Rithm Capital moves into insurance with new acquisition

Rithm Capital announced a new acquisition that adds an insurance business and further boosts its efforts to grow beyond its real estate roots toward asset management. 

The New York-based company and parent to mortgage lender Newrez will purchase alternative investment firm Crestline Management, a firm currently responsible for $17 billion in assets.

Based in Fort Worth, Texas, Crestline also owns an insurance company and affiliated reinsurance firm, whose investments it oversees. Crestline maintains operations in North America, Europe and Asia and has tripled assets under management since 2018. 

"Crestline adds meaningful new credit and alternative investment capabilities, establishes our entrance into insurance and reinsurance, and creates additional value-creating opportunities for our investors and shareholders," said Rithm Capital CEO Michael Nierenberg in a press statement.

The merger is the latest in a series of acquisitions this decade for Rithm, which has made no secret of its ambitions to move from its origins as a real estate investment trust. In its most recent earnings call, company leadership telegraphed the likelihood of a coming insurance-related purchase. 

"It won't be something as scaled as some of the larger asset managers, but I feel like we're getting closer on a platform to be able to launch insurance products that would again help fund some of the things that we do here at Rithm," Nierenberg said in July. 

Rithm's recent M&A history

The Crestline purchase follows other transactions in the last two years that brought hedge fund manager Sculptor Capital Management and REIT Great Ajax Corp. under the Rithm umbrella of companies. Rithm also operates single-family rental provider Adoor via a partnership with Darwin Homes and residential transition lender Genesis Capital.  

"We continue to focus on what I would call acquisitions across the board. Could be in financial services. Could be in so-called energy transition," Nierenberg said during the second-quarter earnings call. 

With the addition of Crestline, Rithm's combined platform will consist of $98 billion in investable assets, with $45 billion on its balance sheet and the remainder under management. The deal is expected to close in the fourth quarter. 

Full terms of the deal were not disclosed. Crestline's investment team, committees and strategies will remain in place, as will its existing offices, officials noted.

In addition to full acquisitions of existing companies, Rithm, which was previously known as New Residential Investment Corp., has also been active in loan purchases this summer, with agreements to buy over $2 billion of both renovation loans and investor mortgages, the latter of which will be serviced by Genesis. 

Following the Crestline announcement, Rithm Capital's stock came in higher in Thursday trading. After closing at $12.35 per share the prior day, its stock price jumped to as high as $12.54 shortly after opening bell on Thursday, Sep. 4. By late afternoon, the equity's value had settled back down to $12.48 per share.