Rithm Capital (US:RITM)2025-10-30 13:00Financial Data and Key Metrics Changes - The company generated approximately $300 million in earnings for shareholders, achieving an 18% return on equity (ROE) [4] - GAAP net income was reported at $193.7 million, or $0.35 per diluted share, with an 11% ROE [14] - Earnings available for distribution (EAD) was $297 million, or $0.54 per diluted share, marking the 24th consecutive quarter where EAD exceeded dividends paid [14] - The book value at the end of the quarter was $12.83, totaling $7.1 billion [14] - Cash and liquidity on the balance sheet stood at $2.2 billion [14] Business Line Data and Key Metrics Changes - Genesis Capital originated $1.2 billion in loans during the quarter, a 60% increase year over year [16] - The mortgage company, Newrez, reported a pre-tax income of approximately $295 million, up 7% quarter over quarter and 20% year over year, with a 20% ROE [33] - Direct origination production for Newrez increased by 32% year over year [34] - The servicing business generated $260 million in pre-tax income, an 11% increase year over year [36] Market Data and Key Metrics Changes - The company ended the quarter with a balance sheet of $47 billion, with Sculptor managing $37 billion in assets under management (AUM), Crestline with $18 billion, and Paramount with a $7 billion portfolio [10] - The demand for office space in New York is over 90% leased, while San Francisco is in the low 70% range, indicating a recovery in demand [8][28] Company Strategy and Development Direction - The company announced two acquisitions: Crestline, a credit manager, and Paramount, a Class A office REIT, to expand its product offerings without raising equity in capital markets [5][7] - The focus remains on performance rather than assets under management (AUM), aiming to provide fewer managers with more products to limited partners (LPs) [6] - The company is exploring opportunities in the energy space and plans to close its first Evergreen ABF fund on a leading wealth management platform [23] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's position, highlighting strong earnings and the potential for growth through acquisitions and product offerings [10][90] - The company aims to drive more fee-related earnings (FRE) to enhance its valuation and is focused on growing its asset management business [42][44] - Management acknowledged the competitive landscape but emphasized their disciplined approach to underwriting and servicing, which differentiates them from peers [66] Other Important Information - The company is now involved in the insurance and reinsurance business, which it intends to grow over time [25] - The average rent for the Paramount portfolio is approximately $85 per foot, with significant potential for rent increases [8] Q&A Session Summary Question: Update on broader strategic vision and timelines - Management believes the company is fundamentally attractive from a value standpoint and is focused on growing asset management business to drive revaluation [41][42] Question: Update on third-party capital for Paramount transaction - The company expects to raise approximately $950 million to $1 billion from third parties, with $300 million to $500 million from Rithm [45][46] Question: Options for growing Rithm Capital - Management is exploring direct lending options and may consider share buybacks if growth does not materialize [55][56] Question: Discussion on Ginnie Mae streamlined refinances - These loans are cheaper to produce, impacting the gain on sale margin [51][54] Question: Share buybacks as a tool for valuation - Management indicated that the focus will be on continued growth rather than share buybacks, especially given the recent acquisitions [80] Question: Fundraising outlook for Sculptor - Management is optimistic about sustaining the fundraising pace into 2026, with significant investments planned in capital formation [82][84]