Q3 2025 Granite Point Mortgage Trust Inc Earnings Call

Good morning. My name is Alicia and I'll be your conference facilitator at this time. I'd like to welcome everyone to Granite Point. Mortgage trust, third quarter, 2025 Financial results conference call. All participants will be on a listen-only mode. 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 the call.

Over to Chris petta with investor relations for granted point. Please proceed.

Thank you and good morning everyone. Thank you for joining our call to discuss. Granted points, third quarter, 2025 Financial results with me on the call. This morning are Jack Taylor, our president and Chief Executive Officer, Steve Albert, our chief investment officer and co-head of originations Blake Johnson, our Chief Financial Officer, Peter Morrell Chief development officer and co-head of origin Nations, and Ethan lit. Our chief operating officer.

After my introductory comments, Jack will provide a brief recap of market conditions and review our current business activities. If you will discuss our portfolio and Blake will highlight key items from my financial results.

The press release financial tables and earning supplemental associated. With today's call Will filed yesterday with the SEC and are available in the investor relations section of our website along with our Forum. Thank you.

I would like to remind you that marks 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 our subject to uncertainties that could cause actual results to different materially from expectations, please. See our filings with the SEC for a discussion of some of the risks. That could affect results. We do not undertake any obligation to update any forward-looking statements,

We also refer to certain non-gaap measures on this call. This information is not intended to be considered in isolation, or is a substitute for the financial information presented in accordance to Gap.

The 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'll 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 granter points, third quarter 2025 earnings call.

Investor sentiment can continue to improve through the third quarter, with more participants gaining confidence to deploy debt and equity capital into the recovering commercial real estate market, against the backdrop of improving fundamentals and a general decline in new supply.

Lender activity has been mostly for refinancing and there has also been a pickup in acquisition financing in line with the gradually increasing number of sales transactions.

The greater liquidity in the market is reflected, across multiple segments, including a robust scene of the s market and particular, the single asset single borrower segment. Increased lending activity by larger commercial Banks. Both for their direct lending, and notably for warehouse financing.

And a growing appetite from life. Insurance companies.

While the real liquification of the commercial real estate market is underway, it remains uneven and bifurcated.

The Middle Market loan segment is compelling for certain in favor of property types, such as multi-family, and Industrial properties, and more challenging for some other property sectors with regional and smaller Banks, still not providing significant liquidity.

Even though there is a large wall of maturities, creating an attractive opportunity set going forward, there's not enough supply of actionable deals yet, which is a key factor contributing to the spread tightening. We've seen this year,

We have continued to make progress in 2025 with ongoing asset resolutions and reducing our higher cost debt which has helped reduce the risk of our portfolio and improve our net interest spread.

During the quarter, the Louisville student housing loan was resolved at over million dollars above our carrying value.

The office portion of the risk, rated 5 office and Retail property located in Chicago.

Was sold, which resulted in a net 3.4 million partial pay down of our loan.

As a result that loan is now classified as 100% retail.

With respect to our REO assets, we continue to reposition these 2 properties and our investing Capital where we believe it will maximize our outcome and will then seek to exit and extract capital.

During the quarter, our risk ratings were stable with the 1.5 loan resolution being partially offset by a hotel loan, being downgraded from 4 to 5.

And over the past year, we have improved, our weighted average risk rating from 3.1 to 2.8 and meaning to the reduced, the number of 5 rated loans and the balanced by some 2/3.

Turning to originations, as we said last quarter, we expect to begin to regrow our portfolio in 2026.

As we sit here today, we expect to start that process in mid-2026.

the estimated timing and pace of originations, is being affected by a slower than anticipated set of repayments resolutions and Aro repositioning

We continue to be focused on loan repayments and asset resolutions, and our origination activity will be partially fueled by the release of capital from our existing loan portfolio and REO.

Also, we continuously evaluate the various paths for all assets in our portfolio, in order to maximize outcomes.

In certain situations, the best path may be investing additional capital or adjusting the timing of when we ultimately realize a resolution.

Investing additional capital, for example, may be related to Good News, Leasing, and, or Capital Improvements on the REO properties.

We're making subordinate Capital Investments such as preferred equity in the loan portfolio.

While the timing and volume are uncertain and may change because of market conditions and idiosyncratic factors, repatriating this embedded capital in our portfolio and recycling it into high-earning assets remains one of our highest priorities.

We will update as we have new information.

Also during the quarter we reduce the balance of our higher costs secured credit Facility by 7 and a half million dollars and extended the maturity to December 2026 and reduce the financing spread by 75 faces points.

During the fourth quarter, we expect to further reduce the secured credit Facility by an additional 7 and a half million dollars for a total of 15 million for 2025.

Which would result in an improvement to earnings of 3 cents per common, share on an annual basis.

I would now like to turn the call over to Steve alpart to discuss our portfolio activities in more detail.

Thank you Jack, and thank you all for joining our third quarter earnings call.

We ended the third quarter with 1.8 billion in total loan portfolio. Commitments and 1.7 billion in outstanding principal balance with about 76 million of future fundings, which accounts for only about 4% of total commitments.

Our loan portfolio remains well, Diversified across regions and property types and includes 44 Investments with an average upb of about 39 million and a weighted average stabilized LTV of 65% at origination.

As of September 30th our portfolio weighted average risk rating held steady at 2.8.

The realized loan portfolio, yield for the third quarter was 7.5%, which excluding non-accrual loans would be 8.4% or 0.9% higher.

The prior quarter realized loan portfolio. Yield was 7.1%, and excluding non-accrual loans was 8.2%, or 1.1% higher for that quarter.

The improvement in our overall loan yield of about 40 basis points is due to the reduced proportion of non-accrual loans in the portfolio.

we had an active third quarter of loan repayments, partial pay downs and resolutions totaling about 121 million, including the repayment in full of an office loan where we previously provided staple financing and a loan secured by a quality event and entertainment venue in New York City

Also, during the quarter, we funded about 12 million on existing loan. Commitments resulting in a net loan portfolio, reduction of about 110 million.

A property sale. Resulting in a realized write-off of about 19 million, which was previously reserved for through the recorded allowance for credit losses, and recognized a gap benefit from provision for credit losses of 3 million.

We now like to provide some color on the risk-rated 5 loans.

At September 30th. We had 3, such loans with a total upb of about 196 million.

A quarter end. We downgraded a 27 million loan collateralized by a hotel and fully leased retail pad in Tempe. Arizona, from a risk, rating of 4 to a rating of 5,

The property had been under contract with a hard deposit at a price. Well, in excess of our loan amount, however, that sale is now on hold and in combination with the property's performance, we felt it was prudent to change this rating.

During the third quarter, we had a partial resolution related to the 79 million. Chicago office loan with the sale of the Upper Floor Office Space.

while retaining the ground floor, retail

Working with our borrower and the new buyer, the zoning change of the upper floors to residential use was approved by the City of Chicago after a lengthy process.

The sale, resulted in net proceeds of 3.4 million, which we used to pay down the loan to about 76 million.

since the pandemic, the bulk of the value has been in the retail component and now with the sale of the Upper Floor office space, our remaining collateral is the ground floor retail on the Magnificent Mile

As a result of the office sale, the story is less complicated for potential buyers as we proceed towards the ultimate resolution which should occur over the next few quarters.

Following this sale, the loan was reclassified from office to retail.

Regarding the 93 million Minneapolis office loan as previously. Disclosed, we anticipate a longer resolution timeline given the persistent local market challenges.

We are seeing the beginnings of the long awaited return to office mandates in Minneapolis.

While it seems premature to call this a recovery. The trends are slowly moving in the right direction.

Resolving. These remaining 5 rated loans Remains the top priority.

Turning to the Rio assets, we continue to have positive leasing successes at the Suburban Boston property and remain actively engaged with our partner, the local jurisdiction, and other third parties on several value-enhancing repositioning opportunities.

We continue to invest invest Capital into this property to maximize the outcome.

The Miami beach beach. Office property is a class A asset located in a strong submarket

We are having positive leasing discussions with the variety of existing and new tenants will prudently invest in the property and continue to review resolution alternatives.

As we said in Prior quarters, our plan for 2025 has been to remain focused on loan and REO, resolution and maintaining higher levels of liquidity.

As a result, we expect that our portfolio balance will Trend lower in the near term most likely through the first half of 2026 at that point. We expect to return to our core lending, business and restart our origination efforts, and take advantage of attractive investment opportunities and begin to regrow our portfolio.

I will now turn the call over to Blake to discuss our financial results.

Thank you, Steve. Good morning, everyone. And thank you for joining us today. Turn to our financial results for the third quarter. We reported the Gap net loss by trimming it into a common stockholders of 0.6 million. Our negative 1 cent for basic common share, which includes the benefit from credit losses of 1.6 million, or positive 3 cents per basic. Common share mainly from a decrease, in our general Reserve due to more favorable macroeconomic forecasts. And our Cecil model relative to the prior quarter partially offset by a net increase in our specific reserve on our collateral dependent loans.

Distributable loss for the quarter with 18.9 million or -40 cents per basic common share including write-offs of 19.8 million.

or 42 cents per basic common share which were previously reserved for

write us for primarily related to the 1 non acral loan resolution that Steve discussed earlier.

Our book value is a September 30th with 7.94 cents per common, share a decline of 5 cents per share from Q2

Our aggregate C Reserve at September 30th was about 134 million as compared to 155 Million last quarter.

the 21 million decline in our Caesar Reserve was driven by 19.8 million of write-offs, largely relate to the 1 resolution

and the benefit from credit losses of 1.6 million.

Representing 44% of the unpaid principal balance.

We believe we are appropriately reserved for, and further resolutions should meaningfully reduce our total CECL reserve balance.

Turning to liquidity and capitalization, we ended the quarter with about $63 million in unrestricted cash, and our total leverage decreased slightly relative to the prior quarter, from 2.1 times to 1.9 times.

As of a few days ago, we cared about $80 million in cash.

Our funding mix remains well diversified and stable.

And we continue to have very constructive relationships with our financing counterparties as evidenced by the extension of our secured credit facility during the third quarter.

We expect to expand our financing capacity. Once we return to originating new loans,

I will now ask the operator to open the line for questions.

Thank you. We will now begin a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2. 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.

1 moment, please while we pull for questions.

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At this time, I'd like to pass a call to Jack.

Well, thank you for joining us today and we're diligently proceeding on our plans to resolve the assets and positioning for a regrowth in 2026.

We appreciate the efforts of our whole team and for your time and attention today. Thank you very much.

Today's teleconference, you may disconnect your lines at this time. Thank you for your participation.