Q3 2024 Great Ajax Corp Earnings Call

Speaker Change: Good day and welcome to the Great AJAX 3rd quarter 2020 for earnings call. All participants will be in listen only mode. Should you need assistance, please signally conference specialist by pressing the star key follow by Z-Rest.

Operator: All participants will be in listen-only mode. Should you need assistance, please signal conference specialist by pressing the star key followed by zero.

Operator: After today's presentation, there will be an opportunity to ask questions. To ask a question, may press star, then one, on a touch-tone phone. To withdraw your question, please press star, then two.

Speaker Change: after today's presentation. There will be an opportunity to ask questions to ask a question. May press star then one on a touchstone phone. To withdraw your question, press star then two.

Operator: Please note this event is being recorded.

Emma Bola: I would now like to turn the conference over to Emma Bola, Associate General Counsel. Please go ahead.

Speaker Change: Please note this event is being recorded.

Speaker Change: I would now like to turn the conference over to Emma Bola, Associate General Counsel.

Emma Bola: Thank you and good morning, everyone. I would like to thank you for joining us today for Great Ajax's third quarter 2024 earnings call. Joining me today are Michael Nierenberg, Chairman, CEO and President of Rhythm Capital, and CEO of Great Ajax, and Mary Doyle, Principal Financial Officer of Great Ajax.

Speaker Change: He's going ahead.

Emma Bola: Thank you and good morning, everyone. I would like to thank you for joining us today for Great Ajax's third quarter, 2024 earnings call. Joining me today are Michael Nierenberg, Chairman, CEO and President of rhythm capital and CEO of Great Ajax and Mary Doyle, Principal Financial Officer of Great Ajax.

Emma Bola: Throughout the call, we were going to reference the earnings supplement that was posted this morning to the Great Ajax website, www.greatajax.com. If you've not already done so, I'd encourage you to download the presentation now.

Emma Bola: Throughout the call, we are going to reference the earnings supplement that was posted this morning to the Great Ajax website www.greatajax.com If you've not already done so, I'd encourage you to download the presentation now

Emma Bola: I would like to point out that certain statements made today will be forward-looking statements. These statements, by their nature, are uncertain and may differ materially from actual results. I encourage you to review the disclaimers in our press release and earnings supplement regarding forward-looking statements and to review the risk factors contained in our annual and quarterly reports filed with the SEC.

Emma Bola: I would like to point out that certain statements made today will be forward-looking statements. These statements by their nature are uncertain and may differ materially from actual results.

Emma Bola: I encourage you to review the disclaimers in our press release and earning supplement regarding forward-looking statements and to review the risk factors contained in our annual and quarterly reports filed with the SEC.

Emma Bola: In addition, we will be discussing some non-GAAP financial measures during today's call. Reconciliation of these measures to the most directly comparable gap measures can be found in our earnings supplement.

Emma Bola: In addition, we will be discussing some non-gap financial measures during today's call. Reconciliation of these measures to the most directly comparable gap measures can be found in our earnings supplement. I would not turn the call over to Michael.

Michael Nierenberg: And with that, I will turn the call over to Michael.

Michael Nierenberg: Thanks, Emma. Good morning, everyone, and thanks for joining the Great Ajax earnings call. During the quarter, our mission is continues to be pretty much the same as what we discussed on our prior earnings call, which is to you sell down legacy what I would call negative carry residential assets and redeploying the capital into real cash flowing CNBS with the intent for the company to get breakeven as soon as possible from an earnings perspective, which we expect to happen by the end of Q1. Obviously, this is before dividends. Regarding the dividend while the company does not make money today, we are hopeful that we will continue to earn our way out of this deficit while maintaining the current dividend of 8 cents.

Michael Nierenberg: Thanks so much, good morning everyone and thanks for joining the Greedy Jets earnings call.

Michael Nierenberg: During the quarter, you know, our mission is continues to be pretty much the same as what we discussed on our prior earnings call, which is to you sell down legacy, what I would call negative.

Michael Nierenberg: Brigative Carey, residential assets, and redeploying the capital into real cash flowing CNBS.

Michael Nierenberg: With the intent for the company to get break even as soon as possible from an earnings perspective, which we expect to happen by the end of Q1. Obviously this is before dividends.

Michael Nierenberg: Regarding the dividend while the company does not make money today, we are hopeful that we will continue to earn our way out of this deficit while maintaining the current dividend of eight cents.

Michael Nierenberg: Obviously, there are no guarantees. As I mentioned in the past, our playbook will be similar to what we've done at Fortress and what some of the other large alternative asset managers have done in the past, which is to grow earnings while looking for a transformational opportunity to grow the company. As I pointed out, we've done that before while we were at Fortress, and that was in 2013, when new residential was born out of a legacy mortgage rate known as New Castle. Regarding the balance sheet today, we'll continue to unwind the legacy resi assets, which are on balance sheet while attempting to maintain book value.

Michael Nierenberg: Obviously, there are no guarantees, as I mentioned in the past, our playbook will be similar to what we've done at Fortress and what some of the other large alternative asset managers have done in the past.

Michael Nierenberg: which is to grow earnings while looking for transformational opportunity to grow the company. And as I pointed out, we've done that before while we were at Fortress and that was in 2013 when New Residential was born out of a legacy mortgage rate known as Newcastle.

Michael Nierenberg: Regarding the balance sheet.

Michael Nierenberg: Today, we'll continue to remind the Legacy Resi assets, which are on balance sheet while attempting to maintain book value. Books value during the quarter was 547, which is essentially unchanged from the 550 something number that was reported last quarter.

Michael Nierenberg: Book value during the quarter was 547, which is essentially unchanged from the 550-something number that was reported last quarter. While saying that we're just not going to give away many of these smaller assets that sit on the balance sheet, so we'll be patient. Again, we're going to continue to grow our earnings and earn our way out of this. When you look at other assets that sit on the balance sheet, the largest portion are some legacy securitizations where the actual cost of funds are 2.68 percent, so there's no reason to call those transactions, and those will stay outstanding for a while.

Michael Nierenberg: While saying that we're just not going to give away as many of these smaller assets that sit on the balance sheet.

Michael Nierenberg: So, you know, it will be patient and again, we're going to continue to earn our grow our earnings.

Michael Nierenberg: in our way out of this.

Michael Nierenberg: When you look at other assets that sit on the securitization, on the balance sheet, the largest portion or there are some legacies, securitizations where the actual cost of funds are 2.68%. So there's no reason to call those transactions and those will stay outstanding for a while.

Michael Nierenberg: Regarding opportunities, we'll be patient. This past week, we bid on a billion dollars of assorted commercial real estate loans, about half for multifamily and half for office. Obviously, to give you a sense, we are starting to see a little bit of movement and starting to see some of the banks come out with some assets. While saying that we need to make sure that whatever transaction or transactions we do around this balance sheet are huge winners, so we're going to be patient here. Again, and we'll continue to grow our way out of this earnings deficit.

Michael Nierenberg: Regarding Opportunities, we'll be patient, you know, this past week, we've been on a billion dollars of assorted commercial real estate loans, about half remotey family and half for office.

Michael Nierenberg: Obviously, they would not go into this vehicle, but just to give you sense, we are starting to see a little bit of movement. Starting to see some of the banks come out with some assets.

Michael Nierenberg: While saying that we need to make sure that whatever transaction or transactions we do around this balance sheet or a huge winners. So we're going to be patient here and again, and we'll continue to grow our way out of discerning's deficit. With that, I'm going to now refer to the supplement which has been posted on the website.

Michael Nierenberg: With that, I'm posted on the website. Page 3, just so we're on the same page. Great Ajax, it's an externally managed, what I would call a real estate investment platform. We intend to change the name from Great Ajax to Rhythm Property Trust at some point in the fourth quarter. We'll be updating our websites and all the associated information that go along with that. We took over the company or the management of the company in June of this year, June 11th, to be exact. And again, between that time and where we are now, we've made tremendous progress cleaning up what I would call the legacy positions that sit on the balance sheet.

Michael Nierenberg: Page 3

Michael Nierenberg: and just so we're on the same page, great age access. It's an externally managed, what I would call real estate investment platform.

Michael Nierenberg: We intend to change the name from grade A, Jax, to rhythm property trust at some point in the fourth quarter. We'll be updating our websites and all the associated information that go along with that.

Michael Nierenberg: We took over the company or the management of the company in June of this year June 11th to be exact.

Michael Nierenberg: and again, between that time and where we are now, we've made tremendous progress, cleaning up what I would call the legacy, the legacy position that's sit on the balance sheet.

Michael Nierenberg: When you look at this vehicle and we think about the market opportunity, think of it more from a go-forward basis. I look at it today as a clean platform. There's not much there. And again, I am confident that we are going to find the right transaction or transactions to transform this into a real winner. So patients' investors will be rewarded, I think, if you're patient here. When you look at how this is managed, you know, again, when we're all part of Fortress, New Residential at that point was externally managed. The Rhythm team here continues to work aggressively on any and all opportunities around the space.

Michael Nierenberg: When you look at this vehicle and we think about the market opportunity, think of it more from a go-forward basis. I look at it today as a clean platform. There's not much there. And again, I am confident that we are going to find the right transaction or transaction to transform this into...

Michael Nierenberg: You know, a real winner. So patience, investors will be rewarded. I think if you're patient here, when you look at how this is managed, you know, again, when we were all part of fortress, new residential at that point was externally managed.

Michael Nierenberg: The rhythm team here continues to work aggressively on any and all opportunities around the space and we have a very good team here going back to the

Michael Nierenberg: And we have a very good team here. Going back to the Fortress days, we started a new residential with a billion dollars of capital, and today we're roughly seven and a half to eight billion of permanent capital. So a good success story. And then again, you know, when you look to the right side of the page, we're very committed to grow this vehicle, but we have to be smart about how we do that. Fourth, third quarter financial highlights: gap net income loss of $8 million or 18 cents per diluted share; earnings available for distribution, negative $5.4 million or 12 cents per diluted share.

Michael Nierenberg: Fortress Days, we started a new residential with a billion doors to capital and today we're roughly seven and a half to eight billion a permanent capital. So a good success story. And then again, you know, we, when you look to the right side of the page, we're very committed to grow this vehicle, but we have to be smart about how we do that.

Michael Nierenberg: for third quarter financial highlights.

Michael Nierenberg: Gapnetting come loss of the $8 million or 18 cents per diluted share, earning available for distribution, negative 5.4 million or 12 cents per diluted share. We declared the dividend in the third quarter of six cents. I think I miscoded, I said eight cents before, so it will be, will maintain that six cents.

Michael Nierenberg: We declared a dividend in the third quarter of six cents. I think I miscooted. I said eight cents before. So it will be; we'll maintain that six cents. Dividend yield currently 7.2% at the end of 9.30. Cash and equivalence sitting on balance, 84 million of that 84 million. The way I would think about it is roughly 30-odd million is available for investment. Some of that money has already been committed. And then we're going to keep a roughly $50 million reserve. And then stockholder equity is a little under $250 million. You look at the transformation of this company during Q3.

Michael Nierenberg: dividend yield currently 7.2% at the end of 930.

Michael Nierenberg: Cash in Equivalence, sitting on Balance Eighty, 4 million of that Eighty, 4 million. The way I would think about it is roughly 30 odd million is available for investment. Some of that money has already been committed and then we're going to keep a roughly a 50 million dollar reserve and then stockholder equity is a little under $250 million.

Michael Nierenberg: We sold 85 million a residential mortgage loan generating a little under 18 million dollars in cash. Since the end of Q1, the company sold roughly 91% of its legacy residential mortgage loans that they've held for sale. We also sold 62.7 million residential securities, which generated 14 million in cash. And then during the quarter, the team deployed $100 million of what we actually close in $100 million of no social amount of AAA CNBS and roughly a 12% leverage return. When you look to the bottom, you can see what's really left on balance sheet. Obviously, there's not a lot there.

Michael Nierenberg: You look at the transformation of this company during Q3, we sold 85 million a residential mortgage loans, generating a little under 18 million dollars in cash. Since the end of Q1, the company sold roughly 91% of its legacy residential mortgage loans that they've held for sale.

Michael Nierenberg: We also sold 62.7 million residential securities, which generated 14 million cash, and then during the quarter the team deployed 100 million dollars of what we actually close in 100 million dollars of no-cial amount of AAA CNBS at roughly a 12% leveraged return.

Michael Nierenberg: When you look to the bottom, you can see what's really left on balance sheet. Obviously there's not a lot there. You can look to the middle part of the page. You can see the breakout of our commercial real estate investing. And then I think one of the more important things while small. Look at what we've done with net interesting comments that went from a million six and we've up a hundred twenty six percent to three point six million dollars closing at the end of three Q3 . And again, going back to my earlier comments, we expect to to run this company break even before dividends. And hopefully we can cover the dividend no later than the end of Q1 .

Michael Nierenberg: You can look to the middle part of the page. You can see the breakout of our commercial real estate investing. And then I think one of the more important things, while small, look at what we've done with net interesting comments. It went from a million six, and we've up 126% to $3.6 million, closing at the end of Q3. And again, going back to my earlier comments, we expect to run this company break even before dividends. And hopefully we can cover the dividend no later than the end of Q1. When we look at the path to profitability, we've done a few things here as well.

Michael Nierenberg: We moved all of the legacy. There was a bunch of registered servicing that went to Show Point Mortgage, which is one of our wholly owned subs at Rhythm. We drove servicing expense saves. Probably, I think by about, I think we lowered the servicing fee by about 30% or so. I think that's about the number. We took all the financing. We went from full daily market to either non-marked to market or non-daily market to market with margin holidays. And we approved our cost of funds by 28 basis points. On sales, again, we sold a significant portion of the legacy resi assets.

Michael Nierenberg: We look at the path to profitability, we've done a few things here as well, we moved all of the legacy. They were so much of a busy servicing, then went to show point mortgage which is one of our wholly owned subs at rhythm. We drove servicing expenses, probably I think, by about.

Michael Nierenberg: I think we lowered the servicing fee of by about 30% or so. I think that's about the number. We took all of the financing. We went from full daily mark to market to either non-mark to market or non-dialey mark to market with margin holidays. And we improved our cost of funds by 28 basis points.

Michael Nierenberg: This is not that much left there, honestly, to talk about. I'm going initiatives cleaning up some of the legacy stuff and then continue to look to source opportunities in the commercial space. I'm not going to spend any real time on this. It's everything we've been talking about. Look to the future, clean up the, you know, the remaining small items that sit on balance sheet and redeploy capital. Look for that opportunistic either deal or investments to recapitalize the company and that will come as we go forward here. As you look at the real estate sector, obviously there's a lot of talk about real estate commercial now.

Michael Nierenberg: On sales, again, we sold a significant portion of the legacy-resi assets. This is not that much left there, honestly, to talk about it. I'm going initiative, cleaning up some of the legacy stuff, and then continuing to look to source opportunities in the commercial space.

Michael Nierenberg: Playbook, I'm not going to spend any real time on this, it's everything we've been talking about. Look to the future, clean up the, you know, the remaining small items that sit on balance sheet and redeploy capital. Look for that opportunistic either deal or investments to recapitalize the company and that will come as we go forward here.

Michael Nierenberg: As you look at the real estate sector, obviously there's a lot of, there's a lot of talk about real estate commercial now, you know, the pine is now. What I would say is we see a lot of opportunities or not opportunities, I should say.

Michael Nierenberg: You know, the prime is now what I would say is we see a lot of opportunities or not opportunities, I should say. And there's a lot of hair on a lot of the things that come out, and you've got to be really, really careful here. And we are really, really careful here. We want to make sure that the transactions that we do or that we do contemplate are going to be, obviously, are going to be the right ones. And that first large transaction we do in this vehicle is going to be very, very important. So we're going to be really patient.

Michael Nierenberg: Um...

Michael Nierenberg: and there's a lot of hair on a lot of the things that come out and you got to be really, really careful here and we are really, really careful here. We want to make sure they eat.

Michael Nierenberg: The transactions that we do or that we do contemplate are going to be obviously or going to be the right ones.

Michael Nierenberg: and that first large transaction we do in this vehicle is going to be very, very important. So we're going to be really patient. You're starting to see a little bit more flow come out of some of the banks I would say. But, you know, we haven't seen a ton come out.

Michael Nierenberg: You're starting to see a little bit more flow come out of some of the banks, I would say. But, you know, we haven't seen a ton come out yet, but we'll continue to see more. When we look at the portfolio on page 9 going forward, this is just a snapshot of what it could look like. It could look right, frankly, to look like something totally different, but really what we're trying to do is create a portfolio cash flowing portfolio, which returns in kind of the load of mid teens. For the so-called grade Ajax or Rhythm Property Trust shareholders.

Michael Nierenberg: Yet, but we'll continue to see more. When we look at the portfolio on page 9, going forward, this is just a snapshot. What it could look like, it could look, right, right, right, plate to look like something totally different, but really what we're trying to do is create a portfolio, cash-flowing portfolio, which returns in kind of the load of midteens.

Michael Nierenberg: We are obviously involved in the equity that was part of the deal when we took over the manager. And we're all highly vested in seeing the success of this company.

Michael Nierenberg: for the so-called great-age acts or rhythm property, trust shareholders. We are obviously involved in the equity that was part of the deal when we took over the manager. And we're all highly vested in seeing the success of this company.

Michael Nierenberg: So, with that, I'll turn it back to the operator.

Operator: We can open up to some questions. Thank you.

Michael Nierenberg: So with that, I'll turn it back to the operator we can open up to some questions.

Operator: We will now begin the question in the answer session to ask a question. You may press star them one on your touch on the phone. If you're using a speaker phone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your questions, please press star and then two.

Michael Nierenberg: Thank you.

Speaker Change: Hey, well now begin the question in the answer session to ask a question, you may press star, then one on your touch phone phone. If you are using a speaker phone, please pick up your handset before pressing the keys. If at any time your question is, when addressed, do you would like to withdraw your questions, please press star and then two.

Tom Catherwood: Our first question comes from Tom Catherwood with BTIG.

Tom Catherwood: Please go ahead.

Speaker Change: Our first question comes from Tom Katherwood with BTIG. Please go ahead.

Michael Nierenberg: Thank you and good morning, everybody. Michael, you know, rhythm has succeeded with a hidden where they ate type strategies and inception. Now that you've been digging in with Ajax soon to be RPT, you know, what segment or segments of the commercial real estate debt universe. Have the dislocation and mispricing that match a rhythm type investing strategy? Good morning, and thanks for the question. When I'll give you an example of the portfolio that we bid on last week, I mentioned before, you know, there was some multi-family in there. There was some affordable housing, and then there was some office.

Tom Katherwood: Thank you, and good morning, everybody. Michael, you know, rhythm has succeeded with a hidden where they ain't type strategies in its inception.

Tom Katherwood: Now that you've been digging in with Ajax, soon to be RPT, you know what segment or segments of the commercial real estate debt universe?

Tom Katherwood: have the dislocation and misprasing that match arhythm type in vetting strategy.

Michael Nierenberg: You're more in and thanks for the question. When I'll give you an example of the portfolio that we bid on last week.

Michael Nierenberg: I mentioned before, you know, there was some multi-family in there, there was some affordable housing, and then there was some office. The one thing that we need to be, you know, we have a large real estate team both here and obviously sculptor has a terrific real estate team as well. When we look at these different asset classes,

Michael Nierenberg: The one thing that we need to be, you know, we have a large real estate team both here and obviously Sculptor has a terrific real estate team as well. When we look at these different asset classes, you know, we need to focus on what I would say on things that are truly cash flowing. So when we look at office, for example, did that fit this vehicle? The answer is no. We look at affordable housing. Does that fit this vehicle, potentially? But what you could expect is on a lot of these loans, and these loans that we bid on all were coming up again debt maturity walls over the next year or so.

Michael Nierenberg: You know, we need to...

Michael Nierenberg: Focus what I would say on things that are truly cash flowing so when we look at office, for example, did that fit as vehicle? The answer is no, we look at affordable housing, does that fit as vehicle?

Michael Nierenberg: Patentially.

Michael Nierenberg: But what you could expect is on a lot of these loans and these loans that we bid on all were coming up again, debt matured or maturity walls.

Michael Nierenberg: I think you're going to see more of the stuff come out of the banks that sit in the workout groups. That's really where we're going to focus. We're not going to go and do what I would say large single property deals. That's not, that's not where we're going to focus. I mentioned before, you know, we've been buying some AAA CNBS that gives us that low double-digit return that's going to, and they're fairly liquid. So if we do come up with a strategy or come up with a portfolio of assets that we think makes sense, we can always rotate out of those.

Michael Nierenberg: Over the next year or so, I think you're going to see more of the stuff come out of the banks that sit in in the workout groups. That's really where we're going to focus. We're not going to go and do what I would say large single property deals. That's not where we're going to focus. I mentioned before, you know, we've been buying some AAA CNBS.

Michael Nierenberg: that gives us that low double digit return, and they're fairly liquid, so if we do come up with a strategy or come up with a portfolio of assets that we think makes sense, we can always rotate out of those.

Michael Nierenberg: But I think it's going to be more on, you know, every hot topic these days are data centers. Right? I mean, you know, will we look at data centers? The answer is yes. We just looked at a student housing deal that we're going to deploy a little bit of capital in. But I think for the main thing, it's got to be cash flowing. It's got to be extremely solid, or we've got to have the expertise around the house to be able to manage through that. Certain things low, you know, low yielding or low cap rate multifamily probably not for us right now.

Michael Nierenberg: But I think it's going to be more on, you know, every, the hot topic these days are data centers, right? I mean...

Michael Nierenberg: You know, we'll be looking at data centers, the answers, yes, we just looked at a student housing deal that we're going to deploy a little bit of capital in

Michael Nierenberg: But I think for the main thing, it's got to be cash flowing, it's got to be extremely solid, or we got to have the expertise around the house to be able to manage through that. Certain things low yielding, or low cap rate, multifamily, probably not for us right now. The other thing I would point out is in our manufacturing.

Tom Catherwood: The other thing I would point out is in our manufacturing capabilities at Rhythm, you know, our Genesis business, which will do, you know, three plus billion dollars in loans this year. They do a fair amount of multifamily lending, and there's always the opportunity for what I would call some nice mezz, you know, coupon type preferred. You know, preferred mezz, or preferred equity in the cap stat. So we're not going to rule out anything, but it's got to be really solid cash flowing to actually get this company to start making money. Again. Got it. Appreciate that answer, Michael.

Michael Nierenberg: Capabilities at rhythm, you know, our Genesis business, which we'll do, you know, three plus billion dollars on loans this year. They do a fair amount of multi-family lending and there's always the opportunity for what I would call some nice meds, you know, coupon type preferred.

Michael Nierenberg: But you know, preferred meds or preferred equity in the cap stat. So we're not going to rule out anything, but it's got to be really solid cash flowing to actually get this company to start making money again.

Michael Nierenberg: And then maybe kind of falling up on that. And I know this is kind of a crystal ball type question. So I apologize. But in the past, you've mentioned rate cuts by the Fed really helping to spur transaction activity. But is there a scenario where maybe the lower rates give borrowers and kind of the very banks that you're referring to some cushion to ride out the distress, and we get less opportunity coming to the market? Or is there just so much out there that that's not likely to be a scenario? Yeah, I think, first of all, you know, rates this morning, you've seen the bond market back up fairly significantly over the course of the past month or so, right?

Speaker Change: Got it, appreciate, appreciate the answer, Michael, and then maybe kind of falling up on that, and I know this is kind of a crystal ball type question, so I apologize, but in the past, you've mentioned, right?

Speaker Change: Convits by the Fed, really helping to spur transaction activity, but is there a scenario where maybe the lower rates give borrowers and kind of very banks that you're referring to some cushion to ride out this distress and we...

Speaker Change: Get less opportunity coming to the market, or is there just so much out there that that's not likely to be a scenario.

Speaker Change: Yeah, I think first of all, you know, reach this morning, you've seen the bomb market back up fairly significantly over the course of the past month or so, right? You got tens.

Michael Nierenberg: You've got tens, you know, north of 410; you've got the front end trading at 4% right now. While saying that, you know, I think rates historically, you know, a six and a half coupon mortgage is not historically high or a 10 year notice. And that's four or four and a quarter percent is just not high. So what you really have is that the problem is the equity in these properties, and you've seen it for some of the very, very large sponsors; the equity has been wiped out in a lot of these deals, particularly in a lot of the office deals.

Speaker Change: You know, North of 410, you got the front end trading at 4% right now. While saying that, you know, I think reach historically, you know, a 6.5 coupon mortgage is not historically high, or a 10-year note isn't at 4.4% as it does not high.

Speaker Change: So what you really have is that the problem is the equity in these properties and you've seen it for some of the very very large sponsors

Michael Nierenberg: So there will be the opportunity to recap a number of these things that we look at on a daily basis. I think where we are from a rate perspective, whether the Fed goes, you know, 25 at the next meeting or not, I do think 50 was a mistake. Obviously, as you look back, I do think where we sit now and whether the Fed cuts rates in other 25 or in other 100 basis points, there's still going to be that huge need for both equity and debt financing in the commercial real estate sector. And I think that will only spur it.

Speaker Change: The equities have been wiped out in a lot of these deals, particularly in a lot of the office deals. So there will be the opportunity to recap a number of these things that we look at on a daily basis. I think where we are from a retrospective, whether the Fed goes.

Speaker Change: 25 at the next meeting or not, my duty 50 was in the state, obviously, as you look back, I do think where we sit now and whether the Fed cuts rates in other 25 or another 100 basis points, there's still going to be that huge need for both equity and debt financing and the commercial real estate sector. And I think that will only spurred.

Michael Nierenberg: As it relates to the banks, once that bank takes impairment on an asset, they want out. So, you know, you look at the very large banks that are sitting on a number of these assets. If they can get out, they're going to get out. And when you look at the banking system today and you look at their quarterly earnings, they make so much money. So, to be able to clean up balance, she did not hold capital against the stress assets. I think you'll continue to see it come out, whether the rates are three and a half percent or whether they're, you know, 5 percent.

Speaker Change: As a release of the banks, banks once a bank takes impairment on an asset, they want out.

Speaker Change: So, you know, you look at the very large banks that are sitting on a number of these assets, if they can get out, they're going to get out. And when you look at the banking system today and you look at their quarterly earnings, they make so much money. So to be able to clean up balance, you do not whole capital against the stress assets, I think you'll continue to see it come out.

Speaker Change: with a rates or three and a half percent of whether they're five percent.

Michael Nierenberg: I'm understood; appreciate that color. And then last one for me, you know, kind of two-fold. One, obviously, you put a lot of capital to work in the third quarter by the AAA tranches of CNBS. Have you put any more of kind of that cash balance to work so far in October? And then, you know, beyond the 31 million of Rezzy mortgage loans that are remaining in the help for sale bucket, are there any other, you know, smaller investments in your balance sheet that you could look to monetize in the near term? Yeah. So what I would say today, as we speak today, the amount of equity available for deployment to buy securities or something like that is about between $20 and $25 million.

Speaker Change: I'm understood, appreciate that color and then last one for me, you know, kind of twofold.

Speaker Change: One, obviously, you put a lot of capital to work in the third quarter, buying the AAA, tronches of CNBS. You put any more of kind of that cash balance to work so far in October. And then, you know, beyond the 31 million of resume mortgage loans that are remaining in the health for sale bucket, are there any other, you know, smaller investments in your balance sheet that you could look to monetize in the near term?

Speaker Change: So what I would say today, as we speak today, the amount of equity available for deployment to buy securities or something like that is about between $20 and $25 million. When I look at the balance sheet, I think about the equity there, you know, candidly, there is a lot of...

Michael Nierenberg: When I look at, you know, the balance sheet, I think about the equity there. You know, candidly, there's a lot of small, odd lot positions that were created on the, on this great age X balance sheet. It's not going to give you a huge amount of cash. Really, when you look at some of this stuff and we think about the total amount of real equity, it's not that much that's remaining in the portfolio. And I mentioned earlier, we're going to be patient about cleaning up, you know, the rest of the stuff. Like this, I'm looking at our position sheets.

Speaker Change: Small, odd-lot positions that were created on the, on the, on the, this great-age expalant sheet. It's not going to give you a huge amount of cash. Really, when you look at some of this stuff, and, and we think about the total amount of...

Speaker Change: of Real Equity, it's not that much that's remaining in the portfolio. And I mentioned earlier we're going to be patient about cleaning up.

Michael Nierenberg: You know, on things that we could actually sell, the AA position is 2.6 million a notional amount of debt. It's just that they're just small pieces. So we're remarked. And when I look at book value today at 547, I think we feel pretty good about that. The loan book of 30 odd million, you know, there was a bunch of what I would call scattered things that sit in there, including some zero coupon loans that were made that somebody bought that were made by Habitat for Humanity. So it gives you a sense of this, some of the stuff that we're working on to get cleaned up, and we'll look to refinance out a number of those things or do short sales, what have you.

Speaker Change: You know, the rest of the stuff, like this, I'm looking at our position sheets.

Speaker Change: You know, on things that we could actually sell, the AA position is 2.6 million, a notional amount of debt.

Speaker Change: It's just they're they're they're just small pieces

Speaker Change: So we're a mark and when I look at books out here today at 547 I think we feel pretty good about that. The loan book of 30 odd millions.

Speaker Change: You know, there is a bunch of what I would call scattered things that sit in there including some zero coupon loans that were made that somebody bought that were made by habitat for humanity. So it gives you a sense of this some of the stuff that we're working on to get cleaned up and we'll look at the refinance out a number of those things or do short sales would have you.

Michael Nierenberg: But in general, I would say the balance sheets are in very good shape; there's 20 to 25 million of cash left to deploy. When you think about the broader capital structure, there's 100 million of debt that carries a 10 and a quarter coupon. We're addressing that. We'll be figuring out solutions around that as well. But it's going to take a little time to get this company to where we want to. Again, unless there is that large transformational deal or group of loans that we think are going to make a lot of sense for the balance sheet.

Speaker Change: But in general, I would say the balance sheets in very good shape. There's 20 to 25 million of cash left to deploy. When you think about the broader capital structure, there's a hundred million of debt that carries a 10 and a quarter coupon. We're addressing that.

Speaker Change: will be figuring out solutions around that as well.

Speaker Change: But it can take a little time to get this company to where we want to, again, unless there is that large transformational deal or group of loans that we think are going to make a lot of sense for the balance sheet, and that's what's going to take us forward. But I think the message to clear message to the market and shareholders for now is...

Michael Nierenberg: And that's what's going to take us forward. But I think the message, the clear message to the market and shareholders for now is the story remains the same. Continue to deploy a little bit of capital here. I think we'll be fully deployed by the end of Q4. in commercial stuff. Look for that great opportunity, maintain or dividend policy right now. Obviously, it's a board decision and deal with the 100 million or so of debt that's a 10 and a quarter coupon. But again, think of it almost like I hate to use this word, like a blank canvas.

Speaker Change: The story remains the same, continue to deploy a little bit of capital here I think will be fully deployed by the end of Q4.

Speaker Change: in commercial stuff.

Speaker Change: Look for that great opportunity, maintain or dividend policy right now, obviously it's a board decision.

Speaker Change: Figure and deal with the, you know, the 100 million or so of debt that's a 10 and a quarter group on So but again, it's think of it like almost like a you know, he used this word like a blank canvas It's a $250 million vehicle that I think has tremendous upside for shareholders

Tom Catherwood: It's a 250 million dollar vehicle that I think has tremendous upside for shareholders. Got it. Thank you for all the thoughts, Michael. That's it for me. Thank you.

Speaker Change: it

Speaker Change: Got it. Thank you for all the thoughts, Michael. That's it for me.

Stephen Laws: Next question comes from Stephen Laws with Raymond James. Please go ahead.

Speaker Change: Thank you.

Speaker Change: Next question comes from Stephen Laws with Raymond James. Please go ahead.

Stephen Laws: Hi, good morning. Michael Laws covered in your comments with Tom. It's going to make sure I tied this together. You mentioned 20 to 25 million remaining of investible capital. I think in your prepared remarks, you commented maybe break even this quarter and supporting the dividend in Q1. So is that really just Q1 being the full quarter impact of getting these remaining proceeds deployed into most likely triple ACNVS? Yeah, I think it's a couple of things. One is it's addressing our debt, which is 100 million and a 10 and a quarter coupon debt, to deploying the rest of our so-called capital, three cleaning up whatever we can on balance sheet.

Stephen Laws: Loss covered in your comments with Tom, but just kind of make sure I've tied us together. You mentioned 20 to 25 million remaining of an investable capital, and I think in your prepared remarks, you commented, it may be break even this quarter, and...

Stephen Laws: Supporting the dividend in Q1. So is that really just Q1 being the full quarter impact of getting these from?

Stephen Laws: Mining Proceeds deployed into most likely Triple A C in the US.

Speaker Change: Yeah, I think it's a couple of things. One is it's addressing our debt, right, which is a hundred million or ten and a quarter coupon debt to deploying, you know, the rest of our so-called capital, three cleaning up, whatever we can on balance sheet, but I'm not, you know, we're not really that concerned where we are today balance sheet wise with the legacy assets. I think it's, you know, Stephen, to your question, I don't see break even, I don't believe this quarter, I think it's going to be more of a first quarter thing, pre-dividend, and if we could figure out ways to cover that and, you know, do some, what I would say, capital.

Michael Nierenberg: But we're not really that concerned where we are today balance sheet wise with the legacy assets. I think it's Stephen to your question. I don't see break even. I don't believe this quarter. I think it's going to be more of a first quarter thing, pre-dividend. And if we could figure out ways to cover that and do some, what I would say capital re-engineering, I think that's how we're going to get there sooner rather than later. But in general, I think I would love to Q1. Great.

Speaker Change: Reengineering, I think that's how we're going to get there sooner rather than later. But in general, I think I would love to Q1.

Michael Nierenberg: Then I thought the slide on page 8, the bank lending was pretty interesting. Multi hasn't really changed much, right? The construction and non-multi-serie banks have become much less active or interested in that right now. Is that really where we should expect you to lean in? Or is this really a situation where you're looking for that kind of big bite that's significantly accretive, and it's just the timing of when that large opportunity presents itself as uncertain? I think it's both. I don't know that we need to lean into any one asset class going back to Tom's question.

Speaker Change: Great. And then, you know, I thought the slide on page eight, the bank lending was pretty interesting. I mean, multi hasn't really changed much, right? But construction and non-multi theory, you know, banks have become much less active or interested in that right now. Is that really where we should expect you to lean in? Or is this really a situation where you're looking for that kind of big bite that's significantly accretive and it's just the timing of when that large opportunity presents itself as uncertain?

Speaker Change: I think it's both, you know, I don't know that we need to lead into anyone as a class, go and back to Tom's question. You know, we have a large construction slash multi-family lender in Genesis.

Michael Nierenberg: We have a large construction slash multi-family lender in Genesis. There could be things that we do together between Genesis and Great AJAX as we go forward. The asset class itself, if you think about it on the multi-family side, is an extremely good read asset for us. So we'll continue to monitor that. And then you look at the opportunities that get created as a result of us owning Great AJAX. We see plenty of opportunities. So I think we're not, what I would say, we're not married to any one type of lending vertical. However, we don't want to put all our eggs in one basket.

Speaker Change: There could be things that we do together between Genesis and Great Ajax as we go forward. The asset class itself, if you think about it on the multifamily side, is an extremely good read asset for us, so we'll continue to monitor that, and then you look at the opportunities that get created as a result of us owning Great Ajax, we see plenty of opportunities.

Speaker Change: You know, we're not what I would say we're not married to any one type of lending vertical however, you know, we don't want to put all our eggs in one basket so I think it's going to be a little bit more diverse and the bank and Steven to your point the banks, you know, banks don't want to really do construction loans and they don't want to do other types of loans so it is a great opportunity for a genesis business but you know, there is a possibility going forward at some point that Great Ajax does something with them. [inaudible]

Michael Nierenberg: So I think it's going to be a little bit more diverse. And Stephen, to your point, the banks don't want to really do construction loans, and they don't want to do other types of loans. So it is a great opportunity for Genesis business, but there is a possibility going forward at some point that Great AJAX does some.

Michael Nierenberg: and then lastly, maybe too early to know just on the financing side. I notice in the DACA, you guys made some progress on both improving and reducing the cost of the financing facilities. But as you look forward, you know, do you think this vehicle will largely be financed using bank lines? Is it, you know, when you look to the markets for some type of CLO or, you know, if it's construction, we try to find a way to maybe find a note financing or some other financing alternative away from bank lines and, you know, CLOs. Yeah, I think that bank lines will be specific to the security portfolio, but at some point we'll want to hit, you know, the debt markets or, you know, the equity markets for some type of different security, is what I would say.

Speaker Change: Great. And then lastly, it may be too early to know just on the financing side. I noticed in the DACA, you guys made some progress on both improving and reducing the cost of the financing facilities. But as you look forward, you know, do you think this vehicle will largely be financed, using bank lines, is it, you know, when you look to the markets for some type of CLO or, you know, if it's construction, we try to find a way to maybe find those on note financing or some other.

Speaker Change: Financing alternative away from bank lines and, you know, CEOs.

Speaker Change: Yeah, I think the bank lines will be specific to the securities portfolio, but at some point we'll want to head, you know, the debt markets or, you know, the equity markets for some type of different security is what I would say.

Stephen Laws: Great. Appreciate the comments this morning, Michael. Thank you.

Stephen Laws: Hi, Steven.

Speaker Change: Great, appreciate the time, it's this morning, Michael, thank you.

Operator: This concludes our question in the answer session.

Speaker Change: Thanks for even.

Michael Nierenberg: I would like to turn the conference back over to Michael Nierenberg for any closing remarks. Appreciate the questions, everyone. And stay tuned. This is all about the future. You know, we're looking to take this vehicle and create great earnings for equity holders and shareholders that join us along this, what I would call endeavor going forward. So have a great week. Thanks for dialing in.

Speaker Change: It's concludes our question in the answer session. I would like to turn the conference back over to Michael Nierenberg for any closing remarks.

Operator: The conference is now concluded. Thank you for attending today's presentation. You may now.