Investor Presentation Fourth Quarter 2017
Safe Harbor Statement This presentation contains, in addition to historical information, certain forward-looking statements that are based on our current assumptions, expectations and projections about future performance and events. In particular, statements regarding future economic performance, finances, and expectations and objectives of management constitute forward-looking statements. Forward-looking statements are not historical in nature and can be identified by words such as "believes," "expects," "may," "will," "should," "seeks," "approximately," "intends," "plans," "estimates," "anticipates," “targets,” “goals,” “future,” “likely” and other expressions that are predictions of or indicate future events and trends and that do not relate to historical matters. Although the forward-looking statements contained in this presentation are based upon information available at the time the statements are made and reflect the best judgment of our senior management, forward-looking statements inherently involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements to differ materially from anticipated future results. Important factors that could cause actual results to differ materially from expected results, including, among other things, those described in our filings with the Securities and Exchange Commission (“SEC”), including our 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 state of the U.S. economy generally or in specific geographic regions; the state of the commercial real estate market and the availability and cost of our target assets; 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 arrangement on favorable terms if at all; general volatility of the securities markets in which we invest; changes in interest rates and the market value of our 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; and our ability to qualify as a REIT for U.S. federal income tax purposes. These forward-looking statements apply only as of the date of this press release. We are under no duty to update any of these forward-looking statements after the date of this presentation to conform these statements to actual results or revised expectations. You should, therefore, not rely on these forward-looking statements as predictions of future events. For historical information relating to TH Commercial Holdings LLC and its subsidiaries, which we acquired from Two Harbors Investment Corp. as part of our Formation Transaction on June 28, 2017, you should consider the information contained in Two Harbors Investment Corp. ’s filings with the SEC, including its Annual Report on Form 10-K for the fiscal year ended December 31, 2016 and Quarterly Report on Form 10-Q for the period ended September 30, 2017. This presentation also contains estimates and other statistical data made by independent parties and by us relating to market size and growth and other data about our industry. This data involves a number of assumptions and limitations, and you are cautioned not to give undue weight to such estimates. In addition, projections, assumptions and estimates of our future performance and the future performance of the markets in which we operate are necessarily subject to a high degree of uncertainty and risk. 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 PORTFOLIO, MODEST ORIGINATION PLATFORM LEVERAGE AND STRONG FINANCING PROFILE • Direct origination of senior floating rate commercial real • Well diversified portfolio across property types and estate loans geographies with carrying value of $2.4 billion • Target top 25 and (generally) up to the top 50 MSAs in the • Senior loans comprise over 90% of the portfolio U.S. • Over 97% of loans are floating rate; well positioned for • Fundamental value-driven investing combined with credit rising short term interest rates intensive underwriting • Actively exploring alternative financing sources such as • Focus on cash flow as one of our key underwriting criteria CLO securitizations and additional types of funding • Prioritize income-producing, institutional-quality properties facilities and sponsors 4 1) Except as otherwise indicated in this presentation, reported data is as of or for the period ended December 31, 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 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
Investment Philosophy OUR TEAM HAS DEVELOPED A SUCCESSFUL INVESTMENT PHILOSOPHY THAT HAS BEEN TESTED THROUGH SEVERAL ECONOMIC, INTEREST RATE AND REAL ESTATE CYCLES • Long-term, fundamental value-oriented investing philosophy; heavy focus on relative value • Avoid “sector bets” and “momentum investments” • Emphasize selectivity and diversification • Prioritize income-producing, institutional quality properties and owners/sponsors • Cash flow is a key underwriting metric • Intensive diligence with a focus on bottom-up underwriting of property fundamentals • The property is our collateral; the loan is our investment 9
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