Q2 2025 Rithm Property Trust Inc Earnings Call
Operator: your conference operator today. At this time, I would like to welcome everyone to the Rhythm Property Trust Inc.
Operator: Second Quarter 2025 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. And if you'd like to withdraw your question, again, press star one. Thank you.
Emma Bolla: I would now like to turn the conference over to Emma Bolla, Associate General Counsel. Emma, you may begin. Thank you and good afternoon, everyone.
Ladies and gentlemen, thank you for standing by. My name is Krista and I will be your conference operator. Today at this time, I would like to welcome everyone to the Rhythm Property. Trust Inc, second quarter 2025 earnings conference. Call all lions have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad. And if you'd like to withdraw your question, again, press star 1, thank you. I would now like to turn the conference over to Emma, Bola. Associate general counsel Emma. You may begin
Emma Bolla: I would like to thank you for joining us today for Rhythm Property Trust second quarter 2025 earnings call.
Emma Bolla: Joining me today are Michael Nierenberg, Chairman, CEO and President of Rhythm Capital and CEO of Rhythm Property Trust, and Nick Santoro, Chief Financial Officer of Rhythm Capital and Rhythm Property Trust. Throughout the call, we're going to reference the earnings supplement that was posted this afternoon to the Rhythm Property Trust website, www.rhythmpropertytrust.com. If you've not already done so, I'd encourage you to download the presentation now.
Emma Bola: Thank you and good afternoon everyone. I would like to thank you for joining us today for rhythm Property. Trust second quarter 2025 earnings call joining me today are Michael Nuremberg, chairman CEO and president of Rhythm capital, and CEO of Rhythm Property, Trust and Nick Santoro. Chief Financial Officer of Rhythm capital, and Rhythm Property Trust.
Emma Bolla: I would like to point out that some 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.
Emma Bola: Throughout the call, we are going to reference the earnings supplement that was posted this afternoon to the Rhythm Property, Trust website, www.thr.com if you've not already done. So, I'd encourage you to download the presentation now.
Emma Bola: I would like to point out that some statements made today will be forward-looking statements, these statements by their nature are uncertain and may differ materially from actual results.
Emma Bolla: 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.
Emma Bola: 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.
Michael Nierenberg: With that, I will turn the call over to Michael. Good afternoon. Thanks, Emma. Good afternoon, everyone, and thanks for joining the call.
Emma Bola: 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 earning supplement with that. I will turn the call over to Michael.
Michael Nierenberg: One year ago, we took over the management contract of this REIT, which was formerly known as Great Ajax. The company was losing money, needed more liquidity, and, quite frankly, a new leadership team and a new mission. We renamed the company to Rhythm Property Trust. We sold down legacy assets, which were not accreted for shareholders, and we repositioned the company to be an opportunistic commercial real estate REIT. Over the course of the past year, we went out and deployed $300 million. or bought $300 million in commercial real estate assets. We raised a new pool of capital without diluting shareholders.
Michael Nuremberg: Uh, good afternoon, thank thanks, Emma. Good afternoon, everyone, and thanks for joining the call. Um,
Michael Nuremberg: You know, the way, 1 year ago, we took over the management contract of, of this Reit, which was formerly known as great Ajax, the company was losing money, needed more liquidity and quite frankly, a new leadership team and a new Mission. We renamed the company to Rhythm Property. Trust, we slowed down Legacy assets, which were not accredited for shareholders. And we repositioned the company to be uh an opportunistic commercial, real estate. Reed
Michael Nuremberg: Over the course of the past year, we went out and deployed 300 million dollars.
Michael Nierenberg: We did that via a PREP offering, and we put the company on a path towards success and profitability. While the numbers this past quarter are similar to last, we have a ton of deals and investments in the pipeline.
Michael Nierenberg: When we were at Fortress, we took a company at that time, which was known as New Residential, which is currently Rhythm Capital today, from $1 billion of equity in 2013. Today we stand at almost $8 billion of permanent capital or equity. We manage over $80 billion of assets across all of our various business lines. We intend to do the same here. Unfortunately, it takes some time.
Equity, we manage over 80 billion dollars of assets, across all of our various business lines,
Michael Nierenberg: If you think about the company this way, I'm confident you will be rewarded well in the future. One, that we do not have any legacy commercial real estate assets. Two, the equity trades at a 50% discount a book. So we believe as we continue to execute on our plan, there'll be huge upside in the valuation of the equity. Three, with what's going on in the real estate market, whether it be on the equity or debt side, we have very large pipelines of deals we are currently evaluating. And then we also have a number of deals that should close here in the third quarter.
Michael Nuremberg: Um, we intend to do the same here. Unfortunately, it takes some time.
Michael Nuremberg: If you think about the company, this way, I'm confident you you will be rewarded. Well, in the future 1 that we do not have any Legacy commercial, real estate assets.
Michael Nierenberg: So net net, while we're not thrilled with the current stock price, obviously, I believe the value proposition here is a good one. I'll now refer to the supplement, which we have posted online. I'm gonna start on page three. So again, the way to think about this is an opportunistic equity investment in a publicly traded commercial real estate REIT. And it doesn't have to be commercial, it could be opportunistic as well. Current pipeline is in and around $2 billion of assets that we're currently evaluating. We have a little under 300 million in total equity. Our real estate portfolio is $300 million.
Michael Nuremberg: 2, the equity trades at a 50% discount a book. So we believe, as we continue to execute on our plan, there'll be huge upside, uh, in the valuation of the equity 3, um, with what's going on in the real estate market, whether it be on the equity or debt side, we see we have very large pipelines that deals. We are currently evaluating and then we also have a number of deals that that should close here in the uh third quarter. So net net, while we're not thrilled with the current stock price. Obviously, I believe the value proposition. Here is a good 1. I'll now refer to the supplement, which we have posted online. I'm going to start on page 3.
So again, the way to think about this is an opportunistic, uh, Equity investment in a publicly traded, um, commercial real estate Reit, and it doesn't have to be commercial, it could be opportunistic as well. Um, current pipeline is in and around 2 billion dollars of assets that we're currently evaluating, we have a little under 300 million in total equity.
Michael Nierenberg: And we're sitting on approximately $100 million of cash and liquidity. As you flip to page four, earnings, kind of fairly similar to where it was last quarter. 1.4 million in gap income, or $0.03 per diluted share. The EAD is about $100,000, or effectively, you know, virtually zero. Second quarter, common stock dividend is $0.06 per common share. We do not intend to reduce that any time here soon. Cash-in cash equivalents, about $98.6 million, and total equity of $2.95. Gap book value is $5.37, with the stock trading, I believe, something around $2.70, so about a 50% discount to book.
Michael Nuremberg: A real estate portfolio is million dollars and we're sitting on approximately 100 million dollars of cash and liquidity.
Michael Nuremberg: As you flip to page 4 earnings kind of Fairly similar to where it was. Last last quarter um, 1.4 million in gapp income or 3 cents per per diluted share.
Michael Nuremberg: The EAD is about a hundred thousand dollars or effectively. Um,
Michael Nierenberg: The opportunity for Rhythm Property Trust, why now? We're entering what we think the real estate market at a very attractive time. We've been pretty vocal about that. While saying that, not every real estate asset is the same, and we need to be extremely diligent and careful in our underwriting and how we deploy capital in this and every other vehicle that we manage.
You know, virt virtually zero uh second quarter. Common stock dividend is 6, cents per common, share. We we do not intend to reduce that any time here. Soon cash in cash, equivalents about 98.6 million in total Equity of 295 Gap. Book value is $5.37 with the stock trading, I believe something around $2.70, so about a 50% discount to book.
Michael Nierenberg: So why Rhythm Property Trust? One, again, no legacy commercial real estate exposure. Two, again, the company's trading in a sizable discount to book value. Three, the amount of employees and management team here at Rhythm, and this does not include our Green Barn subsidiary or Sculptor, there's approximately 75 to 100 folks in the house here that work on our various vehicles. When we think about the commercial real estate landscape, one, the repricing of commercial real estate assets. The continuous debt maturities and dislocations in the market are and will continue to create opportunities across the capital stack.
The opportunity for rhythm Property Trust, um, why? Now we're entering what we think the real estate market at very attractive time. We've been pretty vocal about that. Um, while saying that not every real estate assets the same and we need to be extremely diligent and careful, uh, in our underwriting and how we deploy capital in this in this. This and every other vehicle that we manage
Michael Nuremberg: The white ribbon Property, Trust 1 again no Legacy commercial real estate exposure 2 again, the company's trading in a sizable discount to book value 3, the the amount of employees and management team here um at Rhythm and this does not include our Green Barn, um, subsidiary or sculptor. There's approximately 75 to 100 folks in the house here that work on our various Vehicles. When we think about the commercial real estate landscape 1 3.
Michael Nierenberg: As we look at changing capital structures, there's a huge need for PREP equity and a number of the different assets and things that we're looking at that'll continue to create what we think are extremely attractive opportunities to deploy capital. As we go forward, the pipeline as of the end of June was $2 billion of different types of real estate investments that include senior mortgages, subordinate loans, mezzanine loans, and other opportunistic investments. The emphasis, and finally our emphasis on growth, as we achieve scale, that is something that's going to enable us, in our own opinion, to drive the valuation of the company higher.
Michael Nuremberg: The Continuous debt maturities and dislocations in the market are are and will continue to create opportunities across the capital stack.
Michael Nuremberg: As we look at changing Capital structures, there's a huge need for prep equity in a number of the different different, uh, assets and things that we're looking at. That will continue to uh, create what we think are extremely, uh, attractive opportunities, to deploy Capital. As we go forward. The pipeline as of the end of June was 2 billion dollars of uh different types of real estate Investments that include senior mortgages. Um subordinate loans meas, mezzanine loans and other opportunistic Investments.
The m and and finally, our emphasis on growth as we achieve scale, um, that is something that's going to enable us. I in in our own opinion to drive the uh the valuation of the company higher.
Michael Nierenberg: We have some profitability. If you have a look at page six, when we took over the company, as I mentioned before, the company was losing money. Q2 of 24, the company lost $0.35 per diluted share. If you look at where we are now, we made $0.03 per diluted share. So continued risk discipline around, one, the asset side of the balance sheet, and then two, as we think about growing earnings.
Michael Nierenberg: Like I pointed out in my opening remarks, it will take some time because the equity base here is $300 million, and we intend to take this same vehicle, or this vehicle, like we did at Fortress, where we started new residential with $1 billion of assets, and we grew it to $8 billion over time. When you look at seven, as we think about Q2 investment activities, and you look at where we are today, one, the deal source of approximately $6.5 billion. And as I pointed out, we have a number of deals that we believe we're going to close here in the third quarter, and that should deploy about $50 million of equity here with double-digit returns.
Michael Nuremberg: Pass the profitability. If you have a look at page 6 when we took over the company, as I mentioned before, the company was losing money Q2 of 24, the company lost 35 cents per diluted share. If you look at where we are now, we made 3 cents per diluted share. So continued risk discipline around 1, the asset side of the balance sheet. And then 2, as we think about growing earnings, like I pointed out in my opening remarks, it will take some time because the equity base here is is 300 million, um, and we intended to take this same vehicle, um, or or this vehicle like we did at Fortress, where we, we started new residential with a billion dollars of assets and we grew it to to, uh, 8 over time.
Michael Nierenberg: We look at the investment opportunities. There's a number of different things we look at. Again, as I pointed out, whether it be debt, PREP equity, MES, and opportunistic equity across the stack. Straight to the platform, we are at Rhythm. Obviously, we take our performance extremely seriously. When you look at Rhythm as a whole from a parent perspective, typically our ROEs are anywhere from 15% to 20%. We'd like to try to position this company to be able to do the same thing over time.
Close here in the third quarter, um, and that should deploy about $50 million of equity here, um, with double digit returns. We look at the investment opportunities. Um, there's a number of different things we look at again, as I pointed out, uh, whether it be debt pref Equity, mes and opportunistic, Equity across the stack strength of the platform. You know, we are at Rhythm, obviously. We take our, uh, our performance. Extremely seriously. You know, when you look at Rhythm, as a whole, from a parent perspective, typically or Roes, or anywhere from 15 to 20%, uh, we'd like to try to position this company to be able to do the same thing over time.
Michael Nierenberg: Page eight, just looking at the potential, excuse me. portfolio over the future between CMBS Senior Loans, Opportunistic Investments, and Subordinated and Mezzanine Loans, we believe that we're going to generate target yields of in and around 15%.
Michael Nuremberg: Page 8. Just looking at the, uh, the potential excuse me.
Michael Nierenberg: So, before I turn it over to Q&A, what I would say is we love the optionality in this platform. We're very happy with where the balance sheet stands. We are working on a number of situations that I believe will enable us to deploy significant amounts of capital. We do not intend to dilute shareholders to the extent that we don't need to, so that will likely be bringing in third-party partners on some of the larger things that we're looking at.
Michael Nuremberg: Portfolio over the future, um, between cmbs senior loans, opportunistic, Investments, and subordinated and mezzanine loans. We believe that we're going to generate uh Target yields over and around 15%.
Operator: And with that, I'll turn it back to the operator and we'll open up for Q&A. Thank you. We will now begin the question and answer session.
So, before I turn it over to Q&A, what I would say is we love the optionality in this platform. We, we're very happy with where the balance sheet stands. We are working on a, on a number of situations that I believe uh will enable us to uh deploy significant amounts of capital. Um, we do not intend to dilute shareholders, to the extent that we don't need to, so that will likely be bringing in third-party Partners on some of the larger things that we're looking at. And uh, with that, I'll turn it back to the operator and we'll open up
Michael Nuremberg: For Q&A.
Operator: If you would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. And if you'd like to withdraw your question, simply press star one again.
Jason Stewart: Your first question comes from Jason Stewart with Janey. Please go ahead. Thank you. Thank you, Michael.
Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. And if you'd like to withdraw your question, simply press star 1. Again your first question comes from Jason Stewart with Janie. Please go ahead.
Michael Nierenberg: In terms of the near-term opportunities in the pipeline, could you talk about how that splits up between the different sectors, loans, securities, etc.? I'm sure. So most of the stuff, you know, when we look at securities today, for example, when you look at our portfolio, most of it's floating rate around the on the real estate side. When we look going forward, and most of that is up in the capital stack in AAAC MBS, we do have some loans on the balance sheet that we made. We did a small SRT deal with one of our larger bank counterparties.
Jason Stewart: Hi. Thank you. Thank you Michael. Um, in terms of the near-term opportunities in the pipeline, could you talk about how that splits up between the different sectors? Loans Securities, Etc.
Jason Stewart: Um sure. So most of the stuff you know, when we look at Securities today. For example, when you look at our portfolio, most of its floating rate around the uh on the real estate side.
Um, when we look going forward and and, and most of that is, uh, up in the capital stack in in AAA cnbs, we do have some loans on the balance sheet that we made. We did a um, a small SRT deal with 1 of our
Michael Nierenberg: Going forward, looking at pipelines, we have anything from something that will fund, we're hopeful in the next couple weeks, which is a retail asset up in Seattle anchored by some very strong tenants, including Albertsons, Staples, etc. We're looking at stuff in the multifamily space. We have some nice opportunities, we believe, on the office side as well.
Michael Nierenberg: And then we're looking at some larger M&A opportunities that we think could change the landscape of this organization for years to come. Okay, that's helpful. And then on the last point, and I think you started to perhaps talk about this in your comments. You said commercial and opportunistic but not necessarily doesn't have to be commercial. Maybe you could elaborate a little bit more on what you meant there in terms of opportunistic. You know, it's going to be right now, the intent is for this vehicle to be focused on commercial opportunities. You know, I think back to our fortress days when we bought a little under four billion of consumer loans into our REIT, along with some other capital vehicles we had.
Jason Stewart: Larger Bank counterparties, um, going forward, looking at pipelines. We have anything from, uh, something that will fund, uh, where hopeful in the next couple of weeks, which is a retail, uh, a retail asset up in, uh, in Seattle anchored, by some very strong, tenants, including Albertson's, uh, Staples Etc. Um, we're looking at stuff in the, in the multi family space. Uh, we have some nice, uh, opportunities We Believe on the office side as well. Uh, and then we're looking at some, uh,
Some larger m&a opportunities that we think could change the landscape of the of this organization uh for years to come.
Jason Stewart: Okay, uh, that's helpful then and then on the last point and I think you started to perhaps talk about this in your comments, you said, um, commercial an opportunistic but not necessarily doesn't have to be commercial. Maybe you could elaborate a little bit more on what you meant there in terms of opportunistic.
Michael Nierenberg: And that that was the beginning of what became one main financial. I'm just using that as an example. Right now, though, what I would say is I'd focus the focus for all of us here at Rhythm is to build this as a dedicated opportunistic commercial region. got it. Okay.
Jason Stewart: You know, I it's it's going to be right now. The intent is for this vehicle to be focused on Commercial, um, opportunities. Um, you know, I I think back to our Fortress days, when we bought a little under 4 billion of Consumer loans, into our read along with some other, um, Capital Vehicles we had with. And that, that was the beginning of what um, became 1 Main Financial. Uh, I I'm just using that as an example right now, though, what I would say is, I'd Focus. Um, the focus for for all of us here at rhythm is to build this as a dedicated. Um, opportunistic commercial rate
Jason Stewart: Thanks for taking the questions. Appreciate it.
Tim D'agostino: Your next question comes from the line of Randy Binner with B Reilly's Securities. Please go ahead. Hi, thank you for taking the question.
Got it. Okay, thanks for taking the questions. Appreciate it. Thank you. Jason.
Speaker Change: Your next question comes from the line of Randy Benner with B Riley Securities. Please go ahead.
Michael Nierenberg: This is Tim D'Agostino on for Randy Binner. When we think about the go forward plan for the portfolio, what should we think about in terms of capital being put to work per quarter, and where we may see that capital So again, it's the capital that's going to where it's going to go, it's going to be the very same assets that I just described. So you'll have, you know, the pipeline between retail multifamily office, we have some industrial things we're looking at, we did an SRT deal with one of our like, like I pointed out, one of our larger bank counterparties.
Hi. Thank you for taking the question. This is Tim Dino on for Randy Benner.
Speaker Change: when we think about the go forward plan for the portfolio, what should we think about in terms of capital being put to work per quarter and where we may, see that Capital be putting to work
Michael Nierenberg: So it's going to be in those very same pockets. When you think about capital deployment, you know, the good news is we're sitting with roughly 100 million of cash and liquidity on balance sheet, where as much as we want to deploy that capital yesterday, and we could, we want to make sure that we are we find the right opportunities to create what we're really striving to do, which is going to, you know, be something with with teams type returns. So that 100 million that sits there, I think our projections are we'll be deploying about 50 million this quarter, here in the third quarter, assuming that the all the different loan opportunities we're working on close here in the third quarter.
Michael Nierenberg: I mean, going forward, you know, obviously, we'd like the stock to write itself, but we'll likely continue to tap into the pref market as well, so we don't delete shareholders.
Parties. Um, so it's going to be in those very same uh, Pockets. Um, when you think about Capital deployment, you know, the good news is, we're sitting with a, with roughly 100 million of cash and liquidity on balance sheet, um, where as much as we want to deploy that Capital yesterday and we could, we want to make sure that we are, we find the right opportunities to create what what we're really striving to do, which is going to, you know, be something with with teams type returns. Um so that 100 million that sits there. I think our projections are will be deploying about 50 million this quarter. Uh, here in the third quarter assuming that the all the different loan opportunities. We're working on close here in the third quarter.
Speaker Change: And then going forward, you know, obviously we we'd, like to stock to write itself, um, but we'll, we'll likely continue to tap into the pre market, um, as well. So we don't delete shareholders.
Tim D'agostino: Okay, great. Thank you so much. That's all for me. Thank you.
Speaker Change: Okay, great. Thank you so much. That's all from me.
Tom Catherwood: Your next question comes from the line of Tom Catherwood with BTIG. Please go ahead. Thank you, and good afternoon, everybody. So my question, I want to kind of try to tie a couple of ends together here. So it really does sound like your pipeline of opportunities has scaled up. And, you know, you took us through the cleanup that you did on, you know, legacy grade Ajax over the past 12 months. But as far as that pipeline, and it seems like you've gotten to the point in time when it'll really be an execution opportunity right now.
Speaker Change: Thank you.
Speaker Change: Your next question comes from the line of Tom katherwood with btig. Please go ahead.
Speaker Change: Thank you and good afternoon everybody. Um, so my question is want to kind of try to tie a couple of ends together here. So, it really does sound like your pipeline of opportunities has scaled up. And, you know, you took us through the, the clean up that you did on, you know, Legacy grade Ajax over the past 12 months. Um, but
Michael Nierenberg: Was it just a matter of time of building that? Or was there a shift in what you were looking at that helped that scale? Or were you missing out in deals and you've gotten more aggressive and some more is dropping to the bottom line?
Michael Nierenberg: What's kind of changed between 1Q and 2Q that's helped that pipeline scale the way it has? Yeah, no, I think those are great questions. One is the team is out, you know, hunting and having lots of conversations, whether it be with our large bank friends, with some third party origination platforms, or just stuff that, you know, where we get calls directly from sponsors. So we're seeing a lot more of that. And I think part of it is building the not the Rhythm brand, because I think the Rhythm brand and well, you know, resonates extremely well in the investment community, but the Rhythm Property Trust brand, which wasn't really as well known, you know, since other than when we initially took over the platform.
Speaker Change: Is as far as that Pipeline and the it seems like you've gotten to the point in time when, when it's, it'll really be an execution opportunity right now. Was it just a matter of time of building that or was there a shift in what you were looking at that helped that scale or were you missing out in deals and you've gotten more aggressive? And some more is dropping to the bottom line, what's kind of changed between 1 q and 2q, that's helped that pipeline scale the way it has
Speaker Change: Yeah, no, I I think those are a great question. 1 is the team um is out
Speaker Change: You know, hunting and and having lots of conversations, whether it be with our large Bank friends, um, with some third-party origination platforms or or just stuff that, you know, where we where we get calls directly from sponsors. Um, so we're seeing a lot more of that. And I think part of it is building the not the Rhythm brand because I think the Rhythm branded, well, you know, resonates extremely well in the investment Community, but the Rhythm Property Trust brand, which wasn't really as well known, um, you know, since
Michael Nierenberg: So, the pipelines are building, the teams are having a ton of conversation. You know, what I would say, though, on the flip side of that is, we're not going to compete for the last dollar to drive cap rates extremely low on, for example, an office if we don't think it makes sense for the vehicle. Our goal here is to take what we have, which is this clean, in our opinion, a clean balance sheet, sitting on some liquidity. We could use more and deploy that capital prudently with teams type returns. We're not going to get into a bidding war with somebody, at least for now, on things that we don't think make a lot of sense.
Speaker Change: Other than, when we, when we, when we initially took over the, uh, the platform. So the pipelines are building, the teams are, are having a ton of conversation, um, you know, certain things. What I would say though, on the, flip side of that is, we're not going to compete for the last dollar. Um, to drive cap rates, extremely low on, for example, on office. If if we don't think it makes sense for the vehicle, our goal here is to take what we have, which is as clean in our opinion.
Tom Catherwood: So, I think it's a combination of, one, we are seeing a lot more directly from sponsors. Two, we're having a lot more conversations with our banking partners, of which we have a lot of. And three, the brand is, the Rhythm Property Trust brand overall, with the great job the team is doing, is getting out there. So, the teams are getting the call on these, not just, for example, the largest real estate players in the industry. Got it. Appreciate that caller, Michael.
Speaker Change: A clean balance sheet, sitting on some liquidity we could use more um and deploy that Capital prudently with teams type returns. Um we're not going to get into a bidding war with somebody at least at least for now on things that we don't think make a lot of sense. So I think it's a combination of 1. We are seeing a lot more directly from sponsors too. We're having a lot more conversations with our banking partners of which we have a lot of um and 3. The brand is the Rhythm Property, Trust brand overall with the with the great job, the team is doing is is getting out there. So the teams are getting the call on these. Not just for example, the largest real estate players in the industry.
Michael Nierenberg: And then if we think of Sources and uses here, right? You know, the opportunity set scales, there's more deals falling to the bottom line. You've obviously built this large book of CNBS securities. You did it over a period of time where spreads were wider. They've obviously tightened down towards record levels again. How do you think about, you know, either taking on more debt, using the cash on your balance sheet, or even selling the securities, which again, we assume you would have a gain on, in order to put them into more of this direct lending opportunity, which is what it sounds like.
Speaker Change: Got it, I appreciate the the caller Michael. And then if we think of
Speaker Change: Sources and uses here, right? You know, the the opportunity to set scales, there's more deals falling to the bottom line. You've obviously built this large book of cnbs Securities you. You did it over a period of time where spreads were wider. They have obviously tightened down towards record levels again.
Michael Nierenberg: That's more of that's in that pipeline right now. How do you think of securities book as a funding? It could easily be that, right, because one of the reasons why, and thanks for leading me to the answer here, one of the reasons why we stayed up in the cap stack was as we continue to grow this, we wanted to deploy capital to create some earnings for the balance sheet. As we look at some of the opportunities we're seeing, and the way we're going to grow this company, honestly, is by doing things that are a little bit more meaningful and larger over time.
Speaker Change: How do you think about, you know, either taking on more debt using the cache, on your balance sheet or even selling a Securities? Which again we assume you would have a gain on in order to put them into more of this direct lending opportunity, which is what it sounds like that's more of that's in that pipeline right now. How do you think those Securities book as a as a funding source?
Michael Nierenberg: Yeah, we'll hit our singles, but we have to do something that's meaningful and be able to raise a bunch of capital around that. And the way to, you know, if you look, we did a, I think it was a $50 million PREP offering kind of, you know, a few months back. We don't want to dilute shareholders to the extent that we don't need to. I think what we're going to likely do is bringing third-party capital alongside a larger transaction, which is going to help get this platform off the ground. And then I think once we do that, you're going to see the stock really right itself.
Tom Catherwood: So I think the, you know, the optionality in this company and the stock, I think, is extremely high and significant to the upside. Appreciate that. And last one for me, if we think of kind of, once you allocate that, let's assume the $50 million in opportunities that are near-term close, if we do a quick back of the envelope that looks to us like just about, maybe a little bit over a penny a share per quarter, does that check out? And is this the kind of thing where to get up to that dividend level you're going to need to put out $300 million of incremental capital, or are there other catalysts that help you kind of boost earnings back to that dividend level?
Speaker Change: Um, and that and and the way that you know, if you look we did a I think it was a $50 million prefer offering um, kind of, you know, a few months back. Um we don't want to dilute shareholders to the extent that we don't need to. I think where we're going to likely do is bringing third-party Capital alongside a larger transaction which is going to help. Get this platform off the off the ground. Um and then I think, once we do that you're going to see see the stock really write itself. So I think the, you know, the optionality in in this company and the stock um, I think is is extremely high and and significant um, to the upside
Speaker Change: I appreciate that. And the last 1 for me, if we think of
Speaker Change: kind of, once you allocate that let's assume the $50 million in opportunities that that are near-term closed. If we do a quick back of the envelope that looks to us like just about maybe a little bit over a penny, a share per quarter. Is that does that check out? And is this the kind of thing where to get up to that dividend level, you're going to need to put out.
Speaker Change: 30 million dollars of incremental capital or are. There, are there other catalysts that help you kind of boost earnings back to that dividend level?
Tom Catherwood: I think in your math, it's about two cents a quarter. You know, again, it's we're going to have to create some scale around our capital formation side. But, you know, I think we'll get to whatever, you know, our current dividend that that we're paying. You know, we came into this thing not looking to to cut the dividend because folks have suffered a lot of pain prior to us acquiring the management contract here. So we're going to do all we can to maintain this dividend and continue to try to grow earnings. Understood. Appreciate all the answers.
Speaker Change: Um, I think in your math, it's about 2 cents a quarter.
Speaker Change: Um, you know, again it's we're going to have to create some scale around our Capital formation side. Um but you know I think we'll get to whatever, you know, our current dividend that that we're paying, you know, we we came into this thing, not looking to, um, to cut the dividend because folks have suffered a lot of pain prior to us, um, acquiring the management contract here. Uh, so we're going to do all, we can to maintain this dividend and continue to try to grow earnings.
Tom Catherwood: That's it for me. Thanks.
Doug Harter: Your next question comes from the line of Doug Harter with UBS. Please go ahead. Thanks, Michael. Hey, I'm hoping you could just talk about, you know, kind of trying to square all the things you you've said about a growing pipeline, you know, lack of interest and diluting. Shareholders and just, you know, how you think about, you know, kind of the patience that you have to try to scale the business while kind of looking at those two factors and, you know, and kind of how you think that plays out. I think the scale of the business is going to be around a larger scale transaction.
Speaker Change: Understood, appreciate all the answers that's it for me. Thanks. Thanks Tom.
Speaker Change: You are. Next question. Comes from the line of Doug harder with UBS. Please go ahead.
Speaker Change: Um, it does. Thanks Michael. Hey, um, hoping you could just talk about, you know, kind of trying to, to square all the things you you've said about it growing pipeline, you know, lack of interest and and diluting
Speaker Change: Uh, shareholders and just, you know, how how you think about, you know, kind of the patients that that you have to to try to scale the business while while kind of looking at those those 2 factors and you know, and kind of how you think that plays out.
Michael Nierenberg: That's how we're going to be able to raise capital to create a vehicle that's where we're going to start generating significant earnings. While saying that, I alluded to likely bringing third party capital alongside us. I think you'll see that without going out to truly dilute the shareholders here that with the stock trading at, again, give or take $2.70, quite frankly, you can't raise enough stock around that level to make a significant dent in this company. Pipeline-wise, I'm looking at 11 different transactions on a sheet in front of me right here. They range anywhere from a large M&A opportunity to a retail loan that I pointed out.
I, you know, I think the scale of the business is going to be around a larger scale transaction. That's how we're going to be able to raise Capital to, to create, to create a vehicle that's, um, you know, where we're going to start generating significant earnings.
Michael Nierenberg: I gave you some color with Albertsons and Staples as some of the anchor tenants, to looking at some multifamily stuff in Florida, to some New Jersey office, to some local office. Our pipelines are pretty robust.
Doug Harter: The one thing we want to make sure that we do, though, is obviously be extremely thoughtful on deploying the capital. Great, appreciate it. Thanks, Michael. Thanks, Doug.
Speaker Change: Um, while while saying that, you know, I I alluded to Pro likely bringing third-party Capital alongside us. Um, I think you you'll see that without going out to truly, dilute the shareholders here, that with the stock trading at again, give or take 2.70, I, I don't, you know, you can't quite frankly you can't raise enough stock around that level to make this a significant dent in in this company pipeline wise, you know. Um, you know I'm looking at 11 different transactions on a sheet in front of me right here, they range anywhere from a large m&a opportunity to a retail loan that I pointed out. You know, I gave you some color with Albertson's and Staples at some of the anchor tenants to looking at some multi family stuff in Florida, to some New Jersey office to some local office. So, you know, our pipelines are pretty robust. The 1 thing. We want to make sure that we do though is obviously be extremely thoughtful on the point of the capital.
Speaker Change: Great. Appreciate it. Thanks Michael.
Operator: And that concludes our question and answer session.
Thanks Doug.
Michael Nierenberg: And I will now turn the conference back over to Michael Nierenberg for closing comments. Thanks so much for the questions guys, look forward to updating you next quarter or during the quarter. You know, again, I do like where we sit, we're going to be patient, but we need to, we need to try to grow our stock price here and we're extremely mindful of that.
Speaker Change: That concludes our question and answer session, and I will now turn the conference back over to Michael nerenberg for closing comments.
Operator: So have a great rest of the summer if we don't chat and have a good weekend. Thank you.
Operator: This concludes today's conference call. Thank you for your participation and you may now disconnect.
Speaker Change: Thanks so much for uh for the questions guys. Uh look forward to updating you next quarter or during the quarter. Um you know again I I do like where we said, we're going to be patient but we need to uh we need to try to grow our stock price here and we're extremely mindful of that. So have a great uh rest of the summer if we don't chat and have a good weekend. Thank you.
This concludes today's conference call. Thank you for your participation and you may now disconnect