Great Ajax(AJX) - 2024 Q3 - Earnings Call Transcript

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$85 million of residential mortgage loans, generating nearly $18 million in cash [13] - Approximately 91$62.7 million of residential securities, generating $14 million in cash [13] - Net interest income increased by 126$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]