Operator : Good morning, and welcome to the Rithm Capital Second Quarter 2026 Earnings Call. note this event is being recorded. I would now like to turn the conference over to Emma Hoelke, Deputy General Counsel. Please go ahead.
Emma Hoelke : Thank you, and morning, everyone. I would like to thank you for joining us today for Rithm Capital's Second Quarter 2026 Earnings Call. Joining me today are Michael Nierenberg, Chairman, CEO and President of Rhythm Capital; Nick Santoro, Chief Financial Officer of Rhythm Capital; Baron Silverstein, President of NewRez; and Peter Brindley, Head of Real Estate at Elecor Properties. 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.
Michael Nierenberg : Thanks, Emma. Good morning, everyone, and thanks for joining our Rithm Q2 earnings call. The company had a terrific quarter, proving the power of the platform is working. All of our divisions, Newrez, Genesis, Sculptor, Crestline and Elecor, all delivering good results during the quarter. While the markets were extremely volatile, our results show the depth of our platform and the risk culture and experience of our investment teams. . Today, we feel the markets are different. We have a new Fed chair -- likelihood of higher rates for longer which plays extremely well for our business when you think about an $850 billion MSR portfolio. The time is now for firms like parts to differentiate ourselves with performance. Our investment professionals have been in the market for 20-plus years. We've seen the best and the worst of markets, and we will use that experience to do our best in providing alpha for our clients. Our ethos, risk management and performance first is how we think of our fiduciary responsibility to our clients and shareholders. The growth of our third-party business is something that is essential to us. When we acquired our management contract from Fortress in 2022, our goal was to build a formidable third-party business. I'm very proud of where we stand today. Our teams have Rithm, Sculptor and Crestline manage north of $60 billion in third-party assets with over 200-plus different clients and LPs. Between our third-party client business and our balance sheet, we manage -- we now manage more than $100 billion in investable assets. When we look at our origination businesses, they are second to none, Newrez, which is one of the leading mortgage companies in the United States; Genesis, which is one of the leading nonbank construction lenders in the United States a true market leaders. They both create products for not only our balance sheet but also for our fund offerings. So now we take a step back and we ask ourselves where do we go from here? It's simple, create value for our LPs, add product offerings in areas where we have the expertise fill in gaps in in-trend real assets and continue to perform for our clients creating value for our shareholders and LPs. I'll now refer to the supplement, which has been posted online. I'm going to start on Page 3, and then I'll turn it over to my different partners as we go through the various sections. Page 3 up top, Rithm today is north of $100 billion in investable assets. We also have $1 billion of permanent capital. That's very different than a lot of firms out there. When we look to the left side of the page, our balance sheet, give or take, $50 billion. A lot of the balance sheet is used to hedge out our mortgage company, our MSR portfolio. Newrez is one of the top 5, as I pointed out earlier, mortgage originators and servicers in the United States. This year, we project to originate about $65 billion in mortgage loans. We serve over 4 million different homeowners. Genesis, the #2 U.S. residential transitional lender. This is a company, again, we bought from Goldman and going back to 2022. At that time, we were doing roughly $1.7 billion a year in production. This year, we'll do a little bit south of 7 million and I'll get into those numbers shortly. Elecor, which was formerly known as Paramount is a premier owner operator and manager of [indiscernible] core Class A office properties between New York and San Francisco, totaling a little under 10 million square feet. Peter Brindley talked to that company here shortly. When you look to the right side of the page, our asset management business, continues to grow. I feel like we're just hitting our stride right now and really excited about the future growth prospects there, not only in AUM, but actual performance. When we look at that business, we have 3 different divisions today. One is Sculptor which, again, I'll get into some of the numbers here shortly, Crestline and then Rithm Capital, which manages funds on a couple of the different warehouse platforms. When you look at the overall performance of our asset management business going back, Sculptor has been around for 30-plus years. And the folks at Crestline led by Keith Williams have done a great job building that business as well. Most of -- one of the more important things when I look at our platform and -- versus a number of others, we continue to invest our own capital alongside our partners in our funds. Not everybody does that. Page 4, when we look at the quarter end review, $338.9 million in EAD or $0.60 per diluted share of GAAP net income, $20.2 million or $0.04 per diluted share, some of the movement in the GAAP income has to do with our hedges around our MSR portfolio. Book value of $6.9 billion which correlates about $12.33. I think coming into the quarter, we were $12.50. So essentially, it's unchanged when you think about dividend and depreciation. Today, our book value is, give or take, about $12.50 million. Common stock dividend, 10.6% dividend yield, quite frankly, from our vantage point, obviously too high. Our dividend paid is $0.25 per common share, and our cash and liquidity ending Q2 was $2.1 billion. When I look at Rithm, the asset management platform, again, I feel like we're just hitting our stride. We have a number of different product offering. I believe that we are true leaders in everything in real estate, credit in our ABF business, which is something that between all of our different partners here is something that's near and dear to our hearts because that's how we grew up in the business. When you look at the multi-strat fund for year-to-date performance, closing out Q2, it's up roughly 8%, great job by the team there. Across the platform, there's north of 200 different investment professionals, and we have 16 offices globally. Page 7. When you look at our Asset Management business, as I pointed out, the multi-strat fund net return for the first 6 months approximately 8% over 3 years, 12.3%, with a ball number of 4.7%. Conservative risk and liquidity positioning are the core tenets of the platform, and where we stand today, we've -- the team has taken the risk down based on some of the volatility we've seen in the marketplace. When you look at scale, again, we started this business in 2023 or really the third-party business with virtually 0 in third-party AUM. Today, we're at $61 billion and growing. Our strategy is not just to grow AUM. We want to lead with performance, and that's going to lead to more AUM and make sure that we have a suite of product offerings for our clients where we could serve all of their needs. When you look at the fundraising side of our business, we continue to expand -- one is we're expanding personnel there, but 2 is we continue to see more gross inflows coming into the business. Current fundraising activities are focused on ABF, direct lending, capital solutions, our multi-strat business and then stabilized core real estate plus real estate credit. So across the board, leveraging the expertise we have in-house with our existing personnel. And like I pointed out in my opening remarks, we'll add areas once we make sure that we have the expertise internal. New product offerings in development include insurance solutions, infrastructure, and we continue to work with our bank partners on private wealth. From a deployment perspective, we target the most compelling investment opportunities. We don't need to deploy capital for the sake of deploying capital. We want to make sure that we deploy capital in areas where we feel like we have the best risk return for our clients. We want to make sure that we're nimble and allowing capital to be deployed when opportunities again arise not just to deploy capital for the sake of doing it. Page 8, when we look at our AUM, strong organic and inorganic growth. When you look to the left side of the page, we acquired Crestline -- the Crestline business at the end of Q4 in last year. That continues to be a very, very good business, great track record, great group of folks. Sculptor is doing great. And then when we look across the board, our CAGR up 28% to now again where we give or take, about $60-odd billion. Key note here, 71% of our AUM is longer-term AUM. Now I'll touch on the real estate side, I'll hit a couple of slides, and then I'm going to turn over the Elecor section to Peter Brindley, who's who helps lead that organization for us. So when you look at Rithm real estate, the way that we think about it today is we have Elecor, which is a -- obviously, it's a portfolio of buildings and a true operating company that sits on balance sheet. Over the past couple of years, we've put out about $200 million in equity across a number of different real estate strategies, most -- some debt, some equity. So when you look at the bottom part of the page, we -- across some of the realizations that we saw in Q2 and some of the realizations we're expecting in the returns in Q3 have been very, very good. One thing I'd like to point out here, if you look on the right side of the page, we bought an office building and I have mentioned this on prior earnings calls, I think in '24, 2 years ago, [indiscernible] in Virginia, we paid, give or take, about $26 million to $27 million, something in that range. We expect to realize a purchase price or a sale price on that of roughly $55 million to $60 million. I bring that up because in real estate and in most cases, one is we have to be extremely good from an operating perspective. Peter and the team have done a great job, and Peter will talk to that in a minute. But the most important thing in some of the office stuff and in other real estate, you make money when you buy cheap assets. So when we think about the Elecor thesis, and I'll flip to Page 11 on that. The entry point really matters. So when we buy buildings, in this case, we're buying Class A office at a 75% discount to replacement cost. When we look at geography, Class A office -- and Peter will talk about Midtown South and just all the leasing trends we're seeing there. But being in the right geography on the main avenues really, really matters. Our basis -- our low cost basis allows us to deploy future capital to further enhance value. We have a lot of projects going on around the building not only at the so-called Elecor level with some of our larger strategic partners who own pieces of these assets alongside us. When we think about supply, there's limited new supply. And again, when we think about replacement costs, it costs multiples to build these buildings today versus our entry point. And when we look at San Francisco, for example, there's no new office construction in San Francisco. Flight to quality tenants and institutional capital continue to pursue the best in Class A office product. We see that now. I pointed out in prior calls, we, as an organization, have a need for, give or take, $75,000 to $100,000 of office coming up here over the course of the next couple of years as we think about our geography and the current buildings that we're in and where we're going. And then when I look at the operating team, we have a great operating team. We did the Elecor deal, which was, again, paramount at a time when the company was essentially forced into a sale. We'd like to be in those situations. And when we look at that, we've cleaned up the G&A. We've appointed Peter to help lead the organization and the team has done a great job. With that, I'll turn it over to Peter who will take us out for the rest of the Elecor stuff, and then we'll turn it over to Baron, who will talk about -- or back to me on Genesis and then to Baron on Newrez.
Peter Brindley : Thank you, Michael, and good morning. Turning to Page 12. At Elecor properties, we continue to execute our business plan while seamlessly emerging Elecor's operational expertise with Rithm Capital financial strength to further enhance our trophy quality portfolio. The quality of our portfolio, coupled with our planned significant investments alongside our partners, will ensure we continue to attract the world's leading companies across a variety of industries well into the future. We are making great progress on our plans, the specifics of which are generating excitement in our 2 markets and we believe contributed to positive results through the first half of the year. Our portfolio consists of 10 core assets totaling 9.9 million square feet, approximately 7 million square feet of which are in New York and the balance in San Francisco. The core portfolio is currently 86.5% leased with an average in-place rent of $90 per square foot and a weighted average lease term of 8.3 years. Key portfolio highlights include: on leasing, year-to-date, we have executed leases and had leases pending on more than 681,000 square feet across the New York and San Francisco portfolio with weighted average initial rent of approximately $100 per square foot, 21.4% higher than the weighted average initial rent for our 2025 transactions. Approximately 62% of this robust leasing activity is based in our San Francisco portfolio where leasing fundamentals continue to improve. Operational excellence. Since the acquisition, we have identified and implemented operating efficiencies at the management company of approximately $44 million. Opportunistic recapitalization. We are currently assessing opportunities to potentially JV select high-quality assets as well as potentially finance our unencumbered asset. Financing. During the quarter, we closed a $283 million CMBS financing at 1325 Avenue of the Americas. And subsequent to quarter end, we closed on the refinancing of 31 West 52nd Street, extending the building's current loan maturity while ensuring a well-laddered maturity profile throughout the portfolio. Lastly, we are moving swiftly to execute our growth-focused capital improvement strategy, which includes, in conjunction with our JV partners, the repositioning and amenitization of 4 key assets, 2 in New York and 2 in San Francisco, reinforcing our commitment to deliver a leading workplace experience resulting in a truly differentiated experience for our tenants. During the second quarter, we made significant progress on our capital improvement plans at both 1633 Broadway and 712 Fifth Avenue in New York and One Market Plaza and One Front Street in San Francisco. As a reminder, at 1633 Broadway, we are transforming the lobby, developing an amenity space with a signature bar and event venue, creating a 200-seat conference space and upgrading the plaza and building elevators. At 712 Fifth Avenue, we are curating a hospitality-driven amenity offering, which is currently under development. In San Francisco, at One Market Plaza, we are redesigning atrium and grand floor experience in developing a state-of-the-art conference center, fitness facility, Atrium Bar, 7-floor Skybar game room and rooftop deck. And finally, at One Front Street, we are reimagining the lobby with a cafe; bar and restaurant and a full elevator modernization. In addition, we are adding a full amenity space with a gym, conferencing and a private Speakeasy. We expect that our capital improvement strategy will drive significant rent growth and occupancy gains in 2026 and beyond. Turning to Page 13. In 2025, we leased more than 1.7 million square feet, approximately 76% of which occurred in New York and the balance in San Francisco. In 2026, approximately 62% of our leasing velocity 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. In both New York and San Francisco, a significant percentage of our leasing velocity is occurring with tenants that are new to our portfolio and expanding within the portfolio. At quarter end, our New York core portfolio's leased occupancy was 91.6%. Initial rents in New York year-to-date on leases signed and leases pending are 32% higher as compared to our 2025 transactions. Leasing fundamentals continue to strengthen in midtown, particularly in well-located, well-amenitized Class A buildings, we are very well positioned to capitalize on this tenant demand, which continues to reflect the city's diverse tenant base. Robust demand, limited near-term new development and conversions of office buildings to alternate uses will continue to serve as significant tailwinds as we execute on our business plan in New York. At quarter end, our San Francisco core portfolio's leased occupancy was 64.9%, up approximately 6% quarter-over-quarter. Year-to-date, we have approximately 425,000 square feet of leases executed or pending, which exceeds our San Francisco leasing velocity for full year 2025. Strong tenant demand, historic levels of venture capital funding to San Francisco-based companies and a return to in-person work, coupled with our growth focused strategy will drive continued leasing velocity and occupancy gains in our San Francisco core assets this year. We are moving very quickly to execute our key objectives and look forward to updating you on our progress.
Michael Nierenberg : Thanks, Peter. Just a couple of quick comments here. When you look at -- and I'm just going back to Page 12 for a second, when you think about $90 a square foot for our average annual rent, the ability or our desire actually to invest capital back into these buildings to achieve higher rent growth, thus achieving higher NOI. And as Peter pointed out, with great tenants, I think it's going to lead to a really wonderful result for this company. And like I said earlier, you make money in this business, particularly on the real estate side, when you buy quality assets at attractive levels, and that's what we've done here. And again, the team has done a great job. So Thanks, Peter. On Genesis Capital, I'm going to go to Page 15. A great story here. I pointed out earlier, we acquired this company from Goldman's Merchant Bank going back to 2022. At that time, we were doing $1.7 billion a year in total originating this quarter, we did $1.9 billion. Pretax income was a little under -- was about $42 million, going again back to 2022 pretax income back then was about $47 million. So when you think about it, what we've accomplished in 1 quarter was what going back to '22 was accomplished in a full year. ROE, 17% annualized operating ROE. And when you look quarter-over-quarter pretax income is up about 26%. Another thing to point out here when we look, this business today is one of the hottest products, I would say, in the so-called ABF/ fund market as well. So not only do we have this business feeding our balance sheet, this also feeds our funds really, really important. And as I get to the -- in a couple of more slides -- later into a couple more slides, what you're going to see is that the ability to truly grow this business is significant because the real market share around the so-called RTL space is so low and it's such an attractive product because it's such a high coupon short-duration product where our LPs and investors truly love this product, is something that we're really excited about as we think about the growth there. Page 16, just to give you a little bit of a portfolio composition, the other thing I'll point out before I talk about the portfolio composition, we lead with risk and credit first in this business. There's a lot of folks that have had significant issues around their risk. And quite frankly, their delinquency profile -- our delinquency profile here is extremely low, and I think part of that speaks to the overall culture of the firm. So when you look at Page 16, taking it to the left side of the page, the summary by loan type, you have construction bridge and Reno. Construction is about 50%. Your bridge is about 34%, and your renovation is about 12%. Summary by structure between arm and fixed, give or take, 50-50. Here, we have it at 45-55 that will change over time, depending upon what happens with rates in the yield curve. And then when you look at product type to the right, what you're seeing is dominated by single family, although we're doing a lot more right now in multifamily. Key portfolio metrics, if you look to the bottom part of the page, the loan to after repaired value is about 63%, loan-to-value about 68% and looks across 76%. Real conservative metrics. Again, that business is led by [indiscernible] Smith, who does a great job us, Clint and his team. Page 17, just talk about the Genesis growth. I pointed out earlier, the upside in this business is significant. I think some of this, as we think about our LPs and our third-party client business, some of the -- a lot of the growth will be driven by the demand from our clients in the third-party business, which is significant. When we look at the overall CAGR, you can look at some of the numbers here. And when you think about the overall market share of Genesis, I think we're only scratching the surface here, and we expect more great things out of this company. So just to summarize on my part here. The real estate side at Elecor, great job done by that team, very, very excited about the upside there. I'd like to look at just our so-called purchase of the Boston, Virginia property as a proxy when we think about holding period investing capital and getting true value out of that asset. We're going to look to do the same there on Elecor. And I think Genesis again, we're only scratching the surface. With that, I'll turn it over to Baron.
Baron Silverstein : All right. Thank you, Michael. Good morning. Starting on Slide 19. Newrez had another great quarter. Second quarter pretax income, excluding mark-to-market of approximately $308 million, which is up 12% quarter-over-quarter, and delivering a 22% ROE for the quarter overall. Results were driven by our disciplined origination strategies, higher servicing fees and despite interest rate volatility, higher recapture and lower amortization, and the performance continues to show the power of our platform and our ability to drive consistent earnings. Moving to Slide 20. You can see where we're investing in our road map to re-envision how we approach the mortgage process to further unlock efficiency and operating leverage. Our teams have met key milestones in co-creating game-changing technology through our proprietary ReziAI solutions and in partnership with Valon and Home Vision as we discussed in prior quarters. These initiatives have only begun to drive meaningful outcomes with instant approval decisions, best-in-class self-service containment rate and delivering customer satisfaction. On Slide 21, we highlight our results first approach to our technology and AI investments. Our revenue growth is focused on maximizing overall customer lifetime value through the expansion of our partner base, product innovation and homeowner retention. And our expense initiatives continue to deliver operational leverage to further reduce our cost per loan, currently 1/3 below industry average and forecasted to be 50% below industry average post-Valon and Home Vision integrations. Executing this growth up and spend down strategy will allow us to continue to deliver for our shareholders. On Slide 22, in our originations business, funded volume came in at $15.9 billion, which is up 1% quarter-over-quarter as we maintained pricing discipline and did not chase market share and stayed focused on non-agency through our wholesale channel and customer retention through our consumer direct channel. Both channels combined now 40% of our overall originations, which is up 11% quarter-over-quarter. Co-issue MSR acquisitions came in at $5 billion, up 45% quarter-over-quarter as we continue to expand our momentum on MSR growth. And while market competition continues to pressure gain on sale margins, we continue to lead with performance and deliver consistent returns. On new products, we're excited about the expansion of our home rewards and insurance offerings and a new personal loan product that broadens our consumer finance offering. And moving to Slides 23 and 24 and our market-leading servicing platform, our focus remains on growing our capital-light fee-based third-party business with 8 new clients this quarter and $27 billion in new loan boardings. We remain on track for the transition to the Valon operating system in early 2027 that we estimate will deliver a total annual expense savings in excess of $65 million or a direct cost per loan reduction of 21% to $93. Our owned MSR portfolio continues to perform well across products, including [indiscernible] delinquencies that remained stable quarter-over-quarter. And while delinquencies remain low from a historical context, our special servicing business has significant opportunities to deliver superior outcomes for both homeowners and clients across market cycles. Special servicing remains a foundational capability of our platform and our operational performance is evidenced by our client retention rate. Our business has never been better positioned, and I look forward to sharing the next chapter of the Newrez growth story. Back to you, Michael. .
Michael Nierenberg : Thanks, Baron. I'm just -- I'm going to wrap up on Page 26, and then we'll open up for some Q&A. On the investment portfolio side, as most of you know that follow us, the investment portfolio supports our different operating companies, and we use the balance sheet for more opportunistic investing. As you look back to the quarter or really the first half of '26, we have done about $6.6 billion in residential investments, we did $3.7 billion in securitizations, achieving an annual ROE of about 15%. So in some of my earlier comments, as we think about the ABF business were really significant in the ABF world. . We probably do more on balance sheet than others, but that makes a likely shift as we go forward here and continue to expand our third-party franchise. One thing I do want to point out away from the volume that we're seeing in RTL and non-QM and through our own origination channels, we did enter into a flow arrangement where we're purchasing home improvement loans. And just this past Friday, we closed our second home improvement loan securitization, about $300 million. So that's been a very good avenue for us as well. So overall, what I would say is when I look at the business today, things are functioning and performing extremely well, very proud of the team, very proud of the business that we have here to and look forward to updating you on the Q&A. So now we'll turn it back to the operator for Q&A.
Operator : The first question comes from Doug Harter with BTIG.
Douglas Harter : Could you talk about kind of the outlook for continuing to grow asset management and kind of as we look forward, 12 months or 24 months as you think about the asset generation, kind of how much of that gets funded on Rithm's balance sheet versus with third-party capital?
Michael Nierenberg : Sure. So thanks for the question. When we look at where we're going with the asset management business, again, in our remarks, we acquired Sculptor, I believe, in -- at the end of '23. So figure like we're, give or take, a couple of years in, we've seen between Sculptor, Crestline and [indiscernible] at the Rithm asset management level, with AUM at $60 billion. I would say, over the course of the next couple of years, there's no reason that can double. The one thing I just want to be really clear about is we're not in an AUM race, we need to perform and and that's going to lead to more AUM. When we look at the operating business and let's just take Genesis, for example, Genesis will do $6.5 billion or $7 billion of production. I see no reason why we can't double that in 1 year or 2 years as we continue to grow our funds business. As we all know, in our capital structure, our operating as a REIT and paying out these significant dividends, the more we could shift to our funds business, the better it will be for our equity holders. So overall, I see significant growth in our funds business. When you look at the product offerings, we have a number of different product offerings, as I alluded to again in my comments, in the marketplace today. So we're extremely optimistic where we're going with the business. And performance has been great. You look at Sculptor in the first half on the multi-strat fund. They're up 8%. I mean, the numbers speak for themselves.
Douglas Harter : And I guess along those lines, can you talk about any progress on raising third-party funds for Elecor or JVs? .
Michael Nierenberg : Sure. So when we set out and we get asked the question, why? Why do this deal, when we did it last December, I think, is when it closed. These are office buildings. They're not bonds. You don't just buy something and flip it. So our initial thesis was we were going out, we're going to raise third-party capital alongside us. We still are having a number of conversations with what I would call, third-party LPs and third-party partners. We are currently -- we went out with 13016 Avenue, we have an LOI, we're finalizing some documents. We'll likely have a partner on that asset that will probably close by the end of Q3. And so that's an example where we're going to bring in a partner on a specific asset. I think overall, making the investments in these buildings, keep in mind in some of the larger buildings, for example, in one market, our partners, Blackstone on that. We're investing capital alongside each other into this asset to grow NOI, and as a result, we think that's going to improve the value of those assets. So the long-winded -- my long-winded answer to this is we have partners in place. We're going to have more partners in place and we're really excited about where we're going with this portfolio. I think you're going to see that business grow for us, quite frankly. We're looking at more and more office. We're looking at more and more asset classes across the spectrum in the real estate world. So I think you'll see that asset class grow for us.
Operator : The next question comes from Jason Stewart with Compass Point.
Jason Stewart : Just another follow-up on the Elecor business. Where are you seeing the most traction? It's great news on the Sculptor performance. But what are you seeing the most traction in terms of fundraising? And how does that cadence progress throughout the quarter? .
Michael Nierenberg : So we're out with a number of different funds. I think from a legal perspective, I can't really disclose specific funds that we're out with. But if you think about the platform, with where we stand with one of the premier direct lenders in the marketplace in the Crestline business, opportunistic and regular credit on the Sculptor franchise the Sculptor Real Estate Group came off a $4.6 billion fundraise, and we're starting to see some inflows into the multi-strat business. So it's really -- we're starting to see inflows across the board. And then when you look at the ABF space, we're having numerous conversations around ABF products and funds. So it's truly across the board. The one thing that we want to be clear about, we're not going to be in a space unless we think we have the expertise in-house. And that was some of the other comments that I made in my opening remarks. But flows have been very good across the board. We're adding folks to our capital formation groups, and we're really excited about the prospects where the asset management business is going.
Jason Stewart : Okay. And then on the mortgage side, in terms of the MSR portfolio, It'd be helpful if you could give us a little bit more color on how realized cash flows trended at the end of the quarter given the move in rates and where your expectations are for for that just given the exit velocity of where rates are in the quarter?
Michael Nierenberg : So what we're seeing is, obviously, you're seeing fewer prepayments. I'll give you like just a metric when we look at our overall origination business. So we're -- from an origination perspective, if we were doing, for example, $400 million a day $350 million to $400 million a day. Now we're probably doing something between $200 million and $250 million a day. Part of that is our own desire to pull back based on where MSR values are and how we think about the deployment of capital as an asset management business, not just to do something for the sake of doing it, but overall cash flows are trending higher because prepayments are definitely lower. You're seeing less velocity and obviously, in some of the housing stuff. So we expect, again, more cash flow, higher yielding -- higher yields on our underlying portfolios, but we are pretty thoughtful here as we think about the competition and think about gain on sale and and what we want to put on balance sheet or what we don't. I mean recognizing that we have between owned and third-party MSRs about $865 billion.
Operator : The next question comes from Kenneth Lee with RBC Capital Markets. .
Kenneth Lee : Just within the asset management business and specifically within Sculptor, wondering if you could just talk about what drove the incentive fees there. And I know it's obviously very difficult to predict it, but any updated outlook in terms of where incentive fees could trend this year just based on performance so far. .
Nicola Santoro : Sure. So the incentive fees at Sculptor was driven by an up cycle crystallization of incentive revenue. Most of the incentive revenue that comes through at Sculptor, about 70% of it comes through in the fourth quarter, but there are instances where we do recognize off-cycle incentive fees that was recognized in the second quarter.
Kenneth Lee : Got you. And just one, if I may. Within the Genesis Capital business, the origination strength there that you saw. Wondering if you could just talk a little bit more about what the momentum is being driven by? And then maybe some color overall in terms of how Genesis Capital has been able to to grow originations faster than the rest of the market?
Michael Nierenberg : Sure. So demand for this product, as I pointed out, is as high as we've ever seen. Again, if you think about it, it's 1- to 3-year duration products. So just assume it's like 2-year duration product, give or take, 8% coupons levered returns in the mid-teens. So when you think about demand and think about some of our peers out there that own these large insurance companies, the amount of demand from insurance companies for this product is extremely high. You couple that with us rolling out new so-called ABF funds, SMAs that go along with this product, that's going to help drive significant growth in that company. And we think that when you look at a couple of those slides that we put in the deck today, our ability to actually grow origination is significant. We've also made a lot of investments in people. When you look at where we are today versus when we first acquired the company a couple of years ago, the headcount is up pretty significantly. And then as we think about overlays, AI and technology similar to some of the things that we're working on and at the mortgage company level, we're excited about where that growth is going to go. But it's really driven by demand, insurance company demand, fund demand. And quite frankly, if we could create mid-teens type returns on a levered basis for our shareholders, we're going to do that all day long. So I would be very shocked if we can double and triple the size of this business.
Operator : The next question comes from Trevor Cranston with Citizens JMP. .
Trevor Cranston : On Newrez, looking at the gain on sale margin, it looks like there was some improvement this quarter, primarily driven by consumer direct. Can you just give us some early read on kind of how you're seeing trends there early in 3Q as you see stability across the channels or kind of what you're seeing with rates moving higher? .
Baron Silverstein : I mean I think the market's a bit kind of bifurcated. You saw the banks come out and they're gain on sales margins came in. So I do think you will continue to see us be very disciplined on how -- what our approach is from a gain on sale perspective. So I would tell you that there have been at least coming into what I'll say the beginning of the first quarter and even at the end of the second quarter, we did see a little bit of relief on gain on sale. So that's our expectation even with where rates are elevated today. .
Trevor Cranston : Got it. Okay. And then kind of a general question on the MSR market. I was curious if you guys could just kind of broadly talk about if you've seen any particular trends in MSR pricing over the last few quarters. In particular, I'm curious about if you think the market is kind of appropriately priced in the improved efficiency of refinancing from all the investment and implementation of AI and improved technology that's coming online this year and next year. .
Michael Nierenberg : I'll give you my own -- just my own view. MSR pricing today is you're in a position where things are fairly negatively convexed. So obviously, being in the bond market forever, and as I think about our partners here and how we hedge out that book is something that's there's no shortage, what I would say, of experience in that -- in doing that. So when I look at absolute values, you're still looking at unlevered returns of something in upper single digits. But your room for error there is less. So when Baron points out, whether it be bank pricing or other kind of nonbank pricing to create origination, we are little bit more cautious there than perhaps others. When you look at our real growth in the quarter and with the banks growing, and we haven't seen other mortgage companies come out and speak to what their growth is. So general view is the assets price extremely well. As it relates to AI and other technology around refinance, we -- I mean, I think today, we haven't seen anything that's dramatically different. We point out we're going to be going on the Valon platform of which we own 9.9% of that company as part of the deal we did to go on that platform. We're really excited to work with them. They're absolutely fantastic, really smart. So I think you're going to see improvements in technology, not only just on the servicing side, but also on the origination side, which is going to -- which when you think from an expense standpoint, if we have a company that does between $4 billion and $4.5 billion and we're bringing $1 billion-ish down from a pretax standpoint, the ability to capture a significant amount of of efficiency and expense there through AI and technology is going to be pretty great for us. And others, if they describe value to the same type of thing, but I don't think you've seen the real efficiency yet. We got to be really, really good around marketing. We've made significant investments in our company and on the marketing side, and we're making significant investments on the technology side. So we want to be the clear winners here. We hope we're ahead of the curve. But as we all know, the mortgage operating business is not an easy place to operate.
Operator : The next question comes from Crispin Love with Piper Sandler.
Crispin Love : Can you share your outlook for the Newrez business just in the current environment, we're in the better seasonal part of the year for originations, but the environment has remained challenging. You definitely did benefit from the service servicing side, but just curious on the big picture outlook on the origination outlook over the back half of the year. .
Baron Silverstein : Michael will talk briefly about it, like rates higher for longer. You see the resiliency on the purchase market. Rate in term refinances, I think will continue to be pressured in this rate environment, but there's still significant demand for housing. And there still opportunities on the home equity side, whether that's cash outs or home equity products, home equity loans and HELOCs. So I think from -- if you look at the pure volume perspective, I think the MBA forecast is probably directionally correct. And as to where consumer demand is in our expectation. .
Michael Nierenberg : I think, Crispin, the other thing just to talk about is new product innovation. And one of the things that we're going to -- that we're continuing to focus on is launching new products through our origination business and new products to our client base. So when you think about it, if there's 4 million homeowners and you think each house has 1.5 people or 2 people -- many people you think that you could tap into roughly 7 million consumers. So you're going to see more and more product innovation coming out of us where we actually own the origination business. I used the example of the home improvement loans where we have a strategic partnership with upgrade. We'll likely do more of that going forward, but also launch some of our own origination businesses where we can put more product out there, which hopefully will drive more earnings for the company. The other thing we're extremely mindful of when you look at where rates are and not just to originate a mortgage because we own a mortgage company. I think that's one of the things that truly differentiates us from others where we could be nimble about how we redeploy our capital as an organization. .
Crispin Love : Great. And then Michael, just on that last one, I don't know if this is necessarily where you're going with it. But could you discuss if you'd have any interest in buying back stock near these levels. Results remain really strong, but just the valuation trading low to mid-single-digit multiple sizable discount to book value. So just curious why you wouldn't be leaning more into the buyback at these levels, especially when you look at the potential value of the whole company. .
Michael Nierenberg : Yes. It's -- obviously, we've gotten asked this question over the years as we trade between whatever discount we are to book and book value, I think our general belief is, one, as a REIT, we continue to distribute more capital; two is if we think we could grow the business longer term that's going to reward shareholders in a different way than going out and buying back stock. I think historically, if you look back to companies that bought back stock, it really doesn't do a whole hell of a lot, quite frankly. And being that we pay out $1 a year, we always need more capital to grow our business. So I think the likelihood of us buying back stock here unless we brought in a third-party partner and we explore different ways to bring in third-party capital into our funds business is -- the net-net is we're not going to buy back -- we're likely not going to buy back stock. It's a Board decision, but right here, we're likely not going to buy back stock. .
Operator : The next question comes from Matthew Erdner with Jones.
Matthew Erdner : You touched on it a little bit earlier about the sculpture incentive fees, but kind of stripping that out in some onetime hedge gains, do you still view the kind of core EAD run rate in the low mid-50s?
Nicola Santoro : Yes, Matthew. When you back out the sculpture incentive that we received this quarter and you back out the incentive income on a run rate basis, we should run around $0.50 on a core basis.
Matthew Erdner : Got it. And then going back to the Genesis platform. You mentioned the growth that you kind of expect there. What levers are you kind of wanting to pull? Or I guess, what is the most attractive opportunity? Does it kind of sit on the construction site or bridge to the more attractive product at the moment? .
Michael Nierenberg : We're doing more on the multifamily side -- on the lending side on multifamily, some of those loans are -- can be a little bit larger in size. I think we're going to continue to focus there. And then more broadly, we'll focus across the board on on all the different products. The main thing there for us is sponsors. We don't want to just put money out there to kind of fix and flip lenders unless they have the wherewithal from a financial perspective to be able to support their business in a downturn. There's been a lot of headwinds, what I would say in the SFR space with some of the noise out of D.C., where that ultimately ends up, I'm not really sure. I think things are a little better now than they were before. But there's still a little bit of headwinds around some of the headlines in the SFR business. So I think you'll see more growth from us in the multifamily side. The total addressable market is extremely large. And as we think through this versus where we are and others are, we think we're going to see significant lift in that business.
Matthew Erdner : Got it. That's helpful. And then can you just kind of remind me what the average size of those multifamily loans are? .
Michael Nierenberg : There are, I think, $10 million to $11 million something in and around that kind of range. .
Operator : The next question comes from Michael Piccolo with Wedbush.
Michael Piccolo : I know you mentioned already the view with buybacks as a return of capital. but with earnings available for distribution comfortably exceeding the dividend, is there any thought of a potential dividend increase? Or is it kind of the same thought process around that type of return of capital as well? .
Michael Nierenberg : It's the same thought process. We're going to redeploy our capital. Clearly, we're not -- and I did a CNBC segment, I think, last quarter. We're not thrilled with where our stock price is by any means. So we continue to evaluate different ways to to see the stock price increase. While saying that, we don't want to give back the capital if we think we could redeploy the capital at a higher return for our shareholders and continue to build our business. You rolled back the clock, we started the company in 2013. It was really an owner of MSRs, you look where we are today, you're managing north of $100 billion in assets, to Crispin's point, our valuation or multiple where we trade versus earnings is is obviously low relative to the -- to other peers, I would say, in the asset management business or in some of the financial service side, but we're going to stay the course right now.
Operator : Thank you. This concludes our question-and-answer session. I would like to turn the conference back over to Michael Nierenberg for any closing remarks. .
Michael Nierenberg : Thanks for all your questions. And if there's any follow-up, let us know. In the meantime, have a great rest of the summer. Appreciate your support, and have a great day. .
Operator : Thank you, sir. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
