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Great Ajax Corp. Announces Results for the Quarter Ended September 30, 2018

November 6, 2018

NEW YORK--(BUSINESS WIRE)--Nov 6, 2018--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, 2018. 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 residential and commercial mixed use retail/residential properties.

Our consolidated net income decreased $0.7 million for the quarter ended September 30, 2018 compared to the quarter ended June 30, 2018, primarily due to the acceleration of deferred issuance costs of $0.8 million, or $0.04 per share, as a result of the call of our senior bonds from our Ajax Mortgage Loan Trust 2016-A and Ajax Mortgage Loan Trust 2016-B securitizations, as well as realized and unrealized losses for properties held for sale and impairments of our 2014 NPL loan pools, offset by lower operating expenses.

The weighted average yield on our loan portfolio increased to 8.84% compared to 8.74%, for the quarter ended June 30, 2018 resulting in a $0.4 million increase in interest income. The $0.4 million increase in interest income is net of the negative impact of $0.4 million in impairments recorded on our 2014 NPL loan pools. The $0.4 million in impairments were based on a reduction in forecasted cash flows that caused a 40 basis point drop in yield over the remaining life of the two loan pools. These two pools total approximately $24.4 million in remaining carrying value. Despite the impact of the impairments, net interest margin increased to 3.80% from 3.75% compared to the prior quarter.

Other income was lower for the quarter ended September 30, 2018 compared to the quarter ended June 30, 2018 due to lower Home Affordable Modification Program (“HAMP”) fees received on HAMP eligible loans due to seasonal timing.

We recorded $0.9 million in impairments on our real estate owned (“REO”) portfolio in real estate operating expense for the quarter ended September 30, 2018 as compared to $0.7 million for the quarter ended June 30, 2018. The increase is primarily attributable to certain properties in judicial foreclosure states that experienced longer than expected foreclosure timelines and significant damage during the foreclosure and eviction process.

We collected $55.8 million on our mortgage loan and REO portfolios through loan payments, loan payoffs and sales of REO during the quarter, and ended the third quarter with $59.8 million in cash and cash equivalents. Of the $55.8 million in cash collections , we received $19.4 million from loans paying the full amount of principal, past due interest and charges.

During the quarter ended September 30, 2018, we acquired $64.4 million of RPLs with an aggregate UPB of $69.2 million, and underlying collateral values of $103.8 million and we acquired $1.4 million of NPLs with an aggregate UPB of $1.7 million and underlying collateral values of $2.3 million. We originated six SBC loans with UPB of $4.8 million that represented 72.7% of the underlying collateral value of $6.7 million, and ended the quarter with $1,272.6 million of mortgage loans with an aggregate UPB of $1,449.8 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 nine days during the quarter. During the quarter, we also acquired two commercial properties, consisting of a ten-unit apartment building acquired for $1.6 million and a single-tenant commercial property acquired for $0.8 million.

During the quarter ended September 30, 2018, we closed on Ajax Mortgage Loan Trust 2018-C with institutional third parties on September 25, 2018 with an aggregate of $170.5 million senior securities, and $15.9 million of subordinated equity issued with respect to $227.4 million of mortgage loans. The senior securities represent 75% of the UPB of the underlying mortgage loans and carry a 4.36% interest rate. We retained 5% of the senior securities, 63% of the subordinated securities and 63% of the equity certificates of the trust. The non-retained securities were issued to institutional third parties. As the primary beneficiary of the trust, we have included 2018-C in our consolidated financial statements at September 30, 2018. As a result, we included 100% of the mortgages on our consolidated Balance Sheet in our mortgage loans account offset by a liability in secured borrowings of $167.9 million and equity of $6.7 million in non-controlling interest. We include the interest accretion and interest expense offset by the non-controlling interest in our consolidated Statements of Income. We recorded a deferred gain of $2.1 million on the transaction, which will be recognized over the life of the transaction through a reduction in the amount of non-controlling interest.

During the quarter ended September 30, 2018, we co-invested with a third-party institutional investor to acquire 20.0% of each class of Ajax Mortgage Loan Trust 2018-D (“2018-D”), which acquired 470 RPLs with UPB of $100.8 million and an aggregate property value of $149.1 million in two separate transactions. The first transaction consisted of a pool of 371 mortgage loans with UPB of $72.5 million which closed during the quarter ended September 30, 2018, and the second consisted of a pool of 99 mortgage loans with UPB of $28.3 million which closed in October, 2018. The senior securities represent 80% of the UPB of the underlying mortgage loans and carry a 3.75% interest rate. The remaining ownership interest in 2018-D was acquired by the third-party institutional investor. Based on the structure of the transaction we do not consolidate 2018-D under GAAP.

The following table provides an overview of our portfolio at September 30, 2018 ($ in thousands):

Subsequent Events

Since quarter end we acquired 413 residential RPLs with aggregate UPB of $75.3 million in four transactions from four sellers for our own account. The RPLs were acquired at 89.3% of UPB and the estimated market value of the underlying collateral is $109.9 million. The purchase price equaled 67.3% of the estimated market value of the underlying collateral. In a joint venture with a third party institutional investor, we have also acquired 99 RPLs with aggregate UPB of $28.3 million from a single seller. The RPLs were acquired at 92.2% of UPB and the estimated market value of the underlying collateral is $45.6 million. The purchase price equaled 57.3% of the estimated market value of the underlying collateral.

Additionally, we agreed to acquire, subject to due diligence, 2,069 residential RPLs, four SBC RPLs and 486 NPLs with UPB of $561.1 million, $3.4 million and $105.0 million, respectively, in six transactions from six different sellers. The purchase price of the residential RPLs equals 91.0% of UPB and 55.0% of the estimated market value of the underlying collateral of $928.4 million. The purchase price of the SBC RPLs equals 100.0% of UPB and 65.0% of the estimated market value of the underlying collateral of $5.2 million. The purchase price of the NPLs equals 93.5% of UPB, 68.8% of the borrowers’ total amount due and 57.5% of the estimated market value of the underlying collateral of $170.7 million. Some of these loans are expected to be acquired through joint ventures with institutional investors.

We also agreed to acquire three commercial properties for an aggregate purchase price of $10.0 million and collateral value of $10.0 million in three separate transactions from three different sellers.

On October 25, 2018, Oileus Residential Loan Trust called the subordinate debt securities held by the Company as investments. The debt securities were called at par value resulting in no gain or loss from the carrying value at September 30, 2018.

On October 30, 2018, our Board of Directors declared a dividend of $0.32 per share, to be paid on November 30, 2018 to common stockholders of record as of November 16, 2018.

Conference Call

Great Ajax Corp. will host a conference call at 5:00 p.m. EST, Tuesday, November 6, 2018 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 is a real estate investment trust, that focuses primarily on acquiring, investing in and managing RPLs secured by single-family residences and, to a lesser extent, NPLs. We also originate 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 Corp., 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, 2017 filed with the SEC on March 8, 2018. Great Ajax Corp. 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.

View source version on businesswire.com:https://www.businesswire.com/news/home/20181106005960/en/

CONTACT: Great Ajax Corp.

Lawrence Mendelsohn

Chief Executive Officer

or

Mary Doyle, 503-444-4224

Chief Financial Officer

Mary.Doyle@aspencapital.com

KEYWORD: UNITED STATES NORTH AMERICA MARYLAND NEW YORK

INDUSTRY KEYWORD: REIT CONSTRUCTION & PROPERTY COMMERCIAL BUILDING & REAL ESTATE RESIDENTIAL BUILDING & REAL ESTATE

SOURCE: Great Ajax Corp.

Copyright Business Wire 2018.

PUB: 11/06/2018 04:05 PM/DISC: 11/06/2018 04:05 PM

http://www.businesswire.com/news/home/20181106005960/en

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