GPMT - Earnings call transcript Q3 2018 | Granite Point Mortgage Trust Inc.

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good morning. My name is Anita, and I will be your conference facilitator. At this time, I'd like to welcome everyone to Granite Point Mortgage Trust's Third Quarter 2018 Financial Results Conference Call. [Operator Instructions]. I would now like to turn the conference over to Chris Patta [ph] with Investor Relations for Granite Point. Mr. ahead. go please Patta,

Unidentified Company Representative

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

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

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

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

John Taylor

and Point. everyone. Thank morning, We're you, would third quarter you us strong Chris, our you to and good for like thank excited welcome We another for to for Granite call. quarter earnings report all, joining

sign the We combined over earnings and commitments loans With loans. pipeline loans our us to continued million next quarter, solid credit close with originations of fundings grow $XXX Our portfolio when healthy momentum has to months. loans the either and already and closed the couple limited are prepayments in in or third approximately investment of increase a quarter pipeline second that of helped loan resulting in third have funded our quarter from the expected which new generated date, of fundings. loans committed strong over vigorous have pipeline, solid of rate $XXX and forward total initial our our we the in the of had dividend. we capital. We've a $XXX of To funded continued and new at of quarter, million up investable floating and originations million to in the $XXX approximately senior million a pace most

second advantage to convertible result, us offering over notes. issuing Capital and our new generated a our the capital of per of It earnings. an the million of quarter, increase us of further differentiated grow a provided net October third access the to share, origination $XXX As allowed take chose successfully from we portfolio early also in with proceeds Markets to to The continues X-year $X.XX of strategy we core across fact share our variety markets. investment large produce a volume attractive $X.XX opportunities that over earnings of In per wide quarter.

We and which also provides this we is share, second the an $X.XX believe $X.XX such year our raise shareholders. common to increased which our dividend to attractive per by current yield

we benefit was earnings $X.X continue commitments. grow to portfolio our dividend outstanding principal as $X.X funding balance quarter-end, including our expect our We At billion portfolio. billion, future and to and our

loans LTV rates. strategy, for geographic Our both remains our sectors, performing don't type changing a with XX% major property floating office XX% which sponsorship. investment of weighted portfolio Consistent average positions with property plus in portfolio our significantly is remains XXX% weighted well X%. of XX% multifamily foresee yield weighted portfolio LIBOR our is the and by and average near us rising The towards investments well stabilized short-term and markets, a of our asset over rate, the term. we Senior overall our type markets, across and as and portfolio nonmajor allocation diversified as comprise and

as counterparties. financing our from of We finance and set market a to diversified financing with continue funding. an ample to of line have We competitive provides This us of an business. attractive tools across capital sources very benefit well of array as all mix from

when market occupancies. across markets estate and evaluate improving funding to property be continues lending estate cost and commercial options ongoing of mix particularly favorable, for rate types floating most with loans. Real and fundamentals managing growth focused to remain our senior capital. rent real available continue the We on for all our strong strategy The overall

loan the in maintain our through reliable Improvements happen. We part, believe have been ample lending. estate helped portfolio, likely interest continued whether continue to and decades their which a to costs, CLO return we higher We remains In and recent should plans they to generally or in able real rates the fundamental believe the continue attractive by continue origination execution improve, reputation and made borrowers, and standards our overall and support as calls, put overall prior cash noted generally a spreads growth so, on Property Even originate an trend business in credit abating, transaction attractive to to has rational. of overall strong function as facilities our this valuations our loans are supported the financing provides impact strategy have our profile. or due funding on would pressure relationships view, for Competition opportunities through loan due source are credit we volatility don't flows to spreads, a trends. quality we we us in through strong volume. our is market economic our we team believe the economy, differentiated interest rate see also of in our counterparty on assets better has built real estate remain that have investment a lively lending to strong the though of to sector. material for in our

in investment our will I call Now to turn Steve more Alpart to detail. over the discuss activity

Stephen Alpart

Thank thank We so our our and third quarter joining. you the reviewing and originations quarter. time all you, your this morning. progress far appreciate minutes Jack, few I'll highlighting a fourth for in spend

Following loan be up the factors quarter. originations October. likely and second our total appeared closings certainty the ended degree the to our pipeline. originations further few as closing loans many commitments strong difficult our that closed to The closings documentation originations predict in exact quarter-over-quarter solely new in of quarter, X with early September by and momentum timing and decline in approximately building of The slightly negotiation of be we any process. loans of to We close the was third maintained and timing delayed business impacted loan in our of related with in can during can this in was a million in $XXX loan

plus for in the total from our Our were high-quality million producing They third $XXX fundings properties have $XXX LTV closed the from across by new secured a approximately weighted X.XX. weighted initial existing X $X of average we loans, XX% quarter of income million, pre-existing a commitments. markets. loans upsizing $XX our pre-existing The are of from third comprised fundings loan loans yield and and quarter average in million the target million LIBOR

you last the we the line result investments. take anticipated strong prepaid quarter, very our and loan loan's $XXX-plus as That indicative approach result a retail time on excellent being well retail-related second As of executed by in was remember may the million earnings an a of a ahead prepayment call, plan business of the sponsor. from

assets their we business loans at same are large our high-quality origination of successfully geography. our feel sponsors retail in plans. had strength quarter the its skewed low, size find closed a us records by origination also which Both that remains very exposure our retail managed Overall, high-quality quality institutional with enables investments. our of on pipeline. the of retail and time, and with by executing which retail examples highlighted track to in We loan loan comfortable we platform, of our that for of we successfully Additionally, statistics the because the third these type property quarter,

in multifamily we to the and also quarter, third in loans originated sectors We favorably. the which continue office view

types vary will and from Our be as mix markets of quarter-to-quarter volume our originations. property will

However, market. would pretty and our over to see markets lending unless across time, be portfolio property the consistent we type shifts diversification significant in expect we

low new with a had We've our pipeline. senior the of loans the attractive first close and $XXX and of fourth conditions. on in the in already million of in to rate We initial building and healthy the anticipated see about third subject to strong million. XXXX continue in $XX a loans over closing the million floating million we momentum flow and level opportunities, quarter. of We typical $XXX amortization, realized of maintained investment about prepayments to quarter We later potentially $XXX fundings remainder we've made our commitments expect some funded total of quarter about

during will seasons, it's and year prepayments predict the see they difficult occur. the to exactly remainder of portfolio the as to expect We amount our though when

likely previously, as pay on product we stabilized becomes approximately XX% we more it basis, seasoned. our that annual a an As portfolio believe stated off rate of will

further to Marcin now So to in our our excited financial to continue execute shareholders. will of and results. quarterly business I our the call deliver for summary, review to returns a over our we build attractive are turn successfully strategy detailed on more and

Marcin Urbaszek

everyone. for joining our Steve, and you, good Thank Thank you call. morning,

capitalization well I liquidity. few next the performance as our financial and Over minutes, will review as our

income net was versus or GAAP share for or per third share million $X.XX quarter million $XX.X last $X.XX Our $XX.X per the quarter.

The share, year. declared We $XX.X a differences quarter was or of of between to related and in second an the share. the transaction GAAP to a income resulting quarter. quarter. core versus current from $XX.X We common increase per share our second offers that GAAP formation believe dividend difference was share tax $X.XX our or our or dividend tax last yield $X.XX third $X.XX quarter million $X.XX to $XX.X share the attractive income an Taxable per investors. per the which was third for $X.XX Our per mainly was versus earnings million million per

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

of deployment LIBOR successful available the of result costs. financing a capital, improving are dividend higher our the and earnings improved Our and

strong liquidity Our our pipeline quarter the committed originations third forward fourth and essentially quarter. available early in

of issuing we a the diversify in and million convertible early provide Capital As to result, over October, X-year further us with debt sheet. unsecured new senior growth accessed to balance Markets our capital net the well were and exercise partial pleased approximately we of the us it from with offering We're for The transaction future the $XXX growth. option. positions quite proceeds million, inclusive this of $XXX overallotment believe

transaction be should the of new result impact that couple expense temporary believe we and the the earnings associated our we will near on earnings drag this of the with next moderate notes, quarters the deploy to expect a anticipate term. capital. as over we As convertible We growing in and a return interest the

our quarter-over-quarter. resulted spread our X the has couple financing originations, outstanding our XX interest had approximately basis about XX, costs loans originated of The credit last lower points across helped of agreements total in compression with outstanding of combined much us the a on and lenders. our CLO of assets and specific $X.X points loan offset our new As of billion facility interest on over newly large we capacity billion to on declined financing institutional the investments. has quarters. attractive of The X total repurchase overall $X.X the balances borrowing on from decreasing XX rate September new on depending financing loan This to anywhere rate the basis

of overall a agreements function of may asset cost funds financing that of originations the it While the and vary lower continue. quarter-to-quarter costs mix repurchase on and as repayments, trend is anticipate should new we

loans overall us the financing deploy additional continue to the have we new over million our with cost balance our available of to over realize we $XXX as we repayments, our sheet We the debt-to-equity quarter Xx and including which debt-to-equity X.Xx, ended pipeline, are couple to we any third believe get evaluate diversify and of remainder potential capital. currently to alternatives, We quarters with options pleased will the capital. year. Accounting various the to of nonrecourse further to we continue may leverage of CLO available ratio We of debt. optimize including will our of next without closer liquidity the over originate for mix

invested, we to grow again, will at alternatives that provide operator additional fully now, being funds questions. And to call we joining closer Thank As the I us today. us examine you, get capital open business. our to time the different to with will to raising ask for

Operator

[Operator Instructions].

The from first question Stephen Raymond today James. comes with Laws

Stephen Laws

your following little seeing that, where Jack, Appreciate bit given give across your the loan provided, size? in color MSAs the on a up us if what largest, or versus bit comments. XX Maybe XX as is detail you color which a on a but little the I competition MSAs say, with more can MSAs? competition in different could maybe start you're operate on think probably you're more you seeing average you what little below you

John Taylor

would I are you is active top what question, who like in MSAs, of to something good that that probably Well, you. XX% say I say mind our speak portfolio. the would first, in we're for keep with your X thank

just but the into market in more meaning CLOs are we maybe the qualify that So be of we're only a X the expand to found top the those who them. X then above, generally, assets, in and approach in seeing on would CLO-related rating because agency MSAs bifurcation we MSAs, I above, upper likely there. active for X not are and say

pressure the top on And smaller so spread X. puts compared the some that markets to

the I X MSAs in above. more markets, in However, would pricing the I'm still say we're the finding power and smaller sorry, larger --

competition And it in the we're the markets than that's also the the top X so is but and fierce smaller Top is you're right sizes, X that markets, true markets doing X more loan above. for for

Stephen Laws

I asset XX on on looking an helpful. repayments, Jack, loans, All that. especially appreciate the maturity this up Steve, following XX like right. of month. top around the That's portfolio, looks your comments at has it original

should difficult taking Are how X to -- growth the the asset loans towards of As origination only those the volume outside we half more can others provide little next color Or and of a we on consider any X, project, material know should repayment I think bit you first there other in relates, there? year. about that portfolio it's but number? of us your any moving net kind

Stephen Alpart

the Thank you for question. It's Steve Alpart.

pretty on So run-rate like Steve, annual number good basis, we a XX% mentioned earlier, us. feels to still

in still don't have of We It's to we're think that want hard specifics number a QX. about good that us. so will basis annual XXXX. tracking they'll off, But we pretty predict couple pay pay to give when off XX% in what a to the really pay or off, number feels to expect say, like QX loans overall an on we I

Stephen Laws

difference on taxable you know has was you transaction. taxable and it accounting income tax core. believe roughly to [indiscernible] dividend over that what with into that time? any I or know that or difference play? be time X it'll GAAP don't period quarters taxable remains if realized on will quarters that's is, what remaining question Year-to-date, one GAAP Marcin, some lastly, formation due Can us roundup for provide the I any X color And the I exceeded come Okay. but color difference.

Steven Plust

done that, prepays. left. joining would us. for with are original repays is I highly dependent few say, the million portfolio when we look, largely a It dollars on Thanks there's or

didn't saw you QX, any have in repayment. really So significant what we

happens be have in if taxable that closer That original X was we GAAP loans next then much over income to quarters, significant prepayments from the So portfolio. the those said, earnings. our core to

would the We And and this major in difference, will have forward. than amortize at a that probably closer point, of our driver but of it rest I say our past. going should be been core be shouldn't they the dividends results

Operator

KBW. with from Next Rahmani Jade question comes

Jade Rahmani

asset with management? to discuss you're issues also, And if proactive in the credit your are in portfolio? you any you Can approach seeing borrowers? How dialogue

Steven Plust

this can handle is Steve that Hey Jade, one. Plust, I

philosophy. and organization investment critical Asset pretty our management is our to

ownership primarily performance that and culture tracking originators of final closing for responsible from loans. asset the Our our repayment, is are they the the through maintain of

there Given the budget reviews, leads periodic borrowers' of are us that events capital assets, had and nature these conversations nature. the of between approvals, that

with borrowers. we're actively our conversation in So pretty

We a have third-party servicer.

and said, how We in, have said, portfolio multiple data or have our being portfolio properties. rankings, any by servicers X to portfolio. third-party That near transitional risk in engage of being to call, of term. rank collection the but what number authority making loans XXX% ministerial our any and our the over managing comprised We impairments performing. processing, I X in maintain loans potential decision loans we is the large see a primary our don't in we're secured we That manage don't

So it time the time, to wouldn't one or loans may ordinary be of more unexpected downward. or migrate out if from

Jade Rahmani

Have had recent any loan modifications? you

Steven Plust

Not credit from a perspective.

value amended loans a them our and retain to the time. harvest and from over the as progress of defer needs have sponsors' plans business the them number We

Jade Rahmani

Okay.

of spike terms took place the that is showing that since pretty repayments? in third slowdown drivers a industry of the in the any quarter, in was most In specific repayments big there of

Steven Plust

that factors a but competition, our speak a to of I I our peers. as perhaps are: well. of bit our couple portfolio can than little handle can't younger one, is that one maybe some

business it's as So portfolios. plans haven't possibility. much that as other our ripened possible one That's

doing to closer the amending harvest We we're so. borrowers, we've you loans we've aware their over fairly alluded maintain balances. been them successful before, I of work plan, in time our active been as asset with to is, fairly Another pretty and and

Jade Rahmani

new any fees -- amendments modification are would show that result? those there Do Or originations? and up as

Steven Plust

no. to is both answer The

Jade Rahmani

you or rate loans, the the talking how term extending adjusting And in and anything of you modify about terms else? are the

Steven Plust

Extending additional with. getting protection share future lion from the of as what the call term, of funding X dealing provide biggies. the the changes We plans. recharacterize may and we capital may the the for adjusting more we're that's certain X rate, other to business their business Situationally, plan bucket

Jade Rahmani

mainly question. business picture cap on the rate real bigger volumes floating to have transitional think the What fixed impact A going estate do and respect interest to rate you overall rates, than commercial and transaction additional rather are stabilized hikes type? rate with

John Taylor

you -- your fixed evolution the think And is up long-term of the wanting market. be for rate market. glad the the the long-term rate don't floating specified but of takeout really on and should people on are that glad I forward actually sorts we are their rate still rate will next effect having the the people over but as period effect, address be I I'm walk loan a reaching to of -- I'm curve stabilization. that's transitional The of Jade. volume business huge consequence on is fixed an the much predicted loan, Jack. question floating say, much the rate of the seeking to market. natural Most reasons, that the going because on of have this rates it does, going if the you rate. property plan a up Hi financing time, all -- of not in fixed to in not have but rates seeking Interest effect going don't dampening it's believe

not in reduced. that dramatically for is our the market, CMBS the view be noticeably, volumes So could loan but example,

Jade Rahmani

type the core relationships, to as better ventures you and expand complement think of things the far the on -- and considering are in have the could joint existing strategically that you additional Just you constraints, you lending considering how loan that provide organization of nature? capital customers could lines and products leverage about focus make business platform as

John Taylor

I'd is for Yes. returns And various we're business Thank our you what for business. that that. always evaluating opportunities say drive will

more on But focused since year, a the business team, span growing a if so we our as execute been commercial know, strategies performance, run rate in will. you a long and last has you solely really going because careers real done on sheet to Our investment public capabilities of getting balance may we've deploying our have strong estate. of capital, over to variety

out expand makes other not we're to beneficial say partnerships, So shareholders. actively and JVs our that initiatives strategic as currently our we and to would to looking sense from but business, long that's as future are in risk or a the potential rule perspective not

the not in future. but now, potentially So

Operator

next [Operator comes Securities. Muller Chris Instructions]. from question JMP The with

Christopher Muller

them are the already. one wise little guess, of a answered Most you into seeing CLO competition you're and appetite have on for that here, again? just your market then can bit, tapping what I I touch last a

John Taylor

Thank for your you is question. This Jack.

I Let me It real to was just you. understood. make hear sure hard

it? it's The on first competition, was part having that was, what effect

Christopher Muller

all with What in you're in then there CLO seeing No. that things you future? your turning to appetite the bottoming wise just the market and competition for are spread think compression, at out

John Taylor

like highly so -- own financing, this we you. non-recourse did sounds view for having earlier CLO market the you thank know, our you advantages We firms a Right, the beneficial we nonmarked-to-market, market year. et understand. because cetera I may as its issue do, of and as such as

they always on evaluating the we're its it's believe that I it effect respect issuers bond open nicely we With selecting. people still holding market, but fool's earlier benefit say, are look retains originating seem CLO they to try competition, would the are to across and stays like market, are in year. spreads that on in at spreads where and to the So be a to originating that predict errand and to loans us going going, we takeouts that execution the to to their and be

are loans can there do bifurcation that the up. market, well And easily And closer as so don’t we're loans the and witnessing being but especially in print are get context many we that into firms are and fit where being variables see aggressively. many, and the as fit into doing not So ongoing go an bid seems, market. it bid it that CLO CLO there there they're to they're in that,

or and month that getting over and that Does on seeking assets getting to past were print. the aggressive they arb You answer so question? more more and your can look back see

Operator

question with The next from Zucker Ben BTIG. comes

Benjamin Zucker

ask I I metric as think clear about it loans popped retail loan lot your skewing I think and a Still a that it's out in you know the wanted about heard bit, big your perhaps. a guys I property component size quarterly a originations, little is bit redlined to I little haven't type. bit. that comments or that

just you're attention So the are sector, what that you you underwriting the when it retail property? looking heightened retail could a for given around guys discuss is

Stephen Alpart

Hi Ben, it's Steve Alpart, thank you for the question and for joining.

So be where the tenancy. you've calls demographics, center, about more the the tenants type internet of retail, focusing where tenants We retail essential could strong threats on it of could be probably very from on be heard defensive to sponsorship. to prior find where type us e-commerce, selective. We're resistant, very on on talk focused defensive going be retail goods -- the are the that mainly to grocery, services, we're most be that it lifestyle the mix continuing providing or We're a cetera. resistant those to focused We're neighborhood tends center. very et centers

kind kind a future. did, upside of type with sponsor good you the and plan basis and we sub-market, this our more center, of loan lift in urban larger paid look light the one loan are that some flow infill strong today, lots just in the similar off loan, deal, of entertainment us did behind for lifestyle quarter that equity experienced an that at very with good mix in-place of very -- If the project, just of we business the size cash there a use part was

right if the the We very still in of that. where very are selective picture fourth but So that -- we has the and in recall, been at And in has look my pipeline the do have now been we just the to but loan it's retail is say akin been percent have the loan retail the retail that which no any portfolio, that's closed loan now couple the specific no a we last quarter to you big we being have right the about much we quarters. wouldn't retail. But on from level was quarter, limit, it portfolio. in not this currently don't

Benjamin Zucker

As that, risk product, a attractive lending the follow-up on senior a the return quick lender? the making profile less more now secured perhaps competition you retail from vantage are of for observing

Stephen Alpart

And very the not true is think on the true. I solid that's true, very probably strong reason are things because credit all focused mentioned. with just say somewhat I I we -- somewhat but

So yes, the more you can more are but what loan, little aren't focusing believe we get a credits. we're paid spreads retail and the because bit selective different on very dramatically being on a strong

Benjamin Zucker

then, I pool. lastly, asked think my hear and should how around answered, future you there. your pace And deployment we funding just I guess, most of questions the but were about of

repayments like like year dirty I like schedule you wondering for I'm like something million right think kind that's XX% per like $XXX now. just a quick and provided that? funding, -- I'm is something there of like

Stephen Alpart

that you that we that $XXX before we will about loans XX% the So that future loan that, think the but of oftentimes if million typically of fund that time. over of not think XX% of commitments. because will funding we the third the prepay We fund will probably end at about quarter, it, of look fund, had to XXX%

quarter-over-quarter. see in the third steady hard portfolio You very vary caveat or with but exact will is that, It's probably the the we could quarter fundings a quarter, number decent XX% have we balance that predict $XX those XX% in much each about as the quarter-to-quarter. funding to the about increase per of million, estimate seeing been remaining total funded and grow, period,

Operator

turn over to conference Jack This Taylor the now like concludes back question-and-answer closing our would for remarks. I to session. any

John Taylor

thank to Anita. you. business. soon. for and of our like to with everyone speaking you, Thank you everyone's we'd today thank joining look support And all again Well, for forward We us

Operator

attending This presentation. conference Thank has today's for now you concluded.

now disconnect. You may

Granite Point Mortgage Trust (GPMT) 6 Nov 182018 Q3 Earnings call transcript