GPMT - Earnings call transcript Q1 2024 | Granite Point Mortgage Trust Inc.

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Operator

Good morning. My name is Paul, and I will be your conference facilitator. At this time, I would like to welcome everyone to the Granite Point Mortgage Trust First Quarter 2024 Financial Results Conference Call. [Operator Instructions] Please note today's call is being recorded.I would now like to turn the call over to Chris Petta with Investor Relations for Granite Point.

Chris Petta

Thank you, and good morning, everyone. our Results. discuss joining Quarter Point's for Financial XXXX you call Granite to First Thank of on call Urbaszek, me Officer and Officer; With the Alpart, of current and our introductory Chief our Jack provide will comments, Steve Co-Head Peter Executive Steve market and our our Originations; recap review President conditions Chief Co-Head activities. Taylor, of Development Officer Officer; Chief Morral, Plust, business Chief Jack a and and Marcin our Operating our Originations; my brief Officer.After Financial this Chief Investment morning are: Steve will results Alpart from will and discuss key financial our portfolio and our highlight Marcin capitalization. items The would with section website, along press with yesterday like may the associated supporting SEC the supplemental with by our and outside and company's you of call our that of in which uncertain remind and slides release, Relations financial this during to are remarks are the management earnings Investor filed today's Form made call were and include available tables the statements, forward-looking XX-Q.I control.

which in on a measures to to in is will isolation a that turn our cause results. measures available of call. to be any as views could comparable non-GAAP non-GAAP reconciliation to are with of do to with and financial considered refer subject on regarding our and from earnings most to SEC events the release GAAP obligation risks or our in any website.I these not Please This information to future the measures accordance information that A filings over the for slides, Jack. reflect will update our differ some found GAAP. also see results uncertainties expectations. could to are actual statements.We not affect be statements intended materially our now undertake discussion the call We substitute Forward-looking can forward-looking presented this financial

Jack Taylor

you like and for Point's Granite We Call. welcome First and joining you, Earnings to Quarter everyone. thank for Chris, good morning, XXXX you would Thank us

in with The first estate healthy strength few fixed sector months trends, of the of suppressed XXXX properties rebound upbeat trends fueled as some deeply of course real and of as activity, Fed higher cuts impacting rate estate continues economy by level spreads costs [ income of more interest equity markets, capital a sentiment volumes, anticipated contributed expenditure.The X real with interest issuance. commercial to have ] XXXX overall such to require transaction in that high shifts over the materials demand, along and in the the an pent-up the credit by year a market, ongoing rebound pressured the which, of the pickup commercial began diverging the strong tightening while in resulted a CMBS and a real rates some fundamental be with expectations and to by work-from-home and such estate in transaction labor X capital and

by consensus real and the in the to year-end, rate low believe in estate higher inflation higher-than-expected rates the and for the worsening medium a hope be path cuts weeks.We X to interest cuts market sentiment commercial stronger the notably to markets, several readings will of with rates reports main for to near performance that the and in the past term. then, activity rate resulting estimates of estate the floating affecting continue the across factor since lowered have the commercial However, real uncertainty interest in curve X employment and in interest

those to on putting choose the suppress rather portfolio, wait be instead with may are transaction more and want their than market values a activity properties, in to continue their in elevated we we cost the in and by sell reluctant may expect markets will continuing the We estate borrowers to continuing support borrowers prolonged support note property and needs seeing for who of further impact near-term certain by pressure properties. especially to this the in rates real challenged to market the additional and capital.While capital our most of are our lower properties more that to

However, mainly of include dynamics and overall some several additional we total and to within our increased to ongoing which reflect ratings these reserves real CECL the of on our reserve quarter. property X risk X.X% to quarter the lowered from our about estate values.Our the pressure in X.X% uncertainty commitments change provisions, risk-rated and market last driven the loans commercial by the on sentiment related credit market, results increased GAAP loss first loans, CECL of

that over their the loans to rated market stages we of expected our lending longer.Although the should difficult the anticipate X timelines with liquidity others and see looking loan non-performing occur respective may nearer activity remains are in resolutions term, extend improving some timing various of though this resolutions of to is we while currently course actively subdued, in year, help drive for opportunistic predict. capital investments Our

varying resolutions is the with the concentrated on in We of mainly value may could we by resolve the some, believe driven term.Most component. office risk-rated several may or portfolio underperforming impact property X including some an of degrees $XXX next loans be in the the on currently near our credit office of overall where on retail the million which have our these to quarters. exposure, to multifamily We for visibility of million loans, most occur $XXX over

remain While remains slow, activity markets.Multifamily favorable. some we leasing office have office leasing improvement seen fundamentals select in in generally

higher property and from some values higher resulting rates. seen have we pressure cap rates interest in on this sector, However,

cash our loan our near believe bottoming and prepayment property navigate of modest market many effective realized the process the portfolio.We to growth profitability prudent higher in of sponsors balance moving though during and not consensus leverage of remain asset context events this opportunities, business emphasis where healthy on these of repositioning real the from for even our even strategy of likely flow are the proactively protect credit paying returns.Our apartment volatility.Over do to the declines. from maximizing liquidity to conservative our future while ongoing maintaining and debt decided highly through said, portfolio, material We effects higher economic the to results shareholder meaningful is in cycles near-term.Recent resolutions, resolved management pressure for cycle outcomes that multifamily That credit activities approach market with though uncertainty the our shareholders. this select transact emphasizing of stability managing have sheet. immune and We for reserves benefit properties total it successfully and will market anticipate reflects periods, the is challenging reposition portfolio there to an the our the modified and the lending, points believe business to and loan are very various focused not to even profitability strategy We improve additional company's and we losses our in we through the term. experience grow the time rate of credit on with support be materially such the market, multifamily on so loans of firmly liquidity decades and year in portfolio our deleveraging team's value we managing select us While in levels. have rates, on couple that strong returns to our losses, our can run and and position market our and over to corporate to and business reduced core our the return realize last estate portfolio, balance we sheet off the through years, course our steps associated

market, visibility While interest and path available repayments rate the will year, path and be across should fundamentals of capital of currently cuts the activity the and timing for real improve on the large sentiment of once is cost significantly, loans. of in there We future all the with amounts resolutions will types of uncertain and aided capital continue risk-rated agree will remains drive the the to working our the on recovery our commercial particularly which macro facilitate borrowers continue trends to later by that estate. of uneven be property of sidelines.We X the more in

current effect Steve that help returns, time rate positioning we while investment improve profitability us future.I their turn our like more opportunities Alpart in activities believe the will these detail. our to our now on would over attractive discuss of actions to over to run call Given portfolio material in advantage take the to

Stephen Alpart

total fundings, morning. commitments. all $X.X $X.X of you joining million outstanding of for this with billion, call only quarter ended which and our commitments Thank for of X% total the about and $XXX about of balance future principal portfolio an first We account you, about billion with thank Jack,

for Our size includes diversified at million with loan XX.X%.Our average of about origination regions portfolio LTV realized yield we first X XX remains stabilized investments first the property well of and a and of of about year. loans, X.X%, and across to of $XX quarter an weighted average was net types which the for estimate the about non-accrual basis impact XXX months the points portfolio be the

upsizes $XX the about of existing about $XX and During loan and first million loan quarter, realized repayments commitments funded paydowns. million and we of

a interest lower last quarter, existing uncertainty, in commitments the loan So of be we the to in weeks, few we sentiment, $XX about have during million over realized far loan the million shift the we funded high volume million second our and repayments in paydowns.Given than about $X loan $XXX macro XXXX. of realized particularly market and meaningful anticipate rates

the our higher and quarters prioritize we and capital risk-rated X, levels risk to portfolio of working diligently for stance lower rating X in for lower our maintaining will credit in highlight. and cost QX, sentiment, of market change expect to downgrades continue contributed the of we expectations loans.The balance our briefly of coming resolve that just the higher Jack a to losses of we loans We and to maintain liquidity value risk quarter.During X our rating discussed, during to which certain conservative property loans provisions trend as downgraded has higher

stages for million it been loan early the on been office all resulted to has properties X capital term, the list their with space opportunity next we where has exploring to a in discussions plan, liquidity conversion challenging to X.X stages coming which property X period.With the the office have The UPB New will properties course upgrades for risk for $XX in reduced had the its has office multifamily March XX, remaining degrees office resulted weighted-average during has loans, being loan in as likely million loans a They been risk months the and addition, their to Baton The prior partner ongoing. X working that office a on our the reach come Boston modestly are resolution assessments or business which them been on we sponsor mixed-use to repay not and our X timing the million $XX the risk an is may to JV potential rating property for our is respect liquidity as downgraded properties mixed-use, secures sale environment in property a generally. we in in loan loan a in of intermediate of rate and with that borrower decision retail recent million plan also risk-rated or process other to as a and of in first sponsor loan with over of hotel The loan York loan Pittsburgh, to Chicago The and residential local about million though some sponsor these in of impairment building.The remain $XX multifamily multifamily where $XX are the remains conducting the of one time potential this the process sector. a an dynamics the X and our a dynamics. we in of office the rating securing with retail below sell and property. CBD, respective to $XX the the markets the a interest turn sale to in sale a recapitalization with and Chicago resolution resolution steps. varying also loans achieved, near potential the potential leasing million quarter, materialize, pursuing The is the The $XX by low in in the ultimate event and active for in include processes, term. processes happen the impacted our where sales a of been were first Minneapolis recapitalization Louisiana property. in $XX given is did remain process in about mixed-use partially loan March instead been impacted ultimate the quarters.Similarly, is choose expectation resulted The made new outcome component aggregate Milwaukee. options.The office other office sales hope next several by process in are proceeds X and them predict in by million loan The borrowers in office to in office $XX the million take amounts, have the loans. XX.In City, leasing which of sale various which X.X collateralizing in may and Rouge, retail and hard sale most also could increasing quarter, compared challenges $XX rating our loans offset our a million sold, market, collateral our market in in a ongoing the The downgrades, portfolio

Phoenix, in sponsor $XX leasing potential our various X property L.A. as The are the close and opportunities securing we're year. recovery. to a some have to bottom for in liquidity asset million the the getting real has the are to is on volumes to also in believe The sale we transferred deed intend REO the this low and mixed-use We retail asset property.We cash while it deploy is to long-term increased the the discussions be with evaluating in later there negotiated in beginning a office of managing our lieu. for million, transaction risk-rated Massachusetts office valuations, $XX loan are in market positive value loan through in in and invest months buyers office coming the likely as are actively to asset flow, over the maximize REO marketing X they time.Despite overall, capital estate the

our include goal some Our by transfers backdrop many restructurings of sales, to where potential discounted property is Point, potentially this we staple maximizing to of sales, hard predict believe discussions ongoing sometimes strategies loan in for the borrowers, for value and with outcomes for could the XXXX these loan upside, we macro to loans with select and likely to type medium-term see from we taking of all company.Timing the Granite of are REO, market, given payoffs, end financing economic but more resolve resolve, longer with the challenging assets dynamics. current these given local market with

business our equity discussed, on new their supporting institutional sponsors a most is company's rate timing progressing their and of by some just plans. realized that with headwinds properties repaying cost high-quality the to resolutions, and improving pleased status the returning continue assets of the higher of loans properties.Despite financing these losses goal balance run to the accrual basis profitability the on de-levered Our impacting sponsors to support we've remain are and/or we

have look to as and to REO work core we forward as of for to call and turn capitalization. to our the more possible.I business results X asset, a resolving review now financial an our rated will lot soon While over loans, do, returning Marcin we of a detailed our

Marcin Urbaszek

a pressured value reported was risk-rated or by share non-accrual and interest per earnings provision impacted about related quarter $X.XX per decline or due loan to by loss per share, joining afternoon, provision $X.XX morning, a loans. everyone, which Thank for Good of primarily a million earlier. million share, million were the income $X.XX Steve. share, thank was XX share.Our for million we mainly or $XX first March which per $XX.X $X.XX basic were for basic today. per or which at approximately of basic book QX, Yesterday to from X mentioned share loans, us $XX.X of loss credit $X.X common $X.XX net $XX.XX GAAP Distributable certain includes and you per mainly the losses you, quarter basic

as about CECL last portfolio reserve newly risk-rated reserve were to to additional our CECL or $X.XX $XXX share, total that in end Our provisions this on loans X.X% of quarter. X.X% related $XXX the quarter.The our commitments quarter at representing was was change X per compared of commitments or mainly million million

to macro by severity QX reserve $XX million individually-assessed increased to the which allocated total or expectations for is reserve property an in general status, of in implies Our about XX% due market assumptions, our million non-accrual in $X of estimated quarter. interest loans Over additional were assets.As and ongoing of those loans, million CECL challenges accounted pressure end, The $XXX loss real estate as nonaccrual placed most on select of X average commercial income $XXX XX, we of had of March are resolutions. stages quarter that for the million of of during XX% of on about first realized about which loans various about on values.

our the Given we rate non-performing term. company's the on earnings profitability, anticipate to the loans our dividend our in be impact below have run near

make impacted resolving the As time, the capitalization, cash, quarter a X.Xx improve by our QX progress increased exact mainly remains on with timing we liquidity in company's CECL to due compared the ended we over higher QX, and the $XXX leverage and assets, in to X.Xx million market.Turning unrestricted uncertain to modestly profitability in we total lower this these should difficult to though over reserves. believe of equity to balance predict

our relationships we highlighting remains balanced, support mix market. long-standing in and well enjoy lenders, Our from our funding continued the

call for about would we will in us and questions. million thank cash.I today, joining for again now the days few got a $XXX of like you to As we open ago,

Operator

with first Raymond Stephen Our Laws question James. from is

Stephen Laws

they something I Chicago X I mixed-use detail and from during Milwaukee, a and X defend to X changed It us of their it. and during buy Was the Pittsburgh, wanted then caps went you double quarter? back on around to multi downgrades those guess, caused little that? rates going more to specifically a you strategy situation where Kind give the multi, protecting to and assets? what they Can on I it in the circle new were quarter. Steve, moved -- X mentioned

Stephen Alpart

pretty look, Each this some -- or along. sponsors, middle they joining loans both process, in were active They're far them. in, were these on and the of Milwaukee involved the a call the to similarities in were sales is good will. They it at Sure. amount. these below Yes, like in very plan, coming both for as one near along thanks looked you are bidding far The was stabilization. X had as morning. of-- kind if Steve, really to properties our business processes. function of them come bid began the of it loan And were

the they leased, been investment in So Chicago the would think market leased. came a not fully multifamily, bit ground retail. partially below floor sales say a The asset, little little Milwaukee deal is there, some expectations.I soft. I primarily that It's has has

was loans. these we're multifamily function bids in seeing seeing the comfortable we're our we but of -- the In wouldn't from I but a with why think the are bids much we the X, where amount. are loan We it -- pretty mainly reasons thought fundamentals moved below because to wouldn't we we're generalize those general, just So too it coming in. the a are coming mainly in loans,

Stephen Laws

I of I have may reserve to losses comments Appreciate that. you the versus them, do also And don't on wanted specific the non-office How bifurcate to specific multi you but a believe reserves reserves as and those office mentioned, you up the take loans on maybe X-rated Could expect component? you as follow remaining CECL, loans. significant Steve Marcin, reserve on the XX% on roughly where then, the the level far do against as specific percentage that allocate that?

Marcin Urbaszek

less but related would say thanks hard the for of Stephen, sort the say are specifics office It's on reserve reserve the office I is I get would varies us. meaningfully and Sure. multifamily. to to higher specific Yes, joining issues generally, assets, by loan, of to think it really the than multifamily. on but particular impairments majority I on

Stephen Laws

you. this comments your morning. Appreciate Great. Thank

Operator

Our next UBS. question with Harter is from Doug

Douglas Harter

more commitment starting the incremental which cash the the given to buy talk plus earnings dividend to of instead how using your think or Just can would this accretive? paying you back from you that stock, point quarter, would about be about drag non-accruals, clearly

Marcin Urbaszek

first Obviously, and joining we I for impact for of as can of a of us. sort we to resolve the dividend, board in horizon sort said there's dividend we earnings on dividend material when these have reduced at the terms to today, be going some of our these I Thanks pressure look Doug, hard pretty runway sort over longer in some run quarter of the think the Sure. profitability. and predict, resolutions a assets.Timing time our but as think is profitability. we the rate to

time from of if our view, point rather that happens. than of sort a of matter So, it's of sort

of So that -- prepared the But And these think predict. but be single by we we Board, again, of timing as our as we is remarks, all assess may and that end difficult at the sort in dividend. year. said assets many look with every quarter of we the resolved the to of

going to be So an process. ongoing it's

Jack Taylor

the add, would buybacks. Jack. would And stock this -- Doug, is I just add I about

don't we guidance as give will say, normally stock buybacks. on So, we

the pretty been of course over have example, opportunistic We XXXX, purchasing. for

valuation X was the our about think opportunity it loans. the on I current stock price great our the business non-accrual accretive. for we common do of quite as maintaining note for given in would be And repurchases think priority liquidity to and work want #X investors, we the potential do million that presents a value is But I shares. that fundamentals now the through

Douglas Harter

stock? marks being liquidity comfort the to your being or buy non-accrual current short at that and just use term on loans guess transact to able back what some of on those be the that, in able of to to I would close

Stephen Alpart

million that, it on think quarters Well, visibility, million is it market. the is ever a next nearer said call X complex because as question things. $XXX We $XXX term we to it's dynamic an

sales the riper in XX Xs X million a nearer resolution or in process, ]. $XXX stage the $XXX visibility million have and are of seems the But [ out process to particular. of We in

would we the earnings like respect have potential time position is our liquidity those to that so to time. resolutions, assess of and And what the at with and at

I So now. it say couldn't right

Operator

Our JMP. next question Citizens is with Steve with Delaney

Steven Delaney

me, hear you everyone? Can

Jack Taylor

Yes.

Steven Delaney

Good on with this to you Wonderful. morning. be Wonderful.

offered over a So, and of And REO. had opposed the I some yesterday Richard days, week we've Both opportunistic sell -- pretty as into opportunistic last few sounded Mack comments property to observed how TRTX to CMTG comments. purchasers? and reports, -- on the guess, okay, money REO clean last your go that then rather taking companies about Appreciate been that your actually pretty loan you loss but with get that in to on, the possible able yesterday. process. strategy.Just a and he he optimistic and loss feel about amount about the the positive looking sounded was taking you loans Are at go of And in taking, a sort maybe in seeing discussions are opportunities? loan-to-own ahead are of than people you looking having thoughts to through

Jack Taylor

you past, Well, is, in to at done go Steve, I'll the a able to you've in which looked wanted please. ahead, me it so, quick future. it make we've the answer, Steve, comment, do we're like

Stephen Alpart

we it's was -- we a I No, Steve -- have have, Alpart. yes, so Steve,

that strategies resolution of number a have about heard talk us quarter-over-quarter. you've We

although the many get basis them, property the year, cooperative selling both. think would of we property. For sell to are a good a both that by strategies, loan, general, with we end the better on price done a good working they're we've say, the to of just the borrower you talked about, selling I versus In we very loans resolve a lot them, the of most of trying by

loan few while simultaneously cases, running a last been lieu deed this a and/or a property both. in marketing we've loan, fact, -- process, In at the the we a we're and quarter, have sometimes foreclosure sale.In did we

ownership number property ready, buyer reasons, to or in to smaller in of need cases, need the a on long did the own for to we we we going value to can deliver the variety deal, what those the the probably REO. short the we and do So or REO, bid term, of title, the do like don't to take a not term know we of we sell fee. assets think when in then take we term.We're the we'll we of look we office medium Phoenix can If is maximize as think own the kind price

really situational and done with different the lot right So best flavors you, to it. we've working the all it is that bid. in now are very We of gets of the sell the general, A think them property. borrower

Steven Delaney

borrowers existing will working with the a it. with Got new And capital usually when you're or the benefit those to to infusion, place find remain understanding new new your buyer buyer it is new a in that loan the and equity?

Stephen Alpart

providing financing loan. a refer loan to are that, There be a opposed as ways at what at would we financing, we just loan buyer to, it's going but staple case, certainly don't we more would a we need are a in provide term. assuming say It's going we're providing basis. basis and if every in to likely new but reset more do likely need to buyer an to financing, office that least going case-by-case to a sale It can today, but medium to new on to it more be be we're often staple the to to probably new that provide, providing I reset do often, loan, short a at the as than existing it's we not, if a

Steven Delaney

for you morning. comments the Thank this

Operator

question Our from next is Jade Rahmani with KBW.

Jade Rahmani

Thank much. you very

of as some liabilities been of the banks more offering there's and pressure have cities the the Essentially, banks kind and X ago. modifying relief loans a This than credit while between rates, of performance. they're stable REITs volatile, quarter a commercial with year estate believe their real has commercial and I tale extending been in on mortgage less terms

On mortgage the commercial losses. other hand, the taken REITs significant have

And it I asset that. the pressure most -- or as could to if on of if comment side is on was liability you so the on And the it's side. question raises the whether the wondering

Jack Taylor

Well, lend a non-bank off on it's think -- by the I general, In banks rate than lenders. at I'll have both. saying, the lend advance start lower

that over you be double in difference and with all the in a than stealing and on more a which the improve rate credit, capital call proven So loans loan like the bond some at low out punch cases, from the some of has pandemic are though worked to meaning between rates we the the of lenders there current the with advance would from the assets environment, but has meant higher elevated what now non-bank the advance to world, not difficult from positive with at time would convexity improve borrowers expect many to cases. rate, credit a that very interest the meant even

do and I of own many that's on liability provided true.On the very structures stable, the and financing with our in our other others side, So peers, we side, have, asset think have leverage. our facilities case, broadly diverse then us that

capital work with. a deposits, the have lower of it's However, to banks cost and

is that. this I So why observing we're think

Jade Rahmani

are help access And investment some the type part firm top liquidity do you side, mentioned bigger credit your to a of reprieve management think of so would was that balance of had the you GPMT that capital multiple that priority, lines if that's or outcomes. on cushion sheet

better that saying when than there's You're properties loans are sold. are sold results when

don't when on a a a -- working particularly loan. better have put So the with the is sometimes with better you if a so results, point to times, Other best cooperative respect to wondering can result who's get if finer you you, sell you that. route so you borrower and Well, a about were could deed lieu bases. what that But compared selling of think sell, by so liquidity structure. having I deposit of probably the a it -- aspect taking as in banks to as over simultaneous in much property the with in talking and

who's So it's do sale equity oftentimes, think discount the oftentimes, -- versus the a case-by-case somebody always, they basis what at so is loan the But sale. property on a buying worth. the wants to note to but not

when made so that that's believe referencing I was Steve And comment. what he

Operator

Taylor floor any for turn to over Thank closing no questions. you. There Jack comments. back are would I further to like the

Jack Taylor

all navigating look with extraordinarily investors' team's We to we much. challenging next market, you. and effort our you in this Thank Thank forward you appreciate of time. and speaking the very support

Operator

conference. today's concludes This

You disconnect at this your time. lines may

Granite Point Mortgage Trust (GPMT) 8 May 242024 Q1 Earnings call transcript