Rithm Property Trust (RPT) risk factors, FY2024 10-K

Risks Related to Our Business

1. 01We depend on a manager to run our business. If the New Manager is unable to conduct our investment activities properly, there could be a material adverse effect on our business
2. 02We expect to continue to incur consolidated net losses from our mortgage asset holdings
3. 03The lack of liquidity of our assets has adversely affected our business, including our ability to sell our assets
4. 04Commercial real estate-related investments that are secured by commercial real property are subject to delinquency, foreclosure and loss, which could result in losses
5. 05We invest in commercial mortgage loans which are non-recourse in nature and include limited options for financial recovery in the event of default; an event of default may adversely affect our results of operations and financial condition
6. 06Investments in commercial real estate companies are subject to the specific risks relating to the particular company and to the general risks of investing in real estate-related loans and securities, which may result in significant losses
7. 07We are subject to risks of loss from weather conditions, man-made or natural disasters and climate change
8. 08There are certain risks associated with the servicers of commercial real estate loans
9. 09There are certain risks associated with an investment in CMBS
10. 10Difficult conditions in the mortgage, residential real estate and commercial real estate markets as well as general market concerns, have adversely affected the value of the assets in which we invest and these conditions continue to persist for the foreseeable future
11. 11A significant portion of our residential mortgage loans may become NPLs, which could further increase the significant losses we have incurred to date
12. 12We own higher risk loans, which are more expensive to service than conventional mortgage loans
13. 13A change in delinquencies for the loans we own could adversely affect our business, financial condition and results of operations
14. 14The principal and interest payments on our MBS are not guaranteed by any entity and, therefore, are subject to increased risks, including credit risk
15. 15The commercial real estate loans we expect to acquire will be subject to the ability of the commercial property owner to generate net income from operating the property as well as the increased risks of delinquency and foreclosure
16. 16We may be materially and adversely affected by risks affecting borrowers in which our investments may be concentrated at any given time, as well as from unfavorable changes in the related geographic regions
17. 17Changes in the underwriting standards by Freddie Mac, Fannie Mae or FHA could make it more difficult to refinance our purchased mortgage loans
18. 18The whole residential mortgage loans and other residential mortgage assets in which we have invested are subject to risk of default, among other risks
19. 19If we fail to develop, enhance and implement strategies to adapt to changing conditions in the commercial real estate industry and capital markets, our financial condition and results of operations may be materially and adversely affected by our acquisition of commercial real estate loans
20. 20If we acquire and subsequently re-sell any whole mortgage loans, we may be required to repurchase such loans or indemnify investors if we breach representations and warranties
21. 21We are subject to counterparty risk and may be unable to seek indemnity or require our counterparties to repurchase mortgage loans if they breach representations and warranties, which could cause us to suffer losses
22. 22To the extent that due diligence is conducted on potential assets, such due diligence may not reveal all of the risks associated with such assets and may not reveal other weaknesses in such assets, which could lead to losses
23. 23The failure of a seller of mortgage loans to provide all the necessary documentation to us could adversely affect our ability to leverage our assets or otherwise service the mortgage loans that we will own
24. 24Market conditions may affect our ability to securitize assets, which could increase our financing costs and adversely affect our results of operations and ability to make distributions
25. 25Prepayment rates can change, adversely affecting the performance of our assets and our ability to reinvest the proceeds thereof
26. 26The real estate assets and real estate-related assets we invest in are subject to the risks associated with real property
27. 27The allocation of capital among our mortgage loans may vary, which may adversely affect our financial performance
28. 28Our use of models in connection with the valuation of our assets and determination of the timing and amount of cash flows expected to be collected subjects us to potential risks in the event that such models are incorrect, misleading or based on incomplete information
29. 29Valuations of some of our assets will be inherently uncertain, may be based on estimates, may fluctuate over short periods of time and may differ from the values that would have been used if a ready market for these assets existed
30. 30An increase in interest rates may cause a decrease in the amount of certain of our target assets that are available for acquisition, which could adversely affect our ability to acquire target assets that satisfy our investment objectives and to generate income and pay dividends
31. 31The failure of our Servicer to service our assets effectively would materially and adversely affect us
32. 32We rely on the Servicer for our loss mitigation efforts relating to mortgage loan assets, which loss mitigation efforts may be unsuccessful or not cost-effective
33. 33Contingent or unknown liabilities could materially and adversely affect us
34. 34We may be required to make determinations of a borrower’s creditworthiness based on incomplete information or information that we cannot verify, which may cause us to purchase or originate loans that we otherwise would not have purchased or originated and, as a result, may negatively impact our business or reputation
35. 35Our inability to compete effectively in a highly competitive market could adversely affect our ability to implement our business strategy, which could materially and adversely affect us
36. 36We are highly dependent on communications and information systems operated by third parties, and systems failures could significantly disrupt our business and negatively impact our operating results
37. 37Security breaches and other disruptions could compromise our information and expose us to liability, which would cause our business and reputation to suffer
38. 38Interest rate fluctuations and shifts in the yield curve may cause losses
39. 39Security breaches and other cyber-security incidents could result in a loss of data, interruptions in our business, subject us to regulatory action and increased costs, each of which could have a material adverse effect on our business and results of operations

Risks Related to Leverage and Hedging

1. 40We use leverage in executing our business strategy, which may adversely affect the return on our assets and may reduce cash available for distribution to our stockholders and increase losses when economic conditions are unfavorable
2. 41We may not be able to achieve our optimal leverage or target leverage ratios
3. 42Non-recourse long-term financing structures such as securitizations expose us to risks that could result in losses to us
4. 43Our failure to comply with covenants contained in any debt agreement, including as a result of events beyond our control, could result in an event of default that could materially and adversely affect our operating results and our financial condition
5. 44Hedging against interest rate changes and other risks may materially adversely affect our business, financial condition and results of operations and our ability to make distributions to our stockholders

Risks Related to Regulatory and Legislative Actions

1. 45RCM GA has registered under the Investment Advisers Act and is subject to regulation under that Act
2. 46We operate in a highly regulated industry and continually changing U.S. federal, state and local laws and regulation could materially adversely affect our business, financial condition and results of operations
3. 47We may be unable to operate within the parameters that allow us to be excluded from regulation as a commodity pool operator, which would subject us to additional regulation and compliance requirements, and could materially adversely affect our business and financial condition
4. 48We could be subject to liability for potential violations of predatory lending laws, which could materially adversely affect our business, financial condition and results of operations and our ability to make distributions to our stockholders
5. 49Changes to U.S. federal income tax laws could materially and adversely affect us and our stockholders
6. 50Changes in applicable laws or noncompliance with applicable law could materially and adversely affect us

Risks Related to Our Management and Our Relationship with Our New Manager, and the Servicer

1. 51Rithm’s failure to appropriately manage or address conflicts of interest could damage its and our reputation and adversely affect our business, financial condition and results of operations
2. 52The Servicing Agreements were not negotiated at arm’s length

Risks Related to Our Organizational Structure

1. 53Maintenance of our exclusion from regulation as an investment company under the Investment Company Act imposes significant limitations on our operations
2. 54If we were required to register as an investment company but failed to do so, we could be prohibited from engaging in our business, and criminal and civil actions could be brought against us
3. 55The ownership limit in our charter may discourage a takeover or business combination that may have benefited our stockholders
4. 56Our stockholders’ ability to control our operations is limited
5. 57Certain provisions of Maryland law could inhibit a change in our control
6. 58Our authorized but unissued common and preferred stock may prevent a change in control of the Company
7. 59Our rights and the rights of our stockholders to take action against our directors and officers are limited, which could limit your recourse in the event of actions not in your best interest
8. 60Our charter contains provisions that make removal of our directors difficult, which could make it difficult for our stockholders to effect changes to our management
9. 61Conflicts of interest could arise in the future as a result of our structure

Risks Related to Our Common Stock

1. 62The market price of our Common Stock may fluctuate, and you could lose all or part of your investment
2. 63Our Common Stock share price has been and may continue to be volatile
3. 64The preparation of our consolidated financial statements involves the use of estimates, judgments and assumptions, and our consolidated financial statements may be materially affected if such estimates, judgments and assumptions prove to be inaccurate
4. 65If we fail to establish and maintain an effective system of internal controls, we may not be able to accurately determine our financial results or prevent fraud
5. 66We generally need to distribute at least 90% of our taxable income each year (subject to certain adjustments) to our
6. 67We may pay distributions from offering proceeds, borrowings or the sale of assets to the extent that distributions exceed earnings or cash flow from our investment activities
7. 68Future sales of our Common Stock or other securities convertible into our Common Stock could cause the market value of our Common Stock to decline and could result in dilution of your shares