8-K
Rithm Property Trust Inc. (RPT)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): March 3, 2022
GREAT AJAX CORP.
(Exact name of registrant as specified in charter)
| Maryland | 001-36844 | 46-5211870 |
|---|---|---|
| (State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
13190 SW 68th Parkway
Suite 110
Tigard, OR 97223
(Address of principal executive offices)
Registrant’s telephone number, including area code:
503-505-5670
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbols | Name of each exchange on which registered |
|---|---|---|
| Common stock, par value $0.01 per share | AJX | New York Stock Exchange |
| 7.25% Convertible Senior Notes due 2024 | AJXA | New York Stock Exchange |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
| Item 2.02. | Results of Operations and Financial Condition |
|---|
On March 3, 2022, Great Ajax Corp., a Maryland corporation (the “Company”), issued a press release regarding its financial results for the fourth quarter and year ended December 31, 2021 (the “Press Release”). A copy of the Press Release is attached hereto as Exhibit 99.1 and is available on the Company’s website.
The information provided in Item 2.02 of this report, including Exhibit 99.1, shall be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.
| Item 7.01. | Regulation FD Disclosure |
|---|
On March 3, 2022, the Company will hold an investor conference call and webcast to discuss financial results for the fourth quarter and year ended December 31, 2021, including the Press Release and other matters relating to the Company.
The Company has also made available on its website presentation materials containing certain additional information relating to the Company and its financial results for the fourth quarter and year ended December 31, 2021 (the “Presentation Materials”). The Presentation Materials are furnished herewith as Exhibit 99.2, and are incorporated by reference in this Item 7.01. All information in Exhibit 99.2 is presented as of the particular date or dates referenced therein, and the Company does not undertake any obligation to, and disclaims any duty to, update any of the information provided.
The information provided in Item 7.01 of this report, including Exhibit 99.2, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall the information or Exhibit 99.2 be deemed incorporated by reference in any filings under the Securities Act of 1933, as amended.
| Item 9.01. | Financial Statements and Exhibits |
|---|---|
| Exhibit | Description |
| --- | --- |
| 99.1 | Press Release dated March 3, 2022 |
| 99.2 | March 2022 Presentation Materials |
| 104 | Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document |
EXHIBIT INDEX
| Exhibit | Description |
|---|---|
| 99.1 | Press Release dated March 3, 2022 |
| 99.2 | March2022 Presentation Materials |
| 104 | Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| GREAT AJAX CORP. | |
|---|---|
| By: | /s/ Mary Doyle |
| Name: | Mary Doyle |
| Title: | Chief Financial Officer |
Dated: March 3, 2022
Document
Exhibit 99.1
GREAT AJAX CORP. ANNOUNCES RESULTS FOR THE QUARTER
ENDED DECEMBER 31, 2021
Fourth Quarter Highlights
•Interest income of $23.2 million; net interest income of $14.2 million
•Net income attributable to common stockholders of $7.4 million
•Basic earnings per common share (“EPS”) of $0.32
•Book value per common share of $15.92 at December 31, 2021
•Taxable income of $0.40 per common share
•Formed one joint venture that acquired $329.8 million in unpaid principal balance ("UPB") of mortgage loans with collateral values of $716.7 million and retained $55.3 million of varying classes of related securities issued by the joint venture to end the quarter with $494.8 million of investments in debt securities and beneficial interests
•Purchased $148.8 million of re-performing mortgage loans ("RPLs"), with UPB of $149.5 million at 54.1% of property value, $3.5 million of non-performing loans ("NPLs"), with UPB of $3.3 million at 56.5% of property value, and $5.4 million of small balance commercial loans ("SBC loans"), with UPB of $5.3 million at 43.7% of property value to end the quarter with $1.1 billion in net mortgage loans
•Collected total cash of $86.6 million from loan payments, sales of real estate owned properties ("REO") and collections from investments in debt securities and beneficial interests
•Held $84.4 million of cash and cash equivalents at December 31, 2021; average daily cash balance for the quarter was $79.3 million
•As of December 31, 2021, approximately 72.3% of portfolio based on UPB made at least 12 out of the last 12 payments
New York, NY—March 3, 2022 —Great Ajax Corp. (NYSE: AJX), a Maryland corporation that is a real estate investment trust, today announces its results of operations for the quarter ended December 31, 2021. We focus primarily on acquiring, investing in and managing a portfolio of RPLs secured by single-family residences and commercial properties and, to a lesser extent, NPLs. In addition to our continued focus on residential RPLs, we also originate and acquire SBC loans secured by multi-family retail/residential and mixed use properties.
Selected Financial Results (Unaudited)
($ in thousands except per share amounts)
| For the three months ended | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| December 31, 2021 | September 30, 2021 | June 30, 2021 | March 31, 2021 | December 31, 2020 | ||||||
| Loan interest income(1,2) | $ | 16,718 | $ | 15,772 | $ | 15,788 | $ | 18,181 | $ | 18,108 |
| Earnings from debt securities and beneficial interests(2,4) | $ | 6,447 | $ | 7,126 | $ | 6,994 | $ | 5,937 | $ | 6,243 |
| Other interest income/(loss) | $ | 81 | $ | 156 | $ | 266 | $ | (83) | $ | 407 |
| Interest expense | $ | (8,999) | $ | (8,609) | $ | (8,830) | $ | (10,304) | $ | (10,837) |
| Net interest income(2,3) | $ | 14,247 | $ | 14,445 | $ | 14,218 | $ | 13,731 | $ | 13,921 |
| Net decrease in the net present value of expected credit losses(2,3) | $ | 4,296 | $ | 3,678 | $ | 4,733 | $ | 5,516 | $ | 7,966 |
| Other income and income from equity method investments | $ | 854 | $ | 868 | $ | 843 | $ | 519 | $ | 618 |
| Total revenue, net(1,5) | $ | 19,397 | $ | 18,991 | $ | 19,794 | $ | 19,766 | $ | 22,505 |
| Consolidated net income(1) | $ | 9,279 | $ | 10,684 | $ | 11,170 | $ | 10,642 | $ | 14,402 |
| Net income per basic share | $ | 0.32 | $ | 0.40 | $ | 0.45 | $ | 0.30 | $ | 0.47 |
| Average equity(1,6) | $ | 500,760 | $ | 493,687 | $ | 498,990 | $ | 508,319 | $ | 509,628 |
| Average total assets(1) | $ | 1,696,144 | $ | 1,669,965 | $ | 1,600,337 | $ | 1,674,301 | $ | 1,654,579 |
| Average daily cash balance(7,8) | $ | 79,294 | $ | 89,240 | $ | 113,008 | $ | 115,220 | $ | 128,687 |
| Average carrying value of RPLs(1) | $ | 924,171 | $ | 860,155 | $ | 897,847 | $ | 1,025,204 | $ | 1,044,997 |
| Average carrying value of NPLs(1) | $ | 116,272 | $ | 88,205 | $ | 46,139 | $ | 46,437 | $ | 39,958 |
| Average carrying value of SBC loans | $ | 25,989 | $ | 28,469 | $ | 23,685 | $ | 31,539 | $ | 8,751 |
| Average carrying value of debt securities and beneficial interests | $ | 487,110 | $ | 520,814 | $ | 405,612 | $ | 361,852 | $ | 367,389 |
| Average asset backed debt balance(1) | $ | 1,089,104 | $ | 1,044,125 | $ | 992,122 | $ | 1,088,936 | $ | 1,025,717 |
____________________________________________________________
(1)At the beginning of the first quarter of 2021, we acquired all of our joint venture partner's interest in Ajax Mortgage Loan Trust 2018-C ("2018-C"). Results for the quarters ended June 30, 2021 and March 31, 2021 reflect our 100% ownership of 2018-C. In all prior quarters, 2018-C was 37%, owned by third party institutional investors, and was consolidated by us under U.S. Generally Accepted Accounting Principles ("U.S. GAAP"). Our remaining ownership interest in Ajax Mortgage Loan Trust 2017-D ("2017-D"), which we consolidate, remains at 50% and is consistent with prior quarters.
(2)All quarters have been updated to reflect the reclassification of loan and beneficial interest credit loss expense from Net increase in the net present value of cash flows to loan interest income and earnings from debt securities and beneficial interest lines, respectively.
(3)Net decrease in the net present value of expected credit losses represents the net decrease to the allowance resulting from changes in actual and expected cash flows during the quarter. It represents the net increase of the present value of the expected cash flows in excess of contractual cash flows offset by any incremental provision expense on the Mortgage loan pools and Beneficial interests. The decrease is calculated at the pool level for Mortgage loans and at the security level for Beneficial interests. To the extent a pool or Beneficial interest has an associated allowance, the decrease in expected credit losses is recorded in the period in which the change occurs, otherwise it is recognized prospectively as an increase in yield.
(4)Interest income on investment in debt securities and beneficial interests issued by our joint ventures is net of servicing fees.
(5)Total revenue includes net interest income, income from equity method investments, gain or loss on sale of mortgage loans and other income.
(6)Average equity includes the effect of an aggregate of $115.1 million of preferred stock.
(7)Average daily cash balance includes cash and cash equivalents, and excludes cash held in trust.
(8)For the three months ended September 30, 2021, the average daily cash balance excludes $9.4 million of funds on deposit in a non-interest bearing account which closed on August 20, 2021. Including the $9.4 million on deposit, average daily cash was $94.4 million. For the three months ended June 30, 2021, the average daily cash balance excludes $22.1 million and $17.5 million of funds on deposit in a non-interest bearing account which closed on June 17, 2021 and June 24, 2021, respectively. The average daily cash balance also excludes $9.4 million of funds on deposit in a non-interest bearing account for a transaction that closed on August 20, 2021. Including the aggregate amount of $49.0 million on deposit, average daily cash was $125.7 million.
Our consolidated net income attributable to our common stockholders was $7.4 million for the quarter ended December 31, 2021, compared to $9.3 million for the September 30, 2021 quarter.
Our net interest income for the quarter ended December 31, 2021 prior to the net decrease in the present value of expected credit losses was $14.2 million, a decrease of $0.2 million over the prior quarter. Gross interest income increased by $0.2 million driven by an increase in the average balance of our investments in mortgage loans. Our interest expense for the quarter ended December 31, 2021 increased $0.4 million compared to the prior quarter primarily as a result of the acquisition of Ajax Mortgage Loan Trust 2019-C ("2019-C"). We acquired the remaining outstanding 66% of the Class B notes and trust
certificates in 2019-C from our joint venture partner and retired the outstanding $95.2 million liability for the senior bond on December 27, 2021 which carried an interest rate higher than our current borrowing rate. As a result we now own a 100% interest in the loans that were formerly in 2019-C. By calling 2019-C we accelerated the amortization of the deferred issuance costs of $0.3 million.
During the quarter ended December 31, 2021, we recorded $4.3 million in earnings from a reduction in expected future credit losses compared to a $3.7 million reduction in the third quarter of 2021, for an increase of $0.6 million due to higher than expected payments received during the quarter. We generally acquire loans at a discount and record an allowance for expected credit losses at acquisition. We update the allowance quarterly based on changing cash flow expectations in accordance with the current expected credit losses accounting standard, otherwise known as CECL.
Our operating expenses increased during the quarter ended December 31, 2021 due to an increase in loan servicing expense primarily due to including a full quarter of servicing fee expense on an NPL pool acquired in September 2021 and the acquisition of loans from 2019-C. We also experienced increased tax consulting and preparation fees of $0.5 million, and increased amortization of the put option liability. The increase in tax preparation fees is a one-time adjustment not expected to recur in 2022.
We ended the quarter with a book value of $15.92 per common share, compared to a book value per common share of $16.00 for the quarter ended September 30, 2021. The decrease in book value is due to both the special cash dividend of $0.10 per share declared on December 30, 2021 and a reduction in common equity resulting from net fair value decreases of $2.4 million, or approximately $0.08 per share, taken on our portfolio of debt securities recorded as an adjustment to equity after considering our regular quarterly dividends on common and preferred stock and our quarterly earnings.
During the quarter, we acquired the remaining outstanding 66% of the Class B notes and trust certificates in 2019-C for approximately $33.5 million in cash. The acquisition resulted in us owning 100% of the equity interest of the Trust and the related mortgage loan assets and senior debt outstanding. Subsequent to the acquisition, we removed our prior investment in securities and beneficial interests for 2019-C and recorded a $152.9 million investment in mortgage loans and a $95.2 million liability for the senior bond. The senior bond was redeemed on December 27, 2021. We paid double interest expense of approximately $0.1 million while the acquired mortgage loans and debt securities were placed on a repurchase line before the senior bond could be retired. The combination of the additional interest expense and the acceleration of the deferred issue costs for calling 2019-C contributed an additional $0.4 million of expenses for the quarter, or about $0.02 per share. By consolidating 2019-C, and removing the related securities and beneficial interests from our balance sheet, our future earnings from debt securities will decrease and we will have higher interest income from mortgage loans and higher servicing fees from our direct ownership of the underlying loans.
Including the loans acquired through 2019-C, we purchased $148.8 million of RPLs with UPB of $149.5 million at 54.1% of property value, $3.5 million of NPLs with UPB of $3.3 million at 56.5% of property value, and $5.4 million of SBC loans with UPB of $5.3 million at 43.7% of property value. These loans were acquired and included on our consolidated balance sheet for a weighted average of 52 days of the quarter. We ended the quarter with $1.1 billion of mortgage loans with an aggregate UPB of $1.2 billion.
On November 19, 2021, we co-invested with third party institutional accredited investors to form a joint venture, 2021 NPL1 and acquired 16.33% of the varying classes of securities including class A securities, B securities and trust certificates. 2021 NPL1 acquired 2,343 NPLs with aggregate UPB of $329.8 million. The purchase price is 102.7% of UPB and 47.2% of the estimated market value of the underlying collateral of $716.7 million. Based on the structure of the transaction we do not consolidate 2021 NPL1 under U.S. GAAP.
We recorded $0.1 million in impairments on our REO held-for-sale portfolio in real estate operating expense for the quarter ended December 31, 2021. We sold nine properties in the fourth quarter and nine properties were added to REO held-for-sale through foreclosures, deed in lieu proceedings or direct purchase. Limited housing inventory has accelerated our REO liquidation timelines while we are continuing to experience some delays in foreclosure proceedings relating to the COVID-19 pandemic.
We collected $86.6 million of cash during the fourth quarter as a result of loan payments, loan payoffs, sales of REO, payoff of securities and cash collections on our securities portfolio to end the quarter with $84.4 million in cash and cash equivalents. Cash collections of $67.6 million were derived from our mortgage loan and REO portfolios as a result of loan payments, loan payoffs, and sales of REO during the quarter, and $19.0 million were derived from interest and principal payments on investments in debt securities and beneficial interests.
During the quarter ended December 31, 2021, we repurchased an aggregate principal amount of $1.3 million of our senior convertible notes for a total purchase price of $1.3 million, and accelerated the amortization of the deferred issuance costs of $0.1 million.
On December 30, 2021, our Board of Directors declared a special cash dividend of $0.10 per share of our common stock, which was paid on January 25, 2022 to our common stockholders of record as of January 10, 2022.
The following table provides an overview of our portfolio at December 31, 2021 ($ in thousands):
| No. of loans | 5,941 | Weighted average coupon | 4.33 | % | |||
|---|---|---|---|---|---|---|---|
| Total UPB(1) | $ | 1,165,841 | Weighted average LTV(5) | 63.7 | % | ||
| Interest-bearing balance | $ | 1,069,407 | Weighted average remaining term (months) | 295 | |||
| Deferred balance(2) | $ | 96,434 | No. of first liens | 5,883 | |||
| Market value of collateral(3) | $ | 2,193,143 | No. of second liens | 58 | |||
| Original purchase price/total UPB | 82.0 | % | No. of REO held-for-sale | 31 | |||
| Original purchase price/market value of collateral | 47.1 | % | Market value of REO held-for-sale(6) | $ | 6,611 | ||
| RPLs | 87.5 | % | Carrying value of debt securities and beneficial interests in trusts | $ | 494,361 | ||
| NPLs | 10.8 | % | Loans with 12 for 12 payments as an approximate percentage of UPB(7) | 72.3 | % | ||
| SBC loans(4) | 1.7 | % | Loans with 24 for 24 payments as an approximate percentage of UPB(8) | 63.9 | % |
____________________________________________________________
(1)Our loan portfolio consists of fixed rate (60.6% of UPB), ARM (7.5% of UPB) and Hybrid ARM (31.9% of UPB) mortgage loans.
(2)Amounts that have been deferred in connection with a loan modification on which interest does not accrue. These amounts generally become payable at maturity.
(3)As of the reporting date.
(4)SBC loans includes both purchased and originated loans.
(5)UPB as of December 31, 2021 divided by market value of collateral and weighted by the UPB of the loan.
(6)Market value of other REO is the estimated expected gross proceeds from the sale of the REO less estimated costs to sell, including repayment of servicer advances.
(7)Loans that have made at least 12 of the last 12 payments, or for which the full dollar amount to cover at least 12 payments has been made in the last 12 months.
(8)Loans that have made at least 24 of the last 24 payments, or for which the full dollar amount to cover at least 24 payments has been made in the last 24 months.
Subsequent Events
Since quarter end, we have acquired two residential RPLs in two transactions from two different sellers. The purchase price of the RPLs was 89.0% of UPB and 57.9% of the estimated market value of the underlying collateral of $0.5 million.
We have agreed to acquire, subject to due diligence, 23 residential RPLs in five transactions, and 39 NPLs in three transactions, with aggregate UPB of $5.6 million and $7.4 million, respectively. The purchase price of the residential RPLs is 98.3% of UPB and 39.7% of the estimated market value of the underlying collateral of $13.8 million. The purchase price of the NPLs is 99.2% of UPB and 49.9% of the estimated market value of the underlying collateral of $14.7 million.
In January 2022, Gaea Real Estate Corp. ("Gaea"), an affiliated company in which we hold an interest, completed a private capital raise through which it raised $30.0 million from the issuance of 1,828,153 shares of common stock and warrants. We acquired 371,103 shares and an equal number of warrants for $6.1 million. Upon completion of the private placement, our ownership interest in Gaea was approximately 22.2%.
On March 3, 2022, our Board of Directors declared a cash dividend of $0.26 per share to be paid on March 31, 2022 to stockholders of record as of March 18, 2022.
Conference Call
Great Ajax Corp. will host a conference call at 5:00 p.m. EST on Thursday, March 3, 2022 to review our financial results for the quarter. A live Webcast of the conference call will be accessible from the Investor Relations section of our website www.greatajax.com. An archive of the Webcast will be available for 90 days.
About Great Ajax Corp.
Great Ajax Corp. is a Maryland corporation that is a real estate investment trust, that focuses primarily on acquiring, investing in and managing RPLs secured by single-family residences and commercial properties and, to a lesser extent, NPLs. We also originate and acquire loans secured by multi-family residential and smaller commercial mixed use retail/residential properties and acquire multi-family retail/residential and mixed use and commercial properties. We are externally managed by Thetis Asset Management LLC. Our mortgage loans and other real estate assets are serviced by Gregory Funding LLC, an affiliated entity. We have elected to be taxed as a real estate investment trust under the Internal Revenue Code.
Forward-Looking Statements
This press release contains certain forward-looking statements. Words such as “believes,” “intends,” “expects,” “projects,” “anticipates,” and “future” or similar expressions are intended to identify forward-looking statements. These forward-looking statements are subject to the inherent uncertainties in predicting future results and conditions, many of which are beyond the control of Great Ajax, including, without limitation, risks relating to the impact of the COVID-19 outbreak and the risk factors and other matters set forth in our Annual Report on Form 10-K for the period ended December 31, 2021 when filed with the SEC. The COVID-19 outbreak has caused significant volatility and disruption in the financial markets both globally and in the United States. If the COVID-19 outbreak continues to spread or the response to contain it is unsuccessful, Great Ajax could experience material adverse effects on its business, financial condition, liquidity and results of operations. Great Ajax undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law.
| CONTACT: | Lawrence Mendelsohn |
|---|---|
| Chief Executive Officer | |
| Or | |
| Mary Doyle | |
| Chief Financial Officer | |
| Mary.Doyle@aspencapital.com | |
| 503-444-4224 |
GREAT AJAX CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands except per share amounts)
| Three months ended | ||||||||
|---|---|---|---|---|---|---|---|---|
| December 31, 2021 | September 30, 2021 | June 30, 2021 | March 31, 2021 | |||||
| (unaudited) | (unaudited) | (unaudited) | (unaudited) | |||||
| INCOME: | ||||||||
| Interest income | $ | 23,246 | $ | 23,054 | $ | 23,048 | $ | 24,035 |
| Interest expense | (8,999) | (8,609) | (8,830) | (10,304) | ||||
| Net interest income | 14,247 | 14,445 | 14,218 | 13,731 | ||||
| Net decrease in the net present value of expected credit losses(1) | 4,296 | 3,678 | 4,733 | 5,516 | ||||
| Net interest income after the impact of changes in the net present value of expected credit losses | 18,543 | 18,123 | 18,951 | 19,247 | ||||
| Income from equity method investments | 89 | 90 | 357 | 163 | ||||
| Other income | 765 | 778 | 486 | 356 | ||||
| Total revenue, net | 19,397 | 18,991 | 19,794 | 19,766 | ||||
| EXPENSE: | ||||||||
| Related party expense - loan servicing fees | 2,158 | 1,743 | 1,699 | 1,833 | ||||
| Related party expense - management fee | 2,281 | 2,292 | 2,270 | 2,273 | ||||
| Professional fees | 1,011 | 526 | 763 | 640 | ||||
| Real estate operating expenses | 131 | (76) | 88 | 185 | ||||
| Fair value adjustment on put option liability | 2,824 | 2,493 | 2,201 | 1,944 | ||||
| Other expense | 1,315 | 1,227 | 1,375 | 1,304 | ||||
| Total expense | 9,720 | 8,205 | 8,396 | 8,179 | ||||
| Loss on debt extinguishment | 367 | — | 161 | 911 | ||||
| Income before provision for income tax | 9,310 | 10,786 | 11,237 | 10,676 | ||||
| Provision for income tax | 31 | 102 | 67 | 34 | ||||
| Consolidated net income | 9,279 | 10,684 | 11,170 | 10,642 | ||||
| Less: consolidated net (loss)/income attributable to non-controlling interests | (33) | (578) | (1,158) | 1,689 | ||||
| Consolidated net income attributable to Company | 9,312 | 11,262 | 12,328 | 8,953 | ||||
| Less: dividends on preferred stock | 1,950 | 1,949 | 1,950 | 1,949 | ||||
| Consolidated net income attributable to common stockholders | $ | 7,362 | $ | 9,313 | $ | 10,378 | $ | 7,004 |
| Basic earnings per common share | $ | 0.32 | $ | 0.40 | $ | 0.45 | $ | 0.30 |
| Diluted earnings per common share | $ | 0.32 | $ | 0.38 | $ | 0.42 | $ | 0.30 |
| Weighted average shares – basic | 22,905,267 | 22,862,429 | 22,825,804 | 22,816,978 | ||||
| Weighted average shares – diluted | 30,439,064 | 30,407,649 | 30,198,696 | 22,816,978 |
____________________________________________________________
(1)Net decrease in the net present value of expected credit losses represents the net decrease to the allowance resulting from changes in actual and expected cash flows during the quarters ended December 31, 2021, September 30, 2021, June 30, 2021 and March 31, 2021. It represents the net increase of the present value of the expected cash flows in excess of contractual cash flows offset by any incremental provision expense on the Mortgage loan pools and Beneficial interests. The decrease is calculated at the pool level for Mortgage loans and at the security level for Beneficial interests. To the extent a pool or Beneficial interest has an associated allowance, the decrease in expected credit losses is recorded in the period in which the change occurs, otherwise it is recognized prospectively as an increase in yield.
GREAT AJAX CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands except per share amounts)
| December 31, 2020 | |||
|---|---|---|---|
| ASSETS | |||
| Cash and cash equivalents | 84,426 | $ | 107,147 |
| Cash held in trust | 188 | ||
| Mortgage loans held-for-sale, net | — | ||
| Mortgage loans held-for-investment, net(1,2) | 1,119,372 | ||
| Real estate owned properties, net(3) | 8,526 | ||
| Investments in securities at fair value(4) | 273,834 | ||
| Investments in beneficial interests(5) | 91,418 | ||
| Receivable from servicer | 15,755 | ||
| Investment in affiliates | 28,616 | ||
| Prepaid expenses and other assets | 8,876 | ||
| Total assets | 1,759,680 | $ | 1,653,732 |
| LIABILITIES AND EQUITY | |||
| Liabilities: | |||
| Secured borrowings, net(1,2,6) | 575,563 | $ | 585,403 |
| Borrowings under repurchase transactions | 421,132 | ||
| Convertible senior notes, net(6) | 110,057 | ||
| Management fee payable | 2,247 | ||
| Put option liability | 14,205 | ||
| Accrued expenses and other liabilities | 6,197 | ||
| Total liabilities | 1,139,241 | ||
| Equity: | |||
| Preferred stock 0.01 par value; 25,000,000 shares authorized | |||
| Series A 7.25% Fixed-to-Floating Rate Cumulative Redeemable, 25.00 liquidation preference per share, 2,307,400 shares issued and outstanding at December 31, 2021 and December 31, 2020 | 51,100 | ||
| Series B 5.00% Fixed-to-Floating Rate Cumulative Redeemable, 25.00 liquidation preference per share, 2,892,600 shares issued and outstanding at December 31, 2021 and December 31, 2020 | 64,044 | ||
| Common stock 0.01 par value; 125,000,000 shares authorized, 23,146,775 shares issued and outstanding at December 31, 2021 and 22,978,339 shares issued and outstanding at December 31, 2020 | 231 | ||
| Additional paid-in capital | 317,424 | ||
| Treasury stock | (1,159) | ||
| Retained earnings | 53,346 | ||
| Accumulated other comprehensive income | 375 | ||
| Equity attributable to stockholders | 485,361 | ||
| Non-controlling interests(7) | 29,130 | ||
| Total equity | 514,491 | ||
| Total liabilities and equity | 1,759,680 | $ | 1,653,732 |
All values are in US Dollars.
____________________________________________________________
(1)Mortgage loans held-for-investment, net include $756.8 million and $842.2 million of loans at December 31, 2021 and December 31, 2020, respectively, transferred to securitization trusts that are variable interest entities (“VIEs”); these loans can only be used to settle obligations of the VIEs. Secured borrowings consist of notes issued by VIEs that can only be settled with the assets and cash flows of the VIEs. The creditors do not have recourse to the primary beneficiary (Great Ajax Corp.). Mortgage loans held-for-investment, net include $7.1 million and $13.7 million of allowance for expected credit losses at December 31, 2021 and December 31, 2020 respectively.
(2)As of December 31, 2021, balances for Mortgage loans held-for-investment, net include $1.4 million from a 50.0% owned joint venture. As of December 31, 2020, balances for Mortgage loans held-for-investment, net include $307.1 million and Secured borrowings, net of deferred costs includes $250.6 million from 50.0% and 63.0% owned joint ventures, all of which we consolidate under U.S. GAAP. The creditors do not have recourse to the primary beneficiary (Great Ajax Corp.).
(3)Real estate owned properties, net, are presented net of valuation allowances of $0.5 million and $1.4 million at December 31, 2021 and December 31, 2020, respectively.
(4)As of December 31, 2021 and December 31, 2020, Investments in securities at fair value include amortized cost basis of $354.2 million and $273.4 million, respectively, and net unrealized gains of $1.0 million and $0.4 million, respectively.
(5)Investments in beneficial interests includes allowance for expected credit losses of $0.6 million and $4.5 million at December 31, 2021 and December 31, 2020, respectively.
(6)Secured borrowings, net are presented net of deferred issuance costs of $7.3 million at December 31, 2021 and $5.4 million at December 31, 2020. Convertible senior notes, net are presented net of deferred issuance costs of $1.7 million at December 31, 2021 and $3.3 million at December 31, 2020.
(7)As of December 31, 2021 non-controlling interests includes $1.8 million from a 50.0% owned joint venture, $1.3 million from a 53.1% owned subsidiary and $0.1 million from a 99.9% owned subsidiary. As of December 31, 2020 non-controlling interests includes $27.4 million from the 50.0% and 63.0% owned joint ventures, $1.5 million from a 53.1% owned subsidiary and $0.2 million from a 99.9% owned subsidiary which we consolidates under U.S. GAAP.
Appendix A - Earnings per share
The following table sets forth the components of basic and diluted EPS ($ in thousands, except per share):
| Three months ended | ||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| December 31, 2021 | September 30, 2021 | June 30, 2021 | March 31, 2021 | |||||||||||||||||
| Income<br>(Numerator) | Shares<br>(Denominator) | Per Share<br>Amount | Income<br>(Numerator) | Shares<br>(Denominator) | Per Share<br>Amount | Income<br>(Numerator) | Shares<br>(Denominator) | Per Share<br>Amount | Income<br>(Numerator) | Shares<br>(Denominator) | Per Share<br>Amount | |||||||||
| (unaudited) | (unaudited) | (unaudited) | (unaudited) | |||||||||||||||||
| Basic EPS | ||||||||||||||||||||
| Consolidated net income attributable to common stockholders | $ | 7,362 | 22,905,267 | $ | 9,313 | 22,862,429 | $ | 10,378 | 22,825,804 | $ | 7,004 | 22,816,978 | ||||||||
| Allocation of earnings to participating restricted shares | (79) | — | (92) | — | (78) | — | (52) | — | ||||||||||||
| Consolidated net income attributable to unrestricted common stockholders | $ | 7,283 | 22,905,267 | $ | 0.32 | $ | 9,221 | 22,862,429 | $ | 0.40 | $ | 10,300 | 22,825,804 | $ | 0.45 | $ | 6,952 | 22,816,978 | $ | 0.30 |
| Effect of dilutive securities(1) | ||||||||||||||||||||
| Restricted stock grants and manager and director fee shares(2) | 79 | 248,482 | 92 | 229,291 | — | — | — | — | ||||||||||||
| Amortization of put option(3) | — | — | — | — | — | — | — | — | ||||||||||||
| Interest expense (add back) and assumed conversion of shares from convertible senior notes(4) | 2,229 | 7,285,315 | 2,237 | 7,315,929 | 2,255 | 7,372,892 | — | — | ||||||||||||
| Diluted EPS | ||||||||||||||||||||
| Consolidated net income attributable to common stockholders and dilutive securities | $ | 9,591 | 30,439,064 | $ | 0.32 | $ | 11,550 | 30,407,649 | $ | 0.38 | $ | 12,555 | 30,198,696 | $ | 0.42 | $ | 6,952 | 22,816,978 | $ | 0.30 |
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(1)Our outstanding warrants for an additional 6,500,000 shares of common stock would have an anti-dilutive effect on diluted earnings per share for the three months ended December 31, 2021, September 30, 2021, June 30, 2021 and March 31, 2021 and have not been included in the calculation.
(2)The effect of restricted stock grants and manager and director fee shares on our diluted EPS calculation for the three months ended June 30, 2021 and March 31, 2021 would have been anti-dilutive and have been removed from the calculation.
(3)The effect of the amortization of put options on our diluted EPS calculation for the three months ended December 31, 2021, September 30, 2021, June 30, 2021 and March 31, 2021 would have been anti-dilutive and have been removed from the calculation.
(4)The effect of interest expense and assumed conversion of shares from convertible senior notes on our diluted EPS calculation for the three months ended March 31, 2021 would have been anti-dilutive and have been removed from the calculation.
9
exhibit992-20220303
Fourth Quarter and Year-End 2021 Investor Presentation March 3, 2022
Safe Harbor Disclosure 2 We make forward-looking statements in this presentation that are subject to risks and uncertainties. These forward-looking statements include information about possible or assumed future results of our business, financial condition, liquidity, results of operations, cash flow and plans and objectives. When we use the words “believe,” “expect,” “anticipate,” “estimate,” “plan,” “continue,” “intend,” “should,” “may” or similar expressions, we intend to identify forward-looking statements. Statements regarding the following subjects, among others, may be forward-looking: market trends in our industry, interest rates, real estate values, the debt financing markets or the general economy or the demand for and availability of residential and small-balance commercial real estate loans; our business and investment strategy; our projected operating results; actions and initiatives of the U.S. government and changes to U.S. government policies and the execution and impact of these actions, initiatives and policies; the state of the U.S. economy generally or in specific geographic regions; economic trends and economic recoveries; our ability to obtain and maintain financing arrangements; changes in the value of our mortgage portfolio; changes to our portfolio of properties; impact of and changes in governmental regulations, tax law and rates, accounting guidance and similar matters; our ability to satisfy the real estate investment trust qualification requirements for U.S. federal income tax purposes; availability of qualified personnel; estimates relating to our ability to make distributions to our stockholders in the future; general volatility of the capital markets and the market price of our shares of common stock; and the degree and nature of our competition. The forward-looking statements included in this presentation are based on our current beliefs, assumptions and expectations of our future performance. Forward-looking statements are not predictions of future events. Our beliefs, assumptions and expectations can change as a result of many possible events or factors, not all of which are currently known to us or reasonably expected to occur at this time. If a change in our beliefs, assumptions or expectations occurs, our business, financial condition, liquidity and results of operations may vary materially from the forward-looking statements included in this presentation. Forward-looking statements are subject to risks and uncertainties, including, among other things, those resulting from the pandemic caused by Covid-19 or one its variants and those described under Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2021, which can be accessed through the link to our Securities and Exchange Commission ("SEC") filings on our website (www.greatajax.com) or at the SEC's website (www.sec.gov). Other risks, uncertainties and factors that could cause actual results to differ materially from the forward-looking statements included in this presentation may be described from time to time in reports we file with the SEC. Any forward-looking statement speaks only as of the date on which it is made. New risks and uncertainties arise over time, and it is not possible for us to predict those events or how they may affect us. Except as required by law, we are not obligated to, and do not intend to, update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Unless stated otherwise, financial information included in this presentation is as of December 31, 2021.
Business Overview 3 Leverage longstanding relationships to acquire mortgage loans through privately negotiated transactions from a diverse group of customers and in joint venture investments with institutional investors – Acquisitions made in 352 transactions since inception. Seven transactions closed in Q4 2021 Use our manager’s proprietary analytics to price each mortgage pool on an asset-by-asset basis – We own 19.8% of our manager – Adjust individual loan bid price to accumulate clusters of loans in attractive demographic metropolitan areas Our affiliated servicer services the loans asset-by-asset and borrower-by-borrower – We own 8% and hold warrants to purchase up to an additional 12% of our affiliated servicer – Analytics and processes of our manager and servicer enable us to broaden our reach through joint ventures with third-party institutional investors We use modest mark to market leverage to fund our investments in debt securities and primarily non mark to market leverage to fund our mortgage portfolio As of January 2022, we own a 22.2% equity interest in Gaea Real Estate Corp. (“GAEA”), an equity REIT that invests in multifamily properties with a focus on property appreciation and triple net lease vet clinics
Highlights – Quarter Ended December 31, 2021 4 Interest income of $23.2 million; net interest income of $14.2 million Net income attributable to common stockholders of $7.4 million Basic earnings per common share (“EPS”) of $0.32 Book value per common share of $15.92 at December 31, 2021 Taxable income of $0.40 per common share Formed one joint venture that acquired $329.8 million in unpaid principal balance ("UPB") of mortgage loans with collateral values of $716.7 million and retained $55.3 million of varying classes of related securities issued by the joint venture to end the quarter with $494.8 million of investments in debt securities and beneficial interests Purchased $148.8 million of re-performing mortgage loans ("RPLs"), with UPB of $149.5 million at 54.1% of property value, $3.5 million of non-performing loans ("NPLs"), with UPB of $3.3 million at 56.5% of property value, and $5.4 million of small balance commercial loans ("SBC loans"), with UPB of $5.3 million at 43.7% of property value to end the quarter with $1.1 billion in net mortgage loans Collected total cash of $86.6 million from loan payments, sales of real estate owned properties ("REO") and collections from investments in debt securities and beneficial interests Held $84.4 million of cash and cash equivalents at December 31, 2021; average daily cash balance for the quarter was $79.3 million As of December 31, 2021, approximately 72.3% of portfolio based on UPB made at least 12 out of the last 12 payments
Portfolio Overview – as of December 31, 2021 5 $1,165.8 MM RPL1: $1,035.6 MM NPL : $130.2 MM $2,199.8 MM RPL: $1,982.5 MM NPL: $ 210.6 MM REO & Rental2: $ 6.6 MM 1 Includes $1.32 million UPB in joint ventures with third party institutional accredited investors that are required to be consolidated for GAAP 2 REO and rental property value is presented at estimated property fair value less expected liquidation costs 89% 11% Unpaid Principal Balance RPL NPL 88.9% 10.7% 0.4% Property Value RPL NPL REO
Portfolio Growth 6 RPL UPB includes $24.8 million of small balance commercial loans, which are performing loans. Includes $1.32 million UPB in RPLs included in joint ventures with third party institutional accredited investors that are required to be consolidated for GAAP RPL status stays constant based on initial purchase status $994 $1,412 $1,436 $1,230 $1,158 $1,036 $1,210 $1,891 $1,966 $1,733 $1,894 $1,983 $775 $1,151 $1,183 $1,076 $1,019 $916 0 500 1,000 1,500 2,000 2,500 12/31/2016 12/31/2017 12/31/2018 12/31/2019 12/31/2020 12/31/2021 M ill io ns Re-performing Loans UPB Property Value Price
Portfolio Growth 7 NPL status stays constant based on initial purchase status $111 $76 $53 $46 $38 $130 $117 $84 $63 $59 $50 $211 $68 $48 $35 $33 $28 $117 0 50 100 150 200 250 12/31/2016 12/31/2017 12/31/2018 12/31/2019 12/31/2020 12/31/2021 M ill io ns Non-performing Loans UPB Property Value Price
Portfolio Concentrated in Attractive Markets 8 Clusters of loans in attractive, densely populated markets Stable liquidity and home prices Over 80% of the portfolio in our target markets Target States Target Markets Los Angeles San Diego Dallas Portland Phoenix Washington DC Metro Area Atlanta Orlando Tampa Miami, Ft. Lauderdale, W. Palm Beach New York / New Jersey Metro Area REIT, Servicer & Manager Headquarters Property Management Business Management Houston Charlotte
Portfolio Migration 9 24 for 24: Loans that have made at least 24 of the last 24 payments, or for which the full dollar amount to cover at least 24 payments has been made in the last 24 months 12 for 12: Loans that have made at least 12 of the last 12 payments, or for which the full dollar amount to cover at least 12 payments has been made in the last 12 months 7 for 7: Loans that have made at least 7 of the last 7 payments, or for which the full dollar amount to cover at least 7 payments has been made in the last 7 months NPL: <1 full payment in the last three months
Subsequent Events 10 1 While these acquisitions are expected to close, there can be no assurance that these acquisitions will close or that the terms thereof may not change. Acquisitions Under Contract1 RPL UPB: $5.6MM Collateral Value: $13.8MM Price/UPB: 98.3% Price/Collateral Value: 39.7% 23 loans in 5 transactions NPL UPB: $7.4MM Collateral Value: $14.7MM Price/UPB: 99.2% Price/Collateral Value: 49.9% 39 loans in 3 transactions Acquisitions Closed since 12/31/2021 RPL UPB: $352.6K Collateral Value: $542.0K Price/UPB: 89.0% Price/Collateral Value: 57.9% 2 loans in 2 transactions A dividend of $0.26 per share, to be paid on March 31, 2022 to common stockholders of record as of March 18, 2022. In January 2022, Gaea, an affiliated company in which we hold an interest, completed a private capital raise through which it raised $30.0 million from the issuance of 1,828,153 shares of common stock and warrants. We acquired 371,103 shares and an equal number of warrants for $6.1 million. Upon completion of the private placement, our ownership interest in Gaea was approximately 22.2%.
Financial Metrics1 11 1Refer to our prior presentations for our non-GAAP reconciliations in prior periods 2Includes the impact of the credit loss expense 3Interest income on debt securities is net of servicing fee 4Includes the impact of the net decrease in the net present value of expected credit losses on mortgage loans and beneficial interests 5Excludes the impact of consolidating trusts and convertible debt as of March 31, 2021 6Excludes the impact of consolidating trusts as of March 31, 2021
Securities and Loan Repurchase Agreement Funding 12
Consolidated Statements of Income 13 1Net decrease in the net present value of expected credit losses represents the net decrease to the allowance resulting from changes in actual and expected cash flows during the quarters ended December 31, 2021, September 30, 2021, June 30, 2021 and March 31, 2021. It represents the net increase of the present value of the expected cash flows in excess of contractual cash flows offset by any incremental provision expense on the Mortgage loan pools and Beneficial interests. The decrease is calculated at the pool level for Mortgage loans and at the security level for Beneficial interests. To the extent a pool or Beneficial interest has an associated allowance, the decrease in expected credit losses is recorded in the period in which the change occurs, otherwise it is recognized prospectively as an increase in yield.
Consolidated Balance Sheets 14
Consolidated Balance Sheets Footnotes 15 1. Mortgage loans held-for-investment, net include $756.8 million and $842.2 million of loans at December 31, 2021 and December 31, 2020, respectively, transferred to securitization trusts that are variable interest entities (“VIEs”); these loans can only be used to settle obligations of the VIEs. Secured borrowings consist of notes issued by VIEs that can only be settled with the assets and cash flows of the VIEs. The creditors do not have recourse to the primary beneficiary (Great Ajax Corp.). Mortgage loans held-for-investment, net include $7.1 million and $13.7 million of allowance for expected credit losses at December 31, 2021 and December 31, 2020, respectively. 2. As of December 31, 2021, balances for Mortgage loans held-for-investment, net include $1.4 million from a 50.0% owned joint venture. As of December 31, 2020, balances for Mortgage loans held-for-investment, net includes $307.1 million and Secured borrowings, net of deferred costs includes $250.6 million from 50.0% and 63.0% owned joint ventures, all of which we consolidate under U.S. Generally Accepted Accounting Principles ("U.S. GAAP"). The creditors do not have recourse to the primary beneficiary (Great Ajax Corp.). 3. Real estate owned properties, net, are presented net of valuation allowances of $0.5 million and $1.4 million at December 31, 2021 and December 31, 2020, respectively. 4. As of December 31, 2021 and December 31, 2020 Investments in securities at fair value include amortized cost basis of $354.2 million and $273.4 million, respectively, and net unrealized gains of $1.0 million and $0.4 million, respectively. 5. Investments in beneficial interests includes allowance for expected credit losses of $0.6 million and $4.5 million at December 31, 2021 and December 31, 2020, respectively. 6. Secured borrowings, net are presented net of deferred issuance costs of $7.3 million at December 31, 2021 and $5.4 million at December 31, 2020. Convertible senior notes, net are presented net of deferred issuance costs of $1.7 million at December 31, 2021 and $3.3 million at December 31, 2020. 7. $25.00 liquidation preference per share, 2,307,400 shares issued and outstanding at December 31, 2021 and December 31, 2020. 8. $25.00 liquidation preference per share, 2,892,600 shares issued and outstanding at December 31, 2021 and December 31, 2020. 9. 125,000,000 shares authorized, 23,146,775 shares issued and outstanding at December 31, 2021 and 22,978,339 shares issued and outstanding at December 31, 2020. 10. As of December 31, 2021 non-controlling interests includes $1.8 million from a 50.0% owned joint venture, $1.3 million from a 53.1% owned subsidiary and $0.1 million from a 99.9% owned subsidiary. As of December 31, 2020 non-controlling interests includes $27.4 million from the 50.0% and 63.0% owned joint ventures, $1.5 million from a 53.1% owned subsidiary and $0.2 million from a 99.9% owned subsidiary which we consolidates under U.S. GAAP.