Yahoo Finance Granite Point Mortgage Trust Inc (GPMT) Q1 2024 Earnings Call Transcript Highlights: Navigating ...
GAAP Net Loss: $77.7 million, or $1.53 per basic share.
Provision for Credit Losses: $75.6 million, or $1.49 per basic share.
Distributable Earnings: $1.3 million, or $0.03 per basic share.
Book Value: $11.14 per common share as of March 31st.
CECL Reserve: Approximately $213 million, or 7.5% of portfolio commitments.
Nonaccrual Loans: Approximately $690 million, impacting company's profitability.
Total Portfolio Commitments: $2.8 billion with an outstanding principal balance of about $2.7 billion.
Realized Portfolio Yield: About 7.7% for the first quarter.
Liquidity: Over $155 million of unrestricted cash at quarter end.
Total Leverage: Increased to 2.3 times in Q1 from 2.1 times in Q4.
Release Date: May 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Granite Point Mortgage Trust Inc (NYSE:GPMT) reported a diversified portfolio with total commitments of $2.8 billion and a weighted average stabilized LTV at origination of 63.5%, indicating a strong and balanced investment approach.
The company has a strategy in place to resolve $150 million to $200 million of risk-rated five loans in the near term, showing proactive asset management and potential recovery of value.
Granite Point Mortgage Trust Inc (NYSE:GPMT) benefits from experienced management, which has successfully navigated various real estate cycles, enhancing trust in their capability to manage current market challenges.
Despite the market volatility, the company maintains over $155 million of unrestricted cash, demonstrating strong liquidity to support operations and strategic initiatives.
Granite Point Mortgage Trust Inc (NYSE:GPMT) has a conservative approach towards market conditions, focusing on maintaining higher liquidity and managing the portfolio to protect the balance sheet.
Negative Points
Granite Point Mortgage Trust Inc (NYSE:GPMT) reported a significant GAAP net loss of $77.7 million for the first quarter, largely due to a provision for credit losses of $75.6 million.
The company's earnings are currently pressured by nonaccrual loans, which significantly impact interest income and overall profitability.
There is an ongoing challenge in the commercial real estate market, particularly with high interest rates affecting property values and transaction volumes.
Granite Point Mortgage Trust Inc (NYSE:GPMT) has had to increase its CECL reserves to 7.5% of portfolio commitments, reflecting heightened credit risk and market uncertainty.
The company faces difficulties with certain loans, particularly those rated five, which are expected to result in losses and require complex resolution strategies.
Q & A Highlights
Q: Hi, good morning. Steve, wanted to circle back to something you mentioned specifically around Pittsburgh, Chicago and Milwaukee. The three new of the I guess two multi one mixed use LTM EBITDA. It went from three to five during the quarter. Can you give us a little more detail on that? Was it a situation where they were going to defend and buy caps and then rates moved and they changed their strategy on protecting assets from kind of what caused those double downgrades during the quarter? A: Sure, Steve, good morning. Thanks for joining our call this morning. I'll be able if these were these these two loans had some similarities to them. They are good sponsors are both very far along on business plan of the properties were at or near stabilization from each of them were involved or involved in active bidding and sales processes. The multi one is pretty far along and they're both kind of in the middle of the process, if you will, and as it was really a function of as it began to come in, it looked like they were coming in below below the loan amount. So they came in a little bit below our expectations. I think I would say that the Chicago asset, the investment sales market there has been a little soft. The multi deal is primarily multifamily, has some ground-floor retail is partially leased, not fully leased. And so I wouldn't so. But those are the reasons why we moved it from a up to five, mainly because we thought the bids are coming in below the loan amount. We wouldn't generalize too much from these these loans. But in general, what we're seeing, we're pretty comfortable with the fundamentals we're seeing in our multifamily loans, but it was mainly a function of where we think the bids are coming.
Q: Appreciate that. And then Marcel, wanted to follow up on the comments on Cecil and I believe Steve may have also mentioned you don't expect you have significant losses on the multi where you do take them, but roughly 30% reserve levels far specific reserves on those those five rated loans, could you maybe bifurcate that? How do you allocate that to the specific reserves of percentage of the office loans versus the remaining specific reserves against the non-office component to every morning, Stephen, and thanks for joining us. A: Yes, I would say it really varies by loan, but I think generally office office impairments are higher than than multifamily. Some sort of it's hard to get to sort of specifics on particular assets. But I would say the majority of the reserve on the specific reserve is related to office office issues and meaningfully less on the multifamily.
Q: Banks comp just given the starting point of earnings this quarter, plus the incremental drag from nonaccruals, can you talk about your commitment to paying the dividend or how you would think about instead and using that cash to buy back stock, which would be clearly more accretive. A: Sure. Good morning, Doug. Thanks for joining us on. So I think the dividend we and the Board look at the dividend sort of a longer longer time horizon in terms of run-rate profitability, obviously, as we as we said in our when we reduced the dividend for the first quarter and today and that there's going to be some pressure on earnings as we sort of resolve these assets. Timing is sort of hard to predict, but I think you know some of these resolutions can have a pretty material impact to our run rate profitability. So, you know, from our point of view, it's sort of a matter of sort of time rather than rather than if that happens so on. But again, timing is difficult to predict, but we and as we said in the prepared remarks, we think that many of these assets may be resolved by the end of the year. And we look at all of that every single quarter with our Board and as we sort of assess the dividend. So it's going to be an ongoing process.
Q: Yes, wonderful. Wonderful to be with you this morning. So like we've observed over the last few days reports, I guess CRTX. last week and then CMTG. yesterday, both companies he'd been able to sell loans as opposed to taking the property into REO. And Richard Mack yesterday actually offered some some comments on that and it sounded pretty optimistic about the amount of opportunistic and he sounded positive about the opportunistic money that he was seeing of people that I'm looking to get in and maybe in sort of a loan to own strategy on just your thoughts on are you looking at opportunities or in discussions with possible loan purchasers and how you feel about taking. A: Well, I'll make a quick comment, Steve, which is we've done it in the past and we're able to do it in the future. Steve, it looked to me like you wanted to answer. So go ahead, please.
Q: Back-to-back or much of this quarter has been kind of a tale of two cities between the banks and the commercial mortgage rates with the banks in offering some relief in terms of commercial real estate credit performance, essentially, I believe there they're modifying and extending loans and there's less pressure on their liabilities as rates while volatile have been more stable than a year ago. A: I'll start off with saying I think it's on both. In general, the banks lend have lent at a lower advance rate than the nonbank lenders. So you would expect that there would be some the difference between the nonbank lenders at a higher advance rate, even though a low advance rate with what we like to call from stealing from the bond world positive convexity on credit, which has worked out in many cases, but not at all in the current environment, meaning that the loans are meant to improve of the assets. But the capital from the loan and the is meant to improve credit over time, I would say double punch of the pandemic and now very elevated interest rates has proven more difficult than some of the cases. So I do think on the asset side, that's true. On the liability side, we have in our own case and then many others of our peers very stable broadly, the first financing facilities and other structures that have provided us with our leverage. However, the banks have deposits and it's a lower cost of capital to work.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
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