Great Ajax Corp ((RPT)) has held its Q4 earnings call. Read on for the main highlights of the call.
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In a cautiously optimistic earnings call, Rithm Property Trust reported its first profitable quarter in three years, signaling a positive turnaround for the company. The sentiment expressed during the call highlighted a strategic shift towards commercial real estate, despite ongoing challenges with legacy assets and the need for additional capital. The focus remains on growth and value creation.
Positive Economic Result
Rithm Property Trust achieved a significant milestone by reporting a positive economic result in Q4, with earnings of $0.06 per diluted share from a GAAP perspective. This marks the first time in three years that the company has shown profitability, reflecting a positive shift in its financial performance.
Repositioning and Strategic Shift
The company has strategically repositioned its balance sheet to focus on high-quality commercial real estate. This involved selling down legacy residential positions and reinvesting the proceeds, signaling a decisive shift in investment strategy.
Stable Dividend and Book Value
Despite the challenges posed by rising interest rates, Rithm Property Trust maintained its dividend at $0.06 per common share and kept the book value steady at $5.44. This stability amidst a 60 basis points increase in interest rates highlights the company’s resilience.
Pipeline and Growth Strategy
Rithm Property Trust has set its sights on a robust pipeline of $1 billion in potential investments, targeting commercial real estate and opportunistic situations that could yield low double-digit returns. This forward-thinking strategy aims to drive future growth.
M&A Opportunities for Growth
The company plans to explore mergers and acquisitions as a means to expand its operations. Leveraging a broad pipeline at Rithm Capital, these M&A opportunities are seen as a pathway to enhanced growth.
Need for Additional Capital
In light of its undervalued stock price, trading at roughly 50% of book value, Rithm Property Trust intends to seek additional capital through a preferred equity deal in Q1. This move is aimed at bolstering its financial position and facilitating future investments.
High Coupon Unsecured Notes
Part of the new capital will be allocated to addressing the company’s high coupon unsecured notes currently on the balance sheet, which is a step towards optimizing its financial structure.
Legacy Residential Assets
Several legacy residential RMBS remain on the balance sheet due to their inclusion in older securitizations. Although these assets cannot be sold, they continue to be managed as part of the company’s broader strategy.
Forward-Looking Guidance
Looking ahead, Rithm Property Trust aims to continue building on its positive economic results. The company reported GAAP income of $2.9 million in Q4 and plans to leverage its $64 million in cash and liquidity to pursue low double-digit returns on new commercial real estate investments. The firm also sees significant opportunities for growth through mergers and acquisitions, reinforcing its strategy for future success.
In conclusion, the earnings call of Rithm Property Trust highlighted a cautiously optimistic outlook, with a focus on strategic shifts towards commercial real estate and growth through investments. Despite challenges with legacy assets and the need for additional capital, the company remains committed to creating value and exploring new opportunities for expansion.
