Q4 2023 Rithm Capital Corp Earnings Call
Operator: Good morning, and welcome to the Rhythm Capital fourth quarter and full year 2023 earnings call. Our participants will be in listen-only mode.
Good morning, and welcome to the rhythm capital fourth quarter and full year 'twenty 23 earnings call. All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing Star then zero on your telephone keypad.
Operator: If you need assistance, call 1-866-333-4333. Please signal a conference special by pressing star then zero on your telephone keypad. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on your telephone keypad; to withdraw your question, please press star then 2.
After todays presentation, there will be an opportunity to ask questions.
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Operator: Please note, this event is being recorded. I would now like to turn the conference over to Emma Bullock, Associate General Counsel. Please go ahead.
Please note. This event is being recorded I would now like to turn the conference over to up Hola Associate General Counsel. Please go ahead.
Emma Bullock: Thank you, and good morning, everyone. I would like to thank you for joining us today for Rhythm Capital's fourth quarter and full year 2023 earnings call. Joining me today are Michael Nierenberg, Chairman, CEO, and President of Rhythm Capital, and Nick Santoro, Chief Financial Officer of Rhythm Capital. Throughout the call, we are going to reference the earnings supplement that was posted this morning on the Rhythm Capital website, www.rhythmcap.com. If you've 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.
Thank you and good morning, everyone I would like to thank you for joining us today for rhythm capital fourth quarter and full year 2020 three earnings call. Joining me today are Michael Nierenberg, Chairman CEO and president of rhythm cap at all and Nick Santoro, Chief Financial Officer.
Capital throughout the call we are going to reference the earnings supplement that was posted this morning to the rhythm capital website Www dot rhythm cap dotcom, 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 FCC.
Emma Bullock: 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. And with that, I will turn the call over to Michael. Thanks, Emma. Good morning, everyone.
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 and with that I will turn the call over to Michael.
Good morning, everyone. Thanks for joining our call today.
Michael Nierenberg: Thanks for joining our call today. As we report our fourth quarter of full-year earnings, another, what I would say, very solid quarter and a very good year consistent with earnings across all of our business lines. As we began 2023, we set out on a path to pivot our business to become more of an alternative asset manager while maintaining the very same discipline that got us here in asset classes and the operating companies that we own. Book value year over year is essentially unchanged, despite all the volatility we saw in the markets.
We report our fourth quarter and full year earnings another what I would say very solid quarter and a very good year consistent with earnings across all of our business lines. As we began 2023, we set out on a path to pivot our business to become more of an alternative asset manager, while maintaining the very same discipline that got us here in the end.
Asset classes and in the operating companies that we own book value year over year is essentially unchanged. Despite all the volatility we saw in the markets. There was a little bit of warrant dilution from some warrants that were issued back in 2020, and we distributed a little under $500 million to shareholders. We continue to.
Michael Nierenberg: There was a little bit of warrant dilution from some warrants that were issued back in 2020, and we distributed a little under $500 million to shareholders. We continue to create solid earnings quarter after quarter, and we did a couple of very strategic transactions which put us in a position to, one, maintain earnings and, two, grow our alternative asset business. In the fourth quarter, we closed on Sculptor.
<unk> solid earnings quarter after quarter, and we did a couple of very strategic transactions, which put us in a position to one maintain earnings and to grow our alternative asset business in the fourth quarter. We closed on sculptor. We also announced the acquisition of a leading third party servicer and in SLS, which was acquired from Computershare.
Michael Nierenberg: We also announced the acquisition of a leading third-party servicer, SLS, which was acquired from Computershare. We expect that to close sometime here in the first quarter. As we look forward, the growth of our asset management business will be critical to the revaluing of our equity in our company and just the overall valuation of what we do here at Rhythm. 2024 and beyond should be a very good investing year, and the environment, in the current environment, and as we look forward, we are extremely well positioned to invest in all asset classes. Whether that be real estate, I think it's important to note we have no legacy real estate.
We expect that to close sometime here in the first quarter as we look forward the growth of our asset management business will be critical to the revaluing of our equity in our company and just the overall valuation of what we do here at rhythm two.
2024, and beyond should be a very good investing a year and the environments.
And in the current environment and as we look forward, we are extremely well positioned to invest in all asset classes, whether that'd be real estate I think it's important to note. We have no legacy real estate credit structured products equities et cetera, anything in the financial services sector and.
Michael Nierenberg: Credit, structured products, equities, et cetera, anything in the financial services sector, we will have a hard look at. The results of both Rhythm and the Sculptor companies in 2023 were excellent, and the long-term performance of both the REIT and the asset management business put us in a position to be at the top of the pack. This should enable us to grow our credit and real estate businesses while prioritizing results for our LPs and shareholders. To be clear, results matter.
We will have a hard look at the results at both rhythm and the sculptor companies in 23 were excellent in the long term performance in both the REIT and the asset management business put us in a position to be at the top of the pack. This should enable us to grow our credit and real estate businesses, while prioritizing results for our Lps and shareholders to.
Clear results matter. This will always Trump any growth aspirations, we may have as a company. Our mortgage company continues to be best in class. We're a top three or four a nonbank mortgage company here in the U S between the rhythm and new raise our mortgage company, we have approximately 850 billion.
Michael Nierenberg: This will always trump any growth aspirations we may have as a company. Our mortgage company continues to be best in class. We're a top, you know, three or four non-bank mortgage company here in the U.S. Between Rhythm and Nures, our mortgage company, we have approximately $850 billion pro forma of mortgage servicing rights, which continue to provide great income and great cash flow for our investors. As we look at the macro environment, yes, the Fed has been clear about its desire to lower rates. However, we don't see that happening until inflation comes down a little bit closer to the Fed target of 2% and the data softens. Friday's employment data, as well as some of the other recent economic releases that we've seen, should keep the Fed on hold for the March meeting.
Dollars pro forma our mortgage servicing rights, which continue to provide great income and great cash flow for our investors as we look at the macro environment, yes. The fed has been clear about their desire to lower rates. However, we don't see that happening until inflation comes down a little bit closer to the fed target of 2% and the data softened Fry.
Hey, its employment data as well as some of the other recent economic releases that we've seen should keep the fed on hold for the March meeting regarding our positioning we are close to home. We have as we have been in years as we have hedges against all of our servicing assets I'll now refer to the supplement which has been posted online and we're going to start on page.
Michael Nierenberg: Regarding our positioning, we are close to home, as we have been for years, as we have hedges against all of our servicing assets. I will now refer to the Supplement, which has been posted online, and we're going to start on page three. Sort of a new chapter as we think about, again, the repositioning of Rhythm as a global alternative asset manager. A couple of things to point out on this slide. At the Rhythm level, we have a $35 billion balance sheet, and there's $7 billion of book equity. We've paid out $5 billion in dividends since the company was started in 2013, and our total shareholder return for 2023 was 43%.
Three.
Okay.
Starting with new chapter as we think about again, the repositioning of rhythm as a global alternative asset manager a couple of things to point out on this slide at the rhythm level, we have a $35 billion balance sheet, There's 7 billion of book equity.
Paid out 5 billion of dividends since the company was started in 2013 and our total shareholder return for 2023 was 43%.
Michael Nierenberg: Sculptor is a world-class asset management business with $33 billion under management in verticals such as real estate, credit, Multistrat Funds, and a large CLO business. The combination of the two businesses, or when you think about the different businesses and the performance of both, has put us in a real position to continue to be a formidable player in the alternative space. Page four is financial highlights. 2023. The book value at the end of December was $11.90.
<unk> World Class asset management business $33 billion under management in verticals, such as real estate.
Credit multi strat funds.
And a large CLO business the combination of the two businesses or when you think about the different businesses and their performance on both has been it puts us in a real position to continue to be a formidable player in the all space page for our financial highlights too.
Twenty-three.
Book value at the end of December was $11.90. Our GAAP net income we had a loss of $88 million that's attributable to a write down of some of our MSR assets earnings available for distribution $247 million or 51 cents per diluted share common dividend <unk>.
Michael Nierenberg: In our gap net income, we had a loss of $88 million. That's attributable to our write-down of some of our MSR assets. Earnings available for distribution, $247 million or $0.51 per diluted share. Common dividend, $0.25. At the end of 2023, we had $1.9 billion of cash and liquidity and total equity of $7 billion at the Rhythm level. For the full year, earnings, $533 million or $1.
Five cents at the end of 'twenty, three we had $1 9 billion of cash and liquidity and total equity of $7 billion at the rhythm level for the full year earnings $533 million or $1 10 per diluted share.
Michael Nierenberg: Earnings available for distribution, $997 million, or $2.06 per diluted share. Total economic return, 7.2%, return on equity, 9.3% from a gap perspective, and 17.4% for earnings after distribution. Book value was essentially unchanged, and again, this factors in warrants, dividends, etc. As we think about our new chapter, what are the dynamics that we're seeing in the marketplace today? And What are some of the things that we've done at the rhythm level?
Earnings available for distribution $997 million or $2.06 per diluted share total economic return of 7.2% return on equity, 9.3% from a GAAP perspective, and 17, 4% for earnings after distribution book value was essentially unchanged.
<unk> and again this factors in warrants dividends et cetera.
As we think about our new chapter what what are the dynamics that we're seeing in the marketplace today and what are some of the things that we've done it at the rhythm level.
Michael Nierenberg: In July of last year, or in the second quarter, Goldman announced they were pulling back on their markets business. So we went out, and we acquired a billion dollars worth of consumer loans from Goldman Sachs. As we think about the banks continuing to retreat, Civic, which was a division of PacWest, acquired a portfolio of residential transitional loans that were originated by Civic. We expanded our direct lending capabilities through our Genesis Capital business, which makes residential transitional loans to builders and developers throughout the United States. To grow our alternative asset management business, we acquired Sculptor. When we think about funding gaps, dislocated sectors like commercial real estate have a real need for gap capital and equity infusions. Not having legacy commercial real estate exposure puts us in a very, very good place from a strategic standpoint. Underfunded sectors, such as construction financing, provide great opportunities for our Genesis Capital business.
In July of last year, or or second quarter Goldman announced they were pulling back on there their markets business. So we went out and we acquired 1 billion for a consumer loans from Goldman Sachs. As we think about the banks continuing to retreat civic which was a division of Pac West we acquired a portfolio of residential transition.
No loans that were originated by civic we expanded our direct lending capabilities through our Genesis capital business, which makes loans residential transition loans to builders and developers throughout the United States to grow our alternative asset management business, we acquired sculptor.
When we think about funding gaps dislocated sectors like commercial real estate have a real need for GAAP capital and equity infusions, not having legacy commercial real estate exposure puts us in a very very good place from a strategic standpoint, underfunded sectors, such as construction financing provide great opportunities for our Genesis cap.
Michael Nierenberg: As we think about capabilities, the acquisition of SLS, which is truly a third-party servicer, helps us grow our fee-based business in the third-party servicing business. And we'll get to those slides in a little bit. As we think about performance, and we'll get into some of the numbers shortly, both the Rhythm business and the Sculptor funds had a very, very good 2023. As we think about partnerships, we want to extend our global reach with partnerships throughout the world to create capital solutions to help us deploy more capital and then co-invest alongside our different business lines that we have here at both the Rhythm and the Sculptor levels. Page 6, Sculptor, $33 billion of AUM under management If you look across the different verticals, large credit business, large real estate business, and a great multi-strat fund, and we'll talk about that shortly. When you look at the clients, 70% of the clients have been partners for over a decade. We've deployed, at the scope, delivered $200 billion of capital in credit investments. 70% of the AUM is longer duration.
<unk> business as we think about capabilities the acquisition of as S. L. S, which is truly a third party servicer helps us grow our fee based business in the third party servicing business and we'll get to those slides in a little bit here as we think eyebrow performance and we'll get into some of the numbers shortly both the rhythm business and the skull.
Their funds had a very very good 2023, as we think about partnerships. We wanted to extend our global reach with partnerships throughout the throughout the world to create capital solutions to help us deploy more capital and then co invest alongside of our different business lines that we here have here at both the rhythm and the skull.
Their levels page six sculptor.
$33 billion of Au am under management, if you look across the different verticals large credit business large real estate business and a great multi strat funds and we'll talk about that shortly when you look at the clients 70% of the clients have been partners for over a decade.
We've deployed at the scope deliver $200 billion of capital and credit investments, 70% of the E. U N is longer duration.
Michael Nierenberg: The investment leaders in the business for more than 15 years at Sculptor. And then we have one team, one incentive structure, and we want to operate as a team and be really transparent with our LPs and shareholders. Page 7, 2023 performance, and looking back. The credit funds. There are two credit funds. The tactical credit fund, net, 17.9%. The credit opportunities fund returned 8.6%. Great performance in what I would call a very volatile year.
The investment leaders in the business fit over greater than 15 years at this at sculptor and then we have one team one incentive structure and we want to operate as a team and be really transparent with our Lps and shareholders page seven 2023 performance.
And looking back.
The credit funds.
There's two credit fund the tactical credit fund net 17.9% the credit opportunities Fund 8.6, great performance and what I would call. It volatile here the multi strat fund was up 12, 8% net that is an industry one of the industry leaders in the multi strat business on the real estate side.
Michael Nierenberg: The multistrat fund was up 12.8% net. That is one of the industry leaders in the multistrat business. On the real estate side, life-to-date performance, real estate fund three, 20% net. Real estate fund one, 12.6% net.
I'd like to date performance real estate fund, 320% net real estate Fund 112.6, net and then if you look to the right. The performance since inception, the tactical credit fund was up 10.9% net the credit opportunities Fund 8.8, very good returns and then the multi strat as 10 points.
Michael Nierenberg: And then if you look to the right, the performance since inception, the tactical credit fund was up 10.9% net. The credit opportunities fund was 8.8%, very good returns. And then the multistrat was 10.6%.
Michael Nierenberg: So overall, as I pointed out in my opening remarks, we're going to lead with performance, and then we're going to build AUM around performance and, hopefully, grow our business with strategic LPs and partners throughout the world. As we think about the Rhythm approach on page eight, opportunity, innovation, and partnership, I know these are buzzwords.
So overall as I pointed out in my opening remarks, we're going to lead with performance and they were going to build that U M around performance and hopefully grow our business with strategic Lps and partners throughout the world as we think about the rhythm approach on page eight opportunity innovation and partnership I know these are buzzwords.
Michael Nierenberg: We expect our private capital business to continue to grow as there are a number of sectors that have needs for funding and we see, you know, banks pulling back in different areas. Innovation We've been very much on the forefront of creating innovation. For example, keep in mind Rhythm, which was formerly known as New Residential, was born out of a commercial REIT at Fortress back in 2013. Started out as an MSR-only REIT, and then we've grown into this full-scale operating business where we have obviously an asset manager, we have the large REIT, and then we have our operating companies as well. And then there is the partnership. Track records matter. We all know that.
We expect our private credit private capital business to continue to grow as there was a number of sectors that have needs for funding and we see you know.
Banks pulling back in different areas innovation, we've been very much on the forefront of creating innovation keep in mind, our rhythm, which was formally known as new residential was born out of commercial air that'd be commercial REIT at fortress back in 2013 started out as a as an MSR only read and then.
We've grown into this full scale operating business, where we have obviously an asset manager we have the large REIT and then we have our operating companies as well and then partnership track Records matter, we all know that and that's something that we're very very focused on.
Barron: And that's something we're very, very focused on. Barron's here. I'm going to let Barron talk about the mortgage company, and we'll take those slides out on page 9. All right. Good morning.
Hum.
Barents here, what I'm going to let Bert talk about the mortgage company and we will take those slides out it on a on page nine alright, good morning.
Just turning to slide nine.
Barron: Just turning to slide nine, you know, and the focus really is that we had a very good year with industry-leading ROE at 19%. You know, and we view our platform as a differentiated platform and are really structured to continue to succeed in 2024, right? Our Q4 results, which you can see on the chart on the right, the servicing segment had $210 million of income in Q4'23. Obviously, Michael talked a little bit about his gap mark to market on the MSRs of $296.
And the focus really is and we had a very good year with industry, leading Roe of 19%.
And where are we view our platform as a differential differentiated platform and really structured to continue to succeed in 2024 right. Our Q4 results that you see on the chart on the right. There is the servicing segment had a $210 million of our income in <unk>.
Q4, 'twenty three obviously, Michael talked a little bit about as GAAP mark to market on the MSR is a $2 96 in originations you know we have is kind of a baseline you know when basically running the origination business on a breakeven, which we were able to do for all of 2023, our strategic advantage really is our servicing platform.
Barron: And originations, you know, we have as kind of a baseline and basically run the origination business on a break-even, which we were able to do for all of 2023. Our strategic advantage really is our servicing platform. And I'll go a little bit more on that on the next slide. But we also really, very much differentiate ourselves with the origination model and being in all four of the different channels that you see there, retail, wholesale, correspondence, DTC, and our partnership channel. We feel like we're positioned for growth going into 2024 and going forward. Turning to slide 10.
And I'll go a little bit more on that on the next slide but we also really very much differentiate ourselves with the origination model and being one and all four of the different channels that you see there retail wholesale correspondent DTC and our partnership channel, we feel like we're positioned to growth going into 'twenty for them going forward turning to slide 10.
Right when we benchmark our servicing platform you see on the chart on the bottom left.
Barron: When we benchmark our servicing platform, you see, the chart on the bottom left is really how we view our growth, right? So we've had a 39% CAGR over the last six years, and when you include also what we're looking at for the acquisition of the SLS servicing business that Michael talked about, we are almost doubling our third-party fee-based income, which is going from $111 billion at the end of the fourth quarter to $196 billion on a pro forma basis. And Michael said that we're anticipating to close the SLS deal in the first quarter of 24.
Is really how we how we view our growth right. So we've had a 39% CAGR over the last six years and when you include also what we're looking at for the acquisition of the SLS servicing business that Michael talked about are we are almost doubling our third party.
Fee based income, which is going from 111 billion at the end of the fourth quarter to 196 billion on a pro forma basis, and Michael talked that we're anticipating to close the S. L. S deal in the first quarter of 'twenty. Four there are a lot of continued opportunities for us on the servicing sector and whether that's to grow.
Barron: There are a lot of continued opportunities for us in the servicing sector, and whether that's to grow MSRs or even to look at third-party servicing market share, you know, either on an acquisition basis or on an organic basis, we continue to grow with our existing counterparty. Turning to slide 11, which is really just a brief overview of our origination platform, you know, we remain in the retail business. We like the retail business, and we're focused on looking at our retail business as it continues to align to New-Res overall from a strategic perspective. You know, and our focus really there is to think about our servicing portfolio. The retail business has been excellent at recapture with their relationships with their customers, and then how do we marry our retail platform and our distributed retail sales leaders to our servicing portfolio across the entire business?
Ours are even to look at third party servicing market share you know either on a acquisition basis or on an organic basis as we continue to grow with our existing counterparties.
Turning to slide 11, which is really just a brief overview of our origination platform. We remain in the retail business, we like the retail business and we're focused on looking at our retail business as it continues to align to new res overall from a strategic perspective, you know in our focus really.
There is two.
Think about our servicing portfolio the retail business has been excellent at recapture with their relationships with their customers and then how do we marry our retail platform and our distributed retail sales leaders to our servicing portfolio across the entire business our correspondent platform cost effective customer.
Barron: Through our correspondent platform, cost-effective customer acquisition channel, and MSR acquisition channel, I would tell you that we believe that we're best in class in how we position our business, and we're continuing to expand our business into different asset classes as we go downstream with our customers, and our growth into co-issue is going to begin in the first quarter of 2024. Our wholesale platform is really focused on alternative products, and then we have a partnership with Rhythm for our non-agency products, including closed-end seconds and non-QM. Our consumer direct, our centralized sales force, as we continue to basically grow out our platform and utilize that as a defensive strategy across the entire business. And last is really our joint venture platform as we do strategic partnerships with different fintechs, brokerage companies, and different builder partnerships as we can continue to drive relationships and grow our origination business across the entire platform. The last thing to really just talk about is AI on slide 12.
Customer and MSR acquisition channel I would tell you that we believe that we're best in class and how we positioned our business and we're continuing to expand our business into different asset classes. We go downstream with our customers.
And our growth into a co issue is going to begin in the first quarter of 2020 for our wholesale platform is really focused on alternative products.
And then our partnership with rhythm in our non agency or non agency products, including closed end seconds, and non QM or consumer direct our centralized sales force as we continue to basically grow out our platform and utilize that as a defensive strategy across the entire business and last is really our joint venture.
Platform as we do strategic partnerships with different fintech brokerage companies and different build their partnerships as we can continue to drive relationships and grow our origination business across the entire platform.
Last thing to really just talk about is on AI on slide 12, certainly it's been a focus for the entire business.
Barron: Certainly, it's been a focus for the entire business for the mortgage industry, and I do agree that it is going to revolutionize the mortgage industry. We made an announcement yesterday as a strategic partnership with Microsoft, and really, what it talks about is just implementing self-service tools for our employees, and, you know, with respect to policies, procedures, guidelines, and data. And then that way, our employees, salespeople, our processing, and our operations teams can really just focus on their customers and serving our customers at all times. You know, our view on AI across the board is it's going to have significant benefits for our platform as we continue to evaluate different ways to better serve our customers but also become more efficient across the entire operating business. So on that, I'll turn it back to Mike.
Or the mortgage industry and I do agree that it is going to revolutionize the mortgage industry. We made an announcement yesterday is a strategic partnership with Microsoft.
And really what it talks about is just implementing self service tools for our employees and and you know with respect to policies procedures guidelines and data and then that way are our employees salespeople are processing and our operations teams can really just focus on on their customers.
In servicing our customers at all times.
Our view on AI across the board is this going to have significant benefits for our platform as we continue to evaluate different ways.
To better serve our customers, but also become more efficient across the entire operating business.
So on that I'll turn it back to Mike.
Thanks parents. So there's a couple a couple more slides just to get through and then we'll go through Q&A.
Michael Nierenberg: Thanks, Barron. So just a couple more slides to get through, and then we'll go through Q&A. Just a couple minutes on the Genesys business, or a minute on the Genesys business.
I just had a couple of minutes on the Genesis business for a minute on the Genesis business Genesis Genesis capital as a business we acquired from Goldman back in 2021.
Michael Nierenberg: Genesys Capital is a business we acquired from Goldman back in 2021. They make loans to builders and developers. They're all typically first lien mortgages, and attachment points are anywhere from 65 to 70 percent LTV.
They make loans to builders and developers, they're all typically first lien mortgages attachment points are anywhere from 65 to 70 L. T. V's coupon rates can range anywhere from so for plus kind of 400 to 700. So when you look at the portfolio on an unlevered basis.
Michael Nierenberg: Coupon rates can range anywhere from SOFR plus, kind of, 400 to 700. So when you look at the portfolio on an unlevered basis, the coupons on these underlying loans are anywhere from, call it, you know, 8%, 9%, 10% up all the way up to 12%. There are points going in and points going out. I bring this up because it's a great direct lending business, and we think about where we're going to go in the alternative space and think about the potential to grow in the direct lending space, whether it be in this business or other business lines. I think this is a good example of something that we feel we're a good market leader in. The business itself will do something, you know, close to $2.5 billion, we think, in 24 hours. It's been a very good business for us, but banks continue to retreat into that space.
The the coupons on these on these underlying loans are anywhere from call. It you know.
Eight 910% up all the way up to 12 percentage points going into points going out I bring this up because it's a great direct lending business and we think about where we're going to go in the Alt space and think about the potential to grow in the AR in the direct lending space, whether it be in this business or other business lines. I think this is a good example of something.
That we feel we're a good market leader in the business itself will do something.
Close to two and a half billion dollars, we think in 'twenty for its been a very good business for us banks continue to retreat in that space and from an overall income standpoint in a row. It it's been a it's been a good business and we expect to grow that over time, the last slide I'll talk about it as our single family rental business.
Michael Nierenberg: And from an overall income standpoint, an ROE, it's been a good business, and we expect to grow that over time. The last slide I'll talk about is just our single-family rental business. We have about 4,200 homes, pretty consistent with where we were at the end of Q3. We have about $1 billion in homes, and $200 million in capital. We are very small in the context of this arena.
We have about 4200 homes pretty consistent with where we were at the end of Q3.
We have about $1 billion of homes $200 million in capital, we're very small in the context of this arena, we intend to grow this through private funds that'll be like a if you think of it almost like a public private partnership.
Michael Nierenberg: We intend to grow this through private funds. That'll be, if you think of it, almost like a public-private partnership with Rhythm, the public company. The reason we haven't scaled up more in the past couple of years is because we thought rates were going to go up, and they did go up. Cap rates, we thought needed to go higher, and they are higher. So when we look at the opportunity today, we think the opportunities are going to be more likely in the build-to-rent space, as there's clearly a shortage of housing here in the U.S., and we expect to deploy large pools of capital and partner with different builders throughout the U.S. over the course of the next couple of years as we continue to create capital for this business.
With the rhythm that the public company. The reason, we haven't scaled up more so in the past couple of years, just because we thought rates were going to go up and they did go up cap rates, we thought needed to go higher and they are higher than when we look at the opportunity today. We think the opportunities are going to be something we're going to be more likely in the build to rent space as is clearly.
The shortage of housing here in the U S and we expect to hopefully deploy large pools of capital and partner with different builders throughout the U S. Over the course of the next couple of years as we continue to create capital for this business.
Michael Nierenberg: After that, if you look at the segment performance, you can have a look at that separately, and now we'll turn it back to the operator for Q&A. We will now begin the question and answer session. To ask a question, you may press star and then one on your telephone keypad. If you're using a speakerphone, please pick up your handset to press the keys. If at any time your question has been addressed, and you would like to withdraw your question... Please press star then 2.
After that you know if you look at the segment performance you could have a look at that separately.
And now I will turn it back to the operator for Q&A.
We'll now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad, if you're using a speakerphone. Please pick up your handset before pressing the keys.
If at any time. Your question has been addressed and you would like to withdraw your question.
Please press Star then two.
Operator: Once again, it is star, then one, to ask a question. At this time, we will pause momentarily to assemble our roster. The first question comes from Bose George with KBW. Please go ahead. Hey, everyone. Good morning.
Once again it is star then one.
To ask a question.
At this time, we will pause momentarily to assemble our roster.
The first question comes from Bose, George with K B W. Please go ahead.
Hey, Brian Good morning can you talk about your excess capital position.
Bose George: Can you talk about your excess capital position, including a pro forma for the SLS acquisition? Current cash on hand, you know; we announced at the end of Q4 that we were roughly $1.9 billion. Today I think our cash and liquidity is something about $1.7 billion, and so that's kind of where we stand. We expect the SLS acquisition to fund, most likely in early March. Yes, and post SLS acquisition, we expect to be at around $1.3 and $1.4 billion of liquidity.
Pro forma for the SLS acquisition.
Current cash on hand, you know, we we announced at the end of Q4 were roughly $1.9 billion today, I think our cash and liquidity is something about one 7 billion.
And so that so that's kind of where we stand we expect the SLS.
Acquisition to fun, most likely in a in a really early March yes, and post ex SLS acquisition, we expect us to be at around 1.3, and $1 4 billion of liquidity.
Michael Nierenberg: I mean, is there a good way to think of that sort of... cash available for deployment versus, you know, because obviously you'd have to keep a certain level of liquidity at all times? So, you know, as things come up like how much capital they have available for deployment posts that, Yeah, it's approximately 400 million Bose. You know, one of the things that we set out over the course of the past couple years is to carry excess cash and liquidity on our balance sheet. We've done that before.
Okay. I mean is there a good way to think of that as sort of.
Cash available for deployment versus.
Obviously, you have to keep a certain level of liquidity at all times. So I was just.
As things come up like how much capital do you have available for deployment post that acquisition.
Yeah, it's approximately 400 million Boes.
You know what are the things that we set out over the course of the past couple of years is to carry excess cash and liquidity during our balance sheet. We've done that we really haven't hit the capital markets since 2020.
Michael Nierenberg: We really haven't hit the capital market since 2020. Clearly, we're monitoring some, you know, in the mortgage company world, for example, some of the peers that have been out there raising capital in the high yield markets. So we'll continue to, you know, evaluate all sources of capital. And then also keep in mind, you know, as we grow our alternative space, the teams are on the road, you know, and having discussions with various LPs around capital formation. So I think you could expect 2024 to be a year of some capital formation, you know, at the Rhythm level, as well as at some of the other operating companies, as well as Sculptor. Okay, great. Thanks. Actually, another quick one: just what was the final goodwill number for Sculpey?
Clearly were monitoring some in the mortgage company will for example, some of the peers that have been out there raising capital in the high yield markets. So we'll continue to evaluate all sources of capital and then also keep in mind you know as we grow our old space. The teams are on the road.
And having discussions with various L PS in.
Around capital formation. So I think you could expect 2024 to be a year of some capital formation you know at the Red at the rhythm level as well as at some of the.
The other operating companies slate as well as sculptor.
Okay, great. Thanks actually another quick one just what was the final goodwill number for Sculpsure.
Michael Nierenberg: A Goodwill intangible is approximately $345 million. 325. Okay, great. Thanks. Thanks, Bose. The next question comes from Eric Hagen with BTI. Please go ahead. Hey, good morning.
Our goodwill and intangibles of approximately 325 million.
325, okay, great. Thanks.
Thanks Bose.
The next question comes from Eric Hagen with BTG. Please go ahead.
Eric Hagen: I hope we're doing well. A couple of questions around reCAPTCHA in the portfolio, you know, just as a big correspondent letter. I mean, how effective do you expect to be with reCAPTCHA in that channel, including the MSRs that you bought from SLS. Is there sort of a recapture estimate that you're using as you bring that on board? I'll let Barron take it in a sec.
Hey, good morning, Hope Youre doing well a couple of questions around recapture in the portfolio. You know just as a big correspondent letter out I mean, how effective do you expect to be with recapture in that channel.
The MSR is that you bought from SLS is there sort of a recapture estimate that you're using.
As you bring that on board.
I'll, let Barry take it in a second I think you know when you look at the recapture business.
Michael Nierenberg: I think, you know, when you look at the recapture business, whether it be us or anybody else in the marketplace, you have to look at apples to apples. Ninety-nine percent of our portfolio is out of the money, including the SLS stuff from a recapture standpoint or out of the money from a refinancing standpoint, I should say. When you think historically in the mortgage business, refi, and recapture, depending upon the product type, Ginnie Mae or HUD-type loans are typically easier because they're easier to refinance or recapture.
Of whether it be us or anybody else in the marketplace you have to look at apples to apples, 99% of our portfolio was added the money, including the S. L S stuff for them from a recapture.
Standpoint, or added the money from a refinancing standpoint, I should say when you think historically in the mortgage business refi recapture depending upon the product type Ginnie Mae or HUD type loans are typically easier because theyre easier to refinance or recapture and you've seen that with some of our peers in the marketplace over the years.
Michael Nierenberg: And you've seen that with some of our peers in the marketplace over the years. So those numbers are going to be higher. On the Fannie and Freddie products, typically, those recapture numbers are a little bit lower. The cohorts of recapture today are significantly out of the money just based on where rates were and where they are now.
So those numbers are going to be higher on the Fannie Freddie products typically those those recapture numbers are a little bit lower the cohorts of recapture today are significantly added the money just based on where rates were and where they are now so when we think about recapture I think you could assume that our reefer.
Michael Nierenberg: So when we think about recapture, I think you could assume that our refi recapture numbers are going to be north of 50 percent. And I think, you know, purchase recapture is a much more difficult thing. It's something that we continue to work on. Big, you know, we have a huge group of folks in our data business, as well as the servicing folks working with the origination folks. But I think overall you're going to see refi recapture in a normalized market, probably with a six handle, would be my guess. And I think that's consistent with where the industry has been and know that because we helped form some of these companies in my prior life and our previous life. And I think you'll see higher numbers on the Ginnie Mae products. I don't know if there's anything you want to add there. No.
The recapture numbers are going to be north of 50% and I think you know purchase recapture is a much more difficult thing. It's something that we continue to work on were huge you know we have a huge group of folks in our data business as well as the the servicing folks are working with the origination folks, but I think overall, you're going to see refinery.
Recapture in a normalized market probably with a six handle would be my guess and I think that's consistent.
With where the industry has been and knowing that because we helped form some of these companies and in my prior life in our prior life and I think you'll see on the Ginnie Mae product a higher numbers that bearing out I don't know if there's anything you want to add there.
No that's right.
Michael Nierenberg: Okay, great. Hey, you mentioned some unsecured debt being raised in the sector and possibly looking into some yourself. Maybe you can flesh out how you think about your appetite there. And do you feel like the capital that's being raised by some of the other servicers will drive.................. kind of change the competitive dynamic in the market in any way? Yeah, I'm not. You know, I think we all do what we do, and we're all respectful of each other.
Okay. Great. How are you you mentioned some unsecured debt being raised in the sector and possibly looking into some unsecured yourself, maybe you can flesh out how you think about you know your appetite there.
And do you feel like the capital that's being raised by some of the other Servicers will drive.
Hum.
Kind of change the competitive dynamic in the market in any way.
Yeah, I'm not you know I think we all do what we do you know well a respectful of each other we've been we you know the whether it be cooper, whether it be painting and some of the other folks who have all been at it in a long time, when we look at the high yield market and we look at where were financed so for today is five and a quarter five and a half. So if you think about your MSR finance.
Michael Nierenberg: We've been, you know, whether it be Cooper, whether it be Penny and some of the other folks, we've all been at it a long time. When we look at the high yield market and we look at where we're financed, so for today, it's five and a quarter, five and a half. So if you think about your MSR financing, let's assume it's, whatever, 250 to 300 over, so that's give or take 8%. If we could issue high-yield, unsecured debt in the public markets, we're going to explore that heavily. So the short answer to your question is we're hungry. Got it.
Saying, let's assume it's whatever $2 50 to 300 over so that's give or take 8% and if we could issue high yield unsecured debt in the AR in the public markets, we're going to explore that heavily so the short answer to your question is we're hungry.
Got it.
Eric Hagen: Thank you guys very much. Thanks, Eric. The next question comes from Doug Harter with UBS; please go ahead. Thanks, Michael.
Thank you guys very much.
Thanks, Eric.
Next question comes from Doug Harter with UBS. Please go ahead.
Thanks, Michael you said that you were kind of closer to home.
Doug Harter: You said that you're kind of closer to home on hedging for MSRs. Obviously, it's continued to be volatile in rates. If you could just, you know, give us a little update as to kind of when you added those hedges and how they've performed in the first quarter. Sure, so I think if you look at Q... The tenure closed, I think, at like 388 or 389, something like that, so you had a massive rally between Q3 and Q4. Our gap result reflected our write-down of our MSR book, which was significantly higher than the 88 million that we reported as a kind of gap loss, so it's really an MSR mark. When I look at, when you think about that 88 versus, I think, the total mark we took it down was 280 or something like that, which I think is probably a little bit higher than others in the industry.
On hedging for Msr's, obviously, it's been continued to be volatile in rates. If you could just give us a little update as to kind of win when you added those hedges and kind of.
How they performed in the first quarter.
Sure. So I think if you look at Q4, the 10 year closed I think like 388 or 389, something like that so you had a massive rally between Q3 and Q4, our GAAP result reflected or or write down of our MSR book, which was significantly higher.
Then the 88 million that we reported in in in kind of the GAAP loss. So.
So it's really an MSR mark.
When I look at when you think about that that 88 versus I think the total Mark we took it down was 280 or something like that which I think is probably a little bit higher than others in the industry.
Michael Nierenberg: That 280 versus the 88 shows you that when we look at the broad scale of our business, we have a lot of other assets from a duration perspective that were longer. When you look at Q1, and Nick, you should just, if you could just dust off what we think the P&L is as of now. When we look at Q1 from a hedging perspective, we have rates, we have mortgages that are hedging out our MSR book, and what I said in my opening remarks, whereas as close to home as we've been in a few years, that is because we have billions and billions of dollars of hedges versus our MSR asset. For the quarter, you could assume, and this reflects the hedges, book value is probably, where we are now is north of $12 a share, so that reflects the gains that you're going to see in both the MSR book as well as what we're seeing in our hedges. Great.
At $2 80 versus the 88 shows you that when we look at the broad scale of our business, we have a lot of.
Other assets from a duration perspective that were longer when you look at Q1 and Nick you should just if you could just desktop what we think the P&L is as of now when we look at Q1 from a hedging perspective, we have rates. We have mortgages that are hedging out our MSR book as you know and when I, what I said in my open.
And remarks, whereas as close to home as we've been in a few years that is because we have billions and billions of dollars of hedges versus our RMS error at our MSR asset for the for the quarter you could assume in this reflects that the hedge is book value is probably you know where we are now.
It is north of $12 a share so that reflects the gains that you're going to see in both the MSR book as well as what we're seeing in our hedges.
Great and I guess, what's your expectation kind of still trying to.
Michael Nierenberg: And I guess, would your expectation be to kind of still try to, from this point, try to run pretty close to home, or, you know, given the moving rates, do you adjust that? You know, kind of, what are you thinking about? I think what I would say from a market perspective, I think the past couple years from an overall market standpoint, listening to the Fed was why we were set up to be on the short side. Listening to the Fed now, there's obviously a ton of Fed speak about their desire to lower rates, even though when you look at the economy or you go out for dinner here in New York City or anywhere else, things feel pretty good. When you look at the probability of rate cuts, we think that March is off the table barring some unforeseen geopolitical event or something else. June right now, when you look at the probability of a rate cut, is that 90 percent? So we're not going to fight the Fed.
From this point try to run pretty close to home or you know given the move in rates do you address that you know kind of how are you thinking about great risk at this point.
I think.
Well, what I would say from a market perspective, I thought the pass or we felt the past couple of years from a overall market standpoint, you know listening to the fed was why we were set up to be on the short side listening to the fed now there's obviously, there's a ton of fed speak about their desire to lower re.
<unk>, even though when you look at the economy or you go out for dinner here in New York City or anywhere else things feel pretty good when you look at the probability rate cuts. We think set we think March is off the table barring some.
Unforeseen geopolitical event or something else June right now when you look at the probability of a rate cut is at 90%. So we're not going to fight the fed we will be closer to home everywhere from a duration standpoint, because again, we won't fight the fed and we we think from an age standpoint it.
Michael Nierenberg: We will be closer to home everywhere from a duration standpoint because, again, we won't fight the Fed. And we think from an edge standpoint, you're going to see a lot more volatility in the markets this year than or going into the end of Q4 as well as into this year versus what we've seen in the past couple of years. In the past couple of years, it was straight up.
See a lot more volatility in the markets this year than them or going into the end of Q4 as well as into this year versus what we've seen in the past couple of years past couple of years. It was straight up now it's it's a little bit harder to predict so we're gonna be close to home.
Kevin J. Barker: Now it's a little bit harder to predict. So we're going to be close to home. Great. Thanks, Doug. The next question comes from Kevin Barker with Piper Standler. Please go ahead.
Great. Thank you Michael.
Thanks, Doug.
The next question comes from Kevin Barker with Piper Sandler. Please go ahead.
Kevin J. Barker: Thank you for taking my questions. Just in regards to the news segment, are you viewing... go forward, or do you see some of the different segments?
Thanks for taking my questions just regards to the new segment information are you viewing. These four segments is basically the way you're going to manage the business on a go forward basis, where do you see some of the different segments I'm interacting with each other whether it's you know asset management.
Michael Nierenberg: Interacting with each other, whether it's asset management, selling the Investment Portfolio, or handling. How should we think about... Rhythm as a whole?
Handling the investment portfolio or handling the mortgage loans receivable, how should we think about rhythm.
Rhythm as a whole just given these different segments going forward.
Michael Nierenberg: Kevin, first, thank you for noticing the new segment. And the answer to your question is yes. It's the way we anticipate managing the business on a go-forward basis. So, as you have noticed, we have it set up: the mortgage company, the Genesys business, the asset management business, and the investment portfolio that sits at the reed. To answer your second question, we do envision some asset management activity occurring between the segments as we move forward. And so when you're moving forward, there could be different structures, together. DPS, for C-Corp. How do you envision that playing out? and give any updates.
Hey, Kevin well first thank you for noticing the new segments.
And the answer to your question is yes.
It's the way, we anticipate managing the business on a go forward basis, So as you.
You have noticed we havent set up mortgage company Genesis business asset management business and the investment portfolio that sits at the REIT.
To answer your second question, we do envision some asset management activity occurring between the segment as we move forward.
And so when you're moving forward right there could be different structures, whether it's a read them the asset management business or C Corp. Within this.
Do you envision that playing out.
You know and can you give any updates on timing and how you think about structurally rhythm and what it looks it looks like whether it's six or 12 months down the road.
Michael Nierenberg: structurally. Hey Kevin, you know, it's going to, I think our, not that I think I know, our business will continue to evolve. We closed Sculptor at the end of, I think at the end of November.
Hey, Kevin I, you know I, it's going to I think R. R.
Michael Nierenberg: The way we want to simplify our story and our structure, and that's why I think Nick created these different columns or verticals, you know, in our financial reporting. Sculptor, you know, there's obviously a huge desire, one, to put up great results, number two, to grow AUM. That is going to be our asset management business. The REIT itself currently sits as a REIT.
Not that I think I know our business will continue to evolve we quote sculptor at the end of Ah I think at the end of November the way, we want to simplify our story and our structure and that's why I think Nick created these these different columns of verticals in our financial reporting sculptor you know they're there.
Obviously, a huge desire one to put up great results number two to grow a U M that is going to be our asset management business. The REIT itself currently sits.
As as a REIT, what you could expect from us over time, and I think we've been pretty vocal about that to become I think a world class asset manager, we need to continue to simplify our story, we need to raise funds. The REIT is going to be the read and it's no different than some of the larger players in the in the marketplace.
Michael Nierenberg: What you can expect from us over time, and I think we've been pretty vocal about that, to become, I think, a world-class asset manager, we need to continue to simplify our story. We need to raise funds. The REIT's going to be the REIT, and it's no different than some of the larger players in the marketplace, whether it be Blackstone or Ares or folks like that. I do think, however, when we look at our pipeline of opportunity in everything that we do, things are going to continue to change for sure. And our sole, not our sole goal, but our goal is to grow our asset management business and the fees associated with that because that's going to drive a higher terminal value for our underlying business.
Whether it would be blackstone, or aries or or or folks like that I do think you know when we look at our pipeline of opportunity in.
Everything that we do things, we're going to continue to change for sure and <unk> and are sold not our sole goal, but our goal is to grow our asset management business and the fees associated with that because that's going to drive a higher terminal value on our underlying business.
Michael Nierenberg: But again, we need to lead with performance. And one of the reasons I wanted to highlight in our deck the performance, both at the sculptor level and at the rhythm level, because the results are terrific and we have, you know, what I would call really good investment professionals across both platforms. Things could come together over time. But, you know, for now, it's onward and upward.
But again, we need to lead with the performance in one of the reasons I wanted to highlight.
In our deck that performance both at the sculptor level and the rhythm level because the results are terrific and we have you know what I would call really good investment professionals across both platforms.
Things could come together over time, but for now it's onward and upward so things will change, but I think you could assume that will be something closer to you know a we're not gonna be Blackstone, obviously, but to a blackstone type structure and Ares type structure.
Michael Nierenberg: So things will change, but I think you could assume that we'll be something closer to, you know, we're not going to be Blackstone, obviously, but to a Blackstone-type structure or an Ares-type structure, for all that. Just to follow up with Barron, a little bit of momentum on growing servicing fee revenue. Obviously, there are a lot of headwinds on the mortgage side. As you move forward to 24, which originates... a greater share of the overall revenue, a little bit of pickup and origination volume. I mean, going into 24, I think stability in rates is a benefit, right, across the board. There is the, I use this term, the lock-in effect for consumers that have those low interest rates, right, so for them to sell a home today, you know, it's more challenging, you know, from an affordability perspective, but we expect more activity in the mortgage sector. I do think it's going to be slower than maybe what certain people hope, but I do believe that 24 is definitely going to be a better year from a mortgage production standpoint, you know, overall.
Okay. Thank.
Thank you for all that detail and then just a follow up with burn you know, there's quite a bit of momentum on growing servicing fee revenue.
Obviously, there's a lot of headwinds on the mortgage side, but as you move forward to 'twenty four mm do you anticipate them.
Mortgage origination revenue.
They have a greater share of the overall revenue mix.
Just given maybe a little bit of pickup in origination volume.
Do you anticipate you know servicing revenues.
We needed to be the main driver. Thank you.
I mean going into 'twenty, four I think stability in rates as a benefit right across the board. The there is a I use this term the locked in effect for consumers that have those low interest rates right. So for them to sell a home today.
You know is more challenging you know from an affordability perspective, but we expect more activity in the mortgage sector I do think it's going to be slower than maybe what certain people hope, but I do believe that 'twenty four is definitely going to be a better year from mortgage production you know.
Overall, you know our focus is certainly ongoing from <unk>.
Barron: You know, our focus is certainly ongoing from, you know, expense production across the board, certainly on the origination side, but also on the servicing side, to make sure that we run as efficiently as possible. I talked a little bit about AI as well, but, you know, we still look at the business very opportunistically across each one of our different verticals, the different channels, from an opportunistic perspective and, you know, even from the servicing perspective that Michael talked about. But I do think that you're going to see a better year in origination. And we're starting to see that now, right? That's right. The first quarter came in already better than, you know, certainly better than December. I was not surprised.
Expense reduction across the board certainly on the origination side, but also on.
The servicing side to make sure that we run as efficient as possible with talked a little bit about about AI.
As well, but you know we still look at the business very opportunistically across each one of our different verticals. The different channels, you know from an opportunistic perspective, and even from the servicing perspective that Michael talked about.
But I do think that youre going to see a better year in originations in 2000 and.
And we're starting to see that now right, that's right and I think Warner came in already.
Better than certainly better than December is not surprised.
Barron: But, you know, we're certainly seeing momentum coming into the months as we get closer. And the other thing, Kevin, is when you look at the platform on all the different origination businesses, for example, we just, you know, we just made some strategic changes in the retail platform, taking expenses out and trying to align that business with the goals of the company, which, quite frankly, is profitability. The other thing is, you know, there's obviously the variability in where you produce your MSRs and how you think about gain on sale there. So, you know, there are levers that you could pull that would obviously drive higher earnings in the origination segment versus low earnings in the servicing segment, for all. The next question comes from Stephen Laws with Raymond James. Please go ahead. Hi, good morning.
But we're certainly seeing momentum coming into.
The months as we get closer to spring and the other thing Kevin as you know when you look at the platform on all the different origination businesses. For example, we just you know we just made some strategic changes in the retail platform, taking expenses out and trying to align that business with the with the goals of the company, which quite frankly is profitability.
The other thing is you know there is obviously the variability in on where you produce your MSR is and how you think about gain on sale. There. So you know there there are there levers that you could pull that would obviously drive higher earnings in the origination segment versus low earnings in the servicing segment.
Alright, Thank you for all the color I appreciate it.
Thanks.
Next question comes from Stephen Laws with Raymond James. Please go ahead.
Hi, Good morning, Michael I wanted to talk about you know growth organic versus can you know additional acquisitions, specifically with sculptor our seafood asset management business as well as maybe the retail channel.
Stephen Laws: Michael, you know, I wanted to talk about, you know, growth, organic versus, you know, additional acquisitions, specifically with, you know, Sculptor, or, excuse me, the asset management business, as well as maybe the retail channel. You know, do you? I saw Sculptor, I think, is out raising, I believe, a $6 billion fund for CRE. You know, do you have any targets for AUM growth, as far as organically? Would you look at adding, you know, maybe smaller asset managers and complementing what you've already got in place? And same with retail, seems like, I believe, market share maybe made you 19th, but attractive margins there and some compelling pieces of that business. Is that something you may look to acquire as well?
Do you know I saw scorecard thinks out reasonably to $6 billion fund for CRE.
Do you have any targets on AUM growth as far as organically would you look at adding you know maybe smaller asset managers and complementing what you've already got in place.
Same with retail seems like Oh, I believe market share, maybe maybe my team, but but attractive margins there and some compelling pieces of that business is that something you may look to acquire as well.
Michael Nierenberg: So first, on the sculptor side, yeah, everybody's out meeting with clients and LPs around the platform, which is wonderful. The real estate guys have a fund they're out marketing. You know, it's I believe it's, you know, something around a $3 billion fund that could grow over time. The credit businesses continue to grow, look to grow the funds there. You're not going to grow.
So first on the sculptor side.
Yeah. The the you know everybody's out meeting with clients and Lps around the platform, which is wonderful.
The real estate guys have a fun they're out marketing you know, it's a I believe it's something around a $3 billion fund that that could that could grow overtime. The credit businesses continue to to to grow.
Look to grow the funds there.
You're not going to grow I mean, the noise is gone right. So we're moving forward the whatever it was in the past at the organization is is is out Don moving forward. So we're highly confident and really excited about the prospects of you.
Michael Nierenberg: I mean, the noise is gone, right? So we're moving forward. Whatever was in the past at the organization is out, gone, and we're highly confident and really excited about the prospects of growing AUM, but more on the FRE side. But you have to lead with performance.
You know growing a U N, but more you know more in the F. R. E side, but you have to lead with performance. So in what I said in the opening remarks and this goes for every any one of the businesses that we have where we are a fiduciary of capital whether it be L. P 's or public shareholders first and foremost we need to drive.
Michael Nierenberg: And as I said in my opening remarks, and this goes for any one of the businesses that we have, we are fiduciaries of capital, whether it be LPs or public shareholders. First and foremost, we need to drive good earnings there and good returns. And when you look at 23 and look prior to that, both at the sculptor level, as well as at the Rhythm level, we've delivered there. So that's going to help us grow AUM. I don't have a specific target.
Good earnings there and good returns and when you look at 'twenty, three and looking prior to that both at the sculptor level as well as at the rhythm level. We've delivered there. So that's going to help us grow AUM I don't have a specific target I'd love to tell you. It's you know you hear that the bigger players talk about how much dry powder and how big they are a L. M is yeah, we'd like to we'd like.
Michael Nierenberg: I'd love to tell you about it. You hear the bigger players talk about how much dry powder and how big their AUM is. Yeah, we'd like to be there. We're just not right now, but I think over time, we're going to grow those businesses. We could grow strategically through some acquisitions, which we look at acquisitions for, I would say, every single day. So I think you can expect more acquisitions as we go forward in the asset management space. You know, the teams we currently have in place are world-class.
B there, we're just not right now, but I think over time, we're going to grow those businesses, we could grow strategically through some acquisitions, which we look at acquisitions I would say every single day. So I think you could expect more acquisitions as we go forward in the asset management space.
The the teams we currently have in place our World Class. If you look at the you know the results at the asset management level.
Michael Nierenberg: If you look at the results at the asset management level and here at the Rhythm level, you know, I'd put us up against anybody, candidly, and this is not being disparaging against anyone. When you look at the retail side, you know, retail is a hard business. We, you know, we've taken some pretty aggressive measures at the beginning of the year to align the production side with the proper P&L that we expect out of the business. And when you look at the overall business with SLS, the third-party business, as well as what we have here, between both the Rhythm level and the New Res level, I think, including excess MSRs that we have, I think we have something about $850 billion or some number We have a lot of customers that we should be able to drive origination volumes through. If something was a giveaway on the retail side that we thought we could actually make money on, we'd have a hard look at it. But I think we're pretty happy where we are now.
And here at the rhythm level, you know I would put us up against anybody candidly and this is not being disparaging against anyone when you look at the retail side you know retailers are hard business. We you know we've taken some pretty aggressive measures here beginning of the year to align the production side with.
Proper P&L that we expect added the business and when you look at the overall business with S. L. S. A the third party business as well as what we have here.
Between both the rhythm level and the new res level, I think and including excess MSR is that we have I think we have something about 850 billion or some some number like that of of MSR. So we have a lot of customers that we should be able to drive origination volumes through if something was a give away from me on the retail side that we felt we could ask.
We make money.
With we'd have a hard look at it but I think now we're pretty happy where we are we are we are actively recruiting salespeople because we do think mortgage origination will pick up over time.
Michael Nierenberg: We are actively recruiting salespeople because we do think mortgage origination will pick up over time. Great, and as one follow-up, you know, given the scope of the acquisition closed and we've got SLS closing likely this quarter, you know, can you talk about the expense side, you know, any synergies you think can work out as we move through the year? Do you feel like the operating expenses are pretty accurate or, sorry, in study state as we move forward? Kind of talk about the option potential there to drive some higher ROEs.
Great and then just one follow up you know given the Sculpsure acquisition close we got asked the last closing likely this quarter.
Talk about the expense side, you know any synergies.
You think can can work out as we move through the year or do you feel like the operating expenses are pretty accurate or sorry study state as we've empowered kinda talk about option.
They are there to drive some higher roe's. Thanks.
Stephen Laws: On the SLS side, we haven't closed on that yet, so what I would say is there's going to be significant synergies and savings, I think, around that line of business. We're looking at other platforms that I think are going to be able to add revenue to the business, and same, those should do, those should, you know, if we're successful, that will add additional synergies and create more expense At the Sculptor level, you know, Sculptor is its own thing from an asset management standpoint.
On the SLS side, we haven't closed yet so what I would say is there's going to be significant synergies and saves I think around that line of business.
We're looking at other platforms that I think we're gonna be able to add revenue to the business and seen those those should do those should if you know if we're successful that that will add additional synergies.
Synergies and create more expense saves at the sculptor level sculptors its own thing from an asset management standpoint, it's.
Michael Nierenberg: It's, you know, as we go forward, and we could create synergies between, for example, shared services. You know, when I look at the Fortress model, and that's where we came from, we had a good shared service model, and I think we'll continue to look at things around that. The investment teams, though, are going to be the investment teams. Great. Thanks for the comments, everyone.
As we go forward and we can create synergies between for example shared services when I look at the fortress model and that's where we came from we had a good shared service model and I think we'll continue to look at things around that are the investment teams, though we're gonna be the investment teams.
Great. Thanks for the comments as well.
Jay McCandless: Thank you. The next question comes from Jay McCandless with Wedbush. Please go ahead. Good morning.
Thank you.
The next question comes from Jay Mccanless with Wedbush. Please go ahead.
Hey, good morning, Thanks for taking my questions. The first question, Michael you talked about there being <unk>.
Michael Nierenberg: Thanks for taking my questions. The first question, Michael, you talked about there being, and gaps in CRE gap funding. I guess where do you see the opportunities right now for Rhythm to be involved in? If rates stay at these levels and don't go down until later in the year, how do those opportunities evolve? So I think there's a ton of opportunities. I mean, the office is obviously for sale, for example.
Gaps in CRE got funding, I guess, where where do you see the opportunities right now for rhythm to be involved in and if rates stay at these levels and don't go down until later in the year, how do those opportunities of ball.
So you know there there is.
I think there's a ton of opportunities I mean office is obviously for sale. For example, we've looked at a number of different opportunities in office because most folks are shying away from that you know what.
Michael Nierenberg: We've looked at a number of different opportunities in office because most folks are shying away from that. When we look at the real estate market today, what I would say is we equate it to some of the best investing environments we've seen, quite frankly, in our careers. And this takes us back to, you know, I'm not sure everybody on this call was born in the early 90s, which were the RTC days when the government was liquidating all these thrift stores.
When we look at the real estate market today, what I would say is we equate it to somebody you know the best investing environments, we've seen in quite frankly in our careers and this takes us back to.
You know I'm not sure everybody on this call is boring, but the early ninety's, which where the RTC days when the government was liquidating all these thrifts those are great opportunities to deploy capital.
Michael Nierenberg: Those were great opportunities to deploy capital. You look at the great financial, you look at the dot-com crisis. You look at where we are today with rates, you know, and, and, as a result of COVID and people not being in the office, there are great, great opportunities. As the banks write some of their assets down, I think what you're going to find over time is once they write them down, they will look to part with them off their balance sheets as long as they're not strategic. We've done some investing in office space recently around the, around the debt side, where we looked at, for example, a deal that was originated a few years back with it, with a total market cap of about $2.4 billion. And we just, we acquired a pool of debt with a, you know, the first dollar of loss said roughly $900 million. So if you think about that 2.4 to 9, you know, $900 million stuffed down significantly.
Look at them the great financial crisis, and when you look at the Dotcom crisis, you look at where we are today with rates you know and you know as a result of Covid and people not being in the office there is great great opportunities as the banks right.
Some of their assets down I think what you're going to find over time is once they write them down they would look to part with them off their balance sheet as long as they're not strategic we've done some investing in the office space recently around the around the debt side, where we've looked at for example, a deal that was originated a few years back with it.
I think a total market cap of about $2 $4 billion and we just are we acquired a pool of debt with a you know the first dollar of law said roughly $900 million. So if you think about that 2.4 to nine you know $900 million stuffs down significantly and as long as you think you have the expertise down under.
Michael Nierenberg: And as long as you think you have the expertise to underwrite it, we're going to, we're going to deploy capital there. The real estate guys on the sculpture side are out, you know, doing their thing around both equity and debt. And again, the story is the same.
It we're going to we're going to deploy capital there the real estate guys on the sculptor side, they're out you know doing their thing around both equity and debt and again. The story is the same. It's you know we're in one of the better real estate investing environments that we've seen in our careers. There is a need for funding.
Michael Nierenberg: It's, you know, we're in one of the better real estate investing environments that we've seen in our careers. There is a need for funding because whether it be, you know, some of the traditional real estate players who have a fair amount of legacy commercial real estate or are going to be less aggressive in certain areas, or when you look at the banks who are going to be less aggressive, I think it puts us in a great position between both rhythm and sculptor to take advantage of these opportunities. So if you could take that a step further, and when you're thinking about acquisitions and the alternative asset space, what makes sense? What are you guys taking an eye at or taking a look at right now? Anything that could be synergistic with our existing business, which we think, you know, we have the pieces in place to win at both the sculptor and the rhythm level. We don't need anything else.
Because whether it be you know some of the traditional real estate players, who who have a fair amount of legacy commercial real estate or are going to be less aggressive in certain areas or when you look at the banks, who are going to be less aggressive I think it puts us in a great place between both rhythm and sculptor could take advantage of these opportunities.
So if you could take that a step further and when you're thinking about acquisitions in the alternative asset space. What makes sense. What are you guys thinking.
And I are taking a look at right now.
Anything that could be synergistic with our existing business.
That we think you know we have the pieces in place to win at both the sculptor and rhythm level, we don't need anything else I think part of this is as we think about real earnings for shareholders.
Michael Nierenberg: I think part of this is that as we think about real earnings for shareholders, you know, when you look at the way we trade, quite frankly, I think that we trade poorly from an equity perspective. If we could change the narrative where we trade more like an alternative asset manager and you pick up several multiples versus EBITDA, I think we're going to be, you know. I think the opportunity for us and our shareholders and LPs is a great one. So that's how we're thinking about it. But you know, the Sculptor real estate guys are world class, the credit guys are world class, the master fund, and you know, and Jimmy and that team. I mean, we have all the pieces in place. You know, at the rhythm level, I'm sitting here, and Charles is here with me. I think we all punch above our weight.
You know when you look at the way, we trade quite frankly, I think that we traded poorly from an equity perspective, if we could change the narrative, where we trade more like an alternative asset manager and you pick up several multiples versus EBITDA I think we're gonna be.
The the opportunity for us and our shareholders in an L. P is a great one.
So that's how we're thinking about it but you know the sculptor real estate guys are world class. The credit guys are world class, The Master Fund and you know and Jimmy and that team I mean, we have all the pieces in place.
Level I'm sitting Charles is here with me I think we all punch above our weight, we have a world class team and we don't really need anything else. It is more what can what can be accretive for.
Michael Nierenberg: We have a world-class team, and we don't really need anything else. It's just more of what can be accretive for our equity holders and the business. Thank you, Michael.
Our equity holders in the business.
Okay. Thank you Michael and one more if I may if rates do stay high. This year are there acquisition opportunities you think to build out the Genesis platform I mean anything you're seeing that looks interesting there.
Jay McCandless: If rates do stay high this year, are there acquisition opportunities, you think, to build out the Genesis platform? Anything you're seeing that looks interesting there? Yeah, I think scale wins in those business lines. I mentioned earlier, this year should be, give or take, $2.5 billion or so in our origination business. I do think there will be platforms and or people, honestly.
Yeah, I think scale wins in those business lines are I mentioned earlier, you know this year should be give or take two and a half a billion dollars or so in our origination business I do think there are there will be platforms <unk> people honestly, we don't need a you don't need a lending.
Michael Nierenberg: You don't need a lending platform if you have the platform; you can acquire teams of people, which I know we're currently looking to do right now. Okay, sounds great, thank you. Thank you. The next question comes from Giuliano Bologna with Compass Point. Please go ahead. Good morning.
For them. If you have the platform if you could acquire teams of people, which I know you know we're currently looking at looking to do right now.
Okay sounds great. Thank you.
Thank you.
The next question comes from Giuliano Bologna with Compass point. Please go ahead.
Giuliano Bologna: Congratulations on the good results this quarter. One thing I'm curious about asking you, and this might be, hopefully not too convoluted, is, you know, I'm curious if there's been, you know, progress on raising MSR funds. And I think we all know that there's a large opportunity for both deals out there. And I'm curious how you think about, you know, the growth of the mortgage company and the MSRs. I realize the SLS deal is still there, and you know, hopefully, it will close soon.
Good morning, and congrats on the good results of sooner.
One thing I'm curious what else news.
Hopefully not too convoluted as you know I'm curious if there has been progress on raising MSR funds.
I think we all know that there's a large opportunity for bulk deals out there and I'm curious how you think about the growth of the mortgage company in the MSR is I realize you have Celeste yours. So there and you know hopefully closing soon but I'm curious how you think about allocating those to your balance sheet versus you know potential fund vehicles at this point.
Michael Nierenberg: But I'm curious how you think about, you know, allocating those to your balance sheet versus, you know, potential fund vehicles. You know, there's constant dialogue between what I would call the asset management business under Sculptor and at the Rhythm level as we think about the balance sheet and balance sheet investing. I brought up the SFR funds, for example, that were likely going to grow that business away from the public company. I think there was an article about one of the larger asset managers raising money for a billion-dollar fund around the built to rent space.
You know there there is constant dialogue between what I would call the asset management business under sculptor and at the rhythm level as we think about the balance sheet and balance sheet investing I brought up the SFO. Our funds for example that will likely going to.
Grow that business away from the public company I think there was an article about.
You know a large one of the larger asset managers raising money a $1 billion fund around the build to rent space, we intend to do something similar there on the MSR side, we will we continue to evaluate MSR funds candidly I mean, you know when you look at where you create these they're created anywhere from an 8% to 10% Unlevered.
Michael Nierenberg: We intend to do something similar there. On the MSR side, we will, you know, we continue to evaluate MSR funds candidly. I mean, you know, when you look at where you create these, they generate anywhere from an 8 to 10% unlevered type of yield.
Type of yields so you got to make sure that resonates with folks there are P. You need to have the operating business and have a great recapture slasher origination business in my in our mind to make this work we've had these discussions with a number of folks.
Michael Nierenberg: So you got to make sure that resonates with folks. You need to have the operating business and have a great recapture slash origination business in our minds to make this work. You know, we've had these discussions with a number of people. You know, I've been overseas four times in the past year.
You know I've been overseas four times in the past year.
Michael Nierenberg: So we've had a ton of these discussions, and we'll continue to do so, but it has to work within our business. The last thing I'll point out, you know, when you look at the Sculptor business, we have credit funds. The credit funds have structured products in them.
So we've had a ton of these discussions and we'll continue to do so but it has to work within our business. The last thing I'll point out when you look at the sculptor business. You know we have credit funds. The credit funds have structured products in them. Some of the best results. There are you know when they take advantage of for example, the March 2020 period during Covid.
Michael Nierenberg: Some of the best results are, you know, when they take advantage of, for example, the March 2020 period during COVID when, you know, assets were essentially a giveaway, and the team pounced on those and created great results. So we don't necessarily need a dedicated fund per se when we have the credit funds and we have the real estate funds at the Sculptor level or the multi-strat fund. That's very helpful.
When assets were essentially a giveaway M and the team Poundstone noticing created great results. So we don't necessarily need a dedicated fund per se. When we have the credit funds and we have the real estate funds that the sculpsure level or the multi strat fund.
That's very helpful and then.
Giuliano Bologna: And then obviously, it's, you know, won't be an overnight process, but you know, pivoting to more of, you know, an alternative asset manager model will take some time. I'm curious, you know, you've talked about the potential for, They're doing something you're talking about confidentially selling an S1 to the mortgage company in the past. Obviously, the SOS deal probably pushes that back a little bit, you know, in terms of timing, to get that done. We talked about moving.
No it won't be an overnight process, but you know permanent tomorrow.
An alternative asset manager model.
It takes some time.
I'm curious you talked about the potential for that.
So doing something or not.
Our own comfort to talk about covenants with filing an S. One for the mortgage company in the past.
The us honest youll, probably pushes us back a little bit you know in terms of timing to get that down you talked about moving.
Michael Nierenberg: Yeah, so for our business into, you know, phone vehicles, I'm curious when you think about, you know, the pivot of moving some of the balance sheet assets to third-party service or asset management and moving some more of the AUM to asset management for the rhythm level. How long you think that will take or what the milestones can be over the next few weeks. If we could do it in two weeks, we would do it in two weeks. It's going to take some time. Listen, do we need the biggest balance sheet? The answer is no.
So far our business I'm too on vehicles I'm curious when you think about you know the pivot of moving some of the balance sheet assets to <unk>.
Third parties or asset management, and moving some more of the AUM.
Asset management with a rhythm level, you know and how long do you think they won't take or what the milestones can be over the next few years.
You know if we could do it in two weeks, we would do it in two weeks and it takes some time you know we can listen do we need the biggest balance sheet. The answer is no because the balance sheet help the answer's, yes.
Michael Nierenberg: Does the balance sheet help? The answer is yes. We look at strategic things that we could do together. No different than, I think, the larger players in the alternative space.
We look at strategic things that we can do together no different than I think the large the larger players in the old space. When we look at things that we could do together with the sculptor folks there are things we will do together at those levels. It's gonna take it'll take some time, you know ideally you'd want to train you'd want to do more and the <unk>.
Michael Nierenberg: When we look at things that we could do together with the Sculptor folks, there are things we will do together at those levels, but it will take some time. Ideally, you would want to do more in the so-called fund business. The other thing, just to point out, one of the beautiful things about our business is that we do have $7 billion of permanent capital from an equity perspective. I think that's highly valuable. As we look going forward, if we could create more vehicles that are going to give us what I would call permanent equity from a permanent capital standpoint, we'll continue to look at that as well. Transferring or not transferring, just creating more assets off the balance sheet, I think, is going to help from a valuation standpoint as well. That's very helpful. I appreciate it, and I'll jump back in the queue.
You know the fund business. The other thing I just to point out you know one of the beautiful things about our business is we do have $7 billion of permanent capital and you know from an equity perspective.
And they took that's highly valuable so as we look going forward. If we can create more vehicles that are going to give us what I would call permanent.
Equity from our permanent capital standpoint, we'll continue to look at that as well, but transferring or not transferring just creating more assets off balance sheet. I think is going to help from a valuation standpoint as well.
That's very helpful. I appreciate it and I'll jump back in the queue.
Giuliano Bologna: Thank you. The next question comes from Jason Stewart with Jones Trading. Please go ahead. Hey, good morning, guys.
Thank you.
The next question comes from Jason Stewart with Jones trading. Please go ahead.
Hey, good morning, guys. Thanks for taking my question. This is Jason Weaver by the way I was wondering Michael can you elaborate a bit on how you see the integration going for S. L. S. Within the larger new Red ecosystem. Once you close in March.
Jason Weaver: Thanks for taking my question. I was wondering, Michael, can you elaborate a bit on how you see the integration of SLS within the larger New-Res ecosystem once you close in March? You know, what's the expected duration of that, and the time?
The expected duration of that and the time to achieve the synergies you mentioned in earlier question.
Michael Nierenberg: You know, we signed the deal. Things are happening as we speak now. You know, we're going to try to concentrate geography more so than just have geography across, you know, every state here in the U.S.
You know we signed the deal with things that are happening as we speak now you know we're going to try to concentrate geography more so than just have geography across every.
Every state here in the U S.
Michael Nierenberg: But things continue, and we expect that integration to be pretty seamless because it's a servicing business, you know, for the most part. You know, when you look at our servicing sites, we have Greenville, South Carolina; we have Fort Washington and PA; we have Tempe, Arizona; and then we have a couple of sites in Texas. Those are our main sites.
But things continue and we expect that integration to be pretty seamless because it's it's a servicing business you know for the most part.
You know when you look at our servicing sites, we have Greenville, South Carolina, We got four Washington and P. A we got Tempe, Arizona.
And then we have you know a couple of sites in in Texas. Those are our main sites I.
Michael Nierenberg: I think you could assume that it's going to continue that way, but acquiring a servicing asset and putting it on your servicing platform is a lot different from going out and acquiring a full-scale operating business. All right, thank you for that. And just as a follow-up on the origination side of things, I was wondering if you have any update on possible new developments for new joint venture partnerships there? We evaluate them just like, you know, Michael talked about in different strategic transactions. With the origination business, you know, obviously being pretty slow, most of our partnerships are on the realtor side, which is obviously a pretty slow business as well.
I think you could assume that it's going to continue that way, but acquiring servicing asset and putting on your servicing platform is a lot different from going out and acquiring them.
Full scale operating businesses.
Alright, Thank you for that and just as a follow up on the origination side of things I was wondering if you have any update on possible new developments for new.
Venture partnerships there.
We evaluate them just like you know Michael talked about from different strategic transactions.
With the origination business, obviously being pretty slow.
Most of our partnerships are on the realtor side, which is obviously a pretty slow business as well I will tell you that we're more focused on I would say.
Jason Weaver: I would tell you that we're more focused on, I would say, you know, FinTech relationships or other relationships that might be accretive for our entire business overall. So it's something that we can constantly look at, even for any type of acquisition, say if someone's trying to sell a platform, and then we can utilize, you know, the joint venture kind of structure as an alternative. All right, thank you for that call. The next question comes from Trevor Cranston with JMP Security. Please go ahead.
Fintech relationships or other relationships that might be accretive for our entire business overall.
It's something that we constantly look at even on any type of acquisition save someone's trying to sell a platform and then we can utilize.
The joint venture kind of structure as an alternative.
Alright, thank you for that color.
Thank you.
The next question comes from Trevor Cranston with JMP Securities. Please go ahead.
Trevor Cranston: All right, thanks. You know, looking at slide 16, you guys have made quite a bit of progress on the servicing cost per loan. As you look forward, you know, post-SLS.
Alright, thanks, good morning.
Looking at Slide 16, you guys have made quite a bit of progress on the servicing cost per loan.
As you look forward closed to sell lists in particular can you talk about sort of how you see that evolving in a few of them sort of a target.
Barron: Can you talk about sort of how you see that evolving and if you have sort of a target where you think you can get to in terms of the efficiency of the servicing platform? Yeah, I mean, look, there's a fair amount of operating leverage that we continue to get from the consolidation that we've done and the consolidation of the different Rhythm subservicing that we moved into the new RIS ecosystem. We're going to continue to get that operating leverage with the acquisition of SLS. Michael briefly talked about that, you know, the time period of when we could move that in. We think it's going to be very quick. They're going to come on to our proprietary servicing system, utilizing our processes, you know, and they have, you know, the third party business is obviously very strategic for us in bringing those clients onto our platform, some of which we already have relationships with that we're going to continue to grow, and others that are our new relationships.
Got to on the efficiency efficiency of the servicing platform.
Yeah, I mean look.
Theres a fair amount of operating leverage that we continue to get from the consolidation that we've done and the consolidation of the different rhythm sub servicing that we moved into the new risk ecosystem, we're going to continue to get that operating leverage with the acquisition of SLS, Michael briefly talked about that.
The time period of when we can move that and we think it's going to be very quick they're going to come onto our proprietary servicing system users utilizing our processes you know when they have a you know.
The third party business is obviously very strategic for us and bringing those those clients onto our platforms some of which we already had relationships with that we're going to continue to grow and others.
That where our new relationships, but you know I always say that it's very seamless are from a cost perspective, and overall efficiency I talked about this before that as one of my top priorities to continue to drive costs down you see the cost per loan here that continues to go down obviously, that's just all about operating leverage.
Barron: But, you know, I would say that it's very seamless from a cost perspective and overall efficiency. You know, I talked about this before. That is one of my top priorities to continue to drive costs down. You see the cost per loan here that continues to go down. Obviously, that's just all about operating leverage in our benchmark. And we think we're the best in the business. We really do.
And our benchmark and we think we're the best in the business, we really do.
Trevor Cranston: Got it. Okay, that's helpful. And then a follow-up on the question about opportunities on the commercial real estate side. Can you talk about sort of how you think about how much capital you have available to pursue those opportunities on Rhythm's balance sheet versus pursuing the opportunities potentially in betting? You know, I think that with the managed funds, that business will continue to run itself. You know, Steve Orbach and Nick Hecker and their team will continue to run their business the way that they do. We look at some one-off stuff here on the Rhythm Balance Sheet. This is not where one division is going to compete with the other.
Got it okay. That's helpful.
A follow up on the question about opportunities on the commercial real estate side can.
Can you talk about sort of how you think about how much capital you have available to pursue those opportunities on rhythms of balance sheet, you know versus pursuing the opportunities potentially in managed funds.
You know I think that on the managed funds that business will continue to run itself, you know, Steve or Buck and Kirk are and their team will continue to run their business the way that they do.
We look at some one off stuff here on the on the rhythm balance sheet. This is not where one one division is going to compete with the other they do very very different things than I think for example, I brought up this debt deal that we did they do very different things and I think what youre going to see on the rhythm balance sheet. If you. If you recall we are about.
Michael Nierenberg: They do very, very different things than I think. For example, I brought up this debt deal that we did. They do very different things than I think you're going to see on the Rhythm Balance Sheet. If you recall, about at the end of 22, we brought in a world-class group of folks at, which was, which is named Greenborn, David Welsh, and Dave Chambron and their team, who have been instrumental in some of the stuff that we've looked at here. So I think you're going to see some investment on the Rhythm Balance Sheet. Clearly, we want to grow the funds business, and Steve and Nick will continue to do what they do, and the results, you know, stand for themselves. So it'll be a different type of investing business than I think you see there. There could be times when we partner no different than I think you'd see at, you know, for example, at Blackstone with some of their private funds and what they do between the private funds and their REITs. Okay, that makes sense.
At the end of 'twenty two we brought in a you know eight a world class group of folks had which was which is named Green born David Welch and Dave Sean Brown and their team.
Who have been instrumental in some of the stuff that we've looked at here, So I think youre going to see.
There was some investment on the rhythm balance sheet clearly you want to grow the funds business and Stephen Nick will continue to do what they do and the results stand for themselves. So.
It'll be a different type of investing business and I think what you see there there could be times, when we partner no different than I think what you'd see it.
For example, at Blackstone win and some of their private funds and what they do between the private funds and their REIT.
Okay that makes sense. Thank you.
This concludes our question and answer session I would like to turn the conference back over to Michael Nierenberg CEO for any closing remarks.
Michael Nierenberg: Thank you. This concludes our question and answer session. I would like to turn the conference back over to Michael Nierenberg, CEO, for a closing remark. Thanks for joining us. A lot of good dialogue, some good questions, any follow-up, you know how to reach us. Appreciate the support and have a great day. Thank you, everyone. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect
Thanks for joining I'm a lot of good dialogue from good questions any follow up you know you know how to reach us and appreciate the support and and have a great day. Thanks, everyone.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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