Granite Point Mortgage Trust NYSE: GPMT reported a second-quarter GAAP net loss attributable to common stockholders of $62 million, or $1.29 per basic common share, as the commercial real estate lender increased credit-loss reserves and recorded an impairment on real estate owned assets.
The company said the quarterly loss included a $47 million provision for credit losses, a $6.1 million impairment loss on REO, and a distributable loss of $37.7 million, or $0.79 per basic common share. Book value declined to $5.70 per share as of June 30, down $1.35 from the prior quarter.
President and Chief Executive Officer Jack Taylor said commercial real estate credit conditions continued to improve during the quarter, though geopolitical developments tied to the Iran war, energy prices and tariffs increased uncertainty around inflation and interest-rate expectations. While potential rate hikes could pressure property values, Taylor said capital has continued flowing into commercial real estate and lending spreads have tightened.
Reserves Increase as Company Focuses on Legacy Loans
Granite Point’s aggregate current expected credit loss, or CECL, reserve totaled approximately $166 million at quarter-end, up about $17 million from the first quarter. Chief Financial Officer Blake Johnson said the increase included a $10 million rise in specific reserves, largely related to one newly risk-rated five loan, partially offset by a write-off tied to a loan resolution. General reserves increased $7 million because of downgraded macroeconomic forecasts in the company’s CECL model and changes in loan attributes.
About 78% of the company’s allowance was allocated to individually assessed loans. Granite Point had approximately $253 million of principal balances on risk-rated five loans at June 30, with specific CECL reserves of about $120 million, or 47.4% of those loans’ unpaid principal balance.
“We believe we are appropriately reserved and further resolutions should meaningfully reduce our total CECL reserve balance,” Johnson said.
The company completed roughly $160 million of loan repayments, resolutions, paydowns, amortization and participation-interest sales during the quarter. Activities included repayment of a $37 million office loan in Richmond, Virginia; the sale of $31 million in debt interests secured by a Dallas office property; and final resolution of a $76 million Chicago retail loan through a property sale.
Those transactions, partially offset by about $8 million in future fundings and other investments, resulted in a net loan portfolio reduction of about $122 million during the quarter.
Portfolio and Resolution Activity
Granite Point ended the quarter with $1.5 billion in total loan portfolio commitments, including $1.4 billion of outstanding principal balance and approximately $57 million of future fundings. The portfolio contained 38 investments, with an average unpaid principal balance of about $37 million and a weighted-average stabilized loan-to-value ratio at origination of 66%.
The portfolio’s weighted-average risk rating remained 3.2 from the previous quarter. Realized portfolio yield was 6% in the second quarter, or 7.4% excluding non-accrual loans, according to Chief Investment Officer and Co-Head of Originations Stephen Alpart.
Granite Point had five risk-rated five loans totaling about $253 million at quarter-end, three of which were in active sale processes that the company expects could be completed in coming quarters. During the quarter, it downgraded a $65 million loan secured by a 384,000-square-foot office property in San Diego’s central business district from a four to a five rating.
Alpart said the property had been acquired for a hotel redevelopment strategy, potentially including residential and retail components. The borrower and hotel brand had made significant equity investments, but the sponsor indicated that rising construction and financing costs could make the original plan difficult to complete. Granite Point is discussing potential resolution alternatives with the borrower.
The company also said an Atlanta multifamily property securing one of its loans was under contract with a hard deposit and a targeted near-term closing. It expects a $15 million New Haven hotel loan to be resolved through a borrower-led property sale over the next couple of quarters. Granite Point is working with ownership of a $93 million Minneapolis office loan to take the property back as REO in the nearer term.
At quarter-end, Granite Point also had two non-accrual loans with a combined unpaid principal balance of $68 million that were risk-rated four.
REO Sales and Financing Actions
The company said it continued to see leasing momentum at its suburban Boston REO property. Its Miami Beach office property, a Class A asset, was moved to held-for-sale status and is now under contract for sale, according to Alpart. Granite Point is targeting a sale during the second half of 2026.
Liquidity totaled approximately $58 million of unrestricted cash at June 30, while total leverage was 1.9 times. Johnson said cash was approximately $35.7 million a few days before the earnings call, reflecting reduced borrowings under the company’s CLO refinancing, facility fees, REO spending, future fundings and dividend payments.
During the quarter, Granite Point extended its Citibank and Morgan Stanley repurchase facilities by about one year and extended a secured credit facility through December 2027, while reducing that facility’s cost of funds by 25 basis points.
After quarter-end, Granite Point refinanced assets from its two legacy CLOs through an expanded and extended JPMorgan repurchase facility. The transaction reduced the cost of funds on those assets to SOFR plus 200 basis points from SOFR plus 238 basis points. The company expects the 38-basis-point reduction to lower annualized interest expense by about $2 million, based on the June 30 CLO outstanding balance of $521 million.
Taylor said management and the board believe the company’s market valuation does not fully reflect the underlying value of its assets. Granite Point plans to prioritize legacy-loan resolutions, reduction of higher-cost debt, balance-sheet flexibility and eventual redeployment of capital into new investments. The company expects its portfolio balance to trend lower until it resumes originations.
About Granite Point Mortgage Trust (NYSE:GPMT)
Granite Point Mortgage Trust, Inc is a specialty finance company that invests directly in commercial real estate debt. The company focuses on originating, acquiring and managing senior preferred and mezzanine loans secured by income-producing real estate across diverse property types, including multifamily, office, industrial and retail assets. Granite Point Mortgage Trust operates as a real estate investment trust (REIT), providing investors with exposure to floating-rate commercial mortgage loan investments.
Granite Point's investment strategy centers on structuring loans to deliver attractive risk-adjusted returns, with portfolio allocations spanning senior loans, B-notes and mezzanine financings.
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