Granite Point Mortgage Trust Inc.

Good morning. My name is Andrea, and I will be your conference facilitator. At this time, I would like to welcome everyone to the Granite Point Mortgage Trust's first quarter 2020 financial results conference call. All participants will be in a listen-only mode. After the speaker's remarks, there will be a question and answer period. Please note today's event is being recorded. I would now like to turn the conference over to Chris Petta with Investor Relations for Granite Point. Please go ahead.

Thank you. And good morning, everyone. Thank you for joining our call to discuss Granite Point's first quarter 2020 financial results. With me on the call this morning are Jack Taylor, the president and CEO, Marcin Urbacic, our CFO, Steve Alphardt, our CIO, and Steve Kloss, our COO. After my introductory comments, Jack will review our current business activities and a brief recap of market conditions. Steve Alport will discuss our first quarter originations and our portfolio, and Marcin will highlight key items from our financial results. The press release and financial tables associated with today's call, as well as our Form 10-Q, were filed yesterday with the SEC. If you do not have a copy, you may find them on our website or on the SEC's website at sec.gov. In our earnings release and slides, which are now posted in the investor relations section of our website, we have provided a reconciliation of GAAP to non-GAAP financial measures. We urge you to review this information in conjunction with today's call. I would also like to mention that this call is being webcast and may be accessed on our website in the same location. Before I turn the call over to Jack, I would like to remind you that remarks made by management during this conference call and the supporting slides may include forward-looking statements. Forward-looking statements reflect our views regarding future events and are typically associated with the use of words such as anticipate, expect, estimate, and believe, or other such words. We caution investors not to rely unduly on forward-looking statements. They imply risks and uncertainties, and actual results may differ materially from expectations. We urge you to carefully consider the risks described in our filings with the SEC. which may be obtained on the SEC's website at sec.gov. We do not undertake any obligation to update or correct any forward-looking statements if later events prove them to be inaccurate. I will now turn the call over to Jack.

Thank you, Chris, and good morning, everyone. We would like to welcome you all and thank you for joining our first quarter 2020 earnings call. Before we begin, we sincerely hope that everyone and their families remain healthy and safe during these challenging times. We also want to send our deep appreciation to all those who are at the front lines battling this pandemic. As this health crisis first began unfolding, we moved to ensure the safety and wellbeing of our personnel and to maintaining our business activities. We were very well prepared from a business continuity perspective and want to thank everyone across the organization for their preparedness and efforts to make sure the company was ready for an event such as this one. Since mid-March, We have been working remotely very effectively and our team is well connected and unified. Despite working remotely, we remain deeply engaged with all of our business counterparties and have been operating efficiently and without interruption as we navigate these uncertain times and markets. Since our last communication, given the dramatically changed landscape due to the negative impacts of the COVID-19 pandemic on the outlook for the overall economy as well as commercial real estate markets, We've been very busy and pivoted our efforts. We will update you during the course of this call on a number of things, including the following. First, we rapidly shifted our focus to maximizing and preserving our liquidity, including ceasing new loan origination and announcing the suspension of our dividend. Second, we have concentrated our team's efforts on intensive asset management. Third, we have proactively enhanced the near-term stability of our balance sheet through agreements with lenders. And finally, we have been preparing a more deliberate process and working closely with Evercore as our financial advisor to evaluate various longer-term financing alternatives to further improve our liquidity and better position the company for the current environment and for the future. As always, we continue to focus on preserving the value of our investments as well as furthering the franchise value we have built and ultimately expanding it for the benefit of our stockholders. Our first quarter results were largely unaffected by the pandemic, other than our increased allowance for credit losses related to the adoption and application of the new CECL accounting standard, which Marcin will discuss in more detail later. As a reminder, this credit reserve is a non-cash adjustment to our financial statements, and its increase is predominantly driven by the COVID-19 pandemic's impact on the macroeconomic outlook. And it is not related to any specific loan losses or impairments in our portfolio. Steve Alpert will discuss our portfolio and investment activities a bit later. But in summary, we originated about $200 million of new loan commitments and funded about $80 million of loan balances, net of $108 million of repayments during the first quarter. At March 31st, the overall credit quality of our portfolio was strong, with no loan impairments or non-accruals. Our April interest payment collections were very strong, with 123 out of 124 of our investments current on their debt services. Our business model is to be a direct originator of senior floating rate first mortgage loans on high-quality commercial real estate located in attractive markets in the United States and backed by strong and experienced sponsors. We employ a disciplined credit underwriting process focused on protecting against the downside. We have remained disciplined and stuck to our knitting. Our portfolio is comprised of 99% first mortgage loans, secured by a diverse pool of existing properties located primarily in the top 25 and generally up to the top 50 markets in the U.S., with 124 discrete investments. We believe that the attractive diversification profile of our portfolio across geographies, property types, and sponsors reduces concentrated event risk and helps during times of economic and market distress, such as the current one. Our overall philosophy of fundamental value investing in high-quality real estate through a de-risk position of a first mortgage loan is designed to protect against the downside. Our portfolio's initial LTV at origination of about 66% means that sponsors have significant equity in their properties, providing strong motivation to protect their assets and powerful support for our loans and, in the aggregate, for our company. Our senior team has an average of over 25 years of experience successfully navigating various economic and real estate cycles as balance sheet lenders and managers of proprietary and third-party capital. As we have stated many times before, commercial real estate lending is fundamentally based on relationships on both sides of the balance sheet. Having been in this business for so long, we have developed strong and longstanding relationships with many of our borrowers as well as with our financing counterparties. who have been supportive and constructive through this unprecedented environment. While we satisfied, as previously reported, our limited requirements to post cash collateral with respect to certain investments, drawing on those bank relationships and our extensive market experience, we proactively engaged in productive dialogue with all of our lenders. Our financing facilities have no significant near-term maturities, are generally term-matched, and predominantly have no capital markets mark-to-market provisions. Our constructive lender discussions have resulted in executed and agreed in principle agreements with certain of our lenders on over $1.4 billion of outstanding borrowings on our repurchase facilities, which provides us with greater balance sheet stability and flexibility for a period of time in exchange for deleveraging. In the process, we have reduced borrowings on 100% of our hotel loans and almost all retail loans financed with our repurchase facilities with an agreement in principle for the remainder. Having obtained greater stability in our liabilities, and as I said earlier, we are working closely with our advisors on exploring various longer-term financing alternatives to further bolster the company's liquidity and to position it to weather these uncertain times and flourish beyond. As with our lender discussions, we have also been in active and productive dialogue with many of our borrowers regarding loan modifications on properties impacted by the COVID-19 pandemic. that have been centered on jointly ensuring that they can sustain their properties through the current disruptions. Asset management is a key component of our overall risk mitigation strategy and has been and will continue to be a significant focus for us as we navigate this uncertain market environment. While we have tremendous confidence in our fundamental investment approach, discipline, credit, and underwriting, and overall quality of our portfolio, we do not expect to be unaffected by the impact of the COVID-19 pandemic. Currently, More than ever, it is critical to have the skills and experience to actively manage our assets. Our team has these skills and experience, and as we previously reported, in 2018, Charles Citro joined us to head our asset management function. Charles is a key member of our senior team and brings with him over 20 years of asset management and commercial real estate credit experience, including previously heading an asset management and credit department at a major financial institution for many years. Heading into this period of volatility caused by COVID-19, the overall real estate market fundamentals and the economy were on solid footing. Industry lending standards were generally rational with responsible levels of leverage, liquid and balanced capital markets, active real estate transaction volumes, and no significant oversupply of properties, which was largely not the case before the great financial crisis of 2007 to 2008. As a result, we believe that as we get past this crisis, the real estate transaction activity should return, as there is a significant supply of and demand for both equity and debt capital, and U.S. commercial real estate will continue to be viewed as an attractive asset class generating attractive risk-adjusted returns. In summary, I am very pleased with and proud of the strong performance of our entire team in response to this market environment caused by the COVID-19 pandemic. Our seasoned team has successfully navigated multiple cycles and market disruptions, each presenting its own unique challenges, this one being no different. We have the experience and expertise to handle whatever challenges are before us, managing both our assets and our liabilities in a thoughtful way, while focusing on protecting our investors' capital. On behalf of the entire team, I would also like to thank our Board of Directors for their continued partnership and support as we are working together in navigating these unprecedented events. Together, we will be able to position our company for future growth and success. Now, I will turn the call over to Steve Alpert to discuss our portfolio and recent activities in more detail.