Fair Value

6 Months Ended

Jun. 30, 2025

The following tables present financial assets and liabilities recorded at fair value on a recurring basis by level within the fair value hierarchy as of June 30, 2025 and December 31, 2024:


($ in thousands)			Level 1		Level 2		Level 3
June 30, 2025	Carrying value		Quoted prices in active markets		Observable inputs other than Level 1 prices		Unobservable inputs
Assets:
CMBS, at fair value	$	275,204	$	—	$	275,204	$	—
RMBS available-for-sale, at fair value	49,118		—		49,118		—
Other investments	21,565		—		—		21,565


($ in thousands)			Level 1		Level 2		Level 3
December 31, 2024	Carrying value		Quoted prices in active markets		Observable inputs other than Level 1 prices		Unobservable inputs
Assets:
CMBS, at fair value	$	246,614	$	—	$	246,614	$	—
RMBS available-for-sale, at fair value	62,169		—		62,169		—
Other investments	29,916		—		—		29,916

Reconciliation of Fair Value Measurements Categorized within Level 3

Gains and losses on investments categorized within Level 3 are recorded in other income in the consolidated statements of operations. Gains and losses on warrant liability were recorded in fair value adjustment on mark-to market liabilities in the consolidated statements of operations.

The following tables summarize the changes in the Company’s Level 3 financial assets and liabilities measured at fair value on a recurring basis, for the six months ended June 30, 2025 and 2024:


($ in thousands)	12/31/2024		Transfers In / (Out)		Purchases / Issuances		Investment Sales / Settlements		Gains / (Losses) Included in Earnings		Gains / (Losses) Included in Other Comprehensive Income		6/30/2025
Assets:
Other investments	$	29,916	$	—	$	—	$	(5,527)	$	(2,824)	$	—	$	21,565


($ in thousands)	12/31/2023		Transfers In / (Out)			Purchases / Issuances		Investment Sales / Settlements		Gains / (Losses) Included in Earnings		Gains / (Losses) Included in Other Comprehensive Income		6/30/2024
Assets:
Other investments	$	—	$	21,918	(1)	$	—	$	—	$	—	$	—	$	21,918
Liabilities:
Warrant liability	16,644		(851)		(2)	2,734		(18,677)		(150)		—		—

(1)Represents reclassification from equity method securities to other investments, at fair value.

(2)Represents reclassification from warrant liability, at fair value to equity. See Note 8 for additional details.

The Company holds an investment at fair value in a REIT, which is reported in other investments on the Company’s consolidated balance sheets with a carrying value of $19.1 million and $21.9 million as of June 30, 2025 and December 31, 2024, respectively. Prior to the second quarter of 2024, the investment was accounted for under the equity method investment. For the six months ended June 30, 2025, the fair value of investment was estimated using an implied capitalization rate applied to the trailing and forward 12 month net operating income for each property and for properties under contract or listed for sale, the contract or listing price was used. Other investments also include an investment, at fair value, in a credit risk transfer instrument (“CRT”) valued at $2.5 million and $8.0 million as of June 30, 2025 and December 31, 2024, respectively. The fair value for the instrument is calculated as the net present value of the expected cash flows on the CRT.

The following tables present financial assets and liabilities not carried at fair value, by level within the fair value hierarchy as of June 30, 2025 and December 31, 2024:


($ in thousands)			Level 1		Level 2		Level 3
June 30, 2025	Carrying value		Quoted prices in active markets		Observable inputs other than Level 1 prices		Unobservable inputs
Assets:
Mortgage loans held-for-investment, net	$	378,894	$	—	$	—	$	335,143
Mortgage loans held-for-sale, net	27,588		—		—		27,588
Investment in debt securities held-to-maturity	43,673		—		41,810		—
Investment in beneficial interests	91,274		—		—		66,119
Liabilities:
Secured bonds payable, net	$	241,764	$	—	$	224,347	$	—
Repurchase financing agreements	362,502		—		362,502		—
Unsecured notes, net	108,077		—		107,012		—


($ in thousands)			Level 1		Level 2		Level 3
December 31, 2024	Carrying value		Quoted prices in active markets		Observable inputs other than Level 1 prices		Unobservable inputs
Assets:
Mortgage loans held-for-investment, net	$	396,052	$	—	$	—	$	357,119
Mortgage loans held-for-sale, net	27,788		—		—		27,788
Investment in debt securities held-to-maturity	46,043		—		43,947		—
Investment in beneficial interests	89,704		—		—		67,044
Liabilities:
Secured bonds payable, net	$	258,353	$	—	$	234,181	$	—
Repurchase financing agreements	356,565		—		356,565		—
Unsecured notes, net	107,647		—		104,574		—

The fair value of mortgage loans is estimated using the valuation of financial instruments process of the Manager. The Company relies on the Manager’s pricing model, as well as vendor pricing, to estimate the underlying cash flows expected to be collected on the loans. Risks inherent in the Company’s mortgage loan portfolio affecting the valuation of its mortgage loans include the risk of default, delays and inconsistency in the frequency and amount of payments, risks affecting borrowers such as man-made or natural disasters, such as floods or wildfires, or a pandemic and damage to or delay in realizing the value of the underlying collateral. In addition, the Company assesses the expected cash flows from the mortgage loans, the fair value of the underlying collateral and other factors and evaluates whether and when it becomes probable that all amounts contractually due will not be collected.

The fair value of investments in CMBS, RMBS AFS and RMBS HTM is determined using estimates provided by the Company’s third-party pricing vendors which are then reviewed to ensure the resulting yield is comparable to market yields for similar securities.

The fair value of RMBS investments in beneficial interests is determined using prices provided by the Company’s third-party pricing vendors which are then reviewed and compared to the Manager’s pricing model to ensure the resulting yield is comparable to market yields for similar securities.

The fair value of secured bonds payable is estimated using prices provided by the Company’s third-party pricing vendors, which are then reviewed to ensure the resulting yield is comparable to market yields for similar securities.

The Company’s repurchase financing agreements are short-term in nature, and the Manager believes it can renew the current borrowing arrangements on similar terms in the future. Accordingly, the carrying value of these borrowings approximates fair value.

Fair value for unsecured notes, net is determined using indicative pricing available from an independent pricing source.

The estimated fair values are not necessarily indicative of the amounts the Company could realize on disposition of the financial instruments. The use of different market assumptions or estimation methodologies could have a material effect on the estimated fair value amounts.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References

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+ Details

Rithm Property Trust Inc. 10-Q