Q1 2024 Rithm Capital Corp Earnings Call

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Operator: Hello and welcome to the Rhythm Capital first quarter 2024 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key, followed by zero. 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. Please note this event is being recorded. I would now like to hand the call to Emma Bolla, Associate General Counsel. Please go ahead.

Hello, and welcome to the rhythm capital first quarter 'twenty 'twenty four earnings conference call.

All participants will be in listen only mode.

Should you need assistance. Please signal a conference specialist by pressing the Starkey followed by zero.

After todays presentation, there will be an opportunity to ask questions.

To ask a question you May press Star then one on your telephone keypad.

To withdraw your question. Please press Star then two.

Please.

Please note this event is being recorded.

Speaker Change: I would now like to hand, the call to M. A boiler associate General Counsel. Please go ahead.

Emma Bolla: Thank you, and good morning, everyone. I would like to thank you for joining us today for Rhythm Capital's first quarter 2024 earnings call. Joining me today are Michael Nierenberg, Chairman, CEO, and President of Rhythm Capital, Nic Santoro, Chief Financial Officer of Rhythm Capital, and Baron Silverstein, President of NewRest. 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'd encourage you to download the presentation now.

Speaker Change: Thank you and good morning, everyone I would like to thank you for joining us today for rhythm Capital's first quarter 2020 four earnings call. Joining me today are Michael Nierenberg, Chairman CEO and President of Rhythm capital next Santoro, Chief financial officer for them capital and Darren sorry.

Speaker Change: Shane President of near Us 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.

Emma Bolla: I would like to point out that certain statements made today will be forward-looking statements. These statements, by their nature, are uncertain and may differ materially from actual results. I encourage you to review the disclaimers in our press release and earnings supplement regarding forward-looking statements and to review the risk factors contained in our annual and quarterly reports filed with the SEC. In addition, we will be discussing some non-GAAP financial measures during today's call. Reconciliations of these measures to the most directly comparable GAAP measures can be found in our earnings supplement. And with that, I will turn the call over to Michael.

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 ICC.

And 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.

Michael Nierenberg: Thanks, Emma. Good morning, everyone, and thanks for joining us. You know, as you look at our business, another very solid quarter for Rhythm and, quite frankly, all of our operating companies. All of our business lines performed extremely well. With the recent backup in rates, the market should provide us with great opportunities to deploy capital and generate and continue to generate outsized returns. Regarding risk, we are much closer to home from a duration perspective.

Michael Nierenberg: Thanks, Sam and good morning, everyone and thanks for joining us.

Michael Nierenberg: As you look at our business. It was another very solid quarter for rhythm and quite frankly, all of our operating companies.

All of our business lines performed extremely well with the recent backup in rates the market should provide us with great opportunities to deploy capital and generate and continue to generate outsized returns regarding risk. We are much closer to home from a duration perspective with fed speak early in the quarter and quite frankly late last year targeting.

Michael Nierenberg: With FedSpeak, early in the quarter and, quite frankly, late last year, targeting lower rates, we, you know, throughout the first quarter, we hedged most of our MSR risk or MSR positions. What this should do for the company is continue to create stability in earnings as well as book value on a go-forward basis. As everyone knows, we set out on a mission to grow our alternative business. To be clear, this is not just in size but, more importantly, excellent risk-adjusted returns for our shareholders and LPs. Sculptor during the quarter continued to deliver strong results across the platform.

Those rates are we throughout the first quarter, we hedged a most of our MSR risk or MSR positions, what they should do for.

Michael Nierenberg: For the company as is continuing to create stability and earnings as well as book value on a on a go forward basis.

Michael Nierenberg: As everyone knows we sit out on a mission to grow our alternatives business to be clear. This is not just in size, but more importantly, excellent risk adjusted returns for our shareholders in lp's sculptor during the quarter continued to deliver strong results across our platform, where we are seeing in terms of risk reward in credit markets as some of the most attractive.

Michael Nierenberg: What we are seeing in terms of risk reward and credit markets are some of the most attractive levels we have seen in years outside of the financial crisis levels. The multi-strat fund continues to generate strong returns while maintaining conservative risk posture. The real estate group, which focuses on non-traditional, niche asset classes, continues to generate excellent returns.

Michael Nierenberg: The levels, we have seen in years outside of financial crisis levels. The multi strat funds continues to generate strong returns, while maintaining a conservative risk posture in the real estate group, which focuses on non traditional.

Michael Nierenberg: Niche asset classes continues to generate excellent returns their track record you know when you look at the numbers is unparalleled relative to others in the marketplace in the first quarter, we announced the launch of Sculpsure loan financing partners. The firm's froze first captive CLO equity investment platform. This was anchored by a commitment from.

Michael Nierenberg: Their track record, you know, when you look at the numbers, is unparalleled relative to others in the marketplace. In the first quarter, we announced the launch of Sculptor Loan Financing Partners, the firm's first captive CLO equity investment platform, which was anchored by a commitment from Rhythm.

Michael Nierenberg: In the quarter, we priced two CLOs, one in Europe and one in the U.S. As you think about all these comments, we're super excited where we are with the business and the prospects for the future. At NewRes, our mortgage company, Baron and the team did a great job during the quarter. We had excellent results both in the servicing segment as well as in the origination segment.

Michael Nierenberg: Rhythm in the quarter, we priced two CLO one in Europe and one in the U S. As you think about all these comments were Super excited where we are with the business and the prospects for the future at new raise our mortgage company bearing and the team did a great job during the quarter. We had excellent results both in the servicing segment as well as in.

And then the origination segment.

Michael Nierenberg: We look forward to closing the SLS transaction, which we announced late in the fourth quarter, which will add significant third-party business to the platform. Our Genesys business, which is our transition loan business, had its best origination quarter ever. Not only are volumes up as banks retreat, but the addition of new clients to the platform has never been higher. I think we originated loans to 66 different counterparties during the quarter. Also, we completed a $500 million rated securitization in the quarter, lowering our cost of funds by approximately 150 basis points, as well as achieved higher advance rates. All of these are very exciting things for our business, and we look forward to updating you along the way. I'll now turn to the supplement, which has been posted online, on page 3.

We look forward to closing the SLS transaction, which we announced late in the fourth quarter, which will add significant third party business to the platform, our Genesis business, which is our transition one business had its best origination quarter ever not only of volumes up as banks retreat. The addition of new clients to the platform has never been higher.

Michael Nierenberg: I think we originated loans to 66 different counterparties during the quarter also we completed a $500 million rated securitization in the quarter lowering our cost of funds by approximately 150 basis points as well as we achieved higher advance rates or these are very exciting thing for our business and we look forward to updating you along the way.

Speaker Change: I'll now turn to the supplement which has been posted online.

Speaker Change: On page three.

Michael Nierenberg: When you look at where we are today, one thing I want to highlight on this page is that, aside from the sheer scale of our business, the balance sheet at Rhythm today is higher as a result of the hedges that we put on during the quarter against our MSR business. During the, when you look at life to date, $5.3 billion of dividends have been paid, $7.1 billion of equity, and our total economic return since inception is 184%.

Speaker Change: When you look at where we are today. This one thing I want to highlight on this page.

Speaker Change: From the sheer scale of our business the balance sheet at rhythm today is higher as a result of the hedges that we put on during the quarter against our MSR business during.

Speaker Change: During the when you look at a life to date $5 3 billion of dividends paid 7.1 billion of equity and our total economic return since inception to 184% scope there on the right side of the page 32 billion of AUM.

Michael Nierenberg: Sculptor, on the right side of the page, $32 billion of AUM during the quarter. GATT Net Income $262 million or $0.54 per diluted share. Our earnings available for distribution are $233 million or $0.48 per diluted share. Our common dividend is $0.25. Cash and liquidity at the end of Q1 was $2 billion, and the total economic return for Q1 was 4.5%. As you flip to page five, and you look at where we were when this company was first started, you know, just a quick.

Speaker Change: During the quarter.

Speaker Change: GAAP net income $262 million or 54 cents per diluted share our earnings available for distribution $233 million or <unk> 48 per diluted share.

Our common dividend at 25 cents cash and liquidity at the end of Q1 was $2 billion and the total economic return for Q1 is 4.5%.

As you flip to page five and you look at where are we when this company was first started you know just a quick.

Michael Nierenberg: Quick snapshot and going back in history, the company started in 2013 at Fortress to take advantage of dislocations in the MSR market as banks were selling MSRs due to Basel III capital constraints. So we started the business with a billion of equity; today, we're at 7.1 billion. What started out as strictly an owner of excess MSRs is today a full-scale asset manager with capabilities in credit, real estate, and obviously all kinds of lending businesses as well as in the mortgage space.

Speaker Change: A quick snapshot and going back in history company, who started in 2013 at fortress to take advantage of dislocations in the MSR market as banks were selling MSR is due to cap a suit to Basel III capital constraints.

Speaker Change: Constraints. So we started the business with a $1 billion of equity today. We're at 7.1 billion what started out as as strictly an owner of excess MSR is today as a full scale a asset manager with our capabilities in credit real estate, obviously, all kinds of lending businesses and and as well as in the mortgage space.

Michael Nierenberg: As we go forward, we look forward. As we go forward, we will look to increase our scale in our ALTS business. We will look to add insurance over time. As we think about our offerings, we'd like to tap the retail markets, and we'll continue to tap the institutional markets.

Speaker Change: As we go forward, we look forward as we go forward.

Speaker Change: You know, we will look to increase our scale in our alts business, we will look to add insurance over time, as we think about our offerings, we'd like to tap the retail markets and we'll continue to tap the institutional market. So a lot of exciting things are hopefully ahead for algorithm in our operating companies on a go forward basis.

Michael Nierenberg: 21 activity, if you flip to page six. You know, when you look at what we did on the new red side, Baron's going to talk about the mortgage company a bit here. The Origination platform continues to grow market share, and we've had organic growth in the third-party servicing franchise. That's due to both the SLS side as well as, you know, quite frankly, our excellence in the servicing business with clients that we know and that we already service loans for.

Speaker Change: Yeah.

Speaker Change: Q1 activity if you flip to page six you know when you look at what we did on the new Red Sideburns going to talk about the mortgage company and a bit here are the origination platform continues to grow market share we've had organic growth in the third party servicing franchise, that's due to both the SLS side as well as just you know.

Speaker Change: Quite frankly, our excellence in the servicing business with clients that we know and that we already service loans for as you think about where the banks are you know with with the regional banks retreating the Genesis business as I pointed out earlier had a record quarter in origination there.

Michael Nierenberg: As you think about where the banks are, you know, with the regional banks retreating, the Genesis business, as I pointed out earlier, had a record quarter in origination. You know, they're on target to do, looks like we're on target to do about $3 billion in origination. When we first started the platform, I think we were in and around $2 billion. When you look at the credit markets, during Q1, we issued $775 million of senior unsecured notes.

Speaker Change: On target to do it looks like we're on target to do about $3 billion in origination when he first for the platform I think we're in and around $2 billion. When you look at the credit markets. During Q1, we issued $775 million of senior unsecured notes.

Michael Nierenberg: We also tendered for 50% of our outstanding issue, so we currently have $275 million of outstanding senior unsecured notes, which are due in 2025. When you look at the Sculptor platform, again, the captive CLO equity investment platform, we seeded that. Obviously, there are third parties.

Speaker Change: We also tendered for 50% of our outstanding issue. So we currently have 275 million of outstanding senior unsecured notes, which are due in 25. When you look at this photo platform again, the CLO at the captive CLO equity investment platform, we seeded that obviously this third party.

Michael Nierenberg: Every time we do a CLO deal, there are third parties that buy the CLO equity. When you look at our investment in Sculptor and in this platform, I think that on a go-forward basis, this is only scratching the surface of what we could all do together. When we look at performance, strong risk-adjusted returns at both Rhythm and Sculptor platforms, we lead with performance. With performance, we're going to see more AUM come on our platform. Then when we look at partnerships, we continue to expand our global reach and try to create, Sculptor, page 7. There are a couple of highlights here.

Every time, we do a CLO deal there are third parties that are that by the CLO equity when you look at our investment in Sculpsure and in this platform.

Speaker Change: I think that on a go forward basis. This is only scratching the surface, where we could all do together when we look at performance strong risk adjusted returns of both rhythm in Sculpsure platforms, we lead with performance with performance, we're going to see more AUM come on our platform and then when we look at partnerships, we continue to explore and expand our global reach.

Speaker Change: And try to create capital solutions with them with different Lps and shareholders on a go forward basis.

Michael Nierenberg: Again, total AUM $32 billion. The credit business between credit and real estate is $24 billion. Of that $24 billion, roughly $15 billion you can look at in the CLO business. The company has been outstanding for many years over the course of the past. You know, I think the company was started in 1994. They are second to none.

Speaker Change: Page seven.

Speaker Change: Just a couple of highlights here again totally AUM 32 billion the credit business between credit and real estate is 24 billion of that 24 billion roughly $15 billion. You can look at in the in the CLO business. The company has been outstanding for many years over the course of the past.

Speaker Change: I think the company was started something and they're in 94.

Speaker Change: And 94, when you look at AUM today at 32 billion and you look at the acquisition, which closed in November of 'twenty. Three we're just Super excited where we're this platform is going to go.

Speaker Change: When you look at the overall returns on page eight on the sculptor on the on the platform between credit real estate and multi and the multi strat funds quite frankly, I think our returns are second to none.

Michael Nierenberg: And, you know, these...the...credit markets, the real estate markets, and what we're doing overall, I think we're in a position today to truly execute on some of the best investing environments that we've seen in many, many years. On the new rest site on page 9, delivered 23% ROEs, huge numbers, quite frankly. PTI X's mark to market increased by 22% quarter over quarter. The servicing business continues to perform extremely well.

And.

Speaker Change: These could be both the credit markets the real estate markets.

Speaker Change: And what we're doing overall I think our win a position today to truly execute on some of the best investing.

Speaker Change: Environments that we've seen in many many years on.

On the new Red side on page nine mm delivered 23% Roe.

Huge numbers quite frankly P T I X X.

Speaker Change: Ex mark to market increased by 22% quarter over quarter, the servicing business continues to perform extremely well.

Michael Nierenberg: From a UPB standpoint, we grew the servicing business 15% year over year. I know at some point when we get into Q&As, there'll be some questions regarding going out and buying bulk packages; we'll address that, but quite frankly, between where we are today and as we get through more slides here, you'll see that between our subservicing business, or really our third party business, and own servicing, we have 850 billion-ish of MSR exposure in the house. This is not a race to get bigger; this is a race to generate more earnings.

Speaker Change: From a <unk> standpoint, we grew the servicing business, 15% year over year I know at some point when we get into Q&A is there'll be some questions regarding going out and buying bulk packages will address that but quite frankly between where we are today and as we get through more slides here, you'll see that between our sub servicing business.

Speaker Change: Yes.

Speaker Change: For our really our third party business in owned servicing we have 850 billion ish.

Of MSR exposure in the house. This is not a race to get bigger and this is a race to generate more earnings when you look to the right side of the page for the quarter servicing excluding mark to market $220 million, our MSR Mark to market was $195 million originations made $42 million.

Michael Nierenberg: When you look to the right side of the page for the quarter, servicing excluding mark-to-market was $220 million. Our MSR mark-to-market was $195 million. Originations made $42 million. And then, obviously, with corporate expense, the net number there is $408 million. So, great, great quarter, great job done by the team overall.

Speaker Change: And then obviously with corporate expense the net number there at $408 million, so great great quarter, great job done by the team overall Genesis capital Ah I pointed out before record originations.

Michael Nierenberg: Genesis Capital, as I pointed out before, record originations, $840 million in commitments, and sixty-six different sponsors. The business continues to perform extremely well.

Speaker Change: $840 million in commitments 66 different sponsors.

Speaker Change: The business continues to perform extremely well first quarter, our ROE something between 13% and 15% and new clients continue to come to the platform as the banks continue to pull back in the areas that we operate in.

Michael Nierenberg: First quarter ROE, something between 13 and 15 percent. And new clients continue to come onto the platform as the banks continue to pull back in the areas that we operate in. And then, finally, what we'll do is, let's get into the segment performance.

Speaker Change: And then finally, what we'll do is let's get into the segment performance.

Michael Nierenberg: I'll just take page 13, and then Baron's going to take the mortgage company stuff. On the servicing portfolio, again, $857 billion in total servicing. When you look at our earnings stream and you think about where we are today as a business, you couple that with the Sculptor platform on the alternative side, and you think about earnings in the platform, the ability to make investments, whether it be at the Sculptor level or other things that we're going to do over the course of time, I truly believe there is a huge growth opportunity for us. And again, it's not just an AUM thing.

Speaker Change: I'll just take page 13, and then bearing is going to take the mortgage company stuff on the servicing portfolio again $857 billion of total servicing when you look at our earnings stream and you think about where we are today as a business you couple that with the scope to platform you outside and you think about earnings in the platform.

Speaker Change: The ability to make investments whether it be at the sculptor level or other things that we're going to do over there over the course of time.

Speaker Change: I truly believe there is a huge growth opportunity for us and again, it's not just an AUM, saying, it's just real earnings that we're going to generate for shareholders and Lps.

Michael Nierenberg: It's just real earnings that we're going to generate for shareholders and LPs. Total owned servicing, $572 billion. Of that, 99% of the portfolio is out of the money. Gross WAC on our total portfolio is, I think, something around $390 right now. The SLS acquisition adds $150 billion of servicing, of which $100 billion of that is third-party servicing. With that, why don't we go to page 15, and I'll turn it over to Baron, and he'll take it from there.

Speaker Change: Total owned servicing 572 billion.

Speaker Change: Of that 99% of the portfolio is added the money.

Speaker Change: Gross WAC on our total portfolio I think is something around $3 90 right now.

Speaker Change: The SLS acquisition adds $150 billion of servicing of which a $100 billion of that is third party servicing them.

With that why don't we go to page 15, and I'll turn it over to Darren.

Baron Silverstein: Good morning and thanks, Michael. As Michael mentioned, just another good quarter for us, as we continue to grow on the foundation that we've built over the last few years, you know, and our core focus is on strategic growth and continued cost leadership, right? We've executed on synergies across all of our platforms. We've internalized most of the Rhythm third-party servicers.

Darren: And I will take it from there.

Darren: Good morning, and thanks, Michael.

Darren: As Michael mentioned, just another good quarter for us as we continue to grow on the foundation that we built over the last few years you know in.

Darren: Our core focus is on strategic growth.

Darren: And continued cost leadership, alright, we've executed on synergies across all of our platforms. We've internalized.

Darren: Most of the rhythm third party Servicers, we unified our brand strategy and we're now focused on growing our business growing our platform and then modernizing our customer and employee experience through digital and AI initiatives on.

Baron Silverstein: We unified our brand strategy, and we're now focused on growing our business, growing our platform, and then modernizing our customer and employee experience through digital and AI initiatives. On slide 16, our servicing business, our servicing business does continue to perform well. As Michael mentioned, we're expecting to close the SLS acquisition in the second quarter, and it's going to add an additional $149 billion of owned and subservice MSRs while adding co-issue MSR acquisition capabilities.

Darren: On slide 16 on our servicing business, our servicing business does continue to perform well as Michael mentioned, we're expecting to close the SLS acquisition in the second quarter and it's going to add an additional $149 billion of owned and sub service Msr's, while adding co issue MSR acquisition capabilities away.

Baron Silverstein: Away from ASLS, we continue to see additional opportunities to gain market share, including picking up wallet share with our existing third-party customer base. And we continue to evaluate MSR bulk packages, but there are also other strategic acquisitions that we look at as well. Overall, the consumer also performs well, with muted prepayment speeds and historically low delinquencies.

Darren: For me so last we continue to see additional opportunities to gain market share, including picking up wallet share with our existing third party customer base and we continue to evaluate MSR bulk packages, but there's also other strategic acquisitions that we look at as well.

Overall, the consumer also performed well with muted prepayment speeds and historically low delinquencies across it all we remain focused on maintaining operational excellence and cost management, even after adding 1 million loans onto the platform last year and unexpected additional 700000 loans with the SLS transaction.

Baron Silverstein: Across it all, we remain focused on maintaining operational excellence and cost management, even after adding $1 million in loans onto the platform last year and an expected additional $700,000 in loans with the SLS transaction. Going to slide 17, on the origination side, and similar to servicing, our origination business was able to take advantage of market opportunities while remaining disciplined on strategic growth. While the market remains historically muted in terms of origination volume, we grew originations overall by 21% quarter over quarter while also increasing margins, both of which were driven by our correspondent channel.

Darren: Going to slide 17 on the origination side and similar to servicing our origination business was able to take advantage of market opportunities, while remaining disciplined on strategic growth.

Darren: While the market remains historically muted in terms of origination volume.

Darren: Originations overall, 21% quarter over quarter, while also increasing margins both of which were driven by our correspondent channel. We have strong momentum in our non agency products originating over $185 million of non QM loans in the first quarter almost back to levels. We were seeing in 2022 on <unk>.

Baron Silverstein: We have strong momentum in our non-agency products, originating over 185 million non-QM loans in the first quarter, almost back to levels we were seeing in 2022 on a quarterly basis. Meanwhile, our home equity originations were also up 70% quarter over quarter with approximately $81 million in funded volume. We expect to see, you know, increasing growth in our home equity originations also in the months and quarters to follow. Our retail channel, including our JV, after the moves we disclosed we made in the first quarter, was able to break even in the first quarter, which is a big win for us and, I would say, for our team across our entire platform.

Darren: Orderly basis, while our home equity originations were also up 70% quarter over quarter with approximately $81 million in funded volume, but we expect to see increasing.

Darren: Increasing growth in our home equity originations also coming into the months and quarters to follow our retail channel, including our JV. After the moves we disclose we made in the first quarter was able to breakeven in the first quarter, which is a big win for us and I would say for our team across our entire plot.

Baron Silverstein: And while the home purchase market continues to show positive signs regardless of interest rates, we have significant upside in growing our purchase market share through retention strategies, which began with our new Res Home rewards program that was launched in February.

Darren: Form and while the home purchase market continues to show positive signs regardless of interest rates, we have significant upside in growing our purchase market share through retention strategies, which began with our new res home rewards program that was launched in February.

Baron Silverstein: And on slide 16, we, like the rest of the industry, view AI as a technology that will have a transformative impact on our scale business. We have an incredible amount of data across our entire platform. And while our AI platform, branded Resy, is in its early days, currently focused on employee education and onboarding, we see broad applications through originations and services. We also believe our proprietary technology is a strategic advantage, allowing us to be nimble and control costs while delivering custom solutions to our enterprise clients.

Darren: And on Slide 16, we like the rest of the industry view AI as a technology that will have a transformative impact on our scaled business. We have an incredible amount of data across our entire platform and while our our AI platform branded Ramsey is in its early days.

Darren: Only focused on employee education and on boarding, but we see a broad applications through originations and servicing. We also believe our proprietary technology is a strategic advantage, allowing us to be nimble control cost, while delivering custom solutions to our enterprise clients, while we always remain.

Baron Silverstein: While we always remain focused on expense management, our near-term AI initiatives are driven by delivering the best customer experience, which in turn will create future efficiencies. We're really just starting to tell the New Rez story more broadly, and on a final note, we will be hosting an investment community day to dig in further on our business. More details can be found on the RhythmCap website.

Darren: On expense management, our near term AI initiatives are driven by applying the best customer experience, which in turn will create future efficiencies.

Darren: We're really just starting to tell the <unk> story more broadly and on a final note we will be hosting an investment community day to dig in further on our business and more details can be found on the rhythm cap website <unk>.

Michael Nierenberg: Back to you, Mike. Thanks, Baron. Good work. Just a couple of

Michael Nierenberg: Back to you Michael.

Michael Nierenberg: Just a couple last slides for me, and then we're going to open it up for Q&A. On the Green Barn side, just so everybody knows, David Welsh and David Schaumbraun and that team, there are 25 investment professionals. At this time, when we do investments off the Green Barn shelf, typically, they're done on the Rhythm Balance Sheet. So I would think of it as a Rhythm-related investment strategy right now in commercial real estate. We do not have any legacy commercial real estate in the house.

Michael Nierenberg: Thanks, Darren good work.

Speaker Change: Just a couple of last slides for me and then we're going to we're going to open it up for Q&A on the Green Brier side, just so everybody knows.

Michael Nierenberg: David Welch and David Sean, Brian and that team Theres 25 investment professionals.

Michael Nierenberg: At this time, when we do investments.

Michael Nierenberg: Off the Greenbrier shelf typically it's done on the rhythm balance sheet. So I would think of it as a rhythm related investment strategy right now on commercial real estate, we do not have any legacy commercial real estate and in the house.

Michael Nierenberg: So as we see opportunities and want to deploy capital on the Rhythm Balance Sheet, we will do so. Adore, just to touch on our single family rental strategy, 4,200 units. The name of the game there is scale.

Michael Nierenberg: So things there are as we see opportunities and want to deploy capital on the rhythm balance sheet. We will do so a door just to touch on our single family rental strategy 4200 units.

Michael Nierenberg: The name of the game there is scale.

Michael Nierenberg: I know that the growth in the Adore business will come in a so-called co-investment fund alongside our public company, where we have about $200 million of equity capital committed to that business. But you need significant scale there, and we continue to be what I would say thoughtful as far as cap rates, where we think cap rates are going, and where we think we could deploy capital overall in that business. And then, on the portfolio side, in the consumer loan business, we do opportunistic investing in consumer loans.

I think that the growth in the <unk> I know that the growth in the door business will come in a so called co investment fund alongside our public company, where we have about $200 million of equity capital committed to that business, but you need significant scale, there and we continue to be what I would say.

Michael Nierenberg: Thoughtful as far as cap rates, where we think cap rates are going and where we think we can deploy capital overall in that business and then finally on the portfolio side on the consumer loan business.

Michael Nierenberg: We do opportunistic investing in consumer loans everybody knows.

Michael Nierenberg: Everybody knows that in June or July of 23, we bought $1.4 billion in consumer loans from Goldman. That $1.4 billion, just to give you a sense, is now down to $800 million, and it amortizes extremely quickly. I think the average life of that castle will probably be over the next one and a half to two years. So overall, things from a portfolio standpoint are extremely stable, extremely good. Businesses performing well, quite frankly, everywhere.

Michael Nierenberg: <unk> or July of 'twenty, three we bought 1 billion for our consumer loans from Goldman.

Michael Nierenberg: <unk> just to give you a sense of now down to $800 million in amortized is extremely quick I think that the average life of that cash flow will probably be over the next one five to two years. So overall things from a portfolio standpoint extremely stable extremely good businesses performing well.

Speaker Change: Quite frankly everywhere and with that I will turn it back to the operator for Q&A.

Operator: We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble the roster. And our first question comes from Bose George of KVW. Please go ahead.

Speaker Change: We will now begin the question and answer session.

Speaker Change: To ask a question you May press Star then one on your telephone keypad.

Speaker Change: If youre using a speakerphone please pick up your handset before pressing mckee.

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Speaker Change: At this time, we will pause momentarily to assemble the roster.

Speaker Change: And our first question comes from Bose George of <unk>. Please go ahead.

Bose Thomas George: Hey everyone, good morning. Could I get an update on book value quarter to date? You noted that the hedges had taken the balance sheet up, so yeah, just an update would be great.

Bose Thomas George: Hey, everyone. Good morning.

Bose Thomas George: An update on book value quarter to date, you'd noted that the hedges had taken the balance sheet up so just an update would be great.

Michael Nierenberg: We're in and around 1230 to 1240 right now, Bose. You know, during the course, we still have a little bit of a short bias, but overall, I would say as the market continues to sell off, if it does, what you're going to start to see is obviously MSR values will be capped. I've said this, you know, for a long time.

Bose Thomas George: We are in and around $12 30 to 240 right now both.

Bose Thomas George: During the quarter, we're still we're still we still have a little bit of a short bias, but overall I would say as the market continues to sell off if it does work.

Bose Thomas George: You're going to start to see is obviously MSR values will be capped ive said this.

Bose Thomas George: For a long time.

Michael Nierenberg: I think last quarter we had a very conservative mark on our MSRs, as well as where we are today. But what you're going to see is a backup in rates. Well, you know, at some point, the duration flips from negative duration to positive duration, so we have to all be pretty thoughtful about that. But right now, it's 1230 to 1240.

Bose Thomas George: I think last quarter, we had a very conservative mark on our MSR.

Bose Thomas George: As well as I think where we are today, but.

Bose Thomas George: What you're going to see as a backup in rates will at some point the duration flips from negative duration and positive duration. So we have to all be pretty thoughtful of that but right. Now it's 12 30 to $12 40.

Speaker Change: Okay, Great. That's helpful. Thanks, and then I wanted to switch and get any updated thoughts on the timing of any potential spin.

Michael Nierenberg: Okay, great. That's helpful. Thanks. And then I wanted to switch and get any updated thoughts on the timing of any potential spin. And also, does the remaining company need to be any larger in terms of scale, or is it more just the right market conditions for you to do something?

Speaker Change: And also does the remaining company need to be any larger in terms of scale or is it more just the right market conditions for you to do something.

Michael Nierenberg: Well, I think when you look at the mortgage company, you know, when you look at a couple of our peers out there, they're trading above book. So clearly, we look at where we are, and we trade below book overall.

Speaker Change: Well I think when you look at the mortgage company.

Speaker Change: When you look at a couple of our peers out there they are trading above book.

Speaker Change: So clearly we look at where we are and we trade below book.

Speaker Change: Overall.

Michael Nierenberg: So you know, what we're trying to do is, obviously, we need to assess capital, the amount of capital that's in each segment of our business. But as we evaluate whether to take this company public, whether it be a spin or just take it public, it's still what I would say is a work in progress. What we're really trying to do, if you think about the power of our franchise, the earnings from our overall investment business, including the mortgage company, create significant advantages for us to be able to make investments and other things that we may want to do that are not mortgage related. So to give that up today, we're not sure that that's the right thing. But we continue to evaluate that and work with our advisors on which way we're going. Okay, makes sense. Thanks.

Speaker Change: <unk>.

Speaker Change: What we're trying to do is obviously, we need to assess capital the amount of capital that's in each segment of our business, but as we.

Speaker Change: <unk> whether to take this company public whether it be a spin or.

Speaker Change: Or take it public.

Speaker Change: It's still what I would say is work in progress.

We're really trying to do if you think about the power of our franchise the earnings from our overall investment business, including the mortgage company.

Speaker Change: Create significant advantages for us to be able to make investments in other things that we may want to do that our non mortgage related.

Speaker Change: So to give that up today, we're not sure that that's the right thing, but we continue to evaluate that and work with our advisers on which way we're going to go with it.

Okay makes sense. Thanks.

Thanks.

Eric J. Hagen: The next question comes from Eric Hagen of BTIG. Please go ahead.

Speaker Change: The next question comes from Eric Hagen of <unk>. Please go ahead.

Eric J. Hagen: Hey, good morning, guys. Hope you're well. Just looking at the results in Sculptor, I mean, when do you expect that might improve and turn positive? And do you have a target rate of return for the investment in the CLO equity that you made in Sculptor?

Eric J. Hagen: Hey, good morning, guys hope you're well just looking at the results in sculptor I mean, when do you expect that might improve and turn positive and do you have a target rate of return for the investment in the CLO equity that you made in sculptor.

Michael Nierenberg: Hey Eric, there are a couple ways to think about this. One is the enterprise value that we're creating by making investments in the Sculptor franchise should lead to a higher overall equity valuation for Rhythm at the parent level. So in other words, as we grow our CLO business and we create management fees for Sculptor, or we make investments in other things, whether it be alongside Sculptor or actually in Sculptor, what that's going to do is increase the value of Sculptor. So that's part one.

Speaker Change: Hey, Eric there's a couple of ways to think about this one is the enterprise value that we're creating by making investments in the sculptor franchise.

Speaker Change: Should lead to a higher overall equity valuation for rhythm.

At the parent level. So in other words as we grow our CLO business and we create and as human fees for sculptor, where we make investments in other things whether they be alongside scope you're actually in sculptor.

What that's going to do is increase the value of sculptor.

Michael Nierenberg: Part two is when you look at the earnings; the earnings are going to be lumpy for now. Typically, when you look at whether it be the multi-strat fund or you look at some of the other funds that Sculptor has, you'll see earnings when you have realizations. Most of the earnings I think you're going to see, at least for 24, are going to be geared towards the fourth quarter. And then obviously, with more, with the results as good as they are, as we think about the business, that'll continue to hopefully bring more AUM back to the platform. And then you're going to start to see a real lift in not only enterprise value at the Rhythm level but also at the platform level at Sculptor.

Speaker Change: So that's part one part two is when you look at the earnings the earnings are going to be lumpy for now.

Speaker Change: Typically when you look at whether it be the multi strat funds or you look at some of the other funds that sculptor has.

Speaker Change: You'll see earnings when you have realizations most of the earnings I think youre going to see.

Speaker Change: At least for 24 going to be geared towards the fourth quarter.

Speaker Change: And then obviously with more with the results as good as they are and as we think about the business that will continue to hopefully bring more AUM back to the platform and then youre going to start to see the real lift in not only enterprise value at the rhythm level, but also at the platform level at sculptor.

Michael Nierenberg: Yep, that's really helpful, really helpful. Do you feel like the equity in the investment portfolio is relatively stable at this point? And what could get you to maybe direct more capital there, even ahead of a spinoff? And how would you maybe allocate the preferred equity in the capital structure among the different segments of the portfolio at this point?

Speaker Change: Yes, that's really helpful really helpful.

Speaker Change: Do you feel like the equity in the investment portfolio was relatively stable at this point and what could get you to maybe direct more capital there. Even ahead of the spinoffs and how would you maybe allocate the preferred equity and the capital structure among the different segments of the portfolio at this point.

Michael Nierenberg: So on preferred equity, you're referring to the four series that we have outstanding? Yeah, exactly.

Speaker Change: So on the preferred equity.

Speaker Change: Are you referring to the four series that we have outstanding yes, exactly yes.

Michael Nierenberg: You know, we have two that are going to reset this year, and likely, you know, those are being addressed. When we look at capital, we ended the quarter with $2 billion of cash and liquidity. Today, it's a tad lower. We're going to fund SLS here, hopefully extremely short, you know, in the near future. You know, we'll deploy capital when we think that we have the right risk-adjusted return.

Speaker Change: We have two that are.

Speaker Change: Going to reset this year will likely those are being addressed.

Speaker Change: When we look at capital.

Speaker Change: We ended the quarter with $2 billion of cash and liquidity.

Speaker Change: Today, it's a tad lower we're going to fund SLS here hopefully.

Speaker Change: Hopefully extremely short.

Speaker Change: In the near future.

Speaker Change: We'll deploy capital when we think that we have the right risk adjusted return.

Michael Nierenberg: You know, I pointed out earlier in my opening remarks that the credit markets today look as good as they've looked in years. You know, the high yield index is, I think, in and around 360. And when you look at absolute yield levels and what we're able to achieve, it's a pretty ripe environment for us to deploy capital, whether it be in the mortgage market or just other things. So we'll continue to be opportunistic.

Speaker Change: I pointed out earlier in my in my opening remarks, the credit markets today look as good as they've looked in years the high yield indexes I think is in and around $3 60.

Speaker Change: And when you look at the absolute yield levels and what we're able to achieve.

Speaker Change: It's a pretty ripe environment for us to deploy capital whether it be in the mortgage market or just other things. So we will continue to be opportunistic. We obviously, we have a lot of things that I think our bigger from a corporate perspective, not necessarily a short term, but more in the long term how we create.

Michael Nierenberg: Obviously, we have a lot of things that I think are bigger from a corporate perspective, not necessarily in the short term, but more in the long term, how we create, you know, a true global asset management business. And that's really where we're focused, alongside operational excellence in our mortgage company and Genesys and the other things that we have going on, you know, in the company. On the preferreds, again, getting back to that, we'll address the series that are coming up here in the near future. Thank you guys for the...

Speaker Change: A true global asset management business, and Thats really where were focused alongside with operational excellence and our mortgage company in Genesis and the other things that we have on in the company.

Speaker Change: On the preferreds again getting back to that will address the.

Speaker Change: The series that are coming up here in the near future.

Speaker Change: Yes.

Michael Nierenberg: Thank you guys for the perspective. I appreciate it.

Speaker Change: Thank you guys for the perspective I appreciate you.

Speaker Change: Thanks, Eric.

Speaker Change: The next question comes from Doug Harter of UBS. Please go ahead.

Douglas Michael Harter: The next question comes from Doug Harter of UBS. Please go ahead.

Douglas Michael Harter: Thanks, Michael. As you think about the transition to kind of more of an asset management model, you know, how should we think about the timing and or which of the business lines we'll see third-party capital raised first?

Douglas Michael Harter: Thanks, Michael as you think about the transition to kind of more of an asset management model, how should we think about the timing and or which of the business lines.

Douglas Michael Harter: We'll see third party capital raised firsthand.

Michael Nierenberg: You know, the Sculptor franchise is obviously there's 32 billion in AUM at the franchise. You know, when you look at the leadership team there between Jimmy and, you know, Brett Klein on the credit side and Steve Orbach and Nick Hecker on the real estate side, it's a great team. I mean, it hasn't been easy, obviously, to raise money in the past couple of years because of the noise around the platform. That's why we are, you know; that's why we have the platform, quite frankly.

Douglas Michael Harter: No.

Douglas Michael Harter: <unk>.

I mean, the sculptor franchise is is obviously there is $32 billion of AUM at the franchise. When you look at the leadership team there between Jimmy and Brit client on the credit side, and Steve or bucket and the character of the real estate side, It's a great team I mean.

Douglas Michael Harter: It hasnt been easy obviously to raise money going back the past couple of years because of the noise around the platform. That's why we are.

Douglas Michael Harter: That's why we have the platform quite frankly, but when you look at where the actual performance and what that's going to lead to over the next couple of years, we're super excited as far as bringing more money into the credit strategies, the real estate strategies.

Michael Nierenberg: But when you look at where, you know, the actual performance and what that's going to lead to over the next couple of years, we're super excited as far as bringing more money into the credit strategies, the real estate strategies, and as well as the multi-strat fund. So the returns are good. I think returns are going to bring in more capital, and that's going to be from both existing LPs and, hopefully, from a bunch of new LPs. You know, there's a lot of marketing that continues to go on around the platform. So, you know, it's transcribed by https://otter.ai

Douglas Michael Harter: And as well as the multi strat funds. So the returns are good I think returns are going to bring in more capital and thats going to be from both existing Lps and hopefully from a bunch of new Lps.

Douglas Michael Harter: There's a lot of marketing that continues to go on around the platform. So.

Douglas Michael Harter: It's flow, it's going to take a little bit of time here, but performance is going to bring in new pools of capital for sure.

Michael Nierenberg: And I guess just on Sculptor, can you just talk about, you know, how retention has gone since the deal closed relative to your expectations? Great, you know, we've lost...

Douglas Michael Harter: And I guess just on Sculpsure or can you just talk about.

Douglas Michael Harter: How retention has gone since the deal closed relative to your expectations.

Great.

Michael Nierenberg: Great, you know that we've lost a couple of bodies, but that's to be expected in any kind of acquisition. We've added new talent. You know, there's a lot of what I would call incoming resumes that want to join the platform, whether it be at the sculptor level or at the rhythm level. People are excited about where we are and what we're doing. So I don't you know, there's no lack of anything. The investment team is solid, and the results are solid as well, so there will be no issues whatsoever with retention.

Speaker Change: We've lost.

Speaker Change:

Speaker Change: A couple of bodies, but thats to be expected in any kind of acquisition. We've added new talent. There's a lot of what I would call incoming resumes that want to join the platform whether it be at the sculptor level <unk> at the rhythm level people are excited where we are and what we're doing.

Speaker Change: So I don't there's no.

There is no lack of anything the investment team is solid.

Speaker Change: And the results are solid as well so no no issues whatsoever on the retention side.

Stephen Albert Laws: The next question comes from Stephen Laws of Raymond James. Please go ahead.

Great. Thank you.

Speaker Change: Thank you.

Speaker Change: The next question comes from Stephen Laws of Raymond James. Please go ahead.

Stephen Albert Laws: Good morning, Michael. Can you talk about, you know, with mortgage rates moving back towards highs, what you're seeing in the pipeline there, sensitivity of borrowers to rates moving where they are? You know, kind of outlook for volumes near term and how you see that progressing through the year.

Stephen Albert Laws: Hi, good morning.

Good morning, just to start can you talk about.

Stephen Albert Laws: Mortgage rates moving back toward size whats youre seeing in the pipeline there is sensitivity borrowers to rates moving where they are in.

Stephen Albert Laws: You know kind of outlook for volumes near term and then how you see that progressing through the year.

Baron Silverstein: I mean, the market remains predominantly a purchase market, right? So, you know, for us, it's about, you know, delivering excellent service to our customers and then making sure they understand, you know, who we are as a company and what we can otherwise deliver either through, you know, products or quality service. And you know, we think we have a lot of upside in our customer retention from an origination perspective. As I mentioned in our talking points, we, you know, will remain opportunistic through all of our different channels, you know, for, you know, either, you know, ongoing growth and, you know, we're not going to basically, you know, look at the market and, you know, Michael's used this term, fight the Fed, but the market interest rates being higher, we're going to remain nimble and very, very cost efficient in our origination business and cost efficient on our servicing business and that way we can perform in every market.

Speaker Change: But anyway.

Speaker Change: Mortgage rates higher.

Speaker Change: I mean, the market remains predominantly a purchase market right. So.

Speaker Change: For us it's about delivering excellent service to our customers and then making sure they understand.

Who we are as a company and what we can otherwise deliver either through.

Speaker Change: Products, our quality service and we think we have a lot of upside in our in our customer retention from an origination perspective, and as I mentioned in our talking points we.

Speaker Change: We will remain opportunistic through through all of our different channels.

Speaker Change:

Speaker Change: For.

Speaker Change: Either ongoing growth.

Speaker Change: We're not we're not going to basically.

Speaker Change: Look at the market and Michael's uses term fight the fed.

Speaker Change: But the market interest rates being higher we're going to remain nimble and very very cost efficient and our origination business and cost efficient on our servicing business and that way we can perform in every market.

Stephen Albert Laws: Great, and then can you touch on the announcement with Great Ajax and what you envision there and how you think about fees benefiting Rhythm in that relationship?

Speaker Change: Great and then I think there is a little bit can you can you touch on the announcement with great Ajax and then what do you envision there and how you think about.

Speaker Change: These benefiting rhythm with that relationship.

Michael Nierenberg: Yeah, great question. As we look at Great Ajax, it's a platform that's going to be externally managed, assuming that the shareholder vote is positive for us. And the idea there is to grow that into a commercial, publicly traded commercial real estate REIT that has no legacy commercial real estate exposure with the management fees that will flow into NUCCO, which will be a management company. And I think that is just the start when you think about Sculptor and the fees that are going to be generated over the years that'll flow into a management company. Think about Great Ajax and some of the other things that we have on our plate today.

Speaker Change: Yes.

Question as we as we look at Great Ajax it's a.

Speaker Change: It's a platform that's going to be externally managed to assuming that shareholder vote is affirmative for us.

Speaker Change: And the idea there is to grow that into a commercial publically traded commercial real estate REIT that has no legacy commercial real estate exposure with the management fees that will flow into newco, which will be a management company and I think that is the start when you think about sculptor and fees that are going to be generated over.

Speaker Change: The years that will flow into our management company, you're thinking about great Ajax.

Speaker Change: The other things that we have on our plate today, that's really the goal.

Michael Nierenberg: That's really the goal. But it's really going to be a clean platform, probably something between, call it, $250 million of equity that will be investing in commercial real estate with a team's type mandate. And it'll be a clean platform relative to some of the other folks. A lot of work to do on that one, but that's the intention. Great. Appreciate both your comments this morning.

Speaker Change: But it's really going to be a clean platform, probably something between call it $250 million of equity.

Speaker Change: That will be investing in commercial real estate, where the team's types by mandate and it'll be a clean slabs platform relative to the some of the other folks a lot of work to do on that one but that's the intention.

Speaker Change: Great I appreciate both of your comments this morning.

Michael Nierenberg: Great; I appreciate both of your comments this morning.

Speaker Change: Yes.

Speaker Change: Thank you.

Jason Weaver: Once again, if you would like to ask a question, please press star, then 1. And our next question will come from Jason Weaver of Jones Trading. Please go ahead.

Once again, if you would like to ask a question. Please press Star then one.

And our next question will come from Jason Weaver of Jones trading. Please go ahead.

Jason Weaver: Hey, Michael. You mentioned in your prepared remarks that you were anticipating this, but can you talk about what you're seeing about incremental returns on the MSR on MSRs out there right now, as well as if you're looking at anything closer to the current production?

Jason Weaver: Hey, Good morning, Michael you mentioned in your prepared remarks, you were anticipating it but can you talk about what youre seeing about incremental returns on the MSR MSR is out there right now as well as if you're looking at anything closer to the current production coupon.

Michael Nierenberg: So, here's how we evaluate the MSR business. We don't, you know, as I pointed out, we've been doing this a long time. We see a lot of bulk packages. A lot of them are small, but when I say bulk, there were a couple large from Wells that went back over the course of the past year.

Michael Nierenberg: So here's how we evaluate the MSR business, we don't as I pointed out we have been doing this a long time, we see a lot of bulk packages.

Michael Nierenberg: A lot of them are small when I say bulk.

Michael Nierenberg: It was a couple of large from wells that went back over the course of the past year.

Michael Nierenberg: You know, when we look at where we could produce an asset versus where we could buy an asset, if we think we could produce the asset at a cheaper level, we're obviously always going to do that because you're creating, we should be creating enterprise value around our mortgage company versus just going out and buying an asset. So, our whole theme is as we create more enterprise value, that goes to Sculptor, that goes to the mortgage company, and other things that we're going to do around some of our other subs or business lines.

Michael Nierenberg:

Michael Nierenberg: When we look at where we can produce an asset versus where we could buy an asset. If we think we can produce the asset at a cheaper level. We're obviously always going to do that because you are creating we should be creating enterprise value around our mortgage company versus just going out and buying an asset so.

Our whole theme is as we create more enterprise value of that goes to Sculpsure that goes to the mortgage company and other things that we're going to do around some of our other.

Subs or business lines.

Michael Nierenberg: As we evaluate, whether it be lower coupon MSRs or not, it's all just a total return for us. So, if we could buy an MSR at an unlevered 10 and with a little bit of leverage, it's a 12 versus buying a distressed commercial real estate asset at a 15, obviously, we're going to opt for the thing at a 15. But everything is, you know, when we look at where we are today and the capabilities we have between credit and real estate and origination, you know, we have it all.

Michael Nierenberg: As we evaluate whether it be lower coupon msr's or.

Michael Nierenberg: It's all just a total return for us if we could buy an MSR at an unlevered 10, and with a little bit of leverage it's a 12 versus buying a distressed commercial real estate asset at a 15, obviously were going out for the thing at <unk>.

Michael Nierenberg: But everything is when we look at where we are today and the capabilities, we have between credit and real estate and origination.

Michael Nierenberg: We have we have at all that we don't have insurance, but everything is going to be total return oriented how we think about investing in <unk> or some other asset class. We generically, obviously organically I should say manufacturer MSR as with every loan that we create and then we'll just evaluate that versus where we can buy that in.

Michael Nierenberg: We don't have insurance, but everything's going to be total return oriented as we think about investing in MSRs or some other asset class. We generically, obviously, and organically, I should say, manufacture MSRs with every loan that we create. And then we'll just evaluate that versus where we can buy it in the secondary market. Okay, keep in mind, yeah, just keep in mind MSR values, you know, overall, weighted average mark, give or take five for the industry right now, as if rates did sell off another 50 or 100 basis points, at some point, that duration becomes capped, or you get longer. So it's just something to think about, you know, in that asset class.

Michael Nierenberg: Secondary market.

Speaker Change: Okay. Thank you Mike.

Yes, just keep in mind MSR values.

Speaker Change: Overall weighted average mark give or take five.

Mike: For the industry right now as if rates did sell off another 50 or 100 basis points at some point that duration becomes capped or you get longer.

Mike: So it's just something to think about in that asset class.

Jason Weaver: And then on the Genesis business, I was wondering if you could provide a little bit more context around the greater sponsor demand you noted, you know, given little relief on the rate front this far this year. Is this really just a function of banks really getting out of that business?

Speaker Change: Understood. Thank you and then on the Genesis business I was wondering if you could provide a little bit more context around the greater sponsor demand you noted.

Speaker Change: Given a little relief on the rate front. Thus far this year is this really just a function of banks really getting out of that business.

Michael Nierenberg: I think it's both actually. I think, you know, listen, banks are always a little bit hesitant around the construction angle. You know, when you look at our overall business line, think about it this way. Somebody comes to us with a development of multifamily, or call it single family rental. Genesys will go out and make that loan on the single family rental side, or Genesys, I'm sorry, they'll make that loan to the sponsor, who are then going to construct single family rental homes. Adore our single family rental business will then buy those homes, and then we'll get them leased up.

Speaker Change: I think it's both actually I think listen banks banks are always a little bit hesitant around the construction angle.

Speaker Change: When you look at our overall business lines thinking about it this way somebody comes to us with a development of Multistem or call. It single family rental Genesis will go out and make that loan on the single family rental side or Jason I'm, sorry, they'll make that loan to the sponsor who then you're going to construct single family rental homes a door.

Speaker Change: R.

Our single family rental business will then buy those homes and then we will get them leased up so we're seeing a lot more what I would say cross platform origination today than what we've done in years past.

Michael Nierenberg: So we're seeing a lot more, what I would call cross-platform origination today than we've done in years past. And as you look at Genesys, when I say there are 66 different sponsors, you know, the banks are pulling back a little bit. But the team itself is doing a great job of kind of broadening the sponsorship. When we first bought this business, the amount of concentration with one large sponsor was, I think, around 25 percent, 25 or 30 percent.

Speaker Change: And as you look at Genesis when I say, the 66 different sponsors the banks are pulling back a little bit but the team itself.

Speaker Change: Is doing a great job and kind of broadening the sponsorship when we first bought this business the amount of concentration with one large sponsor was I think around 25%, 25% or 30% today. It's it's so spread out and when you think about where you are from a risk adjusted basis you were in a much much better place today than we do.

Michael Nierenberg: Today, it's, it's so spread out. And when you think about where you are from a risk-adjusted basis, you are in a much, much better place today than we were when we actually acquired the platform from Goldman. All right, very helpful.

Speaker Change: And I think we were when we actually acquired the platform from Goldman.

Speaker Change: Alright very helpful. Congratulations on the results I'll hop back in the queue.

Michael Nierenberg: All right, very helpful. Congratulations on the results. I'll hop back in.

Speaker Change: Thank you.

Speaker Change: The next question comes from Trevor Cranston of JMP Securities.

Trevor John Cranston: The next question comes from Trevor Cranston of JMP Securities. Please go ahead.

Trevor John Cranston: Hey, thanks. Good morning.

Trevor John Cranston: Please go ahead.

Trevor John Cranston: Hey, Thanks, good morning.

Michael Nierenberg: You know, you guys have talked a lot about growth opportunities across the entire platform, some of which are, you know, non-REIT investment portfolio opportunities. I guess, when you think about the overall capital deployment set you guys have and the return opportunities out there, can you sort of give us an update on how you think about the dividend level for the overall company in light of all that? Thanks.

Trevor John Cranston: You guys have talked a lot about growth opportunities across the entire platform.

Trevor John Cranston: Some of which are.

Trevor John Cranston: Non REIT investment portfolio opportunities.

Speaker Change: I guess when you think about the overall capital deployment that you guys have and to return.

Speaker Change: Return of opportunity out there can you sort of give us an update on how you think about the digital dividend level for the overall company in light of all those things.

Michael Nierenberg: So the dividend, obviously, we outperform our dividend, and hopefully, we'll continue to do that quarter after quarter. You know, the calculus for us is if we could deploy capital at, you know, 12, 13, 14, 20% return, use 15% on average. If we deploy capital at a 15% rate of return versus a dividend yield of nine or something around that, everything we do from an investment standpoint is going to be highly accretive versus giving money back. So that's how we think about it.

Speaker Change: So the dividend, obviously, we outperformed our dividend.

Speaker Change: And hopefully we'll continue to do that quarter after quarter. The calculus for US is if we can deploy capital at a.

Speaker Change: 12, 13, 14, 20% return used 15 at an average if we can deploy capital at 15%.

Speaker Change: Rate of return versus a dividend yield of nine or something around that.

Speaker Change: Everything we do from an investment standpoint is going to be highly accretive versus giving money back.

Speaker Change: So that's how we think about it.

Okay.

Trevor John Cranston: Okay, I appreciate the comments. Thank you.

Speaker Change: Okay I appreciate the color. Thank you.

Crispin Love: The next question comes from Crispin Love of Piper Sandler. Please go ahead.

Speaker Change: Thank you.

Speaker Change: The next question comes from Christian <unk> of Piper Sandler. Please go ahead.

Crispin Love: Thanks. Good morning.

Christian: Thanks, Good morning.

Crispin Love: Just when you're thinking about acquisitions and the alternative asset management space, what do you believe makes the most sense for you kind of over the intermediate term? What types of firms and investments would you be looking at and most interested in? And do you expect there to be opportunities in this area in 2024?

Christian: Just when you're thinking about acquisitions in the alternative asset management space. What do you believe makes the most sense for you kind of over the intermediate term what types of firms and investments would you be looking at and most interested in and do you expect there to be opportunities in this area in 2024.

Michael Nierenberg: You know, there's plenty of firms that are always out there for sale. What I would say is we have a business today in Sculptor. We really don't need anything other than performance. And again, performance will bring more AUM back to the platform. So we don't need to buy anything.

Christian: You know there is there is plenty of firms.

Christian: That are always out there.

Christian: For sale.

Christian: But I would say is we have a business today in sculptor, we really don't need anything other than performance.

Christian: And again performance will bring more AUM back to the platform. So we don't need to buy anything we are going to try to grow our credit business in a realist.

Michael Nierenberg: We are going to, you know, try to grow our credit business and our real estate. You know, the three pillars of Sculptor are real estate, credit, and the multi-strat fund. We are going to grow those three different verticals. We're going to grow them based on performance. Performance has been great. That'll bring in more AUM.

The three pillars of sculptor real estate credit and the multi Strat fund we are going to we are going to grow those those three different verticals, we're going to grow them by performance performance has been great that will bring in more AUM.

Michael Nierenberg: The firm is extremely stable, a great partner in Rhythm, and, you know, we're off to the races. And I don't think we need anything more than that. If there is a platform that comes up that we think is highly accretive to the overall alt space in the way that we think about the world, of course, we'll look at it. It's no different than, you know, Baron running the mortgage company, and there's another mortgage company asset that's for sale that we think is extremely attractive.

Christian: The firm is extremely stable partner in rhythm.

Christian: And we're off to the races, and I don't think we need anything more than that if there is a platform that comes up that we think is highly accretive to the overall <unk> space and the way that we think about the world of course, we will look at it it's no different than Barron running the mortgage company and there is another mortgage company asset that's for sale that we think is extremely attractive of course, we will.

Michael Nierenberg: Of course, we'll make a play on that. But right now, we have all the pieces in place to continue growing and putting up great returns for LPs. So unless something's extremely attractive, we'll stay the course. Great. Thank you.

Christian: Make a play on that but right now we have all the pieces in place.

Christian: To continue growing and putting up great returns for Lps.

Christian: So unless something is extremely attractive, we'll we'll stay the course.

Christian: Okay.

Crispin Love: Great, thank you. I appreciate you taking the time to answer my question.

Speaker Change: Great. Thank you I appreciate you taking my question.

Speaker Change: Thank you.

Michael Nierenberg: This concludes our question and answer session. I'd like to turn the call back over to Michael Nierenberg for any closing remarks.

Speaker Change: This concludes our question and answer session I would like to turn the call back over to Michael Nierenberg for any closing remarks.

Michael Nierenberg: Thanks for everyone's questions. Thanks for joining us this morning. As I said before, I'm super excited where we are overall as a firm and look forward to continuing to hopefully put up great results for our LPs and shareholders going forward. Great day. Thank you.

Thanks for everyone's questions. Thanks for joining us this morning.

Michael Nierenberg: As I said before Super excited where we are overall as a firm.

And look forward to continuing to hopefully put up great results for our Lps and shareholders going forward and look forward to updating you along the way have a great day. Thank you.

Operator: The conference is now concluded. Thank you for attending today's presentation, and you may now disconnect.

Speaker Change: The conference has now concluded. Thank you for attending today's presentation and you may now.

Speaker Change: I will disconnect.

Speaker Change: Yeah.

Speaker Change: Okay.