Granite Point Mortgage Trust (GPMT) risk factors, FY2024 10-K

Risks Related to Our Lending and Investment Activities

1. 01Our loans and investments expose us to risks associated with debt-oriented real estate investments generally
2. 02We operate in a competitive market for investment opportunities and competition may limit our ability to originate or acquire our target investments and could also affect the pricing of these investments
3. 03A prolonged economic slowdown, a lengthy or severe recession, severe public health events or declining real estate values could impair our investments and harm our operations
4. 04Additionally, global trade disruption, significant introductions of tariffs and other trade barriers and bilateral trade frictions, including due to war or other hostilities, together with any future downturns in the global economy resulting therefrom, could adversely affect our performance
5. 05Most commercial real estate loans are nonrecourse loans and the assets securing these loans may not be sufficient to protect us from a partial or complete loss if a borrower defaults on a loan, which could materially and adversely affect us
6. 06Our portfolio of investments may be concentrated by geography, property type or sponsor, which could subject us to increased risk of loss
7. 07subject to higher risk of loss. For example, our concentration of investments secured by office properties are subject to a higher risk of loss as a result of hybrid work arrangements that allow employees to work from remote locations other than their employer’s office premises
8. 08Real estate valuation is inherently subjective and uncertain, and is subject to change, especially during periods of volatility
9. 09The lack of liquidity of our investments may adversely affect our business, including our ability to value, finance and sell our investments
10. 10The due diligence process that we undertake with regard to investment opportunities may not reveal all facts that may affect an investment and if we incorrectly evaluate the risks of our investments, we may experience losses
11. 11The timing of loan investment repayments is difficult to predict and may adversely affect our financial performance and the value of certain of our investments
12. 12In periods of increasing rates and/or credit spreads, prepayment rates on our loan investments will generally decrease, which could impact our liquidity or increase our exposure to loan non-performance
13. 13Difficulty or delays in redeploying the proceeds from repayments of our existing loans and investments may cause our financial performance and returns to stockholders to suffer
14. 14We may be subject to lender liability claims, and if we are held liable under such claims, we could be subject to losses
15. 15Liability relating to environmental matters may impact the value of our investments and the properties underlying our investments
16. 16The properties underlying our investments may be subject to other unknown liabilities that could adversely affect the value of these properties and, as a result, our investments
17. 17Commercial real estate debt investments may be subject to delinquency, foreclosure and loss, which may adversely impact our business, results of operations and financial condition
18. 18Loans on properties in transition may involve a greater risk of loss than conventional mortgage loans
19. 19Any distressed loans or investments we make, or loans and investments that later become distressed, may subject us to losses and other risks
20. 20The success of our investment strategy depends, in part, on our ability to successfully effectuate loan modifications and/or restructurings
21. 21Financial or operating difficulties of our borrowers may result in our being subject to bankruptcy proceedings
22. 22Taking title to properties securing loan investments, including via foreclosure, can result in losses that harm our results of operations and financial condition
23. 23As an owner of real estate, we are subject to the risks inherent in the ownership and operation of real estate and the construction and development of real estate
24. 24Investments in nonconforming and non-investment grade rated commercial real estate loans or securities involve increased risk of loss
25. 25Insurance on the properties underlying or securing our investments may not cover all losses
26. 26We depend on third-party service providers, including our loan servicer and our information technology managed service provider, for a variety of services related to our business. We are, therefore, subject to the risks associated with third-party service providers
27. 27Increases in our CECL reserves have had and could continue to have an adverse effect on our business, financial condition and results of operations
28. 28CECL reserves are difficult to estimate, and may not be correct, which could severely impact our results of operations
29. 29We may be subject to risks associated with commercial real estate loan participations
30. 30Investments that are subordinated or otherwise junior in an issuer’s capital structure and that involve privately negotiated structures expose us to greater risk of loss

Risks Related to Our Financing and Hedging

1. 31We have a substantial amount of debt and may incur additional debt, which subjects us to increased risk of loss which could adversely affect our results of operation and financial condition and may reduce cash available for distributions to our stockholders
2. 32Interest rate fluctuations could increase our financing costs, which could lead to a significant decrease in our results of operations, cash flows and the market value of our investments that may not be adequately protected, or protected at all, by our hedging strategies
3. 33Our existing financing facilities impose, and additional financing facilities may impose, restrictive covenants, which may restrict our flexibility to determine our operating policies and investment strategy and to conduct our business
4. 34Our existing asset financing facilities require, and future asset financing facilities may require, us to provide additional collateral or pay down debt
5. 35Inability to access funding could have a material adverse effect on our results of operations, financial condition and business
6. 36We are subject to counterparty risk associated with our debt obligations
7. 37We may be subject to losses arising from current and future guarantees of debt and contingent obligations of our subsidiaries
8. 38Our use of financing may create a mismatch with the duration and interest rate of the investments that we are financing, which could adversely impact our liquidity and returns
9. 39Use of nonrecourse securitizations to finance our loans and investments may expose us to risks that could result in losses

Risks Related to Our Company and Structure

1. 40Our ability to retain and attract key personnel is critical to our success
2. 41Our board of directors has approved very broad investment guidelines for us and will not review or approve each investment decision made by us
3. 42Operational risks, including the risk of cyberattacks, may disrupt our business, resulting in loss or limited growth
4. 43Maintaining our exclusions from registration as an investment company under the Investment Company Act imposes limits on our operations. Investment returns may be reduced if we are required to register as an investment company under the Investment Company Act
5. 44subsidiary entities as majority-owned subsidiaries, we may need to adjust our strategy and our assets in order to continue to pass the 40% test. Any adjustment in our strategy or assets could have a material adverse effect on us
6. 45Rapid changes in the values of our assets may make it more difficult for us to maintain our qualification as a REIT or our exclusion from the Investment Company Act
7. 46State licensing requirements cause us to incur expenses and our failure to be properly licensed may have a material adverse effect on us and our operations
8. 47Risks associated with climate change may adversely affect our business and financial results and damage our reputation
9. 48Our business is subject to evolving corporate governance and public disclosure regulations and expectations, including with respect to ESG matters, that could expose us to numerous risks
10. 49The market price of our common stock has been, and may continue to be, volatile and may decline
11. 50Future issuances of equity or debt securities, which may include securities that would rank senior to our common stock, may adversely affect the market price of the shares of our common stock
12. 51Provisions of our charter and amended and restated bylaws and Maryland law may deter takeover attempts, which may limit the opportunity of our stockholders to sell their shares at a favorable price
13. 52cast on the matter, excluding shares owned by the acquiring person or by our officers or by our directors who are our employees
14. 53Our rights and the rights of our stockholders to take action against our directors and officers are limited, which could limit your recourse in the event of actions not in your best interests
15. 54Our charter contains provisions that make removal of our directors difficult, which could make it difficult for our stockholders to effect changes to our board of directors

Risks Related to Our REIT Status and Certain Other Tax Items

1. 55We have not established a minimum distribution payment level and we cannot assure you of our ability to pay distributions in the future
2. 56If we do not maintain our qualification as a REIT, we will be subject to tax as a regular corporation and could face a substantial tax liability
3. 57Even as a REIT, we, in certain circumstances, may incur tax liabilities that would reduce our cash available for distribution to stockholders
4. 58Complying with REIT requirements may cause us to forgo otherwise attractive investment opportunities and limit our expansion opportunities
5. 59Complying with REIT requirements may force us to liquidate or restructure otherwise attractive investments
6. 60Complying with REIT requirements may limit our ability to hedge effectively and may cause us to incur tax liabilities
7. 61Complying with REIT requirements may force us to borrow to make distributions to stockholders
8. 62Ownership limitations may restrict change of control or business combination opportunities
9. 63We may choose to make distributions in our own stock, in which case stockholders may be required to pay income taxes without receiving any cash dividends
10. 64Dividends payable by REITs do not qualify for the reduced tax rates on dividend income from regular corporations, which could adversely affect the value of our shares
11. 65We are largely dependent on external sources of capital to finance our growth
12. 66We may be subject to adverse legislative or regulatory tax changes that could increase our tax liability, reduce our operating flexibility or reduce the market price of our securities
13. 67The “taxable mortgage pool” rules may increase the taxes that we or our stockholders may incur, and, therefore, may limit the manner in which we will effect future securitizations
14. 68We may fail to qualify as a REIT if the IRS successfully challenges the treatment of our mezzanine loans as debt or our preferred equity investments as equity for U.S. federal income tax purposes
15. 69The tax on prohibited transactions limits our ability to engage in transactions, including certain methods of securitizing or syndicating commercial mortgage loans that would be treated as sales for U.S. federal income tax purposes
16. 70The failure of assets subject to repurchase agreements to qualify as real estate assets could adversely affect our ability to qualify as a REIT
17. 71Liquidation of assets may jeopardize our REIT qualification
18. 72Our ownership of, and relationship with, our TRS will be restricted and a failure to comply with the restrictions would jeopardize our REIT status and may result in the application of a 100% excise tax
19. 73Our qualification as a REIT may be dependent on the accuracy of legal opinions or advice rendered or given or statements by the issuers of assets that we acquire, and the inaccuracy of any such opinions, advice or statements may adversely affect our REIT qualification and result in significant corporate-level tax