Great Ajax Corp Q3 2024 Earnings Call Summary

Company Overview
Great Ajax Corp (ticker: NYSE:AJX) announced a strategic shift toward cash-flowing commercial mortgage-backed securities (CMBS) during its third-quarter 2024 earnings call, aiming for breakeven earnings by Q1 2025. CEO Michael Nierenberg emphasized the plan to divest residential assets and reinvest in commercial real estate debt, including a recent bid on $1 billion worth of loans.

Despite reporting a GAAP net loss of $8 million and a negative earnings distribution, Great Ajax maintained a 7.2% dividend yield. The company plans to transition into Rithm Property Trust while managing legacy assets.

Key Takeaways

• Great Ajax reported a GAAP net loss of $8 million and a negative earnings distribution of $5.4 million.
• The company maintained a dividend of $0.06 per share, with a yield of 7.2%.
• As of September 30, 2024, cash and equivalents totaled $84 million, with $30 million available for investment.
• Significant divestment: 91% of legacy residential mortgage loans sold since Q1.
• Rithm's Genesis business targets over $3 billion in loans this year, mainly in multifamily lending.

Company Outlook

• CEO Michael Nierenberg aims for breakeven earnings by Q1 2025.
• The rebranding to Rithm Property Trust is planned by the end of Q4 2024.
• The available capital of $20 million to $25 million is to be fully deployed by Q4.
• Efforts are underway to address $100 million in debt with a 10.25% coupon.

Bearish Highlights

• The company reported a net loss and negative earnings distribution in Q3.
• Breakeven expectations have been pushed to Q1 2025.

Bullish Highlights

• Focus on cash-flowing assets, with recent investments in multifamily, affordable housing, and office segments.
• AAA CMBS purchases have yielded low double-digit returns.
• Exploration of investments in data centers and student housing.

Misses

• The earnings call indicated that breakeven would not be achieved in the current quarter.

Q&A Highlights

• Nierenberg discussed the need for diversified lending strategies and potential collaboration between Genesis and Great Ajax.
• Consideration of alternative financing options, including debt and equity markets.
• Optimism for future earnings growth benefiting equity holders.

Conclusion

Great Ajax Corp, soon to be Rithm Property Trust, is navigating a strategic transition towards commercial real estate debt, positioning itself to capitalize on lending market opportunities despite current losses. The company is focused on achieving a stronger financial footing by early next year.

InvestingPro Insights

Great Ajax's strategic shift aligns with InvestingPro insights, suggesting expected sales growth due to the new focus on cash-flowing CMBS investments. The company's dividend consistency over the past ten years may reassure investors during this transition period. InvestingPro highlights additional tips for analyzing Great Ajax's evolving strategy and financial health.

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