Rithm Capital's Strategic Shift and Acquisition Plans
2023-08-04
Rithm Capital, led by Michael Nierenberg and Nick Santoro, held its second quarter 2023 earnings conference call to discuss the company's financial performance, strategic growth, and recent acquisition of Sculptor. One of the most important topics covered in the meeting was the potential creation of a mortgage REIT and asset manager within the company.
A key highlight of the meeting was Rithm Capital's focus on raising third-party assets under management (AUM) and their intention to shift their business away from their existing balance sheet. This strategic shift is seen as crucial for the company's future capital allocation and growth plans. CEO Mike Nierenberg emphasized the importance of increasing third-party AUM and highlighted the recent acquisition of Sculptor as a means to achieve this goal. By expanding their asset management business and working with third-party limited partners (LPs), Rithm Capital aims to improve their equity valuation, benefiting both shareholders and LPs. This shift in strategy signifies a significant change for the company and has the potential to drive future growth and profitability.
The market outlook presented during the call was positive, with a focus on capital growth, expanding AUM, and improving equity valuation. Rithm Capital plans to leverage its capital formation team to grow AUM and recently made a discount-to-par term financing deal with attractive returns for higher FICO borrowers. The company aims to raise third-party AUM and expand its asset management side, with a strong pipeline of investment opportunities. While the company does not plan to issue equity at the current stock price, they are focused on improving equity valuation for shareholders.
Rithm Capital's outlook for the quarter and year appears to be positive. The company is optimistic about driving higher returns for limited partners and shareholders by focusing on originating profitable units rather than just increasing volume. Despite challenging origination markets, the mortgage company expects to achieve slight profitability. They also anticipate growth in their mortgage servicing rights (MSR) portfolio and plan to bring mortgage servicing in-house. The Genesis business is projected to generate around $2 billion in performance, and the single-family rental space is expected to continue growing with increased acquisitions and higher cap rates. Rithm Capital is also optimistic about its consumer portfolio, expecting returns of 15% to 20%. Overall, the company is confident in its ability to drive profitability and growth across various areas of its business.
During the conference call, Michael Nierenberg discussed the company's strategic growth and acquisition plans, emphasizing their commitment to generating value for shareholders and LPs through high returns. He highlighted the recent acquisition of Sculptor as a significant milestone for Rithm Capital, showcasing their focus on investing in a diverse range of assets.
In conclusion, the Rithm Capital second quarter 2023 earnings conference call provided valuable insights into the company's performance, growth strategy, and future prospects. The focus on raising third-party AUM and shifting away from the balance sheet signifies a significant change in strategy, aiming to drive future growth and profitability. With a positive market outlook, Rithm Capital is optimistic about its ability to generate higher returns for shareholders and limited partners across various areas of its business.