Granite Point Mortgage Trust Inc.

Good morning, my name is Robert, and I'll be your conference facilitator. At this time, I'd like to welcome everyone to Granite Point Mortgage Trust's second quarter 2023 financial results conference call. All participants will be in a listen-only mood. After the speaker's remarks, there will be a question and answer period. Please note, today's call is being recorded. I would now like to turn the call over to your host, Chris Petta, with investor relations for Granite Point.

Thank you, and good morning, everyone. Thank you for joining our call to discuss Granite Point's second 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 Murau, 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 and capitalization. The press release, financial tables, and earnings supplemental 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 10-Q. 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. Please see our filings with the SEC for discussion of some of the risks that could affect results. We do not undertake any obligation 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 the financial information presented in accordance with GAAP. A reconciliation of these non-GAAP financial measures to the most comparable GAAP measures can be found in our earnings release and slides, which are available on our website. I will now turn the call over to Jack.

Thank you, Chris, and good morning, everyone. We would like to welcome you and thank you for joining us for Granted Point's second quarter 2023 earnings call. Granted Point had another strong operating quarter as our pre-loss distributable earnings of 20 cents per share again covered our common stock dividend. Returns from our floating rate senior loan portfolio continue to benefit from higher short-term interest rates. Despite our maintaining the company's leverage meaningfully below our longer-term target levels, because of the market uncertainty. As the commercial real estate sector continues to adjust to higher costs of capital, lower liquidity in the market, and reset property valuations, the majority of the loans within our well-diversified and granular portfolio have been performing well and supporting our operating results. Our balance sheet remains defensively positioned with low leverage, a diversified funding mix, and strong liquidity in advance of the anticipated repayment with cash of our convertible bonds maturing in October. As we navigate this challenging environment, our lending partners remain very supportive of our business and our proactive asset management efforts. To that end, in recent months, we have extended the maturities on three of our large financing facilities that total over $1.2 billion in borrowing capacity, demonstrating our lenders' alignment with us and support of our platform. In fact, our lenders are looking to expand with us and participate as Granite Point grows over time. We continue to focus on bolstering our balance sheet given the stresses of the increased cost of capital for floating rate based borrowers and the associated refinancing and sale challenges for properties in this market. Our proactive and constructive asset management strategy has been facilitating win-win resolutions as we realized over $200 million of repayments and paydowns during the quarter, some of which were on loans that were previously modified to give borrowers more time to effectuate their exit strategy through either a sale or refinancing. Despite some early signs of developing stability in select areas of the real estate capital markets, we believe that property values and liquidity will continue to be under pressure for the foreseeable future. And given this backdrop, we are maintaining our conservative approach to new loan originations. One of our top priorities is resolving our non-accrual loans, given their meaningful impact on our profitability and the timing of when we can go back on offense once signs of greater market stability emerge. We estimate in the second quarter, non-accruals alone impacted our interest income by over $5 million. not even taking into consideration the higher cost of funds associated with the financing of these assets. We are actively pursuing a range of resolution strategies for these loans, and as in the past, we intend to employ a variety of tools available to us, including modifications that include principal paydowns or other credit enhancements, taking title to the properties via a foreclosure or deed in lieu, and loan sales, as we determine the best course of action to maximize the economic outcome for our shareholders. During the second quarter, we made the decision to take title to the office property in Phoenix through a negotiated deed in lieu of foreclosure, which had previously collateralized our $29 million senior loan that was risk-rated 5. We believe that the optimal resolution path for this investment will be achieved by our having taken ownership of the property and then an ultimate future sale of the property to a new owner. As we mentioned last quarter, this property lays out favorably for potential alternative use as multifamily. We are currently working on a potential sale, and we are encouraged by the progress so far. However, given the continued overall market uncertainty, it is difficult to predict the timing of the potential resolution for this property. High interest rates continue to be a major headwind for the commercial real estate industry, keeping downward pressure on asset values, and it remains unclear for how long rates will remain elevated. Fortunately, the U.S. economy is surpassing expectations, and fundamentals across most subsectors of the commercial real estate market remain resilient. Despite the broad negative sentiment around commercial real estate, in general, our borrowers remain supportive of their properties and continue to protect their investments while they wait for the environment to normalize and transaction activity to begin to increase so they can effectuate their exits and repay our loans. We are keenly aware of the headwinds in the office markets, but it is not monolithic, and loan performance depends on specific market fundamentals and the particulars of any given asset. It remains to be seen what impact the regional banking developments will ultimately have on the commercial real estate market, though it is likely to result in continued lower liquidity and a longer recovery timeframe. Accordingly, in light of these factors, we further increased our CECL reserve on our portfolio in the second quarter, to about 4.1% of total commitments from about 3.8% last quarter. In the near term, we intend to maintain our conservative approach to managing our business and protecting our balance sheet, while emphasizing liquidity and focusing on resolving our more challenged assets, so as to over time improve our run rate profitability and close the gap between our stock price and our book value. Over the course of our long careers in real estate lending, Our team has successfully managed through multiple credit and interest rate cycles, and we will do so again this time, getting to the other side of the current disruptions and taking advantage of attractive investment opportunities in the future for the benefit of our stockholders. I would now like to turn the call over to Steve Halpert to discuss our portfolio activities in more detail.