GPMT - Earnings call transcript Q4 2017 | Granite Point Mortgage Trust Inc.

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Operator

Hello and good morning. My name is Chad and I will be your conference facilitator. At this time, I would like to welcome everyone to Granite Point's Fourth Quarter 2017 Financial Results Conference Call. All participants will be in a listen-only mode. [Operator Instructions] I would now like to turn the conference call over to Maggie Field with Investor Relations for Granite Point. begin. Please

Maggie Field

quarter this and originations good Granite you a press some financial will associated portfolio, Marcin Point's our me comments, my provide the brief and call joining results. discuss filed Urbaszek, recap were everyone. Taylor, Plust, our market on discuss Jack from our Alpart, will Jack to fourth call with and today's with our morning, CFO; will fourth you and highlights. our for Thank our With our Steve business release Thank Marcin President the conditions and Steve and tables items highlight are CIO SEC. Alpart introductory CEO; of Steve call yesterday and key morning quarter financial The After XXXX COO. financials.

financial which you find may release SEC's webcast We accessed at copy, our provided reconciliation to to non-GAAP website that sec.gov. the do In like on website, would a the we today's on them have is our on slides, now a not earnings this the If website or call. Investor conjunction be Relations measures. website of I also are you review our section urge you call mention same location. this and information GAAP may in being to posted with in have in our on and

forward-looking the would Jack, may to during slides remarks to Before you the conference by I like this supporting over I statements. and call turn include management made remind call that

actual believe We other statements. do them unduly may events urge described or now to use differ forward-looking on consider to obligation of SEC's from not investors We carefully caution are inaccurate. sec.gov. update and the future such and risks expect, the if over words. our be be materially I obtained results and They rely undertake words with estimate, with correct call reflect in We anticipate, statements Forward-looking prove regarding Jack. risks uncertainties, the forward-looking later associated which website events to SEC, views such filings expectations. to imply will may any at on to the or as our and not typically any you the turn statement

Jack Taylor

Maggie you, On Thank After us behalf our Harbors, executed platform rate thank June, you floating you morning, over joining establishing and like estate and we to take the a Two of good our we for last opportunities earnings in would quarter in everyone. our to capital sector. transformative business. lending all our real commercial the team, our allowing attractive of us IPO for direct advantage few senior part access XXXX year fourth was for the to call. years as of investment welcome markets

over we Over real the commercial of billion the X.X within expanded loans originated XXXX, estate markets. course and footprint further of our lending

in third $X.XX fourth discuss shortly, quarter. results quarter. some on earnings Marcin our quarter activities to business from from to borrowing grew also XXXX We will We business to our share strategy slide company the highlights $X.XX per of and in grow profitably implement to the diversifying about our and detailed but optimistic to our ability Please I'd grew X.X financial our billion like to structure. began capital We and share continue per the beyond. and turn over X. touch fourth our remain core capacity the

and our for prior common share, per $X.XX guidance consistent in quarter quarter. third Our with the $X.XX dividend the per from up share fourth was

growth period sheet It our and of in from was balance of Our activity. continued earnings and active portfolio. an originations terms dividend deployment benefited us and the for of investment capital

quarter fourth million funded loans of in commitments the of to in loan deployed most billion remainings IPO X.X of total and at capital million seven end portfolio our XXX and grew approximately loan the loan XXX of the Our the QX. total from fundings

successfully investment which volumes. we the XX% timing distribution November While raising be the negatively company with million the After we very back including transaction of X. of impacted capital occurred so resulting the associated five allowing we expense going the originations our and to for the approximately capital. net the bonds additional issued our proceeds of We the been pleased notes attractive expect towards and by diminish, prepayment the investment raising overallotment year forward. exercised the January. our mid-December, that available new quarter, we our our million, grow midway Harbors portfolio us, of capital, which volatility we of because Note option, the the convertible was provided investment new do impacted modest in further in building the most however decided by XXX common XXX with with our to the through to earnings short in capital slowed fourth This have high to but rapidly volume us opportunities since in we approximately while stock Two the of to markets, begin earnings investing interest experienced access new term, convertible of Since of by deployed pipeline. pace and originations flow of to had had stock was capital shareholders, IPO our price on

senior visibility the We during and rate on million of current that growing have committed have over quarter. further loans of to the good remainder floating XXX

of the quarter We majority expect in originations to second and of the quarter in first our the quarter XXXX. late close

demand We be which to our our six for believe estate has real line remain pace. strong in estate Sale supply loans. most The historical to up markets, attractive fundamentals tempering estate commercial months, dynamics volume gateway able We we estate with and origination remain and ongoing markets and pace the be twelve lending senior types. increases. property types price continue overall favorable back the across Real floating In averages. many will generally mainly in past especially occupancies. improving with favorable, on property continues remain valuations ramp across transaction market is for rent opportunities growth believe focused real rate of to the over and very real general, to the see strategy, moderated

loans the also remain We months, investment continue improved that attractive and terms, risk decline at find view, XX over floating interest our regard spreads, from rates. is should lending rational we couple continued points a to adjusted some and the on to financing past which pressure opportunities rise terms basis with leverage. believe of there we the lending have the continues ample spreads. benefit markets offer our overall returns about Though in In to of largely and senior rate offsetting seen lenders, we estimate loan from competitive in manufacturing structures

fundamentals. changes, continue enduring and estate We believe to the capital strong supported be that real structural healthy lending by flows alternative sector will

We also industry remain portfolio. to directly underwriting both and us as of our we believe the disciplined originate markets, our enables committed network approach secondary targeting of this our investments primary deep quality and with relationships for strategy broad combined high to

detail. originations Alpart call over turn and will in discuss our to Steve the I portfolio more to Now,

Steve Alpart

some and spend a quarter Thank portfolio. far the appreciate so and metrics quarter originations on highlighting in and morning. few minutes our key our this we Jack our first reviewing I'll progress time you, I'll everyone's provide fourth then

of had of X. XXX XX We loans, loans, in upsized million We slide approximately turn senior six We floating an originated commitments inclusive originations. two representing approximately active and approximately of XXX new loans, quarters. Let's loan fourth commitments million existing million. prior total fundings terms on quarter rate of from to of funded

lower our the at strong fourth half by attractive in the of pace opportunities. lack quarter earlier, mentioned originations to deploy in quarter and third was driven capital rather a than of our investment ability Jack As our quarter-over-quarter raised first IPO a pace

XX% Our the hotel and which secured existing component. properties high remaining across fourth various types. by a quarter mixed balance are properties. our amounts markets and a office retail fully was a secured use small origination of property primarily Approximately with property quality producing loan is The income fund by consists office of property, target

selective sectors, to the that loan can and we continue and risk in QX. do in retail originated we we attractive originate hotel, like fit be our hotel return these While in investments that we believe parameters

originations our overall with characteristics West, Southwest loans and and diverse the these were in geographically targets. the are Northeast of regions quarter and line distributed profiles investment fourth between and Our the return

in quarter, fourth an on of originations an a our million quarter a Washington million sizes and of range peers. Our a the loan $XX loan size loans targets by loan on by in these in In office focus demonstrate $XX Phoenix to broader general secured building of secured office below DC. fourth building our public MSAs range from some the

and our to platform. with selective our ability of flexibility borrowers through best and the of directly business investments each meet relationships customize without ability on financings The plans allows majority pick to us the our variety longstanding of on a for borrowers, specific portfolio. have these to originate of compromising structure protections. our financing speaks which the to credit strategy We be execute loans our to We

we it In realized As annual quarter. the XX% the quarter, will towards discussed rate becomes earnings some million, portfolio which that call, fourth our an as likely we We on pay at of the seasoned. last basis, prepayments approximately on to weighted our stabilized expected our more second loan were of we [indiscernible]. prepayment portfolio on XX approximately believe as begin a receiving half off of

The we approximately to see in rate our continue in To of amount and committed new combined later strong date, million fit of about loans investment and some been with close a our loans expected good flow XXX second this have funded forward. total of XX January our over return XXXX, are of quarter actively growth the these remaining million XX quarter of sourcing loan to for loans and first total possibly about Turning total senior Two made commitments and credit million. floating going close the quarter. to balance that loans. feel we We've of thresholds. pipeline opportunities of

slide a total with asset outstanding let's average plus LTV weighted of December a as approximately discuss X.X XXX% portfolio our weighted principal Moving LIBOR is X, on X.XX%. which of and of yield stabilized XX% billion, the of average performing balance XX, a

we fully of million to funding XXX basis. over to on our portfolio billion up X.X a bringing funded funded addition balance, our have future In commitments,

portfolio various well XX multifamily future type, to to these of continue in the The our We markets at believe sectors, weighted interest positioned sensitivity. fundings XX% rate. towards X, property you across rise rate months. portfolio well the majority office diversified the which rates. and our look portfolio next our short-term occur If a slide floating we for XX is expect find take over is over also will attractive. is see to We we a is By and

were our LIBOR on if assets to by industry income deal our per existing briefly Turning the share strategy examples increase instance, points, would XXX net For on X, recent the relationships. $X.XX the of further through to high network and types basis slide quality large portfolio comment interest increase originate our illustrate annual we of approximately two I'll

example of quality markets million based like been office formed of deal district and is City of collateralized of and our team office repeat office and high is apartment space its in and rate an a acquisition floor financial capital Washington a of building development, own occupied. units is million residential, and approximately XX firm the currently borrower involved investment several York feet and X,XXX ago entry We The sponsor the of Boston, properties by such X lease privately XX% first renovations barrier X space over The $XX apartment Boston well commercial as with a and developer the in type plan the million and square currently square and building owner-operator was XX,XXX management in The and feet has units. DC, The the reasons. for of business of a improvements in high boutique, as Chicago. historic, years floating involves vacant sponsor senior is which this to over operate retail owned loan New ground hospitality CBD. as Boston

the feet property historic was secured business transaction highly plans million existing the building features, prime The office by owning in on XX properties to attractive sides. vacancy in basis finally, Boston equity an value market, office million add and relationship. whom similar an fully we totaling with in having unique executing square The submarket when district loan owner-operator significant is views rate experienced with cash of properties, has And with our including basis submarket six boutique funded. this the X.X three loan is our the sponsor have X%. sponsor on water expertise, Boston sponsor's relative financial loan of of with a including is a Our in approximately

of of business like firms a Los real second example business this LEED-Gold the largest certified The A a XX Angeles. a approximately the retail from Southern property Hollywood knowhow of and office The Class hub. was related years and investment studios recording entertainment development, years Angeles, of type one A deal X%. this located district, for a North submarket operating sponsor property companies we sponsor plan in entertainment involves floating loan is A the has million senior is nearly public industry Los loan providing block specializes reasons. is closed expertise. building The funding estate organization large the Southern theatres, of a area by owned privately The high designing, performing company very the leasing access in vacancy the integrated North development arts, and and Office straightforward We is transportation tenant easy rate California based fully for in XX in pedestrian this and building quality Class the collateralized several to protective and lease is is expiration XXX% estate when loan. galleries, the heart Hollywood been office The secured The managing arts two loan scenario. sponsored occupied submarket structures The of California. the Building. The friendly is approximately properties. in with one and residential with to a California a real by large heart in asset management with and

sales. attractive capitalized properties. highly who basis with in based sponsor is finally, a sponsor's the active and relative loan similar well basis our And to have in recent this We is experienced, and market

on we we are flow our able and investment that industry of strategy relationships So see platform, reputation our investment criteria. a a the to continue counterparty, to opportunities as that great Based summarize, overall our reliable of fit our and confident strength and we'll for manner be the a XXXX. disciplined review turn I'll continue more our over on shareholders quarterly financial business detailed behalf of our execute in results. Marcin successfully on of prudent in our to now a to plan call to

Marcin Urbaszek

our as everyone. I'll and a and spend minutes financial well liquidity. performance capitalization Steve you, as morning, few discussing Thank good our

income Turning fourth per for to $XX.X share. or slide quarter $X.XX XX, our was GAAP net the million

fourth $X.XX Our million was compensation which GAAP share. core share. earnings earnings, Taxable adjusted the per for for or is non-cash equity expense was XX.X XX.X the per $X.XX million income quarter or

As includes the common tax a yield. on income. GAAP we our Consistent $X.XX the cause our of one-time translates than dividend call, last guidance you and attractive per and be our to resulting a from transaction taxable several declared paid with earnings higher dividend share, an formation income quarter fourth an into which may next for income GAAP of recall, our will quarters taxable accretion to our difference,

Our XX at December was share. common book per $XX.XX value

of loan our on in smaller as our timing time earnings. closings drivers remaining a and the timing growth all the loans of should on quarter our able of We a the in impact phase, quarter, relatively the half of good few the of quarterly impacted capital IPO. have our our dividend. slightly commit last had originations Similar were results. Since in closings to closed earnings base a majority is Over the to quarterly on and a of which of originations our nearly from quarter portfolio a fourth significant company period, impact have touch terms grows, second however, Let's can our results. the

our on its GAAP quickly review impact I'll our and reminder, tax dividend. difference to a As

a XX contributed of discussed million through As accretion company our taxable that at approximately taxable potential an of approximately We those will income planning out important loan Harbors. that of elements to recognized for income income. result of credit compliance result the REIT in XXXX, and being dollars will $XX things. accretion, the among obviously million we recognition transaction, higher the This other difference higher life over recognize additional in than million estimate which to estimate a and GAAP are GAAP tax recognized of basis of any formation GAAP may accretion portfolio the loans of as lower by contributed earnings. quarter, end of on result last Two we In of GAAP our prepayments basis GAAP of XXXX, and the eligibility. change than versus additional us as accretion the a $X its transaction. depending This timing and fundings, such we taxable versus will tax the maintaining additional Tax $XX tax time losses approximately factors

on XX, borrowing XX, X.X slide financing and in healthy manage of of our and capital the billion. with capital as to seen approximately loan had $X.X and sources. capacity lenders to manner. we light financing We'll our billion overall our efficient over an are tightening in our facilities the as We've seek total of our funding spreads. are continue of to December of operating improve us remain cost Turning markets diversify financing to outstanding working cost optimize cost a recently We believe of our

loan As approximately debt evolve, a two quarter other our the of positions ended expect of or markets securitizations. financing We times. funding, equity with we fourth to the structured syndicated to forms sources include ratio including

as to loans. additional we rate X floating sources X.X prudent, focus given and in capital, stabilize financing. excluding potential of any equity As we on the target debt view portfolio times, of non-recourse to invest this our expect range grow senior to the leverage We our ratio

quarter, the liquidity earnings to that additional we million $XXX stated call, at of loan we originations. third support of the recall, had you approximately our end If last during

Given to committed that million five-year the midway capital our of decided convertible the fact mid-December in issue and quarter, access we the through remaining $XXX we markets capital to fourth debt diversify provide fully million, us capital $XXX balance inclusive new option, early our approximately overallotment which of sheet. was this and The exercised were proceeds with January. transaction from net the in

pleased are coming well us believe the with the year. positions offering We and for it very

a the earnings our forward transaction. of late closings more well quarters We expense the interest convertible XXXX, of we were As from full invest expense of capital interest loan earlier, and our quarter the lag quarter associated convertible we deployment. of I some on be by fourth recognizing this to our remaining recognition significant that timing of to XXXX, as notes debt the new quarter with as earnings temporary the in anticipate and mentioned in affected earnings a expect in as we few to to impact growing return weeks first a will believe of Rolling capital.

cash, will a December pledge funded Our Adjusting the we of million open us $XXX consisted loans capacity to end over with next assets that available to $XXX available for fourth investment our facilities again to liquidity originations. the call you liquidity We leverage. financing originate and few additional at operator been joining estimate for would now quarter loans, and million all haven't cushion, for that XX, in fully that with to $XXX million at approximately provide on the cash of over of financed. related the repayments ask were additional capacity which we had senior several months, of questions. some receiving depending and today on the I us specific more Thank liquidity potentially over anticipate

Operator

[Operator Jade KBW. Rahmani Instructions] today question with first from comes The

Jade Rahmani

in level? fourth earnings Should imply your quarter we XQ to dip sequentially a the from comments take

Marcin Urbaszek

Marcin. Hi, Yeah. Jade. It's

interest pipeline, exactly think build remarks, a impact. I capital that's full I we the we convertible, prepared and from we as and going It's quarter think but what light assumption. when good the say probably deployment as will to some hard an up of there look, the expense be recognize the in mentioned that's to be,

Jade Rahmani

to level so in, portfolio, of outsized an quarter the we or the coming where expect represent should something fourth quarter is In that terms the should sustained. moderates based of be does on prepayments level are repayments seizing

Steve Plust

is Plust. This Steve

more be to over portfolio be future, matures, and XX% steady prepayments course in the more As state the estimate the the of it's but XX portfolio we expecting we when out, receiving million to of right of we year. get like a seeing think prepay looking such XXX prepayments. something in we the to put spot that will hard to we first be should something a We're we that the think million now, quarter, like should

Jade Rahmani

Granite two X% that therefore the for would of things. value book meaningfully Just trade dilutively, be and the One to to not you need grow, business access seems a you range have returns question, capital it to that achieve Point equity ability investors to two convinced or have above bigger to issue in equity higher. and levered hopefully the and model

just to could if ask specific two those you So things. wanted on comment you

Steve Plust

not to first, heard. with equity issue I intention there repeat Well, have that our Is said the that respect an is echo? to we it today. here and we'll dilutively

Okay.

we'll Secondly, we mentioned. believe be returns those hit you that to I that he to will fully in ask Marcin able wants, if chime but

Marcin Urbaszek

Look our target capital, portfolio stated we'll at the X. next debt as over we today. Jade, the we're of I there deployed several levered X.X think at the two We underlevered is obviously, We end equity the we to our to get quarter. quarters. We're and times think

and So feel we'll to today events markets, as portfolio market is. comparable get and fully and comfortable We pretty returns what barring base in yields what financing markets feel craziness pretty unforeseen we the stabilized. looking at market our some spread cost we're our

Jade Rahmani

you comment to lenders financing about the financing additional increase for without capacity? need capital? the you capacity additional can And have with equity Do discussions ability on accessing your

Jack Taylor

Yeah.

Marcin I'll elaborate. So let

Marcin Urbaszek

Look two I we so upsized think facilities.

on capital costs the But would recently the prepared I but in also that's said we seen we've that our remarks deploy to and in funding we also improvement today on both capacity financing that enough than more have We cost say have. leverage. the our

get as evolve. line an of So, we've in you there's both improvement markets only repo on can in the so seen a much far with terms leverage but go you it, how can

Operator

from Shane Rick Morgan. Next of be J.P. question will

Rick Shane

point Really XXXX. incredibly is the the that what million offering. quarter your sort curious billion, just incremental into in realized implications this some Obviously, we am how of that, and origination the decision the with pipeline, you're base, life at in in given it put I leveraged the I should have long to $X X.X going two the as take range, to leverage been will you of the your times, but reduce probably sort questions going the available growing the of capital sensitive, continue And sub current of proceeds timing deploy here. fourth about in so the of to timing the capital $XXX fully midpoint target understand about from forward, it to do you think is

Marcin Urbaszek

Rick. is Marcin. Hi, This

I'll said prepared had about we of the additional of remarks, as prepayments. or the attack last include million in question. to originate loans your So would I That we plus $XXX does part say, liquidity not minus.

Obviously, deploy. us I to the there. actually to There's quarters couple we're and lag loans closing of should a take think committing a that them.

keep mind. that So please in

we additional to going get of additional portfolio, source that's As be liquidity. an prepayment in a

the we'll be capital throughout deploying So, year.

to rationale We say deal, ability the as deployed of not borrow time that our we had committed, would of unlevered more we additional are assets as, I the We lines, did when assets were were we repo look billion X.X levered. have $X those said, our have, if We fully there. don't through against that said you had quarter. pretty terms capital we at deploy, some we levered. it's QX pledged for of had - some at not we billion at mezzanine midway In when that that assets XX-Q, assets about

we originations our QX, coming at in in originations had capital - the quarter, of accommodate in down later to had prepayments the the We essentially going slow we where because into in some to into were QX, later we debt originations structure, with So quarter unsecured quarter, we very so was started and first we're that's we issue point strong deal going the opportunity five-year some the constraints. a to flexibility us that constraint some on we outcome. it to the good a executed liquidity had the some thought that happy and accommodate we provide provides the capital but just us so were and

Rick Shane

And for where how and at be again but the quarter, when not seem you the off originations quarter third expectations. on the for and increased turn quickly I noise much to potentially implication pipeline and is, fourth turn I guess the on originations, track. pretty frankly that first look can is versus origination

Steve Alpart

Hey, Rick, question. Steve it's Alpart. that I'll take

So a the quarter. just comments of first couple on

funding minus. We We we'll So over that about have you quarter, this into earlier on XXX say senior commitments plus that million about closed and million fund towards an total, million XXX think close funding about later of the that anticipating quarter, rest heard these us will end the little It's a million commitments, XX loans, XX loans. about of floating XXX quarter, or should first possibly second loans have I'm million total initial of half rate we initial of In fund sorry. basis. we're mentioned of about two of for March. about QX, funding

the is closings hard certainty. and Although of timing noted, we've noted to with predict has as the Marcin as

could slip that past quarter. of Some the

you margin They kind of typically closing. to these So take-off just to know to where can loans X left from take X off, weeks. term take as longer sheet

and our originations So the that pace we get you've expecting the quarters. to that of and pace of to QX But will the QX therefore have seen in very impact beginning back about do probably we prior pipeline good we talked on has part in forward the us QX are overall. slowdown visibility impacted

Rick Shane

the on Is actually Last loans, it over XX%? percentage what XX%, about commitment differential question, when is of will we commitments between any quarter That look fund? the think the help life to sort really fundings? at us the of difference expect given between in commitments of individual and any a loan, and do or you it fundings

Steve Alpart

again. Steve it's Rick,

to going deal it's expect would we doesn't loan. mean to every by vary of fund deal. majority So Generally, XXX%. the commitment That on the

towards there's we'll to slide We'll we the Oftentimes around they there lease expecting business be up to plan, and could bit these loan the always are XX% between business we're more. sponsored So way early. gap or their loans, the would expecting what but little property it possibility refi about are underwriting so customized that. just underwrite and small a the is, plans, or lower, sell they what typically the property a think that the sponsors

say as I commitment. in XX% to somewhere what XX%, code as would typically fund So, zip would we on expect that the far

Operator

Fred Our Compass next comes Point. question from Small of

Fred Small

annualized that now? repayments, repayment the on rate. do closer - you'll of sort level? a be run to XX% It higher on of you're where just seems lot Just it the sort rating than that expect seems When you

Jack Taylor

is I look that would half repayments, This months. if the you our say at originated of portfolio, was last roughly Jack. within XX it the

I think that for that later at this this we'll half in stabilized rate until prepayments we're don't year. loans I'll run a the what So call, originated. portfolio on context, fairly were hit, much recently Because looking

would it up year expect that ramp to we So per XX% estimate.

Fred Small

you've And or odd for then million math quarter, the expected that's that understand on just this XXX done fundings originations the right already first I got on the - the the you've quarter. so

you or that's if - there's that XX pipeline not there's are of this getting the that's you're sort so then XX XX, XX that still not done quarter. component there You've in of yet and to X XXX, left expect

Steve Alpart

It's Steve. Yeah. That's right. about

sign closed basically expecting or for of we're some up this near quarter. just in the we what in week a estimates will and think pipeline, fund quarter, up that's doing second two close about what get quarter, that's to to will estimate the we expect but signed So this next what good term visible

Fred Small

of just into discussions any think or And sort the ramping more you that any you could impact - volatility second in up, I mean of seen push quarter? from you have market sort that of volatility have recent rate seen with just back the that

Steve Alpart

It's timing. to and certainty close on but hard and that up come than with estimate estimates typically These weeks. is gets bigger what pipeline four in some then that, obviously, six an based a making with like about signed predict we number up to when loans

they can little a longer. bit Sometimes, go

of estimate us seeing us. just making in based now it's what So best we're right front on

Operator

like turn for closing would back to concludes the our gentlemen, remarks. over any this conference Mr. Ladies I session. to and Jack question-and-answer Taylor

Jack Taylor

for We for joining business. Chad. look again it forward like speaking would again. you, appreciate you you, we to with We appreciate all We to support thank soon. everyone's today. and Thank us everyone thank Well, our

Operator

attending is Thank The conference today's you now you, thank for concluded. And presentation. sir.

now may disconnect. You

Granite Point Mortgage Trust (GPMT) 8 Feb 182017 Q4 Earnings call transcript