Great Ajax Corp. Announces Results for the Quarter Ended September 30, 2017

NEW YORK--(BUSINESS WIRE)--Great Ajax Corp. (NYSE: AJX), a Maryland corporation that is a real estate investment trust, today announces results of operations for the quarter ended September 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 RPLs, we have increased our originations of SBCs secured by multi-family residential and commercial mixed use retail/residential properties.

Consolidated net income increased $0.6 million for the quarter ended September 30, 2017 compared to the quarter ended June 30, 2017, primarily due to recognizing a full quarter of net interest income on acquisitions closed in the second quarter of 2017. This increased interest income was partially offset by higher interest expense resulting from the issuance of our convertible senior notes and impairments on our real estate held for sale (“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 $44.3 million on our mortgage loan and REO portfolios through payments, payoffs and sales of REO during the quarter, and ended the third quarter with $43.1 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 August 18, 2017, we completed the sale of an additional $20.5 million aggregate principal amount of our 7.25% convertible senior notes due 2024, issued at a premium to par, which combined with the notes in April form a single series of securities. We are using the net proceeds of the offering to acquire mortgage loan pools. We expect to securitize a majority of these loans in the fourth quarter of 2017 and first quarter of 2018, and intend to use the resulting net proceeds to acquire additional loan pools and generate additional interest income to offset the interest expense on the convertible notes.

We acquired $32.7 million UPB of RPLs and originated $3.0 million UPB of SBC loans during the quarter to end the period with $1,053.3 million of mortgage loans with an aggregate UPB of $1,257.2 million. Mortgage loans purchased during the third quarter and held as of quarter-end were on our consolidated balance sheet for a weighted average of 59 days during the quarter.

Additionally during the quarter, the Company, through a joint venture with an institutional investor, acquired a pool of 436 mortgage loans for $101.2 million. The purchase price equaled 92.7% of UPB and 59.4% of the underlying property value of $170.4 million. The loans were acquired into a Delaware trust, in which the Company has retained a 5.01% interest.

The following table provides an overview of our portfolio, exclusive of assets held in joint ventures, at September 30, 2017 ($ in thousands):

Subsequent Events

Since September 30, 2017, we purchased 194 RPLs with aggregate UPB of $41.4 million in three transactions from three different sellers. The loans were acquired at 89.8% of UPB and the estimated market value of the underlying collateral is $58.4 million. The purchase price equaled 63.6% of the estimated market value of the underlying collateral. We also acquired two SBC loans with UPB of $2.0 million. Our investment equaled 60.2% of the underlying collateral value of $2.9 million. The majority of the costs associated with these acquisitions were accrued as of September 30, 2017.

Additionally, we have agreed to acquire, subject to due diligence, 35 RPLs with aggregate UPB of $8.9 million in five transactions from four different sellers. The preliminary purchase price equals 82.1% of UPB and 52.3% of the estimated market value of the underlying collateral of $14.0 million. We also agreed to acquire three SBC loans with UPB of $1.1 million. Our investment will equal 49.3% of the underlying collateral value of $2.2 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.

With an institutional partner, we have jointly agreed to purchase, subject to completion of diligence, two RPL pools from two different sellers. The combined acquisitions include 855 RPLs with aggregate UPB of $160.2 million and a preliminary purchase price of $145.9 million. The preliminary purchase price will equal 91.1% of UBP and 59.0% of the estimated market value of the underlying collateral of $247.4 million. Upon completion of this transaction we expect to retain a 50% ownership interest in these loans. We have not entered into a definitive agreement with respect to these loans, and 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 acquisition.

On November 6, 2017, our Board of Directors declared a dividend of $0.30 per share, which will be payable on December 1, 2017, to stockholders of record as of November 17, 2017.

Conference Call

Great Ajax will host a conference call at 5:00 p.m. EST, Tuesday, November 7, 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.

Forward-Looking Statements

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.