Great Ajax(US:AJX)2025-07-31 20:16Financial Transactions - Rithm Property Trust completed a strategic transaction on June 11, 2024, selling $14.0 million of common stock to Rithm at $4.87 per share[167]. - The company anticipates limited ability to acquire significant new commercial mortgage assets due to financial challenges and limited financing sources[186]. - Financing activities saw a net cash increase of $406.2 million, primarily due to the issuance of Series C Preferred Stock, which generated $50.8 million in net proceeds[231][219]. Investment Strategy - The company has shifted its investment strategy towards commercial real estate, focusing on loans and securities collateralized by commercial real estate assets, moving away from residential mortgage loans[171]. - The commercial real estate sector is expected to be resilient despite current volatility, with opportunistic investors well-positioned to capitalize on selective dislocations[185]. Mortgage Loans and Securities - As of June 30, 2025, the carrying value of mortgage loans held-for-investment was $378.9 million, down from $396.1 million at the end of 2024[173]. - The commercial mortgage-backed securities (CMBS) at fair value increased to $275.2 million as of June 30, 2025, compared to $246.6 million at the end of 2024[173]. - The average mortgage loan portfolio decreased by $303,904 thousand to $412,296 thousand for the six months ended June 30, 2025, compared to $716,200 thousand in 2024[201]. - The mortgage loan portfolio's ending carrying value as of June 30, 2025, was $378,894 thousand for held-for-investment loans and $27,588 thousand for held-for-sale loans, compared to $413,916 thousand and $108,868 thousand, respectively, in 2024[209][210]. - The weighted average loan-to-value (LTV) ratio improved to 46.1% as of June 30, 2025, down from 48.2% at the end of 2024[211]. - The company recorded a loss of $3.0 million on the sale of securities related to legacy RMBS in the six months ended June 30, 2025, with no material gains or losses recorded in the prior year[207]. Income and Expenses - Net interest income increased by $3.9 million and $6.0 million for the three and six months ended June 30, 2025, compared to the same periods in 2024, primarily due to reinvesting net proceeds into higher yielding CMBS[199]. - Total expenses decreased by $5.0 million for the three months ended June 30, 2025, and by $23.2 million for the six months ended June 30, 2025, compared to the same periods in 2024, mainly due to a reduction in management fees and general administrative expenses[202]. - Interest income for the three months ended June 30, 2025, was $13,636 thousand, an increase of $1,721 thousand from $11,915 thousand in 2024[200]. - Interest expense decreased to $9,423 thousand for the three months ended June 30, 2025, from $11,567 thousand in 2024, resulting in a net interest income of $4,213 thousand[198]. - The company recorded a net income of $1,899 thousand for the three months ended June 30, 2025, compared to a net loss of $12,861 thousand in 2024[198]. - The total other income for the three months ended June 30, 2025, was $1,673 thousand, a year-over-year increase of $55,842 thousand from a loss of $4,996 thousand in 2024[208]. Cash Flow and Liquidity - As of June 30, 2025, the total cash and cash equivalents amounted to $98.6 million, an increase of $26.6 million from $72.0 million at the end of June 30, 2024[217][228]. - The net cash used in operating activities decreased by $9.6 million year-over-year, from $8.0 million in the six months ended June 30, 2024, to $(1.6) million in the same period of 2025[229]. - Net cash provided by investing activities dropped significantly by $381.4 million, from $383.1 million in the six months ended June 30, 2024, to $1.7 million in 2025[230]. - The company expects to meet its liquidity needs over the next 12 months through cash on hand and cash flow from investments, while also managing near-term maturities[227]. Market Conditions - The unemployment rate decreased to 4.1% in June 2025, down from 4.2% in March 2025, indicating a stable labor market[177]. - Total home sales averaged 4.64 million units in Q2 2025, a 2.9% decline from Q1 2025[178]. - The nominal 10-year Treasury yield was relatively unchanged at 4.24% at the end of June 2025[176]. Risk Factors - The company is subject to credit risk, which may arise from various factors including economic conditions and borrower behavior[246]. - Inflation risk is present as increases in interest rates by the Federal Reserve have raised the company's cost of funds[250]. - Interest rate increases may lead to higher costs of funds for new secured bonds and affect the fair value of mortgage loans and real estate[242]. - The company has no material exposure to market, credit, liquidity, or financing risk from unconsolidated entities or financial partnerships[239]. Regulatory and Compliance - The company must distribute at least 90% of its taxable income to qualify as a REIT, which limits its ability to retain earnings[188]. - The company has no specific debt-to-equity ratio requirement but must adhere to debt covenants that include minimum liquidity and tangible net worth requirements[223].