Rithm Property Trust (RPT) risk factors, FY2025 10-K

Risks Related to Our Business

1. 01We depend on a manager to run our business, and if the Manager is unable to conduct our investment activities properly, there could be a material adverse effect on our business52% rewritten
2. 02We expect to continue to incur consolidated net losses from our mortgage asset holdings
3. 03Many of our investments may be illiquid, and this lack of liquidity has in the past and could continue to significantly impede our ability to vary our portfolio in response to changes in economic and other conditions or to realize the value at which such investments are carried if we are required to dispose of themNew
4. 04CRE-related investments that are secured by commercial real property are subject to delinquency, foreclosure and loss, which could result in losses and could materially adversely affect our business, financial condition, results of operations and/or cash flows
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 condition24% rewritten
6. 06Investments in CRE 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 losses47% rewritten
7. 07The PGRE Investment exposes us to additional risks related to the office real estate industryNew
8. 08We will have little control over the PGRE Investment and will be dependent on third parties to manage our investment, and our investment will be illiquidNew
9. 09There are certain risks associated with the servicers of CRE loans
10. 10There are certain risks associated with an investment in CMBS
11. 11Difficult conditions in the mortgage, CRE and residential 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 future22% rewritten
12. 12If we fail to develop, enhance and implement strategies to adapt to changing conditions in the CRE industry and capital markets, our financial condition and results of operations may be materially and adversely affected by our acquisition of CRE loans25% rewritten
13. 13A significant portion of our residential mortgage loans may become NPLs, which could further increase the significant losses we have incurred to date
14. 14We own higher risk loans, which are more expensive to service than conventional mortgage loans, and a change in delinquencies for the loans we own could adversely affect our business, financial condition and/or results of operations51% rewritten
15. 15The principal and interest payments on our MBS are not guaranteed by any entity and, therefore, are subject to increased risks, including credit risk
16. 16Our CRE loans 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 foreclosure44% rewritten
17. 17Our CRE loans in respect of smaller multi-family residential properties or smaller mixed use retail/residential properties may be subject to defaults, foreclosure timeline extension, fraud, commercial price depreciation and unfavorable modification of loan principal amount, interest rate and amortization of principalNew
18. 18We 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
19. 19Changes in the underwriting standards by Freddie Mac, Fannie Mae or the Federal Housing Administration (the “FHA”) could make it more difficult to refinance our purchased mortgage loans
20. 20The whole residential mortgage loans and other residential mortgage assets in which we have invested are subject to risk of default, among other risks
21. 21If 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
22. 22We 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 losses44% rewritten
23. 23Certain investments in portfolios of whole mortgage loans and other mortgage assets may require us to purchase less desirable mortgage assets as part of an otherwise desirable pool of mortgage assets, which could subject us to additional risks relating to the less desirable mortgage assetsNew
24. 24To 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
25. 25The 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
26. 26Market 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
27. 27Prepayment rates can change, adversely affecting the performance of our assets and our ability to reinvest the proceeds thereof
28. 28The real estate assets and real estate-related assets we invest in are subject to the risks associated with real property
29. 29The allocation of capital among our mortgage loans may vary, which may adversely affect our financial performance
30. 30Our 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
31. 31Valuations 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
32. 32An 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
33. 33The failure of our Servicer to service our assets effectively would materially and adversely affect us37% rewritten
34. 34We 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
35. 35Contingent or unknown liabilities could materially and adversely affect us
36. 36We 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 reputation68% rewritten
37. 37Our 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
38. 38We 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
39. 39Security breaches and other disruptions could compromise our information and expose us to liability, which would cause our business and reputation to suffer
40. 40Interest rate fluctuations and shifts in the yield curve may cause losses
41. 41Security breaches and other cybersecurity incidents could result in a loss of data, business interruptions, regulatory actions and increased costs, each of which could materially adversely effect on our business and results of operations
42. 42We are subject to risks of loss from weather conditions, man-made or natural disasters and climate change

Risks Related to Financing and Hedging

1. 43We may not be able to access financing sources on favorable terms, or at all, which could adversely affect our ability to execute our business strategyNew
2. 44We 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
3. 45We may not be able to achieve our optimal leverage or target leverage ratios
4. 46Non-recourse long-term financing structures, such as securitizations, expose us to risks that could result in losses to us
5. 47Our 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
6. 48Hedging 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. 49RCM GA is subject to regulation under the Investment Advisers Act as a registered investment adviser30% rewritten
2. 50We 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 operations38% rewritten
3. 51We may be unable to operate within the parameters that allow us to be excluded from regulation as a CPO, which would subject us to additional regulation and compliance requirements, and could materially adversely affect our business and financial condition
4. 52We could be subject to liability for potential violations of predatory lending laws, which could materially adversely affect our business, financial condition and/or results of operations and our ability to make distributions to our stockholders
5. 53Changes to U.S. federal income tax laws could materially and adversely affect us and our stockholders
6. 54Changes in applicable laws or noncompliance with applicable law could materially and adversely affect us

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

1. 55Rithm’s failure to appropriately manage or address conflicts of interest could damage its and our reputation and adversely affect our business, financial condition and/or results of operations
2. 56The Newrez Servicing Agreement was not negotiated at arm’s lengthNew

Risks Related to Our Organizational Structure

1. 57Maintenance of our exclusion from regulation as an investment company under the Investment Company Act imposes significant limitations on our operations
2. 58If 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. 59The ownership limit in our charter may discourage a takeover or business combination that may have benefited our stockholders54% rewritten
4. 60Our stockholders’ ability to control our operations is limited
5. 61Certain provisions of Maryland law could inhibit a change in our control
6. 62Our authorized but unissued Common Stock and preferred stock may prevent a change in control of the Company
7. 63Our 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. 64Our 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. 65Conflicts of interest could arise in the future as a result of our structure

Risks Related to Our Stock

1. 66The market price of our Common Stock and preferred stock may fluctuate, and you could lose all or part of your investment
2. 67Our Common Stock share price has been and may continue to be volatile36% rewritten
3. 68The 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. 69If 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 fraud23% rewritten
5. 70We have not established a minimum distribution payment level on our Common Stock, and we cannot assure you of our ability to make distributions in the future, or that our Board of Directors will not reduce distributions in the future regardless of such abilityNew
6. 71We 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. 72Future 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