Earnings call transcript Q3 2022

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

Operator

Good morning. My name is Jason. I will be your conference facilitator. At this time, I would like to welcome everyone to Granite Point Mortgage Trust Third quarter 2022 Financial Results Conference Call. [Operator Instructions] Please note this call is being recorded.

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

Chris Petta

Thank you for Granite morning, everyone. call good XXXX discuss quarter Point's you, to third results. joining and our financial Thank

our are Co-Head my Officer me President After a Taylor, Originations; and Urbaszek, Chief Co-Head and With Officer. Alpart, comments, of Steve Operating market Chief highlight our Plust, from Morral, financial business Marcin our our provide Steve Financial Officer; review of key will and Jack Officer; conditions. discuss this our current will Chief Executive results. brief introductory our the our and call and will and Jack our of on Marcin Originations; portfolio Development items Steve morning Officer Chief activity Chief Peter Alpart recap Investment

release filed were remarks would on our management The slides this XX-Q. our today's of tables are yesterday are during made Investor Form with outside financial may website control. Relations supporting press and with the available you uncertain SEC call statements, that section to of which remind forward-looking and with and the associated company's call include the by and along like the I

could for subject SEC views a future our filings expectations. discussion results. from forward-looking reflect to statements. results some do statements affect Forward-looking update to materially We any the obligation that events of to the and regarding could are uncertainties differ actual not our that any risks cause Please with undertake of see

financial financial comparable our to to now be earnings these in as slides, isolation are on A accordance website. This to measures is our found can this a information GAAP intended available measures also non-GAAP with in or refer be of GAAP. will We and most in on presented release reconciliation call. the which measures certain substitute for non-GAAP considered information

I'll Jack. now turn the call over to

Jack Taylor

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

course rising the the of remained volatility the asset and in with markets geopolitical quarter, rates, rapidly the financial interest across third conditions capital increase while unstable. liquidity Over tightening classes, environment continued to reduced

market rate estate, speed is Fed about of declined the there transaction in less magnitude has recent the respect expect on real of is pressure downward many property With to the XXXX, given volume increases, and full the clarity the values. actions While participants to broader economy. Fed's there and commercial on impact pause

remains commercial historically, global But these. as estate safe real have we seen a like U.S. in times haven

there the for uncertainty for kept market sidelines billion be to waiting the many more has capital now hundred on dollars investors While invested. clarity, are of waiting several

crisis, fundamentals demand global capitalized As compared generally of and banks in the are better to the far balance. commercial financial better supply estate real are and

on loans first of mortgage strategy originating Our U.S. high-quality

our resilient, estate equity proven with granular borrowers healthy be the real real by has the and from loans investments our our Point benefits supported volatility Granite values portfolio. from of to estate of

an million. balance As of $X.X XX, of loans billion consists portfolio average September of XX $XX with our

near during term liquidity the have of maintain third our originations back both realized million $XXX we one market quarter, new repayments emphasizing loan our scaled the loan to build volatility, the we and during and the balance managing only repayments. the realize position. which continue To Nevertheless, quarter, in liquidity to Despite third in sheet. lower actively is we our portfolio resulted given of as by loan effect, cautious up it times, over balance uncertain that a these closing prudent stance sides

assets. Over XX% XX% properties of over repayments these included on and office hotel loans were

have benefits XX% being of and managing portfolio, our continued have $XXX totaled despite the the loans. with about repayments, ongoing These million Year-to-date, asset realized $XXX about over in we which far repayments our uncertainty capabilities of repayments and so office resilience demonstrate of of the Additionally, the about XX% our strategy. million fourth quarter, office market were loans.

In middle-market property we more to with provide their and regard, work Also, from proactively and as this to our flexibility they equity market sales repayments for to more be to liquidity have our borrowers financings. to additional what challenges navigate them properties. benefited seems with invest time continue somewhat support

assets their our We borrowers ongoing are properties invested year fresh into over an over so. $XXX seeing the commitment with equity by to of million last their or

funding at of and to our our moderate a continue being We well-balanced is our mix total fundings our remains below sources increase non-mark-to-market. end leverage flexibility. and to meaningfully X.Xx with while Our quarter X.Xx, we targeted Xx maintain financing diverse at financing majority are the

million During closed capacity non-mark-to-market $XXX our liquidity range financing on loan of funding while we enhancing quarter, expanding further the a our new for assets a management. wider facility, third

financing are our to additional We exploring sources with currently and potentially further funding mix add optionality. us to provide

evolving and the risk Our considering headwinds for the quarter, despite credit industry. and Even on select have portfolio so, our individual generally the loans issues. select down our the Therefore, increased performed adjusted for market reserves. rankings has current remain environment, difficult third well we CECL

to done and have With on volatility, to successfully while we uncertainty stance elevated our cycles. maintain of capital navigate as broad of during this this drawing experience intend prior we markets our the measured environment period macroeconomic team

to discuss portfolio in like detail. turn Alpart Steve more now our to the over to would activities call I

Steve Alpart

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

total million $X.X and $X.X third the balance an principal about than committed commitments, of less of billion quarter $XXX ended which including accounts of a We for future with funding billion, balance of aggregate our commitments. XX%

$XX with and loan investments well property size XX approximately diversified is million. Our across of average an types geographies and includes portfolio

XX%. with Our realized overall deliver yield weighted a generating favorable about of with profile, loans origination at stabilized a an a credit income to continue attractive stream of LTV X.X% average

of approximately on about closed commitments. loan stance Given multifamily new million and to million total loans we cautious which the a of quarter, $XX the during included environment, commitment third million our existing total due $XX with principle, market one funded $XX

real and $XXX over a paydowns activity, and third loan million transaction outpaced in the the decline repayments quarter. our in the approximately in commercial estate Despite portfolio million resulted balance our $XXX totaled loan in quarter, which decline fundings

As driven was which XX, of largely which office risk prior overall of rating upgrades. the downgrades, by mainly the challenges offset quarter rating were average unchanged from were weighted portfolio was market our as by September in rating X.X sector and X.X conditions

negatively loans million quarter, the status on for million on for reserve rating two place these $XXX loans. and CECL market During and a we office nonaccrual risk established been have impacted the X, total ongoing impacts a of our liquidity, especially them moved properties. with leasing two properties loans of UPB of to securing reduced the these pandemic office by collateral office The of $XX

and are a are active we'll with resolution variety provide of the each We alternatives, potential discussions information as more it. evaluating and borrowers of we in have

X, principal of had with million risk As of of CECL ratings totaling XX, in $XXX loans four about reserves $XX million. and we September

During retail successfully we in October, $XXX nonaccrual property Pasadena, resolved the loan one by X-rated our a loans, California. million secured of

investment. resolution sale by new involved with property loan a well-capitalized Granite with cash the meaningful this The through supported Point equity buyer deed their lieu providing a in

creating allowed We a are resolve us to also outcome the pleased while basis. loan, it delevered as on new a with earning asset the

our to other to five actively loans. continue risk-weighted work We resolve

the values, to transaction predict. the light In measured been hard expect volume fourth in in to Given exact timing pace very Considering on approach the of with estate end of experienced the in property pleased pressure the we've of market in relatively and real the repayments by sector. healthy the and office year, we year. our overall continued a repayments decline originations. expect uncertainty, this outcome to We've quarter, the loan modest remain particularly balance slowdown the remain in portfolio we

a detailed over review of turn to Marcin I the our results. more will for now call financial

Marcin Urbaszek

Good and joining morning, thank you Steve. you, us for Thank everyone, today.

provision of basic were or share reported quarter we GAAP earnings losses million share, reflects of per $X.XX $X.X quarter for loss or share. million million the per credit expense. $X.XX net per third third exclude afternoon, a provision which Yesterday or and Distributable $XX.X $XX.X a the basic for basic $X.XX

end by declined basis mainly to our per Away decline commitments. our in quarter from build, share per loan per also of $X.XX were and credit common and interest results interest the net two, quarter CECL floors higher benefit the was about XXX of third by $X.XX share a quarter share reserve by points affected driven represented full $XX.X or two increase basic Our book from at or $XX.XX $X.XX a factors: total totaled and high-rate QX rates. loans by that million in nonaccrual income, reserves, $X.X about loans; which value affected did not with our million one,

the excluding rate portfolio rate were nonaccruals. of above As is our now the floors, and all interest XXX% sensitive, September, rates our benchmark of

During on risk we a September and about of status. that balance them nonaccrual were status. total two $XXX the with of rating third loans five loans quarter, office nonaccrual we million XX, a downgraded principal At place on had four to

We assets impacted or estimate share by $X about $X.XX the third income quarter. interest our during about that million per these

additional just October, and in capital. new that retail asset we nonaccrual late However, asset $XXX releasing earning as discussed, in a Steve a resolved successfully million California, loan in resulting

about reserves four quarter, $XX allocated our quarter ratings million. the X. About increase the allowance At XX. During loans increased June related risk aggregate from to $XX.X million CECL these with third million $XX loans our to at we was million of totaled to the of $XX.X end,

mentioned, our reduced execution relates macro one CECL these increase delays the conservative the of fourth driver plans The in reserve overall quarter. deteriorating just view of market As to liquidity and in in of resolved our was the markets, capital loans environment. business QX of main conditions,

Turning to and capitalization our liquidity.

to in of debt-to-equity We at cash, modestly of CLOs. with assets. to decreased unrestricted third June, repayments X.Xx end ratio million restricted loan mostly September quarter and in the due about at $XXX mainly total in million our deleveraging cash, from another XX $XX Our plus ended the certain X.Xx

cash we and CLOs, realized additional into November satisfying hand, liquidity continue on of to our $XXX end, quarter million balance developing We December sources. capital, sheet. releasing we contributed cash as work convertible on anticipate the additional over unrestricted assets And X, we had bond with and certain improving our further in our prepayments. in loan on maturity Since financing

To $XXX us level our basis, capital financing loan that providing on new within million closed point, flexibility structure. funding a a on third allowing additional for facility, during the we non-mark-to-market quarter,

time, financed two on financed in over delevered basis meaningfully term. on been non-mark-to-market that anticipate and have will loans also of a five we remaining a nonaccruals are them basis, the the near risk-weighted and non-mark-to-market Our be

you And Thank for questions. again open to that, with us call for like the joining today. we would

Operator

comes go question ahead. from first Doug Credit Harter Our from Instructions] Suisse. [Operator Please

Doug Harter

Thanks.

comfort added said, there and Is any of nonaccruals. the wanted some and way potential leverage looks to the last up could give maturity? us the just follow Marcin, some size post some about convert adding you that you in on that Just thing to help liquidity that how against

Marcin Urbaszek

Sure. us. by thanks Doug, of Look, joining the loan are for your question. specific. loan advance Thanks sort rates for

hard to as do plus somewhere appropriate to we or of very $XXX We So what level. build after that is. a sort go is an get we've sort of we specific repayments. bonds as to we little where to higher be which might pay been it's bit our liquidity believe minus that million our more up We anticipate after

flexibility again closed So provide add in one We that to managing third assets of move -- of financing just as prepared may vehicles. we may different certain have funding quarter you on such facilities very flexibility. us between liabilities. funding additional heard remarks, to And in and increase another the we liquidity have focused the types we're we if say financing the

of in really mind, optionality that almost had when forward additional and we twice assets the stabilize. market we provides significantly re-lever delevered, exposure repo today, keep we're pandemic, also some which during we have sort also the going once And may the

Doug Harter

advance looks talk X/XX, is that? you the facility? And it was of an kind rate What about that of a just XX% like rate. a interim level that of facility, on as kind new like it advance on on was leverage Can of stabilized

Marcin Urbaszek

on specific. It depends on what varies really assets. asset of are depending really financed loans there. it which sort It's Again,

-- it's on it asset. of again, where varies So facility like every it depending type it's and -- sort of with like -- an

Doug Harter

Okay. Thanks.

Operator

[Operator Delaney from Instructions] question from Please Our go JMP Securities. ahead. next comes Steve

Steve Delaney

was the the of us just new triggered And or background It Thanks. what some development Good previously, morning, has you sort to loan? but recent downgrade? about a loan. everyone. this I been around XXXX Can five at to I triggered it ask time, point? Phoenix on some the give four origination. a downgrade that event for assume wanted what

Steve Alpart

morning. Hi Steve. Good Steve, joining Thank for it's us morning. you this Yes.

from quarter sponsorship. leasing. more very of loan, the close come moved four property a itself It's we So quality been that renovated. on well this has the nicely institutional is The borrower office loans It is to Phoenix this had The five. located. some

However, the Phoenix leasing been sluggish. market has in

business of market it So a question we just the provide your in the bunch decided more really we'll soft why of information mentioned, leasing it it. going we looking was as downgrade as at triggers We're options continued to plan, slowness to have were this we some and quarter.

Steve Delaney

similar prior the think Diego, $XX difference the I to not vaguely the with, about easier million I is $XX-some guess. San I sounds to and It this guess we conversation work and lot a quarter. fortunately, one loan million loan, had

helpful That's hear. to Okay.

is right, across million I Just your the if -- spread correct? your that loans, believe, that, heard you I X-rated you CECL mentioned three $XX reserve of

Marcin Urbaszek

in those loans the the quarter of resolved It and loan. retail was $XX was end million October, at of one the four

Steve Delaney

the That was Pasadena.

it. Got Okay.

including much million, $XX right? was Pasadena, How on Pasadena? So

Marcin Urbaszek

gets million. see million, $XX can You $XX.X now it about

Steve Delaney

million. $XX

Okay.

Very good. recall $XX you estimated correct. I loss do million, what was be. to that Okay. your

on Thank your clearly wasn't maturity. portfolio, Okay, focused fine. I about you. And the I that. comment the understand on convert

a of cash some recover along why you with that here of restrict lot facility. lending new So would to sense kind your makes

Thanks. once modeling in portfolio the and the $X.X of mean, Is September. potentially the do would we commitments you convert, million like quarter small kind get for for growing? fourth think you How level that have total a there think the were -- you I through portfolio? I see need purposes. the target I

Operator

There queue. are in the no more questions

Jack Taylor

balance speak I and realize. mute didn't was second. believe one We to you Jack, this -- that be sorry, decline on -- modest a I'm is I and Good am we as by were will with wait there usual. Steve. year-end. Well, portfolio

normal rate pointed this first year. be the will the fall we that quarter. And the this during in historically, of run to month healthy We or year. market out, expect as portfolio came of would of prepayments a over we said pretty will We rate we the we slow that we prepayment on course XX%. And had close of have down year this that rate And even kind of a that about short anticipate it.

balanced of a pace repayments expect But very year. by off fact liquidity see in definitely market. that we the the uncertain to lower building and that's being in we're cautious But this

term. lot a add loans of the to looking not in near we're So

And greater quite will originations the decline down, balance while modest So in the would I see the of modest the we slow think until our portfolio in seek a repayments in stay will beginning some -- the stability. meantime. the year for we

Steve Delaney

Understood.

event, not So what a or quarter is two should we hearing. limited just expect kind of another onetime I'm for but originations

Stay very So good. Bye-bye. clarifying that, well. Thanks that's right. Jack. for All very,

Jack Taylor

Yes.

that's So exactly Thank right. you.

Operator

remarks. to in more conference the Taylor session. queue. This our the to over back turn There questions concludes like any I'd Jack for closing are question-and-answer no

Jack Taylor

I'd call. been you us Well, support that with we for thank you the And team your for have thank business. speaking our very all you also, getting to through joining attending to you helping those our we'd much, operator. to Thank like look future. of environment us, this like to And soon. thank here, navigate you ready for And of forward and tough continuing the you with for

Operator

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

may now You disconnect.

Granite Point Mortgage Trust (GPMT) 9 Nov 222022 Q3 Earnings call transcript