Rithm Capital Corp.(RITM)Q2 2026 法說會逐字稿

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.

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 Rithm Capital; Nicola Santoro, Chief Financial Officer of Rithm 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.

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 delivered 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 Rithm 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 at 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 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 — 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 number two U.S. residential transitional lender. This is a company, again, we bought from Goldman 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 billion and I'll get into those numbers shortly. Elecor, which was formerly known as Paramount, is a premier owner-operator and manager of coastal core Class A office properties between New York and San Francisco, totaling a little under 10 million square feet. Peter Brindley will talk 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 I'm really excited about the future growth prospects there, not only in AUM but actual performance. When we look at that business, we have three different divisions today: Sculptor, which I'll get into some numbers on 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. The folks at Crestline led by Keith Williams have done a great job building that business as well. One of the more important things when I look at our platform versus a number of others is 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 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. 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 the Rithm asset management platform, again, I feel like we're just hitting our stride. We have a number of different product offerings. I believe that we are true leaders in real estate and credit in our ABF business, which is something that between all of our different partners here is near and dear to our hearts because that's how we grew up in the business. When you look at the multi-strat fund year-to-date performance, closing out Q2, it's up roughly 8% — great job by the team there. Across the platform, there are 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 six months was approximately 8%; over three years, 12.3%, with a ballpark number of 4.7% (I mean a rolling number). Conservative risk and liquidity positioning are the core tenets of the platform, and where we stand today, the team has taken 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 — really the third-party business — with virtually zero 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 so we can serve all of their needs. When you look at the fundraising side of our business, we continue to expand personnel there, and 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 internally. 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 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. On the left side of the page, we acquired Crestline at the end of Q4 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 is up 28% to now again where we're 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 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 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 — some debt, some equity. So when you look at the bottom part of the page, across some of the realizations that we saw in Q2 and some of the realizations we're expecting in Q3, returns 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 — I have mentioned this on prior earnings calls — I think in '24, two years ago, in Virginia, we paid give or take about $26 million to $27 million, something in that range. We expect to realize a sale price on that of roughly $55 million to $60 million. I bring that up because in real estate, in most cases, one has 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 is 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 the leasing trends we're seeing there — being in the right geography on the main avenues really matters. Our low cost basis allows us to deploy future capital to further enhance value. We have a lot of projects going on around the buildings not only at the 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 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 space 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 Newrez, or back to me on Genesis and then to Baron on Newrez.

Thank you, Michael, and good morning. Turning to Page 12. At Elecor Properties, we continue to execute our business plan while seamlessly merging Elecor's operational expertise with Rithm Capital's 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 two 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 joint venture select high-quality assets as well as potentially finance our unencumbered assets. Financing: during the quarter, we closed a $283 million CMBS financing at 1325 Avenue of the Americas. 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 four key assets — two in New York and two 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 the atrium and grand floor experience and developing a state-of-the-art conference center, fitness facility, atrium bar, seven-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, and 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.

Thanks, Peter. Just a couple of quick comments here. When you think about $90 a square foot for our average annual rent, the ability — or our desire — 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. As 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. The team has done a great job. 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 originations; this quarter we did $1.9 billion. Pretax income was about $42 million; going back to 2022 pretax income back then was about $47 million. So when you think about it, what we've accomplished in one 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: this business today is one of the hottest products in the ABF/fund market as well. So not only do we have this business feeding our balance sheet, this also feeds our funds — really important. As I get into a couple more slides, you'll see that the ability to truly grow this business is significant because the real market share around the RTL space is so low and it's such an attractive product because it's a high-coupon, short-duration product where our LPs and investors truly love it. That's something we're really excited about as we think about growth there. Page 16, just to give you a little bit of portfolio composition: before I talk about 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. 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, summary by loan type: construction is about 50%, bridge about 34%, and renovation about 12%. Summary by structure between ARM and fixed, give or take 50-50; here we have it at 45-55 and that will change over time depending upon what happens with rates and 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: 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 Clint Smith, who does a great job — Clint and his team. Page 17, just talk about the Genesis growth. I pointed out earlier, the upside in this business is significant. Some of this, as we think about our LPs and our third-party client business, a lot of the growth will be driven by 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. 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 my part here: the real estate side at Elecor — great job done by that team, very excited about the upside there. I'd like to look at our purchase of the Boston/Virginia property as a proxy when we think about hold-period investing capital and getting true value out of that asset. We're going to look to do the same there on Elecor. I think Genesis again — we're only scratching the surface. With that, I'll turn it over to Baron.

All right. Thank you, Michael. Good morning. Starting on Slide 19. Newrez had another great quarter. Second quarter pretax income, excluding mark-to-market, was approximately $308 million, which is up 12% quarter-over-quarter, and delivered 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 roadmap 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 HomeVision 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 rates 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. Our expense initiatives continue to deliver operational leverage to further reduce our cost per loan, currently one-third below industry average and forecasted to be 50% below industry average post-Valon and HomeVision integrations. Executing this grow-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, 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 are 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. 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. 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 eight 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 serious 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.

Thanks, Baron. 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, 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, we're really significant in the ABF world. We probably do more on balance sheet than others, but that may shift as we 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 entered into a flow arrangement where we're purchasing home improvement loans. 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. Overall, things are functioning and performing extremely well. Very proud of the team and the business we have here, and I look forward to the Q&A. So now we'll turn it back to the operator for Q&A.

The first question comes from Doug Harter with BTIG.

Could you talk about the outlook for continuing to grow asset management and as we look forward 12 months or 24 months as you think about asset generation, how much of that gets funded on Rithm's balance sheet versus with third-party capital?

Sure. Thanks for the question. When we look at where we're going with the asset management business, again, in our remarks, we acquired Sculptor at the end of '23. So figure we're, give or take, a couple of years in; we've seen between Sculptor, Crestline and Rithm at the asset management level AUM at $60 billion. I would say over the course of the next couple of years there's no reason that can't 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 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 one year or two years as we continue to grow our funds business. As we all know, in our capital structure as an operating REIT and paying out these significant dividends, the more we can 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 in the marketplace today. We're extremely optimistic where we're going with the business. Performance has been great. You look at Sculptor in the first half on the multi-strat fund — they're up 8%. The numbers speak for themselves.

And along those lines, can you talk about any progress on raising third-party funds for Elecor or JVs?

Sure. When we set out — and we get asked the question, why do this deal? When we did it last December, when it closed, these are office buildings. They're not bonds. You don't just buy something and flip it. Our initial thesis was we would raise third-party capital alongside us. We still are having a number of conversations with what I would call third-party LPs and partners. We are currently — we went out with 1325 Avenue of the Americas, we have an LOI and we're finalizing some documents. We'll likely have a partner on that asset that will probably close by the end of Q3. That's an example where we're going to bring in a partner on a specific asset. In some of the larger buildings, for example, on One Market, our partners like Blackstone are investing alongside us. We're investing capital alongside each other into these assets to grow NOI, and as a result, we think that's going to improve the value of those assets. So the long-winded answer is: we have partners in place, we'll have more partners in place, and we're really excited about where we're going with this portfolio. I think you'll see that business grow for us. We're looking at more and more office and more asset classes across the spectrum in the real estate world. I think you'll see that asset class grow for us.

The next question comes from Jason Stewart with Compass Point.

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?

We're out with a number of different funds. From a legal perspective I can't disclose specific funds that we're raising, 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 — 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 we're starting to see inflows across the board. When you look at the ABF space, we're having numerous conversations around ABF products and funds. We're not going to be in a space unless we think we have the expertise in-house. 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 for the asset management business.

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 that given the exit velocity of where rates are in the quarter?

What we're seeing is fewer prepayments. I'll give you a metric: when we look at our overall origination business, if we were doing, for example, $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 deployment of capital as an asset management business — not just to do something for the sake of doing it. Overall cash flows are trending higher because prepayments are definitely lower; you're seeing less velocity in some housing segments. So we expect more cash flow and higher yields on our underlying portfolios, but we are thoughtful as we think about competition and gain-on-sale and what we want to put on balance sheet or what we don't. Recognize that we have between owned and third-party MSRs about $865 billion.

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

Just within the asset management business and specifically within Sculptor, wondering if you could 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 based on performance so far?

Sure. The incentive fees at Sculptor were 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, and that was recognized in the second quarter.

Got you. And within the Genesis Capital business, the origination strength there that you saw — can you talk a little bit more about what the momentum is being driven by? And maybe some color overall in terms of how Genesis Capital has been able to grow originations faster than the rest of the market?

Demand for this product is as high as we've ever seen. If you think about it, it's one- to three-year duration products — assume roughly a two-year duration — with about 8% coupons and levered returns in the mid-teens. When you think about demand, insurance companies in particular are very hungry for this product. Couple that with us rolling out new ABF funds and SMAs that go along with this product, and that's going to help drive significant growth in the company. As I noted earlier, our ability to grow origination is significant. We've also made investments in people; headcount is up significantly versus when we first acquired the company a couple of years ago. We'll also layer in AI and technology similar to some of the things we're working on at the mortgage company level. But it's really driven by demand — insurance company demand, fund demand — and if we can create mid-teens type returns on a levered basis for our shareholders, we'll pursue that. I would be very surprised if we can't double or triple the size of this business over time.

The next question comes from Trevor Cranston with Citizens JMP.

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 give us an early read on how you're seeing trends early in 3Q as you see stability across the channels or what you're seeing with rates moving higher?

I think the market is a bit bifurcated. You saw banks come out and their gain-on-sale margins came in. We will continue to be disciplined on our approach from a gain-on-sale perspective. Coming into the first quarter and 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 rates elevated today.

And a general question on the MSR market: have you seen particular trends in MSR pricing over the last few quarters? In particular, do you think the market is appropriately pricing in improved efficiency of refinancing from investment and implementation of AI and improved technology coming online this year and next year?

My view: MSR pricing today reflects assets that are fairly negatively convex. In absolute values, you're still looking at unlevered returns in the upper single digits, but your room for error is less. We are a bit more cautious than perhaps others when it comes to hedging and valuation. Regarding AI and other technology around refinancing, I don't think we've yet seen anything dramatically different. We will be going on the Valon platform — we own 9.9% of that company as part of the deal to go on the platform — and we're excited to work with them. I think you will see improvements in technology both on the servicing and origination sides, which from an expense standpoint could be meaningful. If we can capture a significant amount of efficiency and expense savings, that will be beneficial. Others may describe similar value, but I don't think we've seen the full efficiency gains yet. We have to be very good around marketing. We've made significant investments in marketing and technology. We want to be the clear winners, and the mortgage operating business is not an easy place to operate.

The next question comes from Crispin Love with Piper Sandler.

Can you share your outlook for the Newrez business in the current environment? We're in the better seasonal part of the year for originations, but the environment has remained challenging. You benefited from the servicing side this quarter, but curious on the big-picture outlook for origination over the back half of the year.

Michael will comment briefly, but overall with rates higher for longer we see resiliency in the purchase market. Rate-term refinances will continue to be pressured in this rate environment, but there's still significant demand for housing. There are also opportunities on the home equity side — cash-outs or home equity products, HELOCs and the like. From a pure volume perspective, the MBA forecast is directionally correct in our expectation of consumer demand.

Crispin, another point is new product innovation. We're focused on launching new products through our origination business and to our client base. If you think about 4 million homeowners, you could tap into roughly 7 million consumers when you consider household members. You'll see more product innovation coming out of us where we own the origination business. For example, the home improvement loans where we have a strategic partnership with Upgrade — we'll likely do more of that going forward — and also launch some of our own origination businesses to put more product out there, which should drive more earnings for the company. We're extremely mindful of where rates are and not just to originate a mortgage because we own a mortgage company. That's one of the things that differentiates us: we can be nimble about how we redeploy our capital as an organization.

Could you discuss whether you'd have any interest in buying back stock near these levels? Results remain really strong, but the valuation is trading at a sizable discount to book value. Why wouldn't you lean more into buybacks at these levels given the potential value of the whole company?

We've been asked this a lot over the years as we trade at a discount to book. Our general belief is: one, as a REIT, we continue to distribute capital; two, if we think we can grow the business long term that's going to reward shareholders in different ways than buying back stock. Historically, buybacks don't always move the needle much. Given we pay out $1 a year in dividends, we always need capital to grow our business. So the likelihood of us buying back stock here is low unless we bring in a third-party partner or explore different ways to bring third-party capital into our funds business. It's a Board decision, but right now we're likely not going to buy back stock.

The next question comes from Matthew Erdner with Jones.

You touched on Sculptor incentive fees. Stripping that out and some one-time hedge gains, do you still view the core EAD run rate in the low mid-50s?

Yes, Matthew. When you back out the Sculptor incentive that we received this quarter and you back out incentive income on a run-rate basis, we should run around $0.50 on a core basis.

Going back to the Genesis platform: what levers are most attractive to pull? Is it construction or bridge at the moment?

We're doing more on the multifamily lending side and some of those loans can be larger in size. We'll continue to focus across all product types. The main thing is sponsor quality: we don't want to put money out to fix-and-flip lenders unless they have the wherewithal from a financial perspective to support their business in a downturn. There have been headwinds and noise in the single-family rental space from Washington; that remains a bit uncertain. Things are a little better than before, but there are still some headline risks. You'll see more growth in multifamily from us. The total addressable market is extremely large. Relative to where we are and others are, we expect a significant lift in that business. Average multifamily loan sizes are in the $10 million to $11 million range.

The next question comes from Michael Piccolo with Wedbush.

With earnings available for distribution comfortably exceeding the dividend, is there any thought of a potential dividend increase? Or is it the same thought process as with buybacks?

Same thought process. We're going to redeploy our capital. Clearly, we're not thrilled with our stock price, so we continue to evaluate ways to increase it. But we don't want to give back the capital if we think we can redeploy it at a higher return for our shareholders and continue to build our business. We started the company in 2013 as really an owner of MSRs; look where we are today — managing north of $100 billion in assets. Our valuation versus peers is obviously lower than some, but we're going to stay the course right now.

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.

Thanks for all your questions. 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.

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