Exhibit 99.1
GREAT AJAX CORP. ANNOUNCES RESULTS FOR THE QUARTER
ENDED SEPTEMBER 30, 2017
Third QuarterHighlights
| · | Purchased $26.6 million of re-performing mortgage loans (“RPL”) with an aggregate unpaid principal balance (“UPB”) of $32.7 million and underlying collateral value of $40.7 million; and originated $3.0 million of small-balance commercial mortgage loans (“SBC”) to end the quarter with $1,053.3 million of mortgage loans with an aggregate UPB of $1,257.2 million. |
| · | Issued $20.5 million of convertible senior notes when we reopened the series of convertible senior notes from our April 2017 offering. |
| · | Portfolio interest income of $24.5 million; net interest income of $13.8 million. |
| · | Net income attributable to common stockholders of $7.5 million. |
| · | Basic earnings per share (“EPS”) of $0.41. |
| · | Taxable income of $0.12 per share. |
| · | Book value per share of $15.60 at September 30, 2017. |
| · | $43.1 million of cash and cash equivalents at September 30, 2017. |
New York, NY—November 7, 2017 —Great Ajax Corp. (NYSE: AJX), a Maryland corporation that is a real estate investment trust, today announces results of operations for the quarter ended September 30, 2017. We focus primarily on acquiring, investing in and managing a portfolio of RPLs secured by single-family residences and commercial properties, and, to a lesser extent, non-performing mortgage loans (“NPL”). In addition to our continued focus on RPLs, we have increased our originations of SBCs secured by multi-family residential and commercial mixed use retail/residential properties.
Financial Results(Unaudited)
($ in thousands except per share amounts)
| | | September 30, 2017 | | | June 30, 2017 | | | March 31, 2017 | | | December 31, 2016 | | | September 30, 2016 | |
| Loan interest income(1) | | $ | 24,396 | | | $ | 21,682 | | | $ | 20,556 | | | $ | 19,653 | | | $ | 18,704 | |
| Total revenue(2) | | $ | 14,226 | | | $ | 13,105 | | | $ | 13,667 | | | $ | 10,969 | | | $ | 12,106 | |
| Consolidated net income | | $ | 7,716 | | | $ | 7,102 | | | $ | 8,698 | | | $ | 6,163 | | | $ | 7,887 | |
| Net income per diluted share | | $ | 0.38 | | | $ | 0.36 | | | $ | 0.46 | | | $ | 0.33 | | | $ | 0.42 | |
| Average equity | | $ | 292,640 | | | $ | 288,884 | | | $ | 284,872 | | | $ | 280,213 | | | $ | 279,222 | |
| Average total assets | | $ | 1,157,223 | | | $ | 1,050,108 | | | $ | 952,112 | | | $ | 883,621 | | | $ | 814,426 | |
| Average daily cash balance(3) | | $ | 43,666 | | | $ | 47,705 | | | $ | 35,513 | | | $ | 32,759 | | | $ | 50,572 | |
| Average carrying value of RPLs | | $ | 1,001,426 | | | $ | 917,646 | | | $ | 806,982 | | | $ | 751,801 | | | $ | 653,699 | |
| Average carrying value of NPLs | | $ | 45,831 | | | $ | 49,530 | | | $ | 53,975 | | | $ | 59,365 | | | $ | 63,778 | |
| Average carrying value of originated SBC loans | | $ | 8,219 | | | $ | 5,605 | | | $ | 3,059 | | | $ | 1,246 | | | $ | - | |
| Average debt balance | | $ | 883,770 | | | $ | 775,717 | | | $ | 669,938 | | | $ | 615,103 | | | $ | 537,279 | |
| (1) | Loan interest income excludes interest income from debt securities and bank account balances. |
| (2) | Total revenue includes net interest income, income from investments in our manager and other income. |
| (3) | Average daily cash balance includes cash and cash equivalents, and excludes cash held in trust. |
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 $170.4 million. The loans were acquired into a Delaware trust, in which the Company has retained a 5.01% interest.
Portfolio Acquisitions
($ in thousands)
| | | September 30, 2017 | | | June 30, 2017 | | | March 31, 2017 | | | December 31, 2016 | | | September 30, 2016(1) | |
| RPLs | | | | | | | | | | | | | | | | | | | | |
| Count | | | 109 | | | | 1,218 | | | | 24 | | | | 729 | | | | 1,416 | |
| UPB | | $ | 32,718 | | | $ | 249,000 | | | $ | 3,445 | | | $ | 145,720 | | | $ | 259,446 | |
| Purchase price | | $ | 26,645 | | | $ | 210,204 | | | $ | 3,143 | | | $ | 127,200 | | | $ | 216,225 | |
| Purchase price % of UPB | | | 81.4 | % | | | 84.4 | % | | | 91.2 | % | | | 87.3 | % | | | 83.3 | % |
| | | | | | | | | | | | | | | | | | | | | |
| NPLs | | | | | | | | | | | | | | | | | | | | |
| Count | | | - | | | | - | | | | - | | | | 23 | | | | - | |
| UPB | | $ | - | | | $ | - | | | $ | - | | | $ | 3,590 | | | $ | - | |
| Purchase price | | $ | - | | | $ | - | | | $ | - | | | $ | 2,022 | | | $ | - | |
| Purchase price % of UPB | | | - | | | | - | | | | - | | | | 56.3 | % | | | - | |
| (1) | Includes 572 RPLs acquired for $78.2 million and aggregate UPB of $100.3 million sold to Ajax E Master Trust, an affiliate of the joint venture we established in March 2016. |
The following table provides an overview of our portfolio, exclusive of assets held in joint ventures, at September 30, 2017($ in thousands):
| No. of loans | | | 5,836 | | | Weighted average LTV(4) | | | 90.3 | % |
| Total UPB | | $ | 1,257,165 | | | Weighted average remaining term (months) | | | 300 | |
| Interest-bearing balance | | $ | 1,165,852 | | | No. of first liens | | | 5,813 | |
| Deferred balance(1) | | $ | 91,313 | | | No. of second liens | | | 23 | |
| Market value of collateral(2) | | $ | 1,630,470 | | | No. of rental properties | | | 9 | |
| Price/total UPB(3) | | | 79.1 | % | | Market value of rental properties | | $ | 2,353 | |
| Price/market value of collateral | | | 62.0 | % | | Capital invested in rental properties | | $ | 1,982 | |
| RPLs loans | | | 94.9 | % | | Price/market value of rental properties | | | 84.2 | % |
| NPLs loans | | | 4.3 | % | | No. of other REO | | | 160 | |
| Originated SBC loans | | | 0.8 | % | | Market value of other REO | | $ | 30,487 | |
| Weighted average coupon | | | 4.28 | % | | | | | | |
| (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 (58.7% of UPB), ARM (10.6% of UPB) and Hybrid ARM (30.7% of UPB) mortgage loans with original terms to maturity of not more than 40 years. |
| (4) | UPB as of September 30, 2017 divided by market value of collateral and weighted by the UPB of the loan. |
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.
| CONTACT: | Lawrence Mendelsohn |
| | Chief Executive Officer |
| | or |
| | Mary Doyle |
| | Chief Financial Officer |
| | Mary.Doyle@aspencapital.com |
| | 503-444-4224 |
GREAT AJAX CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands except per share amounts)
| | | Three months ended | |
| | | September 30, 2017 | | | June 30, 2017 | | | March 31, 2017 | | | December 31, 2016 | |
| | | (unaudited) | | | (unaudited) | | | (unaudited) | | | (unaudited) | |
INCOME: | | | | | | | | | | | | |
| Interest income | | $ | 24,529 | | | $ | 21,721 | | | $ | 20,807 | | | $ | 19,723 | |
| Interest expense | | | (10,775 | ) | | | (9,293 | ) | | | (7,651 | ) | | | (7,582 | ) |
| Net interest income | | | 13,754 | | | | 12,428 | | | | 13,156 | | | | 12,141 | |
| | | | | | | | | | | | | | | | | |
| Income from investment in Manager | | | 143 | | | | 142 | | | | 49 | | | | 60 | |
| Other income | | | 329 | | | | 535 | | | | 462 | | | | 92 | |
| Total income | | | 14,226 | | | | 13,105 | | | | 13,667 | | | | 12,293 | |
| | | | | | | | | | | | | | | | | |
EXPENSE: | | | | | | | | | | | | | | | | |
| Related party expense - loan servicing fees | | | 2,187 | | | | 1,935 | | | | 1,881 | | | | 1,751 | |
| Related party expense - management fee | | | 1,428 | | | | 1,330 | | | | 1,072 | | | | 1,057 | |
| Loan transaction expense | | | 290 | | | | 442 | | | | 525 | | | | 248 | |
| Professional fees | | | 497 | | | | 507 | | | | 480 | | | | 348 | |
| Real estate operating expense | | | 1,151 | | | | 637 | | | | 324 | | | | 1,434 | |
| Other expense | | | 910 | | | | 886 | | | | 686 | | | | 733 | |
| Total expense | | | 6,463 | | | | 5,737 | | | | 4,968 | | | | 5,571 | |
| Loss on debt extinguishment | | | - | | | | 218 | | | | - | | | | 565 | |
| Income before provision for income tax | | | 7,763 | | | | 7,150 | | | | 8,699 | | | | 6,157 | |
| Provision for income tax (benefit) | | | 47 | | | | 48 | | | | 1 | | | | (6 | ) |
| Consolidated net income | | | 7,716 | | | | 7,102 | | | | 8,698 | | | | 6,163 | |
| Less: consolidated net income attributable to non-controlling interests | | | 246 | | | | 238 | | | | 289 | | | | 205 | |
| Consolidated net income attributable to common stockholders | | $ | 7,470 | | | $ | 6,864 | | | $ | 8,409 | | | $ | 5,958 | |
| Basic earnings per common share | | $ | 0.41 | | | $ | 0.38 | | | $ | 0.46 | | | $ | 0.33 | |
| Diluted earnings per common share | | $ | 0.38 | | | $ | 0.36 | | | $ | 0.46 | | | $ | 0.33 | |
| Weighted average shares – basic | | | 18,072,045 | | | | 18,008,499 | | | | 17,976,710 | | | | 17,958,517 | |
| Weighted average shares - diluted | | | 25,246,764 | | | | 23,026,679 | | | | 18,791,231 | | | | 18,766,938 | |
GREAT AJAX CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands except per share amounts)
| | | (Unaudited) | | | | |
| ASSETS | | September 30, 2017 | | | December 31, 2016 | |
| | | | | | | | | |
| Cash and cash equivalents | | $ | 43,086 | | | $ | 35,723 | |
| Cash held in trust | | | 1,075 | | | | 1,185 | |
| Mortgage loans(1) | | | 1,053,285 | | | | 869,091 | |
| Property held-for-sale, net(2) | | | 27,342 | | | | 23,882 | |
| Rental property, net | | | 1,921 | | | | 1,289 | |
| Investment in debt securities | | | 6,306 | | | | 6,323 | |
| Receivable from servicer | | | 12,930 | | | | 12,481 | |
| Investment in affiliate | | | 7,079 | | | | 4,253 | |
| Prepaid expenses and other assets | | | 4,389 | | | | 3,175 | |
| Total Assets | | $ | 1,157,413 | | | $ | 957,402 | |
| | | | | | | | | |
| LIABILITIES AND EQUITY | | | | | | | | |
| | | | | | | | | |
| Liabilities: | | | | | | | | |
| Secured borrowings, net(1,3) | | $ | 496,342 | | | $ | 442,670 | |
| Borrowings under repurchase agreement | | | 258,402 | | | | 227,440 | |
| Convertible senior notes, net(3) | | | 102,383 | | | | - | |
| Management fee payable | | | 750 | | | | 750 | |
| Accrued expenses and other liabilities | | | 4,027 | | | | 3,819 | |
| Total liabilities | | | 861,904 | | | | 674,679 | |
| | | | | | | | | |
| Equity: | | | | | | | | |
| Preferred stock $0.01 par value; 25,000,000 shares authorized, none issued or outstanding | | | - | | | | - | |
| Common stock $0.01 par value; 125,000,000 shares authorized,18,251,975shares issued and outstanding, and 18,122,387 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively | | | 183 | | | | 181 | |
| Additional paid-in capital | | | 249,936 | | | | 244,880 | |
| Retained earnings | | | 34,875 | | | | 27,231 | |
| Accumulated other comprehensive loss | | | (170 | ) | | | - | |
| Equity attributable to common stockholders | | | 284,824 | | | | 272,292 | |
| Non-controlling interests | | | 10,685 | | | | 10,431 | |
| Total equity | | | 295,509 | | | | 282,723 | |
| Total Liabilities and Equity | | $ | 1,157,413 | | | $ | 957,402 | |
| (1) | Mortgage loans includes $685,900 and $598,643 of loans transferred to securitization trusts at September 30, 2017 and December 31, 2016, respectively, that are variable interest entities (“VIEs”) that 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). |
| (2) | Property held for sale, net, includes valuation allowances of $2,026 and $1,620 at September 30, 2017, and December 31, 2016, respectively. |
| (3) | Secured borrowings and Convertible senior notes are presented net of deferred issuance costs. |
