Rithm Capital Corp. (NYSE:RITM) Q1 2024 Earnings Call Transcript

Rithm Capital Corp. (NYSE:RITM) Q1 2024 Earnings Call Transcript April 30, 2024

Rithm Capital Corp. misses on earnings expectations. Reported EPS is $0.00054 EPS, expectations were $0.41. RITM isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Hello and welcome to the Rithm Capital First Quarter 2024 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to hand the call to Emma Bolla, Associate General Counsel. Please go ahead.

Emma Bolla: Thank you and good morning everyone. I would like to thank you for joining us today for Rithm Capital’s first quarter 2024 earnings call. Joining me today are Michael Nierenberg, Chairman, CEO and President of Rithm Capital; and Nick Santoro, Chief Financial Officer of Rithm Capital; and Baron Silverstein, President of Newrez. Throughout the call, we are going to reference the earnings supplement that was posted this morning to the Rithm Capital website www.rithmcap.com. If you’ve not already done so, I’d encourage you to download the presentation now. I would like to point out that certain statements made today will be forward-looking statements. These statements, by their nature, are uncertain and may differ materially from actual results.

I encourage you to review the disclaimers in our press release and earnings supplement regarding forward-looking statements and to review the risk factors contained in our annual and quarterly reports filed with the SEC. In addition, we will be discussing some non-GAAP financial measures during today’s call. Reconciliations of these measures to the most directly comparable GAAP measures can be found in our earnings supplement. And with that I will turn the call over to Michael.

Michael Nierenberg: Thanks, Emma. Good morning, everyone, and thanks for joining us. As you look at our business, another very solid quarter for Rithm and quite frankly all of our operating companies. All of our business lines performed extremely well. With the recent backup in rates, the market should provide us with great opportunities to deploy capital and generate and continue to generate outsize returns. Regarding risk, we are much closer to home from a duration perspective. With Fed speak early in the quarter and quite frankly late last year targeting lower rates, we — throughout the first quarter we hedged most of our MSR risk or MSR positions. What this should do for the company is continue to create stability in earnings, as well as book value on a go-forward basis.

As everyone knows, we set out on a mission to grow our alternatives business. To be clear, this is not just in size, but more importantly, excellent risk-adjusted returns for our shareholders and LPs. Sculptor, during the quarter, continued to deliver strong results across the platform. What we are seeing in terms of risk-reward in credit markets are some of the most attractive levels we have seen in years outside of financial crisis levels. The multi-strat fund continues to generate strong returns, while maintaining conservative risk posturing. The Real Estate Group, which focuses on non-traditional niche asset classes, continues to generate excellent returns. Their track record, when you look at the numbers is unparalleled relative to others in the marketplace.

In the first quarter, we announced the launch of Sculptor loan financing partners, the firm’s first captive CLO equity investment platform. This was anchored by a commitment from Rithm. In the quarter, we priced two CLOs, one in Europe and one in the U.S. As you think about all these comments, we’re super excited where we are with the business and the prospects for the future. At Newrez, our mortgage company, Baron and the team did a great job during the quarter. We had excellent results both in the servicing segment, as well as in the origination segment. We look forward to closing the SLS transaction, which we announced late in the fourth quarter, which will add significant third-party business to the platform. Our Genesis business, which is our transition loan business, had its best origination quarter ever.

Not only are volumes up as banks retreat, the addition of new clients to the platform has never been higher. I think we originated loans to 66 different counterparties during the quarter. Also, we completed a $500 million rated securitization in the quarter, lowering our cost of funds by approximately 150 basis points, as well as we achieved higher advance rates. All of these are very exciting things for our business and we look forward to updating you along the way. I’ll now turn to the supplement which has been posted online. On page three, when you look at where we are today, this is one thing I want to highlight on this page. Aside from the sheer scale of our business, the balance sheet at Rithm today is higher as a result of the hedges that we put on during the quarter against our MSR business.

During the — when you look at life-to-date $5.3 billion of dividends paid, $7.1 billion of equity, and our total economic return since inception is 184%. Sculptor on the right side of the page $32 billion of AUM. During the quarter GAAP net income $262 million, or $0.54 per diluted share. Our earnings available for distribution $233 million, or $0.48 per diluted share. Our common dividend at $0.25, cash and liquidity at the end of Q1 was $2 billion, and the total economic return for Q1 is 4.5%. As you flip to page five and you look at where we — when this company was first started, just a quick snapshot and going back in history. Company was started in 2013 at Fortress to take advantage of dislocations in the MSR market as banks were selling MSRs to Basel III capital constraints.

So we started the business with a $1 billion of equity. Today we’re at $7.1 billion. What started out as strictly an owner of excess MSRs today is a full-scale asset manager with capabilities in credit, real estate, obviously all kinds of lending businesses and as well as in the mortgage space. As we go forward, we look forward, as we go forward, we will look to increase our scale in our alt’s business. We will look to add insurance over time. As we think about our offerings, we’d like to tap the retail markets and we’ll continue to tap the institutional markets. So a lot of exciting things hopefully ahead for Rithm and our operating companies on a go-forward basis. Q1 activity, if you flip to page six, when you look at what we did on the new-res side, Baron’s going to talk about the mortgage company in a bit here.

The origination platform continues to grow market share. We’ve had organic growth in the third-party servicing franchise, that’s due to both the SLS side as well as this, you know, quite frankly, our excellence in the servicing business with clients that we know and that we already service loans for. As you think about where the banks are with the regional banks retreating, the Genesis business, as I pointed out earlier, had a record quarter in origination. They’re on target to do, it looks like we’re on target to do about $3 billion in origination. When we first started the platform, I think we were in and around $2 billion. When you look at the credit markets, during Q1 we issued $775 million of senior unsecured notes. We also tendered for 50% of our outstanding issue, so we currently have $275 million of outstanding senior unsecured notes, which are due in ‘25.

When you look at the Sculptor platform, again the CLO — the captive CLO equity investment platform, we ceded that. Obviously, there’s third-parties every time we do a CLO deal. There are third-parties that buy the CLO equity. When you look at our investment in Sculptor and in this platform, I think that on a go-forward basis, this is only scratching the surface, what we could all do together. When we look at performance, strong risk-adjusted returns of both Rithm and Sculptor platforms, we lead with performance, we’re going to see more AUM come on our platform. And then when we look at partnerships, we continue to expand our global reach and try to create capital solutions with different LPs and shareholders on a go-forward basis. Sculptor page seven, just a couple of highlights here.

Again, total AUM $32 billion. The credit business between credit and real estate is $24 billion. Of that $24 billion, roughly $15 billion, you could look at in the CLO business. The company has been outstanding for many years. Over the course of the past, I think the company was started something in ‘94. When you look at AUM today at $32 billion, and you look at the acquisition which closed in November of ‘23, we’re just super excited where this platform is going to go. When you look at overall returns on page eight on the Sculptor on the platform between credit, real estate and the multi-strat fund, quite frankly I think our returns are second to none. And both the credit markets, the real estate markets, and what we’re doing overall I think are we’re in a position today to truly execute some of the best investing environments that we’ve seen in many, many years.

On the new-res side, on page nine, delivered 23% ROEs, huge numbers, quite frankly. PTI, ex mark-to-market increased by 22% quarter-over-quarter. The servicing business continues to perform extremely well. From a UPB standpoint, we grew the servicing business 15% year-over-year. I know at some point when we get into Q&As, there’ll be some questions regarding going out and buying bulk packages, we’ll address that. But quite frankly, between where we are today and as we get through more slides here, you’ll see that between our subservicing business, or really our third-party business in owned servicing, we have $850 billion-ish of MSR exposure in the house. This is not a race to get bigger. This is a race to generate more earnings. When you look to the right side of the page for the quarter, servicing excluding mark-to-market $220 million.

Our MSR mark-to-market was $195 million. Originations made $42 million, and then obviously with corporate expense, the net number there is $408 million. So great quarter, great job done by the team overall. Genesis Capital, I pointed out before, record originations $840 million in commitments, 66 different sponsors, the business continues to perform extremely well. First quarter ROE, something between 13% and 15%. And new clients continue to come to the platform as the banks continue to pull back in the areas that we operate. And then finally, what we’ll do is let’s get into the segment performance. I’ll just take page 13 and then Baron is going to take the mortgage company stuff. On the servicing portfolio, again $857 billion of total servicing.

When you look at our earnings stream and you think about where we are today as a business, you couple that with the Sculptor platform on the alt side, and you think about earnings in the platform, the ability to make investments, whether it’d be at the Sculptor level or other things that we’re going to do over the course of time. I truly believe there is a huge growth opportunity for us. And again, it’s not just an AUM thing, it’s just real earnings that we’re going to generate for shareholders and LPs. Total owned servicing $572 billion, of that 99% of the portfolios added the money. Gross WAC on our total portfolio, I think, is something around $390 right now. The SLS acquisition adds $150 billion of servicing, of which $100 billion of that is third-party servicing.

With that, why don’t we go to page 15 and I’ll turn it over to Baron, and he will take it from there.

Baron Silverstein: Alright. Good morning and thanks Michael. As Michael mentioned, just another good quarter for us, as we continue to grow on the foundation that we’ve built over the last few years, and our core focus is on strategic growth and continued cost leadership. We’ve executed on synergies across all of our platforms. We’ve internalized most of the Rithm third-party servicers. We unified our brand strategy, and we’re now focused on growing our business, growing our platform, and then modernizing our customer and employee experience through digital and AI initiatives. On slide 16, on our servicing business, our servicing business does continue to perform well. As Michael mentioned, we’re expecting to close the SLS acquisition in the second quarter, and it’s going to add an additional $149 billion of owned and subserviced MSRs, while adding co-issue MSR acquisition capabilities.

Away from a SLS, we continue to see additional opportunities to gain market share, including picking up wallet share with our existing third-party customer base, and we continue to evaluate MSR bulk packages, but there’s also other strategic acquisitions that we look at as well. Overall, the consumer also performs well with muted prepayment speeds and historically low delinquencies. Across it all, we remain focused on maintaining operational excellence and cost management, even after adding 1 million loans onto the platform last year and an expected additional 700,000 loans with the SLS transaction. Moving to slide 17 on the origination side, and similar to servicing, our origination business was able to take advantage of market opportunities, while remaining disciplined on strategic growth.

While the market remains historically muted in terms of origination volume, we grew origination’s overall 21% quarter-over-quarter, while also increasing margins, both of which were driven by our correspondent channel. We have strong momentum in our non-agency products, originating over $185 million of non-QM loans in the first quarter, almost back to levels we were seeing in 2022 on a quarterly basis. While our home equity originations were also up 70% quarter-over-quarter, with approximately $81 million in funded volume, but we expect to see increasing growth in our home equity originations also coming into the months and quarters to follow. Our retail channel, including our JV, after the moves we disclosed we made in the first quarter, was able to break even in the first quarter, which is a big win for us and I would say for our team across our entire platform.

And while the home purchase market continues to show positive signs, regardless of interest rates. We have significant upside in growing our purchase market share through retention strategies, which began with our New-Res Home Rewards Program that was launched in February. And on slide 16, we like the rest of the industry, view AI as a technology that will have a transformative impact on our scaled business. We have an incredible amount of data across our entire platform. And while our AI platform branded Resi is in its early days, currently focused on employee education and onboardings, but we see a broad applications through originations and servicing. We also believe our proprietary technology is a strategic advantage, allowing us to be nimble, control costs, while delivering custom solutions to our enterprise clients.

While we always remain focused on expense management, our near-term AI initiatives are driven by applying the best customer experience, which in turn will create future efficiencies. We’re really just starting to tell the new-res story more broadly and on a final note we will be hosting an investment community day to dig in further on our business and more details can be found on the Rithm Cap website. Back to you, Michael.

Michael Nierenberg: Thanks, Baron. Good work. Just a couple last slides for me, and then we’re going to open it up for Q&A. On the GreenBarn side, just so everybody knows, David Welsh and David Schonbraun in that team, there’s 25 investment professionals. At this time when we do investments off the GreenBarn shelf, typically it’s done on the Rithm balance sheet. So I would think of it as a Rithm-related investment strategy right now on commercial real estate. We do not have any legacy commercial real estate in the house. So things there are, as we see opportunities and want to deploy capital on the Rithm balance sheet, we will do so. Adoor, just to touch on our single family rental strategy 4,200 units. The name of the game there is scale.

I think that the growth in the Adoor business will come in a so-called co-investment fund alongside our public company, where we have about $200 million of equity capital committed to that business. But you need significant scale there and we continue to be, what I would say, thoughtful as far as cap rates, where we think cap rates are going, and where we think we could deploy capital overall in that business. And then finally, on the portfolio side, on the consumer loan business, we do opportunistic investing in consumer loans. Everybody knows in June or July of ‘23, we bought $1.4 billion are consumer loans from Goldman. That $1.4 billion just to give you a sense, is now down to $800 million and it amortizes extremely quick. I think the average life of that cash flow will probably be over the next 1.5 to two years.

So overall things from a portfolio standpoint, extremely stable, extremely good, businesses performing well, quite frankly everywhere. And with that we’ll turn it back to the operator for Q&A.

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Q&A Session

Operator: We will now begin the question-and-answer session. [Operator Instructions] And our first question comes from Bose George of KBW. Please go ahead.

Bose George: Hey, everyone. Good morning. Could I get an update on book value quarter-to-date? You noted that the hedges had taken the balance sheet up. So yes, this an update would be great.

Michael Nierenberg: We’re in and around $12.30 to $12.40 right now, Bose — during the — we still have a little bit of a short bias. But overall, I would say as the market continues to sell off, if it does, what you’re going to start to see is obviously, MSR values will be capped. I’ve said this for a long time. I think last quarter, we had a very conservative mark on our MSRs as well as, I think, where we are today. But what you’re going to see is a backup in rates will, at some point, the duration flips from negative duration and positive duration. So we have to all be pretty thoughtful of that. But right now, it’s all $12.30 to $12.40.

Bose George: Okay, great. That’s helpful. Thanks. And then I wanted to switch and get any updated thoughts on the timing of any potential spin. And also, does the remaining company need to be any larger in terms of scale? Or is it more just the right market conditions for you to do something?

Michael Nierenberg: Well, I think when you look at the mortgage company, when you look at a couple of our peers out there, they’re trading above book. So clearly, we look at where we are, and we trade below book overall. So what we’re trying to do is, obviously, we need to assess capital the amount of capital that’s seen in each segment of our business. But as we evaluate whether to take this company public, whether it be a spin or just — or take it public, it’s still what I would say is work in progress. What we’re really trying to do, if you think about the power of our franchise, the earnings from our overall investment business, including the mortgage company, create significant advantages for us to be able to make investments and other things that we may want to do that are non-mortgage-related. So to give that up today, we’re not sure that, that’s the right thing, but we continue to evaluate that and work with our advisers on which way we’re going to go with it.

Bose George: Okay, makes sense. Thanks.

Michael Nierenberg: Thanks.

Operator: The next question comes from Eric Hagen of BTIG. Please go ahead.

Eric Hagen: Hey, good morning, guys. Hope you are well. Just looking at the results on Sculptor, I mean when do you expect that might improve and turn positive? And do you have a target rate of return for the investment in the CLO equity that you made in Sculptor?

Michael Nierenberg: The — hey Eric, there’s a couple of ways to think about this. One is the enterprise value that we’re creating by making investments in the Sculptor franchise should lead to a higher overall equity valuation for Rithm at the parent level. So in other words, as we grow our CLO business and we create management fees for Sculptor or we make investments in things, whether it be alongside Sculptor or actually in Sculptor. What that’s going to do is increase the value of Sculptor. So that’s part one. Part two is when you look at the earnings, the earnings are going to be lumpy for now. Typically, when you look at whether it be the multi-strat fund or you look at some of the other funds that Sculptor had, you’ll see earnings when you have realizations.

Most of the earnings, I think, you’ll see, at least for ’24 are going to be geared towards fourth quarter. And then obviously, with more — with the results as good as they are and as we think about the business, that will continue to hopefully be more AUM back to the platform. And then you’re going to start to see the real lift in not only enterprise value at the Rithm level, but also at the platform level at Sculptor.

Eric Hagen: Yes, that’s really helpful, really helpful. Do you feel like the equity in the investment portfolio is relatively stable at this point? And what could get you to maybe direct more capital there even ahead of a spin-off and how would you maybe allocate the preferred equity in the capital structure among the different segments of the portfolio at this point?

Michael Nierenberg: So on the preferred equity, we — you’re referring to the four series that we have outstanding.

Eric Hagen: Yes, exactly. Yes.

Michael Nierenberg: We have two that are going to reset this year. We’ll likely — those are being addressed. When we look at capital, we ended the quarter with $2 billion of cash and liquidity. Today, it’s a tad lower. We’re going to fund SLS here, hopefully, extremely short in the near future. We’ll deploy capital when we think that we have the right risk-adjusted return. I pointed out earlier in my opening remarks, the credit markets today look as good as they’ve looked in years. The high-yield indexes, I think, is in and around 360. And when you look at absolute yield levels and what we’re able to achieve, it’s a pretty ripe environment for us to deploy capital, whether it be in the mortgage market or just other things. So we’ll continue to be opportunistic.

We — obviously, we have a lot of things that I think are bigger from a corporate perspective, not necessarily a short-term, but more in the long-term, how we create a true global asset management business. And that’s really where we’re focused alongside with operational excellence in our mortgage company and Genesis and the other things that we have in the company. On the preferreds, again, getting back to that, we’ll address the series that are coming up here in the near future.

Eric Hagen: Yes. Thank you guys for the perspective. Appreciate you.

Michael Nierenberg: Thanks, Eric.

Operator: The next question comes from Doug Harter of UBS. Please go ahead.

Doug Harter: Thanks. Michael, as you think about the transition to kind of more of an asset management model. How should we think about the timing and/or which of the business lines will see third-party capital raised first?

Michael Nierenberg: You know, the — I mean the Sculptor franchise is obviously, there’s $32 billion of AUM at the franchise. When you look at the leadership team there between Jimmy and Brett Klein on the credit side and Steve Orbuck and Nike at the real estate side, it’s a great team. I mean it hasn’t been easy, obviously, to raise money going back the past couple of years, because of the noise around the platform. That’s why we are — that’s why we have the platform quite frankly. But when you look at where the actual performance and what that’s going to lead to over the next couple of years, we’re super excited as far as bringing more money into the credit strategies, the real estate strategies and as well as the multi-stats funds.

So the returns are good. I think returns are going to bring in more capital, and that’s going to be from both existing LPs and hopefully, from a bunch of new LPs. There’s a lot of marketing that continues to go on around the platform. So it’s — money is going to flow. It’s going to take a little bit of time here. But performance is going to bring in new pools of capital, for sure.

Doug Harter: And I guess just on Sculptor, can you just talk about how retention has gone since the deal closed relative to your expectations?

Michael Nierenberg: Great. We’ve lost a couple of bodies, but that’s to be expected in any kind of acquisition. We’ve added new talent. There’s a lot of, what I would call, incoming resumes that want to join the platform, whether it be at the Sculptor to level and/or at the Rithm level, people are excited where we are and what we’re doing. So I don’t — there’s no lack of anything. The investment team is solid and the results are solid as well. So no issues whatsoever on the retention side.

Doug Harter: Great. Thank you.

Michael Nierenberg: Thank you.

Operator: The next question comes from Stephen Laws of Raymond James. Please go ahead.

Stephen Laws: Hi, good morning. Michael, I guess to start, can you talk about with mortgage rates moving back towards highs, what you’re seeing in the pipeline there, sensitivity of borrowers to rates moving where they are? And kind of outlook for volumes near term and how you see that progressing through the year?

Michael Nierenberg: Barron, do you want to hit mortgage rates, higher that…

Baron Silverstein: I mean the market remains predominantly a purchase market, right? So for us, it’s about delivering excellent service to our customers and then making sure they understand who we are as a company and what we can otherwise deliver either through products or quality service. And we think we have a lot of upside in our customer retention from an origination perspective. And as I mentioned in our talking points, we’ll remain opportunistic through all of our different channels for either ongoing growth. And we’re not going to basically look at the market and Michael’s used this term pike the Fed, but the market interest rates being higher, we’re going to remain nimble and very, very cost efficient in our origination business and cost efficient on our servicing business and that way we can perform in every market.

Stephen Laws: Great. And then I think as a little bit. Can you touch on the announcement with great Ajax and what you envision there and how you think about fees benefiting Rithm with that relationship?

Michael Nierenberg: Yes. Great question. As we look at — Great Ajax, it’s a platform that’s going to be externally managed, assuming that shareholder vote is affirmative for us. And the idea there is to grow that into a commercial — publicly traded commercial real estate REIT that has no legacy commercial real estate exposure with the management fees that will flow into NewCo, which will be a management company. So I think that is the start when you think about Sculptor and fees that are going to be generated over the years, that will flow into a management company. You think about — Great Ajax, some of the other things that we have on our plate today, that’s really the goal. But it’s really going to be a clean platform probably something between, call it, $250 million of equity that we’ll be investing in commercial real estate with the team’s type mandate, and it will be a clean platform relative to the — some of the other folks.

A lot of work to on that one, but that’s the intention.

Stephen Laws: Great. Appreciate both your comments this morning.

Michael Nierenberg: Thank you.

Operator: [Operator Instructions] And our next question will come from Jason Weaver of Jones Trading. Please go ahead.

Jason Weaver: Hey, good morning. Michael, you mentioned in your prepared remarks, you were anticipating it, but can you talk about what you’re seeing about incremental returns on the MSRs out there right now? As well as if you’re looking at anything closer to the current production coupon?

Michael Nierenberg: So here’s how we evaluate the MSR business. We don’t — as I pointed out, we’ve been doing this a long time. We see a lot of bulk packages. A lot of them are small when I say bulk, there was a couple of large from wells that went back over the course of the past year. When we look at where we could produce an asset versus where we could buy an asset, if we think we could produce the asset at a cheaper level. We’re obviously always going to do that because you’re creating — we should be creating enterprise value around our mortgage company versus just going out and buying an asset. So our whole theme is as we create more enterprise value that goes to Sculptor, that goes to the mortgage company and other things that we’re going to do around some of our other subs or business lines.

As we evaluate whether it be lower coupon MSRs or it’s all just a total return for us. If we could buy an MSR at an unlevered 10 and with a little bit of leverage, it’s a 12 versus buying a distressed commercial real estate asset out of 15. Obviously, we’re going to offer the thing at 15. But everything is when we look at where we are today and the capabilities we have between credit and real estate and origination, we have it all, we don’t have insurance. But everything is going to be total return-oriented how we think about investing in MSRs or some other asset class. We generically obviously, organically, I should say, manufacture MSRs with every loan that we create. And then we’ll just evaluate that versus where we can buy that in the secondary market.

Yes. Just keep in mind, MSR values, overall, weighted average mark, give or take 5 for the industry right now, if rates did sell off another 50 or 100 basis points, at some point, that duration becomes capped or you get longer. So it’s just something to think about in that asset class.

Stephen Laws: Understood. And then on the Genesis business, I was wondering if you could provide a little bit more context around the greater sponsor demand you noted. Given a little relief on the rate front thus far this year, is this really just a function of banks really getting out of that business?

Michael Nierenberg: I think it’s both, actually. I think — listen, banks are always a little bit hesitant around the construction angle. When you look at our overall business lines, think about it this way. Somebody comes to us with a development of multi or, call it, single-family rental. Genesis will out and make that loan on the single-family rental side or — I’m sorry, they’ll make that loan to the sponsor who are then going to construct single-family rental homes. Adoor our single-family rental business will then buy those homes and then we’ll get them leased up. So we’re seeing a lot more of what I would say is a platform origination today than what we’ve done in years past. And as you look at Genesis, when I say the 66 different sponsors, the banks are pulling back a little bit, but the team itself is doing a great job in kind of broadening the sponsorship.

When we first bought this business, the amount of concentration with 1 large sponsor was, I think, around 25% — 25% or 30%. Today, it’s so spread out. And when you think about where you are from a risk-adjusted basis, you were in a much, much better place today than we — than I think we were when we actually acquired the platform from Goldman.

Stephen Laws: All right. Very helpful. Congratulations on the results. I’ll hop back in the queue.

Michael Nierenberg: Thank you.

Operator: The next question comes from Trevor Cranston of JMP Securities. Please go ahead.

Trevor Cranston: Hey, thanks. Good morning. You guys talked a lot about growth opportunities across the entire platform, some of which are non-reach investment portfolio opportunities. I guess when you think about the overall capital deployment that you guys have and the return opportunity out there, can you sort of give us an update on how you think about the dividend level for the overall company in light of all that? Thanks.

Michael Nierenberg: So the dividend, obviously, we outperform our dividend, and hopefully, we’ll continue to do that quarter-after-quarter. The calculation for us is if we can deploy capital at a 12%, 13%, 14%, 20% return, use 15% on average. If we could deploy capital at 15% rate of return versus a dividend yield of 9% or something around that, everything we do from an investment standpoint is going to be highly accretive versus giving money back. So that’s how we think about it.

Trevor Cranston: Okay. Appreciate the color. Thank you.

Michael Nierenberg: Thank you.

Operator: The next question comes from Crispin Love of Piper Sandler. Please go ahead.

Crispin Love: Thanks, good morning. Just when you’re thinking about acquisitions in the alternative asset management space, what do you believe makes the most sense for you kind of over the intermediate term? What types of firms and investments would you be looking at and most interested in? And do you expect there will be opportunities in this area in 2024?

Michael Nierenberg: There’s plenty of firms that are always out there for sale. What I would say is we have a business today in Sculptor. We really don’t need anything than performance. And again, performance will bring more AUM back to the platform. So we don’t need to buy anything. We are going to try to grow our credit business and our real estate business. The three pillars of Sculptor are real estate, credit and the multi-strat fund. We are going to grow those three different verticals. We’re going to grow them by performance. Performance has been great. That will bring in more AUM. The firm is extremely stable, great partner in Rithm, and we’re off to the races. And I don’t think we need anything more than that. If there is a platform that comes up that we think is highly accretive to the overall alt space in the way that we think about the world, of course, we’ll look at it.

It’s no different than Baron running the mortgage company and there’s the another mortgage at a for sale that we think is extremely attractive, of course, we’ll make a play on that. But right now, we have all the pieces in place to continue growing and putting up great returns for LPs. So unless something is extremely attractive, we’ll stay the course.

Crispin Love: Great. Thank you. I appreciate you taking my question.

Michael Nierenberg: Thank you.

Operator: This concludes our question-and-answer session. I’d like to turn the call back over to Michael Nierenberg for any closing remarks.

Michael Nierenberg: Thanks for everyone’s questions. Thanks for joining us this morning. As I said before, super excited where we are overall as a firm and look forward to continuing to hopefully put up great results for our LPs and shareholders going forward and look forward to updating you along the way. Have a great day. Thank you.

Operator: The conference has now concluded. Thank you for attending today’s presentation, and you may now disconnect.