Granite Point Mortgage Trust (GPMT) 24 Feb 232022 Q4 Earnings call transcript

Good morning. My name is Diego, and I will be your conference facilitator. At this time, I would like to welcome everyone to the Granite Point Mortgage Trust Fourth Quarter and Full Year 2022 Financial Results Conference Call. [Operator Instructions] Please note, today's call is being recorded.

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

morning, good and you, everyone. Thank joining Thank Point's to Granite call quarter you and for fourth results. full discuss financial our year XXXX me Officer. Originations; Officer; of Plust, this President With our and Chief Financial call Co-Head Jack and Alpart, our the our Co-Head our Chief Officer Taylor, Officer of Officer; morning Steve Steve and Morral, Urbaszek, Chief Originations; Marcin are Executive and Investment Operating our Peter Chief Chief on Development

a provide Steve brief of my Investor and SEC our filed introductory results. will After release financial our in key activities. available Jack and are The conditions business portfolio, highlight and were of our yesterday financial tables Alpart recap with section review from will comments, Relations the of market discuss our associated the items press call website. and with current Marcin will today's

this you slides are to outside We made by expect would I the uncertain to like during and file week. our that control. statements, company's which remarks next of include forward-looking XX-K call the remind and Form management may supporting

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

be call. our not non-GAAP our GAAP. the refer and This which with in information We to measures is of in financial measures substitute considered this measures comparable reconciliation are GAAP those information or release presented will also A a in the on can website. most to for found to on non-GAAP earnings slides, be available intended financial isolation accordance

now the over call to turn Jack. I'll

everyone. market the and unstable today. repaid year year, of for dramatic like our the environment and of the morning, and actions challenging cost loan in over further of liquidity of our and many quarter to fourth earnings the rates, equity would welcome preferred offering the Thank backdrop course amount two objectives we XXXX borrowings. Despite you Earlier opportunistically We substantial accomplished joining in this higher releasing and We good $XX.X capital, remainder us navigated full raising to interest vehicles, you and call, legacy you, we Chris, thank our our of million base equity term our Fed's our delevered position. refinanced grew XXXX. add-on strengthening through a the successfully funding

we performing, credit million, second of designed to and more aggregate closed year, new are to During up an non-mark-to-market current on subperforming and a facilities These the of highlight to the two management and the our environment. nonperforming volatile $XXX provide half with capacity fund borrowing which already sources asset our add funding basis. during diverse us on facilities with flexibility liquidity loans to ability

our portfolio our our potential bolster anticipation our balance of loans and from and we business further to consistent managing challenges to half preserving first objectives originating In growing our XXXX, of our approach early business, to in conservative shifted with the new liquidity macroeconomic sheet.

time. to without our $XXX quite in allowed also convertible to while us cash on difficult course contributed the about further $X redeeming dialogue of capital These we access in which million strengthen active of at hand over that well our of through in sheet needing example, matured actions balance markets, loan driving volume year. For repayments maturities. loan funds the proactive repayments December of working borrowers with loan of the asset management, and emphasized This advance were a other notes and the with billion to the the healthy

uncertainty or long and stabilize when nearer for capital will estate will and we have or raising how commercial the the remain stop rates in the markets markets the interest ultimately we expect the estate challenging environment remains real unclear term. short-term they the commercial said environment will in improve. them real will Fed keep It when past, market when As to elevated

to very see headwinds the market. continue we're are has property trends. properties the with the they sponsor markets portfolio, In encountered very sector, impacting unevenly. and strong markets we And more biggest affected While in a well-located by high-quality, a tough office pandemic impact leasing on that’s those been a our work-from-home properties and and

with rates, coupled have electing resulted trends, to a rising stop borrowers interest few equity. in These additional funding

seeing sector. assets much in the with are are ongoing of the general, commitment increased We our views, of exception. term end these properties In as borrowers have we and our quarters last over meaningfully X.X% intermediate of in consistent reserves CECL very addressing have our macro about their office our challenges XXXX. recognize commitment the And portfolio. the However, the couple our by portfolio of to we to been loans loan the and

term, in continue near manage our a we the our liquidity collaboratively leverage, maintain conservative will and with sheet working to while borrowers business balance our protect outcomes. emphasizing In manner, lower to and maximize

opportunities that team's intermediate portfolio leverage. on new of both effects significantly take we clarity allow levels market delevered term over dislocations, on lot to the capital market the we normalize sheet, compelling will more waiting and sidelines stability. commercial market the and of as real global us viewed during always a has capital of proven is seen combined ultimately uncertainty is the expertise our has the amounts attractive mitigate to our for over of time. balance attracted have a invest estate market Currently, with of our U.S. and as We the place and been our significant As previous advantage capital long believe

loan our believe strategy is million estate with resilient like of U.S. more borrower market in leveraged that about and moderately equity loans We middle size targeting significant of average real market with an this. a commercial $XX cushion

potential refinancing and lenders buyers. universe sizes broader of our loan are a As suited property to

estate the to maintain we in the stance drawing to lending. Given our our expertise real experience and successfully over of on we have team, as the while challenges environment, long intend navigate cautious broad our careers done

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

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

During balance $XX funded million loan $XXX we average million. approximately an of XXXX, with of balances

over about for billion, $X.X light XXXX with Our the billion, our total commitments liquidity. year and loans. reflective reduced reflected including origination funding increasing goal of our in million X% accounts which high approximately principal nature approach balance future uncertain our of commitments, $X.X aggregate of from and cautious a for million $XXX balance ended pace $XXX to an quarter QX committed of our the transitional and environment of the of of market a of down We an

with and types $XX Our portfolio benefit from continues of approximately diversification an across size loan average broad to million. property geographies

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

consisting to validates XXXX, structure. being more $XX there repayments commitments economics retail property plans to market with in due of our refinance deleveraging our is our the of borrowers or them sell compared business repayments execute the allow loan working large market middle liquidity while loans and/or or strategy to their our being to enhancing and During a with quarter, on from billion we of this about of acquisition and $XX loan the We related existing fourth financing to million funded of almost $X million sales Pasadena and We during the that two principal believe realized approximately resolution of time about pace loans. office loan. and million XX% $XXX healthy total loan incrementally the our loan the

repayments loan of a Our loan loan quarter, in one throughout $XXX the The sale approximately resulted paydowns continued that $XXX repayments the office with fundings fourth million being which the quarter, repayments, XX% loans. fourth balance. portfolio about in in million our year of decline in roughly with outpaced and

rating weighted was prior December from of largely which of X.X, unchanged XX, quarter our the As was portfolio risk X.X. average

the quarter, it moved $XX X place to risk During ranking loans a status. of one of of and nonaccrual a on our million UPB with office we

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

addition loans about drag focused on the predict. we exact to the pursuing remain with at resolution rating the office loan CECL on the with properties. these risk loans Pasadena quarter. aim associated successfully a We outcomes, With the quarter, loan, meaningful of secured during strategies fourth the release on with various and were economic which We four being million, outcome retail and these accomplished imposed very our $XX as and we XX/XX, fourth loans million the reserves of timing eliminate difficult this $XXX maximize X-rated X trapped loan retail capital to earnings and in of totaling by of have the Pasadena all

average our across loans, is XX XX over $XX of size X-rated million. about these with markets from Apart portfolio with granular an very loans office

fundamentals properties by Nashville, contributions. continued note and Miami, affluent healthy City remained manage in We're our these the locational been Rent financial most have continuing the are strong seeing markets of with capital being that collections or by Some York ongoing to borrowers area. located the amenities will have We'll with through suburbs as year. and and Tri-State office to of as portfolio being programs like properties improvement proactive It's New vigilant continue of and in have the sponsored and the positive completed. in features the in or commitment exhibited the and we also equity renovated other are our substantially desired physical majority tenants. vast have be and important process

the in property in to expect remain volume, light approach to experienced we liquidity, desire transaction uncertainty robust In XXXX. the measured market on slowdown match we pressure don't our We originations. and real our in of pace repayment to expect estate increase values, to

repayments expect fundings. to However, we new do outpace

a to over see a near our So balance the do modest decline as in portfolio result, we term. expect

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

the GAAP includes share, $X.XX sale for on credit resolution $X to $XX.X us distributable Yesterday of loss per Thank in was million thank loss the a basic or and you QX retail losses quarter share related or related per $X.X of million opportunistic $X.XX were quarter a of loan. a loss realized net realized Pasadena, for and the of reported a for basic retail a million million to $XX.X loan loss per afternoon, Distributable or $X.X Adjusted provision you, previously loan $X.XX everyone, or sale morning, we Steve. per mixed-use which share share and fourth for our earnings million $X.XX losses, a disclosed. which share. million joining of $X.XX includes today. fourth per $X.X or Good $XX million and basic our we office an

share Our common increase and by about in per fourth mainly was reserves. to quarter $X.XX declined the CECL book by $XX.XX affected our value

loss of loan per the loss basic a the million to driven net provision GAAP share full share by $X.XX or extinguishment reported year. the $XX.X or or per credit of term $XX.X For was in of mainly million early year, losses we for borrowings earlier per share our repayment related and million debt which of $X.XX $XX.X of basic on $X.XX basic

year were of our two the nonaccrual XXXX XXXX $XX $X.XX Our basic full million realized or full or loan. inclusive were realized of $XX.X one to share per share per $X.XX loans basic $X.XX and per share. the losses, of distributable resolutions losses $XX.X related for sale earnings earnings distributable Adjusted million or year million basic the

loan At commitments. common share represented about $XX.X per $X.XX totaled quarter reserve CECL total of million X.X% our and or our end,

million risk-rated used provision for conservative allowance credit by in loans. includes forecasts reserves four in was $XX.X fourth the analysis. million The allocated quarter losses Our more macroeconomic $XX about driven nonaccrual credit for to our losses X mainly of the

We repayments with our portfolio. to continued the emphasize million convertible ended quarter liquidity, repaying quarter at to continue decreased within December, matured stable our manage to actively $XXX ratio after about debt-to-equity mainly to and in which in funding. Turning notes the our end and cash repayment and the convertible our fourth capitalization notes, and loan $XXX liquidity X.Xx the due X.Xx of total QX, from our of million

uncertain loan capital and during credit additional secured our facility, basis environment. we nonperforming allowing we non-mark-to-market level During us to loans, highly us new giving with respect a to actively for with within our flexibility, added this the continue sheet balance providing especially a million financing as structure quarter, funding manage market more on $XXX optionality

would Thank the for for I call questions. And like now, us today. to you again open joining

[Operator Instructions].

Harter comes Our first question Doug from Suisse. Credit with

about that talk your more liquidity could comes convert generate to Hoping in you plans the due fourth the to quarter? handle

that in delevered us. Look, remain address any that we Thanks Marcin. potential maturities. portfolio. transactions, did Thanks due the Sure. for do question. for We This the joining the 'XX markets is have we not vis-a-vis pretty in obviously, quarter capital our opportunistic will Yes. to fourth do

to potentially the would provide looking of we're funding capital help our to at us address some pretty So which opportunities vehicles, refinance meaningful bond.

again, So But we the them, a evaluate we'll We'll if probably may opportunity as an we'll portfolio there's opportunistic. run that off little -- refinance well. remain to bit.

comment Just that following on about portfolio. the up under-levered

Slide us type repurchase looking -- the advance the Just on at as of get what can facility, rates potential I help XX. facility, with finding for credit non-mark-to-market the think could we kind of you liquidity there? about secured those facilities you

facilities nonperforming really up different very liquidity. manage and These a this can of help is XX% We with XX% the a which XX% -- you mean, to on that. assets. page, We the now. by really a rate I financing varies between great and opportunity really to varies now. XX% see with we're happy facilities, which second loan. us overall lot rate It It's somewhere see with to CLO, on potentially particular right some right advance refinance these It Sure. help below set FLX tool it's sub-performing us of of loans, advanced

that. delevered. pretty the into is But portfolio looking we're So again,

we corporate we'll of some have swap to the believe opportunities over for debt maybe asset-related some So some time. debt

wouldn't I assets that thing. Jack is use repurchase facility. this credit $XXX Taylor. I facility of is million the secured on an non-mark-to-market to would assumption one operative add the any put just or Doug, refinancing underlevered this

what refinancing is in Okay. facilities facilities, today? appetite or is the guess, -- I financing that implying guess new availability that financing the the or get to secured I market

existing to good to We're banks our reach new need with position in wouldn't and out lenders.

lenders as So new we well. also have from inquiry

Steve next Our with comes JMP Securities. Delaney from question

the loan a but new just X-rated The really located market, the And mix sure the office to I'm tenant looks not age some more familiar in for building, that about everyone maybe could X-rated, submarket, the in? business about comments I'm what Dallas. on the wants current little the what part generally call describe plan with and learn with and Dallas, you of the it's like. of sponsor new occupancy

I'll this high Steve, it's Steve Alpart. level. keep

office We loan is in this know. an Dallas, small by a property So X a fourth this secured quarter. the X in moved as to you

other had very office performed loans have We Dallas that have well.

within is performing is which been now, right how of nearby This underperformed. is a us is area North But very one Dallas. Dallas performance to The have well. has get has -- underperformed. General to across kind loan one we Dallas you've This another and has heard also talk by buildings. sluggish. have little We -- markets, uneven just leasing bit been markets, about of

why So we reasons are the moved so those we -- XXX. to

assets hard The resolving increasing potential earnings. and here, As the it's is a looking the usual X-rated resolution but of But could to predict. It property. rate the sale outcomes focused far mix, a in at be deed lieu. potential on we're all very of as we're the timing run

a was It XXXX loan. Understood.

one-year and three assume it I years like So extension. X originally was

decision pretty the it of extension. of reached part kind is much that is So end they second their the of

was these Yes, -- a of are maturity. options. one fair couple loans that's assumption. is a of This Most extension there after

all we're these those are maturity. to very look, deals conversations the that factors the the underperformance But just borrower. like cooperative. this into So X, the all The to almost went one talking moving a are and

at We have the of just range kind to look just of options.

seen distressed funds of sure real sidelines. that a that. capital cycles play lot or in could be assume remarks, the capital. rescue I'm opening over on seen it. estate of equity the in comment -- I that they're years. considered credit of Got A some Jack, lot we've your all a

over share thoughts we some commercial see kind now, of expect coming capital As see point terminal there come you some see source? the the know of could type sort do and or from where into of we and market be that year in? do game money estate And just as need more, that are real next of a market flash right when what wait you about the to Feds in the some and we if people it might rates. Is

good with for speak you you. the question, thank Well, and to

and of I estate commercial think, point, is different it I the objectives goes of types is is think It it's a real market an many excellent with different not monolithic. very to, which needs. question, fundamental composed investors and

properties realize to So or on for selling higher distressed capital or opportunities we'll period they and of then the on funds themselves the a when properties to there's in get and for through probably been properties operate quickly that or will time. credit-oriented hold them buying is come can access more the that's raised to being yields the raised their notes longer and very

is being that and head so capital a driver clarity all be for iterative I both last point. rates going The that's the healing are the bigger the There's about they'll months. in in stop, view how is process. my more there. of issue, And and the of very think, the much primary fakes a inflection And be markets when to lot been six directions over long raised will

look can but prognosticators. only not official You at statements,

all off and that general once they've but that or pivots Most capital or that property they hold if not I up the uncertainty liabilities liabilities volume Fed being entertain now. right into by are in of their believes acquisition leveling think know pivoted what can't And don't [problems]. moving the be a an ratchet only driven there people a a longer-term transaction the on cost. back market view the will the is space

on was February the this XX-year than X. basis the is markets. mean, I XX higher it equity morning And points

this thank morning. everybody’s So comments you, Appreciate February.

Laws from question [Operator next Instructions] with Stephen Our Raymond James. comes

Jack, talk wanted on on place about I nonperforming of cost the for in financing can facility. that that financing but you the loans, And you basis? on that get a what kind the of things to type new rate the to X-year have of of what parameters couple financing a advance do non-marked follow-up A is line? put

Marcin. over turn actually I'll it to

Good Stephen, it's Martin. question.

financing at financing look you based really XX% particular over somewhere of as It's when to sort of at And again, So type with between XX%. rates advance will SOFR. dependent facility. of different the any XXX loans, on on I highly that the time. Page it's all differ type it any XX, a our is But it is as you're asset-specific on really asset and earlier, mentioned Doug

comes question Ramani next with Our Jade from KBW.

When the to why available. the we look company, at puzzled as is leverage of I'm leverage more there

at many and quite of lot level And liquidity looking immediate lower now on Just Xx seem a when to those them peers, never north of GPMT, the it the levels leverage. your the from among I look there's cash. at of appears yet that doesn't got really of is leverage aside source asset have an

main the be think plus you say, to size reasons do the $XXX are range? versus lower the that that resilient, given million for those credit in, play what So performance likely the is loan if average

for of at leverage and look Jade, Look, very company, the the specific. factors when into it, of that it's overall source Thanks think a it's you go question. funding Marcin. the I obviously, lot there's

with of as So us our have, can all of then the CLO or of financing lot at we it's So market, which have if you at second the CLO, sort financing, right? you right? some And below of of it's north in delever look sort as a GLO XX%. of get XX% CLO the financing, XX%

when look sort of obviously has summation of to leverage on all a at on the those. a source of company total because the So of funds of specific you it have

have so So we we to lever just time. we availability to have, and certain you of say, over up as intend do assets, sort

the have the uncertainty right as leverage now bonds by to obviously due the coming the lower maintaining are of end due We the markets, we in year.

that. on planning we're So

to the it's some to that. a just company. we do relever have but So approach, definitely sources have holistic wait markets financing of to for ability We

the was the were with available to that collateral rate? existing unused capacity there facilities based repurchase existing is respect currently facility, get added, to advance the on that that's like excluding a hand to on $XXX in And place, XX% million, that's the new

is. on There of and obviously opportunities to We but asset-specific a depends relever those there yet, not again, some it's and facility go it there's assets. chose particular loan. to But

more we in So And they to are business -- said -- us. lenders. we're with good actually Jack earlier, our standing as but with want do

consideration. obviously we're that into all So taking

capacity I around I do there XX-K, is? have as million. How think don't much something yet. don't But the XX, September think of was you it's it $XXX

much. really Yes, hasn't that changed that

said Okay. it's But you asset-specific.

not be million of would the So available. all $XXX .

Correct.

strategic second for to and relative to mortgage would of be business. the of REITs about And these of just then kind the value, more Okay. lots reasons approach I've a trade levels there's book seen question at that.

the One investors forward. is of reasons looking are

chance value, applying down book to shareholders it's stock to value an modeling of a really preferred basis that, of sort perhaps they're conversation put above that CECL also different perhaps sort the of the to they So has. But a in accretive there capital change that from on common to to reserves, a investor perhaps value in to some go dividend some addition perhaps and stock would in provide could totally company a be discount warrants, be book or to and expect like outside buyback where bridge and earnings. a sort, creative source Is to do company the perhaps forward being convert comes combination capital any position. next gap to the in book partner of leverageable with the might financing or

speak you. is Jack. Nice this with Jade, to

other And don't comment so and we things like things, stock on that. buyback

that could inherent fundamental, of whether of of company. at stock believe reflective won't that I confident is is or our trading we but private because more the specific or anything So provide momentum value our we're it the capital value part accretive not to thinking do the about public in market raises, the go

can't things, in capital. about more think strategic But comment be So terms are we of and of about proceeding. future these accessing we but analyzing we analyzing specifically our will them course, be it, will

that And go do ahead. think you --

to that terms add just to of in profitability. Just

us sort of capital lot and we nonaccruals income have nonaccrual mean $X in fourth a cost of in these loans, We and I earnings drag from the over So interest the million that earnings, trap quarter. right? capital estimate

a that's amount. pretty So significant

focused trapped these. them we once also some you So from but releasing to we earning turning resolving that, benefit capital, obviously assets. on And are of a sort really got do double

So the efficient dramatically can can are run rate profitability improve loans that then be in and more resolved once financed a way. those

it's of the two. sort combination So of were And going into we basis. leveraged X.Xx the pandemic, a on a company total

there's looking So an all back opportunity outcomes relever potential definitely to different at but the up, we're here.

resolved, those broadly probably in there's more out But a what's think and issues the through considering playing mean once that loans pipeline going I of loans estate mean, correction. are after playing in the considering I I out price to what's be real office go other

the of So stock #X than will loans resolving produce and up? get capital is earnings I that that, and plan some think, will that those kind hopefully, rather priority rated thinking risk-X

terms is pipeline, thinking But the the is about problem how market very But that. what a -- comments can couple have the the to current takes I think, and a speak thoughts our account extent different CECL you're more. we our little we of about, process -- loans the view One, it. we into I in uncertain. of that of reserve than that are very,

some resolution to be on the that might responded fact nonaccruals doesn't so -- And sheet there we're ways all are we blind sorts, that of more the mean depending looking the balance to at the as bolster market. in our to, on goes what of the I

our that quite measure, aware somewhere rankings them and said, with will though, not that categorized I type think grapple we've idea the to bigger be We is even be in are of if probably things. that. this as portfolio we'll who is risk thinking these our of relief" is somebody we've approach of the eventualities but to cost we thing, say, that extend carry our only not probably borrowers those and we're another all type largely better. office the of. think, going rising And in market. by And will us We off misunderstood and as the the blind quite think problems dynamics There our portfolio resilient encounter because We're need something to some in of like reserves. it's "We you're with

I Okay. the but questions. GPMT's in overall. I to wasn't appreciate environmental portfolio, pointing But And you taking really the particular, just

there questions this are time. no And at further

floor the back hand for Taylor closing to Jack I'll So remarks.

everybody all participating I the include support they're to company not but specifically thank like hard doing for for call would only company C-suite, to in this in the the our work today want been continuing support on these and thank move through to superb the to team, and want exhibited. challenging to fantastic much. very throughout markets. you efforts Most It's Thank our part our for everybody's a I importantly, being execution company. shareholders to

for disconnect. Have may today. a Thank that All day. good conference today's concludes you. parties And