lower servicing fees as the average balance of our mortgage loan portfolio declined year over year. Additionally, we recorded fair value gains on the Rithm Warrants that were classified as liabilities prior to the closing date of the Strategic Transaction and reclassified to equity on the closing date. A breakdown of expenses is provided in the Table 5 and a breakout of other expense in Table 6 below ($ in thousands):
Previous report
Table 5: Expenses
Previous report
A breakdown of Other expense is provided in the table below ($ in thousands):
Previous report
(3)As of the reporting date.
Previous report
(1)As of the reporting date.
Previous report
Source and Uses of Cash
Previous report
During the nine months ended September 30, 2024, our primary sources of cash have consisted of proceeds from the sale of residential mortgage loans and securities as well as paydowns and interest income from our investment portfolio. Historically, our primary sources of cash have also included proceeds from our securities offerings, our secured borrowings, repurchase agreements, principal and interest payments on our loan portfolio, principal paydowns on securities, and sales of properties held-for-sale. Depending on market conditions, we expect that our primary financing sources will continue to include secured borrowings, repurchase agreements, and securities offerings in addition to transaction or asset specific funding arrangements and credit facilities (including term loans and revolving facilities).
Previous report
As of September 30, 2024 and December 31, 2023, substantially all of our invested capital was residential mortgage loans, residential mortgage backed securities and CMBS, and beneficial interests. We also held approximately $84.0 million of cash and cash equivalents, an increase of $31.2 million from our balance of $52.8 million at December 31, 2023. Our average daily cash balance during the quarter was $76.6 million, an increase of $21.4 million from our average daily cash balance of $55.2 million during the three months ended December 31, 2023.
Previous report
Operating, Investing and Financing Cash Flows
Previous report
Our operating cash inflows for the nine months ended September 30, 2024 were $2.7 million. Comparatively, our operating cash outflows for the nine months ended September 30, 2023 were $34.4 million. Our primary operating cash inflow is cash interest payments on our mortgage loans of $23.8 million and $33.4 million for the nine months ended September 30, 2024 and 2023, respectively. Non-cash interest income accretion on our mortgage loans was $2.7 million and $5.2 million for the nine months ended September 30, 2024 and 2023, respectively. Non-cash interest income on beneficial interests was $3.8 million and $6.0 million during the nine months ended September 30, 2024 and 2023, respectively. Interest income on debt securities was $5.4 million and $7.2 million during the nine months ended September 30, 2024 and 2023, respectively.
Previous report
For the nine months ended September 30, 2024, our investing cash inflows of $428.3 million were driven by the net proceeds from the sales of our mortgage loans of $384.1 million, sales of our debt securities of $57.8 million, principal and interest collections on our securities of $45.5 million, principal payments and payoffs of our mortgage loan portfolio of $40.6 million offset by purchases of CMBS of $101.7 million. For the nine months ended September 30, 2023, our investing cash inflows of $149.0 million were driven by payoffs of our mortgage loan portfolio of $71.2 million, principal and interest collections on our securities of $101.3 million and proceeds from refinancing and sale of our debt securities of $61.7 million, partially offset by the purchase of securities of $74.3 million and acquisitions of mortgage loans of $14.4 million.
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Reworded paragraphs (29)
Previous wording
In this quarterly report on Form 10-Q (“report”), unless the context indicates otherwise, references to “Great Ajax,” “we,” “the Company,” “our” and “us” refer to the activities of and the assets and liabilities of the business and operations of Great Ajax Corp. and its affiliates; “Operating Partnership” refers to Great Ajax Operating Partnership L.P., a Delaware limited partnership; our “Former Manager” refers to Thetis Asset Management LLC, a Delaware limited liability company; our “New Manager” refers to RCM GA LLC; “Aspen Capital” refers to the Aspen Capital group of companies; “the Servicer” or “Newrez” refers to Newrez LLC, a Delaware limited liability company and an affiliate of RCM GA; “Rithm” or “Rithm Capital” refers to Rithm Capital Corp., a Delaware corporation and the parent entity of RCM GA; and “Gregory” or our “Former Servicer” refer to Gregory Funding LLC, an Oregon limited liability company.
Current wording
In this quarterly report on Form 10-Q, unless the context indicates otherwise, references to “Rithm Property Trust,” “we,” the “Company,” “our” and “us” refer to the activities of and the assets and liabilities of the business and operations of Rithm Property Trust Inc. and its subsidiaries (formerly Great Ajax Corp.); references to “Rithm” refer to Rithm Capital Corp., a Delaware corporation and the parent entity of RCM GA and its subsidiaries; references to “Operating Partnership” refer to Great Ajax Operating Partnership L.P., a Delaware limited partnership; references to our “Former Manager” refer to Thetis Asset Management LLC, a Delaware limited liability company; references to “RCM GA” or our “Manager” refer to RCM GA Manager LLC; references to our “Servicer” or “Newrez” refer to Newrez LLC, a Delaware limited liability company and an affiliate of RCM GA; and references to “Gregory” or our “Former Servicer” refer to Gregory Funding LLC, an Oregon limited liability company.
Previous wording
Our Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the unaudited interim consolidated financial statements and related notes included in Item 1. Consolidated interim financial statements of this report and in Item 8. Financial statements and supplementary data in our most recent Annual Report on Form 10-K, as well as the section entitled “Risk Factors” in Part II, Item 1A of our Quarterly Report on Form 10-Q for the quarter ended June 30, 2024, as well as other cautionary statements and risks described elsewhere in this report and our most recent Annual Report on Form 10-K.
Current wording
Our Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the interim consolidated financial statements and related notes included in Item 1.Consolidated interim financial statements of this report and in Item 8. Financial statements and supplementary data in our most recent Annual Report, as well as other cautionary statements and risks described elsewhere in this report and our most recent Annual Report.
Previous wording
Great Ajax Corp. is a Maryland corporation that is organized and operated in a manner intended to allow us to qualify as a REIT. Historically, we have primarily targeted acquisitions of RPLs, which are residential mortgage loans on which at least five of the seven most recent payments have been made, or the most recent payment has been made and accepted pursuant to an agreement, or the full dollar amount, to cover at least five payments has been paid in the last seven months and (ii) NPLs, which are residential mortgage loans on which the most recent three payments have not been made. Historically, we acquired RPLs and NPLs either directly or in security form through joint ventures with institutional accredited investors. As discussed below, under RCM GA’s management, we have started to shift our strategic direction towards investments in the commercial real estate sector and we have begun to invest in commercial mortgage loans. Our mortgage loans and real properties are serviced by Newrez, a Rithm affiliate.
Current wording
Rithm Property Trust Inc. (formerly Great Ajax Corp.) is a Maryland corporation that is organized and operated in a manner intended to allow us to qualify as a REIT. Historically, we acquired RPLs and NPLs either directly or in security form through joint ventures with institutional accredited investors. As discussed below, under RCM GA’s management, we have started to shift our strategic direction towards investments in the commercial real estate sector, and we have begun to invest in CMBS. Our mortgage loans and real properties are serviced by Newrez, a Rithm affiliate.
Previous wording
On June 11, 2024, we completed our previously announced Strategic Transaction with Rithm. The Strategic Transaction included a Securities Purchase Agreement entered into by the Company, the Operating Partnership, the Former Manager and Rithm (the “Securities Purchase Agreement”) on February 26, 2024, which provided for , upon the approval of the Company’s stockholders on May 20, 2024, (i) the sale of $14.0 million of the Company’s common stock to Rithm at a price of $4.87 per share (which represents the trailing five-day average closing price of the Company’s common stock on the New York Stock Exchange (“NYSE”) as of the date of the Securities Purchase Agreement, and (ii) a new management agreement (as maybe amended, modified or supplemented from time to time, the “Management Agreement”) with RCM GA, under which RCM GA would become the Company's new external manager. In connection with the Strategic Transaction, we terminated our existing management contract with the Former Manager primarily in exchange for approximately 3.2 million shares of our common stock.
Current wording
On June 11, 2024, we completed a strategic transaction with Rithm (the “Strategic Transaction”). The Strategic Transaction included (i) the entry into the Securities Purchase Agreement, dated February 26, 2024 (the “SPA”), by and among the Company, the Operating Partnership, the Former Manager and Rithm, which provided for, among other things, the sale of $14.0 million of the Company’s Common Stock to Rithm at a price of $4.87 per share (which represents the trailing five-day average closing price of the Company’s Common Stock on NYSE) as of the date of the SPA, and (ii) upon the approval of our stockholders on May 20, 2024, the entry into the Management Agreement with RCM GA, under which RCM GA became our new external manager. In connection with the Strategic Transaction, we terminated our existing management contract with the Former Manager in exchange for approximately 3.2 million shares of our Common Stock and $0.6 million in cash. For a full description of the components of the Strategic Transaction, see our Definitive Proxy Statement filed with the Securities and Exchange Commission on April 10, 2024. In addition, in connection with the Strategic Transaction, we changed our principal place of business and corporate headquarters to 799 Broadway, 8th Floor, New York, NY 10003. On December 2, 2024, we rebranded and changed our name to Rithm Property Trust Inc. from Great Ajax Corp.
Previous wording
The Company conducts substantially all of its business through our Operating Partnership and its subsidiaries. The Company, through a wholly-owned subsidiary, Great Ajax Operating LLC, is the sole general partner of the Operating Partnership. GA-TRS LLC (“GA-TRS”) is a wholly-owned subsidiary of the Operating Partnership that owns the equity interest in the Former Manager and previously owned an equity interest in the Former Servicer. GAJX Real Estate Corp. (“GAJX”) is a wholly-owned subsidiary of the Operating Partnership formed to own, maintain, improve and sell REO properties acquired by the Company. The Company elected to treat GA-TRS and GAJX as a taxable REIT subsidiaries (“TRS”) under the Internal Revenue Code. Great Ajax Funding LLC is a wholly-owned subsidiary of the Operating Partnership formed to act as the depositor of mortgage loans into securitization trusts and to hold the subordinated securities issued by such trusts and any additional trusts the Company may form for additional secured borrowings. AJX Mortgage Trust I and AJX Mortgage Trust II are wholly-owned subsidiaries of the Operating Partnership formed to hold mortgage loans used as collateral for financings under the Company’s repurchase agreements. In addition, the Company, through its Operating Partnership, holds real estate owned (“REO”) properties acquired upon the foreclosure or other settlement of its owned NPLs.
Current wording
The Company conducts substantially all of its business through our Operating Partnership and its subsidiaries. The Company, through a wholly-owned subsidiary, Great Ajax Operating LLC, is the sole general partner of the Operating Partnership. GA-TRS LLC (“GA-TRS”) is a wholly-owned subsidiary of the Operating Partnership that owns an equity interest in the Former Manager and previously owned an equity interest in the Former Servicer. GAJX Real Estate Corp. (“GAJX”) is a wholly-owned subsidiary of the Operating Partnership formed to own, maintain, improve and sell real estate owned (“REO”) properties acquired by the Company. The Company elected to treat GA-TRS and GAJX as taxable REIT subsidiaries under the Internal Revenue Code. Great Ajax Funding LLC is a wholly-owned subsidiary of the Operating Partnership formed to act as the depositor of mortgage loans into securitization trusts and to hold the subordinated securities issued by such trusts and any additional trusts the Company may form for additional secured borrowings. AJX Mortgage Trust I and AJX Mortgage Trust II are wholly-owned subsidiaries of the Operating Partnership formed to hold mortgage loans used as collateral for financings under the Company’s repurchase agreements. In addition, the Company, through its Operating Partnership, holds REO properties acquired upon the foreclosure or other settlement of its owned NPLs.
Previous wording
We elected to be taxed as a REIT for U.S. federal income tax purposes beginning with our taxable year ended December 31, 2014. Our qualification as a REIT depends upon our ability to meet, on a continuing basis, various complex requirements under the code relating to, among other things, the sources of our gross income, the composition and values of our assets, our distribution levels and the diversity of ownership of our capital stock. We believe that we are organized in conformity with the requirements for qualification as a REIT under the code, and that our current intended manner of operation enables us to meet the requirements for taxation as a REIT for U.S. federal income tax purposes.
Current wording
We elected to be taxed as a REIT for U.S. federal income tax purposes beginning with our taxable year ended December 31, 2014. Our qualification as a REIT depends upon our ability to meet, on a continuing basis, various complex requirements under the Internal Revenue Code relating to, among other things, the sources of our gross income, the composition and values of our assets, our distribution levels and the diversity of ownership of our capital stock. We believe that we are organized in conformity with the requirements for qualification as a REIT under the Internal Revenue Code, and that our current intended manner of operation enables us to meet the requirements for taxation as a REIT for U.S. federal income tax purposes.
Previous wording
Under RCM GA’s management, we have started to shift our strategic direction towards investments in the commercial real estate sector, and we have begun to invest in CMBS. Our target assets are expected to include preferred equity or debt instruments secured by mortgages on commercial real estate, small balance commercial loans, mezzanine loans secured by pledges of equity interests in entities that own commercial real estate or other forms of subordinated debt in connection with commercial real estate, as well as commercial mortgage servicing rights and operating businesses in the commercial real estate sector.
Current wording
Under RCM GA’s management, we shifted our strategic direction towards investments in the commercial real estate sector, and we have begun to invest in CMBS. Although we will evaluate all potentially accretive opportunities, our go forward investment strategy is focused on originating and/or acquiring loans and securities collateralized by various commercial real estate assets and investing in senior loans, subordinated debt, mezzanine loans secured by pledges of equity interests in entities that own commercial real estate or other forms of subordinated debt in connection with commercial real estate, preferred equity or debt instruments secured by mortgages on commercial real estate, small balance commercial loans, as well as commercial mortgage servicing rights, commercial real estate properties and operating businesses in the commercial real estate sector. We do not anticipate investing further in residential mortgage loans, RPLs or NPLs, and we have been selling our residential mortgage loans and RMBS. Given the change in focus of our business, we intend to, over time, reposition much of our existing portfolio. We believe commercial real estate offers an attractive investment opportunity given market dynamics that are creating significant refinancing challenges and funding gaps.
Previous wording
The following table outlines the carrying value of our portfolio of mortgage loan assets and single-family and smaller commercial properties as of September 30, 2024 and December 31, 2023 ($ in millions):
Current wording
The following table outlines the carrying value of our portfolio of mortgage loan assets, investments in securities, equity method investments and REO as of March 31, 2025 and December 31, 2024 ($ in millions):
Previous wording
Labor Markets. During the third quarter of 2024, job creation picked up with nonfarm payrolls averaging a gain of 186,000 jobs, versus an average of 147,000 jobs per month in the second quarter of 2024. The unemployment rate was unchanged at 4.1% in September as compared to March (though this is down from 4.3% in April). The balance between the supply of and demand for labor continued to gradually improve with the ratio of job openings to unemployed job seekers at 1.18 in September 2024, versus 1.21 in June 2024. Year-over-year wage growth picked up to 4.0% in September 2024, from 3.8% in June 2024, indicating a still tight labor market.
Current wording
Average payrolls growth rose an average of 152,000 jobs per month in the first quarter of 2025 versus an average of 168,000 jobs per month in 2024. The unemployment rate remained relatively unchanged since December 2024 at 4.2% in March 2025. Judged by the ratio of job openings to unemployed job seekers, which fell to 1.07 in March 2025 from 1.10 in December 2024, the labor market loosened modestly during the first quarter. Also, year-over-year growth in average hourly earnings was 3.8% in March 2025, easing from the 4.0% wage rate in December 2024.
Previous wording
Housing Market. Home sales remained at low levels in the third quarter of 2024, with total home sales (new and existing) in September reported at an annual rate of 4.58 million, little changed from 4.57 million at the end of the second quarter of 2024. For comparison, total home sales averaged 4.77 million in 2023 and 5.72 million in 2022. Home price growth also moderated further with the 12-month increase in the median resale price of an existing home at 3.0% in September 2024, which compares to 4.1% in June 2024.
Current wording
Total home sales (new and existing) averaged 4.81 million units in the first quarter of 2025, only modestly lower than the average of 4.84 million in the fourth quarter of 2024. Nonetheless, home sales remain at a low level with total sales in a range of 4.5 million and 5.1 million since the beginning of 2023. Home price growth moderated further with the 12-month increase in the median resale price of an existing home at 2.7% in March 2025, which compares to 5.8% in December 2024.
Previous wording
Financing. We previously securitized our whole loan portfolios, primarily as a financing tool, when economically efficient to create long-term, fixed rate, non-recourse financing with moderate leverage, while retaining one or more tranches of the subordinate MBS so created. The secured borrowings are structured as debt financings and not REMIC sales. We completed the securitization transactions pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”), in which we issued notes primarily secured by seasoned, performing and non-performing mortgage loans primarily secured by first liens on one-to-four family residential properties. Currently there is substantial uncertainty in the securitization markets which has limited our access to financing.
Current wording
Financing— We previously securitized our whole loan portfolios, primarily as a financing tool, when economically efficient to create long-term, fixed rate, non-recourse financing with moderate leverage, while retaining one or more tranches of the subordinate mortgage-backed securities (“MBS”) so created. The secured borrowings are structured as debt financings and not sales through a real estate mortgage investment conduit. We completed the securitization transactions pursuant to Rule 144A under the Securities Act of 1933, as amended, in which we issued notes primarily secured by seasoned, performing and non-performing mortgage loans primarily secured by first liens on one-to-four family residential properties. Currently there is substantial uncertainty in the securitization markets which has limited our access to financing.
Previous wording
Distributions. To qualify as a REIT under the code, we generally need to distribute at least 90% of our taxable income each year (subject to certain adjustments) to our stockholders. This distribution requirement limits our ability to retain earnings and thereby replenish or increase capital to support our activities.
Current wording
Distributions— To qualify as a REIT under the Internal Revenue Code, we generally need to distribute at least 90% of our taxable income each year (subject to certain adjustments) to our stockholders. This distribution requirement limits our ability to retain earnings and thereby replenish or increase capital to support our activities.
Previous wording
Expenses. Our expenses primarily consist of the fees and expenses payable by us under the Management Agreement and the Servicing Agreements. Additionally, our Former Manager incurred and our New Manager incurs direct, out-of-pocket costs and expenses related to managing our business, which are contractually reimbursable by us. Loan transaction expense is the cost of performing due diligence on pools of mortgage loans. Professional fees are primarily for legal, accounting and tax services. Real estate operating expense consists of the ownership and operating costs of our REO properties, and includes any charges for impairments to the carrying value of these assets, which may be significant. Interest expense, which is subtracted from our Interest income to arrive at Net interest income, consists of the costs to borrow money.
Current wording
Expenses— Our expenses primarily consist of the fees and expenses payable by us under the Management Agreement and the servicing agreements transferred by Gregory to Newrez pursuant to a Servicing Transfer Agreement (the “Servicing Agreements”). Additionally, our Former Manager incurred and our Manager incurs direct, out-of-pocket costs and expenses related to managing our business, which are contractually reimbursable by us. Additionally, pursuant to the Management Agreement, we also pay all of the Manager’s costs and expenses and reimburse the Manager (to the extent incurred by the Manager) on a monthly basis for the costs and expenses of providing services under the Management Agreement, including reimbursing the Manager or its affiliates, as applicable, for our allocable share of the compensation (whether paid in cash, stock or other forms), including annual base salary, bonus, any related withholding taxes and employee benefits, paid to (i) the Manager’s personnel serving as our chief financial officer based on the percentage of his or her time spent managing the Company’s affairs and (ii) other corporate finance, tax, accounting, middle office, internal audit, legal, risk management, operations, compliance and other non-investment personnel of the Manager and its affiliates who spend all or a portion of their time managing our affairs. Loan transaction expense is the cost of performing due diligence on pools of mortgage loans. Professional fees are primarily for legal, accounting and tax services. Real estate operating expense consists of the ownership and operating costs of our REO properties and includes any charges for impairments to the carrying value of these assets, which may be significant. Interest expense, which is subtracted from our Interest income to arrive at Net interest income, consists of the costs to borrow money.
Previous wording
Changes in Market Interest Rates. The FOMC recently cut the federal funds rate by 50 basis points which has had a favorable impact on the cost of funds of our repurchase lines of credit. Increases in interest rates, in general, may over time cause: (1) the value of our mortgage loan and MBS portfolio to further decline; (2) coupons on our ARM and hybrid ARM mortgage loans and MBS to reset, although on a delayed basis, to higher interest rates; (3) impact adversely our ability to securitize, re-securitize or sell our assets on attractive terms; (4) reduce the ability or desire of borrowers to refinance their loans; (5) mortgage related assets may become more illiquid during periods of interest rate volatility; (6) difficulties refinancing our securitizations and increases in the costs of our repurchase facility financings; (7) increase our financing costs as we seek to renew or replace borrowing facilities; and (8) to the extent we enter into interest rate swap agreements as part of our hedging strategy, the value of these agreements to increase. Conversely, decreases in interest rates, in general, may over time cause: (1) prepayments on our mortgage loan and MBS portfolio to increase, thereby accelerating the accretion of our purchase discounts; (2) the value of our mortgage loan and MBS portfolio to increase; (3) coupons on our ARM and hybrid ARM mortgage loans and MBS to reset, although on a delayed basis, to lower interest rates; (4) the interest expense associated with our borrowings to decrease; and (e) to the extent we enter into interest rate swap agreements as part of our hedging strategy, the value of these agreements to decrease.
Current wording
Changes in Market Interest Rates— Increases in interest rates, in general, may over time cause: (1) the value of our mortgage loan and MBS portfolio to further decline; (2) coupons on our adjustable rate mortgages (“ARMs”) and hybrid interest-only ARM (“Hybrid ARM”) mortgage loans and MBS to reset, although on a delayed basis, to higher interest rates; (3) impact adversely our ability to securitize, re-securitize or sell our assets on attractive terms; (4) reduce the ability or desire of borrowers to refinance their loans; (5) mortgage related assets may become more illiquid during periods of interest rate volatility; (6) difficulties refinancing our securitizations and increases in the costs of our repurchase facility financings; (7) increase our financing costs as we seek to renew or replace borrowing facilities; and (8) to the extent we enter into interest rate swap agreements as part of our hedging strategy, the value of these agreements to increase. Conversely, decreases in interest rates, in general, may over time cause: (1) prepayments on our mortgage loan and MBS portfolio to increase, thereby accelerating the accretion of our purchase discounts; (2) the value of our mortgage loan and MBS portfolio to increase; (3) coupons on our ARM and Hybrid ARM mortgage loans and MBS to reset, although on a delayed basis, to lower interest rates; (4) the interest expense associated with our borrowings to decrease; and (5) to the extent we enter into interest rate swap agreements as part of our hedging strategy, the value of these agreements to decrease.
Previous wording
Our allowance for credit losses decreased $8.2 million versus the prior year period primarily as a result of reclassifying loans from held to maturity to held-for-sale. Loans held-for-sale are not subject to accounting under CECL and the allowance was reversed and reclassified to the mark to market loss recorded during the same period.
Current wording
Loans held-for-sale are not subject to accounting under Accounting Standards Update 2016-13, Financial Instruments - Credit Losses(known as CECL), as a result in the three months ended March 31, 2024, the allowance on loans classified as held-for-sale was reversed and reclassified to the mark-to-market loss recorded during the same period. This mark-to-market loss did not re-occur in the three months ended March 31, 2025.
Previous wording
The interest income detail for the three and nine months ended September 30, 2024 and 2023, are included in the table below ($ in thousands):
Current wording
The interest income detail and interest expense for the three months ended March 31, 2025 and 2024, are presented in the table below ($ in thousands):
Previous wording
Table 2: Interest Income Detail
Current wording
Table 1: Interest Income Detail & Interest Expense
Previous wording
The average carrying balance of our mortgage loan portfolio decreased for the three months ended September 30, 2024, versus the comparative period in 2023 primarily due to loan sales as we reposition our balance sheet into CMBS. Additionally, the average carrying balances of our debt securities, beneficial interests and debt outstanding decreased for the three months ended September 30, 2024, versus the comparative period in 2023 due to paydowns, sales and redemptions offset by investments in CMBS. The average carrying balances for our portfolio are included in the table below ($ in thousands):
Current wording
The average carrying balance of our mortgage loan portfolio decreased for the three months ended March 31, 2025, versus the comparable period in 2024, primarily due to loan sales and paydowns, as we reposition our balance sheet into investments in CMBS. Additionally, the average carrying balances of our RMBS and beneficial interests decreased for the three months ended March 31, 2025, as compared to 2024 balances, due to paydowns, sales and redemptions, partially offset by investments in CMBS.
Previous wording
Our other loss increased for the three and nine months ended September 30, 2024, versus the prior year primarily due to losses on the sale of our mortgage loans held-for-sale offset by lower losses on our sale of securities. The losses were incurred as we repositioned our balance sheet to investments in CMBS. We did not sell any mortgage loans in 2023. A breakdown of Other loss/income is provided in the table below ($ in thousands):
Current wording
Our other loss increased for the three months ended March 31, 2025, versus the comparable period in 2024, primarily due to loss on the sale of our legacy RMBS and mark-to-market losses on securities carried at fair value, partially offset by other miscellaneous income. The loss on sale of securities was reclassified from other comprehensive income. A breakdown of other (loss)/income is provided in the table below ($ in thousands):
Previous wording
Our loan portfolio activity for the three and nine months ended September 30, 2024 and 2023, is presented below ($ in thousands):
Current wording
Our loan portfolio activity for the three months ended March 31, 2025 and 2024, is presented below ($ in thousands):
Previous wording
As of September 30, 2024 and December 31, 2023, our portfolios consisted of the following ($ in thousands):
Current wording
As of March 31, 2025 and December 31, 2024, our loan portfolios consisted of the following ($ in thousands):
Previous wording
(1)At September 30, 2024 and December 31, 2023, our loan portfolio consists of fixed rate (56.0% of UPB), ARM (7.0% of UPB) and Hybrid ARM (37.0% of UPB); and fixed rate (60.0% of UPB), ARM (6.4% of UPB) and Hybrid ARM (33.6% of UPB), respectively.
Current wording
(1)At March 31, 2025 and December 31, 2024, our loan portfolio consists of fixed rate (62.6% of unpaid principal balance (“UPB”)), ARM (7.1% of UPB) and Hybrid ARM (30.3% of UPB); and fixed rate (62.6% of UPB), ARM (7.3% of UPB) and Hybrid ARM (30.1% of UPB), respectively.
Previous wording
(4)UPB as of September 30, 2024 and December 31, 2023, divided by market value of collateral and weighted by the UPB of the loan.
Current wording
(3)UPB as of March 31, 2025 and December 31, 2024, divided by market value of collateral and weighted by the UPB of the loan.
Previous wording
(1)Includes 262 loans that were classified from Mortgage loans held-for investment, net to Mortgage loans held-for-sale, net with a total UPB of $64.2 million and a carrying value of $64.3 million.
Current wording
(1)Includes 249 loans that were classified from mortgage loans held-for investment, net to mortgage loans held-for-sale, net with a total UPB of $38.7 million and a carrying value of $27.8 million.
Previous wording
We also may have difficulty accessing the capital markets on favorable terms or at all. Additionally, market events, including inflation and the related Federal Reserve bank actions, may still adversely impact our future operating cash flows due to the inability of some of our borrowers to make scheduled payments on time or at all, and through increased interest rates on secured borrowings and repurchase lines of credit. From time to time, we may invest with third parties and acquire interests in loans and other real estate assets through investments in joint ventures using special purpose entities that can result in investments AFS, investments held-to-maturity and investments in beneficial interests, which are included on our consolidated balance sheet.
Current wording
We also may have difficulty accessing the capital markets on favorable terms or at all. Additionally, market events, including inflation and the related Federal Reserve bank actions, may still adversely impact our future operating cash flows due to the inability of some of our borrowers to make scheduled payments on time or at all, and through increased interest rates on secured borrowings and repurchase lines of credit.
Previous wording
We are not required by our investment guidelines to maintain any specific debt-to-equity ratio, and we believe that the appropriate leverage for the particular assets we hold depends on the credit quality and risk of those assets, as well as the general availability and terms of stable and reliable financing for those assets. We do, however, have debt covenants related to our various borrowing arrangements that have minimum liquidity and tangible net worth requirements as well as maximum leverage ratio requirements. Generally, we are required to maintain minimum levels of liquidity (in Cash and cash equivalents) and tangible net worth of $30.0 million and $240.0 million, respectively. Similarly, our leverage ratio cannot exceed 3.5 times equity, excluding our secured borrowings.
Current wording
We are not required by our investment guidelines to maintain any specific debt-to-equity ratio, and we believe that the appropriate leverage for the particular assets we hold depends on the credit quality and risk of those assets, as well as the general availability and terms of stable and reliable financing for those assets. We do, however, have debt covenants related to our various borrowing arrangements that have minimum liquidity and tangible net worth requirements, as well as maximum leverage ratio requirements. Generally, we are required to maintain minimum levels of Liquidity (as defined in the indenture governing our senior unsecured notes due 2027 (“2027 Notes”)) (in cash and cash equivalents) and tangible net worth of $30.0 million and $240.0 million, respectively. Similarly, our Consolidated Recourse Indebtedness to our Stockholders’ Equity ratio (as defined in the indenture governing the 2027 Notes) cannot exceed 4.0 to 1.0, excluding our secured borrowings.
Previous wording
See Note 9 — Debt to the consolidated financial statements included in this report, for additional details of our repurchase transactions and balances.
Current wording
See Note 9 — Debt to the consolidated financial statements included in this report, for additional details on our financing arrangements.
Previous wording
Table 12: Summary of Issuer and Guarantor Financial Statements
Current wording
Summary of Issuer and Guarantor Financial Statements
Previous wording
Other than our investments in debt securities and beneficial interests issued by joint ventures, which are summarized below by securitization trust, and our equity method investments discussed elsewhere in this report, we do not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. Further, we have not guaranteed any obligations of unconsolidated entities nor do we have any commitment or intent to provide funding to any such entities. As such, we are not materially exposed to any market, credit, liquidity or financing risk that could arise if we had engaged in such relationships.
Current wording
Other than our investments in RMBS and beneficial interests issued by joint ventures, our investment in a certain equity REIT and our investment in our Former Manager, we do not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities. Further, we have not guaranteed any obligations of unconsolidated entities nor do we have any commitment or intent to provide funding to any such entities. As such, we are not materially exposed to any market, credit, liquidity or financing risk that could arise if we had engaged in such relationships.
Rearranged current paragraphs (3)
Current report — wording carried from elsewhere
The average carrying balances for our portfolio and debt are included in the table below ($ in thousands):
Current report — wording carried from elsewhere
(1) Includes 249 loans that were classified from mortgage loans held-for investment, net to mortgage loans held-for-sale, net with a total UPB of $37.1 million and a carrying value of $27.5 million.
Current report — wording carried from elsewhere
We generally need to distribute at least 90% of our taxable income each year (subject to certain adjustments) to our shareholders to qualify as a REIT under the Internal Revenue Code. This distribution requirement limits our ability to retain earnings and thereby replenish or increase capital to support our activities. Dividends declared in the three months ended March 31, 2025, were $2.8 million on Common Stock, and in the same period the Company accrued $350.0 thousand on Series C Preferred Stock dividend.
Rearranged previous paragraphs (3)
Previous report — wording carried elsewhere
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Previous report — wording carried elsewhere
For a full description of the components of the Strategic Transaction, see our Definitive Proxy Statement filed with the Securities and Exchange Commission on April 10, 2024.
Previous report — wording carried elsewhere
We do not anticipate investing further in residential mortgage loans, RPLs or NPLs. Given the change in focus of our business, we intend to, over time, reposition much of our existing portfolio. We believe commercial real estate offers an attractive investment opportunity given market dynamics that are creating significant refinancing challenges and funding gaps.