Great Ajax Corp. (NYSE:AJX) Q3 2023 Earnings Call Transcript
Great Ajax Corp. (NYSE:AJX) Q3 2023 Earnings Call Transcript November 5, 2023
Operator: Good afternoon, ladies and gentlemen. Welcome to the Great Ajax Corporation Q3, 2023 Financial Results Conference call. At this time, all participants are in a listen only mode and please be advised that this call is being recorded. Now, at this time, I'll turn things over to your host, Mr. Larry Mendelsohn, Chief Executive Officer. Mr. Mendelsohn, please go ahead.
Lawrence Mendelsohn: Thank you. Thank you, everyone, for joining us for the Great Ajax Corp. third quarter call. Before we get started, I want to just point out, page number two, the Safe Harbor Disclosure. Along with me on this call are Russell Schaub, our President, Mary Doyle, our CFO. As I'm sure you have seen, there are several corporate and strategic developments in Q3 2023 and into Q4 2023, which we will discuss a bit later in this call. In Q3 2023, loan performance declined by a small amount as did loan cash flow velocity from reinstatements on delinquent loans and from sales of homes. The slight cash collections decreased from home sales and reinstatements is primarily seasonality-based. Pre-payments from borrowers refinancing their mortgages continued their slower pace as you would expect given current mortgage rates.
The small rise in delinquency is primarily the result of softening economic conditions. The regular payment performance of our mortgage loans and mortgage loans in our joint venture structures from non-performing loans can extend duration and decrease yield. As a result, the small decline in monthly performance actually can increase yield going forward. At September 30, we had approximately $64 million in cash as well as significant amount of unencumbered securities. If we move to page three, the business overview. Our manager's data science guides the loan characteristics and geographic market metrics for performance and property value change. The manager sources loans through long-standing relationships. We've acquired loans in 383 different transactions since 2014, only two small transactions in the third quarter.
We have a 19.8% equity interest in our manager. We believe our affiliated Servicer, Gregory Funding provides a strategic advantage in special servicing and provides a data feedback loop for our manager's analytics. We have certainly seen significant increases in loan performance and our servicer's performance has enabled us to have AAA rated structures that permit up to approximately 40% of loans to be more than 60 days delinquent at the time of securitization. Like our 19.8% equity interest in our manager, we have a 21.6% economic interest in our servicer between shares and warrants. Our servicer's currently is rolling out some new data and technology-driven programs through strategic joint ventures and MSR joint ventures. Its first MSR joint venture is expected to close in December.
We own a 22% equity interest in Gaea Real Estate Corp. Gaea is an equity REIT that primarily invest in repositioning multi-family properties in specific markets and in triple net lease freestanding veterinary clinic properties in conjunction with large national owners of veterinary practices. Gaea internalized its manager effective September 1, 2023. We carry Gaea, our Gaea interest on balance sheet at the lower of cost to market. We expect Gaea to raise additional equity. The current environment of bank credit tightening and CRE loan disruption creates opportunities and optionality for Gaea. On page four, net interest income from loans and securities excluding interest income or expense from the application of CECL was approximately $3 million in Q3.
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