Michael Nierenberg: Hey, Kevin, it’s going to — I think our — not that I think, I know. Our business will continue to evolve. We closed Sculptor at the end of — I think at the end of November. The way — we want to simplify our story and our structure, and that’s why I think Nick created these different columns or verticals in our financial reporting. Sculptor, there’s obviously a huge desire. One, to put up great results, number two, to grow AUM. That is going to be our asset management business. The REIT itself currently sits as a REIT. What you could expect from us over time, and I think we’ve been pretty vocal about that. To become, I think, a world-class asset manager, we need to continue to simplify our story. We need to raise funds, the REIT is going to be the REIT, and it’s no different than some of the larger players in the marketplace whether it be Blackstone or Ares or folks like that.
I do think when we look at our pipeline of opportunity in everything that we do, things are going to continue to change for sure. And our sole — not our sole goal, but our goal is to grow our asset management business and the fees associated with that because that’s going to drive a higher terminal value on our underlying business. But again, we need to lead with performance. And one of the reasons I wanted to highlight in our deck to performance, both at the Sculptor level and the Rithm level because the results are terrific, and we have what I would call really good investment professionals across both platforms. Things could come together over time. But for now, it’s onward and upward. So things will change, but I think you could assume that will be something closer to — we’re not going to be Blackstone, obviously, but a Blackstone-type structure or an Ares-type structure.
Kevin Barker: Okay. Thank you for all that detail. And then just to follow-up with Baron. There’s quite a bit of momentum on growing servicing fee revenue. Obviously, there’s a lot of headwinds on the mortgage side. But as you move forward to ’24, do you anticipate mortgage origination revenue to have a greater share of the overall revenue mix just given maybe a little bit of pickup in origination volume? Or do you anticipate servicing revenue to be — continue to be the main driver? Thank you.
Baron Silverstein: I mean going into ’24, I think stability in rates is a benefit, right, across the board. There is the — I use this term, the lock-in effect for consumers that have those low-interest rates, right? So for them to sell a home today is more challenging from an affordability perspective. But we expect more activity in the mortgage sector. I do think it’s going to be slower than maybe what certain people hope. But I do believe that ’24 is definitely going to be a better year from mortgage production overall. Our focus is certainly on-going from expense reduction across the board, certainly on the origination side, but also on the servicing side to make sure that we run as efficient as possible. I talked a little bit about AI as well.
But we still look at the business very opportunistically across each one of our different verticals, the different channels from an opportunistic perspective and even from the servicing perspective that Michael talked about. But I do think that you’re going to see a better year in originations in ’24.
Michael Nierenberg: Yeah. And we’re starting to see that now, right?
Baron Silverstein: That’s right.
Michael Nierenberg: And I think.
Baron Silverstein: A quarter came in already better than — certainly better than December. It was not a surprise, but we’re certainly seeing momentum coming into the months as we get closer to spring.
Michael Nierenberg: And the other thing, Kevin, is when you look at the platform on all the different origination businesses, for example, we just made some strategic changes in the retail platform, taking expenses out and trying to align that business with the goals of the company, which, quite frankly, is profitability. The other thing is there’s obviously the variability on — way you produce your MSRs and how you think about gain on sale there. So there are levers that you could pull that would obviously drive higher earnings in the origination segment versus low earnings in the servicing segment.
Kevin Barker: Great. Thank you for all the color. Appreciate it.
Michael Nierenberg: Thanks.
Operator: The next question comes from Stephen Laws with Raymond James. Please go ahead.
Stephen Laws: Hi, good morning. Michael, I wanted to talk about growth, organic versus additional acquisitions, specifically with Sculptor or excuse me, asset management business as well as maybe the retail channel. Do you, you know, I saw Sculptor I think is out raising, I believe, $6 billion fund for CRE. Do you have any targets on AUM growth? As far as organically, would you look at adding maybe smaller asset managers and complementing what you’ve already got in place? Same with retail, it seems like I believe market share maybe made you 19th, but attractive margins there and some compelling pieces of that business. Is that something you may look to acquire as well?
Michael Nierenberg: So first, on the Sculptor side, yeah, the — everybody is out meeting with clients and LPs around the platform, which is wonderful. The real estate guys have a fund there out-marketing. It’s a — I believe it’s something around a $3 billion fund that could grow over time. The credit businesses continue to grow — look to grow the funds there. You’re not going to grow — I mean the noise is gone, right? So we’re moving forward. Whatever was in the past at the organization is out, gone, moving forward. So I’m — we’re highly confident and really excited about the prospects of growing AUM, but more on the FRE side. But you have to lead with performance. So and what I said in the opening remarks and this goes for every — any one of the businesses that we have where we are fiduciaries of capital, whether it be LPs or public shareholders.
First and foremost, we need to drive good earnings there and good returns. And when you look at ’23 and looking prior to that both at the Sculptor level as well as at the Rithm level, we’ve delivered there. So that’s going to help us grow AUM. I don’t have a specific target. I’d love to tell you it’s — you hear the bigger players talk out how much dry powder and how big their AUM is. Yeah, we’d like to be there, we’re just not right now. But I think over time, we’re going to grow those businesses. We could grow strategically through some acquisitions, which we look at acquisitions, I would say, every single day. So I think you could expect more acquisitions as we go forward in the asset management space. The teams we currently have in place are world class.
If you look at the results at the asset management level and here at the Rithm level, I’d put us up against anybody candidly, and this is not being — disparaging against anyone. When you look at the retail side, retail is a hard business. We — we’ve taken some pretty aggressive measures here beginning of the year to align the production side with proper P&L that we expect out of the business. And when you look at the overall business with SLS, the third-party business as well as what we have here between both the Rithm level and the Newrez level, I think, and including excess MSRs that we have, I think we have something about $850 billion or some number like that of MSR. So we have a lot of customers we should be able to drive origination volumes through.
If something was a giveaway from — on the retail side that we felt we could actually make money with, we’d have a hard look at it. But I think now we’re pretty happy where we are. We are actively recruiting salespeople because we do think mortgage origination will pick up over time.
Stephen Laws: Great. And then one follow-up. Given the Sculptor acquisition closed and you’ve got SLS closing likely this quarter, can you talk about the expense side? Any synergies you think can work out as we move through the year? Or do you feel like the operating expenses are pretty accurate? Or sorry, steady state as we forward kind of talk about option — potential there to drive some higher ROEs. Thanks.
Michael Nierenberg: On the SLS side, we haven’t closed yet. So what I would say is there’s going to be significant synergies and saves, I think, around that line of business. We’re looking at other platforms that I think are going to be able to add revenue to the business and same. Those should do — those should — if we’re successful, that will add additional synergies and create more expense saves. At the Sculptor level, Sculptor is its own thing from an asset management standpoint. It’s — as we go forward and we could create synergies between, for example, shared services. When I look at the fortress model and that’s where we came from, we had a good shared service model, and I think we’ll continue to look at things around that. The investment teams though are going to be the investment teams.
Stephen Laws: Great. Thanks for the comments.
Michael Nierenberg: Thank you.
Operator: The next question comes from Jay McCanless with Wedbush. Please go ahead.
Jay McCanless: Great. Good morning. Thanks for taking my questions. The first question, Michael, you talked about there being in gaps and CRE gap funding. I guess, where do you see the opportunities right now for Rithm to be involved? And if rates stay at these levels and don’t go down until later in the year, how do those opportunities evolve?
