Financial Data and Key Metrics Changes - The company reported a GAAP net income loss of $8 million or $0.18 per diluted share for Q3 2024 [12] - Earnings available for distribution were negative $5.4 million or $0.12 per diluted share [12] - Book value remained relatively stable at $5.47, compared to $5.50 in the previous quarter [8] - The dividend declared for Q3 was $0.06, with a current dividend yield of 7.2% [12] Business Line Data and Key Metrics Changes - The company sold $85 million of residential mortgage loans, generating nearly $18 million in cash [13] - Approximately 91% of legacy residential mortgage loans held for sale were sold since the end of Q1 [13] - The company also sold $62.7 million of residential securities, generating $14 million in cash [13] - Net interest income increased by 126% from $1.6 million to $3.6 million by the end of Q3 [14] Market Data and Key Metrics Changes - The company is focusing on cash-flowing assets, particularly in the commercial real estate sector, with recent bids on $1 billion of assorted commercial real estate loans [9][21] - The company is seeing some movement from banks in terms of asset availability, although caution is advised due to potential risks in the market [17] Company Strategy and Development Direction - The company aims to sell down legacy residential assets and redeploy capital into cash-flowing CMBS, targeting breakeven by the end of Q1 2025 [6] - A name change from Great Ajax to Rithm Property Trust is planned for Q4 2024 [10] - The management strategy involves being patient and ensuring that any transactions are significant winners to transform the company [9][11] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about finding the right transactions to transform the company into a successful entity, emphasizing the importance of patience for investors [11] - The current economic environment presents both challenges and opportunities, particularly in the commercial real estate sector [17][27] - Management believes that the need for equity and debt financing in commercial real estate will continue, regardless of interest rate fluctuations [28] Other Important Information - Cash and equivalents on the balance sheet totaled $84 million, with approximately $30 million available for investment [12] - The company has a reserve of roughly $50 million and stockholder equity is just under $250 million [12] Q&A Session Summary Question: What segments of the commercial real estate debt universe have dislocation and mispricing that match a Rithm type investing strategy? - Management highlighted a recent bid on a portfolio that included multifamily and affordable housing, emphasizing the need for cash-flowing assets [21] Question: Could lower rates give borrowers some cushion to ride out distress, reducing opportunities? - Management indicated that while lower rates could provide some cushion, there will still be significant opportunities for recapitalization in distressed assets [27] Question: Has any more cash been deployed in October, and are there smaller investments that could be monetized soon? - Management stated that about $20 million to $25 million remains available for deployment, with various small positions being cleaned up [30] Question: Will the vehicle be financed using bank lines or look to the markets for other financing alternatives? - Management noted that bank lines would be specific to the securities portfolio, but there are plans to explore debt and equity markets for different securities in the future [40]

Financial Performance - GAAP net loss attributable to common stockholders was $(8.0) million, or $(0.18) per diluted share, compared to a loss of $(12.7) million, or $(0.32) per diluted share in Q2 2024[1][2] - Earnings Available for Distribution was $(5.4) million, or $(0.12) per diluted common share, improving from $(9.6) million, or $(0.24) per diluted common share in the previous quarter[2][3] - The company reported a net loss attributable to common stockholders of $(8,029,000) for the three months ended September 30, 2024, compared to $(12,742,000) for the previous quarter[27] - Earnings available for distribution for the quarter ended September 30, 2024, were $(5,360,000), down from $(9,598,000) in the prior quarter[27] - Basic and diluted earnings available for distribution per common share were both $(0.12) for the quarter ended September 30, 2024, consistent with the previous quarter[27] - The company reported realized and unrealized gains of $1,640,000 for the quarter ended September 30, 2024, compared to $2,058,000 in the previous quarter[27] Asset and Liability Management - Total assets decreased to $858.2 million from $1.3 billion at the end of 2023[17] - Total liabilities decreased to $611.1 million from $1.0 billion at the end of 2023[18] - Total liabilities and equity amounted to $858,151,000 as of December 31, 2023, down from $1,336,291,000 in the previous period[19] - The company had 1,135,590 shares issued and outstanding as of December 31, 2023[19] - The company’s retained deficit increased to $(158,126,000) from $(54,382,000) in the previous period[19] Equity and Book Value - Book value per common share decreased to $5.47 from $5.56 in Q2 2024, with total book value at $246.1 million[2][3] - As of December 31, 2023, the company had total equity of $247,093,000, a decrease from $310,895,000 at the end of the previous period[19] - The company’s accumulated other comprehensive loss improved to $(8,279,000) from $(14,027,000) in the previous period[19] Strategic Transactions and Investments - The company sold residential loans and securities with an unpaid principal balance of approximately $148.0 million, generating net proceeds of approximately $31.7 million[4] - Acquired $81.9 million in unpaid principal balance of commercial mortgage-backed securities, increasing total investment in CMBS to $101.9 million[4] - The company incurred expenses related to the Strategic Transaction amounting to $1,010,000 for the quarter ended September 30, 2024[27] Corporate Actions - The company declared a cash dividend of $0.06 per common share, to be paid on November 29, 2024[6] - The company filed a shelf registration statement with the SEC to increase the maximum offering price of its securities to $400 million[5] - The company plans to rebrand as Rithm Property Trust Inc. and change its ticker symbol to "RPT" in Q4 2024[7]

Financial Performance - Net interest income for the three months ended June 30, 2024, was $348 thousand, a decrease of 89% compared to $3,301 thousand for the same period in 2023[14]. - Consolidated net loss attributable to common stockholders for the six months ended June 30, 2024, was $87,061 thousand, compared to a loss of $19,975 thousand for the same period in 2023, indicating a significant increase in losses[14]. - Consolidated net loss for the six months ended June 30, 2024, was $86,853 thousand, compared to a loss of $18,826 thousand for the same period in 2023[20]. - The company reported a net loss of $73.978 million for the six months ended June 30, 2024[27]. - The company recorded a net loss of $481 thousand from Gaea Real Estate Corp. for the three months ended June 30, 2024, compared to a net loss of $594 thousand for the same period in 2023[181]. Assets and Liabilities - Total assets decreased from $1,336,291 thousand as of December 31, 2023, to $911,516 thousand as of June 30, 2024, representing a decline of approximately 32%[10]. - Total liabilities decreased from $1,025,396 thousand as of December 31, 2023, to $657,035 thousand as of June 30, 2024, a reduction of approximately 36%[10]. - Total equity attributable to stockholders decreased from $308,933 thousand as of December 31, 2023, to $253,552 thousand as of June 30, 2024, a decline of approximately 18%[10]. - The Company’s accumulated deficit stood at $147.361 million as of June 30, 2024[31]. - The Company’s total stockholders' equity as of June 30, 2024, was $254.481 million[31]. Cash Flow and Investments - Cash and cash equivalents increased from $52,834 thousand as of December 31, 2023, to $72,026 thousand as of June 30, 2024, reflecting a growth of approximately 36%[10]. - Net cash from operating activities increased to $8,019 thousand from a negative $23,636 thousand year-over-year[20]. - Net cash from investing activities significantly rose to $383,103 thousand, up from $88,258 thousand in the prior year[20]. - Proceeds from the sale of mortgage loans amounted to $311,279 thousand, with no proceeds reported in the previous year[20]. - The total investments as of June 30, 2024, amounted to $258.764 million, with gross unrealized losses of $31.816 million[153]. Mortgage Loans - Mortgage loans held-for-sale, net increased from $55,718 thousand as of December 31, 2023, to $108,868 thousand as of June 30, 2024, showing an increase of about 95%[10]. - The carrying value of mortgage loans held-for-investment is approximately $413.9 million, down from $864.6 million as of December 31, 2023, indicating a decrease of about 52%[128]. - The Company sold 1,477 and 1,712 mortgage loans held-for-sale with a carrying value of $263.7 million and $314.3 million during the three and six months ended June 30, 2024, respectively[133]. - The Company has not purchased any RPLs during the three and six months ended June 30, 2024, compared to 68 and 71 RPLs purchased in the same periods of 2023[133]. - The Company recorded a credit loss expense on mortgage loans of $(10) thousand for the three months ended June 30, 2024[140]. Stock and Equity Transactions - The weighted average shares outstanding for basic loss per common share increased from 23,250,725 for the three months ended June 30, 2023, to 39,344,128 for the same period in 2024, an increase of about 69%[14]. - The company declared dividends of $0.10 per share, totaling $15.506 million[28]. - The company reported a stock-based management termination fee and compensation expense of $16,952 thousand, up from $892 thousand in the prior year[20]. - The Company issued an aggregate of $125.0 million of preferred stock in two series during the year ended December 31, 2020[69]. - The Company exchanged 424,949 shares of its 7.25% Series A and 1,135,590 shares of its 5.00% Series B preferred stock for newly issued common stock, totaling 12,046,218 common shares[72]. Debt and Financing - The Company redeemed senior convertible notes totaling $103,516 thousand during the period[22]. - The Company entered into a $70.0 million term loan agreement with NIC RMBS LLC, an affiliate of Rithm Capital Corp.[34]. - The Company has entered into two repurchase facilities with a ceiling of $150.0 million and $400.0 million, respectively, for acquiring and selling mortgage loans[194]. - The total amount outstanding for repurchase transactions is $246.5 million, with a weighted average interest rate of 6.99%[199]. - The Company’s maximum borrowing capacity subject to sufficient collateral was $400.0 million as of June 30, 2024[200]. Credit Quality and Risk Management - The Company monitors the credit quality of its mortgage loans and assesses expected cash flows and fair value of underlying collateral[62]. - The Company has recognized a cumulative allowance for expected credit losses of zero as of June 30, 2024, compared to $3.4 million as of December 31, 2023[131]. - The allowance for expected credit losses at the end of the period was zero for June 30, 2024, compared to $5.985 million for June 30, 2023[140]. - Risks in the beneficial interest portfolio include default risk and delays in payment, with ongoing monitoring of credit quality[67]. - The Company’s expectation of undiscounted cash flows is evaluated at the end of each calendar quarter, impacting the allowance for expected credit losses[66].

Financial Data and Key Metrics Changes - The company reported a GAAP net loss of $12.7 million, which is significantly lower than the first quarter of 2024, driven by mark-to-market losses and additional realized losses on mortgage loan sales [11] - Earnings available for distribution decreased compared to the previous quarter, with a negative net interest margin contributing to the loss [11] - Book value per common share is reported at $5.56, with a potential fair value of around $4.20 if fully marked [12] Business Line Data and Key Metrics Changes - The company is transitioning from reperforming residential assets to investing in cash-flowing commercial real estate assets, having already begun this process [6][9] - The management team is focused on commercial real estate opportunities, leveraging expertise from Rithm Capital and Sculptor Asset Management [10] Market Data and Key Metrics Changes - The commercial real estate market is viewed as presenting some of the best investment opportunities since the financial crisis, particularly in AAA CMBS with levered returns estimated between 12% and 15% [7][20] - The company plans to sell approximately $120 million of legacy assets to clean up the balance sheet [18] Company Strategy and Development Direction - The company aims to grow its equity capital and generate real earnings while maintaining a focus on commercial real estate investments [9][14] - The dividend policy will be evaluated quarterly based on the ability to grow earnings, with the current dividend maintained at $0.06 per share [8][12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to reposition the company and achieve cash flow positivity over time, despite current losses [7][11] - The company is optimistic about the commercial real estate investing environment and believes it can generate attractive returns [14][15] Other Important Information - The company has a total stockholders' equity of $253.6 million and is focused on growing this over time [12] - The management team consists of experienced professionals in commercial real estate, with a significant number of staff dedicated to this area [10] Q&A Session Summary Question: Impact of marking the whole book to fair value and current balance of legacy RPL portfolio - Management indicated that full mark-to-market would bring book value to around $4.23, with approximately $120 million of assets left to be sold [18][19] Question: Focus on commercial real estate and expected returns - The company has made investments primarily in AAA CMBS, expecting returns between 12% and 15% [20] Question: Capital allocation for risk retention and new investments - Approximately $15 million to $16 million of equity capital is allocated to risk retention securities, with $35 million to $40 million for non-risk retention assets [23] Question: Future investment mix and origination efforts - Management believes they have sufficient resources for investment sourcing and will focus on a mix of CMBS, senior loans, and opportunistic investments [25] Question: Willingness to acquire distressed assets - The company has a history of successfully acquiring distressed assets and is open to similar opportunities in the future [31] Question: Geographic or asset class focus for senior loans - Currently, the focus is on highly liquid AAA CMBS, with flexibility to explore various opportunities as they arise [33]

Financial Performance - GAAP net loss for Q2 2024 was $(12.7) million, or $(0.32) per diluted common share, an improvement from a net loss of $(74.3) million, or $(2.41) per diluted common share in Q1 2024[3][4] - Earnings available for distribution were $(9.6) million, or $(0.24) per diluted common share, compared to $(4.8) million, or $(0.16) per diluted common share in the previous quarter[3][4] - As of June 30, 2024, the net consolidated loss attributable to common stockholders was $12.742 million, compared to a loss of $74.319 million for the quarter ended March 31, 2024[17] - Earnings available for distribution for the quarter ended June 30, 2024, was $9.598 million, with a basic and diluted earnings per share of $0.24[28] Asset and Liability Management - Total assets decreased to $911.5 million from $1.3 billion at the end of 2023, primarily due to the net loss and equity issuance[14] - Total liabilities decreased to $657.0 million from $1.0 billion at the end of 2023, reflecting the company's strategic adjustments[14] - The balance for mortgage loans held-for-sale, net, was $487.3 million as of June 30, 2024, compared to $628.6 million as of December 31, 2023[1] Investment and Securities - The company reported a net unrealized loss of $9.5 million on investments in securities available for sale (AFS) as of June 30, 2024, compared to a loss of $8.0 million as of December 31, 2023[4] - The allowance for expected credit losses on investments in beneficial interests increased to $9.1 million as of June 30, 2024, from $6.9 million as of December 31, 2023[6] - The company transferred certain investments in securities AFS to held to maturity (HTM) on January 1, 2023, with a remaining discount of $4.4 million related to unamortized unrealized loss in accumulated other comprehensive income (AOCI) as of June 30, 2024[5] - The company reported zero allowance for expected credit losses on mortgage loans held-for-investment as of June 30, 2024, down from $3.4 million as of December 31, 2023[1] Dividends and Shareholder Returns - Common dividend declared was $2.2 million, or $0.06 per common share, down from $3.7 million, or $0.10 per common share in Q1 2024[3][4] Strategic Transactions - The company completed a strategic transaction with Rithm Capital, transitioning to a focus on commercial real estate and terminating the previous management agreement[7] - The company sold loans with an unpaid principal balance of approximately $305 million, generating net proceeds of about $45.1 million[7] - The company entered into a $70.0 million term loan with NIC RMBS LLC, which remains undrawn[7] - The company expects to leverage Rithm's operating platform to enhance its investment strategy and create shareholder value[7] Real Estate and Valuation - Real estate owned properties, net, included valuation allowances of $1.7 million as of June 30, 2024, compared to $1.2 million as of December 31, 2023[3] - Non-controlling interests included $0.8 million from a 50.0% owned joint venture as of June 30, 2024, consistent with the balance as of December 31, 2023[8] - The company had secured borrowings net of deferred issuance costs of $1.7 million as of June 30, 2024, down from $3.1 million as of December 31, 2023[7] Book Value - Book value per common share decreased to $5.56 from $6.87 in Q1 2024, with total book value at $253.6 million[3][4]

Financial Performance - Consolidated net loss attributable to common stockholders for the three months ended March 31, 2024, was $74,319 thousand, compared to a loss of $7,941 thousand for the same period in 2023, indicating a significant increase in losses [14]. - Comprehensive loss for the three months ended March 31, 2024, was $73,150 thousand, compared to a loss of $2,055 thousand for the same period in 2023, indicating a substantial increase in comprehensive losses [17]. - The company reported a loss before provision for income taxes of $73,077 thousand for the three months ended March 31, 2024, compared to a loss of $7,271 thousand in the same period last year [14]. - Consolidated net loss for the three months ended March 31, 2024, was $73,992,000, compared to a net loss of $7,364,000 for the same period in 2023, representing a significant increase in losses [20]. Asset and Liability Changes - Total assets decreased to $1,244,455 thousand as of March 31, 2024, down from $1,336,291 thousand on December 31, 2023, representing a decline of approximately 6.9% [9]. - Total liabilities decreased to $988,219 thousand as of March 31, 2024, down from $1,025,396 thousand on December 31, 2023, a reduction of about 3.6% [9]. - Cash and cash equivalents increased to $100,054 thousand as of March 31, 2024, up from $52,834 thousand on December 31, 2023, representing an increase of approximately 89.5% [9]. - The total carrying value of mortgage loans held-for-sale as of March 31, 2024, is approximately $368.3 million, compared to $55.7 million as of December 31, 2023 [126]. Investment and Financing Activities - The company reported a mark to market loss on mortgage loans held-for-sale of $47,307 thousand for the three months ended March 31, 2024, with no comparable loss reported in the previous year [14]. - The company reported cash paid for interest of $13,636,000 for the three months ended March 31, 2024, compared to $14,894,000 in the same period of 2023 [22]. - The Company entered into a $70 million term loan with NIC RMBS on February 26, 2024, which includes the issuance of warrants [193]. - The Company issued $110.0 million aggregate principal amount of 8.875% senior unsecured notes due September 2027, with net proceeds totaling approximately $106.1 million after deductions [81]. Shareholder Equity and Dividends - As of March 31, 2024, the Company reported total stockholders' equity of $256.236 million, with retained earnings showing a deficit of $132.400 million [27]. - The Company declared dividends of $0.10 per share, resulting in total distributions of $3.699 million [27]. - The company paid $3,699,000 in dividends on common and preferred stock during the three months ended March 31, 2024, down from $6,425,000 in the prior year [22]. Credit Quality and Loan Performance - The company recorded a net (increase)/decrease in the net present value of expected credit losses of $(4,230) thousand for the three months ended March 31, 2024, compared to an increase of $621 thousand in the prior year [14]. - The Company monitors the credit quality of its mortgage loans by considering loan payment activity or delinquency status [46]. - The Company has observed that borrowers making at least seven consecutive payments are significantly less likely to default, which drives lower loss severity [133]. - The allowance for expected credit losses decreased to $0.4 million by the end of Q1 2024, down from $4.3 million at the end of Q1 2023 [137]. Real Estate and Property Holdings - As of March 31, 2024, the Company's net investments in real estate owned properties increased to $5.2 million from $3.8 million as of December 31, 2023, with a total of 24 properties held-for-sale [143]. - The Company recorded net transfers of $2.0 million from mortgage loans to properties held-for-sale during the three months ended March 31, 2024, compared to a transfer of $(0.2) million in the same period of 2023 [144]. - The Company sold two REO properties during the three months ended March 31, 2024, realizing net gains of approximately $8 thousand, down from five properties and $0.1 million in gains in the same period of 2023 [145]. Securities and Investments - The Company holds debt securities available-for-sale (AFS) at a fair value of $125.1 million as of March 31, 2024, with gross unrealized losses of $8.8 million [161]. - The Company recorded amortization of unrealized losses of $0.8 million for the three months ended March 31, 2024, compared to $2.0 million for the same period in 2023 [150]. - The Company’s investments in beneficial interests were valued at $88.6 million as of March 31, 2024, down from $104.2 million as of December 31, 2023 [165]. - The allowance for expected credit losses for beneficial interests increased to $9.1 million as of March 31, 2024, from a beginning balance of $(6.9) million, indicating a significant change in credit quality assessment [171]. Management and Operational Structure - The Management Agreement with the Manager is set to expire on March 5, 2034, and includes provisions for management fees based on equity managed [82]. - The Company has a focus on acquiring re-performing loans (RPLs) and non-performing loans (NPLs), targeting residential mortgage loans [30]. - The Company operates in a single segment focused on re-performing mortgages, with a lesser focus on non-performing mortgages and real property [125].

Financial Performance - The net loss attributable to common stockholders was $(74.3) million, resulting in a loss of $(2.41) per common share, which includes $(0.50) per share related to the accrual of the manager termination fee[2][5] - The operating loss for the quarter was $(4.8) million or $(0.16) per common share, indicating a significant decline in operational performance[2][5] - The consolidated net loss attributable to common stockholders for the quarter was $(74.32) million, compared to $(23.20) million in the previous quarter[27] - Basic EPS for the three months ended March 31, 2024, was $(2.41), a significant decrease from $(0.86) in the previous quarter[37] - Consolidated net loss attributable to common stockholders for the three months ended March 31, 2024, was $74,319, compared to a loss of $23,197 for the previous quarter[37] - Consolidated operating loss widened to $(4,806) million from $(1,834) million, indicating a deterioration in financial performance[40] - Basic loss per common share was $(2.41), compared to $(0.86) in the previous quarter, reflecting increased losses[40] - Total revenue, net, significantly decreased to $892 million, compared to $3,918 million in the prior quarter, representing a drop of 77.3%[40] Cash and Liquidity - As of March 31, 2024, the company held $100.1 million in cash and cash equivalents, with an average daily cash balance of $65.3 million[2] - Cash collected during the first quarter amounted to $80.9 million, ending the quarter with $100.1 million in cash and cash equivalents[16] - The company expects to generate $47.1 million in cash from the sale of loans with a total UPB of $180.6 million[20] Assets and Liabilities - Total assets as of March 31, 2024, were $1.24 billion, down from $1.34 billion as of December 31, 2023[30] - Total liabilities decreased from $1,025,396 to $988,219, a reduction of approximately 3.6%[31] - Total equity decreased from $310,895 to $256,236, representing a decline of about 17.6%[32] - Total assets decreased from $1,336,291 to $1,244,455, a decline of about 6.9%[32] Loan and Investment Performance - Approximately 84.4% of the portfolio made at least 12 consecutive payments, indicating a stable performance in the underlying loans[2] - The total unpaid principal balance (UPB) of loans as of March 31, 2024, was $882.05 million, with a weighted average loan-to-value (LTV) ratio of 52.2%[17] - The market value of collateral was $2.03 billion, with a current purchase price to total UPB ratio of 81.4%[17] - The company recorded a $47.3 million mark to market loss on loans moved to held-for-sale, reflecting challenges in the loan sales strategy[2][9] - A $3.1 million write-down on beneficial interests was recorded, reflecting adjustments in cash flow projections due to extended loan durations[2][7] - The company reported a net unrealized loss on investments in securities AFS of $7.7 million as of March 31, 2024, compared to $8.0 million at December 31, 2023[34] Shareholder Information - A cash dividend of $0.06 per share was declared, to be paid on May 30, 2024[19] - The company has a total of 36,992,019 common shares issued and outstanding as of March 31, 2024[32] - The book value per common share decreased to $6.87 from $9.99 at the end of the previous quarter, primarily due to the net loss and increased outstanding shares[2][15] Tax and Expenses - The taxable loss for the quarter ended March 31, 2024, was $(0.67) per share, compared to $(0.03) per share for the quarter ended December 31, 2023[16] - Provision for income taxes showed a benefit of $915 million, contrasting with a provision of $69 million in the previous quarter, indicating a change in tax strategy[40] - Total expenses were $5,698 million, slightly down from $5,752 million in the previous quarter, indicating cost management efforts[40] - Related party expense for loan servicing fees was $1,734 million, a slight decrease from $1,773 million in the prior quarter[40]

Financial Agreements and Capital Structure - Great Ajax Corp. terminated its merger agreement with Ellington Financial, receiving $16.0 million in total, including $5.0 million in cash and $11.0 million for approximately 1,666,666 shares at $6.60 per share[27][29]. - The company entered into a Credit Agreement with Rithm, providing a delayed draw term loan facility of up to $70.0 million, maturing on February 25, 2025, with an interest rate of 10.0% per annum[33][34]. - Proceeds from the Credit Agreement will be used to repay outstanding 2024 Notes upon their maturity in April 2024[35]. - The Credit Agreement includes financial covenants, such as a minimum net asset value of $240.0 million plus 65% of positive net equity capital activity[36]. - The company entered into a securities purchase agreement with Rithm to issue shares of Common Stock at a price of $4.87 per share, resulting in gross proceeds of approximately $14.0 million[43]. - The company plans to use the net proceeds from the private placement for repayment of amounts borrowed under the Facility and/or repayment of the 2024 Notes[44]. - The company agreed to file a shelf registration statement with the SEC to register for resale the Shares and the Warrant Shares as soon as practicable[45]. - The company will issue an aggregate of 12,046,222 shares of Common Stock in exchange for outstanding Series A and Series B Preferred Stock[48]. - The company is limited to issuing up to 19.99% of its outstanding shares of Common Stock until stockholder approval is obtained[49]. Corporate Governance and Management - Great Ajax Corp. plans to reconstitute its Board of Directors to a five-member board, including two existing directors and three new members, subject to stockholder approval[38][39]. - The company will issue five-year warrants to Rithm at an exercise price of $5.36, representing a 10% premium to the trailing five-day average closing price[40]. - The number of Warrant Shares will be capped at 19.99% of the current outstanding Common Stock unless stockholder approval is obtained[42]. - The company has established investment guidelines that may be changed by the Board of Directors without stockholder approval[72]. - The company has a broad investment policy allowing the Manager significant discretion in asset selection, which may involve lower returns or higher risks than anticipated[73]. - The Board of Directors periodically reviews the investment policy but does not approve each investment unless it deviates from the approved policy or involves related parties[73]. - The company may change its business strategy and investment policy without stockholder consent, potentially increasing exposure to various risks[74]. - The company intends to raise additional funds through equity or debt offerings, with the Board having the authority to issue additional stock without stockholder approval[76]. Investment Strategy and Market Conditions - The company aims to generate attractive current yields and risk-adjusted total returns for stockholders through its REIT structure[52]. - The company targets a 5% and above return on Residential Performing Loans (RPLs) and a 7% and above return on Non-Performing Loans (NPLs)[56]. - The company focuses on acquiring loans in urban centers where home price appreciation is expected to outpace the national market[57]. - The company expects to borrow to finance acquisitions and may use leverage based on the Manager's assessment of financial conditions and market factors[77]. - Investments exceeding 15% of equity require approval from the Investment Supervisory Committee[78]. - The company may incur termination fees equal to the aggregate servicing fees payable under the Servicing Agreement for the preceding 12-month period if terminated[102]. - The company believes that loan re-performance followed by refinancing generates near-term cash flows and provides stable economic outcomes[105]. - The business model relies on acquiring a steady supply of RPLs and NPLs, with potential adverse effects from legislative actions and economic conditions[147]. Financial Performance and Risks - For the year ended December 31, 2023, the company incurred a net loss attributable to common stockholders of $49.3 million[132]. - The market value of the company's RPLs, NPLs, and SBC loans has significantly deteriorated, leading to substantial operating losses[132]. - The company expects to continue incurring significant and increasing operating losses due to current market conditions for mortgage asset holdings[132]. - Increasing interest rates have negatively affected the company's loan assets, extending duration and resulting in significant decreases in fair market value[133]. - A significant portion of the company's mortgage loans may become non-performing loans (NPLs), increasing the risk of substantial losses[140]. - The company primarily owns higher risk loans, which are more expensive to service and may incur higher compliance costs due to regulatory changes[141]. - The principal and interest payments on the company's retained MBS are not guaranteed, exposing it to increased credit risk[145]. - Difficult conditions in the mortgage and real estate markets continue to adversely affect the value of the company's assets and are expected to persist[138]. - Extended forbearance and foreclosure timelines may lead to lower yields and losses on mortgage loan portfolios[148]. - The ability to repay SBC loans is dependent on the net operating income of the underlying properties, which is subject to various risks[153]. - Concentration in specific geographic regions increases the risk of loss due to adverse local conditions[155]. - The company may face liabilities related to mortgage loans, including potential repurchase obligations if representations are breached[163]. - The company may face additional risks when acquiring portfolios of whole mortgage loans that include less desirable mortgage assets, potentially impairing performance and reducing returns[165]. Regulatory and Compliance Issues - The company operates in a highly regulated industry, and changes in U.S. federal, state, and local laws could materially affect its business and financial condition[20]. - The company has elected to treat GA-TRS as a taxable REIT subsidiary under the Code, impacting its tax obligations[21][26]. - The complexity and variability of U.S. federal, state, and local regulations may increase compliance costs and adversely affect operational expenses[191]. - Higher risk mortgage loans serviced by the Servicer incur increased servicing costs due to more frequent customer interactions and regulatory scrutiny[193]. - Legislative changes aimed at preventing foreclosures may reduce the value of mortgage loans and increase servicing costs, impacting financial performance[192]. - Stricter underwriting standards by agencies like Freddie Mac and Fannie Mae could complicate refinancing efforts[156]. Market Competition and Economic Factors - The company competes with larger mortgage and hybrid REITs, hedge funds, and other financial institutions, which may affect its market position[109]. - The company faces significant competition in acquiring targeted assets, including mortgage REITs, financial companies, and hedge funds, which may adversely affect its business strategy[210]. - Future actions by the Federal Reserve could have a material adverse effect on the company's financial condition and ability to pay distributions[217]. - Rising interest rates may reduce the availability of target assets for acquisition, adversely affecting the company's ability to generate income and pay dividends[187]. - Increased interest rates may hinder borrowers' ability to refinance existing mortgages, leading to decreased cash collections and extended resolution timelines[188]. Cybersecurity and Operational Risks - The company is highly dependent on third-party communications and information systems, and any system failures could disrupt business operations[212]. - Security breaches could compromise sensitive data and expose the company to liability, negatively impacting its reputation and operations[213][214]. - Cybersecurity incidents could result in data loss and increased costs, adversely affecting the company's business and results of operations[218].

Core Insights - Great Ajax Corp. reported a consolidated net loss of $23.2 million for the quarter ended December 31, 2023, translating to a loss of $0.86 per common share, which reflects a significant decline compared to previous quarters [2][6][12] - The company focuses on acquiring, investing in, and managing re-performing mortgage loans (RPLs) and non-performing loans (NPLs), alongside originating small-balance commercial loans (SBC loans) [1][3] Financial Performance - Loan interest income for the quarter was $12.42 million, a decrease from $12.70 million in the prior quarter [2] - Net interest income was reported at $3.17 million, down from $3.04 million in the previous quarter [2] - The average carrying value of RPLs was $882.07 million, while NPLs stood at $42.05 million as of December 31, 2023 [2][4] Asset Management - The total unpaid principal balance (UPB) of the loan portfolio was $957.18 million, with a weighted average loan-to-value (LTV) ratio of 54.2% [4] - The market value of collateral was estimated at $2.12 billion, indicating a significant buffer over the UPB [4] Recent Developments - The company mutually terminated its merger agreement with Ellington Financial, receiving $16 million in total, which included $5 million in cash and $11 million for shares purchased at $6.60 each [3][6] - A cash dividend of $0.10 per share was declared, to be paid on March 29, 2024 [3] Strategic Initiatives - In February 2024, the company identified mortgage loans with a UPB of approximately $330 million for potential sale, anticipating a loss of about $10 million for every $100 million sold [3][4] - A strategic transaction with Rithm was announced, with plans for an annual/special stockholders' meeting [3]

Core Viewpoint - Rithm Capital Corp. and Great Ajax Corp. have entered into a strategic transaction involving a $70 million term loan agreement, aimed at repositioning Great Ajax to capitalize on commercial real estate investment opportunities [1][2]. Group 1: Transaction Details - Great Ajax will utilize the $70 million term loan, along with cash on hand and cash from loan sales, to repay its outstanding convertible notes [1]. - In conjunction with the loan agreement, Great Ajax will issue five-year warrants to Rithm, based on amounts drawn under the loan facility [3]. - Great Ajax will also issue $14 million in common stock to Rithm as part of a securities purchase agreement [3]. Group 2: Management Changes - Great Ajax has issued a termination notice to its external manager, Thetis Asset Management LLC, and plans to enter into a management agreement with an affiliate of Rithm, pending shareholder approval [2]. - The transaction is expected to enhance Great Ajax's strategic direction and enable it to pursue unique investment opportunities in the commercial real estate market [2]. Group 3: Shareholder Involvement - Great Ajax will seek shareholder approval for the transaction at an upcoming annual and special meeting [4]. - Support agreements have been entered into with certain institutional stockholders, representing over 40% of Great Ajax's common stock, to facilitate the transaction [4]. Group 4: Advisory Roles - Citi is serving as the exclusive financial advisor to Rithm, while Piper Sandler & Co. is acting as the exclusive financial advisor to Great Ajax [5]. - Legal counsel for Rithm is provided by Sidley Austin LLP, and Mayer Brown LLP is serving as legal advisor to Great Ajax [5].