• GAAP Net Income Loss: $8 million or 18 cents per diluted share.
• Earnings Available for Distribution: Negative $5.4 million or 12 cents per diluted share.
• Dividend Declared: 6 cents per share.
• Cash and Equivalents: $84 million on the balance sheet.
• Stockholder Equity: Just under $250 million.
• Residential Mortgage Loans Sold: $85 million, generating under $18 million in cash.
• Residential Securities Sold: $62.7 million, generating $14 million in cash.
• Net Interest Income: Increased 126% to $3.6 million by the end of Q3.
• Cost of Funds Improvement: Improved by 28 basis points.

• Warning! GuruFocus has detected 2 Warning Sign with AJX.

Release Date: October 21, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Great Ajax Corp (NYSE:AJX) is actively working to redeploy capital into cash-flowing CMBS, aiming for breakeven by the end of Q1 2025.
• The company has maintained its book value at $547, showing stability in its financial position.
• Great Ajax Corp (NYSE:AJX) has successfully sold 91% of its legacy residential mortgage loans held for sale, generating significant cash flow.
• The company has improved its net interest income by 126% to $3.6 million, indicating better financial management.
• Great Ajax Corp (NYSE:AJX) is exploring opportunities in commercial real estate, with a focus on cash-flowing assets, which could lead to future growth.

Negative Points

• Great Ajax Corp (NYSE:AJX) reported a GAAP net income loss of $8 million, indicating ongoing financial challenges.
• The company is currently not making money and is operating at a deficit, which poses a risk to its financial health.
• There is uncertainty regarding the company's ability to maintain its current dividend of 6, as it is not yet covering it with earnings.
• The company has a significant amount of debt with a high coupon rate of 10.25%, which could impact its financial flexibility.
• Great Ajax Corp (NYSE:AJX) is still in the process of cleaning up legacy assets, which may take time and resources before achieving desired profitability.

Q & A Highlights

Q: Michael, what segment of the commercial real estate debt universe matches a rhythm type investing strategy? A: Michael Nierenberg, CEO: We are focusing on cash-flowing assets, such as multifamily and affordable housing, while avoiding office properties. We are seeing opportunities in assets coming from banks' workout groups, and we are also considering investments in data centers and student housing. The key is to ensure these investments are solid and cash-flowing.

Q: Could lower rates give borrowers and banks some cushion to ride out distress, reducing opportunities in the market? A: Michael Nierenberg, CEO: Despite rate fluctuations, the need for equity and debt financing in commercial real estate remains. Banks are motivated to clean up balance sheets, and we expect distressed assets to continue coming to market, regardless of rate changes.

Q: Have you put more of the cash balance to work in October, and are there other small investments you could monetize? A: Michael Nierenberg, CEO: We have about $20 million to $25 million available for deployment. The balance sheet has small, odd lot positions that won't generate significant cash. We are focused on cleaning up these positions and addressing $100 million of debt with a 10.25% coupon.

Q: Is the goal to break even in Q1 by deploying remaining proceeds into CMBS? A: Michael Nierenberg, CEO: Yes, achieving break-even involves addressing our debt, deploying remaining capital, and cleaning up the balance sheet. We aim for break-even pre-dividend by Q1, with potential capital reengineering to support this goal.

Q: Will Great Ajax lean into specific asset classes or wait for a large opportunity? A: Michael Nierenberg, CEO: We are not committed to any single asset class. While multifamily is a strong asset, we are open to diverse opportunities and may collaborate with Genesis, our multifamily lender, for potential deals.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.