Q3 2023 Granite Point Mortgage Trust Inc Earnings Call
Good that.
Good afternoon, My name is Diego and I will be your conference facilitator.
My name is Diego and I will be your conference facilitator. At this time, I would like to welcome everyone to Granite Point Mortgage Trust 3rd quarter, 2023 Financial Results Conference call. I'll part-
At this time I would like to welcome everyone to granite point mortgage Trust's third quarter 2023 financial results Conference call.
All participants will be on a listen only mode.
After the speaker's remarks, there will be a question and answer period.
After the Speakers' remarks, there will be a question and answer period.
Please note today's call is being recorded.
I would now like to turn over the call to Chris Pedda with Investor Relations.
I'd now like to turn over the call to Chris Petta with Investor Relations for granite point.
Thank you. And good afternoon, everyone. Thank you for joining our calls to discuss granted points third quarter, 2023 financial results. If me and Nicole this morning are Jack Taylor or President and Chief Executive Officer, Marston, herbastic, or Chief Financial Officer. Good afternoon sir sir. In addition to April Heilrich'saire. Training as administrator for systems in the CentralND foriga.
Thank you and good afternoon, everyone. Thank you for joining our call to discuss granite Point's third quarter 2023 financial results. Let me on the call. This morning are Jack Taylor, our President and Chief Executive Officer, Mark sooner, but I think our chief financial Officer.
Steve Alport, our Chief Investment Officer and Co-Head of Origination, Peter Morale, our Chief Development Officer and Co-Head of Origination, and Steve Sloss, our Chief Operating Officer.
These airport, our Chief investment Officer, and co head of originations, Peter Allen Chief Development Officer, and co head of originations as Pete Watson Chief operating officer.
After my introductory comments, Jack will provide a beef recap of market conditions and review our current business activities.
After my introductory comments, Jack will provide a brief recap of market conditions and review our current business activities.
The that part will discuss our portfolio and Marcin will highlight key items from our financial results and capitalization.
He's out part will discuss our portfolio and Marcia will highlight key items from our financial results and capitalization.
The press release, financial tables, and earnings supplemental associated with today's call were followed yesterday with the SEC and are available in the investor relations section of our website, along with our forum 10Q.
The press release financial tables and earnings supplement all associated with today's call was filed yesterday and are available on 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.
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 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 of different materials and expectations.
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 FCC for discussion, but some of the risk that could affect results. We do not only take any obligations to update any forward-looking statement.
Please see our filings with the SEC for a discussion of some of the risks that could affect results.
Do not undertake any obligation to update any forward looking statements.
You also refer to certain non- GAAP measures on this call. This information is not intended to be considered an isolation or a substitute for your trial information to determine the coordinates with depth.
We also refer to certain non-GAAP measures on this call.
It is not intended to be considered in isolation or substitute financial information presented in accordance with GAAP.
and reconciliation of these non- GAAP financial measures for the most comparable GAAP measures can be found in our financial recent law.
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 in our live set. We'll now turn the color of it a jack.
Which are available on our website now I'll turn the call over to Jack.
Thank you, Chris, and good afternoon, everyone. We would like to welcome you and thank you for joining us with Vander Poins, third quarter, 2023 earnings.
Thank you, Chris and good afternoon, everyone. We would like to welcome you and thank you for joining us for granite Point's third quarter 2023 earnings call.
We are happy to report ongoing progress on our business objectives as we continue to proactively manage our assets and liabilities in light of the uncertain market environment.
We were happy to report ongoing progress on our business objectives, as we continue to proactively manage our assets and liabilities in light of the uncertain market environment.
The continued strength of the U.S. economy supported by the strong labor market and consumer spending. That surpassed many expectations, notwithstanding the dramatic rise in its
The strength of the U S economy supported by the strong labor market and consumer spending that surpassed many expectations notwithstanding the dramatic rise in interest rates.
Despite this positive economic backdrop, there remains a high degree of uncertainty about the macroeconomy and the commercial real estate market.
Despite this positive economic backdrop, there remains a high degree of uncertainty about the macro economy.
And the commercial real estate market remains challenged.
I interest rates and uneven fundamental performance across property types contribute to limited market liquidity and a greatly reduced overall volume of property sales and refinancing transactions.
High interest rates and uneven fundamental performance across property types contribute to limited market liquidity and a greatly reduced overall volume of property sales and refinancing transactions.
Accordingly, we intend to maintain our conservative position, emphasizing the maintenance of higher liquidity, and one of the lowest leverage ratios in the second.
Accordingly, we intend to maintain our conservative position emphasizing the maintenance of higher liquidity.
And one of the lowest leverage ratios in the sector.
As we believe that property values on liquidity will continue to be under pressure.
As we believe that property values and liquidity will continue to be under pressure.
Our granular and over 99% senior floating rate loan portfolio in general continues to produce attractive returns benefiting from higher rates and diversification Ross 77 investments and mostly middle market loans.
Our granular and over 99% senior floating rate low portfolio in general continues to produce a tract of returns benefiting from higher rates and diversification across 77 investments in mostly middle market wealth.
In general, our borrowers remain supportive of their properties and continue to protect their investments.
In general our borrowers remain supportive of their properties and continue to protect their investments.
Although transaction volumes are down across the commercial real estate market, reflecting higher cost of capital and associated reset property values. Our portfolio continues to experience repayments across various property types and asset resolutions.
Reflecting higher-costed capital and associated reset property values. Our portfolio continues to experience repayments across various property types and asset resolution.
Since the beginning of the year, we have realized over 500 million in repayments, paydowns, and sales, many of which were from loans that were previously modified to give our hours more time to progress on their business.
Since the beginning of the year, we have realized over 500 million in repayments pay downs and sales many of which were from wells that were previously modified to give borrowers more time to progress on their business plans.
The pace of repayments remains volatile and uncertain, but we have been pleased with the trends and we will continue to manage our business accordingly.
The pace of repayment remains volatile and uncertain, but we have been pleased with the trends and will continue to manage our business according.
The run rate operating results generated by our portfolio of the last few quarters have generally been around our dividend level, including the third quarter pre-lost just typical earnings of 18 cents per share, which was reduced by a couple of pennies per share of one-time items, which Marcin will discuss later.
The run rate operating results generated by our portfolio over the last few quarters have generally been around our dividend level, including the third quarter pre loss distributable earnings of <unk> 18 per share, which was reduced by a couple of pennies per share of one time items, which Marshall will discuss later.
Our gap results include additional Cecil reserves mainly related to the Fibrated Loads and reflecting ongoing market challenges, especially for all office properties in certain markets that have been particularly affected by work from home trends and other factors.
Our GAAP results include additional seasonal reserves, mainly related to the five logs and reflect the ongoing market challenges, especially for office properties in certain markets that had been particularly affected by work from home trends and other factors.
To develop our will discuss the progress we are making on our five rated law.
He felt part will discuss the progress we are making on our five rated bonds.
Our overall Cecil Reserve increased in the third quarter to about 4.9% of total commitments from about 4.1% less quarter.
Our overall Cecil reserve increased in the third quarter to about four 9% of total commitments from about four 1% last quarter.
As we discussed on prior calls, our defensively position balance sheet with the diversified funding mix, low leverage and higher liquidity, provides optionality in the none certain mark.
As we discussed on prior calls our defensively positioned balance sheet with a diversified funding mix low leverage and higher liquidity provides optionality in an uncertain market.
As planned, we received the $132 million convertible note that matured in early October with cash, leaving no corporate debt return is remaining.
As planned we redeemed the $132 million convertible notes that matured in early October with cash, leaving no corporate debt maturities remaining.
In less than a year, we have repaid over $275 million of corporate debt.
In less than a year, we have repaid over $275 million of corporate debt.
We are very pleased to have accomplished that without needing to access the capital markets during this time of elevated volatility and uncertainty.
We are very pleased to have accomplished that without needing to access the capital markets. During this time of elevated volatility and uncertainty.
We believe this outcome further illustrates the liquidity embedded in our portfolio as shown by the level of repayment and the effectiveness of our strategy of proactively lowering our leverage during times of market dislocations, which creates opportunities to increase financing levels on certain assets later.
We believe this outcome further illustrates the liquidity embedded in our portfolio as shown by the level of prepayments and the effectiveness of our strategy proactively lowering our leverage during times of market dislocations, which creates opportunities to increase financing levels on certain assets later.
Since quarter end, we are happy to report that consistent with this strategy, we have successfully upsized our borrowings on our JP Morgan facility in October , generating an additional 75 million in proceeds with a potential to increase them up to 100.
Since quarter end, we are happy to report that consistent with this strategy. We have successfully upsized our borrowings under J P. Morgan facility in October generating an additional 75 million in proceeds with a potential to increase them up to 100 million illustrating.
illustrating our lending partner's continued support of our business and desire to expand those relationships as we navigate this challenging environment.
Illustrating our lending partners continued support of our business and desire to expand those relationships as we navigate this challenging environment.
Our priorities in the near to medium term remain centered around maintaining higher liquidity, working with borrowers to facilitate repayments, and resolving our nonaccrual loans, giving their meaningful impact on our profitability, which is estimated to be an over $6 million drag on interest income during the third quarter.
Our priorities in the near to medium term remained centered around maintaining higher liquidity working with borrowers to facilitate repayments and resolving our non accrual loans given their meaningful impact on our profitability, which is estimated to be in over 6 million dollar drag on interest income during the third quarter.
We are actively pursuing a range of resolutions for these loans each of which may have a different strategy depending on individual circumstances as we determined the best course of action to maximize the economic outcome for our shareholders over the long term.
We are actively pursuing a range of resolutions for these loans, each of which may have a different strategy depending on individual circumstances as we determine the best course of action to maximize the economic outcome for our shareholders over the long term.
We believe that these actions over time will help improve our run rate profitability and close the gap between our stock price and our book value.
We believe that these actions over time will help them prove her run rate profitability and close the gap between our stock price and our book value.
They will also provide us with great opportunities to redeploy our capital into attractive investments and meaningfully grow our portfolio as the real estate market stabilizes.
They will also provide us with great opportunities to redeploy our capital into attractive investments and meaningfully grow our portfolio as the real estate market stabilizes.
I would now like to turn the call over to Steve help part to discuss our portfolio activities in more detail.
I would now like to turn the call over to Steve Alpert to discuss our portfolio activities in more detail. Steve Alpert Thank you, Jack.
Thank you Jack and thank you all for joining our call. This afternoon all.
I'll discuss our portfolio activity and will provide updates on our risk-rated five loans and one REO property.
I'll discuss our portfolio activity and will provide updates on our risk rated five loans and one Oreo property.
We ended the third quarter with total portfolio commitments of about $3 1 billion and an outstanding principal balance of about $2 9 billion with $142 million of future fundings accounting for only about 5% of the total commitments.
We ended the third quarter with total portfolio commitment of about $3.1 billion and an outstanding principal balance of about $2.9 billion, with $142 million of future funding, accounting for only about 5% of the total commitment.
Our portfolio remains well-diversified across regions and property types and includes 77 loan investments with an average size of approximately $38 million.
Our portfolio remains well diversified across regions and property types and includes 77 loan investments with an average size of approximately $38 million.
Our loans continue to benefit from higher interest rates and deliver an attractive income stream with a favorable overall credit profile, with a weighted average stabilized LTV at origination of 63%.
Our loans continued to benefit from higher interest rates and do you live and deliver an attractive income stream with a favorable overall credit profile with a weighted average stabilized LTV at origination of 63%.
Our realized portfolio yield for the third quarter was about 8.4%, accounting for the impact of the nonaccrual loans, which we estimate to be about 85 basis points.
Our realized portfolio yield for the third quarter was about eight 4% accounting for the impact of the non accrual allowance, which we estimate to be about 85 basis points.
During the third quarter, we funded $20 million of existing loan commitments and upsized one loan by about a half a million.
During the third quarter, we funded 20 million of existing loan commitments and upsize one loan by about a half a million.
So far in the fourth quarter, we have funded approximately an additional $5.5 million on existing commitments.
So far in the fourth quarter, we have funded approximately an additional $5 5 million on existing commitments.
We continue to see liquidity and are conservatively underwritten middle market loans with over 177 million of repayments and pay downs realized during the third quarter. So far in the fourth quarter, we have realized an additional 79 million of repayments, including one loan sale.
We continue to see liquidity in our conservatively underwritten middle market loans, with over $177 million of repayments and paydowns realized during the third quarter. So far in the fourth quarter, we have realized an additional $79 million of repayments, including one loan sale.
For the year, we have realized over $500 million of loan repayments, paydowns, and sales, which we view positively, considering that overall real estate transaction volume is down dramatically over the last year or more.
For the year, we have realized over 500 million of loan repayments pay downs and sales, which we view positively considering that overall real estate transaction volume is down dramatically over the last year or more.
We anticipate receiving additional repayments in the coming months and quarters, though the exact timing and volume remain difficult to predict.
We anticipate receiving additional repayments in the coming months and quarters, though the exact timing and volume remain difficult to predict.
Turning to credit, the office market remains challenged, but it is not uniform, and loan performance depends on specific market fundamentals and the particulars of each property.
Turning to credit the office market remains challenged but it is not uniform and loan performance depends on specific market fundamentals and the particulars of each property.
Work-from-home trends impact different markets and specific properties to varying degrees.
Work from home trends impact different markets and specific properties to varying degrees, while high wall hung interest rates and the pull back in commercial real estate lending from the banking sector continues to pressure of available liquidity in the market likely extending the recovery time frame.
while high interest rates and the pullback in commercial real estate lending from the banking sector continues to pressure available liquidity in the market, likely extending the recovery timeframe.
These market trends and individual property challenges are reflected in our quarter-end risk rating.
These market trends and individual property challenges are reflected in our quarter end risk ratings.
As of September 30th, our portfolio weighted average risk rating remained stable at 2.7.
As of September 30th our portfolio weighted average risk rating remained stable at two seven.
During the third quarter, we downgraded the risk rating, risk rating of a $37 million senior loan collateralized by a mixed-use office and retail property located in downtown Los Angeles from a four to a five. This downgrade resulted from the ongoing office leasing challenges and other dynamics in this local market. We are on active discussions with the borrower as we consider potential next steps with respect to this loan.
During the third quarter, we downgraded the risk ratings risk rating of a $37 million senior loan collateralized by a mixed use office and retail property located in downtown Los Angeles on May four.
Four to five.
This downgrade resulted from the ongoing office leasing challenges and other dynamics in this local market.
We are in active discussions with the borrower as we consider potential next steps with respect to this law.
We continue to work collaboratively with our borrowers on the three other risk-rated five loans on a variety of potential resolutions.
We continue to work collaboratively with our borrowers on the three other risk rated five loans on a variety of potential resolutions.
As Jack mentioned earlier, we have made progress on our five rated loans. During the third quarter, a $31.8 million risk rate is five senior loan, collateralized by an office property located in Dallas, Texas.
As Jack mentioned earlier, we have made progress on our five rated loss during the third quarter and.
$31 8 million dollar risk rated five senior loan collateralized by an office property located in Dallas, Texas was transferred to held for sale, which resulted in a write off of $16 8 million.
transfer to health or sale, which resulted in a write-off of 16.89.
Subsequent to quarter end, the loan was resolved through a cash sale with no additional loss record.
Subsequent to quarter end the loan was resolved through a cash sale with no additional loss recognized.
The borrower on the San Diego office loan has reached an agreement to sell the property and we anticipate the resolution of this asset in the near term.
The borrower on the San Diego Office loan has reached an agreement to sell the property and we anticipate the resolution of this asset in the near term.
The borrower on the Minneapolis hotel is continuing with their process to potentially sell the property, so the ultimate result and timing remains uncertain.
The borrower on the Minneapolis Hotel is continuing with their process to potentially sell the property to the ultimate result, and timing remains uncertain.
The four loans that are risk rated five total about $250 million in principal balance and have established an $85 million.
The four loans that are risk rated five total about $250 million in principal balance and habits and have established an $85 million.
specific seasonal reserve against them, implying an impairment of about 34% on air.
Specific seasonal reserve against them, implying an impairment of about 34% on average.
Regarding our one RVO app set and office building in Phoenix, we are actively engaged with our property manager and the building continues to generate modestly positive operating.
Regarding our one RVO asset and office building in Phoenix, We are actively engaged with our property manager and the building continues to generate modestly positive operating income.
We are in the process of responding to various reverse inquiries about a potential sale of the property, which we believe may be a good candidate for alternative use as multifamily.
We are in the process of responding to various referred reverse inquiries about a potential sale of the property, which we believe may be a good candidate for alternative uses multifamily.
We continue to believe that the optimal resolution path for this investment is through a future sale, though it is difficult to predict the ultimate timing.
We continue to believe that the optimal resolution passed by this investment through a future sale. So it is difficult to predict the ultimate timing.
I'll now turn the call over to Martin for a more detailed review of our financial results and capitalization.
I will now turn the call over to Marcin for a more detailed review of our financial results and capitalization.
Thank you Steve, good afternoon everyone and thank you for joining us today.
Thank you Steve Good afternoon, everyone and thank you for joining us today.
Yesterday afternoon, we reported our third quarter gap net loss of $24.5 million of 48 cents per basic share, which includes a provision for credit losses of $31 million or 60 cents per basic share, mainly related to certain risk-graded five loans.
Yesterday afternoon, we reported our third quarter GAAP net loss of $24 $5 million, So 48 cents per basic share.
Which includes the provision for credit losses of $31 million or 60 cents per basic share.
Mainly related to certain risk rated five loans.
Free losses to be able to earnings for 3Q or 9.5 million or 18 cents per basic share and include it about $1 million dollars, a 2 cents per share of one time items related to one of our repayments and one new non-accurable loan.
Pre law, so stupid for earnings for <unk> were $9 5 million or 18 cents per basic share and included about $1 million or two cents per share of one time items related to one of our repayments and one new non accrual loan.
Adjusting for those items, pre-loads DE for 3Q was largely in line with prior quarter and around our 20 cent common dividend as the portfolio runoff was mostly offset by higher interest rates and lower expense.
Adjusting for those items pretty low is D. E for three Q was largely in line with prior quarter and around our 'twenty send common dividend as the portfolio runoff was mostly offset by higher interest rates and lower expenses.
Our distributor would lost the common stockholders with $7.3 million or $14 cents per basic share and includes a ride-off of $16.8 million or $32 cents per share related to the transfer to help for sale of our risk-graded five Dallas office loan which was subsequently sold in October at our carrying value as of September 30.
Our distributable loss to common stockholders was $7 $3 million or <unk> 14 cents per basic share and.
And includes a write off of $16 8 million or 32 cents per share.
Related to the transfer into held for sale of our risk weighted five Dallas office alone, which was subsequently sold in October at our carrying value as of September 30.
3Q was the first full quarter of operations for our Phoenix office, our EO asset, resulting in modest operating income adjusted for depreciation and amortization, which is excluded from distributed or earning.
<unk> was the first full quarter of operations for our Phoenix Office are you asset, resulting in modest operating income adjusted for depreciation and amortization.
Which is excluded from distributable earnings.
Our third quarter book value declined by about 65 cents per common share of about 4.5% to $13.28 per share from $13.93 per share in 2Q and was mainly affected by the loan loss provision.
Our third quarter book value declined by about 65 cents per common share or about four 5% to $13 28 per share.
From $13 93 per share in two Q and was mainly affected by the loan loss provision.
I was fee-filled reserve at quarter end, stood at about $148.9 million or $2.89 per share, representing about 4.9% of our portfolio commitments, as compared to 4.1.
Our seasonal reserve at quarter end stood at about $148 9 million or $2 89 per share.
Representing about four 9% of our portfolio commitments.
As compared to a four 1% last quarter.
The increase in our seasonal reserve was mainly related to specific ones on one new, risk-rated five-learned and a couple of other five-weighted loans driven by assumptions of further declines in estimated property values and additional information gained from the ongoing resolution process is related to certain of these loans.
The increase in our seasonal reserves was mainly related to specific ones on one new risk weighted five loan and a couple of other five rated loans driven by assumptions of further declines in estimated property values and.
And additional information gained from the ongoing resolution processes related to certain of these loans.
As Steve mentioned, more than half of our CIFL Reserve or about $85 million is allocated to the foreign on a cool loans as of September 30.
As Steve mentioned more than half of our seasonal reserve or about $85 million is allocated to the four nonaccrual loans as of September 30.
Turning to our liquidity and capitalization, we enter the quarter with over $257 million of cash.
Turning to our liquidity and capitalization, we ended the quarter with over $257 million of cash.
and our total levels decline to 2.2 times in 3Q from 2.3 times in 2Q due to long repayment.
And our total leverage declined to two two times and three Q from two three times and <unk> due to loan repayments.
Our low leverage provides us with more balanced heat flexibility as evidenced by our recent up sizing of the borrowing capacity on one of our bank facilities by up to $100 million of which we have so far realized 75 million proceeds.
Our low leverage provides us with more balance sheet flexibility as evidenced by our recent upsizing of the borrowing capacity.
One of our bank facilities by up to $100 million of which we have so far our realized 75 million in proceeds.
Our funding mix remains well diversified and stable with continued support from our lenders, highlighting the strength of our long-standing relationships.
Our funding mix remains well diversified and stable with continued support from our lenders highlighting the strength of our long standing relationships.
As planned, we repaid with cash our $132 million convertible notes that matured in early October .
As planned we repaid with cash our $132 million convertible notes that matured in early October.
Following this repayment, we have no corporate debt maturities remaining.
Following this repayment we have no corporate debt maturities remaining.
And as Jack mentioned earlier, we repaid both of our corporate bonds, totaling $275 million by proactively managing our liabilities, and without needing to access the capital markets at an in-opportune time.
And as Jack mentioned earlier, we repaid both of our corporate bonds totaling $275 million.
By proactively managing our liabilities and without needing to access the capital markets at an opportune time.
As of a few days ago, we carried about $178 million in cash, which reflects the bond repayment.
As of a few days ago, we carried about $178 million in cash which reflects the bond repayment.
I would like to thank you again for joining us today, and we will now open the call for questions. Thank you.
I would like to thank you again for joining us today, and we will now open the call for questions.
Thank you.
And ladies and gentlemen at this time, we'll conduct a question and answer session.
If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star two if you would like to remove your question from the queue.
If you would like to ask a question. Please press star one on your telephone keypad.
A confirmation tone will indicate that your line is in the question queue.
You May press Star two if you would like to remove your question from the queue.
For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys, one moment, please while we poll for questions.
And our first question comes from Steve Delaney with JMP Securities. Please state your question.
And our first question comes from Steve Delaney with JMP Securities.
Good afternoon everyone. Thanks for taking the question. Look, in a challenging credit mark, it's nice to see the convert getting cleaned up.
Hey, good afternoon, everyone. Thanks for taking the question look in a in a challenging credit market, it's nice to see the convert getting cleaned up and.
further improve your balance sheet. So, glad you're getting able to take care of those things from a financial condition knowing how much time.
Just further improve your balance sheet so.
Glad you're you're you're getting you're able to take care of those things from a financial condition, knowing how much time, you have to put into the credit.
Flipping over to the comments that Steve made on the San Diego Office loan, you mentioned, I believe, there was possibly a contract for sale. I didn't get all the details. Can you just clarify that, please?
Flipping over to the comments that Steve made on the San Diego Office Sloan You mentioned I believe there was possibly a contract for sale I didn't get all the details can you just clarify that please.
Yeah.
Hey Steve, good morning. It's Steve's L part. Thank you for joining the call. Yes, so we this is a resolution we've been working on. As we said on the call in the past, the buildings, physical, and occasional attributes make it well suited for conversion to other uses. We talked about hotel residential mix use. And as we also mentioned on the call, the property is now under contract. We anticipate resolving it in the next.
Hey, Steve Good morning, its Steve L. Part, thank you for joining the call.
So we are this is.
A resolution even working on our as we said on the call in the past.
The buildings are physical and locational attributes make it well suited for conversion to other uses we talked about hotel residential and mixed use.
And as we also mentioned on the call are the property is now under contract we anticipate resolving it in the next couple of months, but just given market conditions and timing, it's hard to predict the exact timing.
a couple of months, but just given market conditions and timing, it's hard to predict the exact timing. But we were pleased to see that there was good interest in this asset for alternative uses from a bunch of buyers. So it's under contract and hoping to resolve in the next.
But.
Yeah, we were pleased to see that there was good interest in this asset for alternative uses from us from a bunch of players. So it's under contract and are hoping to resolve in the next few months.
And it sounds like the buyer is a property operator. I mean, real estate professional and not just a debt fund. They're working with you looking at this property because they have a vision it wouldn't might become. Is that accurate? Wait a second. That's right.
Alright, and it sounds like the buyer is a property operator, I mean, a real estate professional and not not just a debt fund in other words, there they're working with you looking at just property because they have a vision of what it might become is that is that accurate wider.
Yeah that is that is accurate.
Yes, that is accurate. It's a buyer who would like to own the property and convert it into another.
It's it's a it's a buyer who would like to own the property.
And convert it into another use.
We'll in that transaction, maybe you can't comment on this right now, but I'll let me put it hypothetical. When you sell a property that's a five and it's a workout,
Okay will.
And that transaction, maybe you can't comment on this right now, but I'll, let me put a hypothetical when you when you sell a property that's a five and it's a workout.
Is there a situation where you would write a new loan for the new buyer or would you prefer that it be cleaner?
Is there a situation where you would.
A new loan for the new buyer or would you prefer that it'd be cleaner and.
let that individual find their own financing. Just given the fact that it is on your books as a problem asset now. Curious how you guys would handle that, if that was a requirement of the sale?
What that individual find their own financing just given the fact that it is on your books as a as a problem asset now I'm curious how you guys. We would handle that if that was a requirement of the sale.
Sure, it's a great question. It's always going to be case by case. So we have the ability, if we think it's beneficial to grant a point to facilitate a sale to provide stable financing, as we refer to it, whether we do that or not, will be very case-specific. We did not do that, for example, on.
Sure. It's a great question, it's always going to be a case by case. So we have the ability. If we think it's beneficial to granite point to facilitate a sale to provide a staple financing what we refer to it what do we do that or not will be very case specific.
We did not do that for example on.
the Dallas asset that was an all cash sale. And other cases we have provided stable financing. So I would say Steve it's something in the toolkit that we'll look at case by case. Got it.
The Dallas asset that was an all cash sale.
Other cases, we have provided staple financing so I would say, Steve it's something in the tool kit that will look at case by case.
Got it okay, well, thank you for the comments.
Sure.
Yes.
Thank you and another reminder to ask a question press star one on your telephone keypad to remove yourself from Q Press Star two.
Thank you, and another reminder to ask a question, press Star 1 on your telephone keypad to remove yourself from Q Press.
Our next question comes from Jade Romani with KBW.
Our next question comes from Jade Rahmani with K B W. Please state your question.
Okay.
Thank you very much. I wanted to ask you about multifamily, just looking at the location.
Thank you very much I wanted to ask you about multifamily.
Just looking at the locations.
Doesn't jump out at me as granted point having significant exposure to
It doesn't jump out at me as granite point, having significant exposure to <unk>.
Some of the markets that are under a lot of pressure.
Some of the markets that are under a lot of pressure with respect to where new leases are heading.
back to where new leases are heading in places like Phoenix and Austin we've seen.
In places like Phoenix, and Austin, we've seen you know.
down 9 down 10% new lease growth in October .
Down nine down 10% new lease growth in October.
So just scanning the geographic exposure, I'm not seeing those markets, but overall, what are you seeing in the multi-panel?
No.
Just scanning the geographic exposure I'm not seeing those markets, but overall what are you seeing in the multifamily book.
Yeah.
Hey Jake, good morning, it's Steve. Thanks for joining the call. So the multi-family properties in our portfolio, I would characterize as having generally healthy fundamentals. We feel good about these loans. We have a very diverse portfolio of multi-family properties, which I would generally classify as class A and class B properties. There are a lot of markets that I think you've noted with a concentration, not only with a concentration in the South.
Hey, Jay Good morning, it's Steve Thanks for joining the call.
So the the multifamily properties in our portfolio.
I would characterize as having generally.
Healthy fundamentals, we feel good about these loans are we have a very diverse portfolio of.
Multifamily properties in which I would just generally classify as class a and class B properties. There we're not in a lot of markets as I think you've noted without concentration not only about a concentration in the south eastern southwest.
Southwest. The business plans here typically involve a renovation, a CAPX plan, pushing rent.
The business plans here typically involve a.
Renovation of Capex plan pushing rents.
to market where we're trying to get the rents up to the competitive set. It's well known and we've seen a de-selleration in rental growth rates that were not underwritten but we were seeing double digit
To market, where we're trying to get the rents up to the competitive set.
It's well known and we've seen a deceleration in rental growth rates.
Were not underwritten, but we were seeing double digit.
Rent growth and we've seen that come down to single digits mid single digits low single digits.
Rank roll and we've seen that come down to single digits, mid single digits, low single digits.
In a few cases it's got a little bit negative. But we're seeing that even in this environment.
In a few cases, it's got a little bit negative.
But we're seeing that even in this environment.
Our borrowers are still able to, in many cases, most cases, still able to get rent bumps keeping occupancy pretty strong. And I would just point out that we did not originate a lot of loans at the peak of the market in 21-22. We did not underwrite a lot of rent we had a good mood because, in the stair?, the price of a Semicatch Fisaj?c county returned to very???? high county dog,
Our borrowers are still able to in many cases, most cases still able to get rent.
Rent bumps keeping occupancy is pretty strong.
And I would just point out that we did not originate a lot of loans at the peak of the market in 'twenty. One 'twenty two we did not underwrite a lot of rent growth.
We just mainly under wrote that a bar or could push rent to the level of the property next door. We are seeing some cases where it's a little bit harder to get the rent bump or at least get the full rent bump. But we're generally seeing that rents are still trending upward. We're seeing some pressure on operating expenses. I think that's been well reported. We're seeing it particularly on property taxes in a few markets and insurance in certain markets, particularly coastal markets. So that's just something to watch.
We just mainly underwrote that a borrower could push rents to the level of the property next door.
We are seeing some cases, where it's a little bit harder to get the rent bump or at least get the full ramp up what we're generally seeing that.
That rents are still trending.
Aboard we're seeing some pressure on operating expenses I think that's been well reported we're seeing it particularly on.
Property taxes, and a few markets in insurance in certain markets, particularly coastal markets. So that's just something to watch.
And then there's elevated new supply in some markets, but it's not everywhere. And as we look out and talk, excuse me, to our sponsors, it feels like...
And then there's there's elevated new supply in some markets, but its not everywhere and as we look out and talk excuse me to our sponsors it feels like when.
When you get out beyond the next 12, 18 months, that supply pipeline should come down. So we think, the way we're thinking about it now is that it might take another, you know, water-to-turns of the rent role to get to stabilization. But, you know, generally we feel generally good about these loans. And we are seeing, you know, generally good demand, just given, you know, home affordability. So I guess overall, we're positive on the fundamentals in the sectors we look out, you know, the next 12 to 18 months.
When you get out beyond the next 12 18 months that supply pipeline should come down.
So we think the way we're thinking about it now is that it might take another one or two turns of the rent roll to get to stabilization.
But yes.
Telling me we feel generally good about these loans.
And we are seeing generally good demand just given you know home home affordability. So I guess overall, we're positive on the fundamentals in this sector as we look out the next 12 to 18 months and we haven't seen any general signs of weakness so far.
And we haven't seen any general signs of weakness so far.
Okay, that's good to hear. Sounds like multi-families, not a cause of concern for you all right now. Wanted to ask about some of the older loans in the portfolio. You know, when I scan the loan sheet and it doesn't show risk rating next to it. But for example, there's an origination date of December 2018, 96 million is the maximum commitment. It's a New York mixed-use loan.
Okay. That's good to hear it sounds like multifamily is not a cause of concern for you all right now I wanted to ask about some of the older loans in the portfolio when I scan.
The loan sheet and it doesn't show risk rating.
Next to it but for example, there's an origination date of December 2018, 96 million is the maximum commitment. It's a new York mixed used alone.
Can you give some color and what's going on there? And then I also see a few that are 2015.
Can you can you give some color on what's going on there and then I also see a few that are 2015 2016.
uh... twenty seventeen originations you know just making some assumptions for maximum term you know these loans should matured already so it'd be helpful to get an update on at least a few of the large
2017 originations, just making some assumptions for Maxim Tam.
These loans should have matured already so maybe it would be helpful to get an update on at least a few of the larger ones.
Okay, so in terms of some of the older loans,
Okay. So in terms of some of the older loans.
In many of those cases, those were loans that we made.
Many of those cases those were loans that we made.
Over five years ago and at some point, you know, a couple years into the loan things were going
Over five years ago and at some point you know a couple of years into the law and things were going in a good direction, a borrower had an opportunity to potentially.
In a good direction, a borrower had an opportunity to potentially up size alone or get cheaper across the capital, and they would come to us, good sponsor, and we would do it offensive.
Upsized alone or get cheaper cost of capital and they will come to us good sponsor.
And we would do an offensive loan modification, where we would intentionally want to keep the loan on longer we might give more term when we found those to be kind of a win win.
loan modification where we would intentionally want to keep the loan on longer, we might give more term. When we found those to be kind of we...
loan mods and then we refer to as offensive loan mods. So that's that's what a lot of those older loans are. You mentioned specifically about
Loan mods on on what we refer to as offensive Walmart. So that's that's what a lot of those older loans are you mentioned specifically about.
New York Mifuse property. That one is ground floor retail, upper floor office, the retail fully leased. The sponsor is still working on the business plan. They put a lot of capital into it. They have a lot of equity invested. And that particular loan is, we moved that one to a four, I believe late last year, and that was mainly due to softness in the office market like at the conference, present and nonprofit, that within the same level or community path,
Our New York mixed use property that one is.
As a ground floor retail upper floor office.
The retail is fully leased.
<unk> is still working on the business plan, they've put a lot of capital into it there are a lot of equity invested.
And that particular loan is we moved that one tool for I believe late last year and that was mainly due to softness in the office market in New York.
Are there any of the other larger ones that jump out at you.
Are there any of the other larger ones that jump out of you of the older vintage? I know.
Older vintage.
Uh huh.
We have a.
<unk>.
We have a property in Bent Rouge to a high quality open air center where the sponsor, as we speak, is working on a property.
We have a property in Baton Rouge are it's.
It's a high quality open air.
Center.
Where the sponsor as we speak is working on a on a property sale.
Okay, you might want to add a column for, you know, an updated origination date or something because when investors scan this and they look at the term, they're just adding the numbers and making some assumptions that many of these might be passed through. So it would be helpful to see that. Great.
Okay, you might want to add a column for you know.
Updated origination date or something because when investors scan this and they look at the detail.
The term, they're just adding the numbers and making some assumptions that many of these might be passed do so.
It would be helpful to see that.
Great. Okay. That's a helpful comment thank you for that.
Thank you there and no further questions at this time. I'll hand the floor back to Jack.
Thank you there are no further questions at this time I'll hand, the floor back to Jack Taylor for closing remarks.
Well, thank you. And we want to extend our thanks and appreciation to our investors for supporting us and for all of you attending. I also would like to thank our team for all the great work they're doing in the process of working through these assets and facilitating all the repayments that we've had. And wish everybody a good day. Thank you very much. Bye-bye.
Well thank you.
We want to extend our thanks and appreciation to our investors for supporting us and for all of you attending.
I also would like to thank our team for all the great work, they're doing in the process of working through these assets and facilitating all the repayments that we've had.
And.
I wish everybody a good day, thank you very much bye bye.
Thank you. This concludes today's conference all parties may disconnect have a good day.