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GREAT AJAX CORP. ANNOUNCES
RESULTS FOR THE QUARTER
ENDED JUNE 30, 2017
Second Quarter Highlights
|·||Purchased $210.2 million of re-performing mortgage loans (“RPL”) with an aggregate unpaid principal balance (“UPB”) of $249.0 million and underlying collateral value of $357.7 million; and originated $1.7 million of small-balance commercial mortgage loans (“SBC”) to end the quarter with $1,044.7 million of mortgage loans with an aggregate UPB of $1,257.1 million.|
|·||Issued $87.5 million of Convertible senior notes and a net increase in secured debt of $98.1 million.|
|·||Portfolio interest income of $21.7 million; net interest income of $12.4 million.|
|·||Net income attributable to common stockholders of $6.9 million.|
|·||Basic earnings per share (“EPS”) of $0.38.|
|·||Taxable income of $0.39 per share.|
|·||Book value per share of $15.49 at June 30, 2017.|
|·||$42.0 million of cash and cash equivalents at June 30, 2017.|
New York, NY—August 1, 2017 —Great Ajax Corp. (NYSE: AJX), a Maryland corporation that is a real estate investment trust, today announces results of operations for the quarter ended June 30, 2017. We focus primarily on acquiring, investing in and managing a portfolio of RPLs secured by single-family residences and commercial properties, and, to a lesser extent, non-performing mortgage loans (“NPL”). In addition to our continued focus on residential RPLs, we intend to increase our acquisitions and originations of SBCs secured by multi-family residential and commercial mixed use retail/residential properties.
Financial Results (Unaudited)
($ in thousands except per share amounts)
|June 30, 2017||March 31, 2017||December 31, 2016||September 30, 2016||June 30, 2016|
|Consolidated net income||$||7,102||$||8,698||$||6,163||$||7,887||$||6,861|
|Net income per diluted share||$||0.36||$||0.46||$||0.33||$||0.42||$||0.42|
|Average total assets||$||1,050,108||$||952,112||$||883,621||$||814,426||$||671,275|
|Average daily cash balance(2)||$||47,705||$||35,513||$||32,759||$||50,572||$||39,043|
|Average carrying value of RPLs(3)||$||917,646||$||806,982||$||751,801||$||653,699||$||539,701|
|Average carrying value of NPLs(3)||$||49,530||$||53,975||$||59,365||$||63,778||$||68,205|
|Average debt balance||$||775,717||$||669,938||$||615,103||$||537,279||$||433,595|
|(1)||Total revenue includes net interest income, income from investments in our manager and other income.|
|(2)||Average daily cash balance includes cash and cash equivalents, and excludes cash held in trust.|
|(3)||Average daily balances for RPLs and NPLs exclude balances for two SBC loans, and four SBC loans we originated in the three and six months ended June 30, 2017, respectively.|
Consolidated net income decreased $1.6 million for the quarter ended June 30, 2017 compared to the quarter ended March 31, 2017, primarily due to higher interest expense resulting from our issuance of $87.5 million in Convertible senior notes, partially offset by higher interest income on our increased loan portfolio. We also recorded a $0.2 million charge on the early exinguishment of debt from calling our 2015-A securitization and $0.6 million in impairments on REO. We continue to see a steady transition of NPLs to REO from the NPLs we purchased in the second half of 2014 and the first half of 2015. The largest concentrations of REO held-for-sale remain in New Jersey, New York, Florida and Maryland.
We collected $44.5 million on our mortgage loan and REO portfolios (including our equity method investments) through payments, payoffs and sales of REO during the quarter and ended the second quarter with $42.0 million in cash and cash equivalents. Our purchased RPL portfolio continues to experience significantly lower than expected re-default rates and higher than expected pre-payments.
On April 25, 2017, we completed the public offer and sale of $87.5 million aggregate principal amount of our 7.25% Convertible senior notes due 2024. The notes bear interest at a rate of 7.25% per annum, payable quarterly. The notes will mature on April 30, 2024, unless earlier converted, redeemed or repurchased. The conversion rate initially equals 1.6267 shares of common stock per $25.00 principal amount of notes (equivalent to a conversion price of approximately $15.37 per share of common stock), a 17.5% premium over our stock price on the issue date of the notes. We used the net proceeds of the offering to acquire loan pools that we purchased in late May and June of 2017. We expect to securitize a majority of these loans in the third or fourth quarter of 2017. We intend to use the resulting net proceeds to acquire additional loan pools and thus generate additional interest income to offset the interest expense on the convertible notes.
On May 25, 2017, we completed our ninth securitization, Ajax Mortgage Loan Trust 2017-A. An aggregate of $140.7 million of senior securities were issued in a private offering with respect to $216.4 million UPB of mortgage loans. We re-securitized $33.6 million of loans from the 2015-A securitization in the 2017-A transaction at a lower cost of funds and higher advance rate. Based on UPB, approximately 91.8% of these mortgage loans were RPLs and approximately 8.2% were NPLs. Net proceeds from the sale of the senior securities provided leverage of approximately 3.9 times the related equity.
We acquired $249.0 million UPB of RPLs and originated $1.7 million UPB of SBC loans during the quarter to end the period with $1,044.7 million of mortgage loans with an aggregate UPB of $1,257.1 million. Mortgage loans acquired during the second quarter and held as of quarter-end were on our consolidated balance sheet for a weighted average of 45 days during the quarter.
($ in thousands)
|June 30, 2017||March 31, 2017||December 31, 2016||September 30, 2016(1)||June 30, 2016|
|Purchase price % of UPB||84.4||%||91.2||%||87.3||%||83.3||%||74.2||%|
|Purchase price % of UPB||-||-||56.3||%||-||-|
|(1)||Includes 572 RPLs acquired for $78.2 million and aggregate UPB of $100.3 million sold to Ajax E Master Trust, an affiliate of the joint venture we established in March 2016.|
The following table provides an overview of our portfolio at June 30, 2017 ($ in thousands):
|No. of loans||5,866||Weighted average LTV(4)||91.9||%|
|Total UPB||$||1,257,055||Weighted average remaining term (months)||292.8|
|Interest-bearing balance||$||1,166,406||No. of first liens||5,843|
|Deferred balance(1)||$||90,649||No. of second liens||23|
|Market value of collateral(2)||$||1,606,068||No. of rental properties||9|
|Price/total UPB(3)||79.0||%||Market value of rental properties||$||2,336|
|Price/market value of collateral||62.5||%||Capital invested in rental properties||$||1,969|
|Re-performing loans||94.9||%||Price/market value of rental properties||84.3||%|
|Non-performing loans||4.4||%||No. of other REO||167|
|Originated SBC loans||0.7||%||Market value of other REO||$||39,876|
|Weighted average coupon||4.3||%|
|(1)||Amounts that have been deferred in connection with a loan modification on which interest does not accrue. These amounts generally become payable at maturity.|
|(2)||Market value of collateral as of most recent Broker Price Opinion; the dates of our Broker Price Opinions vary by loan status.|
|(3)||Our loan portfolio consists of fixed rate (59.4% of UPB), ARM (11.1% of UPB) and Hybrid ARM (29.5% of UPB) mortgage loans with original terms to maturity of not more than 40 years.|
UPB as of June 30, 2017 divided by market value of collateral and weighted by the UPB of the loan.
Since June 30, 2017, we purchased 88 RPLs with aggregate UPB of $28.8 million in two transactions from two different sellers. The loans were acquired at 80.4% of UPB and the estimated market value of the underlying collateral is $36.7 million. The purchase price equaled 63.1% of the estimated market value of the underlying collateral. We also acquired one SBC loan with UPB of $1.7 million. Our investment equaled 56.1% of the underlying collateral value of $3.0 million. The majority of the costs associated with these acquisitions were accrued as of June 30, 2017.
Additionally, we have agreed to acquire, subject to due diligence, 16 RPLs with aggregate UPB of $2.8 million in three transactions from three different sellers. The purchase price equals 86.8% of UPB and 65.0% of the estimated market value of the underlying collateral of $3.8 million. Any loans we purchase must meet our acquisition criteria, therefore there is no assurance that we will enter into a definitive agreement relating to these loans or, if such an agreement is executed, that we will actually close the acquisitions or that the terms will not change.
On July 24, 2017, our Board of Directors declared a dividend of $0.30 per share, which will be payable on August 30, 2017, to stockholders of record as of August 15, 2017.
On August 1, 2017, we issued 37,460 shares of our common stock to our manager, Thetis Asset Management LLC, in payment of the stock-based component of the management fee due for the second quarter of 2017 in a private transaction. The management fee expense associated with these shares was recorded as an expense in the second quarter of 2017.
On August 1, 2017, we issued each of our independent directors 605 shares of our common stock in payment of half of their quarterly director fees for the second quarter of 2017.
Great Ajax will host a conference call at 5:00 p.m. EST, Tuesday, August 1, 2017 to review our financial results for the quarter. A live Webcast of the conference call will be accessible from the Investor Relations section of our website www.great-ajax.com. An archive of the Webcast will be available for 90 days.
About Great Ajax Corp.
Great Ajax Corp. is a Maryland corporation that focuses primarily on acquiring, investing in and managing mortgage loans secured by single-family residences and, to a lesser extent, single-family properties themselves. We also invest in loans secured by multi-family residential and smaller commercial mixed use retail/residential properties, as well as in the properties directly. We are externally managed by Thetis Asset Management LLC. Our mortgage loans and other real estate assets are serviced by Gregory Funding LLC, an affiliated entity. We have elected to be taxed as a real estate investment trust under the Internal Revenue Code.
This press release contains certain forward-looking statements. Words such as “believes,” “intends,” “expects,” “projects,” “anticipates,” and “future” or similar expressions are intended to identify forward-looking statements. These forward-looking statements are subject to the inherent uncertainties in predicting future results and conditions, many of which are beyond the control of Great Ajax, including, without limitation, the risk factors and other matters set forth in our Annual Report on Form 10-K for the period ended December 31, 2016 filed with the SEC on March 2, 2017. Great Ajax undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law.
|Chief Executive Officer|
|Chief Financial Officer|
GREAT AJAX CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands except per share amounts)
|Three months ended|
|June 30, 2017||March 31, 2017||December 31, 2016||September 30, 2016|
|Net interest income||12,428||13,156||12,141||11,766|
|Income from investment in Manager||142||49||60||68|
|Other income (expense)||535||462||92||272|
|Related party expense - loan servicing fees||1,935||1,904||1,850||1,556|
|Related party expense - management fee||1,330||1,072||1,057||1,049|
|Loan transaction expense||442||525||248||100|
|Real estate operating expense||637||324||1,434||644|
|Loss on debt extinguishment||218||-||565||-|
|Income before provision for income tax||7,150||8,699||6,157||7,905|
|Provision for income tax (benefit)||48||1||(6||)||18|
|Consolidated net income||7,102||8,698||6,163||7,887|
|Less: consolidated net income attributable to non-controlling interests||238||289||205||264|
|Consolidated net income attributable to common stockholders||$||6,864||$||8,409||$||5,958||$||7,623|
|Basic earnings per common share||$||0.38||$||0.46||$||0.33||$||0.42|
|Diluted earnings per common share||$||0.36||$||0.46||$||0.33||$||0.42|
|Weighted average shares – basic||18,008,499||17,976,710||17,958,517||17,937,079|
|Weighted average shares – diluted||23,026,679||18,791,231||18,766,938||18,664,586|
GREAT AJAX CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands except per share amounts)
|ASSETS||June 30, 2017||December 31, 2016|
|Cash and cash equivalents||$||42,040||$||35,723|
|Cash held in trust||29||1,185|
|Property held-for-sale, net(2)||28,278||23,882|
|Rental property, net||1,969||1,289|
|Investment in debt securities||6,303||6,323|
|Receivable from servicer||16,067||12,481|
|Investment in affiliate||1,862||4,253|
|Prepaid expenses and other assets||4,829||3,175|
|LIABILITIES AND EQUITY|
|Secured borrowings, net(1)||$||522,706||$||442,670|
|Borrowings under repurchase agreement||245,526||227,440|
|Convertible senior notes, net||82,083||-|
|Management fee payable||750||750|
|Accrued expenses and other liabilities||2,697||3,819|
|Preferred stock $0.01 par value; 25,000,000 shares authorized, none issued or outstanding||-||-|
|Common stock $0.01 par value; 125,000,000 shares authorized, 18,169,424 shares issued and outstanding, and 18,122,387 shares issued and outstanding at June 30, 2017 and December 31, 2016, respectively||182||181|
|Additional paid-in capital||248,803||244,880|
|Accumulated other comprehensive loss||(131||)||-|
|Equity attributable to common stockholders||281,734||272,292|
|Total Liabilities and Equity||$||1,146,122||$||957,402|
|(1)||Mortgage loans includes $699,566 and $598,643 of loans transferred to securitization trusts at June 30, 2017 and December 31, 2016, respectively, that are variable interest entities (“VIEs”) that can only be used to settle obligations of the VIEs. Secured borrowings consist of notes issued by VIEs that can only be settled with the assets and cash flows of the VIEs. The creditors do not have recourse to the primary beneficiary (Great Ajax Corp).|
|(2)||Property held for sale, net, includes valuation allowances of $1,304 and $1,620 at June 30, 2017, and December 31, 2016, respectively.|
The following information was filed by Great Ajax Corp. (AJX) on Tuesday, August 1, 2017 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-Q Quarterly Report statement of earnings and operation as management may choose to highlight particular information in the press release.
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