Investor Presentation Third Quarter 2017
Safe Harbor Statement FORWARD LOOKING STATEMENTS This presentation includes “forward - looking statements” within the meaning of the safe harbor provisions of the United States Pr ivate Securities Litigation Reform Act of 1995. Actual results of Granite Point Mortgage Trust Inc. (“Granite Point,” “we,” “us” or “our”) may differ from expectations, estimates and projections and, consequently, readers should not rely on these forward-looking statements as predictions of future events. Wor ds such as “expect,” “target,” “assume,” “estimate,” “project,” “budget,” “forecast,” “anticipate,” “intend,” “plan,” “goal,” “may,” “future,” “likely,” “wi ll, ” “could,” “should,” “believe,” “predict,” “potential,” “continue” and similar expressions or their negative forms are intended to identify such forward -looking statements. These forward-looking statements involve significant risks and uncertainties that could cause actual results to differ materially from expected results, including, among other things, those described in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2017, and any subsequent Quarterly Reports on Form 10-Q, under the caption “Risk Factors.” Factors that could cause actual results to differ include, but are not limited to : the timing of cash flows, if any, from our investments; the state of the U.S. economy generally or in specific geographic regions; defaults by borrowers in paying debt service on outstanding items and borrowers' abilities to manage and stabilize properties; actions and initiatives of the U.S. Government and changes to U.S. Government policies; our ability to obtain financing arrangements on terms favorable to us or at all; financing and advance rates for our target investments; our expected leverage; general volatility of the securities markets in which we invest; the return or impact of current or future investments; allocation of investment opportunities to us by our Manager; changes in interest rates and the market value of our investments; effects of hedging instruments on our target investments; rates of default or decreased recovery rates on our target investments; the degree to which our hedging strategies may or may not protect us from interest rate volatility; changes in governmental regulations, tax law and rates, and similar matters; our ability to maintain our qualification as a REIT for U.S. federal income tax purposes; availability of investment opportunities in mortgage-related and real estate-related investments and securities; our ability to locate suitable investments, and monitor, service and administer our investments and execute our investment strategy; availability of qualified personnel; estimates relating to our ability to make distributions to our stockholders in the future; our understanding of our competition; and market trends in our industry, interest rates, real estate values, the debt securities markets or the general economy. Readers are cautioned not to place undue reliance upon any forward-looking statements, which speak only as of the date made. We do not undertake or accept any obligation to release publicly any updates or revisions to any forward-looking statement to reflect any change in its expectations or any change in events, conditions or circumstances on which any such statement is based. Additional information concerning these and other risk factors is contained in our most recent filings with the Securities and Exchange Commission (SEC). All subsequent written and oral forward-looking statements concerning Granite Point or matters attributable to Granite Point or any person acting on its behalf are expressly qualified in their entirety by the cautionary statements above. This presentation may include industry and market data obtained through research, surveys, and studies conducted by third parties and industry publications. We have not independently verified any such market and industry data from third-party sources. This presentation is provided for discussion purposes only and may not be relied upon as legal or investment advice, nor is it intended to be inclusive of all the risks and uncertainties that should be considered. This presentation does not constitute an offer to purchase or sell any securities, nor shall it be construed to be indicative of the terms of an offer that the parties or their respective affiliates would accept. Readers are advised that the financial information in this presentation is based on company data available at the time of this presentation and, in certain circumstances, may not have been audited by Granite Point’s independent auditors. 2
Company Formation Summary • Granite Point was formed by Two Harbors Investment Corp. (NYSE: TWO) in a spin-out transaction in order to continue the commercial real estate lending business established by Two Harbors in 2015 • As part of the formation transaction in June 2017, we: – Completed an initial public offering (IPO), raising net proceeds of $181.9 million – Issued 33,071,000 shares of common stock to Two Harbors in exchange for the $1.8 billion commercial real estate portfolio that we originated while part of Two Harbors – Established significant borrowing capacity of approximately $2.0 billion • Two Harbors completed the spin-out on November 1, 2017 by distributing its shares of Granite Point common stock to its stockholders, allowing our market capitalization to be fully floating 3
Company Overview (1) LEADING COMMERCIAL REAL ESTATE FINANCE COMPANY FOCUSED ON DIRECTLY ORIGINATING AND MANAGING SENIOR FLOATING RATE COMMERCIAL MORTGAGE LOANS CYCLE-TESTED SENIOR ATTRACTIVE AND SUSTAINABLE INVESTMENT TEAM MARKET OPPORTUNIT Y • Over 25 years of experience leading commercial real • Structural changes create an enduring, sectoral shift in estate lending platforms through multiple credit and real flows of debt capital into U.S. commercial real estate estate cycles • Borrower demand for debt capital for both acquisition and • Extensive experience in investment management refinancing activity remains strong • Broad and longstanding direct relationships within the • Senior floating rate loans remain an attractive value commercial real estate lending industry proposition within the commercial real estate debt markets DIFFERENTIATED DIRECT HIGH CREDIT QUALIT Y ORIGINATION PLATFORM INVESTMENT PORTFOLIO • Direct origination of senior floating rate commercial real • Carrying value of $2.2 billion estate loans • Well diversified across property types and geographies • Target top 25 and generally up to the top 50 MSAs in the U.S. • Senior loans comprise over 90% of the portfolio • Fundamental value-driven investing combined with credit • Over 97% of loans are floating rate; well positioned for intensive underwriting rising short term interest rates • Focus on cash flow as one of our key underwriting criteria • Prioritize income-producing, institutional-quality properties and sponsors 4 1) Except as otherwise indicated in this presentation, reported data is as of or for the period ended September 30, 2017.
Commercial Real Estate Market Overview
Market Environment DEMAND FOR COMMERCIAL REAL ESTATE LOANS REMAINS HIGH… Over $1.5 trillion of loans maturing Sale transaction volume rebounded strongly following over the next 5 years (1) $600 the global economic crisis (2) $500 $400 $ in billions $300 $500 $200 U.S. Foreign $100 $400 $0 2018 2019 2020 2021 2022 Banks CMBS Life Cos Other $300 HOLDERS OF CRE DEBT (3) $200 Other GSE 11.6% 7.2% $100 Life Cos Banks 11.5% 53.2% CMBS 16.5% $- Tot otal al CRE Debt: t: ~$3 3 trilli lion 6 (1) Source: Trepp LLC and Federal Reserve Bank, dated as of 10/20/2017. (2) Source: Real Capital Analytics. Data from 12/31/2001 to 12/31/2016. (3) Source: Federal Reserve Bank, Fourth Quarter 2016 Flow of Funds.
Market Environment (Cont’d) …AND MARKET FUNDAMENTALS REMAIN STRONG 11% 800 Capitalization rates remain favorable versus historical Historically low level of new construction over past several averages (1) years has constrained supply of properties (3) 700 2.30% 9% 600 7% 2.15% 500 400 5% 2.00% 300 3% 1.85% 200 1% 100 1.70% '01 '03 '05 '07 '09 '11 '13 '15 '17 10yr UST Cap Rate Spread (bp, right) Spread Avg (bp, right) 1.55% Occupancies and rents continue to improve across most 1.40% markets and property types (2) 15.0% 15.0% NOI Growth (%) 1.25% Vacancy (%) 10.0% 13.0% 5.0% 11.0% 1.10% 0.0% 9.0% 0.95% Indicates periods when U.S. construction spending -5.0% 7.0% as a percent of GDP is below 1993-2009 average 0.80% -10.0% 5.0% 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 1Q92 1Q94 1Q96 1Q98 1Q00 1Q02 1Q04 1Q06 1Q08 1Q10 1Q12 1Q14 1Q16 NOI Growth Vacancy Pct. GDP Average (1993-2009) Average (2010-2016) 7 (1) Source: National Council of Real Estate Investment Fiduciaries (NCREIF). Data from January 2001 through January 2017. Monthly cap rates are a three-month rolling average. (2) Source: Real Capital Analytics. Data from 1/1/1983 through 12/31/2016. (3) Source: Census Bureau and BEA. Data from 1/1/1993 to 12/31/2016.
Investment Strategy and Portfolio Overview
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