Great Ajax(US:AJX)2024-07-24 16:50Financial 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]