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What changed in Rithm Property Trust Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Rithm Property Trust Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+597 added−843 removedSource: 10-K (2025-02-18) vs 10-K (2024-02-28)

Top changes in Rithm Property Trust Inc.'s 2024 10-K

597 paragraphs added · 843 removed · 317 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

49 edited+59 added−161 removed13 unchanged
Biggest changeGAAP, and (C) one-time events pursuant to changes in U.S. GAAP, and certain non-cash items not otherwise described above, in each case after discussions between the Manager and our independent directors and approval by a majority of our independent directors.
Biggest changeThe amount will be adjusted to exclude on a tax-effected basis (A) one-time events pursuant to changes in GAAP, (B) transaction and deal expenses that in the opinion of the New Manager should be excluded for purposes of calculating Earnings Available for Distribution and be amortized over the life of the related investment / transaction, and (C) non-cash items (including depreciation and amortization) that in the judgment of our officers should not be included in Earnings Available for Distribution, which adjustments in clauses (A), (B) and (C) shall only be excluded after discussions between the New Manager and the Company’s Independent Directors and after approval by a majority of the Company’s Independent Directors.
A proliferation of such companies may increase the competition for equity capital and thereby adversely affect the price of our shares of common stock. In addition, some of our competitors may have higher risk tolerances or different risk assessments, which could allow them to consider a wider variety of assets and establish more relationships than us.
A proliferation of such companies may increase the competition for equity capital and thereby adversely affect the price of our shares of common stock. In addition, some of our competitors may have higher risk tolerances or different risk assessments, which could allow them to consider a wider variety of assets and establish more business relationships than us.
Risk Factors — Risks Related to Our Organizational Structure — Maintenance of our exclusion from registration as an investment company under the Investment Company Act imposes significant limitations on our operations.” Commodity Pool Operator Exemption Under the Dodd-Frank Act, any investment fund that trades in swaps may be considered a “commodity pool,” which would cause its operators to be regulated as a “commodity pool operator,” or (“CPO”).
Risk Factors — Risks Related to Our Organizational Structure — Maintenance of our exclusion from regulation as an investment company under the Investment Company Act imposes significant limitations on our operations.” Commodity Pool Operator Exemption Under the Dodd-Frank Act, any investment fund that trades in swaps may be considered a “commodity pool,” which would cause its operators to be regulated as a “commodity pool operator,” or (“CPO”).
We will be required to pay the Manager a termination fee in the event that the Management Agreement is terminated as a result of (i) a termination by us without cause, (ii) our decision not to renew the Management Agreement upon the determination of at least two-thirds of our independent directors for reasons including the failure to agree on revised compensation, (iii) a termination by the Manager as a result of us becoming regulated as an "investment company" under the Investment Company Act of 1940, as amended (the "Investment Company Act") (other than as a result of the acts or omissions of the Manager in violation of investment guidelines approved by our Board of Directors), or (iv) a termination by the Manager if we default in the performance of any material term of the Management Agreement (subject to a notice and cure period).
We will be required to pay the New Manager a termination fee in the event that the Management Agreement is terminated as a result of (i) a termination without cause, (ii) a decision not to renew the Management Agreement upon the determination of at least two-thirds of our independent directors for reasons including the failure to agree on revised compensation, (iii) a termination by the New Manager as a result of our becoming regulated as an “investment company” under the Investment Company Act (other than as a result of the acts or omissions of the New Manager in violation of investment guidelines approved by our Board of Directors), or (iv) a termination by the New Manager if we default in the performance of any material term of the Management Agreement (subject to a notice and cure period).
We primarily target acquisitions of (i) 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, the Company primarily targeted acquisitions of (i) 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.
Risk Factors — Risks Related to Regulatory and Legislative Actions — We 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.” Environmental Matters As an owner of real estate, we are subject to various U.S. federal, state and local environmental laws, regulations and ordinances and also could be liable to third parties resulting from environmental contamination or noncompliance with environmental laws at our properties.
Risk Factors — Risks Related to Regulatory and Legislative Actions — We 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.” 10 Environmental Matters To the extent we own or acquire real estate, we are subject to various U.S. federal, state and local environmental laws, regulations and ordinances and also could be liable to third parties resulting from environmental contamination or noncompliance with environmental laws at any such properties.
The securities issued by any wholly owned or majority-owned subsidiary that we may form and that are excluded from the definition of “investment company” based on Section 3(c)(1) or 3(c)(7) of the Investment Company Act, together with any other investment securities we may own, may not have a value in excess of 40% of the value of our total assets on an unconsolidated basis.
The securities issued by any wholly owned or majority-owned subsidiary that we may form and that are excluded from the definition of “investment company” based on Section 3(c)(1) or 3(c)(7) of the Investment Company Act, together with any other investment securities we may own, would not have a value in excess of 40% of the value of our total assets on an unconsolidated basis or would meet the 3(c)(5)(C) Real Estate Assets Test or the Section 3(c)(6) test.
Securities and Exchange Commission (the “SEC”). The information on our website does not constitute a part of this Annual Report and is not incorporated by reference. Our reference to the URL for our website is intended to be an inactive textual reference only.
The information on our website does not constitute a part of this Annual Report and is not incorporated by reference. Our reference to the URL for our website is intended to be an inactive textual reference only.
Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) are made available on our website as soon as reasonably practicable after we electronically file such material with, or furnish it to, the U.S.
Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) are available to the public from the SEC’s internet site at http://www.sec.gov and are made available on our website as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.
Most of our competitors are significantly larger than us, have greater access to capital and other resources and may have other advantages over us. In addition to existing companies, other companies may be organized for similar purposes, including companies focused on purchasing mortgage assets.
Most of our competitors are significantly larger than us, have greater access to capital and other resources and may have other advantages over us. In addition to existing companies, other companies may be organized for similar purposes, including companies focused on investments in the commercial real estate sector.
Environmental laws can impose liability on an owner or operator of real property for the 17 investigation and remediation of contamination at or migrating from such real property, without regard to whether the owner or operator knew of or was responsible for the presence of the contaminants.
Environmental laws can impose liability on an owner or operator of real property for the investigation and remediation of contamination at or migrating from such real property, without regard to whether the owner or operator knew of or was responsible for the presence of the contaminants. The costs of any required investigation or cleanup of these substances could be substantial.
When undertaken, these derivative instruments likely will expose us to certain risks such as price and interest rate fluctuations, timing risk, volatility risk, credit risk, counterparty risk and changes in the liquidity of markets.
These derivative transactions will be entered into solely for risk management purposes, not for investment purposes. When undertaken, these derivative instruments likely will expose us to certain risks such as price and interest rate fluctuations, timing risk, volatility risk, credit risk, counterparty risk and changes in the liquidity of markets.
Also, under the First Amendment to the Third Amended and Restated Management Agreement with the Manager, which has an effective date of March 1, 2023, our quarterly base management fee will include our unsecured debt securities to the extent the proceeds were used to repurchase our preferred stock.
Also, under the First Amendment to the Third 7 Amended and Restated Management Agreement with the Former Manager, which had an effective date of March 1, 2023, our quarterly base management fee included, in its computation of equity managed, its unsecured debt securities to the extent the proceeds were used to repurchase our preferred stock.
We may not be able to achieve our business objectives due to the competitive risks that we face. Operating and Regulatory Structure Tax Requirements We elected to be taxed as a REIT for U.S. federal income tax purposes beginning with our taxable year ended December 31, 2014.
We may not be able to achieve our business objectives due to the competitive risks that we face. Operating and Regulatory Structure Tax Requirements We have elected and intend to qualify to be taxed as a REIT for U.S. federal income tax purposes.
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.
Our qualification as a REIT will depend upon our ability to meet, on a continuing basis, various complex requirements under the Internal Revenue Code of 1986, as amended, (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 to our stockholders and the concentration of ownership of our capital stock.
Under the Management Agreement, the Manager implements our business strategy and manages our business and investment activities and day-to-day operations, subject to oversight by our Board of Directors. Among other services, the Manager, directly or through affiliates, provides us with a management team and necessary administrative and support personnel.
Under the Former Management Agreement, the Former Manager implemented our business strategy and managed our business and investment activities and day-to-day operations subject to oversight by our Board of Directors. Among other services, the Former Manager provided us with a management team and necessary administrative and support personnel.
If the Servicing Agreement has been terminated other than for cause or the Servicer terminates the Servicing Agreement, we will be required to pay a termination fee equal to the aggregate servicing fees payable under the Servicing Agreement for the immediate preceding 12-month period. Our Servicer services our mortgage loans, MBS, REO and other real estate assets.
If any Servicing Agreement has been terminated other than for cause and/or the Servicer terminates the Servicing Agreement, we will be required to pay a termination fee equal to the aggregate servicing fees payable under the applicable Servicing Agreement for the immediately preceding 12-month period.
Therefore, although we expect 12 to transact in these derivative instruments purely for risk management, they may not adequately protect us from fluctuations in our financing interest rate obligations. No such derivative instruments are currently in use. The Management Agreement On February 26, 2024, we issued a notice to our Manager to terminate the existing Management Agreement.
Therefore, although we expect to transact in these derivative instruments purely for risk management, they may not adequately protect us from fluctuations in our financing interest rate obligations. No such derivative instruments are currently in use.
Servicing fees for our real property assets are the greater of (i) the servicing fee applicable to the underlying mortgage loan prior to foreclosure, or (ii) 1.00% annually of the fair market value of the REO as reasonably determined by the Manager or 1.00% annually of the purchase price of any REO we otherwise purchase.
Servicing fees for our real property assets that are not held in joint ventures are the greater of (i) the servicing fee applicable to the underlying mortgage loan prior to foreclosure and, (ii) 1.00% annually of the fair market value of the REO or 1.00% annually of the purchase price of any REO otherwise purchased by the Company.
In the event that our Board of Directors determines to raise additional equity capital, it has the authority, without stockholder approval, to issue additional common stock or preferred stock in any manner and on such terms and for such consideration as it deems appropriate, at any time, subject to compliance with applicable regulatory requirements.
In the event that we decide to raise additional equity capital, our Board of Directors has the authority, without stockholder approval (subject to certain NYSE) requirements), to issue additional Common Stock or preferred stock in any manner and on such terms and for such consideration it deems appropriate, including in exchange for property.
Our Servicer must comply with a wide array of U.S. federal, state and local laws and regulations that regulate, among other things, the manner in which it services our mortgage loans and manages our real property in accordance with the Servicing Agreement, including Consumer Financial Protection Bureau (“CFPB”) mortgage servicing regulations promulgated pursuant to the Dodd-Frank Act.
Regulation The Servicer must comply with a wide array of United States (“U.S.”) federal, state and local laws and regulations that regulate, among other things, the manner in which it services our mortgage loans and manages our real property in accordance with the Servicing Agreements, including, but not limited to, Consumer Financial Protection Bureau (“CFPB”) mortgage servicing regulations promulgated pursuant to the Dodd-Frank Frank Wall Street Reform and Consumer Protection Act (including the rules promulgated thereunder, the “Dodd-Frank Act”) and various state licensing, supervisory and administrative agencies.
These laws and regulations cover a wide range of topics. The laws and regulations are complex and vary greatly among the states and localities. In addition, these laws and regulations often contain vague standards or requirements, which make compliance efforts challenging.
These laws and regulations cover a wide range of topics. The laws and regulations are complex and vary greatly among the states and localities. In addition, these laws and regulations often contain vague standards or requirements, which make compliance efforts challenging. Further, the current presidential administration has indicated that it plans to significantly reduce the regulatory burden on businesses.
The costs of any required investigation or cleanup of these substances could be substantial. The liability is generally not limited under such laws and could exceed the property’s value and the aggregate assets of the liable party.
The liability is generally not limited under such laws and could exceed the property’s value and the aggregate assets of the liable party.
We have elected to treat both GAJX Real Estate Corp. and GA-TRS as TRSs under the Code. Investment Company Act Exclusion We conduct our operations so that neither we nor any of our subsidiaries is required to register as an investment company under the Investment Company Act.
Investment Company Act Exclusion We conduct our operations so that neither we nor any of our subsidiaries is required to register as an investment company under the Investment Company Act.
Section 3(c)(5)(C), as interpreted by the staff of the SEC, requires an entity to invest at least 55% of its assets in “mortgages and other liens on and interests in real estate,” which we refer to as “qualifying real estate interests,” and at least 80% of its assets in qualifying real estate interests plus “real estate-related assets.” On August 31, 2011, the SEC published a concept release entitled “Companies Engaged in the Business of Acquiring Mortgages and Mortgage Related Instruments” (Investment Company Act Rel.
Section 3(c)(5)(C), as interpreted by the staff of the SEC, requires an entity to invest at least 55% of its assets in “mortgages and other liens on and interests in real estate,” which we refer to as “qualifying real estate interests,” and at least 80% of its assets in qualifying real estate interests plus “real estate-related assets” (together, the “3(c)(5)(C) Real Estate Assets Tests”).
The total fees we incur for these services will be dependent upon the property value, previous UPB of the relevant loan, and the number of REO properties.
The total fees we incur for these services are dependent upon the following: (i) for fees based on mortgage loans, the total fees will be dependent upon the UPB and the type of mortgage loans that the Servicer services; and (ii) for fees based on REO properties, property values, previous UPB of the relevant loan, and the number of REO properties.
However, we may undertake risk mitigation activities with respect to our debt financing interest rate obligations. We expect that our debt financing may at times be based on a floating rate of interest calculated on a fixed spread over the relevant index, as determined by the particular financing arrangement.
We expect that our debt financing may at times be based on a floating rate of interest calculated on a fixed spread over the relevant index, as determined by the particular financing arrangement. A significantly rising interest rate environment could have an adverse effect on the cost of our financing.
We also reimburse the Servicer for all customary, reasonable and necessary out-of-pocket costs and expenses incurred in the performance of its obligations, including the actual cost of any repairs and renovations to REO properties.
Newrez is reimbursed for all customary, reasonable and necessary out-of-pocket costs and expenses incurred in the performance of its obligations, including the actual cost of any repairs and renovations to foreclosed property undertaken on our behalf.
Our strategy consists of: • constructing and owning a portfolio of residential RPLs and SBC loans at discounts to the unpaid principal balance (“UPB”) and significant discounts to underlying property values; • expanding our acquisitions of RPLs, SBC loans, and limited acquisitions of NPLs through joint ventures; • constructing concentrations of investments in geographic areas, cities and neighborhoods with certain demographic and economic trends and attributes; • working, through a licensed mortgage servicer, to (1) support the continued performance of RPLs; (2) convert a portion of our NPLs to performing status; (3) determine the optimal loss mitigation strategy on an asset-by-asset basis; and (4) manage the process and timelines for converting NPLs to REO held-for-sale; • when economically efficient, securitizing our RPL portfolio to create long-term, fixed rate, non-recourse financing, while retaining one or more tranches of any subordinated securities we may create; • opportunistically mitigating our interest rate and prepayment risk; and • working through joint ventures with third party investors to acquire pools of mortgage loans and other mortgage related assets, which may create value additive opportunities for us.
Prior to the Strategic Transaction, Rithm Property Trust’s investment strategy focused on: (i) owning a portfolio of residential RPLs and small balance commercial loans (“SBC Loans”) at discounts to the unpaid principal balance (“UPB”) and significant discounts to underlying property values; (ii) expanding acquisitions of RPLs, SBC Loans, and limited acquisitions of NPLs through joint ventures; (iii) working, through a licensed mortgage servicer, to (a) support the continued performance of RPLs; (b) convert a portion of the Company’s NPLs to performing status; (c) determining the optimal loss mitigation strategy on an asset-by-asset basis; and (d) managing the process timelines for converting NPLs to real estate properties (“REO”) held-for-sale; (iv) securitizing the Company’s RPL portfolio to create long-term, fixed rate, non-recourse financing, while retaining one or more tranches of any subordinated securities created; (v) mitigating the Company’s interest rate and prepayment risk; and (vi) working through joint ventures with third party investors to acquire pools of mortgage loans and other mortgage related assets, which may create value additive opportunities for the Company.
Under the Management Agreement, we pay a quarterly base management fee based on our stockholders’ equity, including equity equivalents such as our issuance of convertible senior notes.
Additionally, we paid directly for the internal audit function that reported directly to the Audit Committee and the Board of Directors. Under the Former Management Agreement, we paid a quarterly base management fee based on our stockholders’ equity, including equity equivalents such as our issuance of convertible senior notes.
We are organized as a holding company and conduct our businesses primarily through wholly owned subsidiaries of our Operating Partnership. Our Operating Partnership holds certain real estate and real estate-related assets, directly and through subsidiaries. Neither we nor our Operating Partnership nor Great Ajax Funding is an investment company under Section 3(a)(1)(C).
Our Operating Partnership holds certain real estate and real estate-related assets, directly and through subsidiaries. Neither we nor our Operating Partnership nor Great Ajax Funding LLC (“Great Ajax Funding”) is an investment company under Section 3(a)(1)(C) or is excluded from the definition of investment company pursuant to Section 3(c)(5)(C) or Section 3(c)(6) of the Investment Company Act.
The termination fee will be equal to twice the combined base fee and incentive fees payable to the Manager during the 12-month period ended as of the end of the most recently completed fiscal quarter prior to the date of termination.
The termination fee will be equal to three times the base fee plus the higher of (i) three times the incentive fees payable to the New Manager during the 12-month period ended as of the end of the most recently completed fiscal quarter prior to the date of termination and (ii) the total amount of inventive fee that the New Manager would have earned based on the total unrealized gain calculated as of the end of the most recently completed fiscal quarter prior to the date of termination.
From time to time, the Servicer may become party to certain regulatory inquiries or proceedings, which, even if unrelated to the residential mortgage servicing operation, may result in adverse findings, fines, penalties or other assessments and may affect adversely the Servicer’s reputation. 14 The Servicer receives an annual servicing fee ranging from 0.65% annually of UPB to 1.25% annually of UPB.
The implications and any actual changes to current regulatory processes are currently unknown, creating additional uncertainty. From time to time, the Servicer may become party to certain regulatory inquiries or proceedings, which, even if unrelated to the residential mortgage servicing 8 operation, may result in adverse findings, fines, penalties or other assessments and may affect adversely the Servicer’s reputation.
GA-TRS may rely on Section 3(c)(1) or 3(c)(7) for its Investment Company Act exclusion and, therefore, our interest in such subsidiary would constitute an ‘‘investment security’’ for purposes of determining whether we pass the 40% test. We also may form certain other wholly owned or majority-owned subsidiaries that will invest, subject to our investment guidelines, in other real estate-related assets.
We also may form certain other wholly owned or majority-owned subsidiaries that will invest, subject to our investment guidelines, in other real estate-related assets. These subsidiaries may rely upon the exclusion from the definition of investment company under the Investment Company Act pursuant to Section 3(c)(1) or 3(c)(7) of the Investment Company Act.
No. 29778). This release notes that the SEC is reviewing the Section 3(c)(5)(C) exclusion relied upon by companies similar to us that invest in mortgage loans.
On August 31, 2011, the SEC published a concept release entitled “Companies Engaged in the Business of Acquiring Mortgages and Mortgage Related Instruments” (Investment Company Act Rel. No. 29778). This release notes that the SEC is reviewing the Section 3(c)(5)(C) exclusion relied upon by companies similar to us that invest in mortgage loans.
To mitigate this risk, we may use derivative financial instruments such as interest rate swaps and interest rate options in an effort to reduce the variability of earnings caused by changes in the interest rates we pay on our debt, subject to our maintaining compliance with the terms of the no-action letter so that we are not treated as a commodity pool operator for purposes of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”).
To mitigate this risk, we may use derivative financial instruments such as interest rate swaps and interest rate options in an effort to reduce the variability of earnings caused by changes in the interest rates we pay on our debt. We may also fund floating rate investments with floating rate debt.
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.
We believe that, commencing with our initial taxable year ended December 31, 2014, we have been organized in conformity with the requirements for qualification and taxation as a REIT under the Internal Revenue Code and that our manner of operation will enable us to meet the requirements for qualification and taxation as a REIT.
Our principal objective is to generate attractive risk-adjusted returns for our stockholders over the long-term through dividends and capital appreciation. The Board of Directors has adopted an investment policy designed to facilitate the management of our capital and assets and the maintenance of an investment portfolio profile that meets our objectives.
Our principal objective is to generate attractive risk-adjusted returns for our stockholders over the long-term through dividends and capital appreciation. 5 Financing Strategy Our objective is to generate attractive risk-adjusted returns for our stockholders, which at times incorporates the use of leverage.
We may acquire RPLs and NPLs 3 either directly or in joint ventures with institutional accredited investors. The joint ventures are structured as securitization trusts, of which we acquire debt securities and beneficial interests. We may also acquire or originate SBC loans.
We acquired RPLs and NPLs either directly or in joint ventures with institutional accredited investors. The joint ventures were structured as securitization trusts, from which the Company acquired debt securities and beneficial interests. On June 11, 2024, we completed our previously announced strategic transaction with Rithm (such transactions together, the “Strategic Transaction”).
We may also invest in the securities of other REITs, other entities engaged in real estate activities or securities of other issuers for the purpose of exercising control over such entities or with the intention of realizing short-term or long-term gains.
We also may make loans to, or provide guarantees of certain obligations of, our subsidiaries. Subject to the percentage ownership and gross income and asset tests necessary for REIT qualification, we may invest in securities of other REITs, other entities engaged in real estate activities or securities of other issuers, including for the purpose of exercising control over such entities.
We may be required to pay a quarterly and annual incentive management fee based on our cash distributions to our stockholders and increases in our book value. Manager fees are expensed in the quarter incurred and the portion payable in common stock is included in stockholders’ equity at quarter end.
We were periodically required to pay a quarterly incentive management fee based on cash distributions to its stockholders and the change in book value and had the option to pay up to 100% of the base and incentive fees in cash or in shares of our Common Stock.
These subsidiaries may rely upon the exclusion from the definition of investment company under the Investment Company Act pursuant to Section 3(c)(1) or 3(c)(7) of the Investment Company Act.
This exclusion applies to our majority-owned subsidiaries that are excepted from the definition of investment company pursuant to Section 3(c)(5)(C) or Section 3(c)(6).
In addition, we conduct our operations so that neither we nor our Operating Partnership nor Great Ajax Funding come within the definition of an investment company by ensuring that less than 40% of the value of our total assets on an unconsolidated basis consists of “investment securities.” We monitor our compliance with the 40% test and the holdings of our subsidiaries to ensure that each of our subsidiaries is in compliance with an applicable exemption or exclusion from registration as an investment company under the Investment Company Act. 16 Our 19.8% equity interest in our Manager and our 9.5% equity interest in the parent company of our Servicer are owned by GA-TRS, which is a special purpose subsidiary of our Operating Partnership.
In addition, we conduct our operations so that we, our Operating Partnership and Great Ajax Funding (i) do not come within the definition of an investment company, by ensuring that less than 40% of the value of our total assets on an unconsolidated basis consists of “investment securities”; or (ii) meet the 3(c)(5)(C) Real Estate Assets Test or the Section 3(c)(6) primarily engaged test.
Provided that we continue to maintain our qualification as a REIT, we generally will not be subject to U.S. federal income tax on our REIT taxable income that is currently distributed to our stockholders.
As a REIT, we generally pay no federal, state or local income tax on income that is currently distributed to our stockholders if we distribute at least 90% of our current taxable income each year.
Changes in Our Management and Board of Directors On February 26, 2024, we issued a termination notice to our Manager. We are expected to pay the Manager the contractually stipulated termination fee substantially in Common Stock.
On February 26, 2024, we issued a termination notice to our Former Manager, and, on June 11, 2024, 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.
The base management fee equals 1.5% of our stockholders’ equity per annum, including equity equivalents such as our convertible senior notes, and is calculated and payable quarterly in arrears. We have the option to pay the management fee between 50% to 100% cash at our discretion, and pay the remainder in shares of our common stock.
The base management fee equals 1.5% of our stockholders’ equity, including equity equivalents such as our issuance of convertible senior notes per annum. Also, under the 6 Management Agreement, our quarterly base management fee includes, in its computation of equity managed, its unsecured debt securities to the extent the proceeds were used to repurchase our preferred stock.
The servicing fee is based upon the status of the loan at acquisition. Servicing fees are paid monthly. The fees do not change if an RPL becomes non-performing or vice versa. The total fees we incur for these services depend upon the UPB and type of mortgage loans that the Servicer services pursuant to the terms of the Servicing Agreement.
Servicing fees for mortgage loans range from 0.42% to 1.25% annually of UPB at acquisition (or the fair market value or purchase price of REO) and are paid monthly. The servicing fee is based upon the status of the loan at acquisition. A change in status from RPL to NPL does not cause a change in the servicing fee rate.
On February 26, 2024, we issued a termination notice to our Manager. Subject to receipt of stockholder approval, we will enter into a termination and release agreement with the Manager and into a new management agreement with RCM GA, in the form agreed upon with RCM GA.
On February 26, 2024, we issued a termination notice to the Former Manager, in connection with the Strategic Transaction, and on June 11, 2024, we terminated the Former Management Agreement, entered into a termination and release agreement with the Former Manager and issued approximately 3.2 million shares of Common Stock and paid $0.6 million in cash to the Former Manager in connection with the termination.
The Manager has agreed to hold any shares of common stock received by it as payment of the base management fee for at least three years from the date such shares of common stock are received. The Manager is also entitled to an incentive fee, payable quarterly and calculated in arrears, which contains both a quarterly and annual component.
Under the Management Agreement, the New Manager is entitled to a base management fee and an incentive fee calculated and payable quarterly with respect to each calendar quarter (or partial quarter that the agreement is in effect) in arrears in cash or, at the election of the New Manager, in shares of Common Stock of the Company.
Removed
Item 1. Business Overview Great Ajax Corp. is a Maryland corporation that is organized and operated in a manner intended to allow us to qualify as a REIT.
Added
Item 1. Business Overview Rithm Property Trust, formerly Great Ajax Corp, a Maryland corporation, is an externally managed REIT formed on January 30, 2014, and capitalized on March 28, 2014, by its then sole stockholder, Aspen, an affiliate of Aspen Capital. The Company operates as a mortgage REIT.
Removed
The SBC loans that we target through acquisitions generally have a principal balance of up to $5.0 million and are secured by multi-family residential and commercial mixed use retail/residential properties 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.
Added
The Strategic Transaction included (i) the entry into a Securities Purchase Agreement, dated as of February 26, 2024, by and among the Company, the Operating Partnership, the Former Manager and Rithm (the “Securities Purchase Agreement”), which provided for, among other things, upon the approval of our stockholders on May 20, 2024, the sale of $14.0 million of our common stock, par value $0.01 (“Common Stock”), at a price of $4.87 per share (which represents the trailing five-day average closing price of our Common Stock on the New York Stock Exchange (“NYSE”) as of the date of the Securities Purchase Agreement, and (ii) upon the approval of our stockholders on May 20, 2024, the entry into a new Management Agreement, dated as of June 11, 2024 (as amended by that First Amendment to the Management Agreement, dated as of October 18, 2024 and as may be further amended, modified or supplemented from time to time, the “Management Agreement”), by and between RCM GA and the Company, under which, RCM GA became our new external manager.
Removed
Additionally, we invest in single-family and smaller commercial properties directly either through a foreclosure event of a loan in our mortgage portfolio, or, less frequently, through a direct acquisition. We own a 19.8% equity interest in our Manager and an 9.5% equity interest in the parent company of our Servicer through GA-TRS, a wholly owned subsidiary of the Operating Partnership.
Added
Additionally, on February 26, 2024, we entered into a term loan with a subsidiary of Rithm (the “Credit Agreement”), for which the draw period has expired.
Removed
We have elected to treat GA-TRS as a taxable REIT subsidiary under the Code. Our mortgage loans and real properties are serviced by the Servicer, also an affiliated company.
Added
Pursuant to the Securities Purchase Agreement, the entry into the Credit Agreement was accompanied by the entry into a Warrant Agreement, dated as of April 23, 2024, by and between the Company and Equiniti Trust Company, pursuant to which the Company issued warrants to Rithm to purchase 6.5 million of shares with an exercise price of $5.36 per share (the “2024 Warrants”).
Removed
In 2014, we formed Great Ajax Funding LLC, a wholly owned subsidiary of the Operating Partnership, 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 we may form for additional secured borrowings.
Added
See Note 7 — Commitments and Contingencies to our consolidated financial statements included in this Annual Report for additional information.
Removed
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 our repurchase agreements.
Added
For a full description of the components of the Strategic Transaction, see our Definitive Proxy Statement filed with the Securities and Exchange Commission (the “SEC”) 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.
Removed
On February 1, 2015, we formed GAJX Real Estate Corp., as a wholly owned subsidiary of the Operating Partnership, to own, maintain, improve and sell certain real estate owned (“REO”) properties purchased by us. We have elected to treat GAJX Real Estate Corp. as a TRS under the Code.
Added
On December 2, 2024, we rebranded and changed our name to Rithm Property Trust Inc. from Great Ajax Corp. In connection with the Strategic Transaction, we terminated our loan servicing agreement with the Former Servicer, and disposed of our interest in Great Ajax FS LLC, the parent company of Gregory.
Removed
Our Operating Partnership, through interests in certain entities, as of December 31, 2023, owns 99.9% of Great Ajax II REIT Inc. which owns Great Ajax II Depositor LLC which then acts as the depositor of mortgage loans into securitization trusts and holds subordinated securities issued by such trusts.
Added
On June 1, 2024, Gregory assigned all of the servicing agreements for its mortgage loans and real property (the “Servicing Agreements”) to Newrez, an affiliate of Rithm through a Servicing Transfer Agreement dated June 1, 2024, by and between Gregory and Newrez (the “Servicing Transfer Agreement”). The terms of the Servicing Agreements remain unchanged.
Removed
Similarly, as of December 31, 2023, the Operating Partnership wholly owned Great Ajax III Depositor LLC, which was formed to act as the depositor into Ajax Mortgage Loan Trust 2021-E ("2021-E"), which is a real estate mortgage investment conduit ("REMIC"). We have securitized mortgage loans through these securitization trusts and retained subordinated securities from the secured borrowings.
Added
We believe the Strategic Transaction creates a number of benefits for our stockholders, including the opportunity to benefit from a shift in our strategic direction and the opportunity for Rithm Property Trust to benefit from Rithm’s real estate, financial services and capital markets expertise, as well as Rithm’s industry relationships.
Removed
These trusts are considered to be variable interest entities (“VIEs”), and we have determined that we are the primary beneficiary of the VIEs. In 2018, we formed Gaea Real Estate Corp. (“Gaea”), as a wholly-owned subsidiary of the Operating Partnership that invests in multifamily properties with a focus on property appreciation and triple net lease veterinary clinics.
Added
In connection with the Strategic Transaction, we have shifted our investment focus to a flexible commercial real estate strategy.
Removed
We elected to treat Gaea as a TRS under the Code for 2018 and elected to treat Gaea as a REIT under the Code in 2019 and thereafter.
Added
We believe investments in the commercial real estate sector offer an attractive investment opportunity given market dynamics that are creating significant refinancing challenges and funding gaps in the sector. 3 As of June 11, 2024, although we will evaluate all potentially accretive opportunities, our new investment strategy is focused on originating and/or acquiring loans and securities collateralized by various commercial real estate assets and investing in certain target assets, including 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, SBC Loans, as well as commercial mortgage servicing rights, commercial real estate properties and operating businesses in the commercial real estate sector.
Removed
Also during 2018, we formed Gaea Real Estate Operating Partnership LP, a wholly-owned subsidiary of Gaea, to hold investments in commercial real estate assets, and Gaea Real Estate Operating LLC, to act as its general partner.
Added
Under RCM GA’s management, we have started to shift our strategic direction towards the commercial real estate sector through investments in CMBS and have been selling residential mortgage loans and RMBS. We do not anticipate investing further in RPLs, NPLs or RMBS.
Removed
We also formed Gaea Veterinary Holdings LLC, BFLD Holdings LLC, Gaea Commercial Properties LLC, Gaea Commercial Finance LLC and Gaea RE Holdings LLC as subsidiaries of Gaea Real Estate Operating Partnership. In 2019, we formed DG Brooklyn Holdings LLC, also a subsidiary of Gaea Real Estate Operating Partnership LP, to hold investments in multi-family properties.
Added
Through our New 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.
Removed
On November 22, 2019, Gaea completed a private capital raise transaction through which it raised $66.3 million from the issuance of its common stock to third parties. Additionally, in January 2022, Gaea completed a second private capital raise in which it raised approximately $30.0 million from the issuance of its common stock and warrants.
Added
We will seek to attain strong risk-adjusted returns for our investors over the long term by sourcing and managing a diversified portfolio of target assets, financed in a manner that is designed to deliver attractive returns across a variety of market conditions and economic cycles.
Removed
Also, during the year ended December 31, 2023, GA-TRS received an additional 20,991 shares of Gaea common stock for $0.3 million due to the termination of Gaea's management agreement as Gaea's manager distributed its remaining shares to our Manager, which then our Manager distributed its shares to its investors and this increased our ownership.
Added
Further detail on the target assets is included below: • Senior Mortgage Loans — These loans are typically secured by commercial real estate assets and may include construction loans. In some cases, first lien mortgages may be divided into an A-Note and a B-Note.
Removed
At December 31, 2023 we owned approximately 22.2% of Gaea. We account for our investment in Gaea under the equity method. We elected to be taxed as a REIT for U.S. federal income tax purposes beginning with our taxable year ended December 31, 2014.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

176 edited+101 added−116 removed195 unchanged
Biggest changeUnder current Maryland law, our present and former directors and officers will not have any liability to us or our stockholders for money damages other than liability resulting from: 42 • actual receipt of an improper benefit or profit in money, property or services; or • active and deliberate dishonesty by the director or officer that was established by a final judgment and is material to the cause of action.
Biggest changeUnder current Maryland law, our present and former directors and officers will not have any liability to us or our stockholders for money damages other than liability resulting from: • actual receipt of an improper benefit or profit in money, property or services; or • active and deliberate dishonesty by the director or officer that was established by a final judgment and is material to the cause of action. 37 In addition, our charter authorizes us to indemnify our present and former directors and officers for actions taken by them in those and other capacities to the maximum extent permitted by Maryland law and our bylaws require us to indemnify our present and former directors and officers, to the maximum extent permitted by Maryland law, in the defense of any proceeding to which he or she is made, or threatened to be made, a party by reason of his or her service to us as a director or officer in these and other capacities.
Additionally, in connection with mortgage market reforms and recent and possible future regulatory developments, servicers of higher risk loans may be subject to increased scrutiny by state and U.S. federal regulators or may experience higher compliance costs, which could result in a further increase in servicing costs.
Additionally, in connection with mortgage market reforms and recent and possible future regulatory developments, servicers of higher risk loans may be subject to increased scrutiny by U.S. state and federal regulators or may experience higher compliance costs, which could result in a further increase in servicing costs.
The securities issued by our subsidiaries that are 40 excluded from the definition of “investment company” under Section 3(c)(1) or Section 3(c)(7) of the Investment Company Act, together with other investment securities we may own, cannot exceed 40% of the value of all our assets (excluding U.S. government securities and cash) on an unconsolidated basis.
The securities issued by our subsidiaries that are excluded from the definition of “investment company” under Section 3(c)(1) or Section 3(c)(7) of the Investment Company Act, together with other investment securities we may own, cannot exceed 40% of the value of all our assets (excluding U.S. government securities and cash) on an unconsolidated basis.
If we fail to establish and maintain an effective system of internal controls, we may not be able to determine accurately our financial results or to prevent fraud. Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud.
If 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. Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud.
Our 19.8% equity interest in our Manager and our 9.5% equity interest in the parent company of our Servicer are held by GA-TRS, which is a special purpose subsidiary of our Operating Partnership, and GA-TRS may rely on Section 3(c)(1) or Section 3(c)(7) for its Investment Company Act exclusion and, therefore, our interest in such subsidiary would constitute an “investment security” for purposes of determining whether we pass the 40% test (see “Item 1.
Our 19.8% equity interest in our Former Manager and our 9.5% equity interest in the parent company of our Servicer are held by GA-TRS, which is a special purpose subsidiary of our Operating Partnership, and GA-TRS may rely on Section 3(c)(1) or Section 3(c)(7) for its Investment Company Act exclusion and, therefore, our interest in such subsidiary would constitute an “investment security” for purposes of determining whether we pass the 40% test (see “Item 1.
Certain jurisdictions require licenses to purchase, hold, enforce or sell residential mortgage loans. In the event that any such licensing requirement is applicable and we are not able to obtain such licenses in a timely manner or at all, our ability to implement our business strategy could be adversely affected, which could materially and adversely affect us.
In the event that any such licensing requirement is applicable and we are not able to obtain such licenses in a timely manner or at all, our ability to implement our business strategy could be adversely affected, which could materially and adversely affect us. Certain jurisdictions require a license to purchase, hold, enforce or sell residential mortgage loans.
Our Manager’s or our Servicer’s failure to comply with these laws, regulations and rules may result in reduced payments by borrowers, modification of the original terms of mortgage loans, permanent forgiveness of debt, restrictions on tenant evictions, delays in the foreclosure process, increased servicing advances, litigation, enforcement actions, and repurchase and indemnification obligations.
Our New Manager’s or our Servicer’s failure to comply with these laws, regulations and rules may result in reduced payments by borrowers, modification of the original terms of mortgage loans, permanent forgiveness of debt, restrictions on tenant evictions, delays in the foreclosure process, increased servicing advances, litigation, enforcement actions, and repurchase and indemnification obligations.
The frequency at which prepayments (including voluntary prepayments by borrowers, loan buyouts and liquidations due to defaults and foreclosures) occur on mortgage loans, including those underlying MBS, is affected by a variety of factors, including, home price appreciation, prevailing level of interest rates as well as economic, demographic, tax, social, legal, and other factors.
The frequency at which prepayments (including voluntary prepayments by borrowers, loan buyouts and liquidations due to defaults and foreclosures) occur on residential mortgage loans, including those underlying MBS, is affected by a variety of factors, including, home price appreciation, prevailing level of interest rates as well as economic, demographic, tax, social, legal, and other factors.
For example, by relying on incorrect models 27 and data, especially valuation or cash flow models, we may be induced to buy certain assets at prices that are too high, to sell certain other assets at prices that are too low, overestimate the timing or amount of cash flows expected to be collected, underestimate the timing or amount of cash flows expected to be collected, or to miss favorable opportunities altogether.
For example, by relying on incorrect models and data, especially valuation or cash flow models, we may be induced to buy certain assets at prices that are too high, to sell certain other assets at prices that are too low, overestimate the timing or amount of cash flows expected to be collected, underestimate the timing or amount of cash flows expected to be collected, or to miss favorable opportunities altogether.
Similarly, any hedging based on faulty models and data may prove to be unsuccessful. Valuations 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.
Similarly, any hedging based on faulty models and data may prove to be unsuccessful. 22 Valuations 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.
The manner in which we compete and the types of SBC loans we are able to acquire will be affected by changing conditions resulting from sudden changes in the commercial real estate industry, regulatory environment, the role of credit rating agencies or their rating criteria or process, or the U.S. and global economies generally.
The manner in which we compete and the types of commercial real estate loans we are able to acquire will be affected by changing conditions resulting from sudden changes in the commercial real estate industry, regulatory environment, the role of credit rating agencies or their rating criteria or process, or the U.S. and global economies generally.
While total cash collection may be higher than anticipated over the life of the loan, current period operating results could be adversely impacted. The real estate assets and real estate-related assets we invest in are subject to the risks associated with real property. We own real estate directly as well as assets that are secured by real estate.
While total cash collection may be higher than anticipated over the life of the loan, current period operating results could be adversely impacted. 21 The real estate assets and real estate-related assets we invest in are subject to the risks associated with real property. We own real estate directly as well as assets that are secured by real estate.
In lieu of obtaining such licenses, we may contribute our acquired RPLs to one or more wholly owned trusts whose trustee is a national bank, which may be exempt from state licensing requirements, or the seller of such loans may continue to hold the loans on our behalf until we obtain the applicable state license.
In lieu of obtaining such licenses, we may contribute our acquired RPLs to one or more wholly owned trusts whose trustee is a national bank, which may be exempt from state licensing requirements, or the seller of such loans may continue to hold the loans on our behalf or sell such loans until we obtain the applicable state license.
In addition to deterring potential transactions that may be favorable to our stockholders, these provisions may also decrease your ability to sell our common stock. Our stockholders’ ability to control our operations is limited. Our Board of Directors approves our major strategies, including our strategies regarding investments, financing, growth, debt capitalization, REIT qualification and distributions.
In addition to deterring potential transactions that may be favorable to our stockholders, these provisions may also decrease your ability to sell our common stock. 36 Our stockholders’ ability to control our operations is limited. Our Board of Directors approves our major strategies, including our strategies regarding investments, financing, growth, debt capitalization, REIT qualification and distributions.
Additionally, in the event of the bankruptcy of a mortgage loan borrower, the mortgage loan to such borrower will be deemed to be secured only to the extent of the value of the underlying collateral at the time of bankruptcy (as determined by the bankruptcy court), and the lien securing the mortgage loan will be subject to the avoidance powers of the bankruptcy trustee or debtor-in-possession to the extent the lien is unenforceable under state law.
Additionally, in the event of the bankruptcy of a borrower, the mortgage loan to such borrower may be deemed to be secured only to the extent of the value of the underlying collateral at the time of bankruptcy (as determined by the bankruptcy court), and the lien securing the mortgage loan will be subject to the avoidance powers of the bankruptcy trustee or debtor-in-possession to the extent the lien is unenforceable under state law.
A number of factors, including a general economic downturn, acts of nature, terrorism, social unrest and civil disturbances, may impair a borrower’s ability to repay a mortgage loan. Foreclosure of a mortgage loan can be an expensive and lengthy process, which could have a substantial 23 negative effect on our anticipated return on a foreclosed mortgage loan.
A number of factors, including a general economic downturn, acts of nature, terrorism, social unrest and civil disturbances, may impair a borrower’s ability to repay a mortgage loan. Foreclosure of a mortgage loan can be an expensive and lengthy process, which could have a substantial negative effect on our anticipated return on a foreclosed mortgage loan.
In addition, if we exceed our target leverage ratios, the potential adverse impact on our financial condition and results of operation described above may be amplified. Non-recourse long-term financing structures such as securitizations expose us to risks that could result in losses to us.
In addition, if we exceed our target leverage ratios, the potential adverse impact on our financial condition and results of operation described above may be amplified. 28 Non-recourse long-term financing structures such as securitizations expose us to risks that could result in losses to us.
To assist us in qualifying as a REIT, among other purposes, our charter generally limits the beneficial or constructive ownership of our (a) common stock by any person to no more than 9.8% in value or in number of shares, whichever is more restrictive, of the aggregate of the outstanding shares of our common stock and (b) capital stock by any person to no more than 9.8% in value or in number of shares, whichever is more restrictive, of the aggregate of the outstanding shares of our capital 41 stock.
To assist us in qualifying as a REIT, among other purposes, our charter generally limits the beneficial or constructive ownership of our (a) Common Stock by any person to no more than 9.8% in value or in number of shares, whichever is more restrictive, of the aggregate of the outstanding shares of our Common Stock and (b) capital stock by any person to no more than 9.8% in value or in number of shares, whichever is more restrictive, of the aggregate of the outstanding shares of our capital stock.
Net operating income of an income-producing property can be affected by, among other things: 22 • tenant mix; • success of tenant businesses; • property management decisions; • property location and condition; • competition from comparable types of properties; • changes in laws that increase operating expenses or limit rents that may be charged; • any need to address environmental contamination at the property or the occurrence of any uninsured casualty at the property; • changes in national, regional or local economic conditions and/or specific industry segments; • declines in regional or local real estate values; • declines in regional or local rental or occupancy rates; • increases in interest rates; • real estate tax rates and other operating expenses; • changes in governmental rules, regulations and fiscal policies, including environmental legislation; and • acts of God, terrorist attacks, social unrest and civil disturbances.
Net operating income of an income-producing property can be affected by, among other things: • tenant mix; • success of tenant businesses; • property management decisions; • property location and condition; • competition from comparable types of properties; • changes in laws that increase operating expenses or limit rents that may be charged; • any need to address environmental contamination at the property or the occurrence of any uninsured casualty at the property; • changes in national, regional or local economic conditions and/or specific industry segments; 17 • declines in regional or local real estate values; • declines in regional or local rental or occupancy rates; • increases in interest rates; • real estate tax rates and other operating expenses; • changes in governmental rules, regulations and fiscal policies, including environmental legislation; and • acts of God, terrorist attacks, social unrest and civil disturbances.
We may not terminate the Servicing Agreement except for cause or if we terminate the Management Agreement for cause, the Servicer may terminate the Servicing Agreement without cause by providing written notice to us no later than 180 days prior to December 31 of any year, and the Servicing Agreement will terminate effective on the December 31 next following the delivery of such notice.
We may not terminate the Servicing Agreements except for cause or if we terminate the Management Agreement for cause, the Servicer may terminate the Servicing Agreements without cause by providing written notice to us no later than 180 days prior to December 31 of any year, and the Servicing Agreements will terminate effective on the December 31 next following the delivery of such notice.
Further deterioration of the mortgage market and investor perception of the risks associated with MBS we may retain as part of our securitizations, as well as other assets that we acquire could materially adversely affect our business, financial condition and results of operations and our ability to make distributions to our stockholders.
Further deterioration of the mortgage market and investor perception of the risks associated with MBS we may retain as part of our securitizations, as well as other assets that we acquire could adversely affect our business, financial condition and results of operations and our ability to make distributions to our stockholders.
Significant repurchase activity could materially adversely affect our business, financial condition and results of operations and our ability to make distributions to our stockholders. Further, depending on the level of repurchase and resale activities, we may determine to conduct any such activities through a taxable REIT subsidiary.
Significant repurchase activity could materially adversely affect our business, financial condition and results of operations and our ability to make distributions to our stockholders. Further, depending on the level of repurchase and resale activities, we may determine to conduct any such activities through a taxable REIT subsidiary (“TRS”).
Interest rate hedging may fail to protect or could adversely affect us because, among other things: • interest rate hedging can be expensive, particularly during periods of rising and volatile interest rates; • available interest rate hedges may not correspond directly with the interest rate risk for which protection is sought; • the duration of the hedge may not match the duration of the related assets or liabilities being hedged; • to the extent hedging transactions do not satisfy certain provisions of the Code or are not made through a TRS, the amount of income that a REIT may earn from hedging transactions to offset interest rate losses is limited by the Code provisions governing REITs; • the value of derivatives used for hedging is adjusted from time to time in accordance with accounting rules to reflect changes in fair value; and downward adjustments, or “mark to market losses,” would reduce our stockholders’ equity; • the credit quality of the hedging counterparty owing money on the hedge may be downgraded to such an extent that it impairs our ability to sell or assign our side of the hedging transaction; and • the hedging counterparty owing money in the hedging transaction may default on its obligation to pay.
Interest rate hedging may fail to protect or could adversely affect us because, among other things: • interest rate hedging can be expensive, particularly during periods of rising and volatile interest rates; • available interest rate hedges may not correspond directly with the interest rate risk for which protection is sought; 29 • the duration of the hedge may not match the duration of the related assets or liabilities being hedged; • to the extent hedging transactions do not satisfy certain provisions of the Internal Revenue Code or are not made through a TRS, the amount of income that a REIT may earn from hedging transactions to offset interest rate losses is limited by the Internal Revenue Code provisions governing REITs; • the value of derivatives used for hedging is adjusted from time to time in accordance with accounting rules to reflect changes in fair value; and downward adjustments, or “mark-to-market losses,” would reduce our stockholders’ equity; • the credit quality of the hedging counterparty owing money on the hedge may be downgraded to such an extent that it impairs our ability to sell or assign our side of the hedging transaction; and • the hedging counterparty owing money in the hedging transaction may default on its obligation to pay.
In addition, we may change our 39 investment policy and guidelines and targeted asset classes at any time without the consent of our stockholders, and this could result in our making investments that are different in type from, and possibly riskier than, our current investments or the investments currently contemplated.
In addition, we may change our investment policy and guidelines and targeted asset classes at any time without the consent of our stockholders, and this could result in our making investments that are different in type from, and possibly riskier than, our current investments or the investments currently contemplated.
Despite our security measures, our information technology and infrastructure may be vulnerable to attacks by 32 hackers or breached due to employee error, malfeasance or other disruptions. Any such breach could compromise our networks and the information stored there could be accessed, publicly disclosed, lost or stolen.
Despite our security measures, our information technology and infrastructure may be vulnerable to attacks by hackers or breached due to employee error, malfeasance or other disruptions. Any such breach could compromise our networks and the information stored there could be accessed, publicly disclosed, lost or stolen.
In addition, in conducting periodic reviews, our Board of Directors relies primarily on information provided to it by our Manager. Furthermore, our Manager may use complex strategies. Transactions entered into by our Manager may be costly, difficult or impossible to unwind by the time they are reviewed by our Board of Directors.
In addition, in conducting periodic reviews, our Board of Directors relies primarily on information provided to it by our New Manager. Furthermore, our New Manager may use complex strategies. Transactions entered into by our New Manager may be costly, difficult or impossible to unwind by the time they are reviewed by our Board of Directors.
If borrowers default on the mortgage loans backing our MBS and we are unable to recover any resulting loss through the foreclosure process, our business, financial condition and results of operations and our ability to make distributions to our stockholders could be materially adversely affected.
If borrowers default on the mortgage loans backing our MBS and we are unable to recover any resulting loss through the foreclosure process, our business, financial condition and results of operations and our ability to make distributions to our stockholders could be adversely affected.
The volume of new or modified laws and regulations has increased 28 in recent years, and states and individual cities and counties continue to enact laws that either restrict or impose additional obligations in connection with certain loan origination, acquisition and servicing activities in those cities and counties.
The volume of new or modified laws and regulations has increased in recent years, and states and individual cities and counties continue to enact laws that either restrict or impose additional obligations in connection with certain loan origination, acquisition and servicing activities in those cities and counties.
The properties we acquire may also be subject to covenants, conditions or restrictions that restrict the use or ownership of such properties, including zoning laws and regulations and prohibitions on leasing or on tenant 30 evictions, or requirements to obtain the approval of home owner associations prior to leasing.
The properties we acquire may also be subject to covenants, conditions or restrictions that restrict the use or ownership of such properties, including zoning laws and regulations and prohibitions on leasing or on tenant evictions, or requirements to obtain the approval of home owner associations prior to leasing.
While we retain and expect to retain the unrated equity 34 component of securitizations and, therefore, still have exposure to any investments included in such securitizations, our inability to enter into such securitizations may increase our overall exposure to risks associated with direct ownership of such investments, including the risk of default.
While we retain and expect to retain the unrated equity component of securitizations and, therefore, still have exposure to any investments included in such securitizations, our inability to enter into such securitizations may increase our overall exposure to risks associated with direct ownership of such investments, including the risk of default.
Failure of our Manager or service providers to comply with these laws could subject us, as an assignee or purchaser of the related residential mortgage loans, to monetary penalties and could result in impairment in the ability to foreclose such loans or the borrowers rescinding the affected residential mortgage loans.
Failure of our New Manager or service providers to comply with these laws could subject us, as an assignee or purchaser of the related residential mortgage loans, to monetary penalties and could result in impairment in the ability to foreclose such loans or the borrowers rescinding the affected residential mortgage loans.
These changes could adversely affect our financial condition, results of operations, the market value of our common stock, and our ability to make distributions to our stockholders. Our 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.
These changes could adversely affect our financial condition, results of operations, the market value of our common stock, and our ability to make distributions to our stockholders. 25 Our 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.
Security 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 Our Manager oversees our cybersecurity.
Security 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. Our New Manager oversees our cybersecurity.
As part of the risk management process, we use our Manager’s detailed proprietary models to evaluate, depending on the asset class, house price appreciation and depreciation by county, region, prepayment speeds and foreclosure frequency, cost and timing.
As part of the risk management process, we use our New Manager’s detailed proprietary models to evaluate, depending on the asset class, house price appreciation and depreciation by county, region, prepayment speeds and foreclosure frequency, cost and timing.
A change in our investment or leverage strategy may increase our exposure to interest rate and real estate market fluctuations or require us to 31 sell a portion of our existing investments, which could result in gains or losses and therefore increase our earnings volatility.
A change in our investment or leverage strategy may increase our exposure to interest rate and real estate market fluctuations or require us to sell a portion of our existing investments, which could result in gains or losses and therefore increase our earnings volatility.
These higher risk loans, combined with decreases in property values, have caused increases in loan-to-value ratios, resulting in borrowers having little or negative equity in their 20 property, which may provide an incentive to borrowers to strategically default on their loans.
These higher risk loans, combined with decreases in property values, have caused increases in loan-to-value ratios, resulting in borrowers having little or negative equity in their property, which may provide an incentive to borrowers to strategically default on their loans.
Our Manager is authorized to follow a very broad investment policy and guidelines and, therefore, has great latitude in determining the types of assets that are proper investments for us, as well as the individual investment decisions.
Our New Manager is authorized to follow a very broad investment policy and guidelines and, therefore, has great latitude in determining the types of assets that are proper investments for us, as well as the individual investment decisions.
Our Board of Directors will periodically review our investment policy and guidelines and our investment portfolio but will not review or approve each proposed investment by our Manager unless it falls outside the scope of our previously approved investment policy and guidelines or constitutes a related party transaction.
Our Board of Directors will periodically review our investment policy and guidelines and our investment portfolio but will not review or approve each proposed investment by our New Manager unless it falls outside the scope of our previously approved investment policy and guidelines or constitutes a related party transaction.
Difficult conditions in the mortgage, residential real estate and smaller 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.
Difficult 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.
A material failure to comply with any of these laws or regulations could subject us and our Manager to lawsuits or governmental actions and damage our reputation, which could materially adversely affect our business, financial condition and results of operations.
A material failure to comply with any of these laws or regulations could subject us and our New Manager to lawsuits or governmental actions and damage our reputation, which could materially adversely affect our business, financial condition and results of operations.
In the past, 44 securities class action litigation has often been instituted against companies following periods of volatility in their stock price. This type of litigation could result in substantial costs and divert our management’s attention and resources.
In the past, securities class action litigation has often been instituted against companies following periods of volatility in their stock price. This type of litigation could result in substantial costs and divert our management’s attention and resources.
If we are unable to sell 19 our assets at favorable prices or at all, it could materially adversely affect our business, financial condition and results of operations and our ability to make distributions to our stockholders.
If we are unable to sell our assets at favorable prices or at all, it could materially adversely affect our business, financial condition and results of operations and our ability to make distributions to our stockholders.
In the future, our Manager may make investments with lower rates of return than those anticipated under current market conditions and/or may make investments with greater risks to achieve those anticipated returns.
In the future, our New Manager may make investments with lower rates of return than those anticipated under current market conditions and/or may make investments with greater risks to achieve those anticipated returns.
Our residential mortgage loan purchase agreements may entitle us to seek indemnity or demand repurchase or substitution of the loans in the event our counterparty breaches a representation or warranty given to us.
Our mortgage loan purchase agreements may entitle us to seek indemnity or demand repurchase or substitution of the loans in the event our counterparty breaches a representation or warranty given to us.
Our inability to obtain indemnity or require repurchase of a significant number of loans could harm our business, financial condition, liquidity, results of operations and our ability to make distributions to our stockholders. 24 Certain 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 assets.
Our inability to obtain indemnity or require repurchase of a significant number of loans could harm our business, financial condition, liquidity, results of operations and our ability to make distributions to our stockholders. 19 Certain 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 assets.
Under the Servicing Agreement, the Servicer provides us with critically important services, including, among many others, the servicing of our whole mortgage loans, including the mortgage loans underlying our MBS, loan modification services, assisted deed-in-lieu of foreclosure services, assisted deed-for-lease services and other loss mitigation services with respect to our mortgage loans and property management, leasing management and renovation management services with respect to our real property assets and assistance in finding third party financing for such properties.
Under the Servicing Agreements, the Servicer provides us with critically important services, including, among many others, the servicing of our whole mortgage loans, including the mortgage loans underlying our MBS, loan modification services, assisted deed-in-lieu of foreclosure services, assisted deed-for-lease services and other loss mitigation services with respect to our mortgage loans and property management, leasing management and renovation management services with respect to our real property assets and assistance in finding third party financing for such properties.
Any 43 attempt by a stockholder to own or transfer our stock in excess of the ownership limit without the consent of our Board of Directors or in a manner that would cause us to be “closely held” under Section 856(h) of the Code (without regard to whether the stock is held during the last half of a taxable year) or would otherwise cause us to fail to qualify as a REIT will result in the stock being automatically transferred to a trustee for a charitable trust or, if the transfer to the charitable trust is not automatically effective to prevent a violation of the stock ownership limit or the restrictions on ownership and transfer of our stock, any such transfer of our shares will be void ab initio.
Any attempt by a stockholder to own or transfer our stock in excess of the ownership limit without the consent of our Board of Directors or in a manner that would cause us to be “closely held” under Section 856(h) of the Internal Revenue Code (without regard to whether the stock is held during the last half of a taxable year) or would otherwise cause us to fail to qualify as a REIT will result in the stock being automatically transferred to a trustee for a charitable trust or, if the transfer to the charitable trust is not automatically effective to prevent a violation of the stock ownership limit or the restrictions on ownership and transfer of our stock, any such transfer of our shares will be void ab initio.
We therefore are required to retain five percent or more of the credit risk associated with the assets we securitize. 25 In addition to these laws and rules, other U.S. federal or state laws and regulations that could affect our ability to sell assets into securitization programs may be proposed, enacted, or implemented.
We therefore are required to retain five percent or more of the credit risk associated with the assets we securitize. 20 In addition to these laws and rules, other U.S. federal or state laws and regulations that could affect our ability to sell assets into securitization programs may be proposed, enacted, or implemented.
In the event of the bankruptcy of a commercial mortgage loan borrower, the SBC loan to such borrower will be deemed to be secured only to the extent of the value of the underlying collateral at the time of bankruptcy (as determined by the bankruptcy court), and the lien securing the SBC loan will be subject to the avoidance powers of the bankruptcy trustee or debtor-in-possession to the extent the lien is unenforceable under state law.
In the event of the bankruptcy of a commercial mortgage loan borrower, the commercial real estate loan to such borrower will be deemed to be secured only to the extent of the value of the underlying collateral at the time of bankruptcy (as determined by the bankruptcy court), and the lien securing the SBC loan will be subject to the avoidance powers of the bankruptcy trustee or debtor-in-possession to the extent the lien is unenforceable under state law.
In exchange for this higher interest rate, we may pay a premium to par value to acquire the loan. In accordance with U.S. GAAP, we amortize this premium over the expected term of the security or loan based on our prepayment assumptions or its contractual terms, depending on the type of loan or security purchased.
In exchange for this higher interest rate, we would pay a premium to par value to acquire the loan. In accordance with U.S. GAAP, we amortize this premium over the expected term of the security or loan based on our prepayment assumptions or its contractual terms, depending on the type of loan or security purchased.
Our profitability depends, in large part, on our ability to acquire targeted assets at favorable prices. We face significant competition when acquiring RPLs and SBC loans and our other targeted assets. Our competitors include other mortgage REITs, financial companies, public and private funds, hedge funds, commercial and investment banks and residential and commercial finance companies.
Our profitability depends, in large part, on our ability to acquire targeted assets at favorable prices. We face significant competition when acquiring mortgage loans and our other targeted assets. Our competitors include other mortgage REITs, financial companies, public and private funds, hedge funds, commercial and investment banks and residential and commercial finance companies.
The Dodd-Frank Act established a comprehensive new regulatory framework for derivative contracts commonly referred to as “swaps.” Under the Dodd-Frank Act, any investment fund that trades in swaps may be considered a “commodity pool,” which would cause its operators to be regulated as a “commodity pool operator,” or CPO.
The Dodd-Frank Act established a comprehensive new regulatory framework for derivative contracts commonly referred to as “swaps.” Under the Dodd-Frank Act, any investment fund that trades in swaps may be considered a “commodity pool,” which would cause its operators to be regulated as a CPO.
We have used and intend to continue to use securitization and other non-recourse long-term financing for our investments if, and to the extent, available. In such structures, lenders typically have only a claim against the assets included in the securitizations rather than a general claim against the owner-entity.
We have used and expect to continue to use securitization and other non-recourse long-term financing for our investments if, and to the extent, available. In such structures, lenders typically have only a claim against the assets included in the securitizations rather than a general claim against the owner-entity.
Such ownership creates conflicts of interest when such directors or members of our management team are faced with decisions that involve us and our Manager, our Servicer, Aspen or any of their respective subsidiaries. See “Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” and “Item 13.
Such ownership creates conflicts of interest when such directors or members of our management team are faced with decisions that involve us and New Manager, our Servicer, or any of their respective subsidiaries. See “Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” and “Item 13.
The allocation of capital may vary due to market conditions, the expected relative return on equity of each, the judgment of our Manager, the demand in the marketplace for certain mortgage loans and REO and the availability of specific investment opportunities. We also consider the availability and cost of our likely sources of capital.
The allocation of capital may vary due to market conditions, the expected relative return on equity of each, the judgment of our New Manager, the demand in the marketplace for certain mortgage loans and the availability of specific investment opportunities. We also consider the availability and cost of our likely sources of capital.
If the net operating income of the property is reduced, the borrower’s ability to repay the SBC loan may be impaired.
If the net operating income of the property is reduced, the borrower’s ability to repay the loan may be impaired.
Although we acquire mortgage loans at significant discounts from their UPB and underlying property value, in the event of any default under a mortgage loan held directly by us, we bear a risk of loss of the principal to the extent of any deficiency between the value of the collateral and the principal and accrued interest of the mortgage loan, which could have a material adverse effect on our cash flow from operations and results of operations.
Although we historically acquired mortgage loans at significant discounts from their UPB and underlying property value, in the event of any default under a mortgage loan held directly by us, we bear a risk of loss of the principal to the extent of any deficiency between the value of the collateral and the principal and accrued interest of the mortgage loan, which could have a material adverse effect on our cash flow from operations and results of operations.
Some of the other factors that could negatively affect our share price or result in fluctuations in our share price include: • weakening of the mortgage loan market; • actual or anticipated variations in our quarterly operating results; • increases in market interest rates that lead purchasers of our common stock to demand a higher yield; • changes in our cumulative core earnings or earnings estimates; • changes in market valuations of similar companies; • political and social unrest or instability and military conflicts; • actions or announcements by our competitors; • actual or perceived conflicts of interest, or the discontinuance of our strategic relationships, with our Manager, the Servicer or Aspen; • adverse market reaction to any increased indebtedness we incur in the future; • additions or departures of key personnel; • actions by stockholders; • speculation in the press or investment community; • our ability to maintain the listing of our common stock on a national securities exchange; • failure to qualify or maintain our qualification as a REIT; and • failure to maintain our exemption from registration under the Investment Company Act.
Some of the other factors that could negatively affect our share price or result in fluctuations in our share price include: • weakening of the mortgage loan market or the commercial real estate market; • actual or anticipated variations in our quarterly operating results; • increases in market interest rates that lead purchasers of our Common Stock to demand a higher yield; • changes in our cumulative core earnings or earnings estimates; • changes in market valuations of similar companies; • political and social unrest or instability and military conflicts; • actions or announcements by our competitors; • actual or perceived conflicts of interest, or the discontinuance of our strategic relationships, with our New Manager or the Servicer; • adverse market reaction to any increased indebtedness we incur in the future; • additions or departures of key personnel; 39 • actions by stockholders; • speculation in the press or investment community; • our ability to maintain the listing of our Common Stock on a national securities exchange; • failure to qualify or maintain our qualification as a REIT; and • failure to maintain our exemption from registration under the Investment Company Act.
In addition, the Servicer has no liability to us for its negligence in performing services for us under the Servicing Agreement, unless that negligence rises to the level of gross negligence or willful misconduct. The material terms of the Servicing Agreement are further described in “Item 1.
In addition, the Servicer has no liability to us for its negligence in performing services for us under the Servicing Agreements, unless that negligence rises to the level of gross negligence or willful misconduct. The material terms of the Servicing Agreements are further described in “Item 1.
The market price variation of our shares may not necessarily bear any relationship to our book value, asset values, operating results, financial condition or any other established criteria of value, and may not be indicative of the market price for our shares in the future.
The market price variation of our Common Stock may not necessarily bear any relationship to our book value, asset values, operating results, financial condition or any other established criteria of value, and may not be indicative of the market price for our shares in the future.
Business — Operating and Regulatory Structure — Investment Company Act Exclusion” for additional information regarding the 40% test). Certain of our subsidiaries may rely on the exclusion provided by Section 3(c)(5)(C) under the Investment Company Act.
Business — Operating and Regulatory Structure — Investment Company Act Exclusion” for additional information regarding the 40% test). Certain of our subsidiaries may rely on the exclusion provided by Section 3(c)(5)(C) or Section 3(c)(6)under the Investment Company Act.
We also rely on Gregory to provide all of our property management, lease management and renovation management services associated with the real properties we acquire upon conversion of residential mortgage loans that we own or that we acquire directly.
We also rely on our Servicer to provide all of our property management, lease management and renovation management services associated with the real properties we acquire upon conversion of residential mortgage loans that we own or that we acquire directly.
The MBS we retain from our own securitizations evidence interests in, or are secured by, pools of residential mortgage loans. Accordingly, the MBS that we hold is subject to all of the risks of the respective underlying mortgage loans.
The MBS we retained from our own securitizations evidence interests in, or are secured by, pools of residential mortgage loans. Accordingly, the MBS that we hold is subject to all of the risks of the respective underlying mortgage loans.
Upon any termination of the Servicing Agreement, it may be difficult for us to secure suitable replacements or we may secure alternative servicers with less effective servicing platforms or at greater expense.
Upon any termination of the Servicing Agreements, it may be difficult for us to secure suitable replacements or we may secure alternative servicers with less effective servicing platforms or at greater expense.
These faster or slower than expected payments may adversely affect our profitability, although the effects vary because upon prepayment we can receive 100% of the remaining UPB that we had purchased at a significant discount. We may purchase loans that have a higher interest rate than the prevailing market interest rate.
These faster or slower than expected payments may adversely affect our profitability, although the effects vary because upon prepayment we can receive 100% of the remaining UPB that we had purchased at a significant discount. We have in the past purchased loans that have a higher interest rate than the prevailing market interest rate.
If Freddie Mac, Fannie Mae, or the FHA were to adopt other restrictive underwriting standards, that could affect our ability to refinance loans and the terms of those loans. The whole residential mortgage loans and other residential mortgage assets in which we invest are subject to risk of default, among other risks.
If Freddie Mac, Fannie Mae, or the FHA were to adopt other restrictive underwriting standards, that could affect our ability to refinance loans and the terms of those loans. The whole residential mortgage loans and other residential mortgage assets in which we have invested are subject to risk of default, among other risks.
The ability of a commercial mortgage borrower to repay a SBC loan secured by an income-producing property, such as a multi-family residential and commercial mixed use retail/residential property, typically is dependent primarily upon the successful operation of such property rather than upon the existence of independent income or assets of the borrower.
The ability of a commercial mortgage borrower to repay a commercial real estate loan secured by an income-producing property, such as a multi-family residential and commercial mixed use retail/residential property, typically is dependent primarily upon the successful operation of such property rather than upon the existence of independent income or assets of the borrower.
A material decline in the demand for single-family housing or rentals in these or other areas where we own assets may materially and adversely affect us. Lack of diversification can increase the correlation of non-performance and foreclosure risks among our investments. Historically, our mortgage and real estate assets have been concentrated in Florida and the western and southwestern United States.
A material decline in the demand for single-family housing or rentals in these or other areas where we own assets may materially and adversely affect us. Lack of diversification can increase the correlation of non-performance and foreclosure risks among our investments. Historically, our mortgage and real estate assets have been concentrated in Florida and the western and southwestern U.S.
Our SBC 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 principal.
Our commercial real estate 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 principal.
If the Management Agreement has been terminated other than for cause and the Servicer terminates the Servicing Agreement, we will be required to pay a significant termination fee. The Management Agreement will automatically terminate at the same time as the Servicing Agreement if the Servicing Agreement is terminated for any reason.
If the Management Agreement has been terminated other than for cause and the Servicer terminates the Servicing Agreements, we will be required to pay a significant termination fee. The Management Agreement will automatically terminate at the same time as the Servicing Agreements if the Servicing Agreements are terminated for any reason.
Our SBC loans secured by multi-family or commercial property may be subject to risks of delinquency and foreclosure, and risk of loss that may be greater than similar risks associated with loans made on the security of single-family residential property.
Our commercial real estate loans secured by multi-family or commercial property may be subject to risks of delinquency and foreclosure, and risk of loss that may be greater than similar risks associated with loans made on the security of single-family residential property.
Our Board of Directors may amend or revise these and other strategies without a vote of our stockholders. Further, Flexpoint REIT Investor and the Wellington Investors own significant portions of our common stock, will continue to have significant influence over us, and may have conflicts of interest with us or you now or in the future.
Our Board of Directors may amend or revise these and other strategies without a vote of our stockholders. Further, Flexpoint REIT Investor, the Wellington Investors, Magnetar, as well as Rithm, own significant portions of our common stock, will continue to have significant influence over us, and may have conflicts of interest with us or you now or in the future.
We may be materially and adversely affected by risks affecting borrowers or any single-family rental properties in which our investments may be concentrated at any given time, as well as from unfavorable changes in the related geographic regions. Our assets are not subject to any geographic, diversification or concentration limitations.
We 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. Our assets are not subject to any geographic, diversification or concentration limitations.
If we do not effectively respond to these changes, or if our strategies to respond to these changes are not successful, our financial condition and results of operations may be adversely affected. In addition, we can provide no assurances that we will be successful in executing our business strategy in successfully acquiring SBC loans.
If we do not effectively respond to these changes, or if our strategies to respond to these changes are not successful, our financial condition and results of operations may be adversely affected. In addition, we can provide no assurances that we will be successful in executing our business strategy in successfully acquiring commercial real estate loans.
A determination as to the creditworthiness of a prospective borrower is based on a wide range of information including, without limitation, information relating to the form of entity of the prospective borrower, which may indicate whether the borrower can limit the impact that its other activities have on its ability to pay obligations related to the SBC loan.
A determination as to the creditworthiness of a prospective borrower is based on a wide range of information including, without limitation, information relating to the form of entity of the prospective borrower, which may indicate whether the borrower can limit the impact that its other activities have on its ability to pay obligations related to the commercial real estate loan.
In recent years, the asset-backed securitization markets have experienced unprecedented disruptions, and securitization volumes have decreased sharply due to, among other reasons, heightened inflation. These recent conditions in the securitization markets include reduced liquidity, increased risk premiums for issuers, reduced investor demand, financial distress among financial guaranty insurance providers, a general tightening of credit and substantial regulatory uncertainty.
At times, the asset-backed securitization markets have experienced disruptions, and securitization volumes have decreased sharply due to, among other reasons, heightened inflation. These conditions in the securitization markets include reduced liquidity, increased risk premiums for issuers, reduced investor demand, financial distress among financial guaranty insurance providers, a general tightening of credit and substantial regulatory uncertainty.
We also may purchase securities or loans that have a lower interest rate than the prevailing market interest rate. In exchange for this lower interest rate, we may pay a discount to par value to acquire the loan.
We have in the past also purchased securities or loans that have a lower interest rate than the prevailing market interest rate. In exchange for this lower interest rate, we may pay a discount to par value to acquire the loan.
The Servicing Agreement also provides that the Servicer may terminate the agreement within 180 days after receiving notice that the Management Agreement has terminated, without any termination payment by us if the Management Agreement has been terminated for cause.
The Servicing Agreements also provide that the Servicer may terminate the agreement within 180 days after receiving notice that the Management Agreement has terminated, without any termination payment by us if the Management Agreement has been terminated for cause.
Our charter provides that, except pursuant to a Special Election Meeting (as defined in the charter), subject to the rights of holders of one or more classes or series of preferred stock to elect or remove one or more directors, a director may be removed only for “cause” (as defined in our charter), and even then only by the affirmative vote of at least two-thirds of the votes entitled to be cast generally in the election of directors.
Our charter provides that, subject to the rights of holders of one or more classes or series of preferred stock to elect or remove one or more directors, a director may be removed only for “cause” (as defined in our charter), and then only by the affirmative vote of at least two-thirds of the votes entitled to be cast generally in the election of directors.
A significant portion of our mortgage loans may become NPLs, which could further increase the significant losses we have incurred to date. We may acquire mortgage loans where the borrower has failed to make timely payments of principal and/or interest currently or in the past.
A significant portion of our residential mortgage loans may become NPLs, which could further increase the significant losses we have incurred to date. We previously acquired residential mortgage loans where the borrower has failed to make timely payments of principal and/or interest currently or in the past.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeWe have not experienced a material cybersecurity breach and no risks from cybersecurity threats have materially affected or are reasonably likely to materially affect our business strategy, results of operations, or financial condition.
Biggest changeFurthermore, Rithm collects and evaluates SIG, SOC 1 reports and Business Continuity and Disaster Recovery documents for our key service providers. 41 To date, we have not experienced a material cybersecurity breach and no risks from cybersecurity threats have materially affected or are reasonably likely to materially affect our business strategy, results of operations, or financial condition.
For a discussion of how risks from cybersecurity threats affect our business, and our reliance on our Manager managing these risks, see “Part 1. Item 1A.
For a discussion of how risks from cybersecurity threats affect our business, and our reliance on our New Manager managing these risks, see “Part 1. Item 1A.
Item 1C. Cybersecurity We are an externally managed company and our day-to-day operations are managed by our Manager and our officers under the oversight of our board of directors. We are reliant on our Manger, identifying, assessing and managing material risks to our business from cybersecurity threats.
Item 1C. Cybersecurity We are an externally managed company and our day-to-day operations are managed by our New Manager and our officers under the oversight of our Board of Directors. We are reliant on our New Manger, in identifying, assessing and managing material risks to our business from cybersecurity threats.
Risk Factors – Risks Related to Our Company – Security breaches and other cyber-security incidents could result in a loss of data, interruptions in our business, subject us to regulatory actions, increased costs, each of which could have a material adverse effect on our business and results of operations ” in this Annual Report on Form 10-K.
Risk Factors – Risks Related to Our Company – Security 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.” in this Annual Report.
While we have implemented processes and procedures that we believe are tailored to address and mitigate the cybersecurity threats that our Company faces, there can be no assurances that such an incident will not occur despite our efforts, as more fully described in Item 1A. Risk Factors.
While the New Manager has implemented processes and procedures that it believes are tailored to address and mitigate the cybersecurity threats that our Company faces, there can be no assurances that such an incident will not occur despite our efforts, as more fully described in Item 1A. Risk Factors.
Removed
We maintain a comprehensive cybersecurity program, including policies and procedures designed to protect our systems, operations, and the data utilized and entrusted to it, including by us, from anticipated threats or hazards.
Added
Risk Management and Strategy Our New Manager, through Rithm, maintains a comprehensive cybersecurity program and regularly assesses any risk of cybersecurity threats. In doing so, Rithm continuously monitors and tests our information systems for potential vulnerabilities pursuant to our cybersecurity program.
Removed
The cybersecurity program is integrated into our enterprise-wide risk management system, illustrated by conducting planning exercises involving disaster recovery testing and designing and implementing systems to include backup and recoverability principles, protecting sensitive data through encryption techniques, hypothetical cybersecurity incidents to test its cyber incident response processes.
Added
Rithm’s cybersecurity program is led by its interim Chief Information Security Officer (“CISO”) and is part of its overall enterprise risk management program. Rithm’s dedicated cybersecurity personnel supervise and monitor our controls, technologies, systems and other processes utilized to mitigate any data loss, theft, exploitation, unauthorized access or other vulnerabilities that may affect our information or data.
Removed
Learnings from these exercises are reviewed, discussed, and incorporated into its cybersecurity framework as appropriate. We test our cybersecurity defenses through automated and manual scanning, to identify and remediate critical vulnerabilities.
Added
Specifically, Rithm’s cybersecurity program consists of incident response procedures, information security and vendor management due diligence, as well as participation in industry consortiums, ongoing monitoring, internal and independent testing of information systems and continuous employee education and simulations.
Removed
We examine our cybersecurity program every year, evaluating its effectiveness in part by considering industry standards and established frameworks and working in conjunction with external advisors in connection with our annual cybersecurity insurance renewals to ensure our program keeps paces with new threats.
Added
Rithm’s independent testing includes both (i) periodic testing and evaluations performed by its internal audit team and (ii) annual network penetration testing conducted through independent third parties. Rithm’s processes for assessing, identifying and managing material risks from cybersecurity threats have been integrated into its overall risk management system and processes.
Removed
Cybersecurity Governance Our board of directors are responsible for understanding the primary risks to our business, including the risks relating to cybersecurity. Our board of directors are informed of such risks through the audit committee on a quarterly basis.
Added
As part of these processes, Rithm monitors the privacy and cybersecurity laws, regulations and guidance applicable to us in the regions where we do, as well as proposed privacy and cybersecurity laws, regulations, guidance and emerging risks.
Removed
The Chief Technology Officer ("CTO") of our Manager, who holds 20 years of experience in information technology develops and advances the firm's cybersecurity and technology strategy. The CTO reviews our cybersecurity framework. Our board of directors are responsible for understanding the primary risks to our business.
Added
Additionally, in order to reduce cybersecurity risks related to our use of third-party service providers, Rithm (i) obligates our service providers to adhere to strict privacy and cybersecurity measures and (ii) performs risk assessments of each new service provider during onboarding based on, among other things, the nature of their business and the type of information we provide to such service providers.
Removed
The audit committee of our board of directors is responsible for reviewing our and our Manger’s IT security controls with management and evaluating the 46 adequacy of our and our Manager’s IT security program, compliance and controls with management. The audit committee receives periodic updates on our cybersecurity programs at the Company, its Manager and its Servicer.
Added
Each service provider is assigned a tiered risk rating, which determines the frequency and extent of evaluation for the service provider.
Added
Governance Our Board of Directors oversees the Company’s risk management process, including cybersecurity risks, directly and through its committees. The Audit Committee of the Board of Directors, in conjunction with the New Manager, oversees the Company’s risk management program, which focuses on the most significant risks the Company faces in the short-, intermediate-, and long-term timeframe.
Added
Audit Committee meetings include discussions of specific risk areas throughout the year, including, among others, those relating to cybersecurity, and reports from Rithm’s CISO and Chief Information Officer (“CIO”) on the Company’s enterprise risk profile and the Company’s risk treatment policies and processes on a quarterly basis or as needed.
Added
Additionally, Rithm has protocols by which certain cybersecurity incidents would be escalated in a timely manner to our Audit Committee and Board of Directors. The New Manager, through Rithm, takes a risk-based approach to cybersecurity and has implemented cybersecurity policies throughout its operations that are designed to address cybersecurity threats and incidents.
Added
In particular, the CISO is focused on assessing, managing, mitigating and reporting on cybersecurity threats and risks. The CISO plays a critical role in protecting the Company’s assets, data and reputation by developing a robust security strategy and security awareness.
Added
Rithm’s current CISO brings over 20 years of experience in IT operations and information security with a proven track record working in large financial institutions, mortgage companies and banks, with expertise in managing complex security environments. The CISO, in conjunction with other executive leaders such as the CIO and the Chief Legal Officer, manages the Company’s cybersecurity posture.
Added
In doing so, the CISO receives regular reports prepared by our experienced cybersecurity personnel on cybersecurity threats and continuously reviews risk management measures implemented by the Company to help identify and mitigate data protection and cybersecurity risks.
Added
At the employee level, the New Manager maintains an experienced information technology team tasked with implementing our privacy and cybersecurity program and support the CISO in carrying out reporting, security and mitigation functions. The New Manager also holds employee trainings on privacy and cybersecurity, as well as records and information management, and it conduct phishing tests.
Added
We generally seek to promote awareness of cybersecurity risk through communication and education of our employee population.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties Our principal executive offices are shared with our Manager and our Servicer and are located in 13190 SW 68th Parkway, Suite 110 Tigard, OR 97223. The lease for these premises expires on July 31, 2030; we are not responsible for any lease costs.
Biggest changeItem 2. Properties Our principal executive offices are shared with our New Manager and our Servicer and are located at 799 Broadway, 8th Floor New York, New York 10003. The lease for these premises expires on June 30, 2033; we are not responsible for any lease costs. We do not own any material real property.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeMine Safety Disclosures Not applicable. 47 PART II
Biggest changeMine Safety Disclosures Not applicable. 42 PART II.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe graph and table below shall not be deemed to be “soliciting material” or to be “filed,” or to be incorporated by reference in future filings with the SEC, or to be subject to the liabilities of Section 18 of the Exchange Act, except to the extent that we specifically incorporate it by reference into a document filed under the Securities Act or the Exchange Act. 48 Unregistered Sales of Equity Securities In private placement transactions in 2023 pursuant to Section 4(a)(2) of the Securities Act, we issued our five independent directors an aggregate of 13,020 shares of our common stock on May 8, 2023 in payment of part of their quarterly director fees for 2023 and 10,580 shares of our common stock on March 9, 2023 in payment of part of their quarterly director fees for the fourth quarter of 2022.
Biggest changeThe graph and table below shall not be deemed to be “soliciting material” or to be “filed,” or to be incorporated by reference in future filings with the SEC, or to be subject to the liabilities of Section 18 of the Exchange Act, except to the extent that we specifically incorporate it by reference into a document filed under the Securities Act of 1933, as amended (the “Securities Act”) or the Exchange Act. 43 Year Ended December 31, Index 2019 2020 2021 2022 2023 2024 Rithm Property Trust Inc. $ 100 $ 77.5 $ 103.6 $ 64.3 $ 53.5 $ 32.5 NAREIT All REIT 100 94.9 134.1 100.8 112.2 116.6 Russell 2000 100 119.9 137.7 109.5 128.0 142.7 NAREIT Mortgage REIT 100 81.4 94.0 69.3 79.8 78.6 S&P 500 100 118.4 152.3 124.7 157.5 196.8 Unregistered Sales of Equity Securities None.
Dividends We elected to be taxed as a REIT for U.S. federal income tax purposes beginning with our taxable year ended December 31, 2014.
Holders As of February 12, 2025, there were 240 common stockholders of record. Dividends We elected to be taxed as a REIT for U.S. federal income tax purposes beginning with our taxable year ended December 31, 2014.
We generally are not required to make distributions with respect to activities conducted through GA-TRS or any other TRS that we may form. We anticipate that our distributions generally will be taxable as capital gain to our stockholders, although a portion of the distributions may be designated by us as ordinary income or may constitute a return of capital.
We anticipate that our distributions generally will be taxable as capital gain to our stockholders, although a portion of the distributions may be designated by us as ordinary income or may constitute a return of capital.
We furnish annually to each of our stockholders a statement setting forth distributions paid during the preceding year and their characterization as ordinary income, return of capital or capital gains.
We furnish annually to each of our stockholders a statement setting forth distributions paid during the preceding year and their characterization as ordinary income, return of capital or capital gains. Performance Graph We have one class of common stock, which is listed on the NYSE under the symbol “RPT”.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our shares of common stock have been listed on the NYSE since February 13, 2015 under the symbol “AJX.” Holders As of February 26, 2024, there were 242 common stockholders of record.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our shares of Common Stock have been listed on the NYSE since February 13, 2015. On December 2, 2024, the symbol was changed to “RPT” from “AJX” in connection with our name change to Rithm Property Trust Inc.
Removed
Performance Graph The following graph shows the cumulative total shareholder return at market close on February 13, 2015 (the first day of trading of our common stock) through December 31, 2023 for (1) our common stock ("AJX"), (2) the Russell 2000 and (3) the FTSE NAREIT Mortgage REIT index (“FNMR”).
Added
We generally are not required to make distributions with respect to activities conducted through GA-TRS, GAJX Real Estate Corp. (“GAJX”) or any other TRS that we may form.
Removed
The graph and table show the total return on a hypothetical $100 investment in our common shares and in each index, respectively, on February 13, 2015, the first day on which our shares were listed on the NYSE, including the reinvestment of all dividends.
Added
The following graph compares the cumulative total return for our Common Stock (stock price change plus reinvested dividends) with the comparable return of four indices: NAREIT All REIT, Russell 2000, NAREIT Mortgage REIT and S&P 500.
Removed
In private placement transactions in 2022 pursuant to Section 4(a)(2) of the Securities Act, we issued 39,558 shares of our common stock on March 7, 2022 in payment of the stock-based portion of the management fee for the fourth quarter of 2021.
Added
The graph assumes an investment of $100 in our Common Stock and in each of the indices on December 31, 2019 through December 31, 2024. The past performance of our Common Stock is not an indication of future performance.
Removed
We issued our five independent directors an aggregate of 25,790 shares of our common stock on May 9, 2022, August 8, 2022 and November 7, 2022 in payment of part of their quarterly director fees for 2022 and 3,470 shares of our common stock on March 7, 2022 in payment of part of their quarterly director fees for the fourth quarter of 2021.
Removed
In private placement transactions in 2021 pursuant to Section 4(a)(2) of the Securities Act, we issued our five independent directors an aggregate of 11,550 shares of our common stock on May 10, 2021, August 9, 2021 and November 8, 2021 in payment of part of their quarterly director fees for 2021.
Removed
Of the five independent directors, four were in their positions during the fourth quarter of 2020 and were issued an aggregate of 4,280 shares of our common stock on March 8, 2021 in payment of part of their quarterly director fees. Item 6. [Reserved]

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

71 edited+99 added−235 removed4 unchanged
Biggest changeAt December 31, 2023, our book value decreased to $9.99 per common share from $13.00 at December 31, 2022, driven by the year-to-date net loss attributable to common stockholders of $49.3 million and dividends on our common stock of $18.4 million, partially offset by the sale of our common stock of $28.2 million, the effect of mark to market net gain adjustments of $6.7 million on our investments in debt securities AFS and amortization of $5.0 million of unrealized losses on our investments in debt securities AFS transferred to HTM. 58 Table 1: Results of Operations For the year ended December 31, ($ in thousands) 2023 2022 2021 INCOME Interest income $ 72,332 $ 82,582 $ 93,383 Interest expense (59,286) (43,632) (36,742) Net interest income 13,046 38,950 56,641 Net (increase)/decrease in the net present value of expected credit losses (8,137) 8,026 18,223 Net interest income after the impact of changes in the net present value of expected credit losses 4,909 46,976 74,864 (Loss)/income from investment in affiliates, net (1,308) (1,218) 699 Loss on joint venture refinancing on beneficial interests (11,024) (6,115) — Other (loss)/income (9,651) (4,007) 2,385 Total (loss)/revenue, net (17,074) 35,636 77,948 EXPENSE Related party expense – loan servicing fees 7,269 7,960 7,433 Related party expense – management fee 7,769 8,326 9,116 Professional fees 3,157 2,052 2,940 Fair value adjustment on put option liability 4,491 11,143 9,462 Other expense 6,985 5,912 5,490 Total expense 29,671 35,393 34,441 Acceleration of put option settlement — 12,344 — (Gain)/loss on debt extinguishment (31) — 1,439 (Loss)/income before provision for income taxes (46,714) (12,101) 42,068 Provision for income taxes 243 2,835 293 Consolidated net (loss)/income (46,957) (14,936) 41,775 Less: consolidated net income/(loss) attributable to the non-controlling interest 114 75 (80) Consolidated net (loss)/income attributable to the Company (47,071) (15,011) 41,855 Less: dividends on preferred stock 2,190 5,474 7,798 Less: discount on retirement of preferred stock — 8,194 — Consolidated net (loss)/income attributable to common stockholders $ (49,261) $ (28,679) $ 34,057 Basic (loss)/earnings per common share $ (2.01) $ (1.24) $ 1.48 Diluted (loss)/earnings per common share $ (2.01) $ (1.24) $ 1.41 59 For the year ended December 31, ($ in thousands) 2023 2022 2021 Reconciliation of consolidated net (loss)/income attributable to common stockholders to consolidated operating (loss)/income Consolidated net (loss)/income attributable to common stockholders $ (49,261) $ (28,679) $ 34,057 Dividends on preferred stock (2,190) (5,474) (7,798) Discount on retirement of preferred stock — (8,194) — Consolidated net (loss)/income attributable to the Company (47,071) (15,011) 41,855 Provision for income taxes (243) (2,835) (293) Consolidated net (income)/loss attributable to the non-controlling interest (114) (75) 80 (Loss)/income before provision for income taxes (46,714) (12,101) 42,068 Loss on joint venture refinancing on beneficial interests (11,024) (6,115) — Realized (loss)/gain on sale of securities (3,347) (4,775) 201 Net (increase)/decrease in the net present value of expected credit losses (8,137) 8,026 18,223 Fair value adjustment on put option liability (4,491) (11,143) (9,462) Acceleration of put option settlement — (12,344) — Mark to market on mortgage loans held-for-sale, net (8,559) — — Other adjustments (2,373) (3,489) (1,033) Consolidated operating (loss)/income $ (8,783) $ 17,739 $ 34,139 Basic operating (loss)/income per common share $ (0.36) $ 0.77 $ 1.48 Diluted operating (loss)/income per common share $ (0.36) $ 0.77 $ 1.42 Interest Income Our primary source of income is accretion earned on our mortgage loan portfolio offset by the interest expense incurred to fund and hold portfolio acquisitions.
Biggest changeYear ended Variance ($ in thousands except per share data) December 31, 2024 December 31, 2023 Year-over-Year Revenues: Interest income $ 52,874 $ 72,332 $ (19,458) Interest expense (43,572) (59,286) 15,714 Net interest income 9,302 13,046 (3,744) Net change in the allowance for credit losses (5,087) (8,137) 3,050 Net interest income after the net change in the allowance for credit losses 4,215 4,909 (694) Loss from investments in affiliates (1,077) (1,308) 231 Loss on joint venture refinancing on beneficial interests — (11,024) 11,024 Mark-to-market loss on mortgage loans held-for-sale, net (54,537) (8,559) (45,978) Other loss (4,089) (1,092) (2,997) Total revenue/(loss), net (55,488) (17,074) (38,414) Expenses: Related party loan servicing fee 4,175 7,269 (3,094) Related party management fee 23,276 7,769 15,507 Professional fees 3,413 3,157 256 Fair value adjustment on mark-to-market liabilities (3,078) 4,491 (7,569) Other expense 9,631 6,985 2,646 Total expense 37,417 29,671 7,746 Gain on debt extinguishment — (31) 31 Loss before provision for income taxes (92,905) (46,714) (46,191) Provision for income taxes 145 243 (98) Net loss (93,050) (46,957) (46,093) Less: net (loss)/income attributable to the non-controlling interests (1,215) 114 (1,329) Net loss attributable to the Company (91,835) (47,071) (44,764) Less: dividends on preferred stock 340 2,190 (1,850) Net loss attributable to common stockholders $ (92,175) $ (49,261) $ (42,914) For the discussion of results of operations for the year ended December 31, 2023, compared to year ended December 31, 2022, please see “Item 7.
The degree of judgment utilized in measuring fair value generally correlates to the level of pricing observability. Assets and liabilities with readily available actively quoted prices or for which fair value can be measured from actively quoted 57 prices generally will have a higher degree of pricing observability and a lesser degree of judgment utilized in measuring fair value.
The degree of judgment utilized in measuring fair value generally correlates to the level of pricing observability. Assets and liabilities with readily available actively quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of pricing observability and a lesser degree of judgment utilized in measuring fair value.
Our Operating Partnership, through interests in certain entities as of December 31, 2023, owns 99.9% of Great Ajax II REIT Inc. which owns Great Ajax II Depositor LLC which then acts as the depositor of mortgage loans into securitization trusts and holds subordinated securities issued by such trusts.
Our Operating Partnership, through interests in certain entities as of December 31, 2024, owns 99.9% of Great Ajax II REIT Inc., which owns Great Ajax II Depositor LLC, which then acts as the depositor of mortgage loans into securitization trusts and holds subordinated securities issued by such trusts.
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.
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.
With respect to our business operations, increases in existing 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.
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.
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.
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.
The debt securities and beneficial interests we carry on our consolidated balance sheets are issued by securitization trusts formed by these joint ventures, which are VIEs, that we have sponsored but which we do not consolidate since we have determined we are not the primary beneficiary.
The RMBS and beneficial interests we carry on our consolidated balance sheets are primarily issued by securitization trusts formed by these joint ventures, which are VIEs, that we have sponsored but which we do not consolidate since we have determined we are not the primary beneficiary.
As of December 31, 2023, we held 1,035,785 shares of treasury stock consisting of 148,834 shares received through distributions of our shares previously held by our Manager, 361,912 shares received through our Servicer and 525,039 shares acquired through open market purchases.
As of December 31, 2024, we held 1,035,785 shares of treasury stock consisting of 148,834 shares received through distributions of our shares of Common Stock previously held by our Former Manager, 361,912 shares received through our Servicer and 525,039 shares acquired through open market purchases.
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.
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 HTM and investments in beneficial interests, which are included on our consolidated balance sheets.
In 2014, we formed Great Ajax Funding LLC, a wholly owned subsidiary of the Operating Partnership, 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 we may form for additional secured borrowings.
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.
Conversely, decreases in interest rates, in general, may over time cause: (a) prepayments on our mortgage loan and MBS portfolio to increase, thereby accelerating the accretion of our purchase discounts; (b) the value of our mortgage loan and MBS portfolio to increase; (c) coupons on our ARM and hybrid ARM mortgage loans and MBS to reset, although on a delayed basis, to lower interest rates; (d) 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.
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.
(3) Amounts that have been deferred in connection with a loan modification on which interest does not accrue. These amounts generally become payable at the time of maturity. (4) As of the reporting date. (5) UPB as of December 31, 2023 and 2022, divided by market value of collateral and weighted by the UPB of the loan.
(2) Represents amounts that have been deferred in connection with a loan modification on which interest does not accrue. These amounts generally become payable at the time of maturity. (3) UPB as of December 31, 2024 and 2023, divided by market value of collateral and weighted by the UPB of the loan.
For the year ended December 31, 2023, our investing cash inflows of $172.8 million were driven by proceeds from principal payments on and payoffs of our mortgage loan portfolio of $85.7 million and principal and interest collections on our securities of $79.5 million and refinancing and sale of our debt securities and beneficial interests of $61.7 million, partially offset by the purchase of securities of $74.3 million, acquisitions of mortgage loans of $14.4 million and a $0.7 million investment in our Servicer.
For the year ended December 31, 2023, our investing cash inflows of $172.8 million were driven by payoffs of our mortgage loan portfolio of $85.7 million, proceeds from refinancing and sale of debt securities AFS and beneficial interests of $79.5 million, sales of RMBS of $61.7 million, and principal and interest collections on our securities HTM of $29.8 million, partially offset by the purchase of debt securities and beneficial interests of $74.3 million and acquisitions of mortgage loans of $14.4 million.
The standard describes three levels of inputs that may be used to measure fair value: • Level 1 — Quoted prices in active markets for identical assets or liabilities. • Level 2 — Observable inputs other than Level 1 prices, such as quoted prices for similar assets and liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. • Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
The standard describes three levels of inputs that may be used to measure fair value: • Level 1 — Quoted prices in active markets for identical assets or liabilities. • Level 2 — Observable inputs other than Level 1 prices, such as quoted prices for similar assets and liabilities; quoted prices in markets that are less active or not active for identical or similar assets or liabilities; or other inputs that are observable, such as interest rates, yield curves, volatilities, prepayment rates, loss severities, credit risks and default rates or can be corroborated by observable market data for substantially the full term of the assets or liabilities. • Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
Liquidity and Capital Resources Source and Uses of Cash Our primary sources of cash have consisted of 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.
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).
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). We also may have difficulty accessing the capital markets on favorable terms or at all.
Loss on Joint Venture Refinancing on Beneficial Interests During the year ended December 31, 2023, we recorded a $11.0 million loss on joint venture refinancing on beneficial interests.
Loss on Joint Venture Refinancing on Beneficial Interests During the year ended December 31, 2023, we recorded an $11.0 million loss on the redemption of several of our joint ventures.
Our recognition of interest income is based upon us having a reasonable expectation of the amount and timing of the cash flows expected to be collected. When the timing and amount of cash flows expected to be collected are reasonably estimable, we use these expected cash flows to apply the effective interest method of income recognition.
When the timing and amount of cash flows expected to be collected are reasonably estimable, we use these expected cash flows to apply the effective interest method of income recognition.
Similarly, as of December 31, 2023, the Operating Partnership wholly owned Great Ajax III Depositor LLC, which was formed to act as the depositor into 2021-E, which is a REMIC. We have securitized mortgage loans through these securitization trusts and retained subordinated securities from the secured borrowings.
Similarly, as of December 31, 2024, the Operating Partnership wholly-owned Great Ajax III Depositor LLC, which was formed to act as the depositor for a single joint venture with our partners. We have securitized mortgage loans through these securitization trusts and retained subordinated securities from the secured borrowings.
A pool is accounted for as a single asset with a single composite interest rate and an aggregate expectation of cash flows. We 54 may adjust our loan pools as the underlying risk factors change over time. We have aggregated our mortgage loan portfolio into loan pools based on similar risk factors.
Acquired loans may be aggregated and accounted for as a pool of loans if the loans have common risk characteristics. A pool is accounted for as a single asset with a single composite interest rate and an aggregate expectation of cash flows. We may adjust our loan pools as the underlying risk factors change over time.
While no single factor determines the level of our allowance for credit losses, expected borrower performance and underlying property value are two key drivers that factor into our scenario based cash flow projections.
To the extent actual loan performance differs from management’s expectations, our allowance for credit losses could increase or decrease. While no single factor determines the level of our allowance for credit losses, expected borrower performance and underlying property value are two key drivers that factor into our scenario based cash flow projections.
(8) Loans that have made at least 24 of the last 24 payments, or for which the full dollar amount to cover at least 24 payments has been made in the last 24 months. 66 Table 11: Portfolio Characteristics The following tables present certain characteristics about our mortgage loans by year of origination as of December 31, 2023 and 2022 ($ in thousands): Portfolio at December 31, 2023 Years of Origination (1) After 2008 2006 – 2008 2005 and prior Number of loans 578 2,827 1,618 UPB $ 123,340 $ 616,185 $ 217,650 Percent of mortgage loan portfolio by year of origination 12.9 % 64.4 % 22.7 % Loan Attributes: Weighted average loan age (months) 129.5 203.1 242.2 Weighted average loan-to-value 54.5 % 57.0 % 46.1 % Delinquency Performance: Current 59.0 % 60.9 % 61.5 % 30 days delinquent 9.4 % 12.0 % 11.8 % 60 days delinquent — % — % 0.5 % 90+ days delinquent 21.6 % 20.1 % 20.5 % Foreclosure 10.0 % 7.0 % 5.7 % (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 $64.3 million.
Table 7: Portfolio Characteristics The following tables present certain characteristics about our mortgage loans by year of origination as of December 31, 2024 and 2023, respectively ($ in thousands): Portfolio at December 31, 2024: Years of Origination (1) After 2008 2006 – 2008 2005 and prior Number of loans 304 1,485 836 UPB $ 51,872 $ 300,938 $ 102,083 Percent of mortgage loan portfolio by year of origination 11.4 % 66.2 % 22.4 % Loan Attributes: Weighted average loan age (months) 157.3 215.3 254.3 Weighted average loan-to-value 46.8 % 51.1 % 40.3 % Delinquency Performance: Current 76.7 % 79.7 % 76.9 % 30 days delinquent 7.2 % 10.8 % 10.6 % 60 days delinquent 0.1 % 0.2 % 0.4 % 90+ days delinquent 9.6 % 6.0 % 8.0 % Foreclosure 6.4 % 3.4 % 4.1 % (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. 56 Portfolio at December 31, 2023: Years of Origination (1) After 2008 2006 – 2008 2005 and prior Number of loans 578 2,827 1,618 UPB $ 123,340 $ 616,185 $ 217,650 Percent of mortgage loan portfolio by year of origination 12.9 % 64.4 % 22.7 % Loan Attributes: Weighted average loan age (months) 129.5 203.1 242.2 Weighted average loan-to-value 54.5 % 57.0 % 46.1 % Delinquency Performance: Current 59.2 % 61.1 % 61.2 % 30 days delinquent 9.1 % 11.7 % 11.8 % 60 days delinquent 5.8 % 6.5 % 6.8 % 90+ days delinquent 15.9 % 13.7 % 14.5 % Foreclosure 10.0 % 7.0 % 5.7 % (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.
Pricing observability is impacted by a number of factors, including the type of asset or liability, whether it is new to the market and not yet established, and the characteristics specific to the transaction. Recent Accounting Pronouncements Refer to the notes to our consolidated financial statements for a description of relevant recent accounting pronouncements.
Pricing observability is impacted by a number of factors, including the type of asset or liability, whether it is new to the market and not yet established, and the characteristics specific to the transaction.
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. 75 Dividends We may declare dividends based on, among other things, our earnings, our financial condition, our working capital needs, new opportunities, and distribution requirements imposed on REITs.
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.
Total original outstanding principal and principal balance retained of the Class B notes is $25.9 million and $6.0 million, respectively. (4) Includes the addition of Class B notes classified as Beneficial Interests on our consolidated balance sheets. Total original outstanding principal and principal balance retained of the Class B notes is $22.1 million and $3.8 million, respectively.
(4) Includes the addition of Class B notes classified as beneficial interests on our consolidated balance sheets. Total original outstanding principal and principal balance retained of the Class B notes is $22.1 million and $3.8 million, respectively. Contractual Obligations For 2024, our contractual obligations include secured borrowings, borrowings under repurchase transactions and our 2027 Notes.
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. Those expenses may increase due to extended eviction timelines caused by the pandemic.
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.
Unrealized gains or losses recorded to accumulated other comprehensive income for the transferred securities continue to be reported in accumulated other comprehensive income and are amortized into interest income on a level-yield basis over the remaining life of the securities.
Transfers of securities from AFS to HTM are non-cash transactions and are recorded at fair value and on the date of transfer. Any unrealized gains or losses continue to be reported in accumulated other comprehensive loss and amortized into interest income on a level-yield basis over the remaining life of the securities.
Ownership Issuing Trust/Issue Date Security Total Original Outstanding Principal Coupon Ownership Percent Original Stated or Notional Principal Balance Retained Current Owned Stated or Notional Principal Balance Retained Class B notes due 2060 $ 21,754 5.00 % 10.01 % $ 2,178 $ 2,178 (4) Ajax Mortgage Loan Trust 2020-D/ September 2020 Class A notes due 2060 $ 330,721 2.25 % 10.01 % $ 33,105 $ 3,720 (4) Class B notes due 2060 $ 30,867 5.00 % 10.01 % $ 3,090 $ 3,090 (4) Ajax Mortgage Loan Trust 2021-C/ April 2021 Class A notes due 2061 $ 194,673 2.12 % 5.01 % $ 9,753 $ 4,881 (4) Class B notes due 2061 $ 18,170 3.72 % 31.90 % $ 5,796 $ 5,796 (4) Ajax Mortgage Loan Trust 2021-D/ May 2021 Class A notes due 2060 $ 191,468 2.00 % 6.94 % $ 13,288 $ 7,168 (4) Class B notes due 2060 $ 25,529 4.00 % 20.00 % $ 5,106 $ 5,106 (4) Ajax Mortgage Loan Trust 2021-E/ July 2021 (1) Class A notes due 2060 $ 430,760 1.82 % (2) 10.01 % $ 43,119 $ 31,811 (4) Class M notes due 2060 $ 19,415 2.94 % 10.01 % $ 1,943 $ 1,943 (4) Class B-1 and B-2 notes due 2060 $ 38,313 3.73 % 10.01 % $ 3,835 $ 3,835 (4) Class B-3 notes due 2060 $ 29,253 3.73 % 19.57 % $ 5,725 $ 5,725 (4) Ajax Mortgage Loan Trust 2021-F/ June 2021 Class A notes due 2061 $ 476,082 1.88 % 5.01 % $ 23,852 $ 15,125 (4) Class B notes due 2061 $ 49,463 3.75 % 12.60 % $ 6,232 $ 6,232 (4) Ajax Mortgage Loan Trust 2021-G/ June 2021 Class A notes due 2061 $ 317,573 1.88 % 7.26 % $ 23,056 $ 14,386 (4) Class B notes due 2061 $ 32,995 3.75 % 20.00 % $ 6,599 $ 6,413 (4) 2021-NPL 1/ November 2021 Class B notes due 2051 $ 23,088 4.63 % 16.33 % $ 3,771 $ 3,771 Ajax Mortgage Loan Trust 2022-A/ April 2022 Class A notes due 2061 $ 154,921 3.47 % (2) 6.24 % (3) $ 9,664 $ 7,775 Class M notes due 2061 $ 21,762 3.00 % 23.28 % $ 5,066 $ 5,066 Ajax Mortgage Loan Trust 2022-B/ June 2022 Class A notes due 2062 $ 169,924 3.47 % (2) 5.70 % (3) $ 9,692 $ 7,963 77 Great Ajax Corp.
Ownership Issuing Trust/Issue Date Security Total Original Outstanding Principal Coupon Ownership Percent Original Stated or Notional Principal Balance Retained Current Owned Stated or Notional Principal Balance Retained Ajax Mortgage Loan Trust 2021-C/ April 2021 Class A notes due 2061 $ 194,673 5.12 % 5.01 % $ 9,753 $ 3,739 (4) Class B notes due 2061 18,170 3.72 % 31.90 % 5,796 5,796 (4) Ajax Mortgage Loan Trust 2021-D/ May 2021 Class A notes due 2060 $ 191,468 2.00 % 5.00 % $ 9,573 $ 3,898 (4) Class B notes due 2060 25,529 4.00 % 20.00 % 5,106 5,106 (4) Ajax Mortgage Loan Trust 2021-E/ July 2021 (1) Class A notes due 2060 $ 430,760 1.82 % (2) 5.59 % $ 43,119 $ 16,295 (4) Class M notes due 2060 19,415 2.94 % 10.01 % 1,943 1,943 (4) Class B-1 and B-2 notes due 2060 38,313 3.73 % 10.01 % 3,835 3,835 (4) Class B-3 notes due 2060 29,253 3.73 % 19.57 % 5,725 5,691 (4) Ajax Mortgage Loan Trust 2021-F/ June 2021 Class A notes due 2061 $ 476,082 1.88 % 5.01 % $ 23,852 $ 8,268 (4) Class B notes due 2061 49,463 3.75 % 12.60 % 6,232 6,232 (4) Ajax Mortgage Loan Trust 2021-G/ June 2021 Class A notes due 2061 $ 317,573 1.88 % 5.08 % $ 16,133 $ 8,354 (4) Class B notes due 2061 32,995 3.75 % 20.00 % 6,599 6,413 (4) Ajax Mortgage Loan Trust 2022-A/ April 2022 Class A notes due 2061 $ 154,921 3.47 % (2) 5.00 % (3) $ 7,746 $ 5,003 Class M notes due 2061 21,762 3.00 % 5.89 % 1,282 1,282 61 Rithm Property Trust Inc.
Our financing cash flows are driven primarily by funding used to acquire mortgage loan pools and debt securities. We fund our mortgage loan pools primarily through secured borrowings and repurchase agreements and we fund our debt securities primarily through repurchase agreements.
Our financing cash flows were driven primarily by funding used to acquire mortgage assets, as well as the debt service on our 2024 Notes and our notes payable, net (“2027 Notes”). We fund our mortgage loan pools primarily through secured borrowings and repurchase agreements and we fund our debt securities primarily through repurchase agreements.
Our Portfolio The following table outlines the carrying value of our portfolio of mortgage loan assets and single-family and smaller commercial properties as of December 31, 2023 and 2022 ($ in millions): December 31, 2023 December 31, 2022 Residential RPLs $ 822.1 $ 872.9 Residential NPLs 92.0 105.1 SBC loans 6.2 11.1 Real estate owned properties, net 3.8 6.3 Investments in securities available-for-sale 131.6 257.1 Investments in securities held-to-maturity 59.7 — Investment in beneficial interests 104.2 134.6 Total mortgage related assets $ 1,219.6 $ 1,387.1 We closely monitor the status of our mortgage loans and, through our Servicer, work with our borrowers to improve their payment records.
Our Portfolio The following table outlines the carrying value of our portfolio of mortgage loan assets, investments in securities and REO as of December 31, 2024 and 2023 ($ in millions): December 31, 2024 December 31, 2023 Mortgage loans held-for-investment, net $ 396.1 $ 864.6 Mortgage loans held-for-sale, net 27.8 55.7 CMBS available-for-sale, at fair value 246.6 — RMBS available-for-sale, at fair value 62.2 131.6 Investments in securities, held-to-maturity 46.0 59.7 Investments in beneficial interests, net 89.7 104.2 Other investments, at fair value 29.9 — Real estate owned 4.1 3.8 Total mortgage related assets $ 902.4 $ 1,219.6 We closely monitor the status of our mortgage loans held-for-investment and held-for-sale, as well as the mortgage loans underlying our RMBS and, through our Servicer, work with our borrowers to improve their payment records.
The purchase discount which we expect to recover through eventual repayment of the investment gives rise to an accretable yield. We recognize this accretable yield as interest income on a prospective level yield basis over the life of the investment.
The purchase discount expected to be recovered through eventual repayment of the investment gives rise to an accretable yield. The accretable yield is recognized as interest income on a prospective level yield basis over the life of the investment based on the expected cash flows to be collected.
Discount accretion on beneficial interests was $8.0 million, $10.8 million and $16.0 million during the years ended December 31, 2023, 2022 and 2021, respectively. Interest income and discount accretion on debt securities was $9.5 million, $10.6 million and $11.0 million during the years ended December 31, 2023, 2022 and 2021, respectively.
Interest income on debt securities was $10.5 million and $9.5 million during the years ended December 31, 2024 and 2023, respectively.
Fair Value Fair Value of Financial Instruments — A fair value hierarchy has been established that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.
Any allowance for credit losses is determined under CECL as discussed in “Allowance for Credit Losses” above. 50 Fair Value Fair Value of financial instruments — A fair value hierarchy has been established that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.
Ownership Issuing Trust/Issue Date Security Total Original Outstanding Principal Coupon Ownership Percent Original Stated or Notional Principal Balance Retained Current Owned Stated or Notional Principal Balance Retained Class M notes due 2062 $ 17,776 3.00 % 17.18 % $ 3,054 $ 3,054 2022-RPL 1/ October 2022 Class B notes due 2028 $ 29,364 4.25 % 17.50 % $ 5,139 $ 5,139 Ajax Mortgage Loan Trust 2023-A/ February 2023 Class A notes due 2062 $ 163,741 3.46 % (2) 5.89 % (3) $ 9,644 $ 8,851 Class M notes due 2062 $ 10,561 2.50 % 20.00 % $ 2,112 $ 2,112 Class B notes due 2062 $ 20,506 2.50 % 20.00 % $ 4,101 $ 4,101 Ajax Mortgage Loan Trust 2023-B/ July 2023 Class A notes due 2062 $ 91,312 4.25 % 20.00 % $ 18,262 $ 16,545 Class B notes due 2062 $ 8,522 4.25 % 20.00 % $ 1,704 $ 1,704 Ajax Mortgage Loan Trust 2023-C/ July 2023 Class A notes due 2063 $ 147,386 3.45 % (2) 20.00 % (3) $ 29,477 $ 28,038 Class M notes due 2063 $ 25,650 2.50 % 20.00 % $ 5,130 $ 5,130 (1) Ajax Mortgage Loan Trust 2021-E was formed on July 19, 2021 which was subsequent to completing Ajax Mortgage Loan Trust 2021-F and 2021-G.
Ownership Issuing Trust/Issue Date Security Total Original Outstanding Principal Coupon Ownership Percent Original Stated or Notional Principal Balance Retained Current Owned Stated or Notional Principal Balance Retained Ajax Mortgage Loan Trust 2022-B/ June 2022 Class A notes due 2062 $ 169,924 3.47 % (2) 5.99 % (3) $ 9,692 $ 6,914 Class M notes due 2062 17,776 3.00 % 17.18 % 3,054 3,054 Ajax Mortgage Loan Trust 2023-A/ February 2023 Class A notes due 2062 $ 163,741 3.46 % (2) 5.89 % (3) $ 9,644 $ 7,874 Class M notes due 2062 10,561 2.50 % 20.00 % 2,112 2,112 Class B notes due 2062 20,506 2.50 % 20.00 % 4,101 4,101 Ajax Mortgage Loan Trust 2023-B/ July 2023 Class A notes due 2062 $ 91,312 4.25 % 5.00 % $ 4,566 $ 3,250 Class B notes due 2062 8,522 4.25 % 20.00 % 1,704 1,704 Ajax Mortgage Loan Trust 2023-C/ July 2023 Class A notes due 2063 $ 147,386 3.45 % (2) 20.00 % (3) $ 29,477 $ 8,119 Class M notes due 2063 25,650 2.50 % 20.00 % 5,130 5,130 (1) Ajax Mortgage Loan Trust 2021-E made an election to be taxed as a REMIC however the residual class was placed with an unrelated third party.
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 our repurchase agreements.
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.
For the year ended December 31, 2023, we had net financing cash outflows of $121.4 million primarily driven by repayments of $134.9 million on repurchase transactions, pay downs of $57.5 million on our secured borrowings and $20.6 million of dividends on our common and preferred stock, partially offset by additional borrowing through repurchase transactions of $64.8 million and common stock offerings of $28.2 million.
For the year ended December 31, 2023, we had net financing cash outflows of $121.4 million primarily driven by net repayments of $70.1 million on repurchase transactions, and pay downs of $57.5 million on secured borrowings.
In accordance with the terms of the agreements, we may offer and sell shares of our common stock at any time and from time to time through the sales agents. Sales of the shares, if any, will be made by means of ordinary brokers’ transactions on the NYSE or otherwise at market prices prevailing at the time of the sale.
Sales of the shares, if any, will be made by means of ordinary brokers’ transactions on the NYSE or otherwise at market prices prevailing at the time of the sale.
As of December 31, 2022, we held 1,031,609 shares of treasury stock consisting of 144,658 shares received through distributions of our shares previously held by our Manager, 361,912 shares received through our Servicer and 525,039 shares acquired through open market purchases.
No shares were repurchased during the years ended December 31, 2024 and 2023. As of December 31, 2024, we held 1,664,365 shares of treasury stock consisting of 777,414 shares received through distributions of our shares of Common Stock previously held by our Former Manager, 361,912 shares received through our Former Servicer and 525,039 shares acquired through open market purchases.
Our primary operating cash inflow is cash interest payments on our mortgage loan pools of $43.5 million, $46.6 million and $47.6 million for the years ended December 31, 2023, 2022 and 2021, respectively. Non-cash interest income accretion on our mortgage loans was $8.1 million, $13.8 million and $19.5 million for the years ended December 31, 2023, 2022 and 2021 respectively.
Comparatively, our operating cash outflows for the year ended December 31, 2023, were $46.5 million. Our primary operating cash inflow is cash interest payments on our mortgage loans of $28.8 million and $43.5 million for the years ended December 31, 2024 and 2023, respectively.
The trust made an election to be taxed as a REMIC however the residual class was placed with an unrelated third party. (2) The trust certificate has no stated principal balance and is tied to the unpaid balance of the underlying mortgage loans. (3) Includes the addition of Class B notes classified as beneficial interests on our consolidated balance sheets.
(2) The trust certificate has no stated principal balance and is tied to the unpaid balance of the underlying mortgage loans. (3) Includes the addition of Class B notes classified as beneficial interests on our consolidated balance sheets. Total original outstanding principal and principal balance retained of the Class B notes is $25.9 million and $6.0 million, respectively.
During the year ended December 31, 2023, we sold 2,621,742 shares of common stock for proceeds, net of issuance costs of $17.2 million under our At the Market program, which we sell, through our agents, shares of common stock with an aggregate offering price of up to $100.0 million.
No preferred stock or warrants were exchanged during year ended December 31, 2023. During year ended December 31, 2024, we did not sell any shares of Common Stock under our At the Market program. Comparatively, during the year ended December 31, 2023, we sold 2,621,742 shares of Common Stock for proceeds, net of issuance costs of $17.2 million.
Mortgage Loans We adopted ASU 2016-13, Financial Instruments - Credit Losses, otherwise known as CECL using the prospective transition approach for PCD assets on January 1, 2020. At the time, $10.2 million of loan discount was reclassified to the allowance for expected credit losses with no net impact on the amortized cost basis of the portfolio.
Allowance for Credit Losses We adopted ASU 2016-13, Financial Instruments - Credit Losses, otherwise known as CECL using the prospective transition approach for PCD assets on January 1, 2020.
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 could limit our access to financing.
The secured borrowings are structured as debt financings and not sales through a real estate mortgage investment conduit (“REMIC”). We completed the securitization transactions pursuant to Rule 144A under 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.
Off-Balance Sheet Arrangements 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.
Off-Balance Sheet Arrangements Other than our investments in RMBS and beneficial interests issued by joint ventures, our investment in Gaea Real Estate Corp 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.
For the year ended December 31, 2022, our investing cash inflows of $223.1 million were driven by proceeds from principal payments on and payoffs of our mortgage loan portfolio of $147.3 million and principal and interest collections on our securities of $68.2 million and refinancing and sale of our debt securities and beneficial interests of $147.9 million, partially offset by the purchase of securities of $129.1 million, acquisitions of mortgage loans of $11.4 million and a $6.1 million purchase of additional shares in Gaea.
For the year ended December 31, 2024, our investing cash inflows of $297.3 million were driven by the net proceeds from the sales of our mortgage loans of $384.1 million, net proceeds on sales of our RMBS and CMBS of $65.0 million, proceeds from refinancing and sale of debt securities AFS and beneficial interests of $44.5 million, principal and interest collections on our debt securities HTM of $12.3 million, and principal payments and payoffs of our mortgage loan portfolio of $52.5 million, partially offset by purchases of CMBS of $255.3 million.
Further, we have not guaranteed any obligations of unconsolidated entities nor do we have any commitment or intent to provide funding to any such entities. As such, we are not materially exposed to any market, credit, liquidity or financing risk that could arise if we had engaged in such relationships.
Further, we have not guaranteed any obligations of unconsolidated entities nor do we have any commitment or intent to provide funding to any such entities.
The trust made an election to be taxed as a REMIC however the residual class was placed with an unrelated third party. (2) Weighted average of Class A notes. (3) Weighted average ownership of Class A notes. (4) Total principal includes 5.01% EU risk retention component classified as investments in securities HTM on our consolidated balance sheets.
(2) Weighted average of Class A notes. (3) Weighted average ownership of Class A notes. (4) Total principal includes 5.01% EU risk retention component classified as investments in securities HTM on our consolidated balance sheets. A summary of our investments in beneficial interests issued by joint ventures is presented below ($ in thousands): Rithm Property Trust Inc.
This amortization will offset the effect on interest income of the amortization of the discount resulting from the transfer recorded at fair value. We account for our investments in securities HTM under CECL and carry them at amortized cost.
This amortization offsets the effect on interest income of the amortization of the discount resulting from the transfer recorded at fair value. Investments in Beneficial Interests, Net Investments in beneficial interests are carried at amortized cost net of any allowance for credit losses.
Table 18: Investments in Joint Ventures We form joint ventures with third party institutional accredited investors to purchase mortgage loans and other mortgage related assets.
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. 60 Table 10: Investments in Joint Ventures We form joint ventures with third party institutional accredited investors to purchase mortgage loans and other mortgage related assets.
The following table presents summarized financial information for the Guarantors and our Operating Partnership, on a combined basis after eliminating (i) intercompany transactions and balances among the guarantor entities and (ii) equity in earnings from, and any investments in, any subsidiary that is a non-guarantor ($ in thousands): 72 Table 15: Summary of Issuer and Guarantor Financial Statements December 31, 2023 December 31, 2022 Total assets $ 382,962 $ 455,096 Borrowings under repurchase transactions 158,741 206,872 Convertible senior notes and notes payable, net 210,360 210,302 Other liabilities 44,931 46,401 Total liabilities 414,032 463,575 Total equity (deficit) (31,070) (8,479) Total liabilities and equity $ 382,962 $ 455,096 For the year ended December 31, 2023 Total loss on revenue, net $ (17,839) Management fees and loan servicing fees 6,491 Other expenses 13,173 Consolidated loss attributable to the Company (37,503) Less: dividends on preferred stock 2,190 Consolidated net loss attributable to common stockholders $ (39,693) Repurchase Transactions We have two repurchase facilities whereby we, through two wholly owned Delaware trusts (the “Trusts”), acquire pools of mortgage loans, which are then sold by the Trusts, as “Seller” to two separate counterparties, the “buyer” or “buyers.” One facility has a ceiling of $150.0 million and the other $400.0 million at any one time.
Under the indenture governing the 2027 Notes, a subsidiary guarantor’s guarantee will terminate upon: (i) the sale, exchange, disposition or other transfer (including by way of consolidation) of the subsidiary guarantor or the sale or disposition of all or substantially all the assets of the subsidiary guarantor otherwise permitted by the indenture, (ii) satisfaction of the requirements for legal or covenant defeasance or discharge of the 2027 Notes, or (iii) no default or event of default has occurred and is continuing under the indenture. 59 The following table presents summarized financial information for the guarantors and our Operating Partnership, on a combined basis after eliminating (i) intercompany transactions and balances among the guarantor entities and (ii) equity in earnings from, and any investments in, any subsidiary that is a non-guarantor ($ in thousands): Table 9: Summary of Issuer and Guarantor Financial Statements December 31, 2024 December 31, 2023 Total Assets $ 505,465 $ 382,962 Borrowings under repurchase transactions 291,140 158,741 Convertible senior notes and notes payable, net 107,647 210,360 Other liabilities 15,986 44,931 Total liabilities 414,773 414,032 Total equity (deficit) 90,692 (31,070) Total Liabilities and Equity $ 505,465 $ 382,962 Year ended December 31, 2024 December 31, 2023 Total loss on revenue, net $ 20,873 $ (17,839) Management fees and loan servicing fees 22,207 6,491 Other expenses 6,215 13,173 Loss attributable to the Company (7,549) (37,503) Less: dividends on preferred stock 341 2,190 Net loss attributable to common stockholders $ (7,890) $ (39,693) Dividends We may declare dividends based on, among other things, our earnings, our financial condition, our working capital needs, new opportunities, and distribution requirements imposed on REITs.
Financing Activities — Equity Offerings On February 28, 2020, our Board of Directors approved a stock repurchase of up to $25.0 million of our common shares. The amount and timing of any repurchases depends on a number of factors, including but not limited to the price and availability of the common shares, trading volume and general circumstances and market conditions.
The amount and timing of any repurchases depends on a number of factors, including, but not limited to, the price and availability of the Common Stock, the trading volume and general circumstances and market conditions. To date, we have repurchased 525,039 shares of Common Stock for an aggregate purchase price of $5.1 million leaving $19.1 million remaining under the authorization.
To qualify as a REIT under the Code, we generally will 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. 52 Resolution Methodologies .
The declaration of dividends to our stockholders and the amount of such dividends are at the discretion of our Board of Directors. 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.
We securitize 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.
Factors That May Affect Our Operating Results Acquisitions — In light certain financial challenges, including the significant losses we have incurred to date and limited sources of financing, we do not expect to be able to acquire significant new commercial mortgage assets in the near future. 47 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.
Ownership Issuing Trust/Issue Date Total Original Outstanding Principal Ownership Percent Original Stated or Notional Principal Balance Retained Current Owned Stated or Notional Principal Balance Retained Ajax Mortgage Loan Trust 2018-B/ June 2018 $ 28,447 20.00 % $ 5,689 $ 2,122 Ajax Mortgage Loan Trust 2018-D/ September 2018 $ 20,166 20.00 % $ 4,033 $ 790 Ajax Mortgage Loan Trust 2018-F/ December 2018 $ 43,201 20.00 % $ 8,640 $ 3,641 Ajax Mortgage Loan Trust 2019-E/ September 2019 $ 43,464 20.00 % $ 8,693 $ 2,295 Ajax Mortgage Loan Trust 2019-G/ December 2019 $ 33,941 20.00 % $ 6,788 $ 2,285 Ajax Mortgage Loan Trust 2020-A/ March 2020 $ 59,852 20.00 % $ 11,970 $ 5,297 78 Ajax Mortgage Loan Trust 2020-C/ September 2020 $ 73,964 10.01 % $ 7,404 $ 7,393 Ajax Mortgage Loan Trust 2020-D/ September 2020 $ 79,373 10.01 % $ 7,945 $ 7,934 Ajax Mortgage Loan Trust 2021-C/ April 2021 $ 46,722 31.90 % $ 14,904 $ 14,860 Ajax Mortgage Loan Trust 2021-D/ May 2021 $ 38,293 20.00 % $ 7,659 $ 7,630 Ajax Mortgage Loan Trust 2021-E/ July 2021 (1) $ 518,357 19.57 % $ 101,471 (2) $ 1,271 Ajax Mortgage Loan Trust 2021-F/ June 2021 $ 92,743 12.60 % $ 11,686 $ 11,670 Ajax Mortgage Loan Trust 2021-G/ June 2021 $ 61,864 20.00 % $ 12,373 $ 11,630 2021-NPL 1/ November 2021 $ 52,773 16.33 % $ 8,620 $ 8,575 Ajax Mortgage Loan Trust 2022-A/ April 2022 (3) $ 38,784 23.28 % $ 9,029 $ 8,557 Ajax Mortgage Loan Trust 2022-B/ June 2022 (4) $ 33,125 17.18 % $ 5,691 $ 5,352 2022-RPL 1/ October 2022 $ 55,326 17.50 % $ 9,682 $ 9,308 Ajax Mortgage Loan Trust 2023-A/ February 2023 $ 10,254 20.00 % $ 2,051 $ 1,956 Ajax Mortgage Loan Trust 2023-B/ July 2023 $ 29,274 20.00 % $ 5,855 $ 5,398 Ajax Mortgage Loan Trust 2023-C/ July 2023 $ 30,537 20.00 % $ 6,107 $ 6,009 (1) Ajax Mortgage Loan Trust 2021-E was formed on July 19, 2021 which was subsequent to completing Ajax Mortgage Loan Trust 2021-F and 2021-G.
Ownership Issuing Trust/Issue Date Total Original Outstanding Principal Ownership Percent Original Stated or Notional Principal Balance Retained Current Owned Stated or Notional Principal Balance Retained Ajax Mortgage Loan Trust 2021-G/ June 2021 61,864 20.00 % 12,373 11,630 2021-NPL 1/ November 2021 52,773 16.33 % 8,620 8,574 Ajax Mortgage Loan Trust 2022-A/ April 2022 (3) 38,784 23.28 % 9,029 8,287 Ajax Mortgage Loan Trust 2022-B/ June 2022 (4) 33,125 17.18 % 5,691 5,133 2022-RPL 1/ October 2022 55,326 17.50 % 9,682 9,099 Ajax Mortgage Loan Trust 2023-A/ February 2023 10,254 20.00 % 2,051 1,876 Ajax Mortgage Loan Trust 2023-B/ July 2023 29,274 20.00 % 5,855 5,062 Ajax Mortgage Loan Trust 2023-C/ July 2023 30,537 20.00 % 6,107 5,832 Trusts with no Bonds Outstanding n/a n/a 50,341 15,713 (1) Ajax Mortgage Loan Trust 2021-E was formed on July 19, 2021 and an election to be taxed as a REMIC however the residual class was placed with an unrelated third party.
A summary of our investments in beneficial interests issued by joint ventures is presented below ($ in thousands): Great Ajax Corp.
A summary of our investments in RMBS retained from our joint ventures is presented below ($ in thousands): Rithm Property Trust Inc.
Interest expense, which is subtracted from our Interest income to arrive at Net interest income, consists of the costs to borrow money. Changes in Home Prices .
Interest expense, which is subtracted from our Interest income to arrive at Net interest income, consists of the costs to borrow money. 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.
Accordingly, if our delinquency estimate is overstated and our valuation estimates are overstated, there could be a negative impact on our allowance for credit losses. Based on our review of the key inputs and our methodology used, we believe our current allowance for credit losses is properly stated at December 31, 2023 and 2022.
Accordingly, if our delinquency estimate is overstated and our valuation estimates are overstated, there could be a negative impact on our allowance for credit losses. Mortgage Loans Our loans are classified as (i) held-for-investment at amortized cost net of the allowance for credit losses or (ii) held-for-sale at lower of cost or market.
Our average daily cash balance during the year ended December 31, 2023 was $50.6 million, a decrease from our average daily cash balance of $60.9 million during the year ended 2022 and a decrease from our average daily cash balance of $99.1 million during the year ended 2021.
Our average cash balance during the year was $68.5 million, an increase of $17.9 million from our average cash balance of $50.6 million during the year ended December 31, 2023. Operating, Investing and Financing Cash Flows Our operating cash inflows for the year ended December 31, 2024, were $0.3 million.
At December 31, 2023, we owned approximately 22.2% of total shares outstanding. We account for our investment in Gaea under the equity method. We elected to be taxed as a REIT for U.S. federal income tax purposes beginning with our taxable year ended December 31, 2014.
These trusts are considered to be variable interest entities (“VIEs”), and we have determined that we are the primary beneficiary of the VIEs. 45 We elected to be taxed as a REIT for U.S. federal income tax purposes beginning with our taxable year ended December 31, 2014.
Portfolio at December 31, 2022 Years of Origination After 2008 2006 – 2008 2005 and prior Number of loans 596 2,998 1,737 UPB $ 129,867 $ 661,477 $ 236,167 Percent of mortgage loan portfolio by year of origination 12.6 % 64.4 % 23.0 % Loan Attributes: Weighted average loan age (months) 119.3 190.9 230.3 Weighted average loan-to-value 55.2 % 59.5 % 48.6 % Delinquency Performance: Current 58.4 % 59.9 % 58.7 % 30 days delinquent 7.6 % 10.2 % 9.1 % 60 days delinquent 0.1 % 0.1 % 0.5 % 90+ days delinquent 27.3 % 24.2 % 26.6 % Foreclosure 6.6 % 5.6 % 5.1 % Table 12: Loans by State The following table identifies our mortgage loans for our top 10 states by number of loans, loan value, collateral value and percentages thereof at December 31, 2023 and 2022 ($ in thousands): December 31, 2023 December 31, 2022 State Count UPB % UPB Collateral Value (1) % of Collateral Value State Count UPB % UPB Collateral Value (1) % of Collateral Value CA 678 $ 216,124 22.6 % $ 508,854 24.0 % CA 704 $ 226,963 22.1 % $ 525,595 24.0 % FL 792 159,018 16.6 % 366,829 17.3 % FL 862 174,303 17.0 % 376,233 17.2 % NY 344 101,946 10.7 % 209,509 9.9 % NY 354 107,425 10.5 % 216,384 9.9 % NJ 274 60,837 6.4 % 115,635 5.5 % NJ 285 64,085 6.2 % 111,284 5.1 % 67 December 31, 2023 December 31, 2022 State Count UPB % UPB Collateral Value (1) % of Collateral Value State Count UPB % UPB Collateral Value (1) % of Collateral Value MD 198 47,391 5.0 % 79,587 3.8 % MD 212 50,034 4.9 % 84,185 3.8 % VA 171 35,359 3.7 % 68,100 3.2 % VA 176 37,361 3.6 % 67,647 3.1 % TX 318 31,445 3.3 % 85,808 4.1 % TX 337 33,903 3.3 % 90,805 4.2 % GA 264 30,719 3.2 % 77,210 3.6 % GA 283 33,157 3.2 % 80,103 3.7 % IL 182 29,826 3.1 % 48,824 2.3 % IL 194 32,297 3.1 % 50,732 2.3 % MA 136 27,266 2.8 % 64,592 3.1 % MA 148 30,086 2.9 % 67,160 3.1 % Other 1,666 217,244 22.6 % 490,909 23.2 % Other 1,776 237,897 23.2 % 516,648 23.6 % Total 5,023 $ 957,175 100.0 % $ 2,115,857 100.0 % Total 5,331 $ 1,027,511 100.0 % $ 2,186,776 100.0 % (1) As of the reporting date.
Table 8: Loans by State The following table identifies our mortgage loans for our top 10 states by number of loans, loan value, collateral value and percentages thereof at December 31, 2024 and 2023 ($ in thousands): December 31, 2024 December 31, 2023 State Count UPB % UPB Collateral Value (1) % of Collateral Value State Count UPB % UPB Collateral Value (1) % of Collateral Value CA 433 127,133 27.9 % $ 325,507 28.0 % CA 678 $ 216,124 22.6 % $ 508,854 24.0 % FL 346 55,550 12.2 % 157,625 13.6 % FL 792 159,018 16.6 % 366,829 17.3 % TX 165 13,487 3.0 % 44,561 3.8 % NY 344 101,946 10.7 % 209,509 9.9 % GA 144 15,227 3.3 % 44,549 3.8 % NJ 274 60,837 6.4 % 115,635 5.5 % NY 144 41,757 9.2 % 101,167 8.7 % MD 198 47,391 5.0 % 79,587 3.8 % NJ 136 27,374 6.0 % 63,381 5.5 % VA 171 35,359 3.7 % 68,100 3.2 % MD 115 25,083 5.5 % 45,794 3.9 % TX 318 31,445 3.3 % 85,808 4.1 % IL 105 16,741 3.7 % 32,072 2.8 % GA 264 30,719 3.2 % 77,210 3.6 % NC 100 11,567 2.5 % 32,913 2.8 % IL 182 29,826 3.1 % 48,824 2.3 % VA 86 17,108 3.8 % 37,916 3.3 % MA 136 27,266 2.8 % 64,592 3.1 % Other 851 103,866 22.9 % 275,188 23.8 % Other 1,666 217,244 22.6 % 490,909 23.2 % 2,625 454,893 100.0 % $ 1,160,673 100.0 % 5,023 $ 957,175 100.0 % $ 2,115,857 100.0 % 57 Liquidity and Capital Resources Source and Uses of Cash During the year ended December 31, 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.
Our expenses primarily consist of the fees and expenses payable by us under the Management Agreement and the Servicing Agreement. Additionally, our Manager incurs direct, out-of-pocket costs 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 under consideration for purchase.
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.
For the year ended December 31, 2021, we had net financing cash inflows of $45.7 million due to the borrowings through repurchase transactions of $560.6 million and secured borrowings of $391.0 million, partially offset by repayments of $435.7 million on repurchase transactions, pay downs of $393.0 million on secured borrowings and common and preferred dividends of $28.8 million.
For the year ended December 31, 2024, we had net financing cash outflows of $286.1 million, primarily driven by the redemption of our 2024 Notes of $103.5 million, pay downs of our secured borrowings of $154.7 million and net repayments on our repurchase transactions of $19.2 million.
We also held approximately $52.8 million of cash and cash equivalents, an increase of $5.0 million from our balance of $47.8 million at December 31, 2022, which was a decrease of $36.6 million from our balance of $84.4 million at 2021.
As of December 31, 2024 and 2023, substantially all of our invested capital was in residential mortgage loans, CMBS, RMBS and beneficial interests. We also held approximately $64.3 million of cash and cash equivalents, an increase of $11.4 million from our balance of $52.8 million at December 31, 2023.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Overview Great Ajax Corp. is a Maryland corporation that is organized and operated in a manner intended to allow us to qualify as a REIT.
(formerly Great Ajax Corp.) is a Maryland corporation that is organized and operated in a manner intended to allow us to qualify as a REIT. Historically, we acquired RPLs and NPLs either directly or in security form through joint ventures with institutional accredited investors.
Critical accounting estimates are important to the presentation of our financial condition and results of operations and require management to make difficult, complex, or subjective judgments and estimates, often regarding matters that are inherently uncertain.
The Company believes that the following discussion addresses the Company’s most critical accounting policies, which are those that are most important to the presentation of the Company’s financial condition and results of operations and require management’s most difficult, subjective and complex judgments. 48 The mortgage and financial sectors operate in a challenging and uncertain economic environment.
Our loan portfolio activity for the years ended December 31, 2023 and 2022 are presented below ($ in thousands): Table 9: Loan Portfolio Activity For the year ended December 31, 2023 2022 Mortgage loans held-for-investment, net Mortgage loans held-for-sale, net Mortgage loans held-for-investment, net Mortgage loans held-for-sale, net Beginning carrying value $ 989,084 $ — $ 1,080,434 $ 29,572 Mortgage loans acquired 14,401 — 11,414 — Accretion recognized 51,325 — 59,971 — Payments received on loans, net (129,230) — (193,951) — Net reclassifications (to)/from mortgage loans held-for-sale, net (64,277) 64,277 29,572 (29,572) Mark to market on loans held-for-sale — (8,559) — — Reclassifications to REO (2,379) — (4,699) — Decrease in net present value of expected credit losses on mortgage loans and lower of cost or market adjustment 5,597 — 6,275 — Other 30 — 68 — Ending carrying value $ 864,551 $ 55,718 $ 989,084 $ — 65 Table 10: Portfolio Composition As of December 31, 2023 and 2022, our portfolios consisted of the following ($ in thousands): December 31, 2023 (1) December 31, 2022 No. of Loans 5,023 No. of Loans 5,331 Total UPB (2) $ 957,175 Total UPB (2) $ 1,027,511 Interest-Bearing Balance $ 875,209 Interest-Bearing Balance $ 939,115 Deferred Balance (3) $ 81,966 Deferred Balance (3) $ 88,396 Market Value of Collateral (4) $ 2,115,857 Market Value of Collateral (4) $ 2,186,776 Current Purchase Price/Total UPB 81.6 % Current Purchase Price/Total UPB 81.7 % Current Purchase Price/Market Value of Collateral 41.5 % Current Purchase Price/Market Value of Collateral 42.2 % Weighted Average Coupon 4.51 % Weighted Average Coupon 4.38 % Weighted Average LTV (5) 54.2 % Weighted Average LTV (5) 56.4 % Weighted Average Remaining Term (months) 288 Weighted Average Remaining Term (months) 293 No. of first liens 4,979 No. of first liens 5,282 No. of second liens 44 No. of second liens 49 RPLs 89.3 % RPLs 88.3 % NPLs 10.0 % NPLs 10.6 % SBC loans 0.7 % SBC loans 1.1 % No. of REO properties held-for-sale 20 No. of REO properties held-for-sale 39 Market Value of REO (6) $ 4,592 Market Value of REO (6) $ 7,437 Carrying value of debt securities and beneficial interests in trusts $ 310,330 Carrying value of debt securities and beneficial interests in trusts $ 417,262 Loans with 12 for 12 payments as an approximate percentage of acquisition UPB (7) 80.4 % Loans with 12 for 12 payments as an approximate percentage of acquisition UPB (7) 79.6 % Loans with 24 for 24 payments as an approximate percentage of acquisition UPB (8) 76.9 % Loans with 24 for 24 payments as an approximate percentage of acquisition UPB (8) 69.8 % (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 $64.3 million.
A breakdown of other expense is provided in the table below ($ in thousands): Table 4: Other Expense Year ended December 31, Variance 2024 2023 Year-over-Year Borrowing related expenses $ 3,223 $ 625 $ 2,598 Employee and service provider share grants 1,408 1,347 61 Insurance 1,326 1,019 307 Taxes and regulatory expense 780 476 304 Directors' fees and grants 691 902 (211) Impairment on real estate owned 605 1,096 (491) Consulting expense 614 218 396 Other expense 984 1,302 (318) Total other expense $ 9,631 $ 6,985 $ 2,646 Mortgage Loan Portfolio Our loan portfolio activity for the years ended December 31, 2024 and 2023, is presented below ($ in thousands): Table 5: Loan Portfolio Activity Year ended December 31, 2024 2023 Mortgage loans held-for-investment, net Mortgage loans held-for-sale, net Mortgage loans held-for-investment, net Mortgage loans held-for-sale, net Beginning carrying value $ 864,551 $ 55,718 $ 989,084 $ — Mortgage loans acquired — — 14,400 — Accretion recognized 31,802 — 51,326 — Payments received on loans, net (67,128) (9,996) (129,230) — Net reclassifications (to)/from mortgage loans held-for-sale, net (428,029) 428,029 (64,277) 64,277 Mark-to-market on loans held-for-sale — (54,537) — (8,559) Reclassifications to REO (1,696) (345) (2,379) — Sale of mortgage loans — (388,590) — — Net change in the allowance for credit losses (1,112) — 5,597 — Other (2,336) (2,491) 30 — Ending carrying value $ 396,052 $ 27,788 $ 864,551 $ 55,718 55 Table 6: Loan Portfolio Composition As of December 31, 2024 and 2023, our loan portfolios consisted of the following ($ in thousands): December 31, 2024 December 31, 2023 No. of Loans 2,625 No. of Loans 5,023 Total UPB (1) $ 454,893 Total UPB (1) $ 957,175 Interest-Bearing Balance $ 413,131 Interest-Bearing Balance $ 875,209 Deferred Balance (2) $ 41,763 Deferred Balance (2) $ 81,966 Market Value of Collateral $ 1,160,673 Market Value of Collateral $ 2,115,857 Current Purchase Price/Total UPB 80.0 % Current Purchase Price/Total UPB 81.6 % Current Purchase Price/Market Value of Collateral 37.4 % Current Purchase Price/Market Value of Collateral 41.5 % Weighted Average Coupon 4.48 % Weighted Average Coupon 4.51 % Weighted Average LTV (3) 48.2 % Weighted Average LTV (3) 54.2 % Weighted Average Remaining Term (months) 270 Weighted Average Remaining Term (months) 288 (1) At December 31, 2024 and 2023, our loan portfolio consists of fixed rate (62.6% of UPB), ARM (7.3% of UPB) and Hybrid ARM (30.1% of UPB); and fixed rate (60.0% of UPB), ARM (6.4% of UPB) and Hybrid ARM (33.6% of UPB), respectively.
Excluded from the aggregate pools are loans that pay in full subsequent to the acquisition closing date but prior to pooling. Any gain or loss on these loans is recognized as interest income in the period the loan pays in full.
We have aggregated our mortgage loan portfolio into loan pools based on similar risk factors. Excluded from the aggregate pools are loans that pay in full subsequent to the acquisition closing date but prior to pooling. Securities HTM and beneficial interests are assessed at the individual security level.
Other Loss/Income Other loss/income increased for the year ended December 31, 2023 by $5.6 million from 2022. The increase in Other loss/income was driven by a $8.6 million mark to market loss on mortgage loans held-for-sale. During the quarter ended December 31, 2023, we began actively marketing a pool of NPLs.
Other Loss/Income Year Ended December 31, 2024 versus Year Ended December 31, 2023 Our other loss increased for the year ended December 31, 2024 versus the prior year, primarily due to losses on the sale of our mortgage loans held-for-sale, partially offset by mark-to-market gains on our CMBS and lower losses on our sale of securities.
During the year ended December 31, 2023, we collected $163.0 million in cash payments and proceeds on our mortgage loans, securities and REO held-for-sale compared to $261.2 million and $318.5 million for the years ended December 31, 2022 and 2021, respectively. 60 The interest income detail for the years ended December 31, 2023, 2022 and 2021 is included in the table below ($ in thousands): Table 2: Interest Income Detail For the year ended December 31, 2023 2022 2021 Accretable yield recognized on RPL, NPL and SBC loans $ 51,326 $ 59,971 $ 66,459 Interest income on debt securities 9,520 10,558 10,963 Accretable yield recognized on beneficial interests 8,036 10,785 15,540 Bank interest income 2,579 703 261 Other interest income 871 565 160 Interest income $ 72,332 $ 82,582 $ 93,383 Net (increase)/decrease in the net present value of expected credit losses (8,137) 8,026 18,223 Interest income after the impact of changes in the net present value of expected credit losses $ 64,195 $ 90,608 $ 111,606 The average carrying balance of our mortgage loan portfolio decreased for the year ended December 31, 2023 versus the prior year of 2022 primarily due to lower acquisition combined with continued paydown of the loans.
The interest income detail and interest expense for the years ended December 31, 2024 and 2023, are presented in the table below ($ in thousands): Table 1: Interest Income Detail & Interest Expense Year ended December 31, Variance 2024 2023 Year-over-Year Accretable yield recognized on loans $ 31,802 $ 51,326 $ (19,524) Interest income on debt securities 12,087 9,520 2,567 Bank interest income 3,610 2,579 1,031 Accretable yield recognized on beneficial interests 5,178 8,036 (2,858) Other interest income 197 871 (674) Interest income $ 52,874 $ 72,332 $ (19,458) Net change in the allowance for credit losses (5,087) (8,137) 3,050 Interest income after the net change in the allowance for credit losses $ 47,787 $ 64,195 $ (16,408) Interest expense $ (43,572) $ (59,286) $ 15,714 The average carrying balance of our mortgage loan portfolio decreased for the year ended December 31, 2024, versus 2023, primarily due to loan sales as we reposition our balance sheet into investments in CMBS.
We elected to treat Gaea as a TRS under the Code for 2018 and elected to treat Gaea as a REIT under the Code in 2019 and thereafter.
The Company elected to treat GA-TRS and GAJX as TRSs under the Internal Revenue Code.
The average carrying balances of our debt securities and beneficial interests decreased for the year ended December 31, 2023 versus the prior year of 2022 as we did not invest in any new joint ventures with newly acquired loans.
Additionally, the average carrying balances of our RMBS and beneficial interests decreased for the year ended December 31, 2024, as compared to 2023 balances, due to paydowns, sales and redemptions, partially offset by investments in CMBS.
Removed
We primarily target acquisitions of (i) 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.
Added
Management’s Discussion and Analysis of Financial Condition and Results of Operations In this Annual Report, 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. and its subsidiaries; references to “Operating Partnership” refers 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 “New Manager” refer to RCM GA LLC; references to our “Servicer” or “Newrez” refer to Newrez LLC, a Delaware limited liability company and an affiliate of RCM GA; references to “Rithm” refer to Rithm Capital Corp., a Delaware corporation and the parent entity of RCM GA; and references to “Gregory” or our “Former Servicer” refer to Gregory Funding LLC, an Oregon limited liability company.
Removed
We may acquire RPLs and NPLs either directly or in joint ventures with institutional accredited investors. The joint ventures are structured as securitization trusts, of which we acquire debt securities and beneficial interests. We may also acquire or originate SBC loans.
Added
Our Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the consolidated financial statements and related notes included in Item 8. Financial statements and supplementary data, as well as other cautionary statements and risks described elsewhere in this Annual Report. Overview Rithm Property Trust Inc.
Removed
The SBC loans that we target through acquisitions generally have a principal balance of up to $5.0 million and are secured by multi-family residential and commercial mixed use retail/residential properties 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.
Added
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. On June 11, 2024, we completed our previously announced Strategic Transaction with Rithm.
Removed
Additionally, we invest in single-family and smaller commercial properties directly either through a foreclosure event of a loan in our mortgage portfolio, or, less frequently, through a direct acquisition. We own a 19.8% equity interest in our Manager and an 9.5% equity interest in the parent company of our Servicer through GA-TRS, a wholly owned subsidiary of the Operating Partnership.
Added
The Strategic Transaction included (i) the entry into the Securities Purchase Agreement, which provided for, among other things, upon the approval of the Company’s stockholders on May 20, 2024, 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 Securities Purchase Agreement, 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.
Removed
We have elected to treat GA-TRS as 49 a taxable REIT subsidiary under the Code. Our mortgage loans and real properties are serviced by the Servicer, also an affiliated company.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

9 edited+3 added−1 removed8 unchanged
Biggest changeInterest rates are highly sensitive to many factors, including governmental monetary and tax policies, domestic and international economic and political considerations and other factors beyond our control. Rising interest rates could be accompanied by inflation and higher household incomes which generally correlate closely to higher rent levels and property values.
Biggest changeHigher interest rates could be accompanied by inflation and higher household incomes which generally correlate closely to higher rent levels and property values.
There are many reasons borrowers will fail to pay including but not limited to, in the case of residential mortgage loans, reductions in personal income, job loss and personal events such as divorce or health problems, and in the case of commercial mortgage loans, reduction in market rents and occupancies and poor property management services by borrowers.
There are many reasons borrowers will fail to pay including but not limited to, in the case of residential mortgage loans, reductions in personal income, job loss and personal events such as divorce or health problems, and in the case of commercial mortgage loans, reduction in market rents and occupancy and poor property management services by borrowers.
Interest Rate Risk We expect to continue to securitize 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.
Interest Rate Risk We may continue to securitize 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.
It is possible that the value of our real estate assets and our net income could decline in a rising interest rate environment to the extent that our real estate assets are financed with floating rate debt and there is no accompanying increase in loan yield and rental yield or property values.
It is possible that the value of our real estate assets and our net income could decline in a higher interest rate environment to the extent that our real estate assets are financed with floating rate debt and there is no accompanying increase in loan yield and rental yield or property values.
Real Estate Risk Residential property values are subject to volatility and may be affected adversely by a number of factors, including, but not limited to, national, regional and local economic conditions (which may be adversely affected by industry slowdowns, public health crises and other factors); local real estate conditions (such as an oversupply of housing); construction quality, age 80 and design; demographic factors; and retroactive changes to building or similar codes.
Real Estate Risk Residential and commercial property values are subject to volatility and may be affected adversely by a number of factors, including, but not limited to, national, regional and local economic conditions (which may be adversely affected by industry slowdowns, public health crises and other factors); local real estate conditions (such as an oversupply of housing and commercial and residential vacancies); construction quality, age and design; demographic factors; and retroactive changes to building or similar codes.
Changes in prepayment rates will have varying effects on the different types of assets in our portfolio. We attempt to take these effects into account. We will generally purchase RPLs and NPLs at discounts from UPB and underlying property values.
Changes in prepayment rates will have varying effects on the different types of assets in our portfolio. We attempt to take these effects into account. We have historically purchased RPLs and NPLs at discounts from UPB and underlying property values.
An increase in prepayments would accelerate the repayment of the discount and lead to increased yield on our assets while also causing re-investment risk that we can find additional assets with the same interest and return levels. A decrease in prepayments would likely have the opposite effects.
An increase in prepayments would accelerate the repayment of the discount and lead to increased yield on our assets while also causing re-investment risk that we cannot find additional assets with the same interest and return levels. A decrease in prepayments would likely have the opposite effects. Credit Risk We are subject to credit risk in connection with our assets.
Changes in interest rates may affect the fair value of the mortgage loans and real estate underlying our portfolios as well as our financing interest rate expense. Additionally, rises in interest rates may result in a lower refinance volume of our portfolio.
Changes in interest rates may affect the fair value of the mortgage loans and real estate underlying our portfolios as well as our financing interest rate expense.
Increases in interest rates will result in lower refinancing volume, and home price increases will slow. Decreases in property values may cause us to suffer losses.
Increases in interest rates will result in lower refinancing volume and potentially higher defaults on CMBS, and home price increases will slow. Decreases in property values may cause us to suffer losses. Inflation Risk Virtually all of our assets and liabilities are interest-rate sensitive in nature.
Removed
We currently expect the pace of loan prepayments to slow due to rising interest rates. Credit Risk We are subject to credit risk in connection with our assets.
Added
Additionally, rises in interest rates may result in a lower refinance volume of our portfolio. 63 Interest rates are highly sensitive to many factors, including governmental monetary and tax policies, domestic and international economic and political considerations and other factors beyond our control.
Added
Increases by the Federal Reserve Bank to mitigate inflation have increased our cost of funds. While the Federal Reserve Bank has recently decreased interest rates, a change in policy would have a negative impact on our variable rate funding and the value of our residential mortgage assets.
Added
Additionally, inflation that outpaces wage increases could drive a decrease in disposable household income and increase the credit risk of certain borrowers.

Other RPT 10-K year-over-year comparisons