Rithm Capital - Q4 2025

Transcript

Operator (participant)

Please also note today's event is being recorded. At this time, I'd like to turn the floor over to Emma Holke, Deputy General Counsel. Ma'am, please go ahead.

Emma Holke (Managing Director and Deputy General Counsel)

Thank you, and good morning, everyone. I would like to thank you for joining us today for Rithm Capital's fourth quarter and full year 2025 earnings call. Joining me today are Michael Nierenberg, Chairman, CEO, and President of Rithm Capital, Nick Santoro, Chief Financial Officer of Rithm Capital, and Baron Silverstein, President of Newrez. Throughout the call, we are going to reference the earnings supplement that was posted this morning to the Rithm Capital website, www.rithmcap.com. If you've not already done so, I'd 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 (Chairman, CEO and President)

Thanks, Emma. Good morning, everyone, and thanks for joining our fourth quarter earnings call. So much to be excited about with our company. And before I get into the discussion, I want to thank our partners for all your support, as well as our employees across all of our companies, for all of your hard work and effort in driving excellent results for our LPs and shareholders. On today's call, I welcome Peter Brindley, one of our new partners, who has been leading all leasing and other divisions at Paramount. Peter will be speaking about Paramount, which is one of our new acquisitions, on the real estate side, and Baron Silverstein, who you've heard from in the past, will be speaking about Newrez.

As we think about 2025, it was an excellent year for the company, in which we executed for our clients by creating outsized returns for our LPs and higher earnings year-over-year for our shareholders. We grew our asset management business both organically as well as through acquisition, including adding Crestline Asset Management and to take private, as I just pointed out, of the real estate REIT named Paramount to our stable of companies. Today, we manage over $100 billion in investable assets across the firm. As I've said repeatedly, we will grow our firm prudently by creating alpha and results for our clients. While all of us in the asset management business want more assets, we will earn each and every one through performance. Financially, our company had a great year, a great fourth quarter, which I'll get into in our supplement.

The diversification of our platform is paying off as we had a record fourth quarter from an EAD perspective. Book value year-over-year was higher, despite paying out north of $600 million in dividends. Our Genesis business, which manufactures and originates multifamily loans and residential transitional loans, had a record year, both in originations as well as in earnings. This business produced just under $5 billion in loans, and earnings are up 250% from the time we acquired the company in 2022. Just for a metric, when we acquired the company in 2022, production numbers were $1.7 billion. This year, we'll cross north of $5 billion while maintaining prudent discipline around credit. Our mortgage company, Newrez, had a great year. Year-over-year earnings grew by 13%.

We continue to make significant investments in our tech stack as well as our marketing division as we work on our customer experience and our brand. During the year, we welcomed two new leaders to these divisions, Brian Woodring, who joined us from Rocket, and Leslie Gillen, who joined us from J.P. Morgan, both experienced leaders in their field. We announced two transformative transactions on the tech side. One is Valon, which we announced this past week, which is a world-class servicing system, and Baron will speak to that, and HomeVision on the origination side. In our asset management division, we had a very good year. As I mentioned, we announced the acquisition of Crestline, which is a terrific credit shop with both an insurance and reinsurance business.

Sculptor had a great year, both on the performance side as well as on the capital formation side, with assets growing, especially the real estate division, which closed on a $4.6 billion new fund. We launched on the asset management side, we launched our first Evergreen Fund on a bank platform in the ABF space. We created SMAs on our origination business with overseas clients. We launched our first closed ABF fund with initial seed from a pension of $200 million. While we are very pleased with our progress, there is so much more for us to do. On the Paramount acquisition, the, what that deal is, it was an opportunistic situation. We acquired 13 large office buildings in both New York and San Francisco, of which 10, roughly 10 are core.

It's a real highlight for us. Not only do we love the basis for entry, we now have a great operating company, which will help create an edge for us as we look for other opportunistic investments in the real estate space. Looking forward, we will add to the platform where we need to offer products for our LPs and shareholders. I'll now refer to the supplement which has been posted online. I'm going to start on Page 3. As you look at Page 3, again, as I mentioned, we have over $100 billion in assets being managed by the firm. That's both balance sheet as well as in third party, with third-party clients. The Rithm Asset Management AUM is $63 billion. The Rithm balance sheet business is $53 billion.

When you look at our family of companies, Sculptor, world-class asset management business, providing credit, real estate, and multi-strat investing. Crestline, large credit shop, offering a vast array of credit offerings. Paramount, as I mentioned, which is the real estate company that Peter will be speaking to in a minute. And just on a side note, at some point, the Paramount name will go away because obviously it's a little bit confusing between movie studios and other things. So, we are currently working on a rebrand there. NewRez, our mortgage company, third largest servicer of mortgages in the United States and the fifth largest mortgage lender in the United States. And then Genesis, which is one of the largest residential transitional lenders in the US, and probably one of the hottest products when we think about from a fund formation that our clients want.

As I mentioned before, we're going to grow via results, and that's the way that this company was built, and that's the way that we're going to continue to maintain discipline as we go forward. Page 4, financial highlights. Earnings for 2025. Earnings available for distribution, $2.35 per diluted share, which represents 12% year-over-year growth. We had an amazing quarter in Q4, which actually shows the diversification of our platform, earning $0.74 per diluted share. Stable earnings performance. When we look at the company, we've earned 25 consecutive quarters, where our earnings available for distribution were greater than the common dividend paid. Dividends, we paid out well north of $6 billion in dividends since we formed the company in 2013, while at Fortress.

When you look at Q4 results, GAAP net income $53 million, $0.09 per diluted share. For the quarter, 3% return on equity. When you look at EAD for Q4, $419 million in the quarter, $0.74 per diluted share, or 24% return on equity. When we look back to 2025, GAAP net income for the year, $567 million. Obviously, the delta between Q4 and fiscal year 2025 has to do with the MSR mark that we took in the quarter to be a little bit more conservative, and Baron will speak to that in a minute. For fiscal year 2025, from a GAAP perspective, $1.04, and a return on equity from a GAAP perspective, 8%.

When you look for the full year, earnings available for distribution, when you take out the noise, the company made 1.22 or a little under 1.3 billion dollars, $2.35 per diluted share, and a return on equity for the entire business of 19%. Book value reported at the end of 12/31 was $7 billion, which represented $12.60, $12.60, $0.06 per common share. When you look back, I think the year before, it was about 10 cents lower. When you look at where we are market-wise, the 10-year Treasury is backed up in yield towards 4.30. Mortgage rates on the other side have dropped a little bit. Book value today is probably between 12 and three quarters and 13%-- I mean, 13 dollars.

Our common stock dividend, we traded roughly 9.2%. This was at the end of the year, and as everybody knows, we pay out $0.25 a quarter on a fiscal year basis, $1 a share. Cash and liquidity. This is after balance sheeting the Paramount deal on balance sheet as we work to raise capital around that, both in a JV structure as well as in funds. We ended the year with $1.7 billion of cash and liquidity on the balance sheet after funding everything in the business. Page 5, year-end review. As I pointed out on the asset management side, a very, very good year. Sculptor had gross inflows of $5.8 billion in 2025. AUM grew from $34 billion-$38 billion in the year.

On the Rithm side, we closed different ABF products, as I mentioned, First Evergreen Fund, and we're out now marketing a closed-end ABF fund with an initial seed of $200 million. On the Crestline acquisition, this kind of fulfills our mission of what we think on the credit side, and I'll talk to this in a minute. But Crestline is a little bit under $20 billion in AUM. They have a ton of different LPs. They had their annual meeting last week down in Texas. I was down there meeting with a lot of clients and everybody's super excited. One is about the partnership as we go forward, but also what some of the pockets that we didn't have before that we currently acquire as a result of the Crestline organization.

And more importantly, the people there are just terrific. So we're really excited about where we're going to go there. I mentioned Paramount, and again, Peter's going to talk to that. Class A office buildings in New York and San Francisco. Super, super pumped about that one. As many of you know, we at the Rithm level, not at the Sculptor level, have avoided. Not avoided, I should say, but have not made commercial real estate a primary focus. This acquisition obviously puts us where we're the fourth largest owner of office here in New York City, and we're super pumped about that. When you look to the bottom part of the Page on the left side, Genesis Capital, I pointed out that the team there has done a great job.

$4.8 billion of origination in 2025, record earnings, client franchise continues to expand, and we are going to lead with credit first. That is our mantra as we think about our origination businesses. Newrez, I pointed out, third largest mortgage servicer in the U.S. That does include the large banks. Fifth largest mortgage lender in the U.S. Servicing portfolio, $850 billion. Funded volume for 2023, 2025, $63 billion. Generated north of $1.1 billion in pre-tax income. Year-over-year is up 13%, and then we announced our strategic relationships or partnerships, including some equity investments on the technology side. On the investment portfolio side, we did 8 securitizations, $4 billion in UPB. We invested $9 billion in residential mortgage assets.

That's through. A lot of that's through our origination businesses, between non-QM, which grew a lot in the Newrez side, and our residential transition loan business, which again, is the Genesis business. And we also entered into a flow agreement to with Upgrade to purchase up to $1 billion of home improvement loans, and then, we purchased a little bit under $600 million in 2025. From a macro standpoint, obviously a lot of geopolitical risk everywhere in the system. The administration is extremely focused on affordability. They announced, you know, their—the GSEs are going to purchase up to $200 billion of agency MBS. We are not sure exactly what that amount is today. For 2026, we think they could buy upwards of $155 billion.

While saying that, we think a significant amount could have already been purchased. What we did see in the quarter is the mortgage basis tightened, which means you're seeing, lower mortgage rates relative to where, Treasury yields are. As a result of that, we should see more mortgage production. You are going to see higher levels of amortization. The higher levels of amortization should provide an opportunity for us to generate more, origination gains. As we look forward, we believe the yield curve will continue to steepen. I've been pretty vocal on a number of our earnings calls. We are set up for this. We are along the front end, and, we're not really short much, but if we're short anything, we would be short the back end. We do think the yield curve will continue to steepen.

Obviously, President Trump announced Kevin Warsh as the new Fed Chair, and we think that'll continue again to lead to a steepening yield curve. The last part I'll mention on this Page, as we think about this, agency MBS has done extremely well the past towards the end of the year. The other space that's actually really in vogue, and obviously we, we made a significant investment there, is on the the return to office or the office buildings that we have. Again, Peter will speak to that. As we look at the power of the platform, Page 8, you know, the asset management business will continue to grow. We don't... Just to be clear, we don't really need anything. When you look at this Page, there are certain pockets that we don't have.

We will, you know, for example, as we think about infrastructure, where we will grow our thing and my thing has always been, we're not going to grow in a sector unless we have the expertise around the house. I always like to use the example is you can't take the shortstop and make him or her an offensive lineman. That just doesn't work. When we look at our business today, we have a great credit business, we have a great multi-strat business, we have a great real estate business, and our ABF business should grow substantially over time. But again, we're going to grow through our existing teams, and we have great teams. I think in the asset management business, when you look all in, we have about 700 folks across the platform.

That includes both investment professionals as well as support teams. So we're extremely well staffed and well suited for the growth in our company. But again, we do need to lead with results first. Page nine, Sculptor had a great year. I pointed out $5.8 billion in gross inflows, performance across the board, whether it be in the multi-strat fund, which is roughly $9 billion now, 15.5 gross or 11% net in 2025. The credit fund through 2025, and this goes back in time, 18.9 gross and 14.5 net. Asset management revenues in 2025, up $95 million from 2024. Again, we have everything we need in credit. We think we have everything we need in real estate.

We'll grow in areas that we don't have the, you know, either the staff or the what I would say, the wherewithal to grow, unless we think we're going to create an edge or be a market leader. When you look at the Sculptor organization, 30-year track record, greater than 70% of the clients have been with the firm for longer than a decade, and AUM is now approaching $40 billion. Crestline closed that transaction in December. I'm on Page 10. 18 billion total AUM, 700 investors across all strategies. The business has been in place for 20 years. Keith Williams, who leads the asset management business, has done a great job there, continuing to grow.

Offices in, you know, New York, Canada, London, Tokyo, and couple that with our Sculptor partners. There's, you know, again, we have everything we need to continue growing and providing good value for our clients. When you look at 25, the capital solutions business, overall, since 2022, generated a little bit south of 15% from a net IRR perspective. Direct lending, it's a little under 13% since 2023, and the NAV lending business, 11%. A great brand. And again, we're, you know, I think the merits or why this deal works is we bring capital. You know, when you look at the broader organization, there are things that we didn't have and that today we have, for example, direct lending, a BDC, insurance, reinsurance, and capital solutions.

So when you think about the credit business across both Sculptor and Crestline today, I think it's something north of $40 billion. So super pumped about that. On the Paramount deal, Page 12. When we look at Paramount, you know, how do we think about this? So what I would say is, when we started, what was Rithm, which was formerly known as Newrezidential, in 2013, our thesis back then was to take advantage of a dislocation in an asset class and build a company around that. At that time, the asset class that we focused on were mortgage servicing rights. So we seeded Newrezidential at that time with $1 billion. We went out and bought hundreds and hundreds of billions of mortgage servicing rights, from the banks, and from there, that was really the beginning of Newrezidential.

When we look at the Paramount Group, and this again, there'll be a name change there, so it's not confusing. But when we look at this company and you think about the dislocation in office and our ability or what we have at Rithm, which is no legacy office, and a very, very clean balance sheet. We thought this would be the right time and the right asset class and the right team to be able to take advantage of a dislocated sector. So again, you know, what did we do? We went out, we bought a company in competition with some of the largest office REITs here in the U.S., as well as some foreign investors. We bought a company where the going-in cap rate is 7%, our acquisition basis is $585 a sq ft.

We're buying Class A office buildings in two gateway cities at a 40% discount to pre-COVID values, and you just can't build these buildings, and the replacement cost is a 75% discount to replacement cost. One of the things that we get, and I'm gonna turn over the narrative to Peter here in one second. One question we typically get when we're out there raising capital around this particular transaction is, "Well, who's the leadership?" Paramount has 300 people, both at the building level and at corporate. When, you know, when we spend time and when I spend time with Peter, and you look at the expertise we have in-house at Rithm and our operating companies, there's a world-class operating company here at Paramount. We don't need anything else when we think about how this company is gonna run.

Obviously, we're tweaking leadership, and we have done that. And when we look at the team today, we're super excited about where we're gonna go with this company, where we're gonna be able to add in the office space, and quite frankly, where we're gonna add overall as an organization in the real estate space. So super pumped about this. We do think it's transformational for us in the commercial real estate space. With that, I'm gonna turn it over to Peter, who's gonna take over on Page 13.

Peter Brindley (EVP and Head of Real Estate)

Thank you, Michael. I'll start by saying Paramount owns, manages, and operates high-quality, centrally located Class A office properties in New York and San Francisco. The portfolio consists of 10 core assets totaling 9.9 million sq ft, three non-core assets totaling 2.4 million sq ft, and three managed assets in New York totaling 600,000 sq ft. The entire portfolio is approximately 13 million sq ft. In 2025, we leased more than 1.7 million sq ft in our core assets, up 235% from 2024, and our highest annual total on record. Approximately 62% of our 2025 leasing velocity was on vacant space and space scheduled to expire in 2025. The balance of our 2025 leasing served to de-risk future lease roll.

At year-end, our core portfolio leased occupancy at share was 86.9%, up 220 basis points year-over-year. Our core portfolio boasts a weighted average lease term of 8.4 years for office leases, with an average in-place rent of $90 per sq ft. Our tenant roster is comprised of best-in-class companies with significant industry diversification. The portfolio is largely comprised of financial services, legal, insurance, technology, and media companies. Turning to our leasing results on Page 14. In New York, at year-end, our New York core portfolio's leased occupancy was 92.8% at share, up 780 basis points year-over-year. During 2025, we completed 43 deals totaling 1.3 million sq ft, with an average lease term of 13.8 years.

Our 2025 leasing includes 5 deals greater than 100,000 sq ft, a testament to the quality of our assets and the strength of our team, as Michael alluded to previously. With regard to the New York market, it just continues to gain strength. Manhattan has experienced the strongest return to office momentum in the country, with visits to Manhattan office buildings nearing pre-pandemic levels. In-person work, coupled with strong earnings forecasted for U.S. companies in 2026, will power velocity going forward in New York. Return to work is no longer really a conversation. Work from home is in the rearview mirror in New York. The city has more energy than I think it's ever had, and it feels really good.

In 2025, Midtown, which is predominantly where most of our assets are located, posted the highest annual total of new leasing activity since 2018. Robust leasing, little to no new development over the next few years, conversions of select buildings away from office, and the ongoing reduction of available space will further improve Midtown's fundamentals going forward, and we expect will result in NER growth going forward. Turning to our San Francisco leasing results. At year-end, our San Francisco core portfolio's leased occupancy was 62.2% at share, down year-over-year, driven largely by a couple of large known move-outs at One Market Plaza and One Front Street. We're in the process of adding market-leading amenities at each of these premier buildings and look forward to updating you on our progress in subsequent quarters.

During 2025, leasing activity in our San Francisco portfolio increased by 330% year-over-year, as we completed 16 deals totaling 411,000 sq ft with an average lease term of 8.6 years. This represents our highest annual leasing total in 5 years and reflects the ongoing recovery in San Francisco. More broadly, and with regard to the market in San Francisco, 2025, San Francisco recorded approximately 9 million sq ft of leasing activity, the strongest annual leasing total since 2019. This uptick in leasing activity contributed to the 310 basis point year-over-year decline in San Francisco's availability rate, as tenants are increasingly reengaging the market and, in many cases, expanding their footprints.

At year-end, there were approximately 8 million sq ft of tenants in the market, a pipeline that exceeds pre-pandemic levels, and once again, a reflection of improving market conditions in San Francisco.

... In 2025, San Francisco-based companies raised $134 billion of venture capital funding, directed in large part to AI companies, which accounted for 143 deals, totaling approximately 2 million sq ft, more than 20% of San Francisco's annual leasing total in 2025. Approximately 56% of this AI demand, based on deal count, originated from tenants that are new to the market, further reinforcing San Francisco's growing importance as an AI hub. AI companies acknowledge the importance of the office, and are becoming an increasingly large percentage of the demand profile in San Francisco. Bottom line is we remain focused on maintaining our great tenant and broker relationships, delivering market-leading hospitality, securing renewals, filling our vacant spaces, and infusing best-in-class amenities in our Class A assets to enhance our market-leading offering.

Michael Nierenberg (Chairman, CEO and President)

Awesome. Thanks, Peter. You know, just a side note on San Fran. I know, you know, when you look at the slide, it says 62% leased. What I would say in our—as we do our capital formation around this transaction, the amount of incoming phone calls we've had from folks that wanna play the recovery, you know, I'm not gonna call it a trade. The recovery investment in San Francisco has been extremely significant. And one of the things I'd also point out, at Rithm, we made an early investment in the debt in Columbia Property Trust on the debt side. So we've had an exposure to San Francisco and have seen the growth in that in San Francisco since, you know, I think it was 2023.

So, we have a really good feel for that market. I do think there's gonna be a ton of money made there. Peter pointed out on AI, there's been, like, Anthropic has gone in and just taken down a whole new building. Just one other note, and then I'll talk about Genesis. When you look at this office portfolio, one of the things that we all know today, when folks go to work in an office, they want a lifestyle. You can look what the JPMorgan folks have done at 270. Like, they built this amazing building. We are doing a lot of the same things when we think about amenity packages in a number of our buildings.

So again, very, very excited about this investment and, and truly believe it's gonna be a very good one for our shareholders and LPs. Just quickly for me on the Genesis side, then I'll turn it over to Baron, who will talk about NewRez. It's been a great business for us. You know, we bought this from Goldman Sachs Merchant Bank, going back to 2022. Clint Arrowsmith, who leads that organization, has done a fantastic job growing not only just growing the business, and when you think about from an origination perspective and UPB, but sponsors, and most importantly, credit matters.

You know, we see this when we look at companies all day long, delinquency trends, and what you see with some folks that are truly in an either, whether it be an AUM rates or try to grow their origination business where they shouldn't be from a, from an overall credit standpoint. We've seen this in our careers many, many times. But when we look at the Genesis business, and if you have a look at slide 16, the team there has done just a great job, and that product is one of the hottest products in the marketplace. You'll see us expand our multifamily origination as well as our RTL origination, as we go forward. With that, I'm gonna turn it over to Baron, who will talk about Newrez, and we're gonna open up on Page 19.

Baron Silverstein (President and COO)

All right. Thank you, Michael. Good morning to everybody. NewRez had a great 2025, and we're really excited about where we're headed in 2026. We finished the year with a total pre-tax income, excluding mark-to-market, of approximately $1.1 billion, which is a 17% increase year-over-year, and a milestone for our platform. Our fourth quarter pre-tax income, excluding mark-to-market, was $249 million, driven by our origination strategy and our disciplined origination strategy, our third-party servicing business, and despite the impact of faster prepayment speeds, we delivered a 17% ROE on the quarter and a 20% ROE for all of 2025. For context on speeds, the composition of our servicing portfolio is deliberate and reflects a balance between third-party servicing and owned MSR.

Approximately 30% of our overall portfolio is third-party, high-margin, fee-based servicing. 18% of the overall portfolio or 26% of the owned portfolio are Ginnie MSRs, of which approximately one-third were originated in the last 3 years. Regarding our quarterly MSR mark-to-market, while our high-quality own MSR portfolio continues to perform well, we saw seasonal increases in delinquencies and advances, and the new FHA modification rule has increased immediate delinquencies to encourage long-term stability. Our mark-to-market approach has remained consistent with prior quarters and, in our view, conservative. Overall, these results continue to show the power of our platform and our ability to drive consistent earnings. Turning to slide 20, and regarding our 2026 technology strategy, yesterday, we announced our partnership with Valon Technologies on our servicing operating system, and two weeks ago, we announced our partnership with HomeVision for our underwriting decision engine.

These partnerships are designed to upgrade our core operating platforms with AI as a fundamental core component, rather than adding AI as an afterthought to existing structures. The first phase of our HomeVision rollout has already doubled our underwriting capacity, with further functionality to be delivered throughout 2026. Our partnership with Valon began in 2019, with Rithm as one of their first investors and Newrez as their first subservicing client. Michael saw the potential power of connecting Newrez with Valon to create game-changing servicing technology that will transform mortgage servicing... We expect the Valon operating system to materially improve our efficiency, benefiting all of our 4 million homeowners and our third-party clients. Both of these software partnership includes significant long-term minority equity ownerships that will continue to provide future earnings growth.

Turning to slides 20 and 21, 21 and 22, and providing some highlights on our originations and servicing business. Funded volume for the quarter ended at $18.8 billion, up 15% quarter-over-quarter, and $63 billion for all of 2025, and as Michael mentioned, positioning us as the number 5 mortgage lender. The origination platform delivered fourth quarter pretax income, excluding mark-to-market, of $126 million, and full-year pretax income of approximately $360 million, both up 31% year-over-year and 57% quarter-over-quarter. While market competition continues to pressure gain on sale margins, we maintain pricing discipline, did not chase margin-market share, improving our margins quarter-over-quarter. Non-agency production remains a focus with year-over-year growth of 147%, including non-QM originations, which were up 200% year-over-year.

We also just launched our new crypto enhancement, where Newrez is the first major lender to recognize cryptocurrency assets for mortgage qualification. Especially important, as 20% of U.S. adults own crypto today. On the servicing side, our third-party servicing portfolio increased to $256 billion, which includes $25 billion in new third-party servicing, which offset the movement of a single low-margin agency sub-servicing portfolio. The onboarding of the Wells and Onity non-agency MSR portfolios begin in March, and the transition of the Valon to the Valon operating system will begin in 2027. I believe our business is as best positioned as it's ever been, and I look forward to sharing the next chapter of the Newrez growth story. So back to you, Michael.

Michael Nierenberg (Chairman, CEO and President)

Thanks, Baron. Just a couple notes on the mortgage company stuff. Obviously, a little bit of noise, or I shouldn't say a little bit, but some noise around, you know, our equity got hit, as did some of the other kind of mortgage companies over the course of the past few days. We're not in a race to grow origination. We're not in a race to grow AUM unless we can make money. So when you think about it, if folks are out there pricing origination through the market, it's not going to be us. So origination volumes will vary. Similarly, when you think about the MSR business, we're fully hedged against our MSR.

I did point out we have a steepener on, but when we think about that, you are going to have some mark-to-market volatility in a quarter when rates move or mortgage spreads tighten. It's just the nature of the business. You take a step back and you think about that, as well as some of the things we're doing around the technology side, Baron pointed out Valon. You know, Valon is, you know, Valon came to us years ago. We spent some time with them. We seeded them with a portfolio of loans on the servicing side.

At that point, we took an equity stake in the company, and if this thing plays out the way that we think it could and will, we believe that the sheer size of, or the market valuation of Valon could be a substantial, P&L contributor to our business from an overall market value standpoint as we go forward. When you look at tech valuations, and if this company is worth $10 billion, for example, that could be worth a couple, that could be worth a couple of dollars a share. So I look at this, you know, based on equity ownership. I look at this, Baron pointed out the HomeVision side. We're going to get more efficient. We are going to spend some more money on brand as we go forward, but we're not in a race to do just grow origination.

We don't need to do that just to be in a battle with somebody else, and you've seen that in the wholesale channel between a couple different mortgage originators. I'll wrap up, and then we'll go into some Q&A. Just on the investment portfolio, you know, when you look at the power of the franchise, clearly, we're doing we have a great origination business. I do think our origination business, and we'll continue to grow in different areas that we don't have there. That will, that will feed into not only balance sheet and earnings, it'll also feed into the ABF space, which we're going to grow substantially. It is one of the single hottest products that LPs want today. They're looking for diversification away from certain credit products.

When you look at valuations, and you think about the absolute returns of being able to get low double-digit returns backed by real cash flow and, in many cases, hard assets, it's a space that not only that we have expertise, but we've been doing this our entire career. I pointed out earlier, we did $4 billion of securitizations. We invested $9 billion in different assets in the resi space. That most of that is through our own origination, quite frankly. We did the Upgrade transaction, where we sourced $1 billion of home improvement loans. We're going to continue to grow there. We're going to grow our third-party business as well as we continue to expand our sourcing capabilities.

So overall, before I turn it back to the operator for Q&A, the company is in very, very good shape. I do think, and I say this every earnings call, our valuation is just extremely low relative to what I think we do and what we offer both our LPs and our shareholders. We're focused on making money for our LPs and our shareholders first before we do anything else. That will enable us to grow. At some point, the company will get revalued, and we look forward to continuing the journey and growing the business. With that, I'll turn it back to the operator for Q&A.

Operator (participant)

... Ladies and gentlemen, at this time, we'll begin that question and answer session. To ask a question, you may press star and then one using a touchtone telephone. To withdraw your questions, you may press star and two. If you are using a speakerphone, we do ask you please pick up your handset prior to pressing the keys to ensure the best sound quality. Once again, that is star and then one to join the question queue. Our first question today comes from Crispin Love from Piper Sandler. Please go ahead with your question.

Crispin Love (Director and Senior Research Analyst)

Thanks. Good morning, everyone. First, just looking at your funded volumes, purchase versus refi. Refi made up 40% plus for you in the quarter. I think that's the highest level for several years, at least on a percentage basis. Can you just detail that a bit? Were those competitive takeaways, recapture on your own book? A little color there would be great. And then just expectations into the first quarter, thoughts on overall volumes relative to 4Q, just given recent mortgage rate moves.

Baron Silverstein (President and COO)

Yeah. So look, you know, we're a large correspondent buyer, so what you're seeing is, you know, a reflection of the market. You saw the rally in late summer and in September. And, you know, that you saw the refi volume picked up, and you see that in speeds overall going into the fourth quarter. And, you know, that's really kind of the measurement for what you've seen for, you know, refis going up. And then just going into January, you know, Michael referred to what we call the Trump bump. So you saw kind of spreads tighten, and then you saw the pickup in production coming into the month of January. And I think you'll see that when our numbers come out at the end of the first quarter.

Michael Nierenberg (Chairman, CEO and President)

What do you think regarding, just getting to Crispin's question, production for Q forward, you know, let's just go 2026?

Baron Silverstein (President and COO)

In our forecast for 2026 is gonna be up. We think we're gonna be up around where the market is estimating, which I think is approximately 10%. You know, I do think, Crispin, you know, our internal views is that as we continue to connect with our homeowners, as we continue to deliver, you know, better and faster service for them and better tools, that we'll continue to basically improve and pick up market share.

Michael Nierenberg (Chairman, CEO and President)

Crispin, part of this goes back to the investments we're making on the marketing side. We speak about AI, we speak about bringing in some new talent who are gonna help lead certain divisions, who are leading certain divisions. I think all that's gonna help on the recapture side. So, you know, somebody doing this, we built Mr. Cooper when we were at Fortress. We know what, you know, refi, recapture numbers should be. I don't think there's a real, I mean, we could say there's a science, but you just have to be really good at it. I think we're really good at it because we have, you know, really good experience. While saying that, you know, if you go into any kind of cycle thinking you're the best, you're gonna be the loser, and we don't always think we're the best.

We're gonna invest both resources, capital, to make sure that our refi numbers or recapture numbers, I should say, continue to go up. But the market's gonna give you what the market's gonna give you.

Crispin Love (Director and Senior Research Analyst)

Great. Thank you. I appreciate all that. And then, Michael, you alluded to it, but can you discuss competition? The mortgage space definitely been a popular topic. Just some, from some competitors' results in the last few days, gain on sale margins have been lower from a lot of others out there, but, yours held in well, actually expanded. Just what's your view there? Are you seeing mortgage players being irrational in the fourth quarter and today?

Michael Nierenberg (Chairman, CEO and President)

You're really asking me to comment on an earnings call if mortgage players are being irrational? I don't know if anybody's being irrational. What I would say is, it's a competitive business, always has been. You're gonna see more origination. Certain players are, you know, they're more aggressive. It doesn't mean they're gonna make more money. You know, the one thing I would say about our company, and when you look and, you know, Baron referred to amortization, and as we look at where we are. You know, the breadth of the company, when we were able to put up a $400 million quarter in Q4, and, you know, quite frankly, when you look at the MSR business, take a little bit of a more conservative approach, I think Q4, because we could, is something that really differentiates us.

So when we look at the competition and we think about our friends in the space who just wanna grow origination, we don't, we're not, it's not gonna be us. We wanna keep all our customers on our platform for sure. We're gonna do that through refi and recapture. But, you know, the government's come out with some changes as well, right? I mean, you know, when you look at the Ginnie Mae program, that's why you saw a small spike in delinquencies in the fourth quarter. We do think a lot of that, if not all of that, based on a 4.30 ten-year note and call it a low 6% mortgage rate, will reverse here in the first quarter.

So we expect to see that mark-to-market actually go the other way here in the first quarter. As it relates to the broader mortgage, you know, business and originators, there are some folks that have been in, you know, what I would say, real competition for many, many years on the origination side. That hasn't been us, and it's not gonna be us. So, you know, there's a lot of levers that we can pull that make our shareholders and LPs money. We'll continue to do that without getting into a race.

Crispin Love (Director and Senior Research Analyst)

Great. Appreciate all the color, Michael.

Michael Nierenberg (Chairman, CEO and President)

Thank you.

Operator (participant)

Our next question comes from Bose George, from KBW. Please go ahead with your question.

Bose George (Managing Director and Senior Equity Research Analyst)

Hey, guys, good morning. Just wanted to follow up on the gain on sale margin. On the retail channel, specifically, you know, there was a pretty good increase this quarter. Last quarter, you guys noted that I think it was Ginnie Mae's streamlined refis were driving some of the decrease that you saw in 3Q. So just, you know, quarter over quarter, fourth quarter over third quarter, just curious how much of the improvement was mix versus some kind of an apples-to-apples improvement by product type?

Baron Silverstein (President and COO)

... Yeah, so it's definitely mix is always a driver, right? You saw our correspondent share, which was hovering around 70%, is now, I think, 62% for the quarter, you know, as we picked up our production overall in our consumer direct channels. And then I would tell you, look, we, we felt like, you know, we were able to kind of maintain our margins overall. But then you also have what I would just say is, you know, from a timing perspective, some of the, the timing of, of, you know, completion accrual, but also how we basically book our, our MSR recapture, you know, is driving, you know, what you see as a little bit of that, increases in, in our margins on the consumer direct channel.

Bose George (Managing Director and Senior Equity Research Analyst)

Okay, great. And then actually on the wholesale side, you know, you guys alluded to the competition in that market, but then when I look at your numbers, you know, volumes are up by a third. Your wholesale margin is up pretty meaningfully. So, yeah, can you just kind of tie the two? I guess it did not impact your performance.

Baron Silverstein (President and COO)

Yeah. So look, it's driving to, you know, our mix. Michael talks very much about, you know, us not chasing market share. So if we don't like where, you know, pricing is on, say, conventional or government product, you know, but our focus is on non-agency, and we continue to grow on our non-agency and driving our non-agency production through wholesale. It's a really important channel to us. We're looking to basically try to expand as much as we can, but, you know, stay focused on and be disciplined on our margins.

Michael Nierenberg (Chairman, CEO and President)

Yeah, just one further comment on that, Bose. When you look at the non-agency space, and I brought up the so-called ABF space in the fundraising side or on the LP side. The ABF space, asset-based finance space, is the hottest thing that any asset manager is going out to talk about. Our ability to differentiate ourselves where we could actually originate these loans and service these loans, gives us a real edge over a lot of competition. So you're going to continue to see, I think, the non-agency space grow. We just got to make sure that not just on us, quite frankly, as an industry, we maintain discipline around credit here.

Bose George (Managing Director and Senior Equity Research Analyst)

Okay, great. Thanks.

Michael Nierenberg (Chairman, CEO and President)

Thanks, Bose.

Operator (participant)

Our next question comes from Doug Harter from UBS. Please go ahead with your question.

Douglas Harter (Director and Senior Equity Research Analyst)

Thanks. Can you talk about-

Michael Nierenberg (Chairman, CEO and President)

Doug?

Bose George (Managing Director and Senior Equity Research Analyst)

Everyone.

Michael Nierenberg (Chairman, CEO and President)

Everyone? Operator? Did we lose the operator?

Operator (participant)

Yes, sir. Yes, sir. Once again, if you would like to ask a question, please press star and then one on your touchtone phones. Again, that is star and then one to rejoin the question queue.

Michael Nierenberg (Chairman, CEO and President)

I think we lost-

Operator (participant)

While we wait-

Michael Nierenberg (Chairman, CEO and President)

Operator.

Operator (participant)

Are you able to hear me, sir?

Michael Nierenberg (Chairman, CEO and President)

Yeah, I think we lost our queue.

Operator (participant)

Yes, sir. We're getting people back in now. While we're waiting for Doug to rejoin, I can join in Eric Hagan from BTIG.

Michael Nierenberg (Chairman, CEO and President)

Great. Great.

Douglas Harter (Director and Senior Equity Research Analyst)

Hey, thanks. Good morning. So if the expectation is that you could remain in this REIT structure for the foreseeable future, but obviously the clear focus is on growing your asset management at the same time, how do you think that affects your capital allocation plans? And if it ever looked like you could shed your REIT status, would that maybe catalyze a change in capital allocation in any way across the segments that you guys manage?

Michael Nierenberg (Chairman, CEO and President)

It's a good question. It's something that we get asked all the time. We're very focused, obviously, on our capital structure, as you know. At some point, we do need to be a C Corp. We need to grow our asset management business a little bit more. I don't think that's going to take away from the way that we run our business, where we try to drive higher earnings for our shareholders and obviously better results for our LPs. Where our FRE continues to grow as an organization, but like I said, we're going to lead with performance first. There'll be. I'm sure at some point there'll be some kind of opportunity to actually grow FRE, which at that point then probably gives us the ability to have a separately listed asset management business.

We do toy with, and I, I don't use the word loosely, but, you know, we think about the mortgage company and, you know, should we have a separate tracked mortgage company, which kind of simplifies the story a little bit. You know, we also own or actually, we manage Rithm Property Trust, which we're exploring some capital formation around that organization as we build out more in the commercial real estate space. So there's a bunch of moving parts. The one thing I would want every analyst and everybody to understand is we're focused on performance first, which includes earnings for our shareholders and LPs. When you think about the company, today, we have about $8.5 billion of permanent capital. The company makes north of $1 billion in pre-tax, and we trade at, whatever, 6x or something like that.

Real asset management businesses trade anywhere from 10-30x. You know, you look at the heavier balance sheet concentrated asset management firms, which trade, you know, south of there, but there's a ton of upside, in our opinion, to grow. But the capital, the corporate structure or the REIT space, as we think about the way that we currently run, is something that'll change over time. That doesn't mean we're not going to have a REIT. You know, you look at Blackstone, they got BXMT, Blackstone's a C corp up top. So, you know, I say this every earnings call. I would expect at some point we get towards that. We're not going to be Blackstone, but there's, you know, the corporate structure works.

Douglas Harter (Director and Senior Equity Research Analyst)

Yep. Great. Great stuff. Do you guys think there are combination opportunities for Genesis to apply the same playbook that you just did for Paramount, where you have this, you know, synergistic platform that you can raise capital around to support the acquisition? I mean, maybe a better question is, like, within the various strategies that you guys do manage, where do you think you can apply that playbook, where you raise capital for the asset manager, which gives you scale that you can plug into with another business that you also manage at the same time?

Michael Nierenberg (Chairman, CEO and President)

Well, that's a great, it's a great question. That'll be at the Rithm Property Trust, where what you're going to see is we're gonna originate more multifamily loans into RPT or Rithm Property Trust. That capital base will continue to grow. So when you look from a market, you know, from an overall equity standpoint, Rithm Property Trust, which is an externally managed vehicle, where Rithm owns 1.5 and 20 over 8, I believe it is. We will raise capital around that. That balance sheet will grow through a lot of the so-called Genesis origination, as well as third-party origination. So when you think about it, it's a permanent capital vehicle. We've done this with Newrezidential in the past, where we, again, we started with $1 billion of capital.

It's now 8.5. You look at Blackstone, they started BXMT with a small amount. They did a transformational, couple transformational deals to actually grow that. We're gonna do the same thing with RPT, and that'll be fed by Genesis.

Douglas Harter (Director and Senior Equity Research Analyst)

Great stuff. I appreciate you guys very much.

Operator (participant)

Our next question, once again, is from Doug Harter, from UBS. Please go ahead with your question.

Douglas Harter (Director and Senior Equity Research Analyst)

Thanks. Good morning. Hopefully, this works better this time.

Michael Nierenberg (Chairman, CEO and President)

It does.

Douglas Harter (Director and Senior Equity Research Analyst)

Good. Hoping you could give us an update around the capital raising for Paramount and, you know, when... you know, how we should think about the magnitude and the structure of that.

Michael Nierenberg (Chairman, CEO and President)

It's a little bit fluid, quite frankly. We closed Paramount at the end of December. We're exploring whether we raise—you know, we, again, we funded it on third-party balance sheet. We did a pref offering in the quarter at the Rithm level, where we raised $250 million of permanent capital in the pref market. We're in no rush, quite frankly, to turn around and just say, "Okay, we have to do a fund, or we're gonna bring in JV partners." You know, in the real estate world, when you look at the commercial side, a lot of folks bring in partners. So we're exploring both. We're on the road thinking about what's the best structure. We do want to expand, as I pointed out when we bought this or announced this deal.

We want to expand our relationships and partnerships with LPs in the commercial real estate space. That continues to be the primary focus. I think you'll see a combination of both fundraises, permanent capital raises, as well as JV-related partnerships. So it's, it's fluid, is what I would say.

Douglas Harter (Director and Senior Equity Research Analyst)

Great. And just sense as to the timing, like, how we should think about the timing. Is there, you know... How do you think about wanting to free up the capital to redeploy versus, you know, kind of making sure you get the right structure?

Michael Nierenberg (Chairman, CEO and President)

Yeah, we closed the quarter with $1.7 billion of cash in liquidity, so we're not, you know, what I would say is, we're not fussed with the capital at this point. While saying that, you know, we pay, we're a dividend payer, and we always wanna, and we always spend money. You know, we like, you know, we do shop. So when you think about it from that perspective, you know, it's now, where, you know, the teams are now. You know, the one thing I didn't mention to the group is we have a couple of key hires on the asset management business as we continue to grow that. You know, and we'll be putting out a press release here over the next week.

One of them is a former partner of mine from Fortress who will help us to lead the asset management business, you know, along with our other partners at the different organizations. Then we hired an old, not an old colleague, but somebody that's highly recommended that had retired from Blackstone to help on leading the capital formation business. So we have some significant hires on the asset management side. I think you'll continue to see us grow. But like I said, the most important thing is we got to perform for LPs. Once we do that, we'll grow exponentially.

Douglas Harter (Director and Senior Equity Research Analyst)

Great. Thank you, Michael.

Michael Nierenberg (Chairman, CEO and President)

Thanks, Doug.

Operator (participant)

Once again, if you would like to ask a question, please press Star and then one. To withdraw your questions, you may press Star and two. Our next question comes from Giuliano Bologna from Compass Point. Please go ahead with your question.

Good morning. Congrats on the continued great performance. When I think about, you know, some of the commentary you just gave on the asset management side and the C corp, you've obviously grown the asset manager tremendously. Obviously, you've rolled in a few acquisitions, integrated them well over the past, you know, few couple of years here. Is there a sense of scale that you'd want to achieve? Because you're obviously getting, you know, much closer to, you know, a large scale being a large scale alternative asset manager within that segment. You know, and is there a profitability target or kind of, you know, a rough threshold that you'd want to be at before you try to turn that into a C corp?

Michael Nierenberg (Chairman, CEO and President)

I'd say it's—there's no amount that we have in mind. I think it's what the market expects. So when you look at even just taking a step back, and when you say about scale, when we go see an LP, an LP wants to do business with fewer institutions, but want to have more products. When you think about our credit business now between Sculptor, Crestline, and Rithm, we have all the products we need on credit. We have all the products we need on mortgage. We have all the products we need on ABF. We have all the products we need in commercial real estate. What I think it is more about, it's really about the FRE and how you're going to get valued, and make sure that these organizations are sizable enough so they don't trade, you know.

You know, by appointment is what I would say. So it's not like, you know, and I say this, we're never gonna be Blackstone, and, you know, we wanna be who we are. We wanna grow prudently, and we wanna be valued, you know, with the best of the best. And that's really what we're out for. It's like, how do we get valued in a different way than we currently get valued? And I think, there, there's no set amount. I would expect over the next year, we get to that point, but I don't know what that size is gonna be, Giuliano.

Giuliano Bologna (Managing Director and Equity Research Analyst)

That's helpful. And then, you know, maybe going over to the mortgage side. When I think about gain on sale, I'm assuming there's probably some positive lift from some of the recapture in the consumer direct channel. You know, just thinking about the amount of leverage that you have on that side, you know, especially as recapture should continue at least in the near term, you know, gain on debt should continue to be a driver of stability for your gain on sale margins on a consolidated basis.

Michael Nierenberg (Chairman, CEO and President)

Yeah, absolutely. You know, Michael talked about, you know, us continuing to drive our brand, connecting with our customers, right? We have 4 million customers on our platform, and, you know, making sure that we, you know, stay connected as best we possibly can are gonna continue to be a key driver for our business, our growth strategy, and our platform overall.

Giuliano Bologna (Managing Director and Equity Research Analyst)

That's helpful. I appreciate it. Well, I'll jump back in the queue.

Operator (participant)

Once again, if you would like to ask a question, please press Star and then one. To withdraw your questions, you may press Star and two. We'll pause momentarily to assemble any additional questions. Ladies and gentlemen, at this time, we do have an additional question from Bose George from KBW. Please go ahead with your question.

Bose George (Managing Director and Senior Equity Research Analyst)

Hey, guys. Thanks for the follow-up. In terms of recapture expectations in the market, I mean, do you think, recapture expectations embedded in some of these servicing transfers that have happened or even in the correspondent channel, are potentially, a bit high?

Michael Nierenberg (Chairman, CEO and President)

I don't know. I mean, I don't know what the expectations are from different folks. What I would say is, you know, again, going back to my Fortress days, in our Fortress days, we built what is now known as, you know, Mr. Cooper. You know, along with Jay and his team, obviously. We know what recapture percentages are. I do think the world has gotten more efficient. I think with technology, it's only gonna get more efficient. We, you know, alluded to the Valon partnership. We spoke about Homevision. That is going. Those kind of things will help, and I think the mortgage industry will get more efficient. I don't know. You know, you're only gonna be as good as what the market is. It's a very competitive space. People do things that are non-economical.

That's not who we are. But while saying that, we do wanna keep our customers. I can't tell you if other folks' assumptions are too high or not. You know, I think you should speak to them about that.

Giuliano Bologna (Managing Director and Equity Research Analyst)

Okay, great. Thanks a lot, guys.

Michael Nierenberg (Chairman, CEO and President)

Yeah. Well, I wanna thank everybody for dialing in today. We appreciate your support. We have, you know... I was going through my notes last night and, you know, I looked at the amount of times I was using the word great or terrific or wonderful, and I was looking for more adjectives. You know, the one thing you'll get from us, we're not gonna show up in a meeting or tell you that we're the best in anything that we do, because if we take that approach, we're not gonna be the best. But we always have things to learn. While saying that, we have a very, very good company, and we care first about driving results.

With that, you know, hopefully, we get a much better result on our equity price, and we'll continue to do the same thing we've been doing for our shareholders. So thanks again. Look forward to updating you throughout the quarter and on our next call. I appreciate everybody dialing in.

Operator (participant)

Ladies and gentlemen, we thank you for joining today's conference call and presentation. You may now disconnect your lines.