Great Ajax Corp. Announces Results for the Quarter Ended December 31, 2016

Great Ajax Corp. Announces Results for the Quarter Ended December 31, 2016

Fourth Quarter Highlights

• Purchased $129.2 million of re-performing (“RPL”) and non-performing (“NPL”) loans with an aggregate unpaid principal balance (“UPB”) of $149.3 million to end the year with $870.6 million of mortgage loans with an aggregate UPB of $1,070.2 million.
• Portfolio interest income of $19.7 million; net interest income of $12.1 million.
• Net income attributable to common stockholders of $6.0 million.
• Earnings per share (“EPS”) of $0.33 per diluted share.
• Taxable income of $0.33 per diluted share.
• Book value per share of $15.06 at December 31, 2016.
• Raised $101.2 million, net, in secured borrowings.
• $35.7 million of cash and cash equivalents at December 31, 2016.

Great Ajax Corp. (NYSE:AJX), a Maryland corporation that is a real estate investment trust, today announces results of operations for the quarter ended December 31, 2016. We focus primarily on acquiring, investing in and managing a portfolio of RPL mortgage loans secured by single-family residences and commercial properties, and, to a lesser extent, NPL mortgage loans and direct investment in single-family and multi-family properties.

Consolidated net income for the quarter decreased primarily as a result of the increased impairments on our real estate held for sale (“REO”), discussed below, offset by an increase in our net interest income from our mortgage loan portfolio. Additionally, as previously disclosed, we recorded a one-time charge of $0.6 million related to the early call of our 2014 series secured notes.

During the fourth quarter of 2016, we made a strategic decision to list for sale the majority of our single family single unit REO that were previously under consideration to become rental property. Generally Accepted Accounting Principles (“GAAP”) require us to record REO held-for-sale at the lower of cost or net realizable value. Accordingly, we accelerate recognition of any estimated losses but continue to defer potential gains until the property is sold. As a result, we recorded an impairment of $1.3 million on 60 of our 149 held-for-sale REO properties. The carrying value of our entire held-for sale REO portfolio and its estimated liquidation proceeds is as follows ($ in thousands):

For loans that become REO, we believe that the earlier foreclosures out of any given loan pool typically are lower dollar value properties relative to the applicable metropolitan statistical area, with fewer or negative average dollars of equity. Conversely, we believe later-dated REO generally consists of better quality properties relative to the particular metropolitan statistical area of the property.

Over 60% of REO impairments relate to foreclosed properties that we acquired as NPLs with underlying properties located in Florida, Maryland, New Jersey and New York. Additionally, the impairments were largely related to lower relative property values within their particular metropolitan statistical areas,or properties for which the loan to value ratios had been in excess of 100%. We continue to see the majority of foreclosures occurring on loans that we acquired as NPLs during the second half of 2014. We collected $29.1 million on our mortgage loan and REO portfolios through payments, payoffs and sales of REO during the quarter and ended the fourth quarter with $35.7 million in cash and cash equivalents, a $12.4 million increase from the prior quarter.

Our investment strategy remains focused on acquiring RPLs and the percentage of RPLs relative to NPLs in our portfolio continues to increase. We continue to see significantly lower than expected re-default rates for purchased RPLs. As a result, the overall duration of the portfolio continues to extend, resulting in increased cash flow over the life of the loans and increased net asset value of the RPL portfolio as projected principal and interest payments increase, but lower yields and lower current period income as the cash flows occur over a longer time period. In addition to our continued focus on residential RPLs, we intend to increase our acquisitions of small balance commercial loans secured by multi-family residential and commercial mixed use retail/residential properties. We acquired $126.9 million and $2.0 million, respectively, of RPLs and NPLs during the quarter to end the year with $870.6 million of mortgage loans with aggregate UPB of $1,070.2 million.

Mortgage loans purchased during the fourth quarter and held as of quarter-end were on our consolidated balance sheet for a weighted average of 43 days of the quarter. We closed on $57.9 million UPB of RPLs for $48.1 million on December 23, 2016. As a result of the acquisition, we incurred due diligence expense related to the acquisition, but had minimal corresponding income in 2016.

On October 3, 2016, we entered into separate At-the-Market Issuance Sales Agreements to sell, through our agents, shares of our common stock with an aggregate offering price of up to $50.0 million. To date, we have not issued any shares pursuant to the agreements. Additional information about the At-the-Market Issuance Sales Agreements is available in our Current Report on Form 8-K filed with the Securities and Exchange Commission on October 3, 2016.

On October 25, 2016, we completed our eighth securitization, Ajax Mortgage Loan Trust 2016-C. An aggregate of $102.6 million of senior securities and $15.8 million of subordinated securities were issued in a private offering with respect to $157.8 million UPB of mortgage loans, of which $12.9 million were small balance commercial mortgage loans. Nearly all the loans in the 2014-A and 2014-B securitizations that were called were re-securitized in 2016-C at a lower cost of funds and higher advance rate. Based on UPB approximately 82% of these mortgage loans were RPLs and approximately 18% were NPLs. Net proceeds from the sale of the senior securities provided leverage of approximately 3.9 times the related equity.

The following table provides an overview of our portfolio at December 31, 2016 ($ in thousands):

Subsequent Events

During January and February 2017, we acquired 21 RPLs with an aggregate UPB of $2.9 million in three transactions. The loans were acquired at 93.6% of UPB and the estimated market value of the underlying collateral is $5.5 million. The purchase price equaled 48.8% of the estimated market value of the underlying collateral.

Additionally, we have agreed to acquire, subject to due diligence, 18 RPLs with aggregate UPB of $3.0 million in three transactions from three different sellers. The purchase price equals 85.0% of UPB and 57.9% of the estimated market value of the underlying collateral of $4.4 million. 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 acquisitions or that the terms will not change.

On February 16, 2017, our Board of Directors declared a dividend of $0.25 per share, which will be payable on March 31, 2017, to stockholders of record as of March 15, 2017.

On February 16, 2017, our Board of Directors authorized an increase in the annual compensation of our independent directors from $50,000 to $75,000, payable half in shares of common stock of the Company and half in cash.

On February 22, 2017, we issued 20,352 shares of our common stock to our Manager in payment of the stock-based component of the management fee due for the fourth quarter of 2016 in a private transaction. The management fee expense associated with these shares was recorded as an expense in the fourth quarter of 2016.

On February 22, 2017, we issued each of our independent directors 415 shares of our common stock in payment of half of their quarterly director fees for the fourth quarter of 2016.

Conference Call

Great Ajax will host a conference call at 5:00 p.m. EST, Wednesday, March 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.

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, 2015 filed with the SEC on March 29, 2016. 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.

Great Ajax Corp.
Lawrence Mendelsohn
Chief Executive Officer
or
Mary Doyle, 503-444-4224
Chief Financial Officer
Mary.Doyle@aspencapital.com

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