Rithm Capital Corp. (RITM) Q1 2026 Earnings Report, Transcript and Summary

Good day, and welcome to the Rithm Capital First Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Emma Hoelke, Deputy General Counsel. Please go ahead.

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

Thanks, Emma. Good morning, everyone, and thanks for joining us. I'm going to open my remarks and go a little bit into the credit markets for a minute and then we'll get into the supplement, which has been posted online. Baron Silverstein will cover the mortgage company. Peter Brindley will cover Elecor, which was formerly known as Paramount. We rebranded the real estate company last night. We're excited about that, and Peter has a lot of great stuff to discuss. So for the company, another solid quarter for our company, demonstrating the power of the franchise. Activity levels across the board were robust. The firm, as we stand today, is extremely well positioned to take advantage of market dislocations, as the combination of geopolitical risks and private credit headlines give us the opportunity to deploy more capital across the firm in both the ABF and credit space. As market participants pull back, this will play to our advantage. The majority of our capital in our asset management business is with institutional partners. As a firm, the exposure we have to software remains low. It is important to note, we have not seen any notable DQs in our credit exposure across the firm. We do not see systemic risk in private credit. From our seat, this is a sentiment-driven dislocation that will play into our ability to look for opportunities in the credit space. When you look at direct lending, 80% of direct lending sits in institutional drawdown funds. Systemic risk here will be contained. Large BDC portfolio have concentrations of approximately 20% in software. While saying that, defaults in the largest BDC and sponsors sit below the 5-year historical average of 1.1%. While saying all this, what's the opportunity for Sculptor and Crestline? We're structured to take advantage of dislocations. It's that simple. While saying all of this, when we think about dislocations, markets have rebounded. S&P is at all-time highs. Securitization markets remain robust, and there's lots of demand everywhere for ABF products. During the quarter, we did $2 billion of securitizations, and we see a consumer that remains healthy, particularly in our mortgage company as we look at the 4 million customers that we service. In our Paramount portfolio, which is, again, now called Elecor, leasing activities are excellent, and Peter will speak to that. New York City is now roughly 93% leased and San Francisco is on fire as a result of the AI boom and the need for office. San Francisco saw the strongest quarter of activity since 2019 and before. Availability declined by 600 basis points year-over-year. On the Paramount portfolio, the team did a great job in '25. They leased approximately 1.75 million square feet, 76% or 75% of the activity was in New York City with the rest in San Fran. So before I go into the supplement, I want to lay out Rithm our companies and how to think about us. As everybody knows. We started the company in the spring of 2013 at Fortress we started with $1 billion of permanent capital. And since then, we've created the following: $8 billion of permanent capital, all raised in the public market; $110 billion plus of assets; $60 billion managed for third parties. That's our asset management business. We have a $50 billion balance sheet that not only supports our operating companies, also supports our asset management business. We have one of the top 5 mortgage companies in the United States. We started that from scratch in 2018. We have 4 million customers, as I pointed out before. We own one of the top construction/residential transition lenders in the U.S. known as Genesis Capital. We're the fourth largest owner of office in New York City. And again, that's through the acquired Paramount Group, which once again was rebranded to Elecor. And we paid north of $6.5 billion of dividends. So what does all this mean? And where are we going? We'll continue to lead with performance, grow relationships with our LPs, perform as expected and do all we can to increase our value prop for our public equity holders. You heard it before, and you'll hear it again that some of the parts, in our view, is much greater than the whole. Now I'll refer to the supplement, which has been posted online. I'm going to start on Page 3. So when you look at the firm, we have really, what I would say, 5 core operating businesses or really 6. Sculptor and Crestline, our 2 asset management divisions, couldn't be more proud, couldn't be more excited where we sit today with both of those, very complementary strategies, different. One is based in Fort Worth, one is based in New York City, as you know, with global offices everywhere. Assets managed approximately $60 billion with more funds being raised daily. Elecor, formerly known as Paramount, Class A owner-operator of offices in New York and San Francisco. Peter will talk to that. Business is doing great. Newrez, our mortgage company, again, #3 in total unit serviced in the United States, including the large money center banks and a top 5 U.S. mortgage lender. Baron will speak to that. And then Genesis Capital, which is our residential transitional lender. It's also a large multifamily originator, and I'll speak to that in a little bit. And then you have Rithm, which sits obviously in the investment portfolio and at the REIT level. Page 4 for the quarter, what I would say is, as expected, $0.51 per diluted share. When you look at our EAD, $289.6 million in earnings. 17% return on equity. GAAP net income is always going to be noisy due to hedges moving in and out as we hedge up our MSR portfolios. $67.8 million of GAAP net income, $0.12 per diluted share and a 4% return on equity. Book value, we ended the quarter at $7 billion or $12.51. When you think about it, we paid $0.25 in dividends, effectively, we've grown book value quarter-over-quarter net-net. And that's truly a testament to our team as we think about the macro strategy and the markets in general. Dividend yield, 10.5%, $0.25 per common share. And cash and liquidity, we ended the quarter at approximately $1.4 billion. When you look at the quarter in review, and we think about Rithm asset management, which is the so-called parent, we deployed over $2 billion in corporate credit, ABF investments over -- and in ABF investments and the Sculptor Real Estate Fund V, they've committed $1 billion in the first quarter alone in 2026. Keep in mind, coming off a great successful fundraise of $4.6 billion on their latest fund. Great brand, great track record and a great business for us. Sculptor had gross inflows of $600 million, ending the quarter with $37 billion of AUM. When you look at Crestline, overall performance terrific, outperforming our initial underwriting, grew management fee revenue by 16% year-over-year in the first quarter of '26, and we'll continue to grow that business as we see the opportunities in the credit space. Genesis Capital, when you look to the bottom left, best quarter in history Keep in mind on this business, we bought from Goldman in '22. At the time we bought this business, they were doing $1.7 billion of total loans for the entire year. So we did $1.6 billion in the first quarter. We added 118 new sponsors. P&L looks great and credit performance remains strong. We will not sacrifice production for credit, just so we're on the same page. Newrez mortgage -- our mortgage company, servicing portfolio ended the quarter approximately $850 billion. That includes third-party. Funded volume of $15.5 billion, generated $274 million of pretax income with a 19% annualized operating ROE in the first quarter. And then on the investment portfolio, robust around our non-QM business. We originate quite a bit there in the mortgage company. We did $2 billion of securitizations. During the quarter, we invested $3 billion in different mortgage assets that includes non-QM and residential transition loans, and we also purchased $140 million of home improvement loans under our flow agreement with Upgrade, bringing the total purchase since Q3 to $667 million. When you look at the power of the platform, again, across the board we have -- what I would say we have pretty much everything we need from an asset management business. We'll grow in areas that we don't feel we have -- we'll grow in areas where we have core competencies. So what that will likely mean is we'll add teams, not businesses because we're extremely happy where we sit between Sculptor, Crestline and now known as Elecor as we grow our real estate presence. So when you look across the board, we're everything in credit, we're everything in the multi-strat business, on the real estate side, there's roughly $11 billion of AUM in the house. And in asset-based finance, I would expect us to grow that significantly with our third-party partners globally. When you look at the Sculptor business on Page 8, again, we couldn't be more happy where we sit today. We're 2.5 years in, total AUM $37 billion, most importantly, performance. We are going to lead with performance. We're not going to lead with AUM. We have a fundamental belief that you could only deploy so much capital into the markets when the markets give you the ability to create what I would call alpha or/outsized returns. That's how we view the business. So while all of us want to grow AUM, we need to lead with performance first, couldn't be more proud of the team, couldn't be more proud of the business and really excited where that business is going to go. Crestline, our other asset management business, which we closed on in December of '25, total AUM a little under $20 billion, a ton of investors across the platform. I was just in Tokyo, 1.5 weeks ago, meeting with both Crestline and Sculptor investors at a conference. In Asia or in Tokyo, we have 15 different LPs invested in the -- in both the Crestline platform and the Sculptor platform. So real global brands, the teams do a great job. When you look at this business, we are well positioned to take advantage of any dislocations in the market today. Investment performance, if you look to the bottom left side of the page, capital solutions, 13.5% net since '22; direct lending, 12% and change net since '23. So overall performance is very good. I mentioned earlier about software, only 7% of invested assets are classified in software. As we look to Elecor, I'm going to turn it over to Peter, who will give you some color on the real estate business. And then after that, I'll talk about Genesis and then Baron will take the Newrez portion. Peter?

Thank you, Michael. Paramount Group, as Michael just now said, has become Elecor Properties. I'm on Page 11, a new name and a new identity but a continuation of the same commitment to operating Class A real estate in New York and San Francisco. This new chapter reflects our intention to leverage the operational strength of the Elecor team and the financial strength of Rithm Capital to further enhance our trophy-quality portfolio, ensuring that we continue to outperform and attract the world's leading companies. Companies in both New York and San Francisco are choosing to elevate the quality of their real estate to enhance collaborative culture, energize their teams and drive productivity. It is among the most pronounced trends in our 2 markets. The quality of our portfolio, coupled with our planned significant investments will ensure we continue to attract the most discerning companies across a variety of industries well into the future. This rebrand is an acknowledgment of the evolution of the workplace and signifies a renewed commitment to delivering a leading workplace experience, one where world-class amenities are integrated into our buildings, resulting in a best-in-class differentiated experience for our tenants. This is a story of continuity and acceleration. The Elecor properties team is energized and working hard to execute on our exciting plans. Turning to Page 12. Elecor property highlights. Elecor owns, manages and operates high-quality, centrally-located Class A office properties in New York and San Francisco. The portfolio is managed by a senior leadership team with deep knowledge of our markets and a track record of success. Elecor is a vertically integrated platform with in-house expertise in all facets of the business, including leasing, asset management, acquisitions, property management, redevelopment and financing. Since the acquisition on December 19, 2025, we have identified operating efficiencies to increase our annual management company EBITDA by approximately $40 million. Elecor's portfolio consists of 10 core assets totaling 9.9 million square feet. The core portfolio is currently 85.7% leased at share with an average in-place rent of $90 per square foot at share and a weighted average lease term of 8.4 years at share. Key highlights include: leasing, year-to-date, we have executed leases and have leases pending on more than 360,000 square feet across the New York and San Francisco portfolio with weighted average initial rent of $94.64 per square foot, 14.9% higher than our weighted average initial rents in 2025. Capital markets, Rithm acquired the portfolio for $585 per square foot, an increasingly attractive basis given the recent transaction activity in both New York and San Francisco. JV opportunities, earlier this year, we launched a JV process on 1301 Avenue of the Americas, a 100% leased Class A asset located in one of Midtown's best-performing core submarkets. Financing, subsequent to quarter end, we closed a CMBS financing on 1325 Avenue of the Americas on a cash-neutral basis, extending the portfolio's current loan maturities while ensuring a well-laddered maturity profile. We also engaged on the refinancing of 31 West 52nd Street. Lastly, we are moving swiftly to execute on our growth-focused capital improvement strategy, which includes the repositioning and amenitization of 4 key assets, 2 in New York and 2 in San Francisco, which we expect will drive significant rent growth and occupancy gains in 2026 and beyond. Turning to Page 13, Elecor Properties leasing highlights. As Michael mentioned, in 2025, we leased more than 1.7 million square feet, our highest annual total on record. A significant percentage of our 2025 leasing velocity occurred in New York, where we are currently over 92% leased at share and the balance in San Francisco. In 2026, a significant percentage of our leasing activity year-to-date, including both leases signed and leases pending, is occurring in San Francisco, predominantly with leading technology and entertainment companies as well as leading law firms. At quarter end, our New York core portfolio's leased occupancy was 92.1% at share, up 470 basis points year-over-year. Initial rents in New York year-to-date on leases signed and leases pending is 12.2% higher compared to 2025 as leasing fundamentals continue to improve across the board in Midtown Manhattan. Our plan is to make significant improvements at both 1633 Broadway and 712 Fifth Avenue. 1633 Broadway is among Manhattan's -- one of Manhattan's largest buildings, our intention is to transform the lobby, infuse a second floor amenity space with a signature bar and event venue, a 200-seat conferencing atrium on the 17th floor and plaza and elevator upgrades. At 712 Fifth Avenue, we intend to create a hospitality-driven amenity offering commensurate with the trophy quality of the building, more details to come. At quarter end, our San Francisco core portfolio's leased occupancy was 59.1% at share, driven largely by a couple of known move-outs at One Market Plaza and One Front Street within the past year. Year-to-date, we have approximately 280,000 square feet of leases executed or pending, which equates to approximately 70% of our San Francisco leasing velocity in 2025. The strengthening tailwinds in San Francisco, coupled with our growth-focused strategy will drive continued leasing velocity and occupancy gains in our San Francisco core assets this year. Our plan is to make significant improvements at both One Market plaza and One Front Street. At One Market, we are redesigning the atrium and the entire ground floor experience, infusing a state-of-the-art conferencing center, fitness facility, atrium bar, 7th-floor sky bar, executive lounge and a rooftop deck. At One Front Street, we are totally reimagining the lobby with a cafe, a bar, a restaurant, a second-floor amenity space with a gym, conferencing, a private lounge, and we will also be fully modernizing the elevator system in the building. We are moving quickly to execute on our key objectives and look forward to updating you on our progress.

Thanks, Peter. By the way, a good sales pitch by Peter for -- if anybody is looking for space. We've got a lot of really good stuff going on. I'll now talk about Genesis. In my opening remarks, record quarter, $1.6 billion. What I would say is the business, when you think about some of the noise coming out of the administration around build-to-rent and there was an article, I believe, in the Wall Street Journal that I read this morning that discusses how some of the builders are actually pulling back. And I think there's roughly $3.4 billion of commitments that are on hold as a result of some of the new proposed bills that are either being passed or have been passed as it relates to developers needing to not only build these units, but then having to sell them in 7 years. As a result of that, you are starting to see projects on hold. You're seeing the SFR market at a standstill. When you look at our business, the Genesis business today is roughly 35% to 40% multifamily origination. And I think what you're going to -- I know what you're going to see from us as we go forward, a lot more production in the multifamily space. We are going to grow that. At some point, we'd like to grow that around our asset management business. So we look forward to that. When you look at the business, it's been a great one for us. We expect to do something between call it, $6.5 billion and $7 billion of production this year. The P&L on that when we bought the business in '22 was -- I think it was, what, roughly $45 million to $50 million or something like that. This year, we should do something between [ $150 million and $175 million ] of EBITDA. So it's been a great business. But like I said, we won't sacrifice credit in lieu of production. When you look at as we go here, there will be some opportunities, in our opinion, in the so-called RTL space. There'll be some opportunities in the housing market as we see some of the single-family rental operators get out. We have a very small portfolio that we've been selling down to retail. We've got a couple of thousand homes there. But I do think there's going to be some dislocation there, you're seeing in some of the equity prices in some of the larger institutional holders in that business. With that, I'm going to turn it over to Baron, who will talk about Newrez, we'll touch on the investment portfolio, and then we'll open it up for Q&A.

All right. Thank you, Michael. Good morning to everybody. Starting on Slide 18. Newrez had another great quarter. First quarter pretax income, excluding mark-to-market of approximately $274 million, which is up 10% quarter-over-quarter and delivering a 19% ROE for the quarter. The results were driven by our disciplined origination strategy, higher servicing fees and despite interest rate volatility, higher recapture and lower amortization. And this performance continues to show the power of our platform and our ability to drive consistent earnings. On Slide 19, a just a quick highlight and just given the size and fragmented nature of the mortgage and home-ownership market, we believe there is significant runway for scaled, technology-first operators like Newrez. Since the inception of our platform, we have grown our originations market share 8x and our servicing market share 6x, positioning us, as Michael said, as the third largest servicer and the fifth largest originator. And as we continue to deliver on our strategy of making home happen, we continue to grow with our client base overall. On Slide 20, we're highlighting our 2026 strategy with a focus on driving returns through revenue growth and a reduction in operating expenses. Our revenue growth is focused on maximizing overall customer lifetime value through the expansion of our partner base, continued product innovation and homeowner retention and that's shown in our consumer recapture rate and continued growth in our third-party servicing franchise. Our expense initiatives are laser-focused on harnessing technology to deliver operating leverage. Our cost per loan, which is already almost half of industry average, we project an additional 15% reduction from our current run rate. And executing on this growth up and spend down strategy is going to continue to deliver for our shareholders. Turning to Slide 21 in our originations business. Funded volume came in at $15.5 billion, which is up 31% year-over-year but lower than last quarter due to seasonal and interest rate factors. However, we continue to drive growth in our higher-margin direct origination channels, consumer-direct and wholesale, which comprised 37% in Q1 '26, up 75% year-over-year. And while market competition continues to pressure gain on sale margins, we maintain pricing discipline, did not chase market share and margins were contained within our historical 4-quarter range. We also had a very busy quarter of new product launches. Quick-Close Refinance application or Wholesale Express home equity offer, Streamlined Title, Crypto mortgage and medical loans. And most recently, our Freddie Mac VantageScore pilot, demonstrating our shared commitment to responsibly expand access to home ownership and reduce cost to borrowers. On Slide 22, we continue to build on our proprietary ReziAI functionality, which is an end-to-end intelligence system, enabling our originations platform, allowing us to capitalize on our operational efficiencies. Our partnership with HomeVision is ahead of schedule with our first codeveloped tools being implemented by the end of this quarter. All of these platform investments will continue to improve our operating leverage, driving further efficiencies in loans per FTE capacity and turn times. And finally, moving to Slides 22 and 23 regarding our market-leading servicing platform, we continue to grow our capital-light fee-based third-party servicing business with 5 new clients and $22 billion in new loan boarding. Our owned MSR portfolio continues to perform well as delinquencies remain stable quarter-over-quarter and the FHA delinquencies flattened as we normalize the impact of the new FHA modification guidelines. Regarding Valon, we're on track for the transition to their operating system in early '27. And the magnitude of these benefits of moving to an AI-native and modern servicing technology solution cannot be overstated. We expect to materially improve our processes and workflows, providing us a significant competitive advantage through our operating flexibility. And it will also be a significant benefit to any and all servicers who choose to move to Valon. Once we're fully operational, we're estimating total annual expense savings in excess of $65 million or a direct cost per loan reduction of 15% to $93. So I continue to believe our business is best positioned as it ever has been, and I look forward to sharing the next chapter of the Newrez growth story. Michael, back to you.

Thanks, Baron. Just wrapping up here on the investment side, probably one of the more active quarters we've had in a while, quite frankly. As I pointed out earlier, we did 4 non-QM securitizations totaling $2 billion. The one thing I would say is this doesn't include some of the other things we're doing around certain funds that we've launched where we have flow products going in from some of our origination businesses, and we expect that to continuing to grow as we go forward here. During the quarter, $3 billion of investment, $1.4 billion in non-QM loans, $1.6 billion in RTL. I pointed out earlier about the Upgrade flow agreement, how we purchased more loans in the quarter. So overall, investment activities remain, what I would say, despite all the headline risk and the noise, robust. What you're going to see from the firm as we go forward, hopefully, real growth in the ABF business under the Sculptor brands and some of the other and Crestline brands. And again, just staying quite frankly, true to our core knitting and where we can create an edge in the marketplace, that's where you're going to see us grow. But again, as we look forward, we're not going to sacrifice credit for AUM growth, and that's going to be our common theme. So with that, I'll turn it back to the operator, and then we can open up for some Q&A.

[Operator Instructions] The first question today comes from Crispin Love with Piper Sandler.

First, Michael, I appreciate your comments that you're not going to sacrifice credit for AUM growth. But can you just -- can you discuss the fundraising momentum in the asset management business and the outlook there, Sculptor and Crestline? What you're seeing from institutions? And then on the BDC private wealth side of those businesses, just given all the noise out there?

Sure. So what I would say on the -- I mentioned before, and this is a little bit of old news, the real estate group at Sculptor just raised $4.6 billion in probably one of the largest successful fundraises in the real estate space, I would say, in a long time. When we look at the core competencies, and this is where I'd like to think that we have an edge, whether it be at Sculptor and you look at the overall track record at what we've done at Rithm and then at Crestline, we're going to leverage the core competencies of what we do. So for example, when I look at the ABF space, we launched an evergreen fund in the third quarter with one of our wirehouse partners, which is performing extremely well. The -- and that's backed by some of the production stuff that we create, whether it be in Genesis or whether it be in Newrez. When you look at Sculptor's track record around ABF, it's -- quite frankly, it's unparalleled. We'll be out with new funds there, here in the short run. When you look at the credit performance overall as a firm and whether it be at Sculptor and/or Crestline, the credit performance has been very, very good. We don't see any real deterioration in any of the names that we actually hold within any of the funds. And I do think it's important to note when you look at the so-called noise in the private credit markets, a lot of that has been driven by retail. So while everybody wants these evergreen funds that -- where you theoretically have liquidity, we know when the world turns sideways or the markets get dislocated, there is no liquidity or very little liquidity. And I think one of -- I cited this, this morning, in the documents, it says you could have 5% redemption. So when these products are marketed -- and it depends on who the underlying fund manager is. But when you look at the underlying markets and you have something that says in a document 5% redemption limits, there's a reason that happens because if you think about it logically, if Mr. and Mrs. Smith want to take out $1 from their -- whether it be their BDC or their credit fund, and Mr. and Mrs. Jones don't want to take out a $1. Why should Mr. and Mrs. Jones get penalized because someone else needs liquidity and you have to liquidate a good position. That's why I think in a lot of these documents, you have these caps. Now while saying that, I think it's an education process. There's been a lot of stuff that's been distributed. Retail, the good news for us is we don't have a ton of stuff through retail. The bad news for us -- or actually, the good news for us is as we go forward, I think the market is learning. We don't think this -- as I pointed out in my opening comments, this is not systemic risk, and I think there's a huge opportunity for us. The other thing I would say is that it is very, very difficult to deploy the -- we're not going to be Blackstone or Apollo or one of the largest managers. We're going to grow, hopefully, and we're going to grow through performance. But when you look, it's very, very difficult to create alpha when you have to deploy the sheer amounts of capital that a lot of the large asset managers have. Kudos to them, they built great businesses, but it's very, very difficult to deploy that kind of capital. As it relates to the BDCs, roughly, I think the numbers are: 20% of the BDCs have software exposure. I pointed out in my earlier remarks, we haven't -- while the headline risk is dramatic. And if you go back to '21, when interest rates were 0, and you think about companies that were -- lent money at 20x revenue, not EBITDA, revenue and now you have AI kind of taking a center stage. I think it's going to take time to play out. We don't really know how that's going to play out. As you think about the software industry, I think software that's mission-critical to businesses are going to be the winners. There's going to be a bunch of losers. Right now, when I look at our business, we feel really good. As we think of capital formation here at the firm, we're trying to simplify our business. Sculptor is going to be our asset management business. We have Crestline, which we closed, which is another division of asset management. They do different things. And now the teams are working together. And hopefully, we're going to raise a lot more capital. But again, that capital is going to be based on our ability to create alpha relative to the peer set that's out there in the marketplace. And that's what gets us excited. So I would say, onward and upward, and the business feels really, really good to us. There is noise that's going to create opportunity because when you think about the credit markets and you have a 5-year treasury, for example, at 4%, the high-yield index is 3.25%, 3.50%, unlevered returns in that business are now 7.5%. Debt looks very, very attractive to us. And the last point I'll make and then turn it back to you is when you look, debt sits above equity. The S&P is at an all-time high, something is not adding up here. So we'll see how it all plays out. But we feel really, really good where we are from an asset management standpoint, where we're going with that division and how we're going to create more FRE and hopefully turn the tide on the overall valuation of our public equity.

Great. I appreciate all the color there. That's a good segue to my next question because just one pushback that I get from investors is that, that Rithm has become more complicated. You're definitely diversified but in a lot of areas, the results have been strong, but some investors may just move on to a simpler story. So first, what's the response to that? And then just second, what are the key ways that you're looking to simplify the business and the story overall to trade closer to that sum of the parts level?

One is we need to grow our FRE and our asset management business. And that is a big focus, right? So with -- obviously, part of that will come with AUM growth. Part of that will come with synergies. And that really is going to be a driver. So as we create more FRE, the asset management business can then get separated from the broader REIT. So when you think about it, we have really 2 main divisions in our operating business. One is the mortgage company, which we again, another simplistic thing, everybody wants you to take it public. I'm not sure that it's the best time to do that. Obviously, you looked at one of our peer -- one of the peer mortgage companies, their stock, when you miss earnings and the stock goes down by 35% in a day is no investor wants to be in that position. So you can simplify by taking the mortgage company public, breaking out the asset management business, you have Genesis, which is going to continue to grow. But what you're going to see in some of these businesses is more third-party relationships because the one thing that's different today than where we were a couple of years back is that the adoption of ABF as an asset class for third-party LPs has never been greater. And there's a reason for that, right? So you've seen a little bit of rotation out of private credit into what we'll call real assets. In the ABF space, you have assets that are kind of -- think about it almost like hard assets, where the cash flow is backed by these hard assets. So you're going to see more and more capital deployed there. But overall, like the REIT is still the REIT. If I had my druthers or we had our druthers, we paid out $6.6 billion of dividends over -- since we started the company in '13. 550 million shares, that's about $13 a share. You didn't pay out -- I think, I don't have my calculator in my head, but I'll try. Anyway, if you think about that, $13 plus $10, it gets you to a mid-20s stock price. I think part of the challenge is as we continue to maintain REIT status and pay this dividend, which we have no intention of changing right now, growing the asset management business has to be job 1, thinking about simplifying the mortgage company story and Baron and the team have done a great job there. But I think AI and I think Baron is a little bit shy about the amount of money that we're going to save there. But I do think the mortgage industry is going to change dramatically. So I think telling the story around the mortgage company, telling the story around the asset management division, the REIT is not going anywhere. As you know, we just did the Paramount deal. We're going to bring in third-party relationships there. And it's really one of the things we're very focused on how do we grow earnings, right? If we could grow earnings and create more growth businesses, that will help us because we have all the pieces we need at this point. But again, and I hear you, Crispin, part of the challenge is how do we simplify the story. But I think the bigger asset managers, I would argue, are not any more simple than we are. I'd argue they're more complicated. So I think as we continue to get lumped into the REIT space, people who think we're complicated. If we go into the asset management space, I think we'll be less complicated.

Next question comes from Bose George with KBW.

Actually, on the -- switching to the mortgage side, your gain on sale margin on the wholesale and correspondent was down a little bit. Retail was up. Was it mix doing some of that stuff? Or were there trends in the quarter that are worth calling out?

I do think it's -- it is a little bit of a mix. I also think there's some competitive pressures overall with respect to non-QM. I also think when you look at our performance in Q4, especially on the wholesale side, we definitely had a good quarter going into Q4, and I think we just basically normalized back to margins as to where we landed in Q1. In a lighter origination volume, you would expect that things would normalize.

Okay. Great. That makes sense. And then just quarter-to-date, any changes in book value to call out?

No, Bose. We're essentially flat quarter-to-date.

The next question comes from Doug Harter with BTIG.

Hoping you could talk a little bit more about Elecor and bringing in third-party capital just in kind of reducing the capital commitment down to kind of what you talked about at the time of the deal announcement.

So we closed the deal on, I think, December 20 or December 19. So we're 1 quarter in. Peter alluded to it, we've created, I think, $40 million of savings in 3 months. So we're very proud of that. And the conversations we probably had, whether I tell you it's 100 or more LP discussions since we've acquired the portfolio. What I would say, we're out -- and Peter mentioned, we're out with a potential JV partnership on 1301, we have a JV relationship with Blackstone on One Market in San Francisco. We have a JV relationship with another party, Beacon, on one of the other assets in San Francisco. We'll continue to either do JV relationships, which you'll see us quite frankly, create gains. But I think for now, it's really how do we operate the company. I wouldn't be shocked if at some point, we bring it back out in the public markets. I think it's a little bit too soon to do that. That could be a real capital raise as we think about creating external management fees around certain things. So I think it's all TBD. But over the course of the next kind of 9 months or 8 months through the year, it's likely we'll do some JV relationships/third-party LP relationships on the assets.

Got it. And kind of given your view on commercial real estate, is it -- are you considering kind of deploying additional capital into your 2 target markets? Or is that mostly going to be through kind of the property enhancements you talked about?

I think it's both. In the business and we've gotten asked this question in the past, why did we do this deal. When you have the ability to acquire what we think are great assets at cheap prices, you do it. And I think it's that simple on this portfolio. You're on Fifth Avenue and Sixth Avenue, great operating team who we've unleashed, quite frankly, today relative to where the company was positioned before we acquired the company. Peter and his team have done a great job. That's how you make the money. Buy cheap assets at a very attractive value and these are quality assets. They're not mid-block, they're on the big avenue. So we're super pumped about this one.

The next question comes from Marisa Lobo with UBS.

Just moving to Genesis. Looking at construction loans, they're about 52% of that book. As tariffs are pushing up labor and material costs, are you seeing any stress on individual projects? Or how has underwriting changed there?

Our underwriting box is always pretty tight. I don't think that's any different than where we've been overall since we've acquired the company. I will tell you, listen, I'm like everybody else, if you look at consumer sentiment, I'm a little bit nervous. I mean you go out and you buy a sandwich, it's $15. So you have to watch out for, I think, overall, the state of the consumer. Some of the noise out of D.C. makes -- it gets you a little bit concerned as you think about the so-called build-to-rent space. I think seeing the article in the journal this morning, I think, is a positive as the administration will like, hopefully, peel back some of those -- some of the thoughts that you have there. But overall credit, we're extremely diligent. The gentleman that runs that business for us, Clint Arrowsmith, does a great job. By background, he's a bank credit officer. So it's not just to grow volume, it's to grow volume in a meaningful way with a tight credit box. We do a lot of different things than, I think, a lot of the other folks in that space, and we'll maintain discipline around credit. The portfolio, I think, is 3% is the delinquency numbers. And when you think about the average advance rate, they're typically well below the industry. So we feel really good about where we sit there right now. But there's been no real change. But from a risk standpoint and a discipline standpoint, there's been no deviation to grow origination in lieu of credit.

And looking at the new origination yields of 9.5%, down from 10.1% in Q4, is this a function of a mix shift or tighter spreads in the market?

So a little bit -- everything is a little bit more competitive, as I pointed out earlier, there's huge demand for ABF products. This is one of the things that falls within that bucket. While saying that, you have points in and points out and you got different types of fees. So overall, the unlevered yields are still, give or take, about 10% and when you look in the securitization markets or we put them into funds in securitization, you're looking at well into the double digits on a net-net basis. So we feel -- we love that business right now.

The next question comes from Trevor Cranston with Citizens.

When you guys look at the proposed capital rule changes for banks, do you think that has any impact on their participation in the mortgage market or the servicing market? I guess, I was particularly curious about how you think that impacts the correspondent channel of Newrez.

It should help the MBS market, quite frankly. You got the basis in and around 105 basis points. I think the tight we saw pre the conflict in the Middle East was about 90. That was the tight. We got out to 125, 130. Historically being a mortgage bond trader myself, I think stuff seems fair to cheap here. So I wouldn't be surprised that the banks come in. I think some of this depends on the new Treasury Secretary that's -- not Treasury Secretary, the new Fed Chair that's going to come in, Warsh, when he gets elected. He's a little bit more of an inflation hawk. And we were talking last night about you have a massive deficit in the U.S. It's roughly $40 trillion. So they're going to have to continue issuing a lot of securities to fund that deficit. The question is, is that more in the front end or the back end. I think the other thing that probably some of the banks CIOs are thinking about is inflation. You saw this morning in the U.K., I'm looking at bond yields of north of 5%. You look today, the front end of the treasury markets in the [ 3.80s, ] 10-year treasury is now 4.35%. So I think some of that will play into what the banks do. But overall, I would think with easier bank rules and the banks having a ton of cash from their deposits, you're going to see them come back into -- or they're in the mortgage market, but I think you'll see them acquiring more. On the servicing side, don't know. I mean honestly, I think it's -- they're -- one of the -- a couple of the money center banks already have been involved in that space for a while. I think that could continue. We just have to be disciplined about how we originate loans and make sure we're not doing something for market share versus actually making the money to -- which was Baron's earlier comments.

Yes. Okay. That makes sense. And then you mentioned briefly the kind of decline in valuations in some of the public mortgage companies that are out there over the course of this year so far. Are you guys seeing any sort of M&A opportunity associated with that? Or are there any platforms you think that have maybe gotten cheaper that might make sense as a sort of add-on to the existing platform?

Historically, our M&A around the mortgage company space has been where we think we could acquire cheap assets as part of the overall acquisition. When you look at the company today, we don't need anything new. So when you look, I think there's, give or take, 10,000 people, including contractors at the mortgage company, Baron and the team are focused on getting really efficient when you look at the adoption of AI and some of the partnerships that we've set up as a company. I don't -- we don't have any need to buy another mortgage company. If there is a mortgage company that's out there that's cheap, there's not that many left, quite frankly. When you look, Rocket acquired Mr. Cooper, which we built at Fortress, we built Newrez. There's just not that many out there that are independent now. You have United Wholesale, but overall, I think we don't need anything more.

The next question comes from Kenneth Lee with RBC Capital Markets.

Just one on the Newrez side of the business and the potential benefits from AI and efficiency moves there. It looks as if in 2026 you could potentially expect some increased productivity around loan processing. Do you expect to see some of these benefits materialize over the next quarter or 2? Or is it mainly weighted towards the latter part of 2026? I just want to get a little bit more color around the benefits there.

Yes. On the origination side, right, we talked -- I talked a little bit about HomeVision and our partnership there. So that is going to be -- you're going to see those benefits materialize coming into the second half of the year, right? Our initial product launch is ahead of schedule and our -- we hope to have those tools in place really going into the third quarter.

Got you. Very helpful there. And just one follow-up, if I may, just around the Crestline business and realizing that most of the clients that you're serving are from the institutional side. Wondering if you could just talk a little bit more about color you're seeing around institutional investor demand for direct lending. What are you hearing from clients more recently?

It's interesting. When I was in Asia with Keith Williams, who runs Crestline, people -- there's still a lot of demand, what I would say, for direct lending. While saying that, I think that's more institutional based. You are seeing a little bit of rotation. Obviously, with headline risk, if you're a retail investor and you're not in the markets every day. I think if you could rotate out, that's probably some of the stuff that you'll see go on over the next quarter or so. But in general, we have all kinds of different funds in the market and capital formation continues. We have to lead with performance. If we're that heavily weighted to software and you sat down with an LP, and you said, "Well, our software exposure is 20%." They may say like, "I don't really want to do this." I would say that the background of Keith and the team at Crestline and they go back to 25 years of -- and a lot of the folks in that very direct -- same direct lending space, whether it be the folks at Sixth Street or there or at Crestline come out of the old Goldman model. So we feel really good about it, and I think you're going to see more capital being raised around direct lending and they'll continue to do that.

The next question comes from Henry Coffey with Wedbush.

The flip side to the complexity issue, and we've all talked about that a lot, is that there's always one business that does well and another that maybe doesn't do so well. But combined, you always end up at a nice spot. Can you -- if you look at your different businesses, Michael, can you tell us who -- not to pick on anybody, but how do you rank in terms of who's really knocking it out of the park right now? And which businesses are facing legitimate headwinds?

I would say -- and I don't want to sound like we're the -- I don't want to tell everybody we're always the best in everything. But overall, I think everything is performing extremely well. The real estate business, the Paramount or now known as Elecor portfolio is great. The team there, we're so excited to be working together with that team. Baron, there's nobody in our organization that worked harder than Baron other than me. Baron works his tail off and Baron and his leadership team do a great job around the mortgage company. Clint and the Genesis team continue to put up great results. And the asset management business, I think, is just getting started. We're at $60 billion now. And again, it's not an AUM rate, we have to perform. So when everybody asks, what else do we need or what's next? There's really nothing that's next unless we think we're going to create an edge in -- for our LP base. And so I think -- and then the investment portfolio, Rithm, Charles Sorrentino and the team do a great, great job. So -- and we're all working together a long period of time. We love where we sit in the ecosystem, the -- if there's anything that kind of bothers us, it's the overall valuation of the so-called sum of the parts. But in general, I think all the businesses continue to perform really well.

More pedantic. When you look at the P&L and the EAD calculation, is this pretty much the way the business is going to look with some improvements in efficiency? Is this sort of the new overhead level?

No, I think we're always looking at overhead. We're always looking at ways to become more efficient. EAD needs to grow, and that will grow -- hopefully, grow as we -- as the asset management business grows and we get more efficient. But we're always looking at head count. We're always looking at ways to become more efficient. The mortgage company, I think the mortgage company does about $4.5 billion of revenue, something in that range. When you think about it, if we net, give or take, about $1 billion-ish, there's a lot of room to actually get more efficient there. And I think it's not just people-wise, quite frankly, it's process-wise, it's processes. And I think you're going to see that with AI changing the mortgage industry. So we're excited about that. But in general, we look at everything. Asset management fees should grow over time as we continue to perform for our clients.

$87 million in depreciation, is that the new run rate? Or is there some new extra items in there?

Henry, that's a little bit higher than the run rate. That includes both the Adoor portfolio as well as Elecor. So as we sell down the Adoor portfolio, you could expect that number to come to around $60 million, $65 million a quarter.

And the Adoor portfolio, just for everybody's edification, that's our single-family rental business. As I pointed out, we have a few thousand units or a couple of thousand units, and that continues to get sold down retail.

This concludes our question-and-answer session. I would like to turn the conference back over for any closing remarks.

Thanks for everybody dialing in. Thanks for your questions. Thanks for your support. Look forward to updating you on another quarter here in the near future. Have a great day.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.