Good morning. My name is Paul, and I will be your conference facilitator. At this time, I would like to welcome everyone to the Granite Point Mortgage Trust First Quarter 2024 Financial Results Conference Call. Please note today's call is being recorded. I would now like to turn the call over 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 First Quarter 2024 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 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 a discussion of some risks that could affect our results. We do not undertake any obligation to update any forward-looking statements. We will also refer to non-GAAP measures on this call. This information is not intended to be considered in isolation or as a substitute to 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 First Quarter 2024 Earnings Call. The first few months of 2024 have resulted in diverging trends with the ongoing strength of the overall economy and a healthy rebound in the equity and fixed income markets, while the commercial real estate sector continues to be pressured by high interest rates, deeply suppressed transaction volumes, some fundamental shifts such as the work-from-home trends, and higher costs such as materials and labor impacting properties that require some level of capital expenditure. The year began with a more upbeat sentiment in the commercial real estate market, fueled by expectations of 6 to 7 interest rate cuts by the Fed over the course of 2024 and an anticipated rebound in real estate transaction activity, which, along with pent-up capital demand, contributed to a tightening of credit spreads and a strong pickup in CMBS issuance. However, since then, higher-than-expected inflation readings and stronger employment reports have lowered the consensus estimates for interest rate cuts to a hope for 1 to 2 cuts by year-end, resulting in higher interest rates across the curve and uncertainty and sentiment in the commercial real estate markets notably worsening in the past several weeks. We believe that the path of interest rates will continue to be the main factor affecting the activity in and the performance of the commercial real estate floating rate loan market in the near to medium term. We expect the prolonged elevated rates will further impact the real estate market in the near-term by continuing to suppress transaction activity and property values and by putting more pressure on certain borrowers who may be reluctant to support their properties, especially those with additional capital needs in more challenged markets and may instead choose to sell the properties rather than continue to wait for a lower cost of capital. While we are seeing this in the market and in our portfolio, we want to note that most of our borrowers are continuing to support their properties. However, driven by some of these dynamics and the change in sentiment within the commercial real estate market, we lowered the risk ratings on several of our loans and increased our CECL reserves to reflect the market uncertainty and ongoing pressure on property values. Our GAAP results include additional credit loss provisions, mainly related to the risk-rated 5 loans, which increased our overall first quarter CECL reserve to 7.5% of total commitments from about 4.7% last quarter. Our 5 rated loans are in various stages of their respective resolutions with some expected to occur in the nearer term, while the timelines of others may extend longer. Although we see lending activity as currently subdued, we anticipate that improving market liquidity and opportunistic capital actively looking for investments should help drive our non-performing loan resolutions over the course of this year, though timing remains difficult to predict. We have visibility on resolutions for most of our risk-rated 5 loans, which may occur over the next several quarters. We believe we could resolve some $150 million to $200 million of these loans in the near term. Most of the credit impact on our portfolio is driven to varying degrees by the office exposure, including on some, where the overall value of the property may currently be mainly concentrated in retail or multifamily with an underperforming office component. While office leasing remains slow, we have seen some improvement in office leasing activity in select markets. Multifamily fundamentals remain generally favorable. However, we have seen some pressure on property values in this sector, resulting from higher interest rates and higher cap rates. While there is meaningful liquidity in the apartment market, even properties with strong cash flow are not immune from the effects of higher rates, and we are likely to realize modest losses on select multifamily loan resolutions, where sponsors have decided to transact in the near term. That said, we do not anticipate these select multifamily credit events to be very material in the context of our portfolio. We remain highly focused on our asset management activities and moving through this credit cycle while maximizing economic outcomes for the business and our shareholders. We believe that the process of repositioning our portfolio, even though it results in additional credit reserves and associated losses, will position us to return to our core business of lending so we can grow the portfolio and improve our run rate profitability over time and support our total shareholder returns. Our strategy for this year reflects our ongoing conservative approach to the market with an emphasis on maintaining higher liquidity and proactively managing our portfolio to protect our balance sheet. We benefit from our team's decades of experience successfully managing through various real estate cycles and market volatility. Over the course of the last couple of years, we have materially reduced our leverage through paying off corporate debt and deleveraging our loan portfolio, modified and resolved many loans and realized healthy prepayment levels. We firmly believe that during challenging periods, emphasizing balance sheet stability is the prudent and effective strategy to navigate market uncertainty and to reposition the business for future growth opportunities, even though such steps pressure the company's returns on profitability in the near-term. Recent market consensus points to the bottoming of the property value declines. While the future path of macro trends remains uncertain and fundamentals across property types continue to be uneven and the timing of interest rate cuts will drive the path of recovery for commercial real estate. We agree that once there is more visibility on the cost of capital in the market, the sentiment and activity should improve significantly, particularly later in the year, all of which will be aided by the large amounts of capital currently available on the sidelines. We will continue working with our borrowers to facilitate repayments and resolutions of our risk-rated 5 loans. Given their material effect on our current returns, we believe that these actions over time will help improve our run rate profitability while positioning us to take advantage of attractive investment opportunities in the future. 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 call this morning. We ended the first quarter with total portfolio commitments of $2.8 billion and an outstanding principal balance of about $2.7 billion, with about $134 million of future fundings, which account for only about 5% of total commitments. Our portfolio remains well diversified across regions and property types and includes 71 loan investments with an average size of about $38 million and a weighted average stabilized LTV at origination of 63.5%. Our realized portfolio yield for the first quarter was about 7.7%, net of the impact of the non-accrual loans, which we estimate to be about 175 basis points for the first 3 months of the year. During the first quarter, we funded about $17 million of existing loan commitments and upsizes and realized about $35 million of loan repayments and paydowns. So far in the second quarter, we have funded about $3 million of existing loan commitments and realized about $13 million in loan paydowns. Given the macro uncertainty, high interest rates and a meaningful shift in market sentiment, particularly over the last few weeks, we anticipate our volume of loan repayments to be lower than the $725 million we realized during 2023. We expect our portfolio balance to trend lower in the coming quarters as we maintain our conservative stance and continue to prioritize maintaining higher levels of liquidity and working diligently to resolve our risk-rated 5 loans. The change in market sentiment, expectations for higher cost of capital and lower property value that Jack just discussed has contributed to the risk rating downgrades of certain of our loans and higher provisions for credit losses during the quarter. During Q1, we downgraded 5 loans to a risk rating of 5, which we will briefly highlight. The first is a $94 million mixed-use office and retail loan in New York City, where the sponsor had been pursuing a recapitalization plan, potential joint venture with a new partner or a sale of the property. The recapitalization did not materialize, and over the course of the quarter, the sponsor made the decision to instead sell the building. The sale process is in its early stages and we are in active discussions with the borrower about next steps. The next one is a $26 million office loan in the Boston CBD, where the property has been impacted by challenging office leasing dynamics and low liquidity in the office sector. The sponsor has been exploring a potential residential conversion opportunity for the property. They may also choose to list it for sale in the near term, and we are working with them on potential resolution options. The remaining 3 include a $51 million mixed-use, multifamily event space office loan in Pittsburgh, a $34 million multifamily loan in Chicago and a $12 million multifamily loan in Milwaukee. The borrowers on these 3 loans have been conducting sales processes for their properties to repay our loans. The recent interest rate and capital markets environment has resulted in an expectation that the ultimate sale proceeds on all 3 will likely come in below our loan amounts, which in turn resulted in our impairment assessments as of March 31. In addition, during the first quarter, we also downgraded 3 other office loans with an aggregate UPB of about $90 million to a risk rating of 4 as the collateral properties have been impacted to varying degrees by office leasing challenges and reduced liquidity for office properties generally. The risk rating downgrades, which were partially offset by several upgrades to loans where the business plan has been achieved, resulted in our portfolio weighted-average risk rating modestly increasing to 3.0 as of March 31, compared to 2.8 in the prior period. With respect to our other risk-rated 5 loans, most of them are in various stages of their respective resolution processes, which remain ongoing. The mixed-use retail and office property collateralizing our $84 million loan in Baton Rouge, Louisiana is in a sales process and though the ultimate timing and outcome remain hard to predict in this market, we hope to reach a potential resolution in the coming months or quarters. Similarly, the office property with a retail component that secures our $81 million loan in Chicago is also in the process of being sold, which could happen in the intermediate term. The sale process for the Minneapolis hotel securing our $28 million loan remains ongoing and may take some time given the local market dynamics. We are in discussions with the sponsor on the $37 million L.A. mixed-use office and retail loan as they are evaluating various leasing opportunities for the property. We are actively managing our 1 REO office asset in Phoenix, while also marketing it for a potential sale later this year. The office property securing our $36 million, 4 risk-rated loan in Massachusetts is likely to be transferred to REO in the coming months through a negotiated deed in lieu. The asset has positive cash flow, and we intend to maximize the value of the asset over time. Despite the low real estate transaction volumes overall, there is some increased liquidity in the market as buyers believe we're getting close to the bottom in valuations, have capital to deploy and are beginning to invest in the long-term recovery. Our strategies for these loans are likely to include property sales, sometimes with staple financing from Granite Point, loan sales, discounted payoffs, loan restructurings and select transfers to REO, where we see potential for medium-term value upside, all with the goal of maximizing economic outcomes for the company. Timing is hard to predict in this type of market, but given the current macro backdrop and ongoing discussions with our borrowers, we believe we could resolve many of these assets by the end of 2024 with some potentially taking longer to resolve, given more challenging local market dynamics. Our goal is to balance the timing of resolutions, realized losses and improving the company's run rate profitability by repaying higher cost financing and/or returning some of these assets to accrual status on a de-levered basis with new equity sponsors supporting the properties. Despite the headwinds impacting the loans we've just discussed, we remain pleased that most of our high-quality institutional sponsors continue to support their properties and are progressing on their business plans. While we have a lot of work to do, we look forward to resolving our 5-rated loans, an REO asset, and returning to our core business as soon as possible. I will now turn the call over to Marcin for a more detailed review of our financial results and capitalization.

Thank you, Steve. Good morning, everyone, and thank you for joining us today. Yesterday afternoon, we reported a first quarter GAAP net loss of $77.7 million or $1.53 per basic share, which includes a provision for credit losses of $75.6 million or $1.49 per basic share, mainly related to certain risk-rated 5 loans. Distributable earnings for the quarter were $1.3 million or $0.03 per basic share and were mainly impacted by non-accrual loans, which pressured interest income by approximately $12 million or $0.24 per basic share. Our book value at March 31 was $11.14 per common share, a decline of about $1.77 per share from Q4, which was primarily due to the loan loss provision mentioned earlier. Our CECL reserve at quarter end was about $213 million or $4.17 per share, representing 7.5% of our portfolio commitments as compared to $137 million or 4.7% of total commitments last quarter. The change in our CECL reserve was mainly related to the additional provisions on loans that were newly risk-rated 5 this quarter. Our general reserve increased by about $12 million in Q1 due to macro assumptions, expectations for ongoing challenges in the commercial real estate market and pressure on property values. Over 70% of our total CECL reserve or $155 million is allocated to select individually assessed loans, which implies an average estimated loss severity of about 29% of those assets. As of quarter end, we had about $690 million of loans on non-accrual status, most of which are in various stages of resolutions. The additional 5 loans that were placed on non-accrual as of March 31 accounted for about $4 million of interest income realized during the first quarter. Given the impact our non-performing loans have on the company's run rate profitability, we anticipate our earnings to be below our dividend in the near term. As we make progress on resolving these assets, we believe the company's profitability should improve over time, though the exact timing remains difficult to predict in this uncertain market. Turning to liquidity and capitalization, we ended the quarter with over $155 million of unrestricted cash, and our total leverage modestly increased to 2.3x in Q1 compared to 2.1x in Q4, mainly due to a lower equity balance impacted by the higher CECL reserves. Our funding mix remains well balanced, and we enjoy continued support from our lenders, highlighting our long-standing relationships in the market. As of a few days ago, we got about $130 million in cash. I would like to thank you again for joining us today, and we will now open the call for questions.

Steve, I wanted to revisit something you mentioned regarding Pittsburgh, Chicago, and Milwaukee, specifically about the three new mixed-use projects. The number increased from three to five during the quarter. Can you provide more details on that? Was there a plan to defend and acquire caps that changed when rates shifted, leading to the double downgrades during the quarter?

Sure. Steve, thanks for joining our call this morning. Yes, these two loans had some similarities. They both had good sponsors and were well progressed on their business plans, with the properties at or near stabilization. Each is currently involved in active bidding and sales processes, with the Milwaukee deal further along. However, as bids started coming in, they appeared to be below the loan amount, which was a bit disappointing. The investment sales market for the Chicago asset has been somewhat weak. The Milwaukee property is mainly multifamily with some ground floor retail and is partially leased. That’s why we adjusted it to a 5, mainly because we expect the bids to come in below the loan amount. We wouldn’t want to make overly broad conclusions from these loans. Overall, we feel comfortable with the fundamentals of our multifamily loans, but this situation reflects our concerns about the bidding outcomes.

Appreciate that. And then, Marcin, I wanted to follow up on the comments on CECL, and I believe Steve may have also mentioned, you don't expect significant losses on the multi where you do take them, but roughly 30% reserve level as far as specific reserves on those 5-rated loans. Could you maybe bifurcate that? How do you allocate that to the specific reserve as a percentage of the office loans versus the remaining specific reserves against the non-office component?

Sure. Stephen, thanks for joining us. Yes, I would say it really varies by loan, but I think generally, office impairments are higher than multifamily. It's hard to get to specifics on particular assets, but I would say the majority of the reserve on the specific reserve is related to office issues and meaningfully less on the multifamily.

Just given the starting point of earnings this quarter, plus the incremental drag from non-accruals, can you talk about your commitment to paying the dividend or how you would think about instead using that cash to buy back stock, which would be clearly more accretive?

Thank you for joining us. Doug, regarding the dividend, both we and the board assess it over a long-term perspective in relation to our profitability. As we mentioned when we reduced the dividend for the first quarter, there will be some pressure on earnings as we address these assets. The timing of resolutions is uncertain, but we believe these outcomes could significantly influence our profitability. From our standpoint, it's more a question of when it will happen rather than if. However, timing remains challenging to forecast. As noted in our prepared remarks, we anticipate that many of these assets could be resolved by the end of the year. We review all of this every quarter with our Board as we evaluate the dividend, making it a continuous process.

And Doug, I would like to add that regarding stock buybacks, we typically do not provide guidance on this matter. However, we have been fairly opportunistic throughout 2023, having purchased about 2 million common shares so far. We believe our stock price offers a valuable opportunity for investors, considering our business fundamentals and the potential for repurchases at current valuations being quite beneficial. Nonetheless, I want to emphasize that our top priority right now is to maintain liquidity while we address the non-accrual loans.

I guess just on that, what would be your comfort of being able to transact on some of those non-accrual loans in the short term at or close to the current marks and being able to use that liquidity to buy back stock?

Well, it is a complex question because it's an ever dynamic market. We think that, as we said $150 million to $200 million is nearer term visibility, call it the next 2 quarters on things. We have visibility 8 out of the 10 5s are in a process of resolution and sales process, in particular. But the $150 million to $200 million seems riper or nearer in stage. And so we would have to assess at the time of those resolutions, what our position is with respect to liquidity and earnings potential and the like at that time. So I couldn't say it right now.

Can you hear me, everyone?

Yes.

It's great to be here this morning. Recently, we've noticed that both TRTX and CMTG have been able to sell loans instead of opting for real estate owned (REO) properties. Richard Mack provided some positive insights on this yesterday, highlighting the interest in opportunistic investments, particularly around a loan-to-own strategy. I'm curious if you're exploring similar opportunities and engaging in discussions with potential loan buyers. How do you view the possibility of accepting a clean loss instead of going through the lengthy REO process? I appreciate your thoughts on this.

Well, I'll make a quick comment, Steve, which is, we've done it in the past, we're able to do it in the future. Steve, you've looked at me like you wanted to answer, so, go ahead, please.

No, we have a number of resolution strategies that you've heard us discuss regularly. For many of the loans we've mentioned, we are working cooperatively with a good borrower to sell the property by the end of the year. Generally, we believe selling the property yields a better price than selling the loan, although both methods are effective. Last quarter, we conducted a loan sale. In some cases, we are marketing the property while simultaneously managing a deed in lieu or foreclosure process, or both. This way, we can act quickly when a buyer is ready. If the bid price is not acceptable or if we feel the need to take ownership of the property for various reasons, as we did with the Phoenix office deal, we'll take title and manage the property to maximize value in the short to medium term. Our intent is not to hold these assets long term, and we will then sell the property. Each situation is unique, and many of them currently involve working directly with the borrower to sell the property, which we believe generally results in the best bid.

Got it. And when you're working with those borrowers to find a new buyer or a new capital infusion, is it usually with the understanding that your existing loan will remain in place to benefit the new buyer and the new equity?

It can be the existing loan, but I would say more often, we're going to provide, and we don't do it in every case, but if we need to, certainly on an office sale today, it's probably likely that we're going to need to provide staple financing, at least in the short to medium term. It's more likely if we are providing financing case-by-case that we would be providing a new loan at a reset basis as opposed to a buyer just assuming a loan. There are ways to do that, but more often than not, it's going to be what we refer to as staple financing, providing a new loan to a new buyer at a reset basis.

Thank you very much. This quarter has been quite different for the banks and the commercial mortgage REITs, with the banks showing some improvement in commercial real estate credit performance. It seems they are modifying and extending loans, and their liabilities are facing less pressure as rates have been more stable compared to a year ago, despite some volatility. In contrast, the commercial mortgage REITs have experienced significant losses. This raises the question of whether the main pressure is coming from the asset side or the liability side, and I would appreciate your thoughts on this.

I'll begin by saying that I think it's both sides. Generally, banks have lent at a lower advance rate compared to non-bank lenders. Therefore, you would expect a difference, with non-bank lenders operating at a higher advance rate. Although there is a low advance rate, which we refer to from the bond world as positive convexity on credit, this has worked well in many situations but not in the current environment. The loans are intended to enhance the assets using the capital from the loan, and borrowers are expected to improve their credit over time. However, the combination of the pandemic and significantly high interest rates has made this more challenging than in several instances. So, I believe this holds true on the asset side. On the liability side, in our case, along with many of our peers, we have stable and broadly diverse financing facilities that have supported our leverage. However, banks have deposits, which provide a lower cost of capital to operate with. This is likely why we are observing these trends.

Do you believe that if GPMT were part of a larger investment management firm with access to various capital sources, which could enhance liquidity, it would improve credit outcomes? You noted that selling properties typically yields better results than selling loans. Could you elaborate on that? Regarding better results, sometimes the optimal approach is to sell a loan, while other times, if you have a cooperative borrower, taking over the property and selling it—possibly through a simultaneous sale in a deed in lieu arrangement—can lead to better outcomes. I don't consider that primarily a liquidity issue compared to what you mentioned about banks having deposit bases. It's really a case-by-case decision between selling a loan and selling equity. Often, but not always, a buyer of the note wants to acquire it at a discount compared to their valuation of the property, which I believe Steve was referring to with his comment.

Thank you. We appreciate all of our investors' support and the team's effort in navigating this extraordinarily challenging market, and we look forward to speaking with you next time. Thank you very much.

This concludes today's conference. You may disconnect your lines at this time.