ajx-20201105
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): November 5, 2020

GREAT AJAX CORP.
(Exact name of registrant as specified in charter)

Maryland
001-36844
47-1271842
(State or other jurisdiction of incorporation)
(Commission File Number)
(IRS Employer Identification No.)

13190 SW 68th Parkway
Suite 201
Tigard, OR 97223
(Address of principal executive offices)

Registrant’s telephone number, including area code:
503-505-5670

9400 SW Beaverton-Hillsdale Hwy
Suite 131
Beaverton, OR 97005
(Former Address)

Securities registered pursuant to Section 12(b) of the Act:

Title of each classTrading SymbolsName of each exchange on which registered
Common stock, par value $0.01 per shareAJXNew York Stock Exchange
7.25% Convertible Senior Notes due 2024AJXANew York Stock Exchange
 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):




Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Item 2.02.Results of Operations and Financial Condition

On November 5, 2020, Great Ajax Corp., a Maryland corporation (the “Company”), issued a press release regarding its financial results for the third quarter ended September 30, 2020 (the “Press Release”). A copy of the Press Release is attached hereto as Exhibit 99.1 and is available on the Company’s website.

The information provided in Item 2.02 of this report, including Exhibit 99.1, shall be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

Item 7.01.
Regulation FD Disclosure

On November 5, 2020, the Company will hold an investor conference call and webcast to discuss financial results for the third quarter ended September 30, 2020, including the Press Release and other matters relating to the Company.

The Company has also made available on its website presentation materials containing certain additional information relating to the Company and its financial results for the third quarter ended September 30, 2020 (the “Presentation Materials”). The Presentation Materials are furnished herewith as Exhibit 99.2, and are incorporated by reference in this Item 7.01. All information in Exhibit 99.2 is presented as of the particular date or dates referenced therein, and the Company does not undertake any obligation to, and disclaims any duty to, update any of the information provided.

The information provided in Item 7.01 of this report, including Exhibit 99.2, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall the information or Exhibit 99.2 be deemed incorporated by reference in any filings under the Securities Act of 1933, as amended.

Item 8.01.Other Events

On November 5, 2020, the Company announced a change of its corporate headquarters to 13190 SW 68th Parkway Suite 201, Tigard, OR 97223. The Company's telephone number remains the same, 503-505-5670.

Item 9.01.Financial Statements and Exhibits




Exhibit
Description
99.1Press Release dated November 5, 2020
99.2November 2020 Presentation Materials
104Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document






EXHIBIT INDEX

Exhibit
Description
99.1
99.2
104Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document





SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

GREAT AJAX CORP.
By:/s/ Mary Doyle
Name:Mary Doyle
Title:Chief Financial Officer

Dated: November 5, 2020


Document

Exhibit 99.1 
GREAT AJAX CORP. ANNOUNCES RESULTS FOR THE QUARTER
ENDED SEPTEMBER 30, 2020
 
Third Quarter Highlights

Formed joint ventures that acquired $876.1 million in unpaid principal balance ("UPB") of mortgage loans with collateral values of $1.4 billion and retained $83.4 million of varying classes of related securities issued by the joint ventures to end the quarter with $370.9 million of investments in debt securities and beneficial interests
Purchased 244 re-performing mortgage loans ("RPLs") for $41.2 million, with UPB of $46.3 million and collateral values of $65.3 million, one non-performing mortgage loan ("NPL") for $0.5 million, with UPB of $0.5 million and an underlying collateral value of $0.7 million, and originated two small-balance commercial loans ("SBCs") with UPB of $1.9 million and underlying collateral values of $3.9 million, to end the quarter with $1.1 billion in net mortgage loans
Interest income of $24.0 million; net interest income of $16.2 million including a reversal of provision for credit losses of $4.0 million as a result of better than expected loan performance and the related impact on future repayment rates
Net income attributable to common stockholders of $5.3 million
Basic earnings per common share (“EPS”) of $0.23
Book value per common share of $15.35 at September 30, 2020
Taxable income of $0.11 per common share
Collected total cash of $56.4 million from loan payments, sales of real estate owned ("REO") and investments in debt securities and beneficial interests
Held $135.2 million of cash and cash equivalents at September 30, 2020; average daily cash balance for the quarter was $128.6 million excluding $51.0 million of funds on deposit in a non-interest bearing account for a transaction closed September 25, 2020. Including the $51.0 million on deposit, average daily cash was $148.0 million
At September 30, 2020, approximately 74.5% of portfolio based on current UPB made at least 12 out of the last 12 payments

New York, NY—November 5, 2020 —Great Ajax Corp. (NYSE: AJX), a Maryland corporation that is a real estate investment trust, today announces its results of operations for the quarter ended September 30, 2020. 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, NPLs. In addition to our continued focus on residential RPLs, we also originate and acquire SBCs secured by multi-family retail/residential and mixed use properties.
 



Selected Financial Results (Unaudited)
($ in thousands except per share amounts)
For the three months ended
September 30, 2020June 30, 2020March 31, 2020December 31, 2019September 30, 2019
Loan interest income(1,2)
$18,603 $18,732 $22,121 $22,656 $23,869 
Earnings from debt securities and beneficial interests(2,3)
$5,234 $5,028 $5,006 $4,203 $3,322 
Other interest income/(loss)$113 $(55)$159 $254 $532 
Interest expense$(11,727)$(13,058)$(13,070)$(13,884)$(14,317)
Net interest income $12,223 $10,647 $14,216 $13,229 $13,406 
Provision for credit benefit/(losses)$4,007 $4,328 $(5,109)$(561)$(3)
Other income, loss on sale of mortgage loans and (loss)/income from investments in affiliates$512 $1,352 $(1,070)$1,048 $1,913 
Total revenue, net(1,4)
$16,742 $16,327 $8,037 $13,716 $15,316 
Consolidated net income(1)
$8,892 $8,818 $1,496 $7,119 $8,223 
Net income per basic share$0.23 $0.27 $0.02 $0.31 $0.39 
Average equity(1,5)
$503,967 $469,831 $356,539 $368,814 $348,521 
Average total assets(1)
$1,642,090 $1,597,678 $1,559,821 $1,556,054 $1,523,956 
Average daily cash balance(6,7)
$128,621 $125,739 $58,586 $66,072 $55,881 
Average carrying value of RPLs(1)
$1,055,186 $1,048,704 $1,080,453 $1,098,477 $1,121,100 
Average carrying value of NPLs(1)
$35,665 $33,683 $32,767 $31,973 $31,447 
Average carrying value of SBC loans
$6,195 $5,413 $22,116 $25,002 $27,558 
Average carrying value of debt securities and beneficial interests$331,009 $333,359 $298,304 $245,701 $198,320 
Average asset level debt balance(1,8)
$1,038,406 $1,041,673 $1,067,983 $1,068,164 $1,057,536 
____________________________________________________________
(1)Reflects the impact of consolidating the assets, liabilities and non-controlling interests of Ajax Mortgage Loan Trust 2017-D ("2017-D") and Ajax Mortgage Loan Trust 2018-C ("2018-C"), which are 50% and 37%, respectively, owned by third-party institutional investors.
(2)All quarters for loan interest income and interest income on investment in debt securities and beneficial interests have been updated to reflect gross interest income before provision for credit benefit/(losses).
(3)Interest income on investment in debt securities and beneficial interests issued by our joint ventures is net of servicing fees.
(4)Total revenue includes net interest income, income from equity method investments and other income.
(5)Average equity includes the effect of an aggregate of $115.1 million of preferred stock issued during the three months ended September 30, 2020 and June 30, 2020.
(6)Average daily cash balance includes cash and cash equivalents, and excludes cash held in trust.
(7)For the three months ended September 30, 2020, the average daily cash balance excludes $51.0 million of funds on deposit in a non-interest bearing account for a transaction that closed on September 25, 2020. Including the $51.0 million on deposit, average daily cash was $148.0 million.
(8)All quarters have been updated to reflect average asset level debt balance from total average debt balance.

Our consolidated net income attributable to common stockholders decreased $1.0 million for the quarter ended September 30, 2020 compared to the quarter ended June 30, 2020. Our gross interest income increased $0.2 million, and our interest expense declined $1.3 million. Our book value increased to $15.35 per common share from $15.20 at June 30, 2020 primarily from the effects of a $4.3 million mark to market increase in the fair value of our debt securities as prices of mortgage backed securities have continued to increase from first quarter lows.

The decrease in our earnings compared to the quarter ended June 30, 2020 was primarily driven by an increase in the amount of our earnings allocated to non-controlling interests, a decrease in earnings from our equity method investments, and an increase in the amortization expense for the put option on our outstanding warrants. The decrease in earnings from our
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equity method investments was primarily due to the flow through impact of the decline in share price on shares of our stock held by our manager and our servicer. Additionally, our $83.4 million of investments in joint venture debt securities and beneficial interests which were made in the third quarter were on our consolidated balance sheet for a weighted average of only five days during the quarter and therefore provided minimal benefit to our earnings for the third quarter.

Our net interest income prior to the recovery of the provision for credit losses increased $1.6 million over the prior quarter primarily driven by a decrease in our overall cost of funds by approximately 49 basis points during the third quarter and increases in the average balances of our mortgage loan and securities portfolios. We expect our cost of funds to continue to decrease materially in the current interest rate and credit environment.

Our net interest income after the recovery of the provision for credit losses increased $1.3 million over the prior quarter. We had a recovery of $4.0 million of provision for credit losses on our loan and securities portfolios on a consolidated basis, and $3.0 million after allocating $1.0 million to non-controlling interests. This compares to a recovery in the quarter ended June 30, 2020 of $4.3 million, and $4.4 million after $0.1 million of losses to non-controlling interests. The reversal of the provision for credit losses was primarily triggered by better than expected loan performance and its related impact on future cash flows as the impact of the COVID-19 pandemic on cash flow extension has not been as material thus far as we anticipated earlier in the year.

We acquired 244 RPLs for $41.2 million with UPB of $46.3 million and underlying collateral values of $65.3 million, one NPL for $0.5 million with UPB of $0.5 million and underlying collateral value of $0.7 million, and originated two SBC loans with UPB of $1.9 million and underlying collateral values of $3.9 million. These loans were acquired and included on our consolidated balance sheet for a weighted average of 67 days of the quarter. We ended the quarter with $1.1 billion of mortgage loans with an aggregate UPB of $1.2 billion.

We recorded $0.2 million in impairments on our REO held-for-sale portfolio in real estate operating expense for the quarter ended September 30, 2020 compared to $0.1 million for the quarter ended June 30, 2020. We continue to liquidate our REO properties held-for-sale at a faster rate than we acquire properties, with seven properties sold in the third quarter while five were added to REO held-for-sale through foreclosures. Our inventory of REO held-for-sale declined by 52% year-to-date through September 30, 2020 as more REO properties were acquired by third parties at foreclosure and foreclosure sales were delayed due to the continuing impact of the COVID-19 pandemic. We expect these trends to continue into the fourth quarter of 2020.

During the quarter ended September 30, 2020, we repurchased and retired $2.5 million of our senior convertible notes which carry a coupon rate of 7.25% for a total purchase price of $2.3 million.

We use securities and loan repurchase agreements, among other means, to fund our investment activities. Our securities repurchase agreements are subject to margin calls based on the fair value of the security. Due to the turmoil in the financial markets resulting from the COVID-19 outbreak, we received an unusually high volume of margin calls from our financing counterparties during the first quarter of 2020, of which the majority was recovered during the second quarter of 2020. During the quarter ended September 30, 2020, we further recovered cash collateral on a net basis in the amount of $6.6 million from lenders and had $1.0 million of cash collateral on deposit with financing counterparties at September 30, 2020. At September 30, 2020, we held $284.7 million of debt securities in our joint ventures. Of the total debt securities, $265.1 million were pledged as collateral on our repurchase borrowing lines and $19.6 million of debt securities were unencumbered at September 30, 2020. Additionally, we retained $227.2 million in securities from our secured borrowings which are not presented in our consolidated balance sheet at September 30, 2020. Of the total retained securities, $98.1 million were pledged as collateral on our repurchase lines and $129.1 million were unencumbered at September 30, 2020. Our investments in beneficial interests in the amount of $86.2 million at September 30, 2020 were unencumbered.

We collected $56.4 million of cash during the quarter as a result of loan payments, loan payoffs, sales of REO and cash collections on our securities portfolio to end the third quarter with $135.2 million in cash and cash equivalents. $44.0 million of our cash collections were derived from our mortgage loan and REO portfolios as a result of loan payments, loan payoffs and sales of REO during the quarter and $12.4 million were derived from interest and principal payments on investments in debt securities and beneficial interests. Of the $44.0 million of cash collections from mortgage loans and REO, we received $21.4 million from loans paying the full amount of principal, past due interest and charges. We also sold $38.9 million of senior debt securities previously issued by our joint ventures and held as investments and retired the corresponding repurchase agreements through which these were financed.

During the quarter we completed our fourth rated securitization, Ajax Mortgage Loan Trust 2020-B, which closed on August 6, 2020 with an aggregate of $97.2 million of AAA rated senior securities and $17.3 million of A rated securities issued
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with respect to $156.5 million of mortgage loans, all of which were RPLs. The AAA through A rated senior securities have a weighted average coupon of 1.874% and represent 73.2% of UPB of the underlying mortgage loans.

During the quarter ended September 30, 2020 we co-invested with two third-party institutional investors to form two joint ventures, and retained an aggregate $83.4 million of varying classes of related securities and beneficial interests, to end the quarter with $370.9 million of combined investments in securities and beneficial interests. We acquired 10.01% of each class of the securities of Ajax Mortgage Loan Trust 2020-C ("2020-C") for a net investment of $41.5 million and 10.01% of each class of Ajax Mortgage Loan Trust 2020-D ("2020-D") for a net investment of $41.9 million, which were on our Consolidated balance sheet for an average of only five days during the quarter and provided minimal benefit to our earnings.

2020-C acquired 2,564 RPLs and NPLs with UPB of $435.1 million and an aggregate property value of $693.0 million. The senior securities represent 78% of the UPB of the underlying mortgage loans and carry a 2.25% interest rate. Based on the structure of the transaction we do not consolidate 2020-C under Generally Accepted Accounting Principles ("GAAP").

2020-D acquired 2,591 RPLs and NPLs with UPB of $441.0 million and an aggregate property value of $690.4 million. The senior securities represent 75% of the UPB of the underlying mortgage loans and carry a 2.25% interest rate. Based on the structure of the transaction we do not consolidate 2020-D under GAAP.

The following table provides an overview of our portfolio at September 30, 2020 ($ in thousands):

No. of loans6,076 
Weighted average LTV(5)
74.6 %
Total UPB$1,198,286 Weighted average remaining term (months)299 
Interest-bearing balance$1,120,349 No. of first liens6,019 
Deferred balance(1)
$77,937 No. of second liens57 
Market value of collateral(2)
$1,898,221 No. of rental properties
Price/total UPB(3)
82.5 %Capital invested in rental properties$710 
Price/market value of collateral55.4 %No. of REO held-for-sale34 
Re-performing loans96.9 %
Market value of REO held-for-sale(6)
$6,674 
Non-performing loans2.6 %
Carrying value of debt securities and beneficial interests in trusts
$376,377 
SBC commercial loans(4)
0.5 %
Loans with 12 for 12 payments as an approximate percentage of UPB(7)
74.5 %
Weighted average coupon4.5 %
Loans with 24 for 24 payments as an approximate percentage of UPB(8)
67.8 %
____________________________________________________________
(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)As of date of acquisition.
(3)Our loan portfolio consists of fixed rate (52.8% of UPB), ARM (8.7% of UPB) and Hybrid ARM (38.5% of UPB) mortgage loans.
(4)SBC loans includes both purchased and originated loans.
(5)UPB as of September 30, 2020 divided by market value of collateral and weighted by the UPB of the loan.
(6)Market value of other REO is the estimated expected gross proceeds from the sale of the REO less estimated costs to sell, including repayment of servicer advances.
(7)Loans that have made at least 12 of the last 12 payments, or for which the full dollar amount to cover at least 12 payments has been made in the last 12 months.
(8)Loans that have made at least 24 of the last 24 payments, or for which the full dollar amount to cover at least 24 payments has been made in the last 24 months.

Subsequent Events

Since quarter end we have acquired seven residential RPLs and nine residential NPLs with aggregate UPB of $3.3 million and $1.4 million, respectively, in two transactions and one transaction, respectively, from two sellers and one seller, respectively. The purchase price of the residential RPLs and NPLs equals 81.9% and 83.1%, respectively, of UPB and 66.1% and 70.0%, respectively, of the estimated market value of the underlying collateral of $4.1 million and $1.7 million, respectively.

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We have also agreed to acquire, subject to due diligence, 28 residential RPLs and 71 NPLs with aggregate UPB of $3.1 million and $16.5 million, respectively, in eight transactions and two transactions, respectively, from eight sellers and two sellers, respectively. The purchase price of the residential RPLs equals 94.3% of UPB and 45.6% of the estimated market value of the underlying collateral of $6.4 million. The purchase price of the NPLs equals 87.1% of UPB and 45.8% of the estimated market value of the underlying collateral of $31.4 million. We also agreed to acquire seven SBC loans with UPB of $9.9 million. The purchase price of the SBC loans equals 102.0% of UPB and 49.6% of the estimated market value of the underlying collateral of $20.3 million.

On November 5, 2020, our board of directors declared a cash dividend of $0.17 per share, to be paid on November 30, 2020 to stockholders of record as of November 16, 2020.

Conference Call

Great Ajax Corp. will host a conference call at 5:00 p.m. EST on Thursday, November 5, 2020 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.greatajax.com. An archive of the Webcast will be available for 90 days.
 
About Great Ajax Corp.

Great Ajax Corp. is a Maryland corporation that is a real estate investment trust, that focuses primarily on acquiring, investing in and managing RPLs secured by single-family residences and commercial properties and, to a lesser extent, NPLs. We also originate and acquire loans secured by multi-family residential and smaller commercial mixed use retail/residential properties and acquire multi-family retail/residential and mixed use and commercial properties. 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, risks relating to the impact of the COVID-19 outbreak and the risk factors and other matters set forth in our Annual Report on Form 10-K for the period ended December 31, 2019 filed with the Securities and Exchange Commission (the “SEC”) on March 4, 2020 and, when filed with the SEC, our Quarterly Report on Form 10-Q for the period ended September 30, 2020. The COVID-19 outbreak has caused significant volatility and disruption in the financial markets both globally and in the United States. If the COVID-19 outbreak continues to spread or the response to contain it is unsuccessful, Great Ajax could experience material adverse effects on its business, financial condition, liquidity and results of operations. 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.

 
CONTACT:Lawrence Mendelsohn
 Chief Executive Officer
 Or
 Mary Doyle
 Chief Financial Officer
 Mary.Doyle@aspencapital.com
 503-444-4224

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GREAT AJAX CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands except per share amounts)  
 
Three months ended
September 30, 2020June 30, 2020March 31, 2020December 31, 2019
 (unaudited)(unaudited)(unaudited)(unaudited)
INCOME:
Interest income$23,950 $23,705 $27,286 $27,113 
Interest expense(11,727)(13,058)(13,070)(13,884)
Net interest income12,223 10,647 14,216 13,229 
Provision for credit benefit/(losses)4,007 4,328 (5,109)(561)
Net interest income after provision for credit benefit/(losses)16,230 14,975 9,107 12,668 
(Loss)/income from investments in affiliates(25)672 (1,112)31 
Loss on sale of mortgage loans(1)
— — (705)— 
Other income537 680 747 1,017 
Total revenue, net16,742 16,327 8,037 13,716 
EXPENSE:
Related party expense – loan servicing fees1,848 1,936 2,014 2,156 
Related party expense – management fee2,264 2,143 1,799 1,801 
Loan transaction expense(178)65 (103)16 
Professional fees576 732 805 608 
Real estate operating expenses173 188 912 796 
Other expense2,930 2,325 1,025 985 
Total expense7,613 7,389 6,452 6,362 
Loss on debt extinguishment253 — 408 247 
Income before provision for income taxes8,876 8,938 1,177 7,107 
Provision for taxes (benefit)(16)120 (319)(12)
Consolidated net income8,892 8,818 1,496 7,119 
Less: consolidated net income attributable to the non-controlling interest1,662 735 1,096 462 
Consolidated net income attributable to Company7,230 8,083 400 6,657 
Less: dividends on preferred stock1,950 1,841 — — 
Consolidated net income attributable to common stockholders$5,280 $6,242 $400 $6,657 
Basic earnings per common share$0.23 $0.27 $0.02 $0.31 
Diluted earnings per common share$0.23 $0.27 $0.02 $0.31 
Weighted average shares – basic22,844,192 22,808,943 22,070,354 21,083,719 
Weighted average shares – diluted22,989,616 22,929,849 22,189,984 29,487,273 
____________________________________________________________
(1)We sold no mortgage loans during the three months ended September 30, 2020 and June 30, 2020. During the three months ended March 31, 2020, we sold 26 SBC mortgage loans with a carrying value of $26.1 million and UPB of $26.2 million for a loss of $0.7 million. During the three months ended December 31, 2019, we sold no mortgage loans.
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GREAT AJAX CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands except per share amounts)
 
September 30, 2020December 31, 2019
(unaudited)
ASSETS
Cash and cash equivalents$135,190 $64,343 
Cash held in trust189 20 
Mortgage loans, net(1,2)
1,102,360 1,151,469 
Property held-for-sale, net(3)
6,484 13,537 
Rental property, net724 1,534 
Investments at fair value(4)
284,655 231,685 
Investments in beneficial interests(5)
86,241 57,954 
Receivable from servicer16,438 17,013 
Investments in affiliates28,730 30,441 
Prepaid expenses and other assets5,963 8,845 
Total assets$1,666,974 $1,576,841 
LIABILITIES AND EQUITY 
Liabilities: 
Secured borrowings, net(1,2,6)
$614,214 $652,747 
Borrowings under repurchase transactions415,419 414,114 
Convertible senior notes, net(6)
109,710 118,784 
Management fee payable2,261 1,634 
Accrued expenses and other liabilities19,024 5,478 
Total liabilities1,160,628 1,192,757 
Equity: 
Preferred stock, $0.01 par value, 25,000,000 shares authorized
Series A 7.25% Fixed-to-Floating Rate Cumulative Redeemable, $25.00 liquidation preference per share, 2,307,400 shares issued and outstanding at September 30, 2020 and no shares issued or outstanding at December 31, 2019
51,100 — 
Series B 5.00% Fixed-to-Floating Rate Cumulative Redeemable, $25.00 liquidation preference per share, 2,892,600 shares issued and outstanding at September 30, 2020 and no shares issued and outstanding at December 31, 2019
64,044 — 
Common stock $0.01 par value; 125,000,000 shares authorized, 23,034,443 shares issued and outstanding at September 30, 2020 and 22,142,143 shares issued and outstanding at December 31, 2019
231 222 
Additional paid-in capital317,295 309,395 
Treasury stock(634)(458)
Retained earnings46,441 49,446 
Accumulated other comprehensive gain401 1,277 
Equity attributable to stockholders478,878 359,882 
Non-controlling interests(7)
27,468 24,202 
Total equity506,346 384,084 
Total liabilities and equity$1,666,974 $1,576,841 
____________________________________________________________
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(1)Mortgage loans, net include $862.8 million and $908.6 million of loans at September 30, 2020 and December 31, 2019, respectively, transferred to securitization trusts that are variable interest entities (“VIEs”); these loans 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.). Mortgage loans, net include $15.2 million and $2.0 million of allowance for loan credit losses at September 30, 2020 and December 31, 2019, respectively.
(2)As of September 30, 2020, balances for Mortgage loans, net includes $309.2 million and Secured borrowings, net of deferred costs includes $257.0 million from the 50% and 63% owned joint ventures. As of December 31, 2019, balances for Mortgage loans, net includes $341.8 million and Secured borrowings, net of deferred costs includes $284.8 million from a 50% and 63% owned joint ventures, all of which we consolidate under GAAP.
(3)Property held-for-sale, net, includes valuation allowances of $1.4 million and $1.8 million at September 30, 2020 and December 31, 2019, respectively.
(4)As of September 30, 2020 and December 31, 2019 Investments at fair value include amortized cost basis of $284.3 million and $230.4 million, respectively, and unrealized gains of $0.4 million and $1.3 million, respectively.
(5)Investments in beneficial interests includes allowance for credit losses of $5.9 million at September 30, 2020. No allowance for credit losses were recorded as of December 31, 2019.
(6)Secured borrowings and convertible senior notes are presented net of deferred issuance costs.
(7)Non-controlling interests includes $25.8 million at September 30, 2020, from 50% and 63% owned joint ventures. Non-controlling interests includes $22.4 million at December 31, 2019, from a 50% and 63% owned joint ventures, all of which we consolidate under GAAP.
8
exhibit992-20201105
Third Quarter Investor Presentation November 5, 2020


 
Safe Harbor Disclosure  We make forward-looking statements in this presentation that are subject to risks and uncertainties. These forward-looking statements include information about possible or assumed future results of our business, financial condition, liquidity, results of operations, cash flow and plans and objectives. When we use the words “believe,” “expect,” “anticipate,” “estimate,” “plan,” “continue,” “intend,” “should,” “may” or similar expressions, we intend to identify forward-looking statements.  Statements regarding the following subjects, among others, may be forward-looking: market trends in our industry, interest rates, real estate values, the debt financing markets or the general economy or the demand for and availability of residential and small-balance commercial real estate loans; our business and investment strategy; our projected operating results; actions and initiatives of the U.S. government and changes to U.S. government policies and the execution and impact of these actions, initiatives and policies; the state of the U.S. economy generally or in specific geographic regions; economic trends and economic recoveries; our ability to obtain and maintain financing arrangements; changes in the value of our mortgage portfolio; changes to our portfolio of properties; impact of and changes in governmental regulations, tax law and rates, accounting guidance and similar matters; our ability to satisfy the real estate investment trust qualification requirements for U.S. federal income tax purposes; availability of qualified personnel; estimates relating to our ability to make distributions to our stockholders in the future; general volatility of the capital markets and the market price of our shares of common stock; and the degree and nature of our competition.  The forward-looking statements included in this presentation are based on our current beliefs, assumptions and expectations of our future performance. Forward-looking statements are not predictions of future events. Our beliefs, assumptions and expectations can change as a result of many possible events or factors, not all of which are currently known to us or reasonably expected to occur at this time. If a change in our beliefs, assumptions or expectations occurs, our business, financial condition, liquidity and results of operations may vary materially from the forward-looking statements included in this presentation. Forward-looking statements are subject to risks and uncertainties, including, among other things, those resulting from the pandemic caused by the global novel coronavirus outbreak and those described under Item 1A of our Quarterly Report on Form 10-Q for the quarter ended September 30, 2020, which can be accessed through the link to our Securities and Exchange Commission ("SEC") filings on our website (www.greatajax.com) or at the SEC's website (www.sec.gov). Other risks, uncertainties and factors that could cause actual results to differ materially from the forward- looking statements included in this presentation may be described from time to time in reports we file with the SEC. Any forward-looking statement speaks only as of the date on which it is made. New risks and uncertainties arise over time, and it is not possible for us to predict those events or how they may affect us. Except as required by law, we are not obligated to, and do not intend to, update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Unless stated otherwise, financial information included in this presentation is as of September 30, 2020. 2


 
Business Overview  Leverage longstanding relationships to acquire mortgage loans through privately negotiated transactions from a diverse group of customers and in joint venture investments with institutional investors – Acquisitions made in 314 transactions since inception. Twelve transactions closed in Q3 2020  Use our manager’s proprietary analytics to price each mortgage pool on an asset-by-asset basis – We own 19.8% of our manager – Adjust individual loan bid price to accumulate clusters of loans in attractive demographic metropolitan areas  Our affiliated servicer services the loans asset-by-asset and borrower-by-borrower – We own 8% and hold warrants to purchase up to an additional 12% of our affiliated servicer – Analytics and processes of our manager and servicer enable us to broaden our reach through joint ventures with third-party institutional investors  We use modest mark to market leverage to fund our investments in debt securities and primarily non mark to market leverage to fund our mortgage portfolio  We own a 23% equity interest in Gaea Real Estate Corp, an equity REIT that invests in multifamily and mixed use properties with a focus on property appreciation and triple net lease pet clinics. 3


 
Highlights – Quarter Ended September 30, 2020  Formed joint ventures that acquired $876.1 million in unpaid principal balance ("UPB") of mortgage loans with collateral values of $1.4 billion and retained $83.4 million of varying classes of related securities issued by the joint ventures to end the quarter with $370.9 million of investments in debt securities and beneficial interests  Purchased 244 re-performing mortgage loans ("RPLs") for $41.2 million, with UPB of $46.3 million and collateral values of $65.3 million, one non-performing mortgage loan ("NPL") for $0.5 million, with UPB of $0.5 million and underlying collateral value of $0.7 million, and originated two small-balance commercial loans ("SBCs") with UPB of $1.9 million and underlying collateral values of $3.9 million, to end the quarter with $1.1 billion in net mortgage loans  Interest income of $24.0 million; net interest income of $16.2 million including a reversal of provision for credit losses of $4.0 million as a result of better than expected loan performance and the related impact on future repayment rates  Net income attributable to common stockholders of $5.3 million  Basic earnings per common share (“EPS”) of $0.23  Book value per common share of $15.35 at September 30, 2020  Taxable income of $0.11 per common share  Collected total cash of $56.4 million from loan payments, sales of real estate owned ("REO") and investments in debt securities and beneficial interests  Held $135.2 million of cash and cash equivalents at September 30, 2020; average daily cash balance for the quarter was $128.6 million excluding $51.0 million of funds on deposit in a non-interest bearing account for a transaction closed September 25, 2020. Including the $51.0 million on deposit, average daily cash was $148.0 million  At September 30, 2020, approximately 74.5% of our portfolio based on current UPB made at least 12 out of the last 12 payments 4


 
Portfolio Overview – as of September 30, 2020 1 Unpaid Principal Balance Property Value 0.4% 2.7% 3% RPL RPL NPL NPL REO 96.8% 97% $1,198.2 MM $1,905.0 MM RPL: $1,161.4 MM RPL: $1,844.7 MM NPL: $ 36.8 MM NPL: $ 52.9 MM REO & Rental2: $ 7.4 MM 1 Includes $327.9 million UPB in RPLs included in joint ventures with third-party institutional investors that are required to be consolidated for GAAP 2 Real estate owned (“REO”) and rental property value is presented at estimated property fair value less expected liquidation costs 5


 
Portfolio Growth  RPL UPB includes $5.8 million of SBC loans, which are performing loans. Includes $327.9 million UPB in RPLs included in joint ventures with third-party institutional investors that are required to be consolidated for GAAP  RPL status stays constant based on initial purchase status 6


 
Portfolio Growth  NPL status stays constant based on initial purchase status 7


 
Portfolio Concentrated in Attractive Markets  Clusters of loans in attractive, densely populated markets  Stable liquidity and home prices  Over 80% of the portfolio in our target markets Portland New York / New Jersey Metro Area Washington DC Metro Area Los Angeles San Diego Phoenix Atlanta Dallas Target Markets Houston Orlando Target States Property Management Tampa Miami, Business Management Ft. Lauderdale, REIT, Servicer & Manager Headquarters W. Palm Beach 8


 
Portfolio Migration Total Pre 3Q2020 Acquisitions ($ in thousands) Acquisition Current Based on Count UPB Count UPB Liquidated - $ - 2,687 $ 585,652 Sold - - 980 228,834 24for24 830 150,461 4,063 842,678 12for12 573 120,901 409 83,793 7for7 3,251 728,497 98 17,538 4f4-6f6 1,771 390,666 132 27,870 Less than 4f4 2,443 517,683 441 100,388 REO 34 8,074 40 10,908 NPL 607 140,972 659 159,593 9,509 $ 2,057,254 9,509 $ 2,057,254  24 for 24: Loans that have made at least 24 of the last 24 payments, or for which the full dollar amount to cover at least 24 payments has been made in the last 24 months  12 for 12: Loans that have made at least 12 of the last 12 payments, or for which the full dollar amount to cover at least 12 payments has been made in the last 12 months  7 for 7: Loans that have made at least 7 of the last 7 payments, or for which the full dollar amount to cover at least 7 payments has been made in the last 7 months 9  NPL: <1 full payment in the last three months


 
Subsequent Events  Acquisitions Closed since 09/30/2020  Acquisitions Under Contract1  RPL  RPL  UPB: $3.3MM  UPB: $3.1MM  Collateral Value: $4.1MM  Collateral Value: $6.4MM  Price/UPB: 81.9%  Price/UPB: 94.3%  Price/Collateral Value: 66.1%  Price/Collateral Value: 45.6%  7 loans in 2 transactions  28 loans in 8 transactions  NPL  NPL  UPB: $1.4MM  UPB: $16.5MM  Collateral Value: $1.7MM  Collateral Value: $31.4MM  Price/UPB: 83.1%  Price/UPB: 87.1%  Price/Collateral Value: 70.0%  Price/Collateral Value: 45.8%  9 loans in 1 transaction  71 loans in 2 transactions  SBC  UPB: $9.9MM  Collateral Value: $20.3MM  Price/UPB: 102.0%  Price/Collateral Value: 49.6%  7 loans in 1 transaction A dividend of $0.17 per share, to be paid on November 30, 2020 to common stockholders of record as of November 16, 2020 1 While these acquisitions are expected to close, there can be no assurance that these acquisitions will close or that the terms thereof may not change. 10


 
Financial Metrics – Excluding consolidation of the portion of securitizations owned by third-party institutional investors* *The Company believes these financial metrics provide investors with useful supplemental information relating to the Company’s results of operation and financial performance. These adjusted financial metrics are non-GAAP financial measures and should be considered in addition to, but not as a substitute for, the financial measures prepared in accordance with GAAP as reflected on other slides in this presentation. The following slide provides a reconciliation of these financial metrics to the most comparable GAAP measure. 11


 
Financial Metrics - Reconciliation of GAAP consolidated financial metrics to non-GAAP financial metrics excluding the portion of securitizations owned by third-party institutional investors 1Includes the impact of the credit loss expense 2Interest income on debt securities is net of servicing fee 3Includes the impact of the reversal of/(increase in) provision for credit losses on mortgage loans and beneficial interests 12 4Excludes the impact of consolidating trusts and convertible debt 5Excludes the impact of consolidating trusts


 
Securities and Loan Repo Funding 13


 
Consolidated Statements of Income (1) We sold no mortgage loans during the three months ended September 30, 2020 and June 30, 2020. During the three months ended March 31, 2020, we sold 26 SBC mortgage loans with a carrying value of $26.1 million and UPB of $26.2 million for a loss of $0.7 million. During the three months ended December 31, 2019, we sold no mortgage loans. 14


 
Consolidated Balance Sheets 15


 
Consolidated Balance Sheets Footnotes (1) Mortgage loans net include $862.8 million and $908.6 million of loans at September 30, 2020 and December 31, 2019, respectively, transferred to securitization trusts that are variable interest entities (“VIEs”); these loans 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.). Mortgage loans, net include $15.2 million and $2.0 million of allowance for loan credit losses at September 30, 2020 and December 31, 2019, respectively. (2) As of September 30, 2020, balances for Mortgage loans, net includes $309.2 million and Secured borrowings, net of deferred costs includes $257.0 million from the 50% and 63% owned joint ventures, respectively. As of December 31, 2019, balances for Mortgage loans, net include $341.8 million and Secured borrowings, net of deferred costs includes $284.8 million from a 50% and 63% owned joint ventures, all of which the Company consolidates under U.S. Generally Accepted Accounting Principles ("U.S. GAAP"). (3) Property held-for-sale, net, includes valuation allowances of $1.4 million and $1.8 million at September 30, 2020 and December 31, 2019, respectively. (4) As of September 30, 2020 and December 31, 2019 Investments at fair value include amortized cost basis of $284.3 million and $230.4 million, respectively, and unrealized gains of $0.4 million and $1.3 million, respectively. (5) Investments in beneficial interests includes allowance for credit losses of $5.9 million at September 30, 2020. No allowance for credit losses were recorded as of December 31, 2019. (6) Secured borrowings and convertible senior notes are presented net of deferred issuance costs. (7) $25.00 liquidation preference per share, 2,307,400 shares issued and outstanding at September 30, 2020 and no shares issued and outstanding at December 31, 2019. (8) $25.00 liquidation preference per share, 2,892,600 shares issued and outstanding at September 30, 2020 and no shares issued and outstanding at December 31, 2019. (9) 125,000,000 shares authorized, 23,034,443 shares issued and outstanding at September 30, 2020 and 22,142,143 shares issued and outstanding at December 31, 2019. (10) As of September 30, 2020 and December 31, 2019 non-controlling interests includes $25.8 million and $22.4 million, respectively, from the 50% and 63% owned joint ventures, which the Company consolidates under U.S. GAAP. 16


 
Fair Value Balance Sheet1 1Fair Value explanations are included in Note 6 – Fair Value in the Company’s Form 10-Q for the quarter ended September 30, 2020. 2 Information is unaudited as of September 30, 2020. 17


 
v3.20.2
Cover Page
Nov. 05, 2020
Document Information [Line Items]  
Document Type 8-K
Document Period End Date Nov. 05, 2020
Entity Registrant Name GREAT AJAX CORP.
Entity Incorporation, State or Country Code MD
Entity File Number 001-36844
Entity Tax Identification Number 47-1271842
Entity Address, Address Line One 13190 SW 68th Parkway
Entity Address, Address Line Two Suite 201
Entity Address, City or Town Tigard
Entity Address, State or Province OR
Entity Address, Postal Zip Code 97223
City Area Code 503
Local Phone Number 505-5670
Written Communications false
Soliciting Material false
Pre-commencement Tender Offer false
Pre-commencement Issuer Tender Offer false
Entity Emerging Growth Company false
Entity Central Index Key 0001614806
Amendment Flag false
Former Address [Member]  
Document Information [Line Items]  
Entity Address, Address Line One 9400 SW Beaverton-Hillsdale Hwy
Entity Address, Address Line Two Suite 131
Entity Address, City or Town Beaverton
Entity Address, State or Province OR
Entity Address, Postal Zip Code 97005
Common Stock  
Document Information [Line Items]  
Title of 12(b) Security Common stock, par value $0.01 per share
Trading Symbol AJX
Security Exchange Name NYSE
AJXA  
Document Information [Line Items]  
Title of 12(b) Security 7.25% Convertible Senior Notes due 2024
Trading Symbol AJXA
Security Exchange Name NYSE