Q4 2023 Granite Point Mortgage Trust Inc Earnings Call
Participants
Chris Petta; IR Contact Officer; Granite Point Mortgage Trust Inc
John Taylor; President, Chief Executive Officer, Director; Granite Point Mortgage Trust Inc
Steve Alpart
Marcin Urbaszek
Steve Delaney
Stephen Laws
Douglas Harter
Jade Rahmani
Presentation
Operator
Good morning. My name is Donna and I will be your conference facilitator. At this time, I would like to welcome everyone to the Granite Point Mortgage Trust's Fourth Quarter and Full Year 2023 financial results conference call. All participants will be on listen only mode. After the speakers' remarks, there will be a question and answer period. Please note today's call is being recorded. I would now like to turn the call over to Chris Petta with Investor Relations for Granite Point. Please go ahead.
Chris Petta
Thank you, and good morning, everyone. Thank you for joining our call to discuss Granite Point's Fourth Quarter and Full Year 2023 financial results. With me on the call this morning are Jack Taylor, our President and Chief Executive Officer; Marcin Urbaszek, our Chief Financial Officer; Steve Alpart, our Chief Investment Officer and Co-Head of origination; Peter Morral, our Chief Development Officer and Co-Head of originations; and Steven Plust our Chief Operating Officer.
After my introductory comments, Jack will provide a brief recap of market conditions and review our current business activities. Steve Alpart will discuss our portfolio, and Martin will highlight key items from our financial results and capitalization press release, financial tables and earnings supplemental associated with today's call were filed yesterday with the SEC and are available on the Investor Relations section of our website. We expect to file our Form 10-K in the coming weeks.
I would like to remind you that remarks made by management during this call and the supporting slides may include forward-looking statements, which are uncertain out side, the Company's control. Forward-looking statements reflect our views regarding future events and are subject to uncertainties that could cause actual results to differ materially from expectations. Please see our filings with the SEC for a discussion of some of our risks that could affect results. We do not undertake any obligation to update any forward-looking statements. You will also refer to certain non-GAAP measures on this call. This information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP A reconciliation of these non-GAAP financial measures to most comparable GAAP measures can be found in our earnings release and slides which are available on our website.
And I'll now turn the call over to Jack.
John Taylor
Thank you, Chris, and good morning, everyone. We would like to welcome you and thank you for joining us for Granite Point's Fourth Quarter and Full Year 2023 earnings call. 2023 was another challenging year for the commercial real estate industry for both property owners and lenders. Transaction volumes have remained extremely low, high interest rates have continued to increase the cost of capital pressure in property values across sectors. They have also created low visibility for market participants about the future cost of capital. And so further reduced liquidity in the sector at it into 2023, we communicated our cautious approach to the market while putting more emphasis on maintaining higher liquidity and proactively managing our portfolio to protect our balance sheet and investors' capital. Our team has decades of experience managing various real estate lending businesses through market volatility caused by various economic credit and interest rate cycles. As such, we firmly believe that during challenging periods like today, emphasizing balance sheet stability and protecting the downside is the prudent strategy, both to effectively navigate market uncertainty and to position the business for future success and growth opportunities, even though such steps pressured the company's returns and profitability in the near term in mid 2022, with the expectation of continued Federal Reserve actions and the resulting impact on commercial real estate fundamentals and valuations. We shifted our strategy from new loan originations to increasing liquidity to further diversifying our funding sources and to proactively managing our portfolio by collaboratively working with our borrowers. We're pleased to report that in using this approach, we have accomplished a number of our goals in navigating the market challenges, we have reduced our leverage to one of the lowest levels in the industry and well below our target range. We realized a significant volume of loan repayments, paydowns and resolutions totaling over 725 million last year, illustrating the liquidity embedded in our portfolio, and we resolved several nonaccrual loans as we addressed select credit issues. Our proactive balance sheet management strategy also enabled us to repay with cash and two convertible bond maturities totaling over 275 million within 10 months of each other. The latest of which was in October of 2023, as we did not want to access the capital markets during this challenging period. We have also opportunistically deployed capital into our own securities as part of our flexible capital allocation strategy and given the attractive relative value over the course of 2023, we repurchased about 2 million shares of our common stock representing some 3.8% of our shares outstanding, generating book value accretion of about $0.35 per common share. We currently have a little over 4 million shares remaining under our existing authorization, and we intend to remain opportunistic with respect to any future buyback activity. We believe that despite the significant market challenges our industry has faced over the last couple of years, our granular senior floating rate loan portfolio has delivered relatively attractive returns, benefiting from higher short-term rates and diversification across property types, many markets and many sponsors who generally remain supportive of their investments. Although transaction volumes have remained subdued across the real estate market, our portfolio has benefited from its broad diversification and middle market focus. And as I mentioned earlier, we realized a strong pace of loan repayments last year of over 20% of our portfolio. Loan payoffs have been across property types, the largest of which were about 35% was related to loans collateralized by office properties. In fact, over the last couple of years, our exposure to office loans has significantly declined by over 500 million or about 30%, primarily due to repayments and paydowns and also selective loan resolutions. Many of our repayments have come from loans that had been previously amended to allow borrowers more time to progress on their business plans and complete their exit through either property sales or refinancing. This illustrates the benefit of working with our borrowers. The pace of repayments remains volatile and uncertain and we will continue to manage our business accordingly.
While we believe our conservative underwriting has helped our portfolio performance, given the severity of market challenges, we are not immune to experience a select credit issues, which we continue to proactively address, including the resolution of the San Diego office loan in the fourth quarter as we progress on various resolutions strategies for certain loans. During the fourth quarter, we downgraded two loans from a risk rating of four to risk rating of five, both of Baton Rouge, mixed-use retail and office assets and the Chicago office assets are in various stages of resolutions involving potential property sales by their sponsors, which Steve will address shortly. Our GAAP results include additional credit loss provisions, mainly related to the five rated loans while or overall fourth quarter CECL reserve was 4.7% of total commitments versus about 4.9% last quarter. Overall market sentiment has improved somewhat over the past months following the recent shift in the Fed's stance pointing to anticipated reductions in the federal funds target rate during 2024, and we believe that sentiment and activity will likely continue to improve, particularly during the second half of the year. However, the continued strength in the labor market and consumer spending supporting the overall performance of the U.S. economy may impact the timing of such interest rate cuts, which may further delay the recovery in the commercial real estate market. Although we have seen a modest pickup in transaction volumes, in the industry. We believe the future path of macro trends remains uncertain. Fundamental performance across property types continues to be uneven and high interest rates all contribute to continued constrained liquidity in the real estate market. As such in the near to medium term, we will continue to emphasize maintaining higher liquidity, working with our borrowers to facilitate repayments and resolving our nonaccrual loans, giving their meaningful impact on our returns. We believe that these actions over time will help improve our run rate profitability while positioning us to redeploy our capital into attractive investments.
And grow our portfolio as the real estate market stabilizes.
I would now like to turn the call over to Steve Alpart to discuss our portfolio activities in more detail.
Steve Alpart
Thank you, Jack, and thank you all for joining our call this morning. We ended the fourth quarter with total portfolio commitments of 2.9 billion and an outstanding principal balance of about 2.7 billion with $160 million of future fundings accounting for only about 6% of total committed. Our portfolio remains well diversified across regions and property types and includes 73 loan investments with an average size of about $37 million. Both of our loans continue to benefit from higher short-term interest rates and deliver an attractive income stream and carry a generally favorable credit profile with a weighted average stabilized LTV at origination of 64%. Our realized portfolio yield for the fourth quarter was about 8.3% net of the impact of the nonaccrual loans, which we estimate to have been about 90 basis points. During the fourth quarter, we funded $15 million of existing loan commitments and sizes and one new loan for about $49 million related to the previously disclosed resolution of the risk rated five San Diego office loan so far in the first quarter, we have funded about $7 million of existing cash. During 2023, we realized over $725 million of loan payoffs, including over $255 million in the fourth quarter, consisting of full loan repayments, principal paydowns and select loan resolutions. About 35% of the repayment volume was related to office properties and about 28% were multifamily assets with the balance allocated primarily between hotel and industrial loans, right? The broader market challenges, our volume of loan repayments has been relatively healthy, including from office assets as we have benefited from some more liquidity in the middle market and our broad portfolio diversification across primary and secondary markets.
Given the market uncertainty, prepayments are hard to predict. In the near term, we anticipate our loan portfolio balance to trend lower as we maintain our cautious stance and continue to prioritize, meaning higher levels of liquidity, interest rates follow the current consensus path and decline in the second half of the year, we would anticipate some continued improvement in the commercial real estate capital markets with the real estate markets, improving transaction volumes increasing and repayment levels normalize, while higher interest rates have generally benefited our returns and those of our industry increased capital costs and reduced liquidity have negatively affected certain borrowers and in turn the performance of several of our loans during the fourth quarter, we downgraded two loans from risk rankings of four to five, including an 86 million senior loan collateralized by a mixed-use retail and office property in Baton Rouge, Louisiana, and an $80 million senior loan secured by an office property with a retail component in Chicago. We have been monitoring these assets for some time and both are in various stages of potential resolutions. Borrower on the Baton Rouge loan has launched a sale process for the property. The process remains ongoing. And while it is difficult to predict the timing and ultimate outcome, we hope to reach a potential resolution in the next couple of quarters borrower on the Chicago properties also in negotiations to potentially sell the assets. However, the process is in its early stages. In addition, during the quarter, we also moved to a risk ranking of four smaller $26 million senior loan secured buyout secured by an office property located in Boston that has been negatively impacted by the ongoing soft leasing environment. In that market. We are in active discussions with the borrower on this asset as we evaluate potential next steps with respect to this loan, these actions, along with the repayments realized in the fourth quarter resulted in a portfolio weighted average risk rating of 2.8 as of December 31st compared to 2.7 in the prior period. As we previously disclosed during the quarter, we resolved a nonaccrual 93 million San Diego office loan through a coordinated deed in lieu transaction and a sale of the property to a new buyer while providing $49 million Senior Floating Rate acquisition loan to the new ownership who invested meaningful cash equity into the transaction, we worked collaboratively over many months with our previous borrower and the new owner to bring this transaction to a successful conclusion and in the process created an attractive earning asset at a reset basis.
As we discussed on our last call. During the quarter, we also opportunistically sold its 31.8 million senior loan collateralized by an office property located in Dallas. These two resolutions resulted in losses Most of which had been previously accounted for in our book value through our CECL reserve. Assuming the impact of the nonperforming loans have on our run rate profitability, we are actively pursuing various resolution passed for these assets to allow us to redeploy our capital and improve our operating results.
Borrower on a 28 million Minneapolis hotel loan has been we can be conducting a sale process for the property and that process remains ongoing. We are in active discussions with the sponsors on the $37 million LA mixed-use office and retail loan and the 93 million Minneapolis office loan regarding next steps and potential resolutions, both of which are likely to take longer than some of the other assets. We are looking to resolve given local market conditions.
With respect to the REO office property in Phoenix, we are actively asset managing the property, which continues to generate modestly positive operating income. We continue to evaluate potential next steps, including a sale process. We're pleased with our progress to date on these assets and remain focused on resolving all the nonperforming loans. We're also pleased that the majority of our borrowers remain committed to their assets.
I will now turn the call over to Martin for a more detailed review of our financial results and capitalization.
Marcin Urbaszek
Thank you, Steve. Good morning, everyone, and thank you for joining us today. Yesterday afternoon, we reported a fourth quarter GAAP net loss of 17.1 million, or $0.33 per basic share which includes a provision for credit losses of 21.6 million, or $0.42 per basic share, mainly related to certain risk-rated five loans.
Distributable loss for the quarter was $26.4 million or $0.52 per basic share, including a write off of 33.3 million or $0.65 per basic share related to the resolution of our San Diego office loan we disclosed in December tubular earnings before realized losses was 7 million or $0.14 per basic share and reflects the impact of loan repayments and additional loans placed on nonaccrual status during the quarter. Our book value at December 31st was $12.91 per common share, a decline of about $0.37 per share or about 2.7% from Q3. The decrease was primarily due to the loan loss provision, the impact of which was partially offset by our accretive repurchases of 1 million common shares during the quarter, which we estimate benefited book value by about $0.6 per share. Our CECL reserve at year end was about 137 million, our $2.71 per share, representing about 4.7% of our portfolio commitments as compared to about $149 million or 4.9% of total commitments last quarter. The modest change in our CECL reserve was mainly related to the write-off of the allowance related to the sale of asset loan repayments and slightly better macro assumptions used in estimating the general reserve, partially offset by additional specific allowance recorded on the two new risk rated five loans, two thirds of our total CECL reserve or about $90 million is allocated to certain individually assessed loans, which implies an estimated loss severity of about 27%. As of year end, we had about 450 million of loans on nonaccrual status, most of which are in various stages of resolutions. The additional loans that were placed on nonaccrual accounted for over 5 million of interest income during the fourth quarter. Given the impact our nonperforming assets have on run rate profitability, we anticipate our earnings to be below our dividend in the near term. As we make progress on resolving these assets, we believe the Company's profitability should improve over time, though the exact timing and ultimate outcomes remain difficult to predict.
Turning to liquidity and capitalization. We ended the quarter with over 188 million of unrestricted cash and our total leverage continued to modestly decline to 2.1 times in Q4. From 2.2 times in Q3, mainly due to loan payoffs and repayment of the convertible notes in October, which was partially offset by an additional 100 million in borrowings related to an upsizing of the JPMorgan facility during the quarter. Our funding mix remains well diversified and stable, and we enjoy continued support from our lenders, highlighting the strength of these long-standing relationships following the repayment of our convertible notes. We have no corporate debt maturities remaining. As of a few days ago, we carried about $170 million in unrestricted cash. I would like to thank you again for joining us today, and we will now open the call for questions.
Question and Answer Session
Operator
Thank you. The floor is now open for questions. So if you would like to ask a question, please press star one on your telephone keypad. At this time. A confirmation tone will indicate your line is in the question queue. You may press star two. If you would like to remove your question from the queue For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star key. Once again, it is star one to register question at this time. Today's first question is coming from Steve Delaney of MP. Please go ahead.
Steve Delaney
Good morning, everyone. Thanks for taking the question. Steve Alpart, you mentioned in your comments a Boston loan, I believe you indicated it was downgraded to a five on. Was that an event that took place here in the first quarter of 2024. It's not listed on the page 11 on the five rated loans as of year end.
John Taylor
Hey, Steve, good morning. Thanks for joining our call this morning from that loan was downgraded in the fourth quarter from a three to a four Martha and Okay.
Steve Delaney
Okay. Got it. And that leads me to my next question was kind of like what's left and four rated loans given the transition that you had up to a couple of fives in the fourth quarter I believe it was seven. You said the fours were 7% of the portfolio, which sounds like a bit of a couple of couple of hundred million and how many loans are in that four bucket currently?
John Taylor
I'm sure there's some there for loans, Stephen, the four bucket as of December.
Steve Delaney
Okay, great. That's helpful. Thank you very much.
Okay. And on I guess this is just kind of a general comment, but hearing you talk about your liquidity and retaining cash in Martin's comments about near term earnings coming in below the dividend and we model that as well, simply because of some assumed losses impacting distributable EPS.
Jack, I guess I'll direct this to you. You have been using your buyback looking at where things Stan now, would it not make sense for the Board to consider trimming the dividend, the yield, you know now is mid 10s or higher today, trim the dividend and allocate more and more of that cash capital into buying back the shares down here, you know, book less than 50% of book. Just curious your thoughts on that on that suggestion as Steve, this is Jack and Alex.
John Taylor
Good to speak with you and thank you for joining us. I'm sure I'll answer that. And first, I'll start out by saying it's our policy and our goal to provide an attractive income stream through the dividend to our stockholders and dividend sustainability and the the desire for it to be supported by our expectations for the run-rate operating profitability is a key in our mind, but that's also with a view of the long-term profitability.
Excuse me, I'll be a little bit of laryngitis given the guide really uncertain environment and making projections is really pretty difficult and estimates is very challenging. And we recognize that during this period and other periods of credit challenges, we and others in the industry may under earn the dividend for a period of time, especially as we work on resolving the nonaccrual loans, as you pointed out. And so as we mentioned in our prepared remarks, we anticipate that our earnings will be below the current dividend in the near term. And as we resolve these nonperforming assets and they have, as we pointed out at a meaningful drag on our profitability. Now we don't anticipate that we certainly don't hesitate to anticipate that to be a permanent situation, but we don't know how long that it's going to take and how long the resolutions will take. So management, along with our Board, will continue to evaluate the Company's dividend in respect of future quarters. And the dividend is, of course, ultimately a decision of the Board. But all the factors we're taking into account, including what you were saying about stock buybacks and our flexible capital strategy allows us as we have in the past, and we have authorization for it to take advantage of what we've considered to be a very deep discount against value in our stock buyback.
Steve Delaney
And I appreciate that Jack, can you say what the remaining buyback authorization was as of the end of 23?
John Taylor
I believe we have at $4 billion.
Yes, we have $4 million of buyback authorization remaining?
I think it's a little bit more, but it's four point something like 4.1.
Steve Delaney
Okay, great. That's helpful.
Operator
The next question is coming from Stephen Laws of Raymond James. Please go ahead.
Stephen Laws
Hi, good morning.
Good morning.
A couple of questions around on the NPLs. I guess first and Steve Alpart.
I appreciate the color. As you kind of ran through the home. It certainly seems like you said LA mixed-use and the many office. Maybe you are going to be longer resolutions. But you know, as you tried to bucket the others that you went through, any any thoughts on which ones could be resolved first half 24, which ones maybe second half? Or is there a way to somewhat kind of force rank, um, you know what? What's what can be addressed sooner rather than later as you think about the balance of those loans?
John Taylor
I'm sure space, Steve, good morning. Thanks for joining our call this morning. Good to talk to you. So yes. So as we said earlier, the the LA mixed use and the, um, the Minneapolis office asset. Just given what's happening in those two markets, we think that those are probably a little bit longer than some of the others. The Baton Rouge mixed use just to kind of do a quick March here on that. Borrower has launched a sale process to sell the property. And that process is ongoing as we speak. It's difficult in this market to predict timing, but that's what I would say. We hope to resolve in the next couple of quarters from the Chicago office deal, which has a retail component as well. We're working with that borrower. They're in negotiations to potentially sell that property at its early stages.
We're hopeful for resolution.
I would probably characterize that one is more into the intermediate term. Again, the timing's hard to predict this as an FYI, we have no other office exposure in that market on the of the Minneapolis hotel loan that borrowers also conducting a sale process also ongoing. We'll evaluate next steps with them once they have more feedback, which hopefully soon in time is hard to predict. But that one's also ongoing. And then the Phoenix REO asset, we've talked on some prior quarters that and that configuration lays out well for our potential conversion to residential. So there's some optionality, whether it's whether it's multifamily, whether it's office, we're actively managing that one. Right now. We're evaluating next steps that could include a potential sale process, and we'll share more information on that one as it develops.
Stephen Laws
Great. And I guess as a follow-up to those, we see you offer any buyers, you know, kind of seller financing or financing on the new assets, but what you did with San Diego? Are there certain assets that we don't want to have exposure to going forward? How do you think about the willingness to provide financing to the ultimate buyer and the sales process?
John Taylor
Sure. So it's something that we've done in the past. It's a it's something in the toolkit. We can do it where it's necessary, certainly where it's necessary to facilitate a sale in this market on particularly for some of these assets is, does the all the office lending market obviously is difficult. So and we would probably expect for a lot of these office resolutions that we're probably going to providing some type of financing. That's not necessarily the case. We didn't provide any financing on the Dallas office a note sale. So it's something we can do case by case we've done it, we'll evaluate it case-by-case.
Stephen Laws
Great. And then lastly, maybe for Marcin. When you think about the NPLs and financing that may be in place on them. Can you talk about what the drag on runway or run rate earnings are? Are there some way to quantify that?
As far as once you get some resolutions and you're able to pay off the associated financing, kind of what the potential benefit is as you look at those assets clearly.
Marcin Urbaszek
Morning, Stephen. Thank you for joining us. And I would say that the biggest impact from those assets and as I said in my prepared remarks, it's over 400 million of them are as of the end of the year sort of interest income. They they are financed sort of in a variety of a variety of different ways. But I would say most most of the most of the impact of the positive impact from resolutions would come from them potentially turning them into earning assets. As Stephen Steve offers us talk about what if we decide to provide financing or sort of repaying some of the expensive debt, but it's pretty meaningful. I mean, the as you heard us say they sort of accounted for about 90 basis points yield from an interest income perspective, um, so that's that's pretty meaningful. So it's it's sort of hard to quantify, depending on which resolution happens on which loan, but it's in double digits and earnings per share per quarter for sure.
Stephen Laws
Yes, less than that. That was getting to to appreciate the color on that. Thanks for your comments this morning.
Operator
Thank you. The next question is coming from Doug Harter of UBS. Please go ahead.
Douglas Harter
Thanks., can you talk about your upcoming 2024 maturities? And now just in the context of helping us get comfortable that you have the current risk ratings, have your arms around?
Steve Alpart
Yes, potential new problems. Doug, good morning, Steve. Thanks for joining the call. And so as we look out into 2024, 2025, I think we have pretty good handle. Some of these loans will pay off in the normal course of last year. And 2023, 2022, we've had pretty good our repayment pace on these loans. So some of these loans will continue to just pay off in the normal course, some of them will extend, right? Some of them qualify for an extension somewhat.
Maybe maybe coming up on a final maturity. I think that's a question you're getting at. We have a playbook for working for resolving those in general, if something is coming up and we've got a good borrower of doing all the right things. You know, they're financially committed to the asset, we'll come up with a plan to potentially give more time to get loan paydowns to get debt service reserves replenished and trying to create some kind of a win-win situation and what I just described will handle the bulk of it. And then there'll be a smaller cohort of loans from the fives, for example. And when we have to kind of take a different approach. And that and that may be on a note sale could be a can be a property sale, can be working with our borrower to sell the property or go into the earlier question case by case, we can provide seller financing. So it's kind of a range on outcomes oriented tools that we have. We're obviously very focused on this deal. The tone with our borrowers for the majority of our assets is very positive. People are still putting money in until these deals are, but look at some we recognize the environment is challenging for a lot of these loans, particularly office loans. And that's why you've seen us increase our CECL reserve, which I think are about doubled since Q4 2022. It's something we're very focused on.
Douglas Harter
And then still kind of in the US, how are you thinking about your current liquidity? How much of that with no corporate debt maturities, how much of that liquidity could be used for buyback versus how much you need to save for potential defensive portfolio actions?
John Taylor
And I think this is Jack Good to speak with you and thank you for joining us. While we've been maintaining a focus on keeping an elevated level of liquidity and even during that period of time, we have deployed some into purchasing our shares. And so we don't predict when we might and when But and we have the ability to do so and we'll remain opportunistic with respect to that we've had tremendous success so far with providing ourselves more financial liquidity in our asset management of our loan portfolio and addressing potential credit events. And we grew, as we said in our prepared remarks, we're going to maintain that position. As we've said in prior calls, we've stated that our general goal is to maintain about 10% to 15% of our capital base in cash. Now that obviously varies quarter to quarter, and we're currently north of that. But given market dynamics, we believe it's prudent to keep it elevated, but we'll remain opportunistic with respect to managing our balance sheet. And if there are opportunities to further improve our capitalization, we'll consider them like we've done in the past. And if there's opportunities to deploy the capital in accretive ways. We'll do that as well.
Douglas Harter
Great.
Thank you, Jack.
Yes.
Operator
Thank you. The next question is coming from Jade Rahmani of KBW. Please go ahead.
Jade Rahmani
Thank you.
Very much on three more of the 10 K for some time. Could you please provide the balance of nonperforming loans and nonaccrual loans? And I guess the 10 Q had total loans past due as of September 30th of $231.8 million and nonaccrual loans of one 65.9 million. So just looking for an update on those two numbers.
John Taylor
Good morning, and thank you for joining us. Thank you for the question. As I mentioned in my prepared remarks, given sort of the downgrades we had at the end of the year, we had about $450 million of loans that are nonaccrual status and do have the non-performing loans, the total passive. That's that's pretty much pretty much the same number.
Jade Rahmani
Okay. Had there been any change so far this year in terms of credit of page 8, let me ask you that if you could clarify, are you saying is this the over the past 12 months or since the beginning of Gen one since then one?
John Taylor
Well, we've had there's no update to the move risk ratings report that we just gave. I would say that we are we're observing a couple of things in the market and from our borrowers, there is some increase. So there's nothing official to report as a post again Gen one event. What I would say is that we have some subset of the borrowers are watching the Fed even more closely in terms of the calibration of how much more money to put it for how long as it's just general fatigue throughout the market. We believe that some of our borrowers were we continue. Steve Alpart can talk to this on the multifamily sector. We know that there's increasing concern in general about the multi-family sector in the market. We're still seeing pretty good our response from our borrowers and performance of our properties and given our locations and our sponsors that we're not troubled by that portfolio. But that's what I would say answer.
Jade Rahmani
That's good to hear. So Steve, did you want to provide any additional color on that question or perhaps multifamily on shore?
Steve Alpart
No, I guess on the on the multi-family, we talked about this on our call last quarter. I'm coming up specifically on the multifamily, and it's still generally stable and healthy in the markets that we're in, including in the Sunbelt which is, I think where there's a lot of concern about heightened new supply, which we obviously see on. We have assets in places like the Carolinas. They're doing fine on Savannah doing well, Birmingham, very little new supply. And so the supply even in the Sunbelt is not uniform. We are watching some of the markets in Texas we've seen and you've heard some of the other calls about overbuilding and Austin were not in Austin, and we definitely have seen rent growth slow, but our business plans aren't primarily and based on rent growth our business plans are usually based on doing a value, add innovation on looking to get rent bumps, we still are seeing that borrowers are getting rent bumps and may not be exactly what was underwritten. But we think that you could turn the rent roll on one or two times they're likely to get there, um, would not be surprised to see some multifamily assets fall a little bit behind plan. But what we're seeing so far is that we just think it will just maybe take us an extra year to come and we didn't do a ton of loans at the peak. We did some we didn't do a ton and the loans that we were doing call it second half of 21, early 2022, we were increasing our kind of exit debt yield. So the leverage is probably down five or 10 points. The borrowers have good amount of equity protect. So I think the general trend on multifamily was stable and positive. But we are seeing the headlines and we are watching it very carefully.
Jade Rahmani
Thanks very much.
Since they're older originations, could you give an update on the Illinois multi-family. Our origination date is 1219 and also New York mixed use since it's quite a large loan, $96 million origination is 1218 on those risk rated three loans, is there any reserve against those? And what's going on with those plans? Should we expect any potential loss on those two and yes, they're both.
John Taylor
They're both risks ranked from three on. But no, the first thing you mentioned was the Illinois multifamily was does actually two was at one and particularly we're looking at yes, last quarter, it was about $109 million carrying value.
Got it.
Okay. Right. Got that one on. No, no real specific update on that one. That one is doing fine. It's kind of I would say directionally on plan on the New York mixed use, one that one is of his office with ground-floor retail. The retail is some large at least the business plan really revolves around leasing up the office space. Are the sponsors putting more capital to support the asset. It's currently ranked for some leasing. It's really about it. What about leasing up the office space?
Jade Rahmani
Is there a reserve against that because this is a really old origination. So I mean, if the office is still strong, trying to lease up on what are the risks that there's going to be an impairment on this? And what's the reserves held against that at this point?
John Taylor
I'd say, yes, this loan obviously has a reserve on its as part of our general pool being being risk-rated four. I think it's safe to assume that it has higher reserve than than some of the other assets that are in the pool. And it is a loan that we are obviously watching closely given given sort of the New York and what's going on here. And it's hard to predict about what may or may not happen here, but it is definitely given that it's a rate four rated loans. It's obviously on our cortical watch list and we are watching closely, and we'll see what happens there.
Jade Rahmani
Okay, thanks. And then the general reserve, I can't think of any other. I may be wrong though, but I can't think of any others that have taken the general reserve down by the magnitude that you all have. And I know there's management discretion, the macroeconomic variables are unemployment and interest rates. Clearly those improved in the fourth quarter. You know, interest rates are up this year on, but management has discretion there. So why why take down that are received, you know, headwinds still in the market.
John Taylor
And thanks for the question. And it's a it's a function of, you know, some movement in the portfolio. Obviously, as there are some downgrades from four to five and some of the four rated loans may have some higher reserves, like I said earlier than the rest of the pool as they sort of migrate rider reserves sort of migration to general to specific. So that's part of it. Repayments is another part and sort of zone movement within the portfolio. So we remain cautious, right? Our general pool is still close to 2%. But as the portfolio sort of shifts and it continues to sort of run off a little bit and you have some of these downgrades, I think you're you're you have we have seen and, you know, to varying degrees sort of across the peer group, where sort of you have that migration between the general and the specific pool in general and that's what you would expect as sort of the cycle continues.
Jade Rahmani
Okay. That's good color. That makes sense because the specific reserve did increase and then there were repayments. So probably movement out of the general into the specific and then movement decline in general due to loans that paid off for us.
Thanks for taking the questions.
Operator
Thank you. At this time, I'd like to turn the floor back over to Mr. Taylor for closing comments.
John Taylor
Thank you, operator, and thank you, everybody, for joining our call. And I always would want to make sure I do. I want to thank our investors for their support and our team for their hard work, and we look forward to speaking with you again next quarter.
Yes, ladies and gentlemen, thank you for your participation. This concludes today's event. You may disconnect your lines or log off webcast at this time and enjoy the rest of your day.
