Granite Point Mortgage Trust Inc. Navigates Challenges in Q1 2025 with Strategic Resolutions and Share Repurchases

Granite Point Mortgage Trust Inc. (NYSE: GPMT), a non-Agency commercial mortgage REIT, reported its Q1 2025 financial results, revealing a mixed performance amid ongoing efforts to de-risk its portfolio and stabilize shareholder value. While the quarter brought a net loss and challenges in resolving non-performing assets, the company demonstrated resilience through strategic loan resolutions, disciplined capital allocation, and liquidity preservation. Below is an in-depth analysis of its results and post-quarter developments.

Financial Performance: A Focus on Core Earnings and Liquidity

Granite Point reported a GAAP net loss of $10.6 million ($0.22 per share) for Q1 2025, driven by provisions for credit losses and write-offs tied to high-risk loans. However, its Distributable Earnings (Loss) Before Realized Gains/Losses narrowed to $(3.0 million) ($0.06 per share), highlighting progress in managing operational losses excluding one-time impairments.

The company’s book value per share stood at $8.24 as of March 31, 2025, supported by a robust liquidity position of $85.7 million in unrestricted cash, rising to $86.3 million by May 5. This stability was bolstered by extending repurchase facility maturities by ~1 year, reducing near-term refinancing risks.

Asset Management: Aggressive Loan Resolution and Portfolio De-Risking

The quarter saw $230 million in risk-rated 5 loans (high-risk, non-performing assets) resolved, with two additional resolutions expected imminently. Notable write-offs included:
- $7.9 million on a Miami Beach office property (taken as REO).
- $16.6 million from a Boston office loan sale.
- Post-quarter, a $15.4 million write-off on a Minneapolis hotel loan and $21.5 million on a Baton Rouge mixed-use property were finalized.

These actions reduced the total outstanding risk-rated 5 loans to $3.0 million, signaling progress in stabilizing the portfolio. Meanwhile, $107 million in repayments (including $32.1 million in Q2) further de-risked the balance sheet.

Granite Point’s portfolio remains 98% floating-rate loans, with a weighted average LTV of 64.5%, reflecting conservative underwriting. The CECL reserve of $180.2 million (8.8% of total loans) provides a buffer against further credit losses.

Dividend Trends and Capital Allocation: Balancing Returns and Liquidity

Despite the net loss, Granite Point maintained its $0.05 per share quarterly dividend for common stock, emphasizing confidence in run-rate earnings and book value stability. The Series A preferred stock dividend of $0.4375 per share was also upheld.

The company prioritized share repurchases, buying back 0.9 million shares in Q1 at an average price of $2.84, adding $0.10 accretion to book value per share. Year-to-date repurchases totaled 1.7 million shares, underscoring management’s belief in the stock’s undervaluation.

Post-Quarter Updates: Liquidity and Strategic Momentum

• Liquidity: By May 5, unrestricted cash rose to $86.3 million, with no corporate debt maturities on the horizon.
• Loan Activity: $3.0 million in new draws and $32.1 million in additional repayments were realized in Q2.
• Risk Management: No new loans were rated 4 or 5 in Q1, and the weighted average risk rating of 3.0 reflects improving credit quality.

Strategic Priorities and Risks

Granite Point’s roadmap includes:
1. Portfolio De-Risking: Resolving remaining risk-rated 5 loans and prioritizing office and hotel loan repayments.
2. Liquidity Optimization: Maintaining cash reserves and extending debt maturities.
3. Shareholder Returns: Balancing dividends with repurchases to capitalize on undervaluation.

Key Risks:
- Real estate market volatility, particularly in office and hospitality sectors.
- Interest rate sensitivity, though mitigated by floating-rate loans.
- Credit losses exceeding reserves, though write-offs to date align with provisions.

Conclusion: A Resilient Play in a Challenging Sector

Granite Point’s Q1 2025 results underscore its ability to navigate a challenging commercial real estate environment. While the net loss and distributable earnings contraction are concerning, the aggressive resolution of non-performing assets and robust liquidity position provide a foundation for stabilization.

With $86.3 million in cash, a 2.2x leverage ratio, and a disciplined capital return strategy, Granite Point is well-positioned to capitalize on improving credit metrics and rising interest rate benefits (via floating-rate loans). Share repurchases and dividends, while modest, reflect management’s confidence in the company’s long-term trajectory.

Investors should monitor loan repayment trends and CECL reserve adequacy, but the current valuation—trading at ~1.0x book value—suggests a potential undervaluation. For those willing to tolerate near-term volatility, GPMT offers exposure to a REIT with improving fundamentals and a defensive balance sheet.

In summary, Granite Point’s Q1 results highlight progress in de-risking its portfolio, positioning it to emerge stronger as the commercial real estate market stabilizes.

Data as of May 5, 2025. Past performance does not guarantee future results.