RITM - NYSE

Good morning, and welcome to the Rithm Capital Fourth Quarter 2025 Conference Call. [Operator Instructions] Please also note today's event is being recorded. At this time, I'd like to turn the floor over to Emma Holke, Deputy General Counsel. Ma'am, please go ahead.

Thank you, and good morning, everyone. I would like to thank you for joining us today for Rithm Capital's Fourth Quarter and Full Year 2025 Earnings Call. Joining me today are Michael Nierenberg, Chairman, CEO and President of Rithm Capital; Nick Santoro, Chief Financial Officer of Rithm Capital; and Baron Silverstein, President of NewRez. Throughout the call, we are going to reference the earnings supplement that was posted this morning to the Rithm Capital website, www.rithmcap.com. If you've not already done so, I'd encourage you to download the presentation now. I would like to point out that certain statements made today will be forward-looking statements. These statements, by their nature, are uncertain and may differ materially from actual results. I encourage you to review the disclaimers in our press release and earnings supplement regarding forward-looking statements and to review the risk factors contained in our annual and quarterly reports filed with the SEC. In addition, we will be discussing some non-GAAP financial measures during today's call. Reconciliations of these measures to the most directly comparable GAAP measures can be found in our earnings supplement. With that, I will turn the call over to Michael.

Thanks, Emma. Good morning, everyone, and thanks for joining our fourth quarter earnings call. So much to be excited about with our company. And before I get into the discussion, I want to thank our partners for all your support as well as our employees across all of our companies for all of your hard work and effort in driving excellent results for our LPs and shareholders. On today's call, I welcome Peter Brindley, one of our new partners who has been leading all leasing and other divisions at Paramount. Peter will be speaking about Paramount, which is one of our new acquisitions on the real estate side, and Baron Silverstein, who you've heard from in the past will be speaking about NewRez. As we think about 2025, it was an excellent year for the company, in which we executed for our clients by creating outsized returns for our LPs and higher earnings year-over-year for our shareholders. We grew our asset management business, both organically as well as through acquisition, including adding Crestline Asset Management and a take private, as I just pointed out of the real estate REIT name Paramount to our stable of companies. Today, we manage over $100 billion in investable assets across the firm. As I've said repeatedly, we will grow our firm prudently by creating alpha and results for our clients. While all of us in the asset management business want more assets, we will earn each and every one through performance. Financially, our company had a great year, a great fourth quarter, which I'll get into in our supplement. The diversification of our platform is paying off as we had a record fourth quarter from an EAD perspective. Book value year-over-year was higher despite paying out north of $600 million in dividends. Our Genesis business, which manufactures and originates multifamily loans and residential transitional loans had a record year, both in originations as well as in earnings. This business produced just under $5 billion in loans and earnings were up 250% from the time we acquired the company in 2022. Just for a metric, when we acquired the company in 2022, production numbers were $1.7 billion. This year, we'll cross north of $5 billion, while maintaining prudent discipline around credit. Our mortgage company, NewRez, had a great year. Year-over-year earnings grew by 13%. We continue to make significant investments in our tech stack as well as our marketing division as we work on our customer experience and our brand. During the year, we welcomed 2 new leaders to these divisions. Brian Woodring, who joined us from Rocket and Leslie Gillon, who joined us from JPMorgan, both experienced leaders in their field. We announced 2 transformative transactions on the tech side. One is Valon, which we announced this past week, which is a world-class servicing system, and Baron will speak to that, and HomeVision on the origination side. In our Asset Management division, we had a very good year. As I mentioned, we announced the acquisition of Crestline, which is a terrific credit shop with both an insurance and reinsurance business. Sculptor had a great year, both on the performance side as well as on the capital formation side with assets growing, especially the real estate division, which closed on a $4.6 billion new fund. We launched -- on the asset management side, we launched our first evergreen fund on a bank platform in the ABF space. We created SMAs on our origination business with overseas clients. We launched our first closed-end ABF fund with an initial seed from the pension of $200 million. While we are very pleased with our progress, there is so much more for us to do. On the Paramount acquisition, what that deal is, it was an opportunistic situation. We acquired 13 large office buildings in both New York and San Francisco, which 10 -- roughly 10 are core. It's a real highlight for us. Not only do we love the basis for entry, we now have a great operating company, which will help create an edge for us as we look for other opportunistic investments in the real estate space. Looking forward, we will add to the platform where we need to offer products for our LPs and shareholders. I'll now refer to the supplement, which has been posted online. I'm going to start on Page 3. As you look at Page 3, again, as I mentioned, we have over $100 billion in assets being managed by the firm. That's both balance sheet as well as in third party -- with third-party clients. The Rithm Asset Management AUM is $63 billion. The Rithm balance sheet business is $53 billion. When you look at our family of companies, Sculptor, world-class asset management business, providing credit, real estate and multi-strat investing. Crestline, large credit shop offering a vast array of credit offerings. Paramount, as I mentioned, which is the real estate company that Peter will be speaking to in a minute. And just on a side note, at some point, the Paramount name will go away because obviously, it's a little bit confusing between movie studios and other things. So we are currently working on a rebrand there. NewRez, our mortgage company, third largest servicer of mortgages in the United States and the fifth largest mortgage lender in the United States. And then Genesis, which is one of the largest residential transitional lenders in the U.S. and probably one of the hottest products when we think about from a fund formation that our clients want. As I mentioned before, we're going to earn -- we're going to grow via results, and that's the way that we -- this company was built, and that's the way that we're going to continue to maintain discipline as we go forward. Page 4, financial highlights. Earnings for 2025 earnings available for distribution, $2.35 per diluted share, which represents a 12% year-over-year growth. We had an amazing quarter in Q4, which actually shows the diversification of our platform, earning $0.74 per diluted share. Stable earnings performance when we look for the company, we've earned 25 consecutive quarters where our earnings available for distribution were greater than the common dividend paid. Dividends, we paid out well north of $6 billion in dividends since we formed the company in 2013 while at Fortress. When you look at Q4 results, GAAP net income, $53 million, $0.09 per diluted share for the quarter, 3% return on equity. When you look at EAD for Q4, $419 million in the quarter, $0.74 per diluted share or 24% return on equity. When we look back to 2025, GAAP net income for the year $567 million. Obviously, the delta between Q4 and fiscal year 2025 has to do with the MSR mark that we took in the quarter to be a little bit more conservative, and Darren will speak to that in a minute. For fiscal year 2025, from a GAAP perspective, $1.04 and a return on equity from a GAAP perspective, 8%. When you look for the full year, earnings available for distribution, when you take out the noise, the company made 1.2 -- a little under $1.3 billion, $2.35 per diluted share and a return on equity for the entire business of 19%. Book value reported at the end of 12/31 was $7 billion, which represented a $12.66 per common share. When you look back, I think the year before was about $0.10 lower. When you look at where we are market-wise, the 10-year treasury is backed up and yield towards 4.30. Mortgage rates on the other side have dropped a little bit. Book value today is probably between 12.75% and 13% -- I mean, $13. Our common stock dividend, we trade at roughly 9.2%. This was at the end of the year. And as everybody knows, we pay out $0.25 a quarter or on a fiscal year basis, $1 a share. Cash and liquidity, this is after balance sheeting the Paramount deal on balance sheet as we work to raise capital around that, both in a JV structure as well as in funds. We ended the year with $1.7 billion of cash and liquidity on balance sheet after funding everything in the business. Page 5, year-end review. As I pointed out on the asset management side, a very, very good year. Sculptor had gross inflows of $5.8 billion in 2025. AUM grew from $34 billion to $38 billion in the year. On the Rithm side, we closed different ABF products, as I mentioned, first evergreen fund, and we're out now marketing a closed-end ABF fund with an initial seed of $200 million. On the Crestline acquisition, this kind of fulfills our mission of what we think on the credit side, and I'll talk to this in a minute. But Crestline is a little bit under $20 billion in AUM. They have a ton of different LPs. They had their annual meeting last week down in Texas. I was down there meeting with a lot of clients, and everybody is super excited. One is about the partnership as we go forward. but also what -- some of the pockets that we didn't have before that we currently acquire as a result of the Crestline organization. And more importantly, the people there are just -- are terrific. So we're really excited about where we're going to go there. I mentioned Paramount. And again, Peter is going to talk to that. Class A office buildings in New York and San Francisco, super pumped about that one. As many of you know, we, at the Rithm level, not at the Sculptor level, have avoided -- not avoided, I should say, but have not made commercial real estate a primary focus. This acquisition obviously puts us where we're the fourth largest owner of office here in New York City, and we're super pumped about that. When you look to the bottom part of the page on the left side, Genesis Capital, I pointed out that. The team there has done a great job, $4.8 billion of origination in '25, record earnings, client franchise continues to expand, and we are going to lead with credit first. That is our mantra as we think about our origination businesses. NewRez, I pointed out, third largest mortgage servicer in the U.S. That does include the large banks, fifth largest mortgage lender in the U.S. servicing portfolio, $850 billion, funded volume for 2023 -- 2025, $63 billion, generated north of $1 billion in pretax income year-over-year was up 13%. And then we announced our strategic relationships or partnerships, including some equity investments on the technology side. On the investment portfolio side, we did 8 securitizations, $4 billion in UPB. We invested $9 billion in residential mortgage assets. That's through -- a lot of that through our origination businesses between non-QM, which grew a lot in the NewRez side and our residential transition loan business, which again is the Genesis business. And we also entered into a flow agreement with Upgrade to purchase up to $1 billion of home improvement loans -- and then we purchased a little bit under $600 million in 2025. From a macro standpoint, obviously, a lot of geopolitical risk everywhere in the system. The administration is extremely focused on affordability. They announced their -- the GSEs are going to purchase up to $200 billion of Agency MBS. We are not sure exactly what that amount is today. For 2026, we think they can buy upwards of $155 billion. While saying that, we think a significant amount could have already been purchased. What we did see in the quarter is the mortgage basis tightened, which means you're seeing lower mortgage rates relative to where treasury yields are. As a result of that, we should see more mortgage production. You are going to see higher levels of amortization. The higher levels of amortization should provide an opportunity for us to generate more origination gains. As we look forward, we believe the yield curve will continue to steepen. I've been pretty vocal on a number of our earnings calls. We are set up for this. We are along the front end, and we're not really short much, but if we're short anything, we would be short at the back end. We do think the yield curve will continue to steepen. Obviously, President Trump announced Kevin Warsh as the new Fed chair, and we think that will continue again to lead to a steepening yield curve. The last part I'll mention on this page as we think about this Agency MBS has done extremely well the past -- towards the end of the year. And the other space that's actually really in vogue and obviously, we made a significant investment there is on the return to office or the office buildings that we have. And again, Peter will speak to that. As we look at the power of the platform, Page 8, the asset management business will continue to grow. We don't -- just to be clear, we don't really need anything. When you look at this page, there are certain pockets that we don't have. We will -- for example, as we think about infrastructure, where we will grow, our thing and my thing has always been we're not going to grow in a sector unless we have the expertise around the house. I always like to use the example is you can't take the short stop and make him or her an offensive alignment. That just doesn't work. When we look at our business today, we have a great credit business. We have a great multi-strat business. We have a great real estate business and our ABF business should be -- should grow substantially over time. But again, we're going to grow through our existing teams, and we have great teams. I think in the asset management business, when you look all in, we have about 700 folks across the platform that includes both investment professionals as well as support team. So we're extremely well staffed and well suited for the growth in our company. But again, we do need to lead with results first. Page 9, Sculptor had a great year. I pointed out $5.8 billion in gross inflows, performance across the board, whether it be in the multi-strat fund, which is roughly $9 billion now, 15.5% gross or 11% net in '25. The credit fund through '25, and this goes back in time, 18.9% gross and 14.5% net asset management revenues in '25, up $95 million from '24. Again, we have everything we need in credit. We think we have everything we need in real estate. We'll grow in areas that we don't have the -- either the staff or the -- what I would say, the wherewithal to grow unless we think we're going to create an edge or be a market leader. When you look at the Sculptor organization, 30-year track record, greater than 70% of the clients have been with the firm for longer than a decade, and AUM is now approaching $40 billion. Crestline closed that transaction in December. I'm on Page 10, $18 billion total AUM, 700 investors across all strategies. The business has been in place for 20 years. Keith Williams, who leads the asset management business has done a great job there, continuing to grow. Offices in New York, Canada, London, Tokyo and couple that with our Sculptor partners, there's -- again, we have everything we need to continue growing and providing good value for our clients. When you look at '25, the Capital Solutions business, overall, since '22 generated a little bit south of 15% from a net IRR perspective. Direct lending, it's a little under 13% since '23 and the NAV lending business, 11%. A great brand. And again, where I think the merits or why this deal works is we bring capital. When you look at the broader organization, there are things that we didn't have that today we have, for example, direct lending, a BDC insurance, reinsurance in capital solutions. So when you think about the credit business across both Sculptor and Crestline today, I think it's something north of $40 billion. So super pumped about that. On the Paramount deal, Page 12, when we look at Paramount, how do we think about this? So what I would say is when we started was Rithm, which was formerly known as New Residential in 2013, our thesis back then was to take advantage of a dislocation in an asset class and build a company around that. At that time, the asset class that we focused on were mortgage servicing rights. So we seeded New Residential at that time with $1 billion. We went out and bought hundreds and hundreds of billions of mortgage servicing rights from the banks. And from there, that was really the beginning of New Residential. When we look at the Paramount Group, and this -- again, there will be a name change there, so it's not confusing. But when we look at this company and you think about the dislocation in office and our ability or what we have at Rithm, which is no legacy office and a very, very clean balance sheet, we thought this would be the right time and the right asset class and the right team to be able to take advantage of a dislocated sector. So again, what did we do? We went out. We bought a company for -- in competition with some of the largest office REITs here in the U.S. as well as some foreign investors. We bought a company where the going-in cap rate is 7%. Our acquisition basis is $585 a square foot. we're buying Class A office buildings in 2 gateway cities at a 40% discount to pre-COVID values. And you just can't build these buildings and the replacement cost is a 75% discount to replacement cost. One of the things that we get, and I'm going to turn over the narrative to Peter here in one second. One question we typically get when we're out there raising capital around this particular transaction is, well, who's the leadership? Paramount has 300 people, both at the building level and at corporate. when we spend time and when I spend time with Peter and you look at the expertise we have in-house at Rithm and our operating companies, there's a world-class operating company here at Paramount. We don't need anything else when we think about how this company is going to run. Obviously, we're tweaking leadership, and we have done that. And when I -- when we look at the team today, we're super excited about where we're going to go with this company, where we're going to be able to add in the office space and quite frankly, where we're going to add overall as an organization in the real estate space. So super pumped about this. We do think it's transformational for us in the commercial real estate space. With that, I'm going to turn it over to Peter, who's going to take over on Page 13.

Thank you, Michael. I'll start by saying Paramount owns, manages and operates high-quality, centrally located Class A office properties in New York and San Francisco. The portfolio consists of 10 core assets totaling 9.9 million square feet, 3 noncore assets totaling 2.4 million square feet and 3 managed assets in New York totaling 600,000 square feet. The entire portfolio is approximately 13 million square feet. In 2025, we leased more than 1.7 million square feet in our core assets, up 235% from 2024 and our highest annual total on record. Approximately 62% of our 2025 leasing velocity was on vacant space and space scheduled to expire in 2025. The balance of our 2025 leasing served to derisk future lease roll. At year-end, our core portfolio leased occupancy at share was 86.9%, up 220 basis points year-over-year. Our core portfolio boasts a weighted average lease term of 8.4 years for office leases with an average in-place rent of $90 per square foot. Our tenant roster is comprised of best-in-class companies with significant industry diversification. The portfolio is largely comprised of financial services, legal, insurance, technology and media companies. Turning to our leasing results on Page 14. In New York, at year-end, our New York core portfolio's leased occupancy was 92.8% at share, up 780 basis points year-over-year. During 2025, we completed 43 deals totaling 1.3 million square feet with an average lease term of 13.8 years. Our 2025 leasing includes 5 deals greater than 100,000 square feet, a testament to the quality of our assets and the strength of our team, as Michael alluded to previously. With regard to the New York market, it just continues to gain strength. Manhattan has experienced the strongest return to office momentum in the country with visits to Manhattan office buildings nearing pre-pandemic levels. In-person work, coupled with strong earnings forecasted for U.S. companies in 2026 will power velocity going forward in New York. Return to work is no longer really a conversation. Work from home is in the rearview mirror in New York. This city has more energy than I think it's ever had, and it feels really good. In 2025, Midtown, which is predominantly where most of our assets are located, posted the highest annual total of new leasing activity since 2018. Robust leasing, little to no new development over the next few years, conversions of select buildings away from office and the ongoing reduction of available space will further improve Midtown's fundamentals going forward, and we expect will result in NER growth going forward. Turning to our San Francisco leasing results. At year-end, our San Francisco core portfolio's leased occupancy was 62.2% at share, down year-over-year, driven largely by a couple of large known move-outs at One Market Plaza and One Front Street. We're in the process of adding market-leading amenities at each of these premier buildings and look forward to updating you on our progress in subsequent quarters. During 2025, leasing activity in our San Francisco portfolio increased by 330% year-over-year as we completed 16 deals totaling 411,000 square feet with an average lease term of 8.6 years. This represents our highest annual leasing total in 5 years and reflects the ongoing recovery in San Francisco. More broadly and with regard to the market in San Francisco, 2025, San Francisco recorded approximately 9 million square feet of leasing activity, the strongest annual leasing total since 2019. This uptick in leasing activity contributed to the 310 basis point year-over-year decline in San Francisco's availability rate as tenants are increasingly reengaged in the market and in many cases, expanding their footprint. At year-end, there were approximately 8 million square feet of tenants in the market, a pipeline that exceeds pre-pandemic levels and once again, a reflection of improving market conditions in San Francisco. In 2025, San Francisco-based companies raised $134 billion of venture capital funding directed in large part to AI companies, which accounted for 143 deals totaling approximately 2 million square feet, more than 20% of San Francisco's annual leasing total in 2025. Approximately 56% of this AI demand based on deal count originated from tenants that are new to the market, further reinforcing San Francisco's growing importance as an AI hub. AI companies acknowledge the importance of the office and are becoming an increasingly large percentage of the demand profile in San Francisco. Bottom line is we remain focused on maintaining our great tenant and broker relationships, delivering market-leading hospitality, securing renewals, filling our vacant spaces and infusing best-in-class amenities in our Class A assets to enhance our market-leading offering.

Awesome. Thanks, Peter. Just a side note on San Fran. I know when you look at the slide, it says 62% leased. What I would say in our -- as we form -- as we do our capital formation around this transaction, the amount of incoming phone calls we've had from folks that want to play the recovery, I'm not going to call the trade, the recovery investment in San Francisco has been extremely significant. And one of the things I'd also point out at Rithm, we made an early investment in the debt -- in Columbia Property Trust on the debt side. So we've had an exposure to San Francisco and have seen the growth in that in San Francisco since I think it was 2023. So we have a really good feel for that market. I do think there's going to be a ton of money made there. Peter pointed out on AI. There's been like Anthropic has gone in and just taken down a whole new building. Just one other note, and then I'll talk about Genesis. When you look at this office portfolio, one of the things that we all know today, when folks go to work in an office, they want a lifestyle. You can look what the JPMorgan folks have done at 270, like they built this amazing building. We are doing a lot of the same things when we think about amenity packages in a number of our buildings. So again, very, very excited about this investment and truly believe it's going to be a very good one for our shareholders and LPs. Just quickly for me on the Genesis side, then I'll turn it over to Baron, who will talk about NewRez. It's been a great business for us. We bought this from Goldman Sachs Merchant Bank going back to 2022. Clint Arrowsmith, who leads that organization for us has done a fantastic job growing, not only just growing the business and when you think about from an origination perspective and UPB, but sponsors and most importantly, credit matters. We see this when we look at companies all day long, delinquency trends and what you see with some folks that are truly in either whether it be an AUM race or try to grow their origination business where they shouldn't be from an overall credit standpoint. We've seen this in our careers many, many times. But when we look at the Genesis business and if you have a look at Slide 16, the team there has done just a great job. And that product is one of the hottest products in the marketplace. You'll see us expand our multifamily origination as well as our RTL origination as we go forward. With that, I'm going to turn it over to Baron, who will talk about NewRez, and we're going to open up on Page 19.

All right. Thank you, Michael. Good morning to everybody. NewRez had a great 2025, and we're really excited about where we're headed in '26. We finished the year with a total pretax income, excluding mark-to-market of approximately $1.1 billion, which is a 17% increase year-over-year and a milestone for our platform. Our fourth quarter pretax income, excluding mark-to-market, was $249 million, driven by our origination strategy and our disciplined origination strategy, our third-party servicing business and despite the impact of faster prepayment speeds, we delivered a 17% ROE on the quarter and a 20% ROE for all of 2025. For context on speeds, the composition of our servicing portfolio is deliberate and reflects a balance between third-party servicing and owned MSR. Approximately 30% of our overall portfolio is third-party high-margin fee-based servicing. 18% of the overall portfolio or 26% of the owned portfolio are Ginnie MSRs, of which approximately 1/3 were originated in the last 3 years. Regarding our quarterly MSR mark-to-market, while our high-quality owned MSR portfolio continues to perform well, we saw seasonal increases in delinquencies and advances. And the new FHA modification rule has increased immediate delinquencies to encourage long-term stability. Our mark-to-market approach has remained consistent with prior quarters and in our view, conservative. Overall, these results continue to show the power of our platform and our ability to drive consistent earnings. Turning to Slide 20 and regarding our 2026 technology strategy. Yesterday, we announced our partnership with Valon Technologies on our servicing operating system. And 2 weeks ago, we announced our partnership with HomeVision for our underwriting decision engine. These partnerships are designed to upgrade our core operating platforms with AI as a fundamental core component rather than adding AI as an afterthought to existing structures. The first phase of our HomeVision rollout has already doubled our underwriting capacity with further functionality to be delivered throughout 2026. Our partnership with Valon began in 2019 with Rithm as one of their first investors and NewRez as their first subservicing client. Michael saw the potential power of connecting NewRez with Valon to create game-changing servicing technology that will transform mortgage servicing. We expect the Valon operating system to materially improve our efficiency, benefiting all of our 4 million homeowners and our third-party clients. Both of these software partnerships include significant long-term minority equity ownerships that will continue to provide future earnings growth. Turning to Slides 20 and 21 -- 21 and 22 and providing some highlights on our originations and servicing business. Funded volume for the quarter ended at $18.8 billion, up 15% quarter-over-quarter and $63 billion for all of '25, and as Michael mentioned, positioning us as the #5 mortgage lender. The origination platform delivered fourth quarter pretax income, excluding mark-to-market of $126 million and full year pretax income of approximately $360 million, both up 31% year-over-year and 57% quarter-over-quarter. And while market competition continues to pressure gain on sale margins, we maintained pricing discipline, did not chase market share, improving our margins quarter-over-quarter. Non-agency production remains a focus with year-over-year growth of 147%, including non-QM originations, which were up 200% year-over-year. We also just launched our new crypto enhancement, where NewRez is the first major lender to recognize cryptocurrency -- cryptocurrency assets for mortgage qualifications, especially important as 20% of U.S. adults own crypto today. On the servicing side, our third-party servicing portfolio increased to $256 billion, which includes $25 billion in new third-party servicing, which offset the movement of a single low-margin agency subservicing portfolio. The onboarding of the Wells and Onity non-agency MSR portfolios beginning in March and the transition of the Valon -- to the Valon operating system will begin in 2027. I believe our business is as best positioned as it has ever been, and I look forward to sharing the next chapter of the NewRez growth story. So back to you, Mike.

Thanks, Baron. Just a couple of notes on the mortgage company stuff. Obviously, a little bit of noise -- I shouldn't say a little bit, but some noise around our equity got hit as did some of the other kind of mortgage companies over the course of the past few days. We don't -- we're not in a race to grow origination. We're not in a race to grow AUM unless we can make money. So when you think about it, if folks are out there pricing origination through the market, it's not going to be us. So origination volumes will vary. Similarly, when you think about the MSR business, we're fully hedged against our MSR. I did point out we have a steepener on. But when we think about that, you are going to have some mark-to-market volatility in a quarter when rates move or mortgage spreads tighten. It's just the nature of the business. You take a step back and you think about that as well as some of the things we're doing around the technology side, Baron pointed out Valon. Valon is -- Valon came to us years ago. We spent some time with them. We seeded them with a portfolio of loans on the servicing side. At that point, we took an equity stake in the company. And if this thing plays out the way that we think it could and will, we believe that the sheer size of -- or the market valuation of Valon could be a substantial P&L contributor to our business from an overall market value standpoint as we go forward. When you look at tech valuations and if this company is worth $10 billion, for example, that could be worth a couple of dollars a share. So I look at this based on equity ownership. I look at this, Baron pointed out the HomeVision side, we're going to get more efficient. We are going to spend some more money on brand as we go forward. But we're not in a race to do just grow origination. We don't need to do that just to be in a battle with somebody else. And you've seen that in the wholesale channel between a couple of the different mortgage originators. I'll wrap up and then we'll go into some Q&A. Just on the investment portfolio, when you look at the power of the franchise, clearly, we're doing -- we have a great origination business. I do think our origination business and we will continue to grow in different areas that we don't have there. That will feed into not only balance sheet and earnings, it will also feed into the ABF space, which we're going to grow substantially. It is one of the single hottest products that LPs want today. They're looking for diversification away from certain credit products. When you look at valuations and you think about the absolute returns of being able to get low double-digit returns backed by real cash flow and in many cases, hard assets. It's a space that not only have that we have expertise, but we've been doing this our entire career. I pointed out earlier, we did $4 billion of securitizations. We invested $9 billion in different assets in the resi space that most of that is through our own origination, quite frankly. We did the upgrade transaction where we sourced $1 billion of home improvement loans. We're going to continue to grow there. We're going to grow our third-party business as well as we continue to expand our sourcing capabilities. So overall, before I turn it back to the operator for Q&A, the company is in very, very good shape. I do think, and I say this every earnings call, our valuation is extremely low relative to what I think we do and what we offer both our LPs and our shareholders. We're focused on making money for our LPs and shareholders first before we do anything else. That will enable us to grow. At some point, the company will get revalued. And we look forward to continuing the journey and growing the business. With that, I'll turn it back to the operator for Q&A.

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

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

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

And what do you think regarding -- just getting to Crispin's question, production for Q4, let's just go '26?

Our forecast for '26 is going to be up. We think we're going to be up around where the market is estimating, which I think is approximately 10%. I do think, Crispin, our internal views is that as we continue to connect with our homeowners, as we continue to deliver better and faster service for them and better tools that we will continue to basically improve and pick up market share.

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

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

You really asking me to comment on an earnings call if mortgage players are being irrational. I don't know if anybody is being irrational. What I would say is it is a competitive business, always has been. You're going to see more origination. Certain players are -- they're more aggressive. It doesn't mean they're going to make more money. The one thing I would say about our company and when you look and Baron referred to amortization and as we look at where we are, the breadth of the company, when we were able to put up a $400 million quarter in Q4 and quite frankly, when you look at the MSR business, take a little bit of a more conservative approach, I think, Q4 because we could is something that really differentiates us. So when we look at the competition and we think about our friends in the space who just want to grow origination, we don't -- we're not -- it's not going to be us. We want to keep all our customers on our platform for sure. We're going to do that through refi and recapture. But the government has come out with some changes as well, right? I mean when you look at the Ginnie program, that's why you saw a small spike in delinquencies in the fourth quarter. We do think a lot of that, if not all of that, based on a 430 10-year note and call it a low 6 mortgage rate will reverse here in the first quarter. So we expect to see that mark-to-market actually go the other way here in the first quarter. As it relates to the broader mortgage business and originators, there are some folks that have been in, what I would say, real competition for many, many years on the origination side. That hasn't been us and it's not going to be us. So there's a lot of levers that we can pull that make our shareholders and LPs money. We'll continue to do that without getting into a race.

Our next question comes from Bose George from KBW.

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

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

Okay. Great. And then actually, on the wholesale side, you guys alluded to the competition in that market. But then when I look at your numbers, volumes are up by 1/3, your wholesale margin is up pretty meaningfully. So yes, can you just kind of tie the 2? I guess, it did not impact your performance?

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

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

Our next question comes from Doug Harter from UBS.

Can you talk about [Technical difficulty].

Operator?

[indiscernible] Operator.

[Operator Instructions] are you able to hear me, sir?

Yes, I think we lost our queue.

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

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

It's a good question. It's something that we get asked all the time. We're very focused, obviously, on our capital structure, as you know. at some point, we do need to be a C-Corp. We need to grow our asset management business a little bit more. I don't think that's going to take away from the way that we run our business where we try to drive higher earnings for our shareholders and obviously better results for our LPs. We're -- our FRE continues to grow as an organization. But like I said, we're going to lead with performance first. There'll be -- I'm sure at some point, there'll be some kind of opportunity to actually grow FRE, which at that point then probably gives us the ability to have a separately listed asset management business. We do toy with -- and I don't use the word loosely, but we think about the mortgage company and should we have a separate track mortgage company, which kind of simplifies the story a little bit. We also own or actually, we manage Rithm Property Trust, which we're exploring some capital formation around that organization as we build out more in the commercial real estate space. So there's a bunch of moving parts. The one thing I would want every analyst and everybody to understand is we're focused on performance first, which includes earnings for shareholders and LPs. When you think about the company today, we have about $8.5 billion of permanent capital. The company makes north of $1 billion in pretax, and we trade at whatever, 6x or something like that. Real asset management businesses trade anywhere from 10 to 30x. You look at the more -- the heavier balance sheet concentrated asset management firms, which trade south of there, but there's a ton of upside in our opinion to grow. But the corporate structure or the REIT space as we think about the way that we currently run is something that will change over time. That doesn't mean we're not going to have a REIT. You look at Blackstone, they got BXMT, Blackstone is a C-corp on top. So I say this every earnings call, I would expect at some point we get towards that. We're not going to be Blackstone, but there's -- the corporate structure works.

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

Well, it's a great question. That will be at the Rithm Property Trust, where what you're going to see is we're going to originate more multifamily loans into RPT or Rithm Property Trust. That capital base will continue to grow. So when you look from a market -- from an overall equity standpoint, Rithm Property Trust, which is an externally managed vehicle where Rithm owns 1.5 and over 20 over 8, I believe it is. We will raise capital around that. That balance sheet will grow through a lot of the so-called Genesis origination as well as third-party origination. So when you think about it, it's a permanent capital vehicle. We've done this with New Residential in the past, where we -- again, we started with $1 billion of capital. It's now $8.5 billion. You look at Blackstone, they started BXMT with a small amount. They did a transformational -- a couple of transformational deals to actually grow that. We're going to do the same thing with RPT, and that will be fed by Genesis.

And our next question once again is from Doug Harter from UBS.

Hopefully, this works better this time.

It does.

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

It's a little bit fluid, quite frankly. We closed Paramount at the end of December. We're exploring whether we raise -- again, we funded on a third-party balance sheet. We did a pref offering in the quarter at the Rithm level, where we raised $250 million of permanent capital in the pref market. We're in no rush, quite frankly, to turn around and just say, okay, we have to do a fund or we're going to bring in JV partners. In the real estate world, when you look at the commercial side, a lot of folks bring in partners. So we're exploring both. We're on the road thinking about what's the best structure. We do want to expand, as I pointed out, when we bought this or announced this deal, we want to expand our relationships and partnerships with LPs in the commercial real estate space. That continues to be the primary focus. I think you'll see a combination of both fundraises, permanent capital raises as well as JV related partnership. So it's fluid is what I would say.

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

Yes. We closed the quarter with $1.7 billion of cash and liquidity. So we're not -- what I would say is we're not fussed with the capital at this point. While saying that, we -- we're a dividend payer, and we always want to -- and we always spend money. We do shop. So when you think about it from that perspective, it's now where the teams are now. The one thing I didn't mention to the group is we have a couple of key hires in the asset management business as we continue to grow that and we'll be putting out a press release here over the next week. One of them is a former partner of mine from Fortress, who will help us on the lead the asset management business along with our other partners at the different organizations. And then we hired an old -- not an old colleague, but somebody that's highly recommended that comes -- that had retired from Blackstone to help on leading the capital formation business. So we have some significant hires on the asset management side. I think you'll continue to see us grow. But like I said, the most important thing is we got to perform for LPs. Once we do that, we'll grow exponentially.

[Operator Instructions] Our next question comes from Giuliano Bologna from Compass Point.

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

I say there's no amount that we have in mind. I think it's what the market expects. So when you look at -- even just taking a step back and when you say about scale, when we go see an LP, an LP wants to do business with fewer institutions, but want to have more products. When you think about our credit business now between Sculptor, Crestline and Rithm, we have all the products we need on credit. We have all the products we need on mortgage. We have all the products we need on ABF. We have all the products we need in commercial real estate. But I think it is more about -- it's really about the FRE and how you're going to get valued and make sure that these organizations are sizable enough so they don't trade by appointment is what I would say. So it's not like -- and I say this, we're never going to be Blackstone and we want to be who we are. We want to grow prudently, and we want to be valued with the best of the best. And that's really what we're out for. It's like how do we get valued in a different way than we currently get valued. And I think there's no set amount. I would expect over the next year, we get to that point, but I don't know what that size is going to be, Giuliano.

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

Yes, absolutely. Michael talked about us continuing to drive our brand, connecting with our customers. right? It's -- we have 4 million customers on our platform and making sure that we stay connected as best we possibly can are going to continue to be a key driver for our business, our growth strategy and our platform overall.

[Operator Instructions] And ladies and gentlemen, at this time, we do have an additional question from Bose George from KBW.

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

I don't know what the expectations are from different folks. What I would say is, again, going back to my fortress days and our fortress days, we built what is now known as Mr. Cooper, along with Jay and his team, obviously. We know what recapture percentages are. I do think the world has gotten more efficient. I think with technology, it's only going to get more efficient. We alluded to the Valon partnership. We spoke about HomeVision. That is going -- those kind of things will help. And I think the mortgage industry will get more efficient -- I don't, you're only going to be as good as what the market is. It's a very competitive space. People do things that are noneconomical. That's not who we are. But while saying that, we do want to keep our customers. I can't tell you if other folks assumptions are too high or not. I think you should speak to them about that. Okay. Well, I want to thank everybody for dialing in today. We appreciate your support. We have -- I was going through my notes last night, and I looked at the amount of times I was using the word great or terrific or wonderful, and I was looking for more adjectives. And the one thing you'll get from us, we're not going to show up in a meeting or tell you that we're the best in anything that we do because if we take that approach, we're not going to be the best. But we always have things to learn while saying that we have a very, very good company, and we care first about driving results. And with that, hopefully, we get a much better result on our equity price, and we'll continue to do the same thing we've been doing for our shareholders. So thanks again. Look forward to updating you throughout the quarter and on our next call. I appreciate everybody dialing in.