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spk06: Please stand by. We're about to begin. Good afternoon, ladies and gentlemen. Welcome to the Great Ajax Corporation Q3 2022 Financial Results Call. At this time, all participants are in a listen-only mode, and please be advised that this call is being recorded. After the speaker's prepared remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star 1 on your telephone keypad. And if you would like to withdraw your question, simply press star 1 again. And now I'd like to turn the call over to the Great Ajax Chief Executive Officer, Mr. Larry Mendelson. Please go ahead, sir.
spk00: Thank you very much. Thank you very much, everybody, for joining us on the Great Ajax third quarter earnings call. I apologize for my voice. I'm getting over some laryngitis over the last few weeks, so it may come and go a little. Before we get started, I want to point you to page two of the presentation, the safe harbor disclosure and disclosure regarding forward-looking statements. And with that, we can jump to page three, the business overview and an introduction regarding the third quarter. Q3 was what I would call a patient quarter. However, there is some noise in the Q3 income statement numbers, which makes it a bit confusing, and we'll walk through this on today's call. Loan performance increased and loan cash flow velocity from property sales continued and has also continued into the fourth quarter of 2022. Repayments from borrower refinancing declined as you would expect. The significant cash flow velocity from the mortgage loans and mortgage loan JV structures increases income acceleration through the requirements of CECL, but it also rapidly pays down our loan and securities portfolio, as well as the associated asset-based financing, which can also reduce net interest income and the return on equity. At September 30, we had approximately 73 million of cash, as well as a significant amount of unencumbered securities and loans, And in Q3, we repurchased 66 million base amount of our preferred shares and the associated warrants. While these repurchases create a one-time charge, it creates very significant savings going forward beginning Q4. Our manager's data science guides the analysis of loan characteristics and geographic market metrics, which you'll see later are really important for performance and resolution pathway probabilities and its ability to source these mortgage loans through the long-standing relationships it's developed really enables us to acquire mortgage loans that we believe have a material probability of repayment and or long-term continuing re-performance. We've acquired loans now in 372 different transactions since 2014, 10 of which were in Q3 of 2022. We own just under 20% of the equity of our manager and have a zero basis. We don't market to market on our balance sheet or through the income statement. As a result, book value does not reflect market value of our 20% interest in our agency. Additionally, our affiliated servicer, Gregory Funding, provides us a significant advantage in non-performing and non-regular paying loan resolutions and timelines. And it also provides a data feedback loop for our manager's analytics. In today's volatile environment, having the portfolio teams and the analytics group working together with the servicer is really essential. We've certainly seen the benefit of this with significant increases in credit performance, as you'll see, our consistent prepayment for property sales, especially for delinquent loans, and with the securitization structures that we've done so far this year, the first-ever AAA-rated structures with 40% of the loans greater than 60 days delinquent at the time of issuance. Like our 20% equity interest in our manager, we have a 20% economic interest in the servicer, also at a minimal basis. We don't mark to market our equity interest in the servicer and the balance sheet or income statement either. Our servicer currently is evaluating a private equity round as part of rolling out a few new data technology driven programs through joint ventures. The data analytics and sourcing relationships of the manager and the effectiveness of our servicer enables us to broaden our investment reach through joint ventures with third-party institutional investors, and that way we can invest as a co-investor in very large transactions as well and control the outcome of the loan. The servicer's loan expertise is definitely appreciated by the JV partners, as several of our JV partners now pay the servicer for providing third-party diligence services for other transactions they've been working on. They've hired the servicer to solve problems they may have with other servicers they use. We still have low leverage. At September 30, our quarter and corporate leverage ratio is 3.3 times. Our third quarter average asset base leverage was 2.5 times. Our corporate leverage increased as we issued $110 million of unsecured debt securities and used a portion of the proceeds to redeem $66 million in preferred shares and their associated warrants and programs. We also own a 22% equity interest in Gaia Real Estate Corp. Gaia is currently a private equity REIT that primarily invests in repositioning multifamily properties in specific markets and a triple net lease freestanding veterinary clinic properties in conjunction with large national veterinary practice owners. We carry Gaia Our GAIA interest on our balance sheet at the lower cost or market. GAIA completed an additional round of equity in the first quarter of 22 at a premium to our carrying value, but our balance sheet income statement don't reflect any market. We expect that GAIA will raise additional equity and ultimately become a public company in 2023.
spk02: On page four, some highlights from the quarter.
spk00: Net interest income from loans and securities, including $1.9 million of interest income from the decrease in the present value of expected credit reserves under CECL, was approximately $10.5 million. Gross interest income, excluding from the decrease, was about $20 million, which is about $900,000 lower than in Q2. This primarily stems from having approximately $60 million less average interest-earning assets on the balance sheet in Q3 versus Q2, and having significantly more delinquent loans than expected become performing loans. As delinquent loans become performing, they provide more cash flow, but over a longer period. Since we buy loans at a discount, this increase in performance can extend expected duration, which can lower the yield. However, in a recession and in a declining housing price environment, our low LTV loans provide a material hedge as increased CPR and CER shortens duration and correspondingly increases yields materialism. A gap item to keep in mind is that interest income for our portion of joint ventures shows up in income from securities, not interest income from loans. For these joint ventures, servicing fees for securities are paid out of the securities waterfall. So our interest income from joint ventures is net of servicing fees, and our interest income from loans is gross of servicing fees. As a result, since our joint venture investments have been growing faster than our direct loan investments, gap interest income will be lower than if we directly purchased loans outside of joint ventures by the amount of the servicing fees, and gap servicing expense will decrease by the corresponding offsetting amount. An important part of discussing interest income is the payment performance of our loan portfolio. At September 30, almost 80% of our loan portfolio by UPB made at least 12 of the last 12 payments for 74% at June 30 and compared to a fraction of this at the time we purchased the loans. Our NPL purchases over the last 12 months increased materially relative to RPL purchases. Previous increases in housing prices helps maintain these payment and prepayment patterns and leads to decreases in the present value of expected reserves and the related income recognition of $1.9 million of unallocated loan reserves under CECL in the third quarter, as well as reserve releases under CECL in each of the previous six quarters. More than 50% of our full loan payoffs in the third quarter and continuing into Q4 were from loans that were materially delinquent when they paid off. While loans that become regular paying produce higher total cash flows over the length of the loan, they extend in duration because we purchase loans at discounts that can reduce percentage yield interest income. Loans that do not migrate to regular monthly pay status typically have matured in these shorter durations. We're seeing that prepayments from property sales, especially for non-regular paying loans, is continuing or even accelerating. Prepayment from rates from refinancing, as you might imagine, slowed in Q3 for refinancing eligible loans. Our weighted average cost of funds in Q3 was higher than Q2 by approximately 80 basis points. Some of this comes from the issuance of our fixed rate unsecured notes in late August of 2022. Given inflation and Fed rate increase expectations, we'd expect our cost of funds on the adjustable rate repurchase agreement to increase over time. All of our other debt is fixed rate, including our unsecured notes. Net income attributable to common holders was negative $16 million, or $0.71 a share. There's several items of note that had material impact on earnings in the third quarter. To make it a little easier to follow, we have a table that ties gap income to operating income on page 16 in the presentation, as well as in our 10Q. Operating earnings was $3.1 million, or $0.14 a share. Taxable income net of preferred dividends was $0.26 per share. Taxable income is very instructive of the current cash economics of the portfolio. Taxable income was primarily driven by continued prepayment and related loan purchase discount capture from non-performing loans and increasingly monthly payment performance from non-performing loans and regular performing loans. Somewhat offset by higher interest expense and $60 million less loans and securities on the back. Our acceleration of discount allowance related to credit performance and cash flow velocity was $1.9 million versus $1 million in Q2 versus $3.9 million in Q1. We expensed approximately $2.9 million related to gap fair value accrual of the warrant put rights from our Q2 issuance of preferred stock and warrants versus $3.6 in Q2 and $3.2 million in Q1. This number will continue to materially decline in Q4 as well. and a few one-time unusual items. A large one, but one that brings down significant savings going forward, is the repurchase of $66 million base for our outstanding preferred shares and the retirement of the associated warrants on common shares and the warrant put rates. This requires us to recognize a $5.7 million charge from the acceleration of deferred issuance costs and issue discount, as well as $8.8 million charge for the acceleration of expense related to the warrants and warrant put rates. The total one-time charge is approximately $14.5 million, or $0.64 a share. This repurchase more than offsets the cost of the $110 million secured note issuance in Q3 on a go-forward basis. As a result of the repurchase of preferred shares and less average equity going forward, the management fee will also be reduced by approximately $2 million a year. We recorded a loss on investments and affiliates of $500,000, or approximately $0.02 a share, as a result of the flow-through of the mark-to-market decline in the price of our common shares owned by our manager and servicer in Q3. Our manager receives a significant portion of their fee in shares, and changes in market value of the shares flows through to us based on our 20% ownership interest percentage. Our servicer also owns a significant number of shares. Book value was $1,375 at September 30 versus $1,498 at June 30. Book value decreased primarily as a result of the acceleration of deferred issuance costs through repurchase of the preferred and extinguishment of the associated warrants and put rights. We also paid a common dividend of 27 cents per share and preferred dividends of 5 cents during Q3. Book value change is non-cash other than the payment of the dividends and the warrant repurchase. There is a table on page 17 that details the change in book value. We do not mark to market our ownership interest in our manager and servicer and have close to a zero basis for these on our voucher. In late August, we issued 110 million of our eight and seven eighths unsecured notes, a significant portion of which was used to repurchase preferred shares and their associated warrants and put rights. The remainder is to be used for general corporate purposes and investments as we see some opportunities starting to present themselves, which we think will become more so over the next few quarters. At September 30, we had approximately $73 million of cash, and for Q3, we had average daily cash and cash equivalent of approximately $62 million. We had approximately $58 million of cash collections in the third quarter. As I mentioned earlier in this call, at September 30, we also have a significant amount of unencumbered securities from our securitizations and joint ventures, as well as unencumbered mortgage loans. Approximately 79.6% of our portfolio by UPB made at least 12 of their last 12 payments, compared to a fraction of this at the time of loan acquisition. This increased from 73% in Q1 and 74.2% in Q2. despite buying significantly more NPLs than RPLs since the third quarter of 2021. On page five, an overview of our loan portfolio. Purchased RPLs represent about 89% of our loan portfolio at the end of Q3. They represented 96% at the end of Q3 last year. We primarily purchase RPLs that have made less than seven consecutive payments, and NPLs that have certain loan level and underlying property specifications that our analytics suggest lead to positive payment migration, property sales, and prepayment on average.
spk02: We typically buy well-seasoned, lower LTV loans. On page six, you can really see this.
spk00: that we continue to buy and own lower LTD loans. Our overall RPL purchase price is approximately 41% of the current property value. We've always been focused on loans with lower loan to values with certain threshold levels of absolute dollars of equity and in target geographic locations. This has become even more important for RPLs and MPLs in the last six to nine months.
spk02: On page seven,
spk00: In Q3 and Q4 of 2021, we significantly increased our NPL purchases. NPLs on average have shorter duration than RPLs. For NPLs on our balance sheet, our overall purchase price is 47% of property value. As a result of a low loan to value and higher absolute dollars of equity on average for our NPL portfolio, we've accelerated prepayment on NPLs as borrowers can turn significant equity into cash, especially in a volatile economic environment. Under CECL, this can lead to reserve capture from the acceleration of unallocated credit reserve from the loan purchase discount. As I mentioned earlier, for both RPLs and NPLs, purchasing aged loan low LTV loans at more than 50% of discounts to property value provides a natural hedge to housing price declines and recession as resulting increases in CPR and CDR shorten duration and increase corresponding yields.
spk02: At September 30, approximately 78% of our loans and their underlying properties were in our target markets.
spk00: This is up from 72% a quarter ago. California continues to represent the largest segment of our loan portfolio, although there is a smaller percentage than in 2021 due to rapid prepayment. In 2021, California was nearly 30% of our portfolio. It's now approximately 22% of our portfolio. However, California has been nearly 40% of all prepayments. 80% of our California mortgage loans are primarily in Los Angeles, Orange, and San Diego counties. Florida represents approximately 17% of our portfolio, In southeast Florida, it's approximately 75% of that. Significant prepayments from property sales have continued there. We purchased an NPL portfolio of approximately $85 million in late Q3 of 2021, in which all of the loans are secured by properties in Miami, Dade, Broward, and Palm Beach counties in Florida. Since servicing transferred to our servicer Gregory funding in Q4 of 21, These loans have far outperformed expectations, both in prepayment from property sales, but even more so in monthly payment re-performance.
spk02: We continue to see demand for homes in our price ranges in our target markets. On page nine,
spk00: You can see that in September 30, almost 80% of our loan portfolio made at least 12 of the last 12 payments, compared to 74.2% in June 30. Almost 70% have made at least 24 of the last 24 payments. More than 81% have now made at least seven consecutive payments. This compares to a minimal fraction of that at the time of purchase. Significant increase in monthly performance is more notable, given that since Q3 of 21, we primarily purchased low LTV NPLs and not RPLs. Historically, as I mentioned earlier, historically, we've seen that when our purchase loans reach seven consecutive payments, there's a 92% chance that they get to 12 consecutive payments.
spk02: In subsequent events,
spk00: In late October, we co-invested with three third-party institutional investors in a joint venture to purchase almost 300 million UPV of very low LTV sloppy pay mortgage loans. The purchase price, including all joint venture formulation expenses, was 86.7% of UPV and only 40% of the underlying property values of 653 million. We own approximately 17.5% of the joint venture. Our loan servicer, Gregory Funding, is a loan servicer for the joint venture and was also the due diligence provider to the joint venture. On November 3rd, we declared a cash dividend of 27 cents per share to be paid on November 29, 2022 to holders of record on November 15, 2022. Our taxable income in 2022 so far is higher than cumulative 2022 distributions.
spk02: On page 11, some financial metrics.
spk00: Average loan yields excluding the accelerated income from CECL-related credit reserve releases were primarily unchanged. Average yield on beneficial interest declined primarily due to significant loan re-performance. For debt securities and beneficial interests, remember that yield is net of servicing fees and yield on loans is gross of servicing fees. Debt securities and beneficial interests is how our interest in our JVs are presented under GAAP. three years relative to loans, the GAAP reporting shows lower average asset yields by the amount of service increase. We would expect loan yields to decline a little in the Q4. We expect this for loans consolidated in our balance sheet for loans held in joint ventures that show a security to beneficial interest. Since we purchased loans at a discount, the increase in performance of delinquent loans, materially in excess of expectation, can extend duration or reduce yield. The significant absolute dollars of equity for our loans on average accelerated prepayment from home sales on delinquent loans, which released reserves under CECL, which also reduces yield over time, in the future, over time. This re-performance increases total cash flow, but we can reduce yield. The rise in interest rates, strangely, has accelerated the sale of properties for our delinquent loans with certain absolute dollar amounts of equity and certain underlying demographics of the borrower. Leverage continues to be low, especially for companies in our sector. We ended Q3 with asset-level debt at 2.7 times. Average asset-level debt for the quarter was 2.5 times. Our total average debt cost was higher in Q3 versus Q2, but this is primarily the result of rising base rates for repurchase agreements and the issuance of our unsecured notes in August. Fixed-rate debt is currently approximately 60% of our total debt and is increasing as a percentage as our repo debt pays down rapidly. Our total repurchase agreement related debt September 30 was approximately $463 million, down from $509 million at the end of June. $237 million was non-mark-to-market, non-recourse mortgage loan financing. $226 million is financing primarily on Class A1 senior bonds in our joint ventures. We also, as you can see at the bottom of page 12, have significant unencumbered assets. And with that, if anybody has any questions, I'm certainly happy to answer to the extent I know the answer.
spk06: Thank you, Mr. Mendelson. Ladies and gentlemen, at this time, if you have any questions, simply press star 1. And if you find that your question has already been addressed, you can remove yourself from the queue by pressing star 1 again. And we'll take our first question this afternoon from Kevin Barker of Piper Sandler.
spk04: Hi, Larry. This is actually Brad Capuzzi on for Kevin Barker. I hope you're feeling better. I just had a quick question. What do you expect for run rate operating EPS relative to the operating income reported today?
spk00: To some extent, it depends on kind of movements in swap rates and so forth. But we have increased our balance sheet materially at the end of October. and rates have gone up a little bit. That being said, prepayments on delinquent loans continued pretty much at the same level, perhaps even a little higher than what we saw. So I wouldn't expect that much difference other than there'll be some fluctuation based on what
spk01: little less predictable.
spk04: Awesome. And then, yeah.
spk00: Yeah, we've had Decembers where prepayments were really high and we've had Decembers where prepayments were average. So, but we'll run a thought probably in another two to three weeks looking for homes that are listed to give us a feel for December 31 prepayments.
spk04: Awesome. And then one follow-up. I know you touched on this a little bit, but can you quantify the impact of the higher short-term rates and when the offsets from the higher asset yields will start to play through?
spk00: Sure. The higher the portfolio, the pool, the joint venture that we bought at the end of October has higher yields. In fact, it's significantly higher yields in the recession than it has in a boom economy because of the LTVs and locations and the amount of equity and what it would cause prepayment rates, how prepayment rates would change. But the So we'll see an increase in yield from that investment. Existing yields should go down, I would say marginally, not considerably. Just distribution extension from performance. I would say obviously our securitization funding, that doesn't change. We'll see some increase in our debt securities funding costs. based on changes in SOFR, but even that has a lag effect because of roll dates. So a lot depends on how many more assets we put on between now and the end of the quarter. That being said, we're pretty patient only buying things that we really can't resist because we think there's going to be opportunities that's going to increase, not decrease, over the next three to four months.
spk01: Awesome. Thanks, Larry. That's it for me. Sure. Thank you. We'll go next now to Eric Hagan of BTIG.
spk05: Hey, you got Ethan Saggy on for Eric tonight. Just a couple from me. What do you see as catalysts for RPL spreads to tighten right now? Is there anything specific to the behavior outlook for RPLs which would support more tightening as compared to other mortgage credit?
spk00: Sure. Yeah, so let me, so let me kind of separate RPL a little bit from what I'll call new non-QM origination. RPLs, especially in large pools, are trading actually tighter than where the structured finance market is trading. You know, Fannie sold a pool of RPLs, sold four pools of RPLs. We bought the sloppy pay pool, but the two regular paying pools traded to in a yield of below sixes um uh back in and this was in late september early october and um and those were kind of three four five hundred million dollar pools the but and they were lower ltvs so in loan land there's clearly a distinction being made between what i call lower ltvs and higher ltvs and for example and one of the things we're seeing in the non-2m space a little bit in loans um is we're seeing that kind of uh the uh lpbs are going up and the properties um it seems that the 80 LCDs are really 85s and 90s, not 80s. So there's a little more what I'll call property credit risk in those than in kind of larger, very seasoned RPL pools. That being said, RPL pools of smaller amounts spreads are much wider, although still tighter than where we would necessarily expect them. The structured finance market is a little bit broken. You know, the unrated market, which is more kind of NPL, RPL, is, you know, most of the investors have outflows, so that's kind of a market that doesn't have much liquidity. One of the reasons why we spend so much time working with rating agencies to be able to do deals with 40% NPLs as AAA rated structures is because we could see that coming. And that's why we did two rated deals early in the year, in the middle year, April and June rated NPL deals. The rated market is also a bit choppy and illiquid, although there's definitely a difference between who the issuer is. We've seen We have a group of what I'll call regular investors who know our shelf and know how we think and also who co-invest with us in joint ventures. And they still have been kind of regular buyers in our securitization structures. But the credit spreads wide and dramatically. And I'm not sure it necessarily reflects what the true credit, you know, the probability of, you know, AAA RPLs not getting paid in full are, you know, pretty remote, absent high LTVs. You know, for us, our LTVs and our securitizations and loans are in the 40s. You know, high LTVs for us is 55. So, and purchase price to LTV is 39 to 40. So, it's, you know, in the pool we just saw in our joint venture. So, we're kind of making sure we buy things that we're almost indifferent as to what happens in the economy.
spk05: How sensitive do you think distressed or re-performing borrowers will be to lower home values? Does the fact that they've defaulted in the past make them more sensitive to certain factors now?
spk00: Yes. RPL, you know, the R stands for re-performing, which means sometimes in the past, you know, 15 years, they were not paying. And they tend to be a little more multiplier effect than, you know, a brand new loan. The other thing is that if you look at our loans, Our loans have an average origination date that's about 15 or 16 years ago for kind of pool-wide. Our portfolio goes from say 1994 origination all the way through 2022 origination. But on average, they have, you know, they were originated back in 2007. So one of the things we see significantly is, especially in a declining home price environment, is acceleration of selling by empty nesters. And so if you look at our portfolio, the percentage of empty nesters is about 50% of our portfolio. And by 2028, if our portfolio is stagnant, the percentage of empty nesters is 70% of our portfolio. So, and they are much more sensitive to declining home prices because if you were a borrower who had previous delinquency and HPA in the last three years caused you to have significant equity that you didn't previously have, in a declining home price environment, you actually accelerate the probability of selling your home to make sure you capture that equity.
spk01: Got it. That's a great color. Really appreciate it. Thanks. Sure. Sure. We'll take our next question now from Matt Holley.
spk07: Thanks, Larry. Good afternoon. Question is, did I get it correctly, what the yields are being negatively impacted by the phenomenon of an MPL carrying and being longer duration given it's performing?
spk01: Yeah.
spk00: When loans become regular paying, um they they have uh they can become they they don't always become longer duration um but they i would say on average they become a little longer duration um than say a loan that stays delinquent because the in today's market alone that keeps paying it's less likely to refinance than it would have say two or three years ago or even nine months ago. So in today's interest rate environment, a loan that becomes 12-month, 24-month paying is less likely to do a rate term refi. But because of what I'll call, like I mentioned before, the empty nesters scenario, we still see a significant amount of prepayment from property sales or performing loans. It's just not quite as predictable as it is for more delinquent loans.
spk07: Gotcha. Okay. I was just, typically that's a good thing for your business model. Yeah.
spk00: You get, you get, you know, one of the things, one of the oddities of kind of the last six months is, you know, typically you, a non-performing loan becomes performing, becomes more valuable. Now a non-performing loan becomes performing, somehow becomes less valuable.
spk07: That's absolutely incredible. Um, Okay, well, it just takes you longer to, I guess, collect. It doesn't really destroy the long-term value of it. It just takes you a little bit longer to how I think about it.
spk00: Right. In fact, you know, when they re-perform, you get over the life of the loan, you get more total cash flow. Right. And you collect the leverage from the delinquency just like you do when it doesn't perform. But you collect more cash flow than you would have if it didn't perform earlier. but it collected over a longer period of time on average. Gotcha. Which a year ago was probably not a distinguishable difference.
spk07: Right. Good. Interesting. Interesting dynamic. Thanks for pointing that out. Yeah. Larry, you were active in October. It's great to see the deals. When I think of the next, call it just two quarters, I mean, We've heard from some other people that are in your space. They think pipelines are clogged and things are going to get sold out from originators that can't securitize, can't get things out. When I look at your business, it's MPLs, it's RPLs, I guess it's kick-out loans, whatever you want to call it. But the sense is there's going to be a lot of supply. That's great for your business. Do you think that's going to happen? Or do you think some point there'll just be more loan sales from banks or fannie freddy and then you have you know where prices are going do you feel like you're going to just need to let you to use less leverage already under leverage but you feel like you can start to buy things even with no leverage at some point the answer the answer is yes um we think the opportunity set is
spk00: Certainly on the origination side, we think there's going to be some opportunities to be what I'll call lifeline or to potentially acquire an originator who can do specific things, like if nothing else, work on refinancing some of our delinquent borrowers and things like that. But we also are seeing, for example, in commercial land, We're seeing the community banks basically exit like commercial bridge business and the commercial bridge with renovation financing money business. And we're seeing that business being harder and harder for people to get financing facilities or even originators to fund material amounts of it. You know, having a permanent balance sheet and having joint venture partners, we can aggregate a significant amount of that. And that is rapidly becoming what I would call an unlevered double-digit yield business with points and fees. And so we're spending a lot of time. That's something we've done for years and years and years and years. But it got so competitive at rates that we didn't understand in late 2020, 2021. in early 2022 if we kind of step back a little. But that's something where we think there's going to be significant opportunity. We can see it coming. We're starting to see some opportunities that we're evaluating with our joint venture partners. And we've had three or four joint venture partners interested in it reach out to us about being able to expand that. So we think that's going to be an opportunity set as well. And we think that you will see Despite what the Fed said yesterday, we talk to borrowers every day. The recession has already started for a lot of borrowers. And so we think there's going to be some delinquency opportunity, purchase opportunities that'll start to kick in probably still three or four months away, but it's coming.
spk07: Yeah. I forgot about some of the AJAX capabilities with GAIA in the commercial space, and that could be just significant with all the bridge loans.
spk00: We've had a couple of private equity firms reach out to us about structuring joint ventures where they can put money to work and pay fees to great AJAX and to GAIA to help put assets together and oversee them for them and things like that, as well as GAIA and great AJAX co-investors.
spk07: Yeah. Well, that's a significant opportunity. And the first thing you said with the origination strategy, that could be interesting, too. I mean, it's an exciting time in your business. You're always sort of counter-cyclical, and you're really positioned to take advantage of this. I mean, it's nice to see you're cleaning up the balance sheet, too. That put liability expense, that sort of accounting drag, that's going to go lower, right, as you extinguish some of that fair value drag.
spk00: Yeah, yeah. Well, let's put it this way. We did 110 million in notes. Just the 66 million of preferred that we retired more than offsets 100% of the interest on the 110 million notes.
spk03: Unbelievable.
spk01: That's great.
spk00: We're requiring the preferred and the retiring put options. That by itself more than covers just the interest on the notes. Plus, we have cash left over from that for acquiring things.
spk07: Right. Well, I commend you for working on the balance sheet during this time. We'll wait for an update, but look forward to the progress you're making. Thanks a lot, Larry. Yeah.
spk00: That being said, with the economic environment and the broken markets, it's not quite as fun as it used to be.
spk07: Right. I hear that, what the yield curve is and what the Fed's being aggressive. I certainly hear that.
spk00: Yeah.
spk07: Yeah.
spk02: But the one thing we've definitely heard from our borrowers is that the recession has already started. Absolutely. Thanks for that. Yeah. Thank you. And ladies and gentlemen, just a reminder, star one, please, for any further questions today.
spk01: Mr. Middleton, it appears we have no further questions this afternoon. I'll turn the conference back to you for any closing comments.
spk00: Thank you very much, everybody, for joining us on the Great Ajax third quarter 2022 earnings call. I apologize if I was difficult to understand with my voice, but I appreciate you putting up with it. And thanks again for being on. And if you have any questions, feel free to reach out to us. We're happy to discuss anything we can. And with that, have a good evening.
spk06: Thank you, Mr. Mendelson. Again, ladies and gentlemen, that does conclude the Great HX Corporation Q3 2022 Earnings Conference Call. We'd like to thank you all so much for joining us, and again, wish you a great evening.
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