Rithm Capital Corp. (RITM) Q3 2026 Earnings Call Transcript

Operator: To raise your hand. To withdraw your question, press star 1 again. I will now hand the conference over to Emma Hoelke. Deputy general counsel Emma? Please go ahead.

Emma Hoelke: Thank you, and good morning, everyone. I would like to thank you for joining us today for Rithm Capital's third quarter 2026 earnings call. Joining me today are Michael Nierenberg, Chairman, CEO and President of Rithm Capital Nick Santoro, Chief Financial Officer of Rithm Capital Baron Silverstein, President of NewRez and Peter Brindley, Head of Real Estate at Elecor Properties. Throughout the call, we are going to be referencing the earnings supplement that was posted this morning to the Rithm Capital website, www.rithmcap.com. If you have not already done so, I would encourage you to download the presentation now. I would like to point out that certain statements made today will be forward looking statements. These statements, by their nature, are uncertain and may differ materially from actual results. I encourage you to review the disclaimers in our press release and earnings supplement regarding forward looking statements and to review the risk factors contained in our annual and quarterly reports filed with the SEC. In addition, we will be discussing some non GAAP financial measures during today's call. Reconciliations of these measures to the most directly comparable GAAP measures can be found in our earnings supplement. With that, I will turn the call over to Michael.

Michael Nierenberg: Thanks, Emma. Good morning, everyone. Thanks for joining our call this morning. This quarter, we demonstrated the power of the platform. The risk discipline we bring to our investors and partners despite a very challenging environment. You take a step back and look at the quarter, all indices related to markets we invest in were wider. Interest rates rose. Significantly. Geopolitical concerns persist, oil rose, and we still had a great quarter. Our operating business lines, Newrez, Genesis performed really well. Scale matters in those businesses and with our MSR business, at approximately $880 billion of MSRs at NewRez, and Genesis clicking on all cylinders, we sit in a very good position in the marketplace. AI initiatives and expense management will help us drive higher earnings in the future, and I firmly believe AI will change the archaic nature of the mortgage industry. Our real estate business in Rhythm and our asset management business should be a very good growth area for us going forward. Our Elecor investment, which was formerly known as Paramount, which where we bought the. Where we took the company private. And invest in New York City and San Francisco office is an area we are very excited about. We are seeing significant leasing activity, growing rents, brought in a partner on 13 O 0.167 Avenue. As with most assets, entry point matters. And buying off 75% discount to replacement value should reward our shareholders well. The scope to real estate business is world class and with an amazing track record. They continue to see more inflows into all of their differentiated strategies. As well as their recent fundraise, which was approximately $5.5 billion Our asset management business is seeing real inflows. Are launching new funds and did a first close on our new ABF fund. We now have multiple funds in the marketplace, including partnerships with a large bank from the Dish distribution side, investing in our clients, people, and products is essential to our success. I will say when we set out to launch our asset management business in February 2022, upon our separation from Fortress We are running around the globe making connections and developing relationships with investors everywhere. Today, we stand at $60+ billion of third party AUM We have well north of 200 different partners and LPs, and I feel like we have just begun. Our mantra of performance first and making sure we have the expertise in the products we offer our clients is the backbone of our business. We need to differentiate ourselves from others and we will. I have never been more excited about the trajectory of our firm and the collaboration that is happening. Really exciting times for us and our partners. This quarter, changed our presentation a bit, and we speak a little bit to the Rhythm journey and where we are going. Please have a look. I will now refer to the presentation that is been posted online and I will begin on page 3. When you look at Rhythm today, it is roughly $110 billion of investable assets that includes both the balance sheet and third party assets that we manage on behalf of others. When you look to the left side of the page, NewRez is the third largest mortgage servicer in The United States. I pointed out earlier that we have approximately $800 billion $880 billion of mortgage servicing rights. To some. And we originate roughly 60 billion of mortgages. there is something there. We do not need to originate a mortgage to make money. If the economics are there, we will do it. If not, the business performs extremely well and makes a lot of money. Genesis, the number 2 residential transition lender in the country, doing a lot more today in both RTLs as well as in multifamily and we serve well north of 700 sponsors. Elecor Properties, as I mentioned before, was the company we took private. That was the formerly known as Paramount. And Peter Brindley, who is with me here today, who runs real estate there, will speak to that in a minute. When you look to the right side of the page, our AUM north is $60 billion. I pointed out, when we first started this journey in 2022 to Rick money from third parties, we were running around everywhere. Now we have well north of $60 billion of, real AUM, multiple funds in the marketplace, a great brand, and most importantly, great teams to manage the money on behalf of our partners in the marketplace. When you look across, there is more than 30 years of performance across all of our different strategies. The other thing that I think will differentiate us as we go forward in the future is we do invest our own capital along folks that invest in our funds. When you look at the quarter on page 4, very strong quarter, third quarter EAD of $0.55 per diluted share. 28 consecutive 0.25 where our EAD was greater than dividends paid, cumulative dividends paid just a little bit south of $7 billion at $6.8 billion Earnings available for distribution in the quarter, again, $315 million. GAAP net income, $217 million or $08 per diluted share. When you look at book value for the quarter, $7 billion. We are actually a little bit higher quarter over quarter. A lot of that is due to, honestly, our hedging activities. Well as our MSR business. Which in a higher rate environment is gonna perform extremely well. Our common stock dividend, 11.2%, 25¢ per diluted share. And cash and liquidity, we ended the quarter at $1.9 billion Page 5, if you look at the Rhythm story, and then certain slides I will take you through, but I will take you through real quick on this 1. Started this company in 2013. The to take advantage of opportunistic investing in at that time, mortgage servicing rights because the banks needed to sell them due to Basel III capital rules as it related to the amount of capital that they needed to hold on balance sheet. Over the years, we focused on broadening our internal capabilities through acquisitions, while working with our private equity business at Fortress, which owned at that time Mr. Cooper, and we also had built OneMain Financial at that time. In 2018, when it was clear that we were going to sell these portfolio companies because they sat in our private equity business, we decided to build our own. So we acquired a company called New Penn Financial, and that was the beginning of NewRez. Today, again, NewRez is 1 is 1 of the top mortgage companies in The United States. 2022 we buy back the management contract from Fortress, and we rebrand the company as Rithm Capital. It was formerly known as New Residential. Over the years, we said, okay, let's go let's go broaden our asset management business. 2023, we buy Sculptor. 2025, we buy Crestline. And, again, we take Paramount private in 2000, 2025 as well. So that is really the beginning as far as how we got to the place that we did on the asset management side. You look at our origination businesses at both NewRez and at Genesis, we are. It truly differentiates our product offerings in the ABS space. We not only have the ability to underwrite a borrower, we have the ability to service that borrower and whether those underlying loans go into funds or whether they sit on balance sheet, it is a factor that will differentiate us from others in the marketplace. Because we do not have to just go out and bid in competition against everybody else to buy a certain asset class. And as I pointed out before, we have north of 200 institutional investors globally and well north of $61 billion in AUM. So where are we going? We are going on a forward basis. Our origination businesses will continue to be core to our earnings at the public company level. We are going to continue to try to scale our asset management business, which we are really excited about. As asset management earnings scale, we have the potential to optimize our corporate structure, and actually have that as its own segment But we need to continue to grow our so called FRE or fee related earnings in order to do that. When you look at page 6, the quarter in review. Asset management, I pointed out we are starting to see real momentum in some of the new funds we have in the marketplace. During the quarter, we raised $569 million of new capital and we are starting to see real commitment as it looks. As we look to the fourth quarter. For flow in for fund inflows. Year to date, inflows are a little bit south of $3 billion. Fee paid AUM is about 76% of our total AUM. And that is a key to developing the platform into a more durable earning stream. Crestline, held their final close on the. On a European capital solutions fund bringing total commitments there to $625 million And, again, we continue to see healthy inflows into our business. Post end of the quarter. When we look at our core areas, Elecor expanded its third party capital base to a JV with a strategic partner for 1.3 thousand Avenue, while also signing 320 thousand square feet of new leases in the quarter. Genesis originated $1.5 billion in RTL originations in the quarter. Bringing year to date originations of $5 billion and exceeding all of what we did in 2025. And, also, Newrez originated, when you look for a year. From a year to date perspective, $5.1 billion of nonagency loans, mostly in the non QM space. it is a new record for NewRez in the product class. I bring that up as I as I pointed out in my opening remarks. We do not need to originate a loan to be competitive with someone else for the sake of doing it. This is an area where we are using our origination business We use our funds business We use our balance sheet to originate products to where we are gonna make more money for both our shareholders and our clients. When you look at it from a leverage perspective, we continue to leverage technology. And investments in AI to achieve additional efficiencies. We expect to drive going forward $125 million in savings for Newrez, I pointed out in prior quarters, we own roughly 9.9% of a software company or called Baron. Valon is gonna be our new servicing technology. That will come online in the. At should come online at the end of, Q1 in 2027. Our continued focus on expense discipline will help drive consistent sustainable earnings growth I mean, look in the quarter, NewRez delivered a 24% operating ROE showcasing the strong performance in a challenging environment. When you look at our resilience across markets, NewRez is $8.79 or $880 billion of servicing will continue to reward shareholders extremely well as we go forward. With a very strong earnings stream, strong credit at Genesis compared to the rest of the industry, and then we remain extremely vigilant on our interest rate management across the board. Page 7 really just talks again to the sum of the parts valuation. I am not gonna take you through this. The bottom line here is we take our equity as extremely cheap. We trade, at a discount to book. We look at our book value of give or take $12.5, the stock will likely open up higher this morning, but we still trade way too cheap on a relative basis, and we continue to evaluate ways to get our share price up. On the asset management segment, have a look at page 9. 200 institutional investors, 16 global offices, the products that we offer, and I pointed this out again in my opening remarks, we must have expert. Expertise in any fund or product that we offer to the market. The way that I think about our business, we are everything in credit. We are everything in real estate. We are everything in the multistrat business. Our ABS franchise should be significantly bigger And I. And, you know, sometimes we think about. Or we always think about what is next and it is likely gonna be something in infrastructure as we go forward. Because it is extremely scalable, and the TAM in that marketplace is massive. Page 19, the asset management business. I am not gonna hit the same bullets that I did. If you look to the bottom part of the page, the performance numbers, I think, stand. You know, they stand out relative to the pack. Look at some of the Crestline numbers. You look at 11, the asset management business as we continue to scale Again, a lot of these numbers are repeat. A couple things I do wanna point out. Where I think we go organically, When you look at our organic growth initiatives, we expect to deliver AUM of about 75 billion to $80 billion by the end of 2028. We continue to look at opportunities to grow our asset management business in the M&A world, And, again, like I say always, we need to lead with performance. On the commercial real estate side, I will hit 1 bullet here. Just talking about opportunistic investing. We had bought 2 years ago an office building just outside Washington. DC. That we monetized in the third quarter. Again, these are examples how we think about buying assets at the right times, This asset was located in Boston, Virginia. I think we paid 26 or $27 million for it We sold it with a 50 something million dollar handle. 30% IRR, 1.6 MOIC. And when you look across the rhythm side on the balance sheet, third quarter realizations from an IRR perspective, 43%., 1.6 MOIC across 3 different transactions. Other thing is when you look at capital markets and our financing business, we closed on 31 West 52nd Street on a 500 plus million dollar transaction. And we continue to focus on selective, refinancing. So with that, I will turn it over to Peter who will take you through Elecor.

Peter Brindley: Thanks, Michael, and good morning. And turning to page 14, we had a great quarter at Elecor Properties and we continue to execute on our business plan The third quarter was largely defined by strong leasing results, the refinancing of 31 West 52nd Street, the new joint venture agreement 1.3 thousand Avenue Of The Americas, the advancements of our significant amenity plans, and continued operational excellence across the portfolio. Year to date, we have executed leases, and have leases pending on approximately 1 million square feet across our New York and San Francisco core portfolio with a weighted average initial rent of approximately $100 per square foot, 22% higher at share than the weighted average initial rent for our 2,025 transactions. Year to date, approximately 77% of our leasing activity in New York and San Francisco has occurred on vacant space and space scheduled to expire in 2026, and the balance has served to derisk lease role in 2027 and beyond. Our pipeline remains robust, and our lease expiration profile was manageable with approximately 2% at share expiring per annum in 2027 and 2028, paving the way for occupancy gains in our portfolio going forward. Turning to Page 15, our markets and our portfolio. In New York, Midtown's leasing fundamentals continue to strengthen, particularly in well located well amenitized Class A buildings. Looking at the broader Midtown market, the third quarter marked the twelfth consecutive quarter leasing activity outpaced the 5 year quarterly average. Net absorption in Midtown remained positive for the ninth consecutive quarter, the longest run on record, resulting in the ongoing reduction of availability particularly in Midtown's core submarkets, we continue to gain momentum and expect robust demand coupled with the ongoing absorption of quality space in Midtown to support significantly improved deal economics moving forward. We believe we are well positioned to capitalize on current tenant demand in Midtown as we execute on our growth focused business plan. At quarter end, our New York core portfolio's leased occupancy was 88.6% at share, Year to date, initial rents in our New York portfolio are approximately $110 per foot on leases signed and leases pending are approximately 36% higher as compared to our 25 transactions. Our third quarter was highlighted by the 113 thousand square foot renewal and of a financial institution at 1.3 thousand Avenue Of The Americas, building that is currently 100% leased. Turning to San Francisco, market wide leasing activity in the third quarter was 2.7 million square feet bringing the year to date total to approximately 9.7 million square feet on pace to be the strongest year end total since 2018. San Francisco based companies have raised a historic $270 billion of venture capital this mainly benefiting AI companies, have contributed 6.5% of the leasing velocity year to date. This is further reinforcing San Francisco as the world's leading hub for AI innovation and has powered San Francisco to its fifth consecutive quarter of positive absorption. At quarter end, our San Francisco core portfolio leased occupancy was 65% at share, up 590 basis points since Q1 2026. Approximately 65% of the 1 million square feet of leasing year to date has occurred in San Francisco, 96% of which has occurred with companies that are new to our portfolio. Our third quarter was largely defined by a 76 thousand square foot lease with a Fortune 100 entertainment company and a 119 thousand square foot lease with an AI powered health care company 2 of San Francisco's top 10 deals during the third quarter. As previously mentioned, planning is underway to deliver exceptional amenities at both 1 Market Plaza and 1 Front Street, has already begun to generate buzz in the market and will support our growth focused strategy in San Francisco going forward. We remain focused on further developing our tenant relationships delivering market leading hospitality, securing renewals for upcoming lease expirations and filling our vacant spaces, Finally, we believe our capital improvement strategy will drive significant rent growth in occupancy gains in 2026 and beyond. Are moving quickly to execute our key objectives and look forward to updating you on our progress.

Michael Nierenberg: Thanks, Peter. I am gonna take the Genesis section which is. Which begins on page 17 and then, Barron will wrap up with and talk about NewRez. As I mentioned on the Genesis business, truly scaled great reputation with high quality sponsors, you know, when you look at this business and you look at delinquency trends across some of the other what I would call, pure originators in the business, we truly stand out. Mean, our delinquency percentages are about 3%. As, you know, as I mentioned again in earlier comments, we do not need to originate something for the sake of doing it. We need to do it with high quality sponsors. 1.5 billion in the quarter, which takes us now to 5 billion. it is it is not a so called race to get to 5 or 10 or whatever the number is. it is just creating high quality loans that are gonna generate mid teens returns for both our third party partners as well as our balance sheet. When you look to the left side of the page, pretax income for the quarter, $33 million 14% you know, growth year over year. And then the annualized ROE on that business right now is about 13%. And I do think, again, with AI and technology, we. You know, those numbers will likely go up over time. When you look at page 18, it is just a snapshot of the portfolio. You can have a look at that at your own leisure. Then finally, if you look at page 19, we continue to outpace the broader market. We continue to establish more relationships. We are investing in our people. We are investing in our sales force. And when you look at the overall growth, that. That will continue over time. With that, I will turn it over to Baron who will take you through the NewRez section.

Baron Silverstein: Thank you, Michael. And good morning to everybody. Starting on slide 21. And, just kind of continuing with Michael's comments as well as NewRez had another great quarter with third quarter pretax income, excluding mark to market, of approximately 330 million which is up 7% quarter over quarter and delivering a 24% annualized operating ROE for the quarter. The results driven by origination strategy, growth in sub servicing, higher servicing fees, and lower amortization. And the performance continues to show the power of the platform. Delivering on our results first ethos by achieving 15 consecutive quarters of high teens to low twenties annualized operating ROEs. Moving to slide 22. Our edge is simple. We stay disciplined and nimble to optimize returns while maintaining operational excellence, and client trust. We execute through a dynamic channel strategy coupled with a robust product ecosystem with a focus on our homeowners and clients. And we invest in game changing technologies to redefine workflows raising the bar on customer experience, driving our efficiency throughout our platform. Turning to Slide 23. We estimate annualized savings from our technology and AI investments approximately $125 million which will further drive our cost leadership. Our co-development with HomeVision is ahead of schedule with straight through processing of eligible loans expected to launch in the fourth quarter. Our partnership with Valon is on track with phased migration of loans to ValonOS in the first quarter of 2 thousand 27. And once these platform investments are completed, their key driver in us growing market share without sacrificing any shareholder return. Turning to Slide 24 in our originations business. Funded volume came in at $12.9 billion down 19% quarter over quarter, mainly due to interest rate environment lowering overall origination volumes. However, we remain focused on non agency growth and increased overall non agency volumes up 8% quarter over quarter, and 30% year over year despite the market conditions. And while market competition continues to pressure gain on sale margins, we maintain pricing discipline, we do not chase market share, and we stay focused on maximizing returns. We also remain opportunistic on co issue MSR acquisitions, with $5 billion in notional volume as we continue to diversify our investment strategy. New products this quarter include our EasyClick home equity solution, expanded advantage score utilization, and we are excited about our new joint venture with eXp Realty the second-largest real estate platform in The US. And are working through our due diligence and more to come in the next few weeks. Moving to slide 25, and our market leading servicing platform, our focus remains in growing our capital light fee based third party business with 15 new clients and approximately $80 billion in new loan boardings this year. Subservicing remains a foundational capability of our platform, and our operational performance is evidenced by our client retention rate. Our owned MSR portfolio continues to perform well across products And while agency and Ginnie delinquencies increased slightly, quarter over quarter, we attribute this to seasonal factors. And while delinquencies remain low from a historical context, our special servicing business has significant opportunities to deliver superior outcomes, for both homeowners and clients across market cycles. Our business has never been better positioned, and I look forward to continuing to share the next chapter of the NewRez growth story.

Michael Nierenberg: Back to you, Michael. Thanks, Barron. Finally, just on the investment portfolio, continue to look for opportunities in this marketplace where you know, where we see certain dislocations. I would say while spreads are a little bit wider, as I, again, as I pointed out earlier, the balance sheet has really been there to our origination businesses. As well as our asset management business. And I think you will see a lot more of that as we go forward. So, again, exciting times for us. We look forward to answering any that you may have. We will now turn it back to the operator.

Operator: And that is it so far. We will now begin the question and answer session. Please limit yourself to 1 question and 1 follow-up. If you would like to ask a question, please press 1 to raise your hand. To withdraw your question, press 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Douglas Harter with BTIG. Your line is open, Douglas. Please go ahead.

Douglas Harter: Thanks, and good morning. Michael, hoping you could talk a little bit more about the plans to grow the AUM and management, which products do you see the most momentum in right now to deliver that growth?

Michael Nierenberg: Sure. So I, I point. 1 is continue to establish more relationships with call the big wirehouse banks who are distributing products through the wealth divisions. When you look where we are across, whether it be the Sculptor platform, you know, we launched a something called Our Home, which is a rhythm fund through 1 of the large banks. We will continue to do more of that. So that should that will help with growth. The product areas around what I would say the wealth side are things such as capital solutions, which take advantages of dislocations in markets. We are looking at 2040 Act funds on the Sculptor side through some of the large banks. that is more of a liquidity vehicle around you know, around a hedge fund type product, the real estate business, as I mentioned earlier, will continue to grow. So when you look at the kind of the wirehouses, that is an area of focus for us as well. I what I would really say. And then, you know, I pointed out we had our first close in our ABS fund, this past quarter from large pension fund here in the US. The amount of demand that we are seeing today for products that we either manufacture that we have expertise in is probably the highest I have seen in quite frankly, my career. I am old, and I have been doing this for a long time. So when you look, for example, on the residential side, we have a ton of interest in whether it be SMAs on Barron pointed out, the doing all this nonagency product. We make the products that our clients want. So right now, we are seeing extreme demand, what I would say in ABS and ABS-type products, again, whether it be through our funds business or through, specific SMAs. Take the Genesis business. You know, when you look at some of this stuff on a levered basis, you are talking about mid teens return. We put our money where our mouth is. We take equity positions. So you are gonna see a lot more growth in those businesses. When we look at the broader platform, 1 thing that I think is extremely different today than we have been in the past is we have real collaboration across the house. We are working on branding. When you look at you know, we have 3 brands. So we have you know, Rhythm, Sculptor Crestline. We sit down with a client, and we are not changing any of the investment teams. We are not changing any of the investment processes. But it takes us 10 minutes to talk through what we are. You know, the 3 different brands. We need to get to a place where we have a common brand it is a much easier story. And quite frankly, LPs wanna allocate to fewer managers that have more products that are available. We are gonna lead with our expertise. We are gonna lead with our performance first. Credit's gonna grow. Our multistrat business is gonna grow. Our real estate business is gonna grow. Our ABS business is going to grow. And then we will continue to look at our opportunities to acquire other managers. The other area, you know, I pointed out that we need to be in at some point is in infrastructure. it is not hiring, you know, 1 or 2 people to build around that. We need to have a real infrastructure business. So I think you are gonna see some significant growth as we go forward, but. And we are really excited about it.

Douglas Harter: Great. I appreciate that, Michael. Thank you.

Operator: Your next question comes from the line of Bose George with KBW. Your line is open. Please go ahead.

Bose George: Hey, everyone. Good morning. Actually, I wanted to ask on the mortgage banking side, looks like your gain on sale margin, you know, is up in the consumer direct and the wholesale. Is that just a mix of product or was there sort of actual improvement? And then just on gain on sale trends that you are seeing for locks in September, October after rates have gone up. Thanks.

Michael Nierenberg: So good morning. So, yeah, I would tell you on the direct to consumer channel, it definitely is a little bit of a product mix. Right? You are seeing less refinances. And you will start to see more of our home equity products and more of our non QM products. So you will. You know, you are basically driving a bit of a higher return. Overall. On the wholesale side, obviously, it is a very competitive market. And, you know, we are continuing to basically you know, test that product and not chase But I do think that you know, coming into the fourth quarter, you are gonna continue to see that there is definitely going to be more pressure on the wholesale side on margins overall. And Bose, not surprisingly, you know, the interest rate environment is gonna drive overall origination volumes. And, you know, we have seen a pretty material, I will say, decline in production coming from September to October, and you are you are likely going to see something close to about 25%. And Bose, part of that is the market the other part is, like, when we think about having 1 investment dollar, what is going to be the best return for our shareholders? So that is the other, you know, the other way we think about the origination business. And, again, this echoes the earlier comments in that we do not need to originate a loan for the sake of originating a loan. You know, with prepayment speeds at, you know, very low levels, our MSR book will continue to manufacture and produce a lot of great results for the company. So, I think that is the other thing to point out here.

Bose George: Okay. Great. And then just on the book value quarter to date, is that relatively stable?

Michael Nierenberg: Yeah, it is. I mean, you should assume it is roughly unchanged. Yep. So. Okay. Great. Thanks. Thanks, Bose.

Operator: Your next question comes from the line of Crispin Love with Piper Sandler. Your line is open. Please go ahead.

Crispin Love: Good morning. Just in the asset manager on further growth you have called out, infrastructure a couple of times. Just maybe to think about the potential inorganic opportunity there. Do you think it would follow a similar playbook to Sculptor or Crestline? Is it capability that you need to buy fully with scale? Or can you do it on a smaller scale and then build within the current platform? And then just relatedly, is there any interest in adding digital infrastructure or data center investing? To the platform?

Michael Nierenberg: Yeah. So, I think it is it is more likely to be similar to the Sculptor Crestline or something that is even potentially larger. Yeah. I mean, we need to be in the space. We do invest in that space when you look at credit business. And you look at the teams at Sculptor. Sculptor has, you know, give or take 350 professionals there, give or take 100 investment professionals. You think that we are everything in credit, we are everything in ABS. So there is investment that goes on there. Same thing at the Crestline side. We are not putting these kind of investments today on our balance sheet, at the rhythm level. So it. it is gotta be something of scale. We. I do not. You know, we do not wanna start with something that is you know, a couple folks, and then it is gonna take us 5 years to scale it up and miss that opportunity. So it is something that you know, we have our eyes and ears out, and, hopefully, there is something that is attractive to us and a potential partner that will help us scale.

Crispin Love: Great. Thanks, Michael. And then just a second question on mortgage. You called out a 125 million in potential cost savings. Just your. kind of first, the timing of those, and then also just the ROE impact. Been ROEs and new rates have been strong in a tough environment. I think 24% or so quarter. So when you look out over the intermediate term, kind of what is possible for the operating ROEs in that segment? Could you see expansion from Levels today, just given the AI savings and normalizing of the mortgage environment?

Michael Nierenberg: Yeah. So, I mean, I will I will just start with top line stuff. So if you think about our mortgage company, which is, give or take, about $4.5 billion of revenue, and you look at what we bring to the bottom line, I think there is a lot of room for higher earnings there. You know, And AI has gotta help that, and I mentioned in my opening remarks, you talk about anybody that is ever taken out a mortgage, which most folks have, the archaic nature of that with providing paperwork and you think about underwriting guidelines, what have you. That will change. And I think AI is gonna help significantly. Couple that with the investment and you know, this company, Valon, that we are working with, which is really a tech company. I referred to it earlier as a software company, but we are we are going to be using their software platform for our servicing business. That is gonna make us highly efficient. As far as the timing of and I. I will talk to this in a sec. And the timing of really seeing the earnings, I think, is gonna be most likely you will start to see them kick in 2027, but they will go on for 2027, 2028. When you look at product, you know, the 1 thing. And I look across the board at obviously, a lot of other peer companies that are in. Whether they be in the buy now, pay later business. And I look at the valuations on some of those companies versus us. Where we trade at 5 times earnings and you know, and we actually make more money than most of these other companies out there. I look at some of the kind of the digital banks that are valued higher. We gotta figure out a way 1, to roll out more products, but 2, to change our valuation. And I think a couple things here, and it will it will catch on. You know, everybody wants to be in a growth equity type, type stock. I look at us relative to our peers in across the board, and this is no reason for us to be trading where we do. that is 1. But I do think you are gonna see these savings come in 2027, 2028. And then, you know. And I would like to see us launch more products, but they gotta be creditworthy products because I do think at some point, the credit markets will turn and you start to see delinquency trend higher. Right now, we are not seeing that. But I do think you will you will see that at some point. that is where our special servicer, which is second to none, should kick in and generate even more earnings for the house.

Operator: Your next question comes from the line of Kenneth Lee. With RBC Capital Markets. Your line is open. Please go ahead.

Kenneth Lee: Hey. Good morning. Thanks for taking my question. Just on the Genesis Capital side, Wondering if you could just give us a sort of like updated outlook or thoughts around potential originations volume just given the current rate outlook there. Thanks.

Michael Nierenberg: So our goal there, you look at the business, if we are going to do, I think, the production numbers we will probably do is something between $6 billion and $6.5 billion of production. Credit really matters, as we all know, in all this stuff. While saying that, I think the opportunity for us to grow our multifamily business on the lending side is significant. Significant. As we so the way to think about that business, as we roll out whether it be SMAs or funds around the Genesis product, a good chunk of production could go into those funds But what we wanna do is really grow the amount of origination we have so you continue to grow earnings at the at the public company level. So it is a combination where I think that the multifamily business from the origination side will grow significantly over time. And it has grown significantly over time. The RTL business you know, we all know things get challenged when interest rates. You know, you have mortgage rates of 7 and a quarter, 7.5 or something in and around there. Things could be challenged. But when you look at this paper, we make loans to high quality sponsors. that is that is really the bottom line. High quality sponsors, the velocity or the turnover of this product, the duration here is, give or take, a couple of years. So the real growth, I think, is gonna be on. More on the multifamily side as we go forward.

Kenneth Lee: Great. Very helpful there. And just 1 follow-up, if I may, on the Elekor property side. Just looking at the San Francisco leased occupancy rates. Just curious, looking for what factors do you see that could potentially help drive higher occupancy rates, you know, going forward? Thanks.

Peter Brindley: Yeah. Kenneth, thank you for the question. I would say 2 things really. 1 is we have very manageable lease roll over the next couple of years. So we firm ground by which to really, I think, achieve significant gains going forward. Also know that in San Francisco, tenants are pursuing the best product, and we have a very, very fine portfolio in San Francisco. Tenant demand is currently in the neighborhood of 10 million square feet. Of tenants out looking for space. And we are incredibly active. We are as active in San Francisco currently as we been in a very long time. With leading companies across a variety of industry, including tech, AI, legal, financial services. So we are really firing on all cylinders, and the market is certainly been very receptive to the capital improvements that we are making specifically at 1 market and 1 front, which we have now mentioned a few times. So the team is hyper focused on getting that occupancy up back to levels that San Francisco and these 3 buildings in particular are more accustomed to. But we feel really good about the progress and the execution currently.

Kenneth Lee: Gotcha. You very much. Thanks, Kenneth. Have a good weekend.

Operator: Your next question comes from the line of Trevor Cranston with Citizens JMP. Your line is open. Please go ahead.

Trevor Cranston: Great. Thanks. Another question on NewRez. I am looking at slide 36. Particularly the prepay speeds and amortization on the MSR. Curious if you could just give an outlook for how much room you think there is for MSR or prepay speeds To come down in Q4? And going forward if mortgage rates kinda stick above 7%, And more broadly, if that benefit plus expense savings you guys have talked about is kind of enough to offset the pressure on the origination side? Thanks.

Baron Silverstein: So yeah. I mean, I think you are kind of getting to the floor on speeds. You know, you just have a certain amount of turnover. You know, for just life events that are gonna continue to drive, plus also when you think about some of the seasoning on our on our portfolio, you are just gonna really be at that you know, floor So I do not really think that speeds are gonna come in, you know, very much slower than what you saw in, say, September speeds overall. You know? And the offset, I will tell you, in between amortization you know, and originations is pretty good. Pretty linear, right, from the balanced business model on how we look at it. But, also, you have to think about it as, you know, Michael's comments and my comments. Right? We are not driving you know, just growth for growth's sake. Right? We wanna make sure that we are focused on margins. And, you if the market really gets very, very competitive, you know, I think that we are going to look at it in that manner as opposed to just chasing volumes But I will tell you overall, you know, we do think that we have a balanced business model. We wanna stay in front of our customer base. Right, and our 4 million customers and making sure that we, you know, are delivering products for them. Right, as our core focus. And if there is opportunity, outside of that, you know, we will basically look to basically you know, enter into those markets and that are multi you know, channel strategy helps us kind of take advantage of those opportunities when they become available.

Operator: Trevor, the other thing I would say is if you look at the business and to your question about how the servicing book will offset the origination volumes, You know, we look at the entire company.

Michael Nierenberg: Know, when you look at the servicing book today, I think there is roughly 15 billion of escrow deposits. Fed raises rates 25 basis points. it is a huge lift to Kind of the, you know, the firm from a net interest income standpoint. So the balanced nature, I think, of everything that we do across our entire business And that can include, you know, anything from the mortgage company to Genesis to Elecor. Your asset management business is something that, I think it is gonna reward shareholders as we go forward. So that is why, you know, when you look at our business model this quarter versus some of the other folks in the marketplace that, you know, that is 1 of the other reasons why I think we had a good quarter.

Trevor Cranston: Yep. That makes sense. Okay. Appreciate it. Thank you.

Operator: Your next question comes from the line of Marisa Lobo. With UBS. Your line is open. Please go ahead.

Analyst: Thanks, and good morning. I wanted to ask about the investment portfolio and how you are thinking about the opportunity here. Are the new deployment levels enough to grow the portfolio or is the focus more on securitizing and recycling? Capital?

Michael Nierenberg: I think it is both. it is also the investment portfolio. We will continue to recycle that And I am gonna give you the example where if we do not originate a mortgage loan, but I we could take a dollar of capital and reinvest that back in our asset business along with a third party LP who is paying us a management fee. Know, those earnings are recurring, and they trade at a much higher multiple than the so-called mortgage loan that is gonna sit on the balance sheet. I think it is a combination where we will use our balance sheet to continue to support our origination businesses We are gonna be opportunistic and look for areas where we could do. Deploy significant amounts of capital. You know? And Barron pointed out, you know, the nonagency business at NewRez year to date, think it is 6 plus billion dollars. When you look at that, a good chunk of that is non QM. That actually sits on balance sheet, and then we do securitization. So there will continue to be significant earnings as we support our origination businesses. Look for opportunities where we have market dislocations, as I pointed out, this office building, for example, that we sold in Boston, Virginia, some of the Elecor stuff where we are entering that business at a 75% discount to replacement value. We will continue to look at other things. So there is always something that comes up beauty, I think, where we sit as an organization is that between myself and some of my partners, Charles Sorrentino and others, we have been doing this for a long, long time, and we have very, very good relationships with our bank partners, but also we know a lot of folks in the marketplace and, you know, we should continue to see opportunities across the board. So it is a little bit of everything, and the investment portfolio will grow over time, but it is gonna be opportunistic. that is helpful. Thank you. And there is been a lot of movement on housing policy recently, particularly around LLPAs, Vantage Scores and now mortgage insurance. Can you talk about how you are thinking about the potential impact on NewRez? Look. We obviously, we have good relationships with, you know, our partners. In DC. You know? And, you know, I do think that you know, the policies that the director of FHFA are putting out there, we you know, we support them. We were on the pilot program with Freddie Mac on the Vantage score. So, certainly, you know, from our perspective, we do think that will continue to drive benefits for our homeowners. And if there are changes on you know, the. Any of the insurance premiums, know, obviously, we will you know, incorporate that and deliver those savings directly to homeowners. And, you know, so we certainly support you know, the initiatives that the director continues to drive.

Analyst: Okay. Appreciate the answers. Thank you.

Operator: Your next question comes from the line of Jason Stewart with Compass Point. Your line is open. Please go ahead.

Jason Stewart: Hey, Baron. Good morning. Thanks. Hey, Mike. Just to follow-up on Marissa's in terms of the Newrez platform, how important is the technology aspect of the platform? I mean, this is a very dynamic mortgage market, and implementing these changes seems like it is a little probably tougher today than it has been in the past. Could you just talk about, you know, where you are positioned in terms of technology versus some of the other peers?

Michael Nierenberg: Baron could probably-- I will give you it from a high level, then I will turn it to Baron. We our technology budget when we look at expense overall, it is pretty significant. The amount of personnel we have around the house related to the technology so called business is you know, is very significant. I am a believer that on technology, you are you are better outsourcing to so called experts in the industry who are gonna be there to either build you models or build you software that is gonna make your business run better. But while saying that, you know, we have a ton of people there, and we have a ton of investment. The partnership with Valon should be extremely significant across our entire business as we go forward. And it is not only Valon, but there is others as well. So, Baron, you may want to share your thoughts?

Baron Silverstein: Michael's right. I would tell you that, you know, we look at our technology dollars to try to focus on prioritizing the initiatives that have the biggest impact that Michael talks about. Valon Right? And you know, if you think about Valon overall and there is you know, nothing like it in the market, and we are really excited to basically you know, incorporate that technology into our business. The investments that Rhythm made in Valon back in 2019 you know, we have had that front row seat. We have talked about this before, really kind of seeing how it just drives you know, overall operational efficiency improvement in workflows, You know, our entire servicing organization, you know, has been working with Valon for the last you know, year plus. You know? Everybody's definitely excited about, you know, what is ahead. Obviously, there is a lot of work for us to basically go from, I will just say, today you know, throughout the end of 2 thousand 27 and basically in doing that overall conversion. But you know, the if you just even look at you know, all of the AI initiatives and you just continue to see how and what AI does you know, it is it is pretty remarkable about how we think about different initiatives and how that can impact our business. And our focus really is just making sure that we are prioritizing you know, our technology dollars and our technology focus on the items that really move the needle. That drive our efficiency and then drive our ROE. And that you know, it sounds easy. I know it. We focus on it a lot, the management team here. And we work through it, you know, obviously, with Michael. On what we try to prioritize every day. So that. that is that is what I would tell you and how we focus it. This is you asked the question in the beginning. You know, how does this basically you know, and how will this impact how we perform in the industry and how we compete? We think this is 1 of the top components of how we can continue to drive you know, performance from an ROE perspective and differentiate NewRez throughout the market. No question.

Jason Stewart: Okay. Thanks, Baron. And Michael, a follow-up to Marissa's question on the investment portfolio. There seems to be, I would call it episodic opportunities to buy things like non QM and secondary. If you could just elaborate a little bit on how you are thinking about liquidity relative to opportunities if there is sort of a metric that we can look at as a minimum liquidity measure, or how you are thinking about funding markets in relation to the opportunity?

Michael Nierenberg: You know, the 1 thing that is really different I think, today about our business versus where we were, again, going back to when we left Fortress, 200 plus different LPs, you know, great teams at Sculptor and Crestline. So working together across the platform, i.e., my comment about collaborating. No. I do not we are not here to just grow the balance sheet. Quite frankly. We need to use it strategically. I think any large scale situations, we just saw a large consumer portfolio trade We will likely bring in third party capital alongside the, you know, the bigger family of companies or investment strategies. So you know, the goal is to continue to manufacture cash and I. E, have more cash. But it is not just to grow leverage here. Particularly, particularly in this market. Is there something specific? I think, you know, ideally, when you look at our balance sheet today, it is really MSRs, things that we do to hedge out the broader ecosystem of business lines that we have. And it is extremely clean. I mean, the MSR business is massive right now based on, you know, where we are with rates and overall valuation. So it is not to get bigger. it is just more just to maintain and bring in more third party capital along some of the bigger situations. No different than what you will see from you know, some of the biggest money managers out there.

Jason Stewart: Thank you. Thank you.

Operator: Your last question comes from the line of Henry Coffey with Wedbush. Your line is open. Please go ahead.

Henry Coffey: Good morning, and thank you for taking my questions. Great quarter. 2 related subjects. First, kind of talking about investments. The mortgage REIT sector, particularly the commercial REIT sector, has gotten absolutely clobbered. I know you are frustrated with your own valuation, but it is it is really ugly out there. Is that an opportunity? There are companies that are big originators in certain sectors that you are not. I will not put out the names, but is that an opportunity, or is that more just a warning to kinda step away and do not touch?

Michael Nierenberg: You know, I do not think on the commercial REIT side, I do not know that there is a lot of sellers, quite frankly. There are some companies out there that I mean, it could be where some of the credit's actually challenged. You know, we have RPT that we manage. We. Quite frankly, it is a very, very clean portfolio. We cleaned it up. We took over the management contract a couple years ago. We cannot get that off the ground because nobody cares. it is tiny, and, at some point, you know, we will either we. We are evaluating our options what to do with that. Yeah. We are always looking for opportunities. I mean, if we are gonna grow our real estate presence, you know, whether it be Elicor, we will. We continue to look at more office opportunities, but we do not need to be just an office I brought up the Sculptor folks. They have a an unbelievable track record and, you know, they do things that are very, very different from the rest of the pack. So across the board, you are gonna see us grow pretty significantly, I think, in. On the real estate space. If there is an opportunity to acquire another commercial REIT, we will do it. As long as, you know, from a credit standpoint, it underwrites. We do not wanna take over someone else's issues right now. I think that is part of the issue with a lot of these REITs that are that are stuck out there.

Henry Coffey: And in the correspondent business, what are the real economics of originating in a 7% plus market in terms of do you own the customer? what is how do you think about that I am sorry. And can you repeat the question? In the correspondence, residential mortgage business.

Michael Nierenberg: For the NewRez. Yeah. I think if you want to buy cheap MSRs, if MSRs are cheap, you do it. And if not, and this is you know, Barron and I are on the same page in this. We do not need to originate a loan just to have more correspondent value unless we love the valuation of the underlying MSR, and there is real gain on sale. If there is real gain on sale and there is margin, we will do it. And you love your MSR valuation. If not, you know, I would rather take the dollar and support our asset management business or put it into Genesis or something else. We think we are gonna earn a mid teens return.

Henry Coffey: Great. Thank you. Thank you, Henry.

Operator: There are no further questions at this time. I will now turn the call back to Michael Nierenberg for closing remarks.

Michael Nierenberg: Folks, thanks for all the questions. We look forward to updating you during the quarter and next quarter. And thanks for the support always. Have a beautiful weekend.

Operator: This concludes today's call. Thank you for attending. You may now disconnect.