Rithm Capital Corp.

Good morning and welcome to the Rhythm Capital third quarter 2025 earnings call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a touch-tone phone. To withdraw your question, please press star and then two. Please note this event is being recorded. I would now like to turn the conference over to Emma Hulke, Associate General Counsel. Please go ahead.

Thank you and good morning, everyone. I would like to thank you for joining us today for Rhythm Capital's third quarter 2025 earnings call. Joining me today are Michael Nirenberg, Chairman, CEO, and President of Rhythm Capital, Nick Santoro, Chief Financial Officer of Rhythm Capital, and Barron Silverstein, President of NIRAS. Throughout the call, we are going to reference the earnings supplement that was posted this morning to the Rhythm Capital website, www.rhythmcap.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. And with that, I will turn the call over to Michael.

Thanks, Emma. Good morning, everyone, and thanks for joining the call this morning. Our company had a great quarter with all of our business lines performing extremely well. Our market-leading business lines that enabled us to get here, New Res, our mortgage company, which is one of the largest mortgage companies in the U.S., Genesis, our construction lender, which is one of the largest non-bank construction lenders in the U.S., and our investment portfolio and team all had a really good quarter. As we look at all the business lines that we built or acquired, this enabled us to generate approximately $300 million in earnings for our shareholders, generating an 18% ROE. We ended the quarter with $2.2 billion of cash and liquidity. During the quarter, we announced two acquisitions, Crestline, which is a credit manager based out of Fort Worth, Texas, and Paramount, which is a large real estate office read here based in New York City. with properties in two of the gateway cities in the US, both New York and San Francisco. So we are clear, we will not be raising equity in the capital markets to fund these acquisitions. We will fund these acquisitions with a combination of balance sheet and third party LPs and partners. The capital created by these business lines help us expand our platform. When we see an opportunity to acquire a company or an asset that helps expand our product offerings to our LPs, we try and take advantage of these types of situations. We are really excited with these acquisitions. Crestline is an $18 to $20 billion asset manager with great people, great investment professionals, offering direct lending, NAV lending, credit products. They also have an insurance business and a reinsurance business. So now we're in the insurance business. The suite of products that we have across our firm at Rhythm and our subsidiaries enable us to offer a wide spectrum of credit and ABF products to our LP base and, quite frankly, put us on the stage to be able to compete against anyone. Our mantra of performance first will enable us to grow our platforms. We are not, to be clear, in an AUM race. More importantly, what we want to do is lead with results. When we meet with LPs, they want fewer managers with more products, and I believe we are in the middle of accomplishing that. During the quarter, as I mentioned, we also announced the acquisition of Paramount. Paramount is a Class A office REIT with a great portfolio of office buildings in New York and San Francisco. There's 13 properties there. We are seeing huge demand for office in both New York City and the recovery in San Francisco has already begun. Acquiring assets for a little under $600 per foot versus replacement costs of $2,500 to $3,000 a foot gets us really excited. In New York, this portfolio is north of 90% leased, and in San Francisco, it's in the low 70s, creating a huge opportunity for us to grow NOI. When you look at the Paramount portfolio, not only will we grow occupancy, we also believe in the ability to drive rents higher, as the average rent is approximately $85 per foot. For example, when we think about the need for office space, Rhythm and our affiliates have a need for 100,000 of new space. It's very, very difficult to find space, and average rents are well above the $85 per foot that I quoted in most markets for a quality office space. During the quarter, Paramount released their earnings last night, and I believe there's a couple other REITs that released earnings. We're seeing some of the highest leasing activity that we've seen, and this goes back to the pre-COVID days. As it relates to Paramount, they have an excellent team of professionals who have been running the company for many, many years, and as well as the operations. I believe there's approximately 300 people between corporate and ops. We're very excited to work with the team, creating what we believe will be a terrific investment return for our LPs and shareholders. So as we look forward, our mission is still the same. Put up solid results quarter after quarter, be able to offer more products for our LPs and partners, and take advantage of opportunistic situations to generate outsized returns and grow the company. I'll now refer to our supplement, which has been posted online. And I'm going to begin on page three. If you look in the upper part of the page, rhythm by the numbers. Balance sheet, $47 billion. Sculptor has $37 billion of AUM. Crestline has $18 billion of AUM. And Paramount has a $7 billion portfolio. So when we think about this, we think about it in the context of having a little north of $100 billion in investable assets. And between the investment teams that work on our balance sheet, as well as putting up great results for our LPs, we're really excited of where we sit today and where we're going. When you think about rhythm, very few companies have $8.5 billion of permanent capital. We're proud of that. We've grown this company in the public markets when we began this company back in 2013 at Fortress. The average investment team or the average age of the investment team, not age, but been working in the investment business has been 31 years. When you look at the bottom part of the, you can see all the portfolio companies, New Res, again, we're one of the top five mortgage companies in the U.S., Sculptor has been around for 30-plus years, great track record. The real estate team is just coming off a very successful capital raise, raising north of $4 billion for their business. Their brand is second to none in the real estate business. Crestline, super excited to work together and help support that organization. Paramount, I mentioned, on the real estate side, Genesis Capital, just to give you on that one, we bought that company from Goldman Sachs in 2022. At that time, it was doing $1.8 billion of production. This year, I think we're going to either approach or do north of $5 billion of production, and EBITDA numbers have gone from $40-odd million to $120 this year, expected. And then we have Rhythm Property Trust, which was the broken REIT we took over last year, which was known as Great Ajax. We're still trying to figure out a way, quite frankly, to grow that and put the right assets there. As we look at financial highlights on page four, a really good quarter, and it's solid. All of our business lines contributing here. Earnings available for distribution, $0.54 per diluted share. This is the 24th consecutive quarter where EAD was greater than our dividends paid. Gap net income, $193.7 or $0.35 per diluted share for return on equity of 11%. Keep in mind that includes all the mark-to-market stuff. Earnings available for distribution, again, $297 million, $0.54 per diluted share or 18% return on equity. Book value, we closed the quarter at $12.83, which is $7.1 billion. Dividend, $0.25. And as I pointed out before, cash and liquidity on balance sheet, $2.2 billion. As you look at page five, quarter and review, once again, we've demonstrated steady growth year over year in all of our segments. During the quarter, as I mentioned earlier, we entered into a definitive agreement to acquire Crestline on September 3rd. We're hoping that deal closes on December 1st. We entered into a definitive agreement to acquire Paramount on September 17th. That'll go out for shareholder vote, and we're hopeful that closes in mid-December. These acquisitions continue, as I pointed out before, to expand the product offerings that we have to... When we sit down with an LP, we have a larger suite of products because LPs want fewer managers. And now with between Sculptor, Rhythm, Crestline, and some of the real estate stuff we're doing, we have a large amount of products that we could offer to our different clients. Fundraising across the platform, we continue to work hard to build that during the quarter. In Q4, we expect to close our first ever green ABF fund on a leading wealth management platform. And then when you look at inflows, Sculptor continues to see some good inflows into their business. Bottom part of the page, Genesis Capital during the quarter originated $1.2 billion of loans. That's a 60% increase year over year. We saw 71 new sponsors in 2020. But I would say on that company, credit first is the mantra. It's not, again, just to grow, but credit first really matters. The mortgage company, Barron will take us through the mortgage company, but Barron and the team continue to do a great job there. And, you know, as the world changes and we think about AI and innovation, we're doing all we can to stay ahead of that. And then on the investment portfolio, during the quarter, we agreed on a forward flow to acquire up to a billion dollars in home improvement loans, that's from Upgrade. We did a securitization for a little under $500 million on non-QM, and we invested $2.6 billion in non-QM loans and residential transition loans, and that's through our Genesis brand. When you look at the... Hello? When you look, I'm on page six now, when you look at our M&A update, what we wanted to do is put a page in here so you could have a sense for our liquidity walk. As I mentioned, cash and liquidity as of the end of Q3 is $2.2 billion. Here it shows, what are we showing here? $1.2 billion. Sorry, why don't you take it?