Granite Point Mortgage Trust Inc.

Good morning. My name is Kevin, and I'll be your conference facilitator. At this time, I'd like to welcome everyone to Granite Point Mortgage Trust's first quarter 2023 financial results conference call. All participants will be in a listen-only mode. After the speaker's remarks, there'll be a question and answer period. Please note, today's call is being recorded. I'll now turn the call over to Chris Petta with Investor Relations for Granite Point. Chris, please go ahead.

Thank you, and good morning, everyone. Thank you for joining our call to discuss Granite Point's first quarter 2023 financial results. With me on the call this morning are Jack Taylor, our President and Chief Executive Officer, Marcin Urbacic, our Chief Financial Officer, Steve Alpert, our Chief Investment Officer and Co-Head of Originations, Peter Morrell, our Chief Development Officer and Co-Head of Originations, and Steve Plus, our Chief Operating Officer. After my introductory comments, Jack will provide a brief recap of market conditions and review our current business activities. Steve Alpert will discuss our portfolio, and Marcin will highlight key items from our financial results. The press release and financial tables associated with today's call were filed yesterday with the SEC and are available in the investor relations section of our website, along with our Form 10Q. I would like to remind you that remarks made by management during this call and the supporting slides may include forward-looking statements, which are uncertain and outside of the company's control. Forward-looking statements reflect our views regarding future events and are subject to uncertainties that could cause actual results to differ materially from expectations. We see our filings with the SEC for a discussion of some of our risks that could affect results. We do not undertake any obligations to update any forward-looking statements. We will also refer to certain non-GAAP measures on this call. This information is not intended to be considered in isolation or as a substitute for financial information presented in accordance with GAAP. In reconciliation of these non-GAAP financial measures, the most comparable GAAP measures can be found in our earnings release and slides, which are available on our website. I'll now turn the call over to Jack.

Thank you, Chris, and good morning, everyone. We would like to welcome you all to our first quarter 2023 earnings call, and thank you for joining us today. Our business delivered strong operating results in the first quarter despite the challenging macro backdrop and negative sentiment around commercial real estate. Our well-diversified, conservatively underwritten, and granular floating rate senior loan portfolio continues to benefit from higher short-term interest rates as our first quarter distributable earnings increased to $0.20 per basic share and covered our common stock dividend. Given the highly uncertain market environment, our balance sheet remains defensively positioned benefiting from a well-diversified funding mix, leverage that is meaningfully below our target range, and a strong liquidity position. We continue to emphasize protecting our balance sheet and our stockholders' capital while actively asset managing our portfolio and rationalizing our liabilities. The diversity of our funding and the strength of our lender relationships support the execution of our objectives. During the first quarter, we successfully delevered our FL2 CLO, and released a substantial amount of capital, further strengthening our liquidity position. The loans underlying the legacy CLO were refinanced on one of our large bank credit facilities, highlighting our good standing with lenders and our ability to refinance our assets even during periods of major market dislocations. Despite some signs of thawing and recently emerging signs of some more liquidity in the real estate capital markets, we continue to main our conservative approach to new loan originations. However, we have been opportunistic with respect to deploying capital into our own securities when they present attractive relative value. We bought back our common stock capitalizing on a deep value opportunity created by what we believe to be an unwarranted market discount versus our book value. We repurchased about 1 million common shares, generating attractive returns and meaningful book value accretion for our shareholders while maintaining our strong liquidity position. These repurchases have largely used up our prior stock buyback authorization as, from time to time, we have been an active market participant over the last couple of years, accretively repurchasing almost 4 million of our common shares. As a result, and to provide us with more flexibility to actively manage our capital over time, our Board has increased our buyback authorization by an additional 5 million common shares, or almost 10% of our outstanding shares. As we have done in the past, we will remain opportunistic with respect to our repurchases, taking into consideration multiple factors as we manage our business. Given our conservative stance on loan originations, we have been emphasizing proactive asset management and collaboratively working with our borrowers to ensure successful loan repayments and resolutions. In general, our borrowers continue to support their properties and protect their investments as they recognize the embedded value in those assets and wait for the markets to stabilize and transaction volumes to begin returning to more normalized levels. In the near term, we believe that the recent developments in the regional banking sector are likely to further delay market recovery and impact liquidity for commercial real estate assets, given the regional bank's significant historical presence in this market. It remains unclear when the market environment stabilizes, the commercial real estate markets improve, and for how long the Fed keeps short-term interest rates elevated. Accordingly, we further increased our CECL reserves on our portfolio in the first quarter to about 3.8% of our total loan commitments, as the ongoing market disruptions, especially for certain properties located in some of the more challenging cities, are likely to continue to create uncertainty. We remain focused on the macro trends in the office market and the individual performance of our office loans. We are keenly aware of the headwinds in the office market. But the office market is not monolithic, and the performance depends on the specific market fundamentals and the particular assets. Properties located in our portfolio markets, such as Miami, continue having favorable demand characteristics and fundamentals. In other markets that were more impacted by the pandemic and where the trend of returning to the office is more delayed, such as Minneapolis, there have been greater challenges. Fortunately, we have a very diversified and granular office portfolio across 19 MSAs. We have little to no office exposure in some of the most impacted markets, such as San Francisco, Washington, D.C., Portland, and Seattle. As for specific asset characteristics, approximately 90% of our office assets by UPB are either Class A or recently renovated. So while we are witnessing greater stress and challenges in some of our loans, for which we have established reserves and where we are working with the borrowers on resolutions, these situations are not indicative of the balance of our portfolio. In addition, we take comfort in the strong sponsorship profile of the owners of the office properties securing our loans, the substantial cash equity invested in these properties to date, and that these sponsors are generally committed to supporting their properties during this period of dislocation. Over the last year, our portfolio borrowers have contributed over $140 million of additional equity in support of their properties. In the near term, we will maintain our conservative stance, actively managing our business, protecting our balance sheet, and maintaining lower leverage, while emphasizing liquidity and collaboratively working with our borrowers. As we have said in the past, we believe that the U.S. commercial real estate market provides attractive long-term opportunities and the significant amount of capital, which is currently on the sidelines waiting for more market stability, will ultimately be deployed, providing support for the sector. As the environment stabilizes and likely increased regulations for banks occur, once we are on the other side of the current disruptions, this will allow us to take advantage as a non-bank lender of attractive investment opportunities. I would now like to turn the call over to Steve Halpert to discuss our portfolio activities in more detail.