GPMT - Earnings call transcript Q1 2021 | Granite Point Mortgage Trust Inc.

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Operator

Good morning. My name is Sarah and I will be your conference facilitator. At this time, I would like to welcome everyone to Granite Point Mortgage Trust’s First Quarter 2021 Financial Results Conference Call. All participants will be on a listen-only mode. After the speakers’ remarks, there will be a question-and-answer period. to for call Granite like with Chris now Relations Investor Point. would turn to the Petta I

Chris Petta

Chief Thank Peter you quarter Alpart, Officer; items comments, as filed Chief and morning will and Executive joining SEC. press The Steve and With Officer. our Officer; good Officer on well were of our will are morning Morral, yesterday everyone. to will me call Co-Head of Plust, of Development our our financial from President Operating Co-Head and brief Granite Chief the release XX-Q Thank key portfolio; Jack a discuss our and Marcin After Taylor, Officer market associated Investment as activities Point’s our and my call business Urbaszek, financial our and Steve with introductory first Steve the Form with today’s XXXX Alpart Marcin discuss Jack our our results. results. call financial current Originations; this you Chief conditions; our for tables Financial recap Chief review and provide Originations; highlight

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

you include control. like made over I statements, would company’s that may which management and uncertain slides this the turn to during forward-looking of the outside the to call Before call conference remarks are and I supporting by Jack, remind

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

Jack Taylor

you, We earnings Chris XXXX like safe. good all to call. to to stay first continues healthy and would everyone. and our We morning quarter everyone you hope welcome Thank

managed sheet. Granite balance of was and business. afternoon, maintain our excited while $X.XX XXXX of strong we as in share. an quarter level we our first continued internally of to share accomplished across our report per are dividend was This elevated liquidity to of The REIT distributable Yesterday first Point’s per of earnings we an solid reported excess $X.XX well have performance on

cycles. past $X.XX over room liabilities and to Our increase team strong resilience the we our has as dividend March, by share. our across of continued rationalize our our collections year The and and more various business over dividend labor the to of our portfolio grow earnings the time. believe to strategy the illustrate results generated grow our from In we portfolio per performance contractual with of And our Board market decided on benefited our $X.XX in-the-money floors credit loans, interest, XXX% operating the our lower from expenses.

The originations the first we in available level in strong the improved the quarter, has from volume now remain competition continue and towards established build to steadily the Granite transaction markets to benefiting is estate reputation worst investment on with of opportunities new of the end loan attractive among the capital lending Despite tone and pipeline lending Point currently real our believe our the has pre-pandemic market. real the we With estate new returns and levels. been increasing lenders, active. the investments compelling very similar and market restarted

volume portfolio, of to new environment, our market course our we originations a diversify building of Over to stable with exceed the repayments assuming on further match we pipeline to execute capital. then Along redeploy as continue mix. our will strategy and our our growing the the grow our year of we portfolio and excess and pipeline financing

discussed provided us during with funding. which and quarter, of million closed new Sachs, a credit previously the facility with we non-mark-to-market Goldman first match financing As $XXX term about term

As currently our facility. for term this have negotiating a on borrowings outstanding and result, repurchase facility we no new a Goldman are

XX.XX% Additionally close on and which third million very attractive May $XXX transaction an with This improved basis matched as announced a of financing earlier term in anticipated estate basis. non-recourse is to before costs, plus this around or our of priced LIBOR transaction a terms week, points commercial and CLO, XX we XXX cost non-mark-to-market rate while XX. of advanced significantly our funds loans achieved real on

our non-mark-to-market have credit floors closing market our again. discussed about benefits with of and percentage our great a LIBOR our CLO CLOs, portfolio, characteristics to the strong by and accessed we market, $X.X have manage resilient capital three access earnings in financing our issuer continue of Upon off improving and beneficial start We sources time very as have opportunistically our of a portfolio increase highly structure. which in two-thirds. credit previously over achieves consistently repeat to our funding the to CLO, a are established we issued XXXX, and to the of as of this Point viewed Granite our diversified loan Since actively billion which targeted the intend about grow is our as pleased well-respected we goal market totaling this have our to from embedded to the XXXX level liabilities. will component loans, Granite Point supported of borrowings, XX%

potential actively not investments our real loans credit which considering to be any as believe and will manage isolated continue are estate we the resolved. on unexpected market will We impact the certain so pandemic’s relatively risks,

current market of positioned economic future the fundamentals, are about optimistic beyond. real and and improving We growth. opportunities take to for advantage company emerging the Given in and estate we year have well for of our rest believe performance we investment the environment the our

by continue value-add time, business floating further our mortgage would properties liquidity funding to over dividends, first the support scale we sources diversifying to rationalizing emphasize and rate strategy now redeploying We in REIT. sponsors Alpart plans. as risk by economies portfolio adjusted grow detail. our our originating downside turn business delivering loans high-quality attractive will protection with will our managed and activities of our Over while senior mix institutional quality on owned greater meaningful of call while more to providing achieving earnings returns like excess our the internally of I as we discuss recent to our liabilities, Steve an and on

Steve Alpart

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

$X.X which with around for account across our perform received XX% with a through to continued payments about million billion, with has XXX% only in quarter of We XXX about balance interest contractual of portfolio the ended total portfolio April. XXXX, loans, funding of outstanding obligations, commitments. $XXX principal in well Our future

million funded quarter conditions balances and $XX in of about $XX quarter, prior million a market payoffs quarter, first second including million portfolio. in as result of first continued million the During loan in credit far commitments. we an additional on of a $XXX the hotel our of $XXX realized improvement quality loan We the the and so loan

We and pace transaction year of acceleration an volume with economic activity this the of continue, latter picks to up. expect part as loan repayments the in

to $XXX So, quarter during the likely quarter. the XXXX, well in challenge which exceeded million, year. will excess believe be to had vary of actual we Even volume this of is we repayments market from

Turning over seen to of in a modification volume to requests months, as asset have the last conditions the decline market improve. loan continue management, few we

by the of pandemic. properties continue constructively We borrowers, whose our certain to remain with work impacted

loans we of $XXX aggregate first modified principal an the quarter, million. with During X about balance

impacted which borrowers And from to-date, a responsibly are others are haven’t We deferred amended to is previously million watch of by Last remain with that million the particularly properties been loans reflects capitalized assets. modifications $X.X pandemic. the and that these been dialogue to well general there also and basis quality we acting effective high-quality making any financial Most with have their seeing report. shorter of major that developments term modified We $XXX active on interest, ongoing quarters. as borrowers. in quarter, been list have loans highlighted commitments of we QX these and prior theme currently in institutional approximately as the

we risk stable new loan QX quarter. X March to Our At didn’t that rankings any and X the We a which repayment, in was very the risk-rated X. expected loans were were risk-rated that versus have rating moved loan is had mentioned positive, other in prior QX. one from a hotel a X million credit a just including occurred being of of migration upgraded in earlier $XXX X as anticipation mainly to XX,

Minneapolis on We our hotel loan options. attractive million loan remains are over Overall, of a and evaluating of the risk-rated time. the X with it deliver we $XX the ongoing that well-diversified are variety discussions are credit in results and portfolio quality borrower strong in potential confident will was

advantage new loan originations during beginning improving first excess with portfolio economy, in conditions are some of quarter, and resumed As the to our take our and the Jack investment we overall redeploy trends positive mentioned, opportunities. consistent market capital new of to

with pipeline over loans, investment of total initial $XXX consists $XXX current Our fundings million. commitments over and senior of of million

if loans, not quarter. these close to second during We most, expect of the all

with return strong sponsors and attractive multifamily includes loans on mainly pipeline Our properties credit profiles. to

and released as loan CLO. We new the a of set our and most capital recent investments grow in repayments quarters coming significantly expect dramatically investment review we reinvest to opportunities of our larger pipeline from

favorable continue our that return to and selecting characteristics. fundamentals and multi-family the as portfolio remain focus our for types other and investments in will opportunistic will on credit meet best desired We property

XXXX previously, depend noted on repayments. loan we loan volume originations of the new As our in largely pace of will

the results. also for review some redeploying market we of a of over more Marcin financial now However, the the detailed turn excess year, to as course our over call our liquidity the continue I of improve. will anticipate conditions

Marcin Urbaszek

us our per earnings analysis. $X.XX per joining or by first basic and was strong decline which million represented for macroeconomic Thank decrease points in decrease for our the today. for everyone of allowance results, employed million, reserves per reserves. income net million XXX $XX.X non-cash or Yesterday $X.X and repayments you basic or thank driven losses mainly $X.XX you, share, CECL were Good or was quarter CECL GAAP in $X.XX Distributable $XX of quarter quarter million, share reported The share in we Steve. At loan with reserves. end, basis included $X.XX the share of afternoon, our a per morning, the $XX.X first and loan improving our in total and commitments. forecasts credit about excluded our

$XX.XX dividends. to from book was The $X.XX of Our at Board increased the meaningfully at covering by dividend CECL per per cash stock prior result quarter. XX earnings our year $XX.XX of release end. share value in our was March, reserves March share which In common of the and Directors increase of from share, regular our $X.XX $X.XX per increased declared the a

and influencing dependent our from liquidity, loan market on potential the our loan, repayments, savings be term volume largely which be capital pace expected main are of of of the will earnings the conditions. factors refinancing to expense interest deployment our forward, of Going excess run-rate

to of and had with $XXX plus to $XX receive we in XXX a to year. cash. is ended $XXX of cash we in our average end more approximately this draw points. our the with of as lower term Over We basis September in compress. net as million earnings the spread million repayments interest LIBOR LIBOR of originate million the additional an about our loan And proceeds option likely quarter X, embedded May loans, through in from Our new benefit with investments weighted continue loan floors time, floors,

equity the quarter our prior at and CLOs from was other leverage leverage, X.Xx. in borrowings recourse Our down our non-recourse X.Xx total March was debt to Xx, XX which and at excludes

we developments of pace our depending to conditions, leverage total be the in market as on volume debt range such our of originations Xx and Given of loan X.Xx current to the to repayments. in new equity anticipate portfolio, would

the cost transaction announced accounting with CLO, pricing mentioned Zack points for week, an transaction we As earlier rate before third this an million expenses. LIBOR our of XX.XX%, of plus advanced of at of funds basis XXX $XXX a

provides level it with the to We percentage about transaction this low funds and very us very financing pleased attractive with as are XX%. our of increases of cost non-mark-to-market

of also into about closing, upon coming which the months. $XX is additional addition, the originations In expected redeploy million liquidity, release in we CLO new to expect to

we like Finally, loan potential of to part on would impact I last discuss year term our and issued value. the our warrants their as book

of reminder, total a entire $XXX the we a about X.X warrants issued As million million commitment. for

since can net we warrants company’s about at the effectively million, X.X of again I book be currently. in drew $XX term to would vest draw million stock open would recent settlement or $XX million will ask to operator call are initially for if net loan. outstanding there cash to joining warrants However, X.X the in remaining cash a either exercise, At Upon $XXX today. are settled that the on on we million you in the Thank price case proceeds be our option. about now these over warrants the us the value The X% remaining the decided assuming the share of option share, dilutive approximately questions. option. settlement X%, effect per shares And

Operator

you. Thank

Instructions] question from will Credit first comes question-and-answer Our ahead. session. Suisse. begin with go Harter Please We now the [Operator Doug

Josh Bolton

is talk feels hand The everyone. update especially the pre-COVID. Bolton liquidity. This on helpful. still Appreciate elevated Doug. your around where running It time. can you thoughts Good for Josh you morning, was versus are guys Hopefully, cash about

market trying to state Thanks. liquidity level a sense So, looks as like, more a the just steady of what of get normalizes.

Marcin Urbaszek

say we prepared us. It’s remarks, you Marcin. of and we Thanks also for but calls, some yes, said, Hi time. as – your heard for Look, you as we question. joining Thank us prior as to morning. intend excess on it so over just have Good we liquidity, in deploy our Josh. just some

hard we It expect of is it’s we time. basis, pace what pace to to will to depend down accelerate to repayments, originations little a heard, year. you be. go obviously look, of the in balance and on which as net But, the expect of liquidity exactly the half second So tell bit on going just the a over excess

Josh Bolton

or was what second sense. or little a that give Great, million type around color Thanks. guess, hotel what kind of then something to loan gears it upgraded I it $XX a you the that bit any the Any prepaid us makes resolution? shifting a quarter. can and refinance of was else? And or in was hotel Was sale

Steve Alpart

morning, a as located good service Steve type asset. CBD Alpart. Josh. no No, Hey, great from quarter. Minneapolis last real in mentioned update It’s that full last the quarter of it’s the It’s we hotel is hotel

Jack Taylor

he that the sorry he off. am – asking I was asking loan Steve, paid about was

Steve Alpart

very equity that hotel. was Yes, a resolution the a also And full at firm it service purchased was that a one large private on attractive by price.

Josh Bolton

details. for Thanks Great.

Operator

[Operator with Instructions] go Our from next Rahmani question ahead. Jade comes KBW. Please

Jade Rahmani

color. on elaborate much. you you I gave Thank settlements, the how potential you that warrants about know Could thinking are you very and

Jack Taylor

Marcin?

Jade Rahmani

I that perspective potential its effect. Hey, company’s that, the is given Thanks. cash you know likely? Thanks. more dilutive cash guess I is But on position, the Marcin. gave settlement color

Marcin Urbaszek

you warrants The first year. thank the be exercised the So, for can’t question. for

that’s So, one thing.

exercised be year. through can’t they the of September So, this

on they dilution balance cash book effect. overall, it in relative But stock I limit option of and of today, on is is because where at like cash the if stock, we of help sheet because think dilution. is largely the terms value, valuation we we in exercised, get optionality basis cheaper look, get depending stock versus think can they a depend exercised. I are price Obviously, if on will the terms the our moment, where below

Jade Rahmani

hard or it’s point? too are Okay. they And this likely you predict at to be do to exercised think

Marcin Urbaszek

to It’s tell. really hard

Jade Rahmani

Okay.

the Turning a from REITs discussion outlook there this of M&A, been it. has to quarter, lot for mortgage about

be do I you make middle and could another emphasis doesn’t So whether have your if has could accretive? firm was sense Jack, think Granite with that would give wondering and thoughts market perhaps that combining you Point

Jack Taylor

we anything We not And recovery any tell I in we able our we discussions. is you, weren’t, Well, mode, books. that. on wouldn’t growing reacceleration including pursuing like to and be you focused whole we industry tell are us. will the not in if And are are but

been in by has we my prompted looking think near is I some intermediate term. often not point particular there questions So, to REITs, the analyst. from mortgage But that discussion are a in that

Jade Rahmani

Okay. Thanks very much.

Jack Taylor

Thank you.

Jade Rahmani

The watch dollar think million. amount was list loans, I $XXX the you said

Peter Morral

Just want that to sure make correct. I got

Jack Taylor

Peter, that’s correct.

Peter Morral

Okay. And that last from was quarter. unchanged

Jack Taylor

That is correct.

Jade Rahmani

type loans some resolution? timeframe you over Okay, to those what of anticipate do to come

Jack Taylor

question. great a That’s

monitoring situation good a say is from last quarter. these all little no of would I guess update that And loans. watch each bit list particular really obviously, are volatile, I real in We different. loans these is all there Really, for

will this We right it, specific as there that have get timeline but we on no information is now.

Jade Rahmani

lastly, just And point? on non-accrual Okay. one this at loan there is is there –

Jack Taylor

put the the in that’s It’s non-accrual on one same relatively the same. small Yes, correct. that’s It’s first was believe That’s on a I loan quarter. fourth that in the quarter. non-accrual,

Jade Rahmani

taking the questions. for Thanks

Jack Taylor

Thanks Jade.

Operator

from Securities. next comes Please Our Muller JMP go ahead. question with Chris

Chris Muller

I on thanks the guys, Hi, for am Steve today. taking questions. for

On I thinking or or assumption macro Marcin. improving that loans majority the on the But by release. either reserve a just appreciate that specific scale? bit paying risk deeper of on little off was improvements driven comments your CECL the

Marcin Urbaszek

say a mix. it’s I would

the had is Obviously, of to one related macro. the it I loan majority think we repay. hotel

was there bit a to on quarter, a macro but that, second mostly it the in So little allocated level. was

Chris Muller

multifamily, And of I going multi-families competition there any like you have in you. asset mentioned XXXX? heard Alright. right guys are elevated you other that comments, Thank then other which into than Thanks. classes now? your we know

Jack Taylor

I address that. will

doing two things. are We

balancing are needs. interests competing always and our We

so composition, dynamics. portfolio So, there also There is the market. in and levels is also available credit

logistics, together, Life storage, Sciences, least will initially a largely of self some mix well composition as bit that that’s on some trends warehouse at used that over a are is time. by giving our shifting well think multifamily focus office. This occur and more as So, and driven we portfolio all we

multi-families faster. our portfolio For are others, are across and example, ones the prepaying that

to impacted in That always many classes emphasized have such have maintain about, know and need example. balance that, pursue be as have them. originated talked and So, will originate your to near-term. out also like years, I classes we them retail, to for the on more, we the But over more how well, of least them hotel you know at

Chris Muller

congrats and on the Great. comments, Thanks everyone strong today. start for

Jack Taylor

you. Thank

Operator

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

Jack Taylor

all for Thank And our look for of thank first very year, you forward questions. the of today. your a the the We to you again quarter opens the continuation as wish rest everybody listening both safe healthy to call and next strong a as good opportunities all you take you. of and you economy market we quarter. Thank us. as and up, a Thank into of the recovers advantage ahead we

Operator

Thank for presentation. concluded. now today’s attending conference The is you

You may now disconnect.

Granite Point Mortgage Trust (GPMT) 7 May 212021 Q1 Earnings call transcript