Weekly Real Estate News
Summary
Granite Point Mortgage Trust posted a $60.3 million third-quarter common-shareholder loss, resolved several troubled commercial-property loans and reported $185.9 million in credit-loss reserves while continuing a board strategic review.
Granite Point Mortgage Trust’s latest quarterly results show how much work remains in resolving troubled commercial-property loans, even after the lender cleared several problem credits and refinanced portions of its own debt.
The New York-based commercial mortgage REIT reported a $60.3 million third-quarter loss attributable to common shareholders, compared with a loss of about $565,000 a year earlier. The figures appeared in its November 4 earnings release filed with the Securities and Exchange Commission. A $45.4 million provision for credit losses weighed on the quarter.
Loan resolutions bring cash, but reserves remain high
Granite Point said it resolved two loans carrying its most severe internal risk rating and received full repayment on two office-backed loans. Among the reported transactions were resolutions involving a $52.4 million multifamily loan in Stockbridge, Georgia, and a $14.7 million hotel loan in New Haven, Connecticut. The company also received repayment on office loans secured by properties in Cincinnati, Ohio, and Valencia, California.
The combined activity reduced unpaid principal balance by a net $81.7 million during the quarter, after accounting for $7.9 million in fundings. A smaller loan book can reduce exposure to additional losses, but it can also shrink interest-earning assets. The company reported net interest income of only $416,000, compared with $10.3 million in the year-earlier quarter.
Granite Point’s allowance for expected credit losses stood at $185.9 million, equivalent to 13.7% of total loan commitments. Its $1.4 billion portfolio consisted entirely of senior loans and was 97% floating-rate at quarter-end. The lender also held two real-estate-owned assets with an aggregate reported carrying value of $88.5 million.
Funding changes and strategic review
The company extended and expanded its JPMorgan financing facility, refinanced two legacy collateralized loan obligations and moved assets from Citibank and Morgan Stanley repurchase facilities to JPMorgan financing. Management said these steps lowered funding costs and improved flexibility. The precise benefit will depend on future borrowing balances, collateral values and financing terms.
Granite Point ended September with $44.7 million in unrestricted cash and a reported total leverage ratio of 1.9 times. Its unrestricted cash declined to approximately $38.8 million as of November 2, according to the company.
Separately, the board’s previously disclosed review of strategic alternatives remains underway. That is a review, not an announced sale or completed transaction. Granite Point also implemented a one-for-ten reverse stock split on October 5, an action previously covered by WRE News.
What the results say about commercial mortgage distress
The quarter illustrates the difference between successfully working out individual troubled loans and restoring a lender’s overall earnings. The repayment and resolution activity was substantial, but credit-loss reserves remained elevated and the company reported a significant GAAP loss.
Granite Point also reported a non-GAAP distributable loss of $33.7 million. That measure excludes or adjusts certain accounting items and should not be confused with cash available for dividends or with GAAP net income. The company declared a $0.10-per-share common dividend for the quarter.
For commercial-property borrowers and investors, the next developments to watch are additional repayments, sales of lender-owned real estate, any further credit reserve changes and the outcome of the board’s strategic review. Management has not announced a definitive transaction arising from that review.
