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Financial report summary
?Risks
- Our loans and investments expose us to risks associated with debt-oriented real estate investments generally.
- We operate in a competitive market for investment opportunities and competition may limit our ability to originate or acquire our target investments and could also affect the pricing of these investments.
- Fluctuations in interest rates and credit spreads could reduce our ability to generate income on our loans and other investments, which could lead to a significant decrease in our results of operations, cash flows and the market value of our investments and may limit our ability to pay distributions to our stockholders.
- A prolonged economic slowdown, a lengthy or severe recession or declining real estate values could impair our investments and harm our operations.
- Most commercial real estate loans are nonrecourse loans and the assets securing these loans may not be sufficient to protect us from a partial or complete loss if a borrower defaults on a loan, which could materially and adversely affect us.
- Our portfolio of investments may be concentrated by geography, property type or sponsor, which could subject us to increased risk of loss.
- Real estate valuation is inherently subjective and uncertain, and is subject to change, especially during periods of volatility.
- The lack of liquidity of our investments may adversely affect our business, including our ability to value, finance and sell our investments.
- The due diligence process that we undertake with regard to investment opportunities may not reveal all facts that may affect an investment and if we incorrectly evaluate the risks of our investments, we may experience losses.
- The timing of loan investment repayments is difficult to predict and may adversely affect our financial performance and the value of certain of our investments.
- Difficulty or delays in redeploying the proceeds from repayments of our existing loans and investments may cause our financial performance and returns to stockholders to suffer.
- We may be subject to lender liability claims, and if we are held liable under such claims, we could be subject to losses.
- Liability relating to environmental matters may impact the value of our investments and the properties underlying our investments.
- The properties underlying our investments may be subject to other unknown liabilities that could adversely affect the value of these properties and, as a result, our investments.
- Commercial real estate debt investments may be subject to delinquency, foreclosure and loss, which may adversely impact our business, results of operations and financial condition.
- Loans on properties in transition may involve a greater risk of loss than conventional mortgage loans.
- Our potential investments in CMBS, CRE CLOs and other similarly structured finance investments, as well as those we structure, sponsor or arrange, may pose additional risks, including the risks arising from the securitization process and the risk that the special servicer may take actions that could adversely affect our interests.
- Declines in the market values of any available-for-sale investments may adversely affect our results of operations and financial condition.
- Any distressed loans or investments we make, or loans and investments that later become distressed, may subject us to losses and other risks.
- The success of our investment strategy depends, in part, on our ability to successfully effectuate loan modifications and/or restructurings.
- Financial or operating difficulties of our borrowers may result in our being subject to bankruptcy proceedings.
- We have in the past taken, and may in the future take, title to properties securing certain of our loan investments, which could result in losses that harm our results of operations and financial condition.
- If we become the owner of real estate, we are subject to the risks inherent in the ownership and operation of real estate and the construction and development of real estate.
- Investments in nonconforming and non-investment grade rated commercial real estate loans or securities involve increased risk of loss.
- Insurance on commercial real estate loans may not cover all losses.
- We depend on third-party service providers, including our loan servicers and our managed service provider, for a variety of services related to our business. We are, therefore, subject to the risks associated with third-party service providers.
- Increases in our CECL reserves have had and could continue to have an adverse effect on our business, financial condition and results of operations.
- CECL reserves are difficult to estimate, and may not be correct, which could severely impact our results of operations.
- We may be subject to risks associated with commercial real estate loan participations.
- Investments that are subordinated or otherwise junior in an issuer’s capital structure and that involve privately negotiated structures expose us to greater risk of loss.
- We have a substantial amount of debt and may incur additional debt, which subjects us to increased risk of loss which could adversely affect our results of operation and financial condition and may reduce cash available for distributions to our stockholders.
- Interest rate fluctuations could increase our financing costs, which could lead to a significant decrease in our results of operations, cash flows and the market value of our investments that may not be adequately protected, or protected at all, by our hedging strategies.
- Our existing financing facilities impose, and additional financing facilities may impose, restrictive covenants, which may restrict our flexibility to determine our operating policies and investment strategy and to conduct our business.
- Our existing asset financing facilities require, and future asset financing facilities may require, us to provide additional collateral or pay down debt.
- Inability to access funding could have a material adverse effect on our results of operations, financial condition and business.
- We are subject to counterparty risk associated with our debt obligations.
- We may be subject to losses arising from current and future guarantees of debt and contingent obligations of our subsidiaries.
- Our use of financing may create a mismatch with the duration and interest rate of the investments that we are financing, which could adversely impact our liquidity and returns.
- Use of nonrecourse securitizations to finance our loans and investments may expose us to risks that could result in losses.
- We may enter into hedging transactions that expose us to contingent liabilities in the future, which may adversely affect our financial results or cash available for distribution to stockholders.
- Our ability to retain and attract key personnel is critical to our success.
- Our board of directors has approved very broad investment guidelines for us and will not review or approve each investment decision made by us.
- Operational risks, including the risk of cyberattacks, may disrupt our business, resulting in loss or limited growth.
- Maintaining our exclusions from registration as an investment company under the Investment Company Act imposes limits on our operations. Investment returns may be reduced if we are required to register as an investment company under the Investment Company Act.
- Rapid changes in the values of our assets may make it more difficult for us to maintain our qualification as a REIT or our exclusion from the Investment Company Act.
- State licensing requirements cause us to incur expenses and our failure to be properly licensed may have a material adverse effect on us and our operations.
- Changes in laws or regulations governing our operations, changes in the interpretation thereof or newly enacted laws or regulations (including laws and regulations having the effect of exempting REITs from the Investment Company Act) and any failure by us to comply with these laws or regulations, could require changes to certain of our business practices, negatively impact our operations, cash flow or financial condition, impose additional costs on us, subject us to increased competition or otherwise adversely affect our business.
- Risks associated with climate change may adversely affect our business and financial results and damage our reputation.
- Our business is subject to evolving corporate governance and public disclosure regulations and expectations, including with respect to ESG matters, that could expose us to numerous risks.
- The market price of our common stock has been, and may continue to be, volatile and may decline.
- Future issuances of equity or debt securities, which may include securities that would rank senior to our common stock, may adversely affect the market price of the shares of our common stock.
- Provisions of our charter and amended and restated bylaws and Maryland law may deter takeover attempts, which may limit the opportunity of our stockholders to sell their shares at a favorable price.
- Our rights and the rights of our stockholders to take action against our directors and officers are limited, which could limit your recourse in the event of actions not in your best interests.
- Our charter contains provisions that make removal of our directors difficult, which could make it difficult for our stockholders to effect changes to our board of directors.
- Our amended and restated bylaws designate certain Maryland courts as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.
- We have not established a minimum distribution payment level and we cannot assure you of our ability to pay distributions in the future.
- If we do not maintain our qualification as a REIT, we will be subject to tax as a regular corporation and could face a substantial tax liability.
- Even as a REIT, we, in certain circumstances, may incur tax liabilities that would reduce our cash available for distribution to stockholders.
- Complying with REIT requirements may cause us to forgo otherwise attractive investment opportunities and limit our expansion opportunities.
- Complying with REIT requirements may force us to liquidate or restructure otherwise attractive investments.
- Complying with REIT requirements may limit our ability to hedge effectively and may cause us to incur tax liabilities.
- Complying with REIT requirements may force us to borrow to make distributions to stockholders.
- Ownership limitations may restrict change of control or business combination opportunities.
- We may choose to make distributions in our own stock, in which case stockholders may be required to pay income taxes without receiving any cash dividends.
- Dividends payable by REITs do not qualify for the reduced tax rates on dividend income from regular corporations, which could adversely affect the value of our shares.
- We are largely dependent on external sources of capital to finance our growth.
- Our investments in certain investments may cause us to recognize “phantom income” for U.S. federal income tax purposes even though no cash payments have been received on the debt instruments, and certain modifications of such investments could cause such modified investments to not qualify as a good REIT asset, thereby jeopardizing our REIT qualification.
- The “taxable mortgage pool” rules may increase the taxes that we or our stockholders may incur, and, therefore, may limit the manner in which we will effect future securitizations.
- We may fail to qualify as a REIT if the IRS successfully challenges the treatment of our mezzanine loans as debt or our preferred equity investments as equity for U.S. federal income tax purposes.
- The tax on prohibited transactions limits our ability to engage in transactions, including certain methods of securitizing or syndicating commercial mortgage loans that would be treated as sales for U.S. federal income tax purposes.
- The failure of assets subject to repurchase agreements to qualify as real estate assets could adversely affect our ability to qualify as a REIT.
- Liquidation of assets may jeopardize our REIT qualification.
- Our ownership of, and relationship with, our TRSs will be restricted and a failure to comply with the restrictions would jeopardize our REIT status and may result in the application of a 100% excise tax.
- Our qualification as a REIT may be dependent on the accuracy of legal opinions or advice rendered or given or statements by the issuers of assets that we acquire, and the inaccuracy of any such opinions, advice or statements may adversely affect our REIT qualification and result in significant corporate-level tax.
Management Discussion
- Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
- This section of this Annual Report on Form 10-K generally discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022. Discussions of 2021 items and year-to-year comparisons between 2022 and 2021 that are not included in this Annual Report on Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.
- Granite Point Mortgage Trust Inc. is an internally-managed real estate finance company that focuses primarily on directly originating, investing in and managing senior floating-rate commercial mortgage loans and other debt and debt-like commercial real estate investments. Our investment objective is to preserve our stockholders’ capital while generating attractive risk-adjusted returns over the long term, primarily through dividends derived from current income produced by our investment portfolio. We operate as a REIT, as defined under the Code. We also operate our business in a manner intended to maintain our exclusion from registration under the Investment Company Act. We operate our business as one segment.