GPMT - Earnings call transcript Q1 2020 | Granite Point Mortgage Trust Inc.

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Operator

Good morning. My name is Andrea, and I will be your conference facilitator. At this time, I would like to welcome everyone to the Granite Point Mortgage Trust First Quarter 2020 Financial Results Conference call. [Operator Instructions].

I would now like to turn the conference over to Chris Petta with Investor Relations for Granite Point. ahead. go Please

Chris Petta

Jack good Steve call And Financial Thank for Alpart, morning you With Urbaszek, CEO; Thank CFO; our our discuss morning, COO. Granite our Steve are this call to on CIO; XXXX President Point's joining and me Marcin and you. our the everyone. Taylor, Plust, First Results. Quarter

portfolio, Alpart release After as and results. originations recap of brief were activities and my introductory a key quarter filed highlight comments, will yesterday The as XX-Q tables first Jack conditions. Marcin will with will Steve items review and financial well our today's call Form our our and current business our associated discuss market the with our from financial press SEC.

copy, website on find at a you SEC's website If may or the you our sec.gov. not them on do have

to with that review today's like earnings the in be this and have call to webcast In same in you this We now slides, mention location. accessed also website, Investor a urge Relations would may and non-GAAP the reconciliation our being information are we to of of our call. website GAAP our is measures. provided which I in posted on release financial section conjunction

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

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

Jack. will I now turn call to over the

John Taylor

and you first We Chris, XXXX thank morning, welcome you, everyone. our earnings joining you call. like would to quarter good and Thank all, for

we everyone during and healthy that challenging safe remain and these Before times. sincerely we their begin, hope families

to front want are battling all this our to those also who deep at We appreciation lines send the pandemic.

event well health make remotely such continuity have deeply this engaged mid-March, to everyone and ready ensure and been and uncertain maintaining as we began crisis safety across well-being efficiently sure for prepared have our first We well working these we was and perspective, with an As for business of times activities. preparedness and to want as company were connected unfolding, team business and the effectively, counter-parties is remotely, and working to the thank we their Since personnel a Despite interruption the moved efforts operating we business very this without our our from and unified. navigate one. and remain our to all very been markets. organization

on the real Since efforts. as landscape dramatically overall we've for the our negative well pandemic been and outlook busy the of changed last to our commercial impacts the COVID-XX the markets, given very as economy pivoted due communication, estate

new and the dividend. the things, you suspension we a preserving of the course maximizing announcing of originations focus this following: call our number of to liquidity, loan during shifted our our We update on including rapidly ceasing and will first, including

efforts have intensive concentrated we management. asset Second, our on team's

environment alternatives financial various lenders. we adviser and position for a with improve the with financing enhanced company to near-term longer-term Third, And sheet Evercore, of to and stability process preparing agreements better current we as been the our balance more evaluate for have deliberate have closely through the future. finally, and proactively further the liquidity our working our

value the the preserving on furthering focus to of ultimately benefit continue it franchise and investments our we of as our expanding built the for have as well we stockholders. value always, As

results quarter first and CECL will were related pandemic than discuss of accounting the standard, application in the losses by detail unaffected which the Our new allowance other later. to largely adoption for our credit Marcin increased more

reminder, a not adjustment impairments it outlook. and in is this on to a losses or statements, specific COVID-XX related driven its our to As financial credit increase the is macroeconomic reserve predominantly impact the by loan any And noncash in loan activities a our commitments Alpart balances, pandemic's loan Steve we of portfolio quarter. our repayments $XX $XXX million million discuss funded $XXX during of portfolio. But of first net summary, about the of originated bit will investment new and and later. million about is

At non-accruals. the no or quality credit impairments of overall March portfolio with our loan strong XX, was

payment interest April our out with of investments service. their of strong, collections on current XXX XXX were Our debt very

backed Our a by employ We floating commercial to high-quality underwriting strong process the sponsors. estate on first business experienced model focused a against be is and real States originator and disciplined of United on in direct loans senior mortgage attractive markets the rate protecting credit in downside. located

We our to have disciplined and remained knitting. stuck

first located top comprised and generally up XX is in diverse secured pool the to primarily XXX with discrete investments. of in XX% by XX U.S., of the mortgage a portfolio the top loans Our existing markets properties

the economic that and across such risk and diversification believe types reduces of portfolio geographies, one. distress helps the event sponsors during times and property profile market current as attractive We concentrated our of

Our a protect overall high-quality fundamental is philosophy real to loan a in designed of first downside. derisked of the mortgage estate value against position through investing

support assets and in at protect LTV sponsors have and means for motivation initial of that powerful XX% significant about properties, aggregate our their company. loans the portfolio's Our our in to equity strong for origination their providing

has and cycles an navigating real successfully as managers economic XX average sheet over of of experience various team and of and estate third-party senior years Our lenders balance capital. proprietary

developed times our both been financing have well who strong based through we relationships commercial fundamentally balance of on for real relationships as before, supportive long-standing business many so As borrowers have with and unprecedented constructive we in our stated counter-parties, the been lending sheet. estate as have and long, with this many on environment. sides is Having this of

cash to with extensive certain bank with experience, productive reported, post in While dialogue lenders. drawing limited all we're market our to satisfied engaged those collateral as and our of we on relationships proactively previously requirements respect our investments,

term have facilities near-term are predominantly markets financing maturities, significant matched have no Our provisions. and generally no capital mark-to-market

provides outstanding of constructive executed exchange deleveraging. have facilities, agreements a agreed with certain and Our for discussions resulted on repurchase lender over with balance $X.X for lenders in sheet and our billion borrowings time in stability which on greater in principle flexibility us our of period of

closely with times all our repurchase advisers facilities longer-term loans financed on an in I and with and have to In the retail various bolster liabilities, loans the on agreement borrowings our beyond. reduced process, exploring to almost and obtained we hotel principle Having with for XXX% stability in are we our weather greater of and said as flourish further these financing it our position working company's the uncertain alternatives earlier, to liquidity remainder.

lender that been we active jointly discussions, with loan As dialogue fettered, borrowers been current sustain also productive many that regarding COVID-XX impacted through our with ensuring the and on in their they properties modifications pandemic, can have of have by properties our disruptions. the on

of been be market continue our component us, and is we focus for risk navigate this significant to and a environment. overall will management as a Asset mitigation key strategy has uncertain

not assets. and impact fundamental our to portfolio, credit skills Currently, experience and by unaffected manage to do overall in is actively critical quality confidence tremendous approach, have have we ever, the COVID-XX to more disciplined of our and we investment underwriting pandemic. be than of expect our While the the it

management with of credit us Our brings to an has and function. credit team previously department asset we the in and Charles management XX our a Citro financial for head and real asset estate management many including senior heading reported, team skills team is of previously commercial experience, him over at a Charles experience major asset joined years. member years institution as XXXX, our and and

significant Heading were footing. XXXX. into period estate liquid which volatility active the before and lending oversupply balanced financial this rational and Industry largely standards responsible solid XXXX the levels capital not markets, real generally overall caused of with market transaction real by COVID-XX, the were the estate of leverage, economy on of properties, of was no and to fundamentals crisis volumes great case

we result, real we estate as activity past get crisis, return. that the should this a transaction believe As

As estate will and real U.S. a demand risk-adjusted to supply continue returns. significant capital debt there for viewed an commercial is and both attractive as equity generating be and attractive class asset

the to this In summary, performance caused I our by pandemic. team market am and pleased response of in environment the proud with entire COVID-XX very of strong

market has seasoned challenges, navigated no Our multiple each one its disruptions, successfully cycles different. being unique team and this own presenting

on focusing our assets experience and protecting before expertise us, are capital. thoughtful to the investors' liabilities handle way, have whatever in our while a and both We our challenges managing

of together in I Directors future working of thank these behalf also partnership like position team, able are for growth our to Board for On continued their support to and success. would we the and entire Together, company as our events. will we be unprecedented navigating

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

Stephen Alpart

you thank for joining our And this Jack. morning. all you, Thank call

are with pandemic. Our thoughts affected everyone global by this

holistic managing impact estate assets. quarter, our investing experience originations, Overall, markets first our asset new commercial focus our an with in COVID-XX the pandemic, the as management overall emphasizes to borrowers. investment of During from shifted and economy began we to and working real the loan the philosophy approach

the repeat also loan repayment. responsible augments feedback dialogue in Granite loop, of is and Point, through originates a it enhances approach business an the of ownership, the and strong our underwrites building for alignment relationships. also a This significant team and managing creates borrowers, long-term strong resulting sense to that active leads asset with

well-known our mainly expertise. We our owner we great with operators engaged a of borrowers integrated other structures borrowers the have their regional analyzing our from firms, of on well relationships, with months with be have include as institutional been ownership that supportive hand-in-hand quarters, and private our over while high-quality to their plans private equity global our our or of protect both on their in firm Point actively property-specific vertically properties, institutional Granite partner. assets group Discussions Growing equity capital have testing borrower working a lenders. Majority ranging the can as how borrowers, borrowers process. and status and few centered next with

to these customized the highly specifics discussions the of of is Each situation.

with to short-term additional floor, the the equity, paired LIBOR Some involving navigate sponsor with around deferrals disruptions. business objective our reserves, general through help typically of the of reallocating themes flexibility

their level of We the loans. leverage these properties, and strong levels desire our the a our relatively underwriting conservative borrowers from our given in resulting equity to believe have of protect borrower assets moderate

principal diversified sponsors. investments. balance markets, property geographic These and XX was investments commitments, funding across types billion March billion, XXX broadly future at of Our consisting approximately our portfolio's $X.X outstanding including discrete $X.X are

We MSAs. Back should top XX the believe XX located such the up to markets, the risk in concentrated the underlying properties from to as are fallout COVID-XX primarily help reduce pandemic. and top event

we While short less of be likely a paid comprised credit mortgage of loan strong expect currently XX%. of LTV our the senior weighted impairments continues non-accruals to investments is portfolio had performance out pandemic, affected term, than origination at it We April. XXX the by first portfolio the is in exhibit to has at no stabilized XXX of In our first portfolio's our characteristics. average quarter. or our particular, the of in their the interest XX% of loans. of impact end

of new portfolio loans over million $XXX loan million X about balances, loan for fundings million. million our closed of new total commitments. our Funded quarter, of preexisting of commitments about the $XXX initial $XX consisted of of activity and to we $XXX loans first of fundings Turning with

began quarter committed quarters more shift to rapid volatility. our as reflects first as well as experience capital preserve fully markets largely to compared liquidity the our recent Lower to originations being

the earlier, sheet The able Jack liquidity closed As greater plus of a LTV mentioned we stability we average first XX% X.XX%. of for have period some of and average obtain loans of stabilized weighted a weighted during use quarter balance yield our a LIBOR to were to time.

difficult near the the repayments any in environment what do what discussed the the the In of to loan we've anticipate predict activity to pace the estate realizing second for addition, in expect of lack lower we repayments market, real significantly We meaningful during of in rest realized is than current year. happen not about any term the may it amortization. Considering principal the prepayments loan and quarter, $XXX past. and commercial transaction and million of remain we

the hard in timing General the that are reopens, third in are quarters. expectations as second return we transaction it economy Exact if the volume may some to forecast. some market realize does, should loan year. of half repayments and and activity And fourth the

on the commitments mentioned to costs. quarter. our about that I and earlier, loans commitments in particularly funding the expenditures funded of we expect We related such down, existing those should of $XX million also leasing slow first capital

Looking will and when forward, the reemerge to be activity we not activity few it to commercial predict estate surprised quarters. some transaction challenging return is markets. what to to would over next And degree real the see

we are we and today, our managing with have of largely no borrowers lenders. As loan focused and our existing along continuing with our asset liabilities dialogue our and on new commitments, portfolio, constructive

resulting somewhat in have higher we limited evaluate loan We we areas of will participants in lenders. all on seen markets and environment. discovery and to new activity funds returns and how see certain some cost Once of and this in are and our lower probably along price activity higher focused believe to risk market, market with stabilize price spreads, returns, leverage, wider

a market repeat has reliable borrowers. to strong roster lending well-established the counter-party a presence in estate commercial as real debt of Point a Granite

Given of originations to strong the to stockholders. business, are of direct benefit origination advantage platform, market inception of the will take future highly track loan the by we attractive we our our new our of of evidenced the be capabilities able opportunities confident since that record

the detailed more Marcin Now of our review a over for call financial results. I'll turn to

Marcin Urbaszek

Thank you this Thank you, Steve, everyone. and good joining morning, for us morning.

first loss million share, $X.XX which or loan of GAAP standard. to provision of the the of related the million accounting quarter we losses application $XX.X per included reported $XX.X or CECL share a per new $X.XX for For XXXX,

Book share. of XX standard. as March million earnings and and were adoption per impact core included aggregate $XX.X per share first quarter the $X.XX per was $X.XX $XX.XX of value Our of share the or the for application CECL

be and X CECL's found regarding can details Pages earnings Additional on impact our X presentation. our of statements on financial

earnings some on the Focusing from CECL. our first of drivers away of quarter

income lower expense. quarter, interest $XXX,XXX interest increased resulting due in to LIBOR, net last versus about Our by lower largely

yield million expanded a recognized declined rates short-term that floors our as from XX portfolio fact basis about declined with other by and QX, about of overall cost net along loans. certain on loan onetime margin income We in of our LIBOR we also to realized $X.X the Despite interest related fees. versus our points bit funds benefited our our

higher were income At interest over in end, And increased quarter XX% of about ratio The in of net floors income money. our and to operating of offset decline increase more the that earnings week, share XX%. the LIBOR other last was largely our fees, professional which about quarter-over-quarter. expenses, advisory $X.XX and than core in drove per by higher by $X.XX related to about as combined

Turning to sheet. balance our

increased XX% slightly quarter Our about cash as $X.X of million balance about $XX loans. and end senior and portfolio of billion We had million about $XX principal of to comprised was mortgage at Friday. first

for certain and our course As of used agreements and our the last delever lenders. sheet weeks, the Jack mentioned of assets several some over we with balance greater liquidity to through stability of our achieved of of a time earlier, our period flexibility

the of including about also debt-to-equity, equity. recourse leverage X.Xx on which non-mark-to-market was both and of our the total at with CLO quarter CECL the GAAP impact our leverage, X.Xx, ended nonrecourse, of reflect We debt

no category committed strong combined impact characteristics In portfolio million we with loan Among while performance, or of X risk balances, first committed moved rating terms million defaults, total a COVID-XX largely to non-accruals downgraded of pandemic. to continues of balance credit exhibit impairments, those a we our downgrades, ratings additional in $XX credit over the on to loans of the $XXX related the over maturity quarter, X. of risk with

new such our assets and performance credit monitoring actively facts further in if adjustments. the future that adjust risk warrant we ratings of additional may the are We believe our

CECL overview credit current to our of my detail our some for and methodology reserve around Finally, with remarks an losses. conclude like I'd

reminder, effective XXXX, lifetime our CECL X, losses As estimated investments credit for all lenders and similar other for a companies to requires in GPMT became and public on portfolio. reserve an January record against

given the loss with use in CECL inception disclosed or of to from combined given implementation we reserves As of application historical licensed data loan default specific Trepp the a of business, LLC. analytical elected connection the probability since and and with standard, default XX-Q, subset in Form lack a model losses of loss loan loss our of our our

impact In of loan a per X, of provision X $X.XX recorded recorded CECL QX. share addition to day statement, of also the share CECL income our losses $XX.X reduction of million for was from in January to equity, application we $X.XX as or the a in on $XX.X or million adoption per related which

of XXX our reserve of March to our Our of as book value or approximately total per represents CECL is cumulative points XX. $X.XX and loan $XX.X share total basis impact commitments million

loan is general on our to any in losses in macroeconomic for the quarter losses the impact in first related specific commercial estate COVID-XX portfolio. in change of not provision real economy conditions market recorded to Our outlook or is the for and the and and the projected largely pandemic loan impairments

For further refer CECL discussion please to the our XX-Q. of topic,

Thank for ask questions. I call to open the operator And the you will today. joining to again us now

Operator

[Operator of comes JMP Instructions]. question Securities. our Steve And first from Delaney

Steven Delaney

I'm glad the no as mentioned all have well. start I'd like impairments you reserve. with to Marcin, to you hear well that CECL that non-accruals. been are as no there

should without correctly? reserves. million me any entire interpreting tells Am be your have, I that general reserve to specific that So you we consider $XX.X a that the comments

Marcin Urbaszek

how us, yes. Steve, we thank reserve thought you for general us. joining It's about a that's Yes, it. for

Steven Delaney

Page deck, you with you clarify Can X impact, Great. And million the loans, certainly, just liabilities of mark. for other Okay. reserve that have securities, break course. the you But as at please? in looking me, down $X.X the

Marcin Urbaszek

Sure. both the to and a required book commitments. unfunded related We're to unfunded. funded That's for reserve

piece. unfunded the is this So

Steven Delaney

on wasn't, put to exactly I but it. where that's you for some liabilities, that, knew not I have and sense. focusing perfect would Makes reason,

Steve you're loans, I hotel talk loans. Alpart, was of was certain Okay. hotel Great. delevering financing there talk of there And on certain guess, --

Just those advance might some of can specifically, loans the kind comment you type on that -- on financing a loans like some your you range. of Can hotel range Not deleveraging? offer general what delevered? look generally, post have hotel you a rate of those of after

John Taylor

the -- -- our advance We the what asking would the on You're deleveraging? hotels rate after be

Steven Delaney

Yes. yes, the advance hotels, on The rate sir. borrowing

John Taylor

not We they that But and discussions specifics reasonable lenders that we line to at comfortable in get with our with. what were down that. voluntarily with the agreed them into say on prefer we felt paid Right. levels we'll

Steven Delaney

Okay. I can understand that.

So we I'm At your classifying any the delevering as right I related a some you the to thoughts issue important. about Board for your understand now, very retaxable dividend And just currently if suspended to point, first. income being you cash feel know curious when I liquidity, are you is building -- Can the have full you might readdress consider the share dividend? of year.

Marcin Urbaszek

Steve, it's I Look, it's again. -- you're Marcin think correct.

given kind in As in QX preserve to a what's our the we we of said suspended world. liquidity going release, press dividend on

We with are Board. dialogue our in constant

discussing second dividend in be June. going will the We and later quarter forward

So that the discuss back Board, and a factors that. obviously, steps we'll come we'll into our to lot then go next market with with there's But of that that. different the around

Steven Delaney

would Well, the I of but the analysts, need time. this liquidity. hampering obviously, one, would and we'd flexibility seem not the Liquidity paramount risk at community, love investment to like think, -- we, to to at be operating the see

Operator

next comes Jade from of Our question Rahmani KBW.

Jade Rahmani

generally highly net book assets to of off back are at XX% shares? even the a equity good. any to and the you At then book trading repo using go-forward those pay of given to value, XX% believe book prospect to have and might any you At stock the on selling a funding that buy consideration accretive loans of discounts at the loans be value, of basis. Park, XX% proceeds With value par money to

John Taylor

and Good this Jade, speak thank your you you, Jack. for question. is with to

say, So we've on want I'll of straight press selling to out in -- have actively the just to record been in some engaged that. first, loans, not fact, contrary reports that there, set been portfolios

a as working we're exclude variety moment, of closely those financial can said, our not forms, we we our position. loan loans sales, take We the improve And actively at Evercore financing as just I alternatives liquidity with that's explore but various not adviser and alternatives. as will are to said. to selling And

not I very to will to you're asset depending the to particular sell par unusual some different management or trading strategically it a a be would at relating that decision, close helpful. we loan add, when an as asset. on of But book would selling are low part a value variety circumstances par be of aware assets

at So our that's part of financing our overall analysis as look alternatives. we

Jade Rahmani

cycle about debt out such there of to putting out worth What actions think stock that April do I able and it's their the and wanted to of a were that helping out recovery. are was REITs up collections, couple past you the noting the to mortgage ended I were crisis, mentioned financial ask April XXX of XXX a in provide current. floor under service a loans reserves? percentage path of of funded coming

Stephen Alpart

Thank you Steve. varies for it's Jade, joining It us by really today. asset.

of Some out some reserves. from flow of cash debt service loans paying are are built-in paying loans of and these the service debt

mix. a really it's So

the make lot and that are is coming deal. out of to varies that it can being And but multifamily, of loans lot a You is paid deal of cash really on closed the the out flow, office lot a hotel reserves. properties of industrial on a assumption

Jade Rahmani

original balance structure much loans of is percentage of funding make of And cash the sort negative that for how origination? reserves? adjusted service the you out debt if the of loan out had toward funding to speaking, of you loans loan, the was And what flow reserve Okay. been an when there migration generally

Stephen Alpart

could really a by I Again, you varies more deal answer. it specific give deal, wish

for are loans, may need at originate not cash when reserve a a we there all. them So flowing for even be loans that

will replenishment reserves, where to plan expect most obligations. depending just property loan And loans built life the on the mode. business that while these and its ramp debt see the are in in For there's cycle a service reserve existing is loan, not into with loan a built is bridge of might and typical you whether dictate then or

low loans a of constructive lot the conversations protect. the These There's loans with to a generally and borrowers fairly our very into equity having built of borrowers. are have lot levered. equity we're So

seeing was that is replenish reserve the and to that. reserve, borrowers are that extent there a a what is So up need typically a for we're seeing we're stepping that there to

Jade Rahmani

of XXXX through which be funded commitments, to $XXX XQ And in would unfunded about from in terms the year-end? how anticipate million, total much you

Stephen Alpart

Steve again. Jade. Thanks,

So the it of drawn. and be are when a would specific the In the are likely over all expect In to pace slow variable, likely on of and timing they very going refinanced each specifics of dependent extend, mature, will not likely funding funded then fundings is time. depends would future period future these always the market are property. it's of a loans be that of bull a lot we and to be that future on before fundings fundings getting highly conditions. market the current environment, And longer loans the

for This And our assumption XX% are is fundings to tend we make. then we We be typically that drawn. And about another purposes. point make of meeting that all And that all the and finance will of then future funding responsible we to the just future rest. assume liquidity obligations. for we're amount,

of as far year, the to many drawn As a how function question the plans. of business pace the by specific really your be will as it's end of

Operator

of Crédit from Our Doug Suisse. Harter comes next question

Douglas Harter

about talked you In alternatives. financing your various [indiscernible], exploring

you wondering what alternatives some could big of picture talk might sort through Just if of be? those

John Taylor

with hear okay? Can speak to you you. Jack. me Sure. This And is good

Douglas Harter

can. I

John Taylor

best about financing structured like And process as early and thank and about in would there say to with in speculate market And you. priced I ideas extensive through engage to proceed. to approach discussions very might which process. that how the it's we're we alternatives. our that specific the might is we have But Okay, discovery be. Yes, to approach the a optimize our is benefits pipes

So to to Evercore closely detail, but go any it's at look into working we're those. early now with

Douglas Harter

Understood. talk on you with talked lenders, had about I captured Is your then that have the could then take liquidity? goals? as kind wondering that there the just the with back if deleveraging as what received and of lenders? any standstill you there of all And might your margin you current give in about your was from And a just I is guess, future Just kind you deleveraging, of lenders? far

John Taylor

question. Understandable Sure.

the on retail that we first, financed similarly property done the principle properties, remarks, we expect and So loans. document day agreed we There's are in amounts not in with the in repurchase the said facilities, prepared that included our say as for couple amounts in of millions. those the in not next dollar single-digit We I position, so. we but hotel borrowings dollar cash in our be movements And or are the on our so -- will cash the are that the our not principle, dramatic reduced and agreed remainder expect a in are to loans retail to we've the finish position modest.

$X.X billion out and we've the lenders would across paying on on with to that we on, are those other And the lines, line that with wasn't March that be we it respect mentioned. thought engaged the limitations have paydowns our board. full the We asset-specific

our of we March support. a and the banks days. We alternatives the those time time, to to period explore in Our their been -- exchange improve to is XXX -- what satisfied has from of XX was deliberatively view ourselves given for the limitations liquidity. with longer-term on financing very response run And received we've that

Operator

of comes question next Shane from JPMorgan. Rick Our

Richard Shane

your default of talked to -- listened of about to think how Lu. banks on in. curious And this curious a what what your the interesting financial they're an default I in of I term? Dean financing. the you detail -- you you your a of diversity having? with And We I'm am conversations in types I for And call property buffer given you've is the going properties, properties. and and a are guys ways, and the peers, morning hope your one lot everybody's position in a sponsors lot of your had resources you're well. short conversations with owners properties strategic feel of conversations of strategic they about provided your of of or in effectively behave probably Look, owners and terms

Stephen Alpart

this hope Hey Steve Rick, Thanks Alpart, for well morning. it's joining. you're

say, process. would hit, what borrowers. I So describing in constructive. we're not just the you very from as look, portfolio very dialogue management a our We're active we with When active being the pandemic have call. seeing I were conversations prior would describe Those

So of as borrowers. conversations We're those with productive. number I in conversation would a describe our

of You retail borrowers. to borrowers. the very could conversations a lot that those assume -- again, the to constructive. protect. equity loans, would us heard folks lots it's high-quality leveraged of describe moderately type and institutional We're borrowers as describe are Relatively you've hotel And of have, that I talking we

Operator

next question comes of from Raymond Stephen Our James. Laws

Stephen Laws

looking you've first, structure, what expenses? can expense idea give would Jack, on Can contributing look operating advisory and us of as you -- Evercore, far with questions. at well? with then advising And the fee with guess, how other are right the of internalization provide to manager? other that, now And you incremental management couple Appreciate is you What's strategic of internal they under we about at to thinking Are any how follow-up be things any the structure? great. so think color coupled there about expenses should kind we rate they that the that regards of much see? the a covered can the options I run

John Taylor

advisory I'll pass in the minute here talk like. about a and on fees Marcin to the to it

and available relating details from become later our process they X, discussed when be First, a agreement expected are documentation any final when to in announced date to a the delivered. as be internalization we and definitive will at release March press

questions answer at comments to pass on expenses. I about time. make about process your the would or So any can't to more I Marcin commentary internalization this it that

Marcin Urbaszek

thanks can advisory really you Evercore internalization. about beyond we In will like operating general as about options, the exploring -- would of have would Jack for mentioned, I in joining incurring. expenses QX, Again, this said, that I a that comment involves all that talk to QX, working the and some stability But In a balance more for of earnings assume alternatives related to as us various asked of to we couple imagine. to us. beyond related on we in financing our the just address provide it, since million take you opportunity as Steven, higher not I will can't our expenses. is QX more different with that. to lot sheet, had different fees we're also expenses QX, to expenses QX. in I

Stephen Laws

to that of clarify, million is run million level? saw couple is rate year, And which through QX than the Okay. a couple of or you a more more a just than of last normalized more

Marcin Urbaszek

it's assume first to quarter incremental the would level. I

Stephen Laws

on should as we some giving that benefit to we see up a lower net interest Are from that financing the LIBOR number? these Certainly, of facilities? adjustments floors. you disclosure up statement, talk offset And Great. and to benefit, fees. to going consider LIBOR But benefit origination and spreads make LIBOR the as lower be the some we'll that's appreciate move you paying a to renegotiate repay forecast to you need a can the income financing spread income with to and higher

Marcin Urbaszek

costs. seen I would financing much in change haven't we of say far so

I money. And that think not our not now the with obviously, if our we say may to pretty most all our we financing our right that's in providers. not LIBOR discussions of change have floors that, much earnings, continue -- as

So benefit what we so. pieces potential happen the of other that. of a what there's year to alternatives, and obviously, net we the interest should rest of lot options moving But around use, will financing income, have from for

Stephen Laws

bit I the If little you in GAAP have because I the Or there. have and to your impact Great. leverage again, issues there's appreciate labors you do And covenants from another having there? counter-parties CECL disclosure adjust is tied the add to question, and Q, just was is Can there? financing a in deteriorates equity write-down to your final the you a economy about reserve? and Marcin, these facilities. it around reading talk back potentially it's, CECL your noncash, noncash big equity the

Marcin Urbaszek

our forward. GAAP lenders obviously on can going based be as discussions is you things part It equity. with imagine, And of this like will our

Operator

question of next comes Arren from Our Cyganovich Citi.

Arren Cyganovich

those I about the which there's just rated only guess, at but the X $XXX there -- $X.X X I I On guess wasn't, I should you looking are in being risk is and risk in a hotel that million me $XXX is think listed this put retail your I risk, of category in imply like wouldn't into million, as risk guess, ratings, or, clear X, to have lower the which is internal would be -- rated maybe kind environment? Why risk. I it about billion was loans, higher migration average of say

Steven Plust

Plust. Arren, you're I well. hope it's Steve

place portfolio. loan-to-value, a cash highly quality, we system level, And consideration noted, consideration factors rating almost risk a portfolio. taken of for it score constructed variables, over slightly property quantitative, both two range and and loans represent property Quarter-over-quarter, and those our you of average system, into takes does are moved of X million prospective sponsorship, As we XX% market, $XXX the of we is including flow, our risk all and in which down establishing risk rate is ranking into loans. when our

of loans what So done it's in and given we've we appropriate characteristics the all is all think the portfolio. the

Arren Cyganovich

is future, in reserving the few have expected these the move a that would of Okay. Is loans into loans about you do specific terms are loans? it of rated a whenever non-accrual? your underneath, and that of you And the value reserves specific a in four. collateral look if you then one probability terms are Or in How only of at thinking of the for loss? then you any see

Marcin Urbaszek

Thanks Yes. for joining it's us. Arren, Marcin.

particular from on specific way. here reserves to kind we for going to we deteriorate about these of about you're right conditions what's move that's when as more assets. If thinking the think potentially with were I information get more move would it -- the properties,

Arren Cyganovich

yet exercised your have loan request received then modification And any any any or you borrowers? of Okay. for

Stephen Alpart

been process, very borrowers. Steve. It's we've A proactive robust with Yes. our management asset

with but with pretty it's We it's very being also. warehouse. And lot as but place some a number in And think a few loans, we're them. multifamily on it's retail right I between, of of I about and loans. conversations would in earlier, a have hotel been office retail And of mentioned loans say, there's quiet, I now talking now there's are -- don't We not multifamily. our on discussions lot right a focused

for So it's the hotels us. mainly been on

Operator

a Jade Rahmani follow-up is of from question next KBW. Our

Jade Rahmani

back to rate on there XX% the Steve's is net circling covenants. tangible advance much How the Just room about worth question against covenant, that?

Marcin Urbaszek

couple worth Obviously, a net so Well, our of covenants. it's roughly. have covenants, XX% the different of capital, we tangible

So And at that's separate the little leverage bit quarter. covenant we from by end at XX%. a were the think X.X% I leverage X%, covenant. of the is The

managing and we're And closely. but our things lenders, we still something liabilities paying discussing there, this room something obviously, with monitoring as are obviously So is there's are some to. our we is this attention

Jade Rahmani

you give two the the is next range magnitude what deleveraging can a quarters? And of over of anticipated

John Taylor

Jade, this Jack. is

The have I'll I and my range why. I a we'll that. prefer mute. -- about on what to not and extent alternatives longer-term impact and financing pursuing. on the of of structure that the actually any deleverage Sorry explain give other that, be phone will further type other largely

and So our it's there financing an it's And I'll discussions, raise capital the for really discussions process to now. liquidity with premature the alternatives on say go the banks. just iterative discussions

Jade Rahmani

a guess I picture And big Okay. question.

RTC be caused and model, given Or financing, risk? asset with post for rethinking you you the it control all margin -- a have come consider mezz out business company of model value a of CMBS of of a models crisis any call management repo off-balance Has coming mezz the things the assuming the days in been that very lending consider sheet relative pressure whether industry and think mortgages best the of You've lot would but or you period levered asset, first the is on but back, more lending. no survives in do business time different from the had ultimately aspects, of long would repurchase facilities?

John Taylor

to investment It's thought and the yes, now answer I'll So do and assumption and senior opportunity to best first very be look we going you future. whole forms, continue the to what thanks survive, predict to variety should And a we so point for market believe capital. out, think but have, days, do the our after to my that mortgage giving deploy a gets capital first, through question. been just early loans be and have will This significant as I is amounts market that. that of say, it's our country Jack difficult again. I'll try of across will broad this we're We superior experience whole like structures profitably crisis. to to

believe be rethinking the we're loans, first they're mortgage thing more of, financing there whether there like the commercial that will available to we keep that types an is -- exploit ways to it, And that's the structural even for changes debt other whole to lenders, call eye But out do structure community result. or for use a we a REITs one investment pursuing the would be I'll of them. mortgage that about by of funds, world that

Operator

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

John Taylor

on very very times. would are us. with Thank call much, being These the very, for challenging you and everybody thank we

us. And we're you. this on you our everybody period We and of update we delighted hear soon. And and wish how give family Thank good to friends safety and analyst further call are community reports we speaking doing, you and with on the health look again well time. through to forward with to

Operator

may Thank you you concluded. and for now has presentation, today's conference attending disconnect. The now

Granite Point Mortgage Trust (GPMT) 12 May 202020 Q1 Earnings call transcript