Good afternoon. My name is Diageo, and I will be your conference facilitator. At this time, I would like to welcome everyone to Granite Point Mortgage Trust's Third Quarter 2023 Financial Results Conference Call. [Operator Instructions]. Please note today's call is being recorded. I will now like to turn over the call to 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 third quarter 2023 financial results. With me on the call this morning are Jack Taylor, our President and Chief Executive Officer; Marcin Urbaszek, our Chief Financial Officer; Steve Alpart, our Chief Investment Officer and Co-Head of Originations; Peter Morral, our Chief Development Officer and Co-Head of Originations; and Steve Plust, our Chief Operating Officer. After my introductory comments, Jack will provide a brief recap of market conditions and review our current business activities. Steve Alpart will discuss our portfolio; and Marcin will highlight key items from our financial results and capital utilization. The press release, financial tables and earning 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 a discussion of some of our risks that could affect results. We do not undertake any obligations to update any forward-looking statement. We 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 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. The continued strength of the U.S. economy supported by the strong labor market and consumer spending has surpassed many expectations, notwithstanding the dramatic rise in interest rates. Despite this positive economic backdrop, there remains a high degree of uncertainty about the macro economy and the commercial real estate market remains challenged. 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 sector. 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 across 77 investments and mostly middle market loans. In general, our borrowers remain supportive of their properties and continue to protect their investments. Although transaction volumes are down across 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. Since the beginning of the year, we have realized over 500 million in repayments, pay downs, and sales, many of which were from loans 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…

Thank you, Jack, and thank you all for joining our call this afternoon. I'll discuss our portfolio activity and will provide updates on our risk rated 5 loans and one REO 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 billion of future fundings, accounting for only about 5% of the total commitments. 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 realized portfolio yield for the third quarter was about 8.4% accounting for the impact of the non-accrual loans, 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 0.5 million. So far in the fourth quarter, we have funded approximately an additional 5.5 million on existing commitments. We continue to see liquidity in our 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. 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 quarters, though the exact timing and volume remain difficult to predict. Turning to credit, the office market remains challenged, but it is…

Thank you, Steve. Good afternoon, everyone, and thank you for joining us today. Yesterday afternoon, we reported our third quarter GAAP net loss of $24.5 million or $0.48 per basic share, which includes a provision for credit losses of $31 million or $0.60 per basic share, mainly related to certain risk rated five loans. Three loss distributable earnings for 3Q were $9.5 million or $0.18 per basic share and included about $1 million or $0.02 per share of onetime items related to one of our repayments in one new nonaccrual loan. Adjusting for those items, pre-loss DE for 3Q was largely in line with prior quarter and around our $0.20 common dividend as the portfolio run off was mostly offset by higher interest rates and lower expenses. Our distributable loss to common stockholders was $7.3 million or $0.14 per basic share and includes a write off of $16.8 million or $0.32 per share related to the transfer to held for sale of our risk rated five Dallas office loan, which was subsequently sold in October at our carrying value as of September 30th. 3Q was the 1st full quarter of operations for our Phoenix office REO 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 $0.65 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 CECL 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% last quarter. The increase in our CECL reserve was mainly related to specific funds on one new risk rated five loan and a couple of other five…

Thank you. [Operator Instructions] And our first question comes from Steve DeLaney with JMP Securities.

Look, in a challenging credit market, it's nice to see the convert getting cleaned up and just further improves your balance sheet. So glad 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?

Hey Steve, good morning. It's Steve Alpart. Thank you for joining the call. This is a resolution we've been working on. As we said on the call, in the past, the building's physical and locational attributes make it well suited for conversion to other uses. We talked about hotel, residential, mixed use. And as we also mentioned on the call, 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. 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 few months.

It sounds like the buyer is a property operator, a real estate professional and not just a debt fun. In other words, they're working with you, looking at this property because they have a vision of what it might become. Is that accurate way to track the property?

Yes, that is accurate. It's a buyer who would like to own the property convert it into another use.

In that transaction, maybe you can't comment on this right now, but let me put it hypothetical. When you sell a property that's a 5 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 and let that individual find their own financing? Just given the fact that it is on your books as a problem asset now. I'm curious how you guys 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 Granite Point to facilitate a sale to provide stable financing as we refer to it. Whether we do that or not we'll be very case specific. We did not do that for example on the Dallas asset that was an all-cash sale. In other cases, we have provided stable financing, so I would Steve, it's something in the toolkit that we'll look at case by case.

[Operator Instructions] Our next question comes from Jade Rahmani with KBW.

Wanted to ask you about multifamily. Just looking at the locations, it doesn't jump out at me as Granite Point having significant exposure to some of the markets that are under a lot of pressure with respect to where new leases are heading. In places like Phoenix and Austin, we've seen down 9%, 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 multifamily book?

So, the multifamily 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 multifamily properties, which I would generally classify as Class A and Class B properties. There are a lot of markets as I think you've noted with concentration not only, but a concentration in the Southeast and Southwest. The business plans here typically involve a renovation, a 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 deceleration in rental growth rates that 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. 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 as rent bumps keeping occupancies pretty strong. And I would just point out that we did not originate a lot of loans at the peak of the market in 2021, 2022. We did not underwrite a lot of rent growth. We just mainly underwrote that a borrower could push rents to the level of the property next store. 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. 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 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 1 or 2 turns of the rent roll to get to stabilization. But we feel generally good about these loans and we are seeing generally good demand just given home affordability. So, I guess overall we're positive on the fundamentals in the sector as we look out the next 12 to 18 months. And we haven't seen any general signs of weakness so far.

That's good to hear. Sounds like multifamily is not a cause of concern for you all right now. 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 use loan. Can you give some color on what's going on there? And then I also see a few that are 2015, 2016, 2017 originations. Just making some assumptions for maximum term, these loans should have matured already. So it'd be helpful to get an update on at least a few of the larger ones?

So, in terms of some of the older loans. In many of those cases, those were loans that we made over 5 years ago and at some point a couple of years into the loan, things were going in a good direction, a borrower had an opportunity to potentially upsize the loan or get cheaper cost of capital and they would come to us, good sponsor and we would do an offensive loan modification where we would intentionally want to keep the loan on longer or we might give more term. And we found those to be kind of win, win loan mods and what we refer to as offensive loan mod. So that's what a lot of those older loans are. You mentioned specifically about New York mixed use 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 1 to a 4. 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 of the older vintage?

We have a property in Baton Rouge. It's a high-quality open-air center, where the sponsor as we speak as working on a property sale.

You might want to add a column for 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 past due. So, it would be helpful to see that.

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 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.