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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event
reported): October 21, 2024
GREAT AJAX CORP.
(Exact name of registrant as specified in charter)
| Maryland |
|
001-36844 |
|
46-5211870 |
(State or other jurisdiction of
incorporation) |
|
(Commission File Number) |
|
(IRS Employer Identification No.) |
799 Broadway
New York, NY 10003
(Address of principal executive offices)
Registrant’s telephone number, including
area code:
212-850-7770
Securities registered
pursuant to Section 12(b) of the Act:
| Title
of each class |
|
Trading
Symbols |
|
Name
of each exchange on which registered |
| Common stock, par value $0.01 per share |
|
AJX |
|
New York Stock Exchange |
Check the appropriate box below if the Form 8-K filing is intended
to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2.
below):
| ¨ |
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| |
|
| ¨ |
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| |
|
| ¨ |
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| |
|
| ¨ |
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth
company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934
(17 CFR §240.12b-2).
Emerging growth company ¨
If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards
provided pursuant to Section 13(a) of the Exchange Act. ¨
| us-gaap:CommonStockMember |
Common Stock |
| Item 1.01. |
Entry into a Material Definitive Agreement |
On October 18, 2024, Great Ajax Corp. (the “Company”) and
RCM GA Manager LLC, an affiliate of Rithm Capital Corp. (the “Manager”), entered into an amendment (the “Amendment”)
to the Management Agreement, dated June 11, 2024, by and among the Company, Great Ajax Operating Partnership L.P. and the Manager (the
“Management Agreement”), to provide that the Base Management and the Incentive Fee shall be payable in cash or, at the election
of the Manager, in shares of common stock of the Company, subject to the terms and conditions of the Amendment. All other terms of the
Management Agreement remain unchanged.
The description above is qualified in its entirety by reference to
the copy of the Amendment, which is filed as Exhibit 10.1 to this Current Report on Form 8-K and is incorporated herein by reference thereto.
| Item 2.02. |
Results of Operations and Financial Condition |
On October 21, 2024, the Company issued a press release regarding
its financial results for the third quarter ended September 30, 2024 (the “Press Release”). A copy of the Press Release
is attached hereto as Exhibit 99.1 and is available on the Company’s website.
The information provided in Item 2.02 of this Report, including Exhibit
99.1, is being furnished and shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be incorporated by reference
into any of the Company’s filings under the Securities Act of 1933, as amended, or the Exchange Act, unless expressly set forth as being
incorporated by reference into such filing.
The Press Release additionally describes the Company’s plans
to change its name to Rithm Property Trust Inc. (NYSE: RPT) and related matters. The name change is expected to take effect on or about
November 18, 2024, pursuant to customary notices.
| Item 9.01. |
Financial Statements and Exhibits |
EXHIBIT INDEX
SIGNATURES
Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| |
GREAT AJAX CORP. |
| |
|
|
| |
By: |
/s/ Mary Doyle |
| |
Name: |
Mary Doyle |
| |
Title: |
Principal Financial Officer |
Dated: October 21, 2024
Exhibit 10.1
FIRST AMENDMENT TO MANAGEMENT AGREEMENT
THIS FIRST AMENDMENT is entered
into as of October 18, 2024 (the “Amendment”) by and among Great Ajax Corp., a Maryland corporation
(“Ajax”), Great Ajax Operating Partnership LP, a Delaware limited partnership (the “Operating Partnership,”
and together with Ajax and any current or future subsidiaries of Ajax, the “Company”), and RCM GA Manager LLC, a Delaware
limited liability company (the “Manager”). This Amendment amends the Management Agreement, dated as of June 11,
2024 (the “Management Agreement”), by and among Ajax, the Operating Partnership and the Manager. Capitalized terms
used herein without definition shall have the meanings assigned to them in or by reference in the Management Agreement.
WITNESSETH:
WHEREAS, the parties hereto have previously entered
into the Management Agreement; and
WHEREAS, the parties desire to amend the Management
Agreement, as and upon the terms and conditions hereinafter specified.
NOW, THEREFORE, in consideration
of the premises and mutual covenants herein contained, the receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
1. Amendments
to Section 5 of the Management Agreement.
(a) Section 5(a) of
the Management Agreement is amended and restated in its entirety to read as follows:
“For the services rendered under
this Agreement, the Company shall pay a base management fee (the “Base Management Fee”), as described in Section 5(b) below,
and an incentive management fee (the “Incentive Fee”), as described in Section 5(c) below, to the
Manager. The Base Management Fee and the Incentive Fee will be calculated and payable quarterly with respect to each calendar quarter
(or part thereof that this Agreement is in effect) in arrears in cash, or at the election of the Manager, in shares of the common stock
of Ajax (“Ajax Common Stock”) in accordance with the terms of this Section 5.”
(b) Section 5(b) of
the Management Agreement is amended to add the following as new Section 5(b)(iii):
“The Base Management Fee shall
be payable in cash unless the Manager notifies the Ajax Board of Directors in conjunction with the delivery of the computation of the
Base Management Fee to the Ajax Board of Directors in accordance with Section 5(b)(ii) above, that the Manager elects
to receive all or a portion of the Base Management Fee in Ajax Common Stock and, subject to Section 5(e)(ii) below, the
portion of the Base Management Fee which the Manager elects to receive in Ajax Common Stock.
(c) The
introductory paragraph of Section 5(c) of the Management Agreement is amended and restated in its entirety to read as follows:
“The Manager will be entitled
to the Incentive Fee, which is payable quarterly in arrears in cash or, at the election of the Manager in accordance with this Section 5,
in shares of Ajax Common Stock, in an amount equal to 20% of the dollar amount by which (i) Earnings Available for Distribution (as
defined below) exceeds the product of (A) the average common book value per share (excluding fair value marks, impairments, transaction/
deal expenses and associated tax impact and such other items that in the judgment of the Company officers should be excluded) of the Ajax
Common Stock during such calendar quarter and (B) 8%. Notwithstanding either of the foregoing, no Incentive Fee will be payable to
the Manager with respect to any period unless the Company’s cumulative Earnings Available for Distribution is greater than zero
for the most recently completed four calendar quarters (which cumulative Earnings Available for Distribution shall be reset at the completion
of every fourth quarter following the date hereof and each subsequent fourth quarter thereafter (each, a “Reset Date”)
so as not to take into account prior calendar quarters), or, if less, (i) the number of completed calendar quarters since the date
hereof or (ii) the number of completed calendar quarters since the last Reset Date.”
(d) Section 5(c) of
the Management Agreement is amended to add the following as new Sections 5(c)(ii) and (iii):
“(ii) The
Manager will compute the Incentive fee, if any, within 30 days after the end of the calendar quarter with respect to which such Incentive
Fee is payable and promptly deliver such calculation to the Ajax Board of Directors. The amount of the Incentive Fee shown in the calculation
will be due and payable no later than the date which is five Business Days after the date of delivery of such computation to the Ajax
Board of Directors.
(iii) The
Incentive Fee shall be payable in cash unless the Manager notifies the Ajax Board of Directors in conjunction with the delivery of
the computation of the Incentive Fee to the Ajax Board of Directors in accordance with Section 5(c)(ii) above, that
the Manager elects to receive all or a portion of the Incentive Fee in Ajax Common Stock and, subject to Section 5(e)(ii) below,
the portion of the Incentive Fee which the Manager elects to receive in Ajax Common Stock.”
(e) Section 5
of the Management Agreement is amended to add the following as new Section 5(e):
“(i) In the event that any
portion of Base Management Fee or Incentive Fee shall be payable in shares of Ajax Common Stock in accordance with this Section 5,
the value of each share of Ajax Common Stock shall be deemed to be the volume-weighted average share price (as determined by reference
to a Bloomberg terminal) of the Ajax Common Stock for the five (5) Business Days immediately preceding the date on which the calculation
of Base Management Fee or Incentive Fee is delivered to the Ajax Board of Directors in accordance with Section 5(b)(ii) or
Section 5(c)(ii) above, as applicable.
(ii) Notwithstanding anything
herein to the contrary, (i) no amounts of the Base Management Fee or the Incentive Fee shall be payable in Ajax Common Stock to the
extent the ownership of such additional number of shares of Ajax Common Stock by the Manager would violate the limit on ownership of Ajax
Common Stock set forth in in Ajax’s Articles of Incorporation as then in effect, after giving effect to any waiver from such limit
that the Board has granted or may grant to the Manager from time to time, and (ii) the issuance of any Ajax Common Stock to the Manager
will be subject to compliance with all applicable requirements of federal, state, or foreign securities laws and with the requirements
of any stock exchange or market system upon which the Ajax Common Stock may then be listed.
(iii) The Manager shall not offer,
pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right
or warrant for the sale of, lend or otherwise dispose of or transfer, directly or indirectly, any of the shares of Ajax Common Stock it
receives in payment of the Base Management Fee or Incentive Fee for a one hundred eighty (180) day period commencing on the date of receipt
of such shares and ending on the third anniversary of receipt thereof.”
2. Reference
to and Effect on the Management Agreement. From and after the date of this Amendment, this Amendment shall become a part of the Management
Agreement and shall be read together and shall have effect as if the provisions of the Management Agreement and this Amendment were contained
in one agreement, and each reference in the Management Agreement to “this Agreement,” or “hereof,” “hereunder”
or words of like import, and each reference in any other document to the Management Agreement shall mean and be a reference to such Management
Agreement, as amended or modified hereby. Except as expressly amended or modified hereby, the Management Agreement shall remain in full
force and effect and is hereby ratified and confirmed by the parties hereto.
3. Miscellaneous.
This Amendment may be executed in one or more counterparts, each of which shall be deemed an original and all of which taken together
shall constitute one and the same instrument. The headings in this Amendment are inserted for convenience of reference only and shall
not be a part of or control or affect the meaning hereof. This Amendment shall be governed by, enforced and construed and interpreted
in a manner consistent with the provisions of the Management Agreement.
[Signature Page Follows]
IN WITNESS WHEREOF, the parties have caused
this Amendment to be executed as of the date first written above by their duly authorized representatives.
| |
GREAT AJAX CORP. |
| |
|
| |
|
| |
By: |
/s/ Michael Nierenberg |
| |
Name: |
Michael Nierenberg |
| |
Title: |
Chief Executive Officer |
| |
|
| |
GREAT AJAX OPERATING PARTNERSHIP, LP |
| |
|
| |
By: |
Great Ajax Operating LLC, general partner |
| |
|
| |
By: |
Great Ajax Corp., managing member |
| |
|
| |
|
| |
By: |
/s/ Michael Nierenberg |
| |
Name: |
Michael Nierenberg |
| |
Title: |
Chief Executive Officer |
| |
|
| |
|
| |
RCM GA MANAGER LLC |
| |
|
| |
|
| |
By: |
/s/ Nicola Santoro, Jr. |
| |
Name: |
Nicola Santoro, Jr. |
| |
Title: |
Chief Financial Officer |
Exhibit 99.1
GREAT AJAX CORP. ANNOUNCES RESULTS FOR THE QUARTER
ENDED SEPTEMBER 30, 2024 AND
ANNOUNCES INTENT TO REBRAND TO RITHM
PROPERTY TRUST INC.
New York, NY—October 21,
2024 —Great Ajax Corp. (NYSE: AJX, “Great Ajax” or the “Company”) today announced the following financial
results for the quarter ended September 30, 2024.
Third Quarter Financial Highlights:
| · | GAAP net loss attributable to common stockholders of $(8.0) million, or $(0.18) per diluted share1 |
| | | |
| · | Earnings Available for Distribution of $(5.4) million or $(0.12) per diluted common share1,2 |
| | | |
| · | Book value per common share of $5.47 at September 30, 20241 |
| | | |
| · | Paid a common dividend of $2.7 million, or $0.06 per common share |
| | |
Q3 2024 | | |
Q2 2024 | |
| Summary of Operating Results | |
| | | |
| | |
| GAAP Net Loss per
Diluted Common Share1 | |
$ | (0.18 | ) | |
$ | (0.32 | ) |
| GAAP Net Loss | |
$ | (8.0 | )million | |
$ | (12.7 | )million |
| | |
| | | |
| | |
| Non-GAAP Results | |
| | | |
| | |
| Earnings Available for Distribution
per Diluted Common Share1,2 | |
$ | (0.12 | ) | |
$ | (0.24 | ) |
| Earnings Available for Distribution2 | |
$ | (5.4 | )million | |
$ | (9.6 | )million |
| | |
| | | |
| | |
| Book Value | |
| | | |
| | |
| Book Value per Common Share1 | |
$ | 5.47 | | |
$ | 5.56 | |
| Book Value | |
$ | 246.1 | million | |
$ | 253.6 | million |
| | |
| | | |
| | |
| Common Dividend | |
| | | |
| | |
| Common Dividend per Share | |
$ | 0.06 | | |
$ | 0.06 | |
| Common Dividend | |
$ | 2.7 | million | |
$ | 2.2 | million |
1. Per common share calculations for both
GAAP net loss and Earnings Available for Distribution are based on 45,327,254 and 39,344,128 weighted average diluted shares for the
quarters ended September 30, 2024 and June 30, 2024, respectively. Per share calculations of Book Value are based on
44,978,969 and 45,605,549 common shares outstanding as of September 30, 2024 and June 30, 2024, respectively.
2. Earnings Available for Distribution is a
non-GAAP financial measure. For a reconciliation of Earnings Available for Distribution to GAAP net loss, as well as an explanation
of this measure, please refer to the section entitled Non-GAAP Financial Measures and Reconciliation to GAAP Net Loss.
“When we completed the strategic transaction with
Great Ajax, we were clear about our mission: to transform the Company from a legacy residential mortgage vehicle into an opportunistic
real estate platform,” said Michael Nierenberg, Chief Executive Officer of Rithm Capital Corp. “During the third quarter,
we made significant progress towards doing so by selling down $148 million UPB of legacy assets and growing our commercial real estate
debt portfolio to over $100 million UPB. We are excited about the future of the Company and are committed to providing shareholders with
growth and value creation.”
Third Quarter Company Highlights:
| · | Loan and Security Sales: Sold residential loans and securities with approximately $148.0 million in unpaid principal balance
(“UPB”), generating net proceeds of approximately $31.7 million. |
| | | |
| · | Commercial Real Estate Investments: Acquired $81.9 million in UPB of commercial mortgage-backed securities (“CMBS”),
bringing our total investment in CMBS to $101.9 million, as we continue to execute on our transition into the commercial real estate sector. |
| | | |
| · | Capital Activity: On September 6, 2024, the Company filed a shelf registration statement with
the U.S. Securities and Exchange Commission (“SEC”) to increase the aggregate maximum offering price of its common stock,
preferred stock, debt securities, warrants and units to $400 million. The filed shelf registration statement when declared effective by the SEC will replace the Company’s prior shelf registration statement. The securities described in
the recently filed shelf registration statement may not be sold and offers to buy may not be accepted prior to the time the registration statement
becomes effective. This press release shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be
any sale of the securities in any state or other jurisdiction in which such offer, solicitation, or sale would be unlawful prior to registration
or qualification under the securities laws of any such state or other jurisdiction. |
| | | |
| · | Dividend Declaration: On October 18, 2024, our board of directors declared a cash dividend of $0.06 per common share to
be paid on November 29, 2024, to stockholders of record as of November 15, 2024. |
Rebranding to Rithm Property Trust
In connection with the Company’s
strategic transaction with Rithm Capital Corp. (“Rithm”), the Company expects to change its name and rebrand as Rithm
Property Trust Inc. (“Rithm Property Trust”) and to change its ticker symbol on the New York Stock Exchange to
“RPT”. The rebranding initiative highlights a new chapter in the Company’s evolution as an opportunistic real
estate investment platform.
The name change is expected to take effect during the fourth quarter
of 2024, pursuant to customary notices
Earnings Conference Call
Great Ajax will host a conference call at 8:00
AM ET on Monday, October 21, 2024, to review its financial results for the third quarter of 2024. The conference call may be accessed
by dialing 1-844-746-0740 (from within the U.S.) or 1-412-317-5106 (from outside of the U.S.) ten minutes prior to the scheduled start
of the call; please reference “Great Ajax Third Quarter 2024 Earnings Call.” In addition, participants are encouraged to pre-register
for the conference call at https://dpregister.com/sreg/10193667/fdb89356c2.
A simultaneous webcast of the conference call will
be available to the public on a listen-only basis at www.greatajax.com. Please allow extra time prior to the call to visit the
website and download any necessary software required to listen to the internet broadcast.
A telephonic replay of the conference call will
also be available two hours following the call’s completion through 11:59 P.M. Eastern Time on Monday, October 28 2024, by dialing
1-877-344-7529 (from within the U.S.) or 1-412-317-0088 (from outside of the U.S.); please reference access code “6885966.”
About Great Ajax Corp.
Great Ajax Corp. is a real estate investment platform
externally managed by RCM GA Manager LLC, an affiliate of Rithm. Great Ajax has historically focused on acquiring, investing in and managing
re-performing loans and non-performing loans secured by single-family residences and commercial properties. In connection with its recent
strategic transaction with Rithm, the Company expects to transition to a flexible commercial real estate focused investment strategy.
Great Ajax is a Maryland corporation that is organized and conducts its operations to qualify as a real estate investment trust (“REIT”)
for federal income tax purposes.
Forward-Looking Statements
This press release contains certain information
which constitutes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.
Words such as “may,” “will,” “seek,” “believes,” “intends,” “expects,”
“projects,” “anticipates,” “plans” and “future” or similar expressions are intended to
identify forward-looking statements, including the Company’s expectation of the effective date of the name change and its new ticker
symbol on the New York Stock Exchange. These statements are not historical facts. These forward-looking statements represent management’s
current expectations regarding future events and are subject to the inherent uncertainties in predicting future results and conditions,
many of which are beyond our control. Accordingly, you should not place undue reliance on any forward-looking statements contained herein.
For a discussion of some of the risks and important factors that could affect such forward-looking statements see the sections entitled
“Cautionary Statement Regarding Forward-Looking Statements”, “Risk Factors” and “Management’s Discussion
and Analysis of Financial Condition and Results of Operations” in the Company’s most recent annual and quarterly reports and
other filings, including the Company’s recent proxy statements, filed with the Securities and Exchange Commission. The Company expressly
disclaims any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events
or otherwise, except as may be required by law.
| Investor Relations |
| 646-868-5483 |
| IR@great-ajax.com |
GREAT AJAX CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands except per share amounts)
(Unaudited)
| | |
Three months ended | |
| | |
September 30, 2024 | | |
June 30, 2024 | |
| Revenues: | |
| | |
| |
| Interest income | |
$ | 12,348 | | |
$ | 11,915 | |
| Interest expense | |
| (8,660 | ) | |
| (11,567 | ) |
| Net interest income | |
| 3,688 | | |
| 348 | |
| Net change in the allowance for credit losses | |
| (857 | ) | |
| — | |
| Net interest income after the net change in the allowance for credit losses | |
| 2,831 | | |
| 348 | |
| Loss from investments in affiliates | |
| (624 | ) | |
| (974 | ) |
| Mark to market loss on mortgage loans held-for-sale, net | |
| (1,712 | ) | |
| (6,488 | ) |
| Other loss | |
| (3,278 | ) | |
| (1,844 | ) |
| Total loss, net | |
| (2,783 | ) | |
| (8,958 | ) |
| Expenses: | |
| | | |
| | |
| Loan servicing fees | |
| 593 | | |
| 1,324 | |
| Management fee | |
| 2,235 | | |
| 2,173 | |
| Professional fees | |
| 1,083 | | |
| 855 | |
| Fair value adjustment on mark to market liabilities | |
| — | | |
| (4,430 | ) |
| Other expense | |
| 1,286 | | |
| 4,753 | |
| Total expense | |
| 5,197 | | |
| 4,675 | |
| Loss before provision for income taxes | |
| (7,980 | ) | |
| (13,633 | ) |
| Provision for income taxes (benefit) | |
| (23 | ) | |
| (772 | ) |
| Net loss | |
| (7,957 | ) | |
| (12,861 | ) |
| Less: net income/(loss) attributable to the non-controlling interest | |
| 72 | | |
| (119 | ) |
| Net loss attributable to the Company | |
| (8,029 | ) | |
| (12,742 | ) |
| Net loss attributable to common stockholders | |
$ | (8,029 | ) | |
$ | (12,742 | ) |
| | |
| | | |
| | |
| Net loss per share of common stock: | |
| | | |
| | |
| Basic | |
$ | (0.18 | ) | |
$ | (0.32 | ) |
| Diluted | |
$ | (0.18 | ) | |
$ | (0.32 | ) |
| Weighted average number of shares of common stock outstanding: | |
| | | |
| | |
| Basic | |
| 45,327,254 | | |
| 39,344,128 | |
| Diluted | |
| 45,327,254 | | |
| 39,344,128 | |
GREAT AJAX CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands except per share amounts)
| | |
September 30, 2024 | | |
December 31, 2023 | |
| Assets: | |
| (Unaudited) | | |
| | |
| Cash and cash equivalents | |
$ | 84,016 | | |
$ | 52,834 | |
| Mortgage loans held-for-sale, net | |
| 31,315 | | |
| 55,718 | |
| Mortgage loans held-for-investment, net | |
| 403,056 | | |
| 864,551 | |
| Investments in securities available-for-sale, at fair value | |
| 166,650 | | |
| 131,558 | |
| Investments in securities held-to-maturity | |
| 47,144 | | |
| 59,691 | |
| Investment in equity securities at fair value | |
| 21,918 | | |
| — | |
| Investments in beneficial interests | |
| 88,996 | | |
| 104,162 | |
| Other assets | |
| 15,056 | | |
| 67,777 | |
| Total Assets | |
$ | 858,151 | | |
$ | 1,336,291 | |
| | |
| | | |
| | |
| Liabilities and Equity | |
| | | |
| | |
| Liabilities: | |
| | | |
| | |
| Secured borrowings, net | |
$ | 266,776 | | |
$ | 411,212 | |
| Borrowings under repurchase transactions | |
| 231,464 | | |
| 375,745 | |
| Convertible senior notes | |
| — | | |
| 103,516 | |
| Notes payable, net | |
| 107,432 | | |
| 106,844 | |
| Warrant liability | |
| — | | |
| 16,644 | |
| Accrued expenses and other liabilities | |
| 5,386 | | |
| 11,435 | |
| Total Liabilities | |
| 611,058 | | |
| 1,025,396 | |
| | |
| | | |
| | |
| Equity: | |
| | | |
| | |
| Preferred stock $0.01 par value, 25,000,000 shares authorized | |
| | | |
| | |
| Series A 7.25% Fixed-to-Floating Rate Cumulative Redeemable, $25.00 liquidation preference per share, zero shares issued and outstanding at September 30, 2024 and 424,949 shares issued and outstanding at December 31, 2023 | |
| — | | |
| 9,411 | |
| Series B 5.00% Fixed-to-Floating Rate Cumulative Redeemable, $25.00 liquidation preference per share, zero shares issued and outstanding at September 30, 2024 and 1,135,590 shares issued and outstanding at December 31, 2023 | |
| — | | |
| 25,143 | |
| Common stock $0.01 par value, 125,000,000 shares authorized, 44,978,969 shares issued and outstanding at September 30, 2024 and 27,460,161 shares issued and outstanding at December 31, 2023 | |
| 466 | | |
| 285 | |
| Additional paid-in capital | |
| 423,623 | | |
| 352,060 | |
| Treasury stock | |
| (11,594 | ) | |
| (9,557 | ) |
| Retained deficit | |
| (158,126 | ) | |
| (54,382 | ) |
| Accumulated other comprehensive loss | |
| (8,279 | ) | |
| (14,027 | ) |
| Equity attributable to stockholders | |
| 246,090 | | |
| 308,933 | |
| Non-controlling interests | |
| 1,003 | | |
| 1,962 | |
| Total Equity | |
| 247,093 | | |
| 310,895 | |
| Total Liabilities and Equity | |
$ | 858,151 | | |
$ | 1,336,291 | |
NON-GAAP FINANCIAL MEASURES AND RECONCILIATION TO GAAP NET LOSS
“Earnings available for
distribution” is a non-GAAP financial measure of the Company’s operating performance, which is used by management to
evaluate the Company’s performance excluding: (i) net realized and unrealized gains and losses on certain assets and
liabilities; (ii) other net income and losses not related to the performance of the investment portfolio; and (iii) non-capitalized
transaction related expenses.
The Company has three primary variables that impact
its performance: (i) Net interest margin on assets held within the investment portfolio; (ii) realized and unrealized gains or losses
on assets held within the investment portfolio, including any impairment or reserve for expected credit losses; and, (iii) the Company’s
operating expenses and taxes.
The Company’s definition of earnings
available for distribution excludes certain realized and unrealized losses, which although they represent a part of the
Company’s recurring operations, are subject to significant variability and are generally limited to a potential indicator of
future economic performance. Within other net income and losses, management primarily excludes equity-based compensation
expenses.
With regard to non-capitalized transaction-related
expenses, management does not view these costs as part of the Company’s core operations, as they are considered by management to
be similar to realized losses incurred at acquisition. Non-capitalized transaction-related expenses generally relate to legal and valuation
service costs, as well as other professional service fees, incurred when the Company acquires certain investments.
Management believes that the adjustments to
compute “earnings available for distribution” specified above allow investors and analysts to readily identify and track
the operating performance of the assets that form the core of the Company’s activity, assist in comparing the core operating
results between periods, and enable investors to evaluate the Company’s current core performance using the same financial
measure that management uses to operate the business. Management also utilizes earnings available for distribution as a financial
measure in its decision-making process relating to improvements to the underlying fundamental operations of the Company’s
investments, as well as the allocation of resources between those investments, and management also relies on earnings available for
distribution as an indicator of the results of such decisions. Earnings available for distribution excludes certain recurring items,
such as gains and losses (including impairment) and non-capitalized transaction-related expenses, because they are not considered by
management to be part of the Company’s core operations for the reasons described herein. As such earnings available for
distribution is not intended to reflect all of the Company’s activity and should be considered as only one of the factors used
by management in assessing the Company’s performance, along with GAAP net income which is inclusive of all of the
Company’s activities.
The Company views earnings available for
distribution as a consistent financial measure of its portfolio’s ability to generate income for distribution to common
stockholders. Earnings available for distribution does not represent and should not be considered as a substitute for, or superior
to, net income or as a substitute for, or superior to, cash flows from operating activities, each as determined in accordance with
GAAP, and the Company’s calculation of this financial measure may not be comparable to similarly entitled financial measures
reported by other companies. Furthermore, to maintain qualification as a REIT, U.S. federal income tax law generally requires that
the Company distribute at least 90% of its REIT taxable income annually, determined without regard to the deduction for dividends
paid and excluding net capital gains. Because the Company views earnings available for distribution as a consistent financial
measure of its ability to generate income for distribution to common stockholders, earnings available for distribution is one
metric, but not the exclusive metric, that the Company’s board of directors uses to determine the amount, if any, and the
payment date of dividends on common stock. However, earnings available for distribution should not be considered as an indication of
the Company’s taxable income, a guaranty of its ability to pay dividends or as a proxy for the amount of dividends it may pay,
as earnings available for distribution excludes certain items that impact its cash needs.
Reconciliation of GAAP Net Loss to Earnings
Available for Distribution
(Dollars in thousands except per share amounts)
(Unaudited)
The table below provides a reconciliation of earnings
available for distribution to the most directly comparable GAAP financial measure:
| | |
Three months ended | |
| | |
September 30, 2024 | | |
June 30, 2024 | |
| Net loss attributable to common stockholders | |
$ | (8,029 | ) | |
$ | (12,742 | ) |
| Adjustments | |
| | | |
| | |
| Provision for income taxes (benefit) | |
| (23 | ) | |
| (772 | ) |
| Net income (loss) attributable to non-controlling interest | |
| 72 | | |
| (119 | ) |
| Realized and unrealized gains | |
| 1,640 | | |
| 2,058 | |
| Expenses related to the Strategic Transaction | |
| 1,010 | | |
| 883 | |
| Other adjustments | |
| (30 | ) | |
| 1,094 | |
| Earnings Available for Distribution | |
$ | (5,360 | ) | |
$ | (9,598 | ) |
| | |
| | | |
| | |
| Basic Earnings Available for Distribution per common share1 | |
$ | (0.12 | ) | |
$ | (0.24 | ) |
| Diluted Earnings Available for Distribution per common share1 | |
$ | (0.12 | ) | |
$ | (0.24 | ) |
1
Per common share calculations for both GAAP net loss and Earnings Available for Distribution are based on 45,327,254 and 39,344,128 weighted
average diluted shares for the quarters ended September 30, 2024 and June 30, 2024, respectively.
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