Great Ajax Corp.

Good day and welcome to the Great Ajax Second Quarter 2024 Earnings Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Emma Bolling. Please go ahead.

Thank you, and good morning, everyone. I would like to thank you for joining us today for Great Ajax's second quarter 2024 earnings call. Joining me today are Michael Nirenberg, Chairman, CEO, and President of Rhythm Capital and CEO of Great Ajax, and Mary Doyle, Principal Financial Officer of Great Ajax. 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. 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. In addition, we will be discussing some non-GAAP financial measures during today's call. Reconciliations of these measures to the most directly comparable GAAP measures can be found in our earnings supplement. And with that, I will turn the call over to Michael.

Thanks, Emma. Good morning, everyone, and congratulations. For those of you that are joining us this morning, we appreciate you dialing in. Today's call is really about the future. When we first embarked on this from the rhythm perspective, we looked at this vehicle and thought, let's look back to the playbook that we established back at Fortress in 2013, where we saw dislocations in the MSR market. And based on that, we created a vehicle that we seeded with a billion dollars of capital. And then today, that vehicle is known as Rhythm Capital, which has $7.2 billion of equity capital, a large balance sheet, and is a world-class asset manager. We are going to look to do the same playbook with the difference this time looking at the commercial real estate market and the dislocations we see there and the huge needs for capital. So we're going to leverage the very same investment teams that came from Fortress with us here. And we're really excited about the challenge as we look ahead. The needs for capital in the commercial real estate market, I don't think it's something that we need to go into a huge depth on, but there are huge needs. When you look at the landscape around commercial real estate REITs, This vehicle today is clean. It has no legacy commercial real estate assets. And as we look going forward, what we're going to do is migrate from what I would call re-performing residential assets, sell down on those, or sell those down, other than the stuff that we need to keep for risk retention, and reinvest into current cash-flowing commercial real estate assets, which we've already begun to do so. The deal closed, I believe, on June 11th when Rhythm took over the management contract. And as we go forward, you know, full staff here at Rhythm focused on this business around the commercial real estate side. As we think about the commercial real estate investing environment, we think it's some of the best investment opportunities that we've seen, even looking back to the great financial crisis, whether you look at office or you look at some of the other things particularly where spreads are, for example, even on AAA CMBS where, you know, over the course of the past couple of weeks, we've made a few different investments there as we've sold down some of the legacy residential side. The one thing I want to be clear about, it's going to take time to get this vehicle back to a place where it's cash flow positive, it's growing in a meaningful way, But we're very confident that with our existing team, we're going to be able to do that. As we think about the dividend and we think about earnings, obviously, and Mary Doyle, who's the CFO of Great Ajax, is sitting with us. She'll talk a little bit about the financials this morning. But as we look at where we are, look at the dividend policy, yesterday we had a board meeting The board voted to keep the dividend the same. We will be evaluating the dividend quarter to quarter as we think about the ability to grow earnings. The vehicle will need more equity over time, and that equity will likely be hopefully raised in and around what we'll call opportunistic investments. So as you think about that, if the dividend yield where we could raise equity is in and around, call it 6% to 7%, we're able to deploy capital at 12%, is going to be hugely accretive for shareholders. For the quarter, when you look at the overall numbers, there were losses due to asset sales as the balance sheet continues to get turned over, as well as some mark-to-market issues. Mary's also going to talk about book value and how to think about that in the context of what was reported versus actual mark-to-market. That's kind of my opening comments. We'll now flip to the to the supplement which has been prepared and which is posted online. Again, Mary will take the financial side. I'll take some comments. If you start on page three, like I pointed out in the opening remarks, Rhythm Capital today has seven plus billion of equity capital, give or take a $40 billion balance sheet. We own Sculptor Asset Management, which is a large world-class asset management business. And really, you know, the Great Ajax vehicle is going to be focused, again, on commercial real estate opportunities, as well as some other opportunistic investments that we may see come across the platform, and we see plenty. The team, the same team that got us here on the rhythm side is going to be the very same team, plus some, that's going to be focused on Great Ajax. On the commercial real estate side, just a side note, when we look at the amount of real estate professionals we have here at Rhythm. There's about 30 folks between Rhythm and, you know, an opco that we own 50% of it at Greenborn. So we have a lot of real commercial real estate expertise around the house. This is not something we take lightly. And we're really excited again about the prospects as we look at that going forward. On the Sculptor side, Sculptor has about 35 folks as well, 35 to 40 folks in the real estate business, and they're a world-class commercial real estate investor. I'll let Mary talk a little bit, or as much as she wants, actually, about the financial highlights on page four, and then we'll get back into a couple other slides and then open up for Q&A. Sure.