Great Ajax(US:AJX)2026-02-17 22:35Capital Transactions - The Company issued $14.0 million of common stock to Rithm as part of a strategic transaction approved by stockholders on May 20, 2024[21]. - An initial cash investment of $50.0 million was made for a minority interest in PGOP, with a commitment of up to an additional $7.5 million under certain circumstances[25]. - A reverse stock split was approved at a ratio of one share for every six shares issued, effective December 30, 2025[26]. Strategic Direction - The Company transitioned its strategy from residential mortgage loans to a flexible CRE-focused investment strategy, targeting senior and subordinated mortgage loans, mezzanine loans, and preferred equity[23]. - The Company has largely exited residential mortgage loans and does not plan to invest further in RPLs, NPLs, or RMBS[23]. - The company has shifted its strategic direction to focus on the origination and acquisition of commercial real estate (CRE)-related assets, including senior and subordinated commercial mortgages and mezzanine loans[77]. Management and Fees - The base management fee for RCM GA is set at 1.5% per annum of stockholders' equity, while an incentive fee of 20% applies to earnings available for distribution exceeding an annualized return of 8%[40][41]. - The management agreement with RCM GA will remain in effect until June 11, 2027, with automatic renewals for successive two-year terms[38]. Market Conditions and Risks - The Company believes current market conditions present attractive risk-adjusted investment opportunities in the CRE sector due to refinancing challenges[23]. - The company incurred a net loss attributable to common stockholders of $2.7 million for the year ended December 31, 2025, and expects to continue incurring operating losses due to current market conditions for mortgage asset holdings[72]. - The market value of the company's residential and commercial loans has significantly deteriorated, leading to substantial operating losses on loans sold or intended for sale[72]. - Higher historical interest rates are expected to negatively impact loan assets, extending duration and resulting in significant decreases in the fair market value of performing loans[73]. - Difficult conditions in the mortgage and CRE markets have adversely affected asset values, with ongoing concerns about inflation, energy costs, and the stability of the global banking system contributing to market volatility[96]. Compliance and Regulatory Risks - The company is subject to various environmental laws and may incur substantial liability for environmental conditions at properties it owns or acquires[65]. - The company continuously monitors compliance with the Investment Company Act to ensure that less than 40% of total assets consist of "investment securities"[57]. - The company is subject to various regulatory requirements under the Investment Advisers Act, which could lead to civil or criminal liability if not complied with[175]. - The residential and commercial mortgage industries are highly regulated, and failure to comply with laws could materially affect the company's operations[176]. - The Dodd-Frank Act has introduced significant regulatory changes that could impact the mortgage industry and the company's business[179]. Investment Risks - The company invests in commercial mortgage loans, which are non-recourse and include limited options for financial recovery in the event of default, potentially adversely affecting results of operations and financial condition[82]. - Default rates and losses on commercial mortgage loans are influenced by various factors, including economic conditions and the borrower's equity in the mortgage property, with significant declines in specific CRE markets leading to higher delinquencies and defaults[83]. - The company may face challenges in liquidating illiquid investments, which could adversely affect its financial condition and results of operations[74]. - The company may experience interest shortfalls in CMBS investments due to insufficient interest collected from underlying loans, which could impact payments to bondholders[94]. - The company holds higher risk loans, which are more expensive to service than conventional mortgage loans, potentially leading to increased servicing costs due to regulatory changes[102]. Operational Challenges - The company does not currently have any employees paid directly and relies on its Manager and affiliates for operational support[66]. - The company is highly dependent on third-party communications and information systems, and any failures could disrupt operations[147]. - Cybersecurity incidents could result in data loss and increased costs, adversely affecting the company's business and reputation[154]. - Weather conditions and natural disasters could damage properties, impacting the value of collateral and the company's financial performance[159]. Financial Management - The company utilizes leverage to enhance financial returns, but this may reduce cash available for stockholder distributions and increase losses during unfavorable economic conditions[162]. - Leverage magnifies both gains and losses, increasing returns only if investments earn more than the cost of borrowing[163]. - The company may need to post significant cash as collateral for repurchase commitments, which could limit cash available for stockholder distributions[164]. - Non-compliance with debt covenants could lead to events of default, adversely impacting financial condition and operating results[171]. Investment Strategy and Governance - The Board of Directors relies on information from the Manager, which may lead to challenges in oversight and increased exposure to various risks[203]. - The Board of Directors has the authority to change investment strategies without stockholder consent, potentially leading to riskier investments[212]. - The company may revoke its REIT election without stockholder approval, which could negatively impact financial conditions and stockholder distributions[213]. - Provisions in Maryland law may inhibit changes in control, affecting stockholder opportunities to realize premiums on their shares[214].