Earnings Call Transcript - RITM Q3 2025

Operator, Operator

Good morning, and welcome to the Rithm Capital Third Quarter 2025 Earnings Call. Please note this event is being recorded. I would now like to turn the conference over to Emma Bolla, Associate General Counsel. Please go ahead.

Emma Bolla, Associate General Counsel

Thank you, and good morning, everyone. I would like to thank you for joining us today for Rithm Capital's Third Quarter 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. 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. And with that, I will turn the call over to Michael.

Michael Nierenberg, Chairman, CEO and President

Thanks, Emma. Good morning, everyone. I appreciate you joining the call today. Our company had an excellent quarter, with all of our business segments performing exceptionally well. Our market-leading segments have brought us to this point: Newrez, one of the largest mortgage companies in the U.S.; Genesis, a major nonbank construction lender; and our investment portfolio and team all performed strongly. Looking at the overall business lines we’ve built and acquired, we generated around $300 million in earnings for our shareholders, achieving an 18% return on equity. We concluded the quarter with $2.2 billion in cash and liquidity. During this quarter, we announced two acquisitions: Crestline, a credit manager based in Fort Worth, Texas, and Paramount, a large real estate office REIT located in New York City with properties in both New York and San Francisco. I want to clarify that we will not be raising equity in the capital markets to finance these acquisitions; instead, we will use a mix of our balance sheet and third-party limited partners. The capital generated from these business lines allows us to expand our platform. When opportunities to acquire companies or assets that enhance our product offerings arise, we seize those situations. We are very enthusiastic about these acquisitions. Crestline, with $18 billion to $20 billion in assets under management, boasts excellent investment professionals offering direct lending and credit products. They also have an insurance and reinsurance business, which means we are now involved in the insurance sector. The range of products we offer through Rithm and our subsidiaries positions us to provide a broad array of credit and asset-backed finance solutions to our partners, allowing us to compete at a high level. Our principle of prioritizing performance will help us grow our platforms. To be clear, we are not focused on accumulating assets under management but rather on delivering results. Our partners seek fewer managers with a wider array of products, which we are currently working toward accomplishing. During the quarter, as noted, we also announced the acquisition of Paramount. Paramount is a Class A office REIT with a strong portfolio in New York and San Francisco, comprising 13 properties. We are witnessing significant demand for office space in New York City, and the recovery in San Francisco is already underway. The opportunity to acquire properties for under $600 per square foot, especially when replacement costs are between $2,500 and $3,000, is very promising. In New York, the portfolio is over 90% leased, while in San Francisco, it's in the low 70s, presenting a substantial opportunity for us to increase net operating income. For the Paramount portfolio, we not only expect to boost occupancy but also to increase rents, as the average rent is around $85 per square foot. For instance, Rithm and our affiliates need 100,000 square feet of new space, and finding suitable space is quite challenging, with average rents significantly exceeding the $85 per square foot mentioned in many markets for high-quality office spaces. Last night, Paramount released their earnings, and several other REITs reported earnings as well. We're experiencing some of the highest leasing activity we've seen since pre-COVID times. Paramount has an excellent team of professionals who have been leading the company for many years, and we look forward to collaborating with them to generate terrific investment returns for our partners and shareholders. Moving forward, our mission remains unchanged: to deliver solid results consistently, offer a broader range of products to our partners, and leverage opportunistic situations to generate outsized returns and grow the company. I will now refer to our supplement, which is available online, and I will begin on Page 3. On this page, you can see Rithm’s financial highlights: a balance sheet of $47 billion; Sculptor with $37 billion in assets under management; Crestline with $18 billion; and Paramount with a $7 billion portfolio. Overall, we have a little over $100 billion in investable assets. We are excited about the position we're in today and our future. Rithm stands out as very few companies command $8.5 billion in permanent capital, and we are proud of this achievement. Since our establishment in public markets in 2013, we have grown tremendously. The average experience level of our investment team is 31 years. At the bottom of the page, you will find our portfolio companies: Newrez, one of the top five mortgage companies in the U.S.; Sculptor, with a strong track record spanning over 30 years; and the real estate team, which just completed a successful capital raise of over $4 billion, maintaining a leading brand in the industry. Crestline is eager to collaborate and support that organization. Regarding Genesis Capital, we acquired it from Goldman Sachs in 2022 when it was producing $1.8 billion. This year, we anticipate reaching or exceeding $5 billion in production, with EBITDA numbers growing from approximately $40 million to an expected $120 million. Additionally, our Rithm Property Trust continues to find the right assets to support growth after the acquisition of the broken REIT previously known as Great Ajax. On Page 4, our financial highlights indicate a strong quarter; all business lines contributed positively. Earnings available for distribution was $0.54 per diluted share, marking the 24th consecutive quarter where this metric surpassed the dividends paid. GAAP net income reached $193.7 million or $0.35 per diluted share, reflecting an 11% return on equity, factoring in all mark-to-market adjustments. Again, earnings available for distribution was $297 million or $0.54 per diluted share, with an 18% return on equity. The book value at the end of the quarter stood at $12.83, equating to $7.1 billion, with a dividend of $0.25. Throughout Page 5, we see a review of our quarter where we demonstrated consistent year-over-year growth across all segments. As previously mentioned, we entered into a definitive agreement to acquire Crestline on September 3, anticipating closure by December 1. We also finalized a definitive agreement to acquire Paramount on September 17, pending shareholder approval for closure in mid-December. These acquisitions continue to broaden our product offerings. When meeting with partners, we are able to present a diverse suite of products, as clients prefer fewer managers. With Sculptor, Rithm, Crestline, and our various real estate initiatives, we have a vast product range to offer our clients. We are actively working towards enhancing our fundraising efforts across the platform and expect to close our first evergreen asset-backed fund during the fourth quarter on a leading wealth management platform. Sculptor is seeing good inflows into its business. On the lower half of the page, Genesis Capital originated $1.2 billion in loans during the quarter, a 60% increase year-over-year, involving 71 new sponsors. The focus is on credit first, emphasizing that growth is important but credit safety is paramount. Baron and the mortgage team will provide further details soon, and as the industry evolves with AI and innovation, we are doing our utmost to stay ahead. In the investment portfolio, we secured an agreement to potentially acquire up to $1 billion in home improvement loans during the quarter. We performed a securitization of nearly $500 million in non-QM loans and invested $2.6 billion in non-QM loans and residential transition loans through our Genesis brand. Now, as I move to Page 6 for our M&A update, we've added this page to give you a clearer picture of our liquidity position. As mentioned, cash and liquidity at the close of Q3 stands at $2.2 billion. Here, we illustrate...

Nick Santoro, CFO

Sure. So at the end of the quarter, we ended with cash and cash equivalents on the balance sheet of $1.6 billion. Then just rolling it forward, we have the Crestline acquisition and the Paramount acquisition. The amounts shown here are the expected cash outlays or uses at close, net of excess cash on the respective balance sheets of both Crestline and Paramount. Then we have our source of cash, which comes from drawing down on our financing facilities. The expectation is at close, we will have approximately $1 billion of financing available to us, bringing us down to $1.3 billion of cash and cash equivalents post both the Crestline and Paramount transactions. And that $1.2 billion is well north of our regulatory requirements as well as working capital and what we hold for margin requirements.

Michael Nierenberg, Chairman, CEO and President

Thanks, Nick. On Page 7, as we look at the valuation of our company, we try to show the sum of the parts. When you look to the top part of the page, Rithm gets valued similarly to mortgage REIT peers. We think there's a huge amount of upside for us to be able to unlock value. That is going to be driven by our asset management business as well as by the mortgage company. If you look at most mortgage companies today or if you look at what I would call our peer group, they trade anywhere from 1.5 to 3x. Right now, Rithm as a public company is trading at around upper 0.8 to 0.9x. If you think about the mortgage company getting valued properly, and the asset management business trading at 10x, the following slide on Page 8 will show you a range of outcomes, which we believe we will achieve over time of something between $16 and $23 as we compare ourselves either to different asset management firms or when we look at the valuation of our mortgage company and our Genesis business. With that, I'm going to now flip to Page 10, which is the so-called power of our platform. As we pointed out before, a little north of $100 billion in assets. You can see all the different product offerings that we have right now to show our LPs and clients in corporate credit. There's really nothing more that we need when we look at corporate credit. We will be exploring over time the energy space, obviously, a very important space. Right now, there's nothing for us to do there. At Sculptor, there's the multi-strategy fund. Our real estate business continues to grow. And asset-backed finance is something that is near and dear to our heart, and we believe is going to be extremely scalable for us as an organization across all of our business lines. As I mentioned earlier, we expect to close one of our first ABF funds here in the fourth quarter, and that's on one of the large wealth platforms. Page 11, Crestline, just gives you a quick snapshot of that business. Again, $18 billion of AUM acquired in September was founded in '97, headquartered in Fort Worth, with offices in New York, Toronto, London, and Tokyo. Really great brand. The team there, led by Doug Bratton and Keith Williams, do a fabulous job. They have a great NAV lending business, a great direct lending business. They're really good on the credit side. We think from a firm standpoint on the capability between Crestline, Sculptor, and Rithm, the DNA of the firm and what we have to offer should put us in a very, very good position with our LPs. From an employee standpoint, there are 175 employees. The average experience of the management team is 20-plus years, and there are over 700 investors across all the strategies. On Page 12, just gives you a snapshot on the different funds that we have to offer or that Crestline has to offer the investment professionals associated with them. The thing I mentioned in my opening remarks, we are now in the insurance and reinsurance business. That is a business that we intend to grow over time. Obviously, it's very competitive. But now that we have a licensed entity, we're excited about where we could go with that. Page 13, Sculptor. This is our snapshot that we put in each quarter. Results have been great. The team is doing great. Our real estate team recently raised over $4 billion in their latest fund, which was very well-received in the markets with, again, great results and leading with performance first rather than just AUM growth. Page 15, we talk about the Paramount deal. The rationale for us here is simple. One, I think we're really good at developing a thesis or a theory around an investment strategy in a dislocated market. If we start with that, then when you have a Board that announces a process to sell a company that usually the way we believe or think about it, it creates an opportunity for us to take a hard look at that company. When you look at the job that the Paramount team has done and the portfolio of assets that they have assembled, our belief is in the so-called return to office. You could actually poke holes at that a little bit because when you look at New York, it's 90-plus percent leased. So you could say, okay, that office in New York has already returned to office. I mentioned earlier that between Rithm and our affiliates, we need 100,000 square feet. It's really, really hard to find good office at any kind of reasonable value. So we think about that. San Francisco is in the middle of the so-called AI boom. You're seeing a new mayor there and a lot of folks coming back to the office. That portfolio is about low 70s from a lease-up perspective. We think we're going to be able to put in some amenities, invest in some tenant improvements, and we will see some really good lease-ups there. We're seeing that now across all of our leasing activity. When you look at San Francisco, the demand for tenants right now is roughly 7.8 million square feet, which is the highest ever that we know of. So we're really excited about this. Buying assets that we think are attractive or acquiring a company at an attractive value with great assets, then being able to raise third-party capital around that to grow our asset management business is really where we want to go with this. Page 16 just shows a snapshot of the balance sheet. Pro forma after we complete these transactions, you can have a look at that. I'm not going to spend time on that. Again, that's on Page 16. And now I'll just touch base on Genesis, then I'll turn it over to Baron, who will talk about Newrez. On Genesis, as I mentioned, $1.2 billion is a record third quarter for the business, with new originations yielding roughly 10% of funding, and we achieved 71 new sponsors. When you look at the company year-over-year, our outstanding commitments have grown by 51% year-over-year in the third quarter. Funded volume was up 60%, with sponsor growth up a little less than 50%. From a delinquency perspective, as I mentioned earlier, credit first is our mantra. The total portfolio has only 4% that are over 60 days delinquent. Just keep in mind, we do service our own assets. I think that is a huge edge, whether it be in ABF or anything else that we do. For the most part, we're able to control an outcome and work with borrowers where we have some brand recognition. When you look at Page 19, we just talk about a differentiated model versus peers in the business between construction, bridge, and renovation. The business is led by Clint Arrowsmith who has a background in bank credit, and he and Joe, along with the team, have done a great job there. I'm really excited about where we sit. I'm going to turn it over to Baron now, who's going to talk about the mortgage company, and then we'll open it up for Q&A.

Baron Silverstein, President of Newrez

Okay. Thank you, Michael. Good morning to everybody. Turning to Slide 21. Another great quarter for our platform as we execute on our 2025 growth strategy, with significant gains in recapture, non-agency originations, expansion of our client franchise, and as Michael mentioned, exciting market-leading developments in our ReziAI stack. Our third quarter '25 pretax income, excluding mark-to-market, was approximately $295 million, which is up 7% quarter-over-quarter and 20% year-over-year, delivering a 20% ROE for the quarter, continuing our steady performance. These results continue to show the power of our platform and our ability to drive consistent earnings with a results-first ethos. On Slide 22, we can also continue to deliver growth through our differentiated multichannel origination strategy that allows us to use capital efficiently and maximize our returns. The table on the left shows our direct origination production up 32% year-over-year and with a focus on supporting our homeowners and recapture outperforming the industry. In our correspondent channel, we were able to increase production and materially improve margins quarter-over-quarter from 43 basis points to 53 basis points through our co-issue MSR acquisition strategy. Our product expansion fueled growth in non-agency assets, which are forecasted to be up approximately 120% year-over-year. Moving to Slide 23, with the recent drop in rates, our origination business finished the quarter with our biggest month in lock volume since early 2022 and has already surpassed this month in October. But even with increased production, our technology is driving increased underwriting capacity and improved turn times. On margins, our weighted average margins dropped to 114 basis points, which is due to channel mix and a significant increase in government streamline refinances that have a lower margin. While our market competition continues to drive margin pressures, our disciplined focus remains on profitable growth with an eye for market opportunities. As Michael said, performance first, lead with results. Turning to Slide 24, we continue to deepen our connection to our 4-plus million customers with digital and brand investments driving our momentum and recapture. We have seen wins in increased digital application leads, better conversions through our ReziChat and our newest tool, ReziAssist, which powers loan officer call automation and coaching. Customer retention remains a top growth strategy for Newrez, and we're committed to delivering exceptional customer experience and a broad suite of products that differentiate our platform versus our competition. On Slide 25, our servicing business continues to perform well with $260 million of pretax income, which is up 11% year-over-year. Our special servicing platform is the best in the business, and we continue to gain market share as shown by increases in our third-party UPB, which is up 4%. We're also excited about a new partnership with Wells Fargo, which validates our non-agency servicing leadership in the industry. Performance across the servicing platform is also driven by our operational efficiency, and our expansion of our ReziAI platform continues to deliver cost leadership at a fully loaded $140 cost per loan. I continue to 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 with all of you. Thank you. Back to you, Michael.

Michael Nierenberg, Chairman, CEO and President

Thanks, Baron. Quickly on Page 27 before we move to Q&A. Looking at our investment business and portfolio, there's a lot happening at Rithm. In the last quarter, we invested approximately $2.6 billion in non-QM loans and RTL loans. These two segments are among the most sought-after products in the ABF space, with LPs eager to access them. We are able to both manufacture and service these products, and the overall yields and returns on these assets indicate we will keep growing in this area. This applies to both Genesis and Newrez. Overall, it was a strong quarter for the investment portfolio and for the firm as a whole. Now, I'll pass it back to the operator for Q&A.

Operator, Operator

Our first question comes from Crispin Love with Piper Sandler.

Crispin Love, Analyst

Just first, there's been a pretty wide divergence in share price between you and some of the originator servicer peers out there. It doesn't make much sense when you look at the sum of the parts that you lay out. So wondering if you could provide an update on the broader strategic vision and what timelines that could be, whether it's a Newrez spin, the REIT, or anything with the asset manager. Just curious what's your focus? And then what are the key hurdles you need to get past to drive some of those changes?

Michael Nierenberg, Chairman, CEO and President

Thanks, Crispin. Regarding our share price, I believe we are very attractive from a value perspective when considering our fundamentals. When we announced the Paramount deal, the stock reached about $12.5. After that, the market anticipated a return to our ATM and a preferred offering, which likely led to the perception we would raise equity. Currently, with the stock price around $11, I find it very appealing, but that's my personal view. To clarify, we are not raising equity for this transaction and will likely end up with about $1.3 billion in cash and liquidity. We are actively engaging with limited partners, and our asset management business is continuing to grow. We aim to drive more FRE through our operations to enhance our valuation, and we believe the Paramount deal will contribute to this. Additionally, we have an ABF fund that's expected to close in the fourth quarter, which will strengthen our platform. The addition of Crestline will also boost our FRE. Overall, our progress in these areas should help us address potential spins or sales. The mortgage company has substantial capital that could significantly enhance our stock price. Part of our strategy involves building the organization further and not just taking the mortgage company public for immediate gains. We need to grow our asset management and FRE before considering spins or an IPO for the mortgage company. We continuously evaluate these possibilities. From a REIT viewpoint, we aspire to create a structure similar to Blackstone's, but we recognize the necessity for further growth in our asset management business, which is why we made two acquisitions this quarter.

Crispin Love, Analyst

Great. And then just on the Paramount transaction, can you share how much third-party capital you've been able to raise there or just how conversations have been going? I believe you said originally, you'd fund it with $300 million to $500 million in cash at the Rithm level and then the rest from co-investors. So curious on progress there. And then are you not able to bring in capital until after the closing of the deal? I thought I saw something like that in the presentation, but just curious on an update.

Michael Nierenberg, Chairman, CEO and President

So on that deal, we went out stating that we'll put in $300 million to $500 million of our own equity. I think the way that we expect that to be is roughly we think it's going to be about $300 million from Rithm, possibly $50 million from RPT, which is our other externally managed REIT. The other, call it, $950 million or $1 billion, will be raised from third parties. We can raise all that money prior to close depending upon how much economics do we want to give away beforehand. It's just that simple. The money is there. We've had a number of conversations with folks that want to give us the money now. What we're trying to do is really build our asset management business. We did set up from a liquidity standpoint prior to this acquisition and prior to Crestline to make sure that there is enough cash and liquidity on balance sheet. But just to be clear, if we want to fund this thing all with third parties now, we can do that. It's just a question of what do the economics look like for Rithm and our shareholders.

Operator, Operator

And the next question comes from Bose George with KBW.

Bose George, Analyst

I have a question regarding the Ginnie Mae streamline refinances where you mentioned that it reduced the gain on sale margin. Are those loans also less expensive to produce? Essentially, while the economics are similar, is the difference solely in the top line gain on sale margin?

Baron Silverstein, President of Newrez

Yes. Yes. The answer to that is yes. They are definitely cheaper to produce, and that's the most straightforward way to look at it. They are also highly competitive as well, but they are cheaper to produce.

Bose George, Analyst

Okay. Great. And then actually switching to RPT. Given where that's trading, can you just discuss some of the options there for potentially growing that business? Could we see an acquisition or a merger? Just curious what kinds of things you're thinking about there?

Michael Nierenberg, Chairman, CEO and President

We have earnings for RPT tomorrow, and here’s our perspective. This is essentially a capital vehicle. The stock is currently trading very poorly. However, we need to provide investors with a compelling reason to own the equity. Our plan for this company involves attempts at growth, exploring direct lending options among others. If we encounter challenges in achieving this growth, we are likely to consider a tender offer for the shares to streamline the vehicle. For now, our goal is to put in considerable effort to make it work, similar to how BXMT has expanded and how we operated during our Fortress days. But if growth proves unattainable, we will likely move forward with a tender offer.

Bose George, Analyst

Okay. Great. And actually, just going back to the earlier question, just on strategic actions. The partial listing of Newrez as opposed to a spin, but just a small, whatever, 15% listing for a mark-to-market. Just given that you could do that sooner versus the other strategic actions, which probably take time to sort of build out the AUM more, is that something worth sort of reconsidering or revisiting?

Michael Nierenberg, Chairman, CEO and President

Yes. We explore that every day. That is something that we are exploring.

Operator, Operator

And the next question comes from Eric Hagen with BTIG.

Eric Hagen, Analyst

Fleshing out some of this other conversation here. We're looking at Slide 6 again. Is the expectation to raise the third-party capital for Paramount and pay down that $1.1 billion that you drew on the financing line? Or does this pro forma cash position assume that you've raised the third-party capital to fund that?

Michael Nierenberg, Chairman, CEO and President

Yes. We haven't accessed the funds yet because the deal isn't finalized and we still need shareholder approval. Once the deal closes, if we do draw on the funds, we will repay that after securing the capital. There is significant interest from potential participants, including limited partners and partners in the business. Overall, the number of discussions we're having with limited partners and the available capital for serious talks has us feeling optimistic about our situation.

Eric Hagen, Analyst

Got you. That's helpful. I mean there's a lot of attention right now on underwriting, even some fraud with these consumer lenders, regional banks, and such. Do you see that driving changes in the market? I mean your entire business effectively is like underwriting focused at this point. I mean we wouldn't expect any bad underwriting in your portfolio, but do you see that having a spillover effect in any way to the rest of the market?

Michael Nierenberg, Chairman, CEO and President

Yes, we frequently get questions about our ABF funds, particularly regarding First Brands and Tricolor. One distinct aspect of Rithm is our workforce, which includes around 10,000 employees throughout the firm, and the mortgage company itself has about 10,000 employees and consultants. In contrast, Genesis has only a couple of hundred people. Our approach starts with underwriting; we don't simply purchase pools of assets unless we have the ability to control the outcome, which is facilitated by our underwriting and servicing business. This is a crucial distinction. Investors in our ABF LPs are understandably interested in what occurred with First Brands and Tricolor. Tricolor faced classic fraud due to asset pledging twice, while First Brands encountered a liquidity issue, though there are likely additional factors at play. We prioritize underwriting first, and while we've witnessed similar events occur, I don't believe they reflect systemic issues within the broader market. However, we must remain vigilant and continue to lead with underwriting.

Eric Hagen, Analyst

Good stuff. One more, if I may. The falloff in interest income from the investment portfolio quarter-over-quarter, it looks like it went from $82 million to $52 million. What was the driver of that?

Nicola Santoro, CFO

Sure. Eric, we held lower agency balances. In addition, we had a retrospective adjustment in interest income that was offset in unrealized gains and losses. So when you look at that line, you will see the pickup.

Operator, Operator

And the next question comes from Jason Weaver with JonesTrading.

Jason Weaver, Analyst

For the initial ABF fund you're targeting with the wealth management platform, can you talk about the initial size you're targeting for that as well as the expected life of that vehicle?

Michael Nierenberg, Chairman, CEO and President

I don't think we can discuss the marketing of the fund at this moment. However, I can share that we are working on a couple of things related to it. The fund size is likely to be over $500 million, and you can expect the average duration to be around three years, similar to the typical products we offer. Non-QM and RTL are currently popular since they provide diversified risk, and many managers like us are launching various ABF funds. When considering the product range, it could include ABS, mortgages, CLOs, aviation finance, and several other types of investments that fit into these categories.

Jason Weaver, Analyst

All right. That's helpful. And then next, as it pertains to the dividend, you've been covering for, I don't know how long, 5 years as far back as I remember. How do you think about the payout policy right now, whether you can see it expanding given some possible capital needs for integrating these acquisitions or building more of a buffer against market headwinds?

Michael Nierenberg, Chairman, CEO and President

I can say with certainty that the decision about the dividend ultimately rests with the Board. However, from our perspective here at Rithm, we do not intend to raise our dividend. To be frank, considering we currently pay out around $600 million annually, if we were to reinvest that capital at a return of 15% or 20%, given that the company has generated an 18% return on equity, redeploying that capital would significantly enhance our earnings, which would support stock growth. Therefore, at this moment, we have no intention of increasing the dividend. If circumstances change, then we would reconsider.

Operator, Operator

And the next question comes from Trevor Cranston with Citizens JMP.

Trevor Cranston, Analyst

Another question on the valuation of the company and closing the gap to the sum of the parts level. Can you talk about how you guys think about share buybacks as a tool to sort of help bridge that gap or if the focus is really just more on kind of continuing to grow and increase revenue streams to get there?

Michael Nierenberg, Chairman, CEO and President

So people often discuss share buybacks. I believe our strategy will focus on continued growth as long as we can invest capital with a return of 15% to 20%. Although we have various policies in place, such as buybacks and ATMs, given our two acquisitions, I assume we won't be engaging in share buybacks right now. The potential IPO of the mortgage company is something we consider, as it could help us raise some capital if pursued. However, at this moment, I believe we won’t be doing share buybacks. We are financing over a billion-dollar acquisition with Paramount and Crestline. As we keep growing our earnings and increasing FRE, I expect we will see a significant revaluation of the company. That's our goal.

Trevor Cranston, Analyst

Got it. Okay. That's helpful. And then on the Sculptor business, you guys have had a pretty good year of fundraising. I think the number you gave is $4.6 billion so far this year. Can you give us an outlook on how you're thinking about fundraising heading into 2026, if you think that kind of pace is sustainable? And just generally, how do you think about the organic growth potential of the asset management side over the next year or so?

Michael Nierenberg, Chairman, CEO and President

Sure. When we look at the asset management business, we are going to be making capital investments in people as we continue to grow our capital formation and strategy group. So there will be some significant investments there. I'm hopeful over the next 60 days we have some big announcements around some personnel. When you look at the growth, the $4.5 billion or so that Sculptor raised, a large amount of that was in the real estate business. The underlying performance in the credit business and the multi-strategy business continues to be very good. When you look at Crestline, their performance also remains very strong. Across our firm, when you think about Rithm, Sculptor, Crestline, you could assume at some point that the capital formation groups come together, and things really start to synergize, allowing us to raise a lot more capital. When I look at a $4.5 billion or $5 billion capital raise for '25, do I think that's repeatable in '26? Absolutely. The bigger players have done a fabulous job raising lots of capital, and there's no reason why we can't surpass the numbers that have been achieved in '25.

Operator, Operator

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, Chairman, CEO and President

Thank you for your insightful questions and for joining us this morning. As I conclude, I am very enthusiastic about our current position. From a company standpoint, we are performing exceptionally well right now. Our earnings remain strong, supported by the businesses we have acquired or developed to reach this point. These same businesses will allow us to further expand our platform. We are clearly concentrating on the asset management sector and on achieving an appropriate valuation for the company. We consistently evaluate the mortgage company and consider whether to take it public. Honestly, it can sometimes be easier to stay out of the public markets, particularly when many asset managers are discussing a shift from public to private markets as assets move to wealth channels. Overall, everything is functioning smoothly for us, and we are eager to provide updates throughout this quarter and into the next. Thank you once again, and have a wonderful weekend.

Operator, Operator

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