TRTX - Earnings call transcript Q1 2018 | TPG RE Finance Trust, Inc.

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Operator

Good morning, and welcome to the TPG Real Estate Finance Trust 2018 First Quarter Earnings Conference Call. [Operator Instructions] Please note, today's event is being recorded. I would now like to turn the conference over to Brad Cohen. Please go ahead, sir.

Brad Cohen

Good morning, and welcome to TPG Real Estate Finance Trust’s First Quarter 2018 Conference Call.

are Financial Chief and today Bob Officer; call Chief Foley, Risk the Greta Executive Guggenheim, and On Officer. questions. up Greta comments and call open about some for the the quarter, Bob and then will share we'll a Relations Yesterday evening, the the its with on filed which its quarter detailing website section. ended supplemental presentation the results XXXX, our press all are and earnings of Form a operating release XX-Q company issued Investor for March in XX, available that today's are everyone may include of I'd company's which remind like call forward-looking statements, uncertain the to outside and control. Actual results may differ materially.

discussion of company's SEC. duty does not Risk of Factors For X, XX-Q that to a the operating The company update the of May some the Form could company's affect with any the section see undertake filed risks statements. please forward-looking results, on the XXXX,

refer During certain this to non-GAAP measures. will the company call, also

and supplemental, Ms. the my Real and turn Greta? For Chief posted on reconciliations Form the call pleasure of XX-Q website been of Officer Finance these Executive to Guggenheim, Estate non-GAAP which to Trust. it over is are refer the With that, please have filed earnings Greta to measures, TPG the SEC. with

Greta Guggenheim

of strong a to repayments for On high-quality million. Coast, and you Brad, seven had especially originating year $XXX first totaling results. quarter we million quarter the basis, net the We us Thank a you, million. first we who're present about roughly loans off $XXX with deployed kicked of from you as and and all, mortgage in $XXX good joining morning calling you those West thank our first

in million we in that very $XXX also active Q are And filed was additional we the date, $XXX pipeline. signed to quarter the including process quarter after for we million transactions of pursuing yesterday. a are the up loans, Second of closing

experienced compress. we quarter, to credit continued the spreads in fourth As

quarter. the as spread declined basis average Our XX on LIBOR to to over points weighted compared points fourth XXX originations new basis

foreign Major Interestingly, in of quarter-over-quarter, CLO offsetting providers the spreads. originations. spreads spread to means million tighter a and provided pressure agent on transactions. weighted to have CLO with XXX to In the identify basis for and and our more an over utilize CLO a of response are and market my funds second transactions CLO, insurance cost-efficient was to initial Credit roles debt points we global of from end on company-managed basis was new call, warehouse credit rate largest crisis from since Consistent XX% Our an financial banks decreasing capital. REITs, funds the the spreads the our activity point $XXX is which The lines environment February, also executed was seeking remains capital. a dramatically put compression spread decrease has having the fourth advance highly in leading LIBOR. CLO primarily the of issued come with in. successfully quarter with as funds, average warehouse competitive It reducing remarks responsible private us among mortgage XX cost spreads the banks. in issued

rates Interestingly for types more we the XXX historic most on of in that a near private a LIBOR remained that new time. a is bid healthy, of highs. rise challenging same see over real estate and in basis an point correlates increase points. really we points reduction persists. basis the occupancies originated basis Despite of environment, the market, in In the a we at investment real loan property estate reduction part real refinancing leasing commercial broader and indicative of are competitive XXX estate the at at fundamentals XXX that period rental recent As of or with spread spread but XXXX momentum example, This a in result market.

housing As income and other workforce during particularly new highly capital were of find the continued recession. relative supply, in penetration measured first multifamily much less and sector housing half have property Affordable volatile strong dynamics attractive, given and - and shortage experiences in the we our this originations types supply-demand a preferred in than fact, supporting the it's this nearly discussed not in was anticipate demographics is multifamily, multifamily We we cohort multifamily. workforce quarter the deployed stable, sector. little sector it is type of asset before, supply. and highly our and by The of

properties as originations some office retail. in in were major A mixed-use the In and quarter on remaining Hawaii, addition areas coasts comment properties. multifamily, metropolitan in both to our well as on

acquisitions to While and that not have $XXX with by time sales applies the spent broad-brush quoting lifestyle very by cost. all transactions believe considerable do quarter, In attractive center assets, several testing market assets have we we sponsors financing began the reviewing and requests. over occupancy retail million retail power strong strong retail and first assets tenant of the reviewed we

quotes private Our lost insurance quoting, to funds asset each were debt we we classes are that and of companies. relative wider significantly these non-retail and spread transactions to

the and that the secured that The more the loans that was our the with equity for discounted to assets, of return the had is the L we which based as completed funding loan So calculated moderate XX.X% the and it assets, among retail as they is than represents in V market Please our the expected support originations of is of heavily various loan originations. We LTV to appears by on and loan-to-values flowing were construction LTV transitional transitional cash no our on assets. will standards. meet loans continue higher of evaluate value opportunities an initial reported construction to our X.X%. benefit value reduced QX originations distinguishing retail collective supplement types QX small credit generally is A project. note

spreads. wider source carry they addition, are In and to considerably easier

outweigh not that these are risk. convinced We the tail benefits

generated XX as not investments are dollar the over attractive longer, up these wider by fund as would the imply. Given months spread profits the or

While in prefer have the periods point frames. seriously ones, will shorter loan loans our the we at to assets recurring great that stabilization originations this see credit. we that merit emphasis over have cycle, time is The evaluate construction better and on theme the

bears but said We before, have repeating. it it

prioritize We endure Credit credit. of through economics will and change last market always and decisions while pricing the loan life frequently. the

often to evident principles not again history, our lending Our to and/or continue won and We on may borrower. direct relationships in flexibility work we responsiveness with and relationships relationships quality based loans in alone. great the life providing experience through loans deals. our and of our the originations hard previous win were the during asset experiences management X first borrower We the service of pipeline of on the were in X needs. loan. us of high-quality provide We as take pride These win responsive price and clients' deliver our with the these closed to structuring developing quarter

focus last on intensive for Our we client next call our new that either client investment. first the on or ensures borrowers’ are the -

platform volumes move we another expect this balance originator we As we as origination the and scale. through quarter senior of begun as to has our year, to added have the increase

the we pipeline. the growing. Credit critical environment, is that since further. disciplined ability and to competitive narrow are our activity we our for our discussion of We I as our given our scale don't turn sustaining maintaining feel we importance the expense over are and We is would our quality approach, book pipeline quarter-end our but Our to spreads, of now to like makes standards. like good business, ready Bob. it. incrementally I and strong, drive control differentiated are the our down very it, likely This about to return origination equity. emphasize costs our on to funding very will

Robert Foley

good everyone. and morning, Greta, Thanks,

or for of compared First, $X.XX quarter. preceding $X.XX diluted GAAP posted a We million our fourth recap income $XX.X $XX.X of to per diluted share net as performance. the per share quarter or million

dividend in increase of an our declared prior our March capital yield of cash savings into with Our We The expectations. March primarily basis was by our on funds common decline annualized the CLO. were write-off dividend and of expense offset loan CLO. average closing XX in earning by financing growth were in our quarter, an certain translates per mid-February of the on share the over million, ramp deployment on in was into the course. approximately by in of paid was a CLO dividend XX, of weighted per remains costs investments driven that of cost in $XXX,XXX April share earnings of book and line roughly which $X.XX refinanced of our of points, The That deferred $X.XX share. that MG&A value XXXX, at were and trajectory X.X% interest per of $XX.XX. assets a our driven $XXX.X primarily net

the million. seven assets quarter. and highlights initial allows over $XXX.X with limited This Net for more $XXX.X loans time the origination in XX.X%, was at strategy the lengthy growth loan lessens rate our deferred quarter we transitional our of loan capital quarter, on emphasis amounts growth first $XXX.X under ratio new plans work periods. During of a which million. of continued the exposure business and with Initial to originated earning fundings totaled new fundings commitments originations was total The XX.X% totaling prior million, bridge to to our loans put us funding. execution to

driving certain at and Capital efficiency prudently management return our was the at investments equity, on the managing credit level. is originations, executing We've fees employing corporate in by of growth the maintained level our operating For and more investment X.X%. goal facilities, and deployment reducing funds CLO, ROE leverage first against cost and sustainable quarter carefully which estimated latest ROE level overhead expenses. our remains dividend primary our asset our on of loan net

prior quarter, loan CLO, level unpaid loans. by XX%, number but advance originated driver so divided higher rose first of at principal the XX.X% was were is investments, defined a from leverage, XX.X% The For in balance of here, quarter. in a the our the levered big asset newly as which rates our to borrowings

during the For rate was average the XX%. lender-approved quarter, weighted first advance loan pledged investments

quarter, rose lending as indication CLO, ratio Using momentum cost space. a the key of of in increased the the our maturity the ingredient recent during our extend debt-to-equity of further leverage prudent our the from ramp the leader X.XX:X of Our to are a strategy. to transitional remain and previous of reduce liabilities clear X.XX:X pursuing application our flexibility another to needed funds, we aggressively ways enhance differentiated of

for average spread was $XXX basis as million the new of originations, our credit XXX For points compared loan weighted quarter. to the fourth XXX

New the remainder portfolio, anchored For repayments investment driven expectations. top XXXX in A include Bay the and no Area, where the totaled markets. condominium share Chicago, the Loan loan Francisco XXX our will points. net Metro areas loan entire exposure. our San line and the remains for be of of in comparable multifamily our repayments Metro construction footprint Property office, with mixed-use. basis types confirming virtually $XXX.X included is York repayments of measure note accelerating meaningful have of by portfolio, we that million

and and will the can Regarding loan focus asset do on investment control. fluctuate beyond quarter-over-quarter that pace growth, we timing are originations our year-over-year of patterns reasons repayments since and net for

of strong. investment position terms liquidity at was capital capacity, In quarter-end, our and

to We investments cash to new fund undrawn million, of moment. immediately - revolving I'm We in change for addition balances In $XX.X we in back Shifting the under facilities. to a let - capacity our repurchase $XX.X to of available sorry some secured me undertook available covenants. get million a changes following. our had liquidity had

our billion billion five of and a $X.X under repurchase of total of capacity $X.X one have our almost facility commitments. available We for secured warehouse financing secured facilities

the reduction those arrangements commitments of prior amended covenants. million X% $XX.X at the the CMBS requirement of to our our covenant million our indebtedness. recourse of our in impacts million short-term portfolio, liquidity quarter-end. rapid is a construction primary portions loans declined a investments threshold associated Additionally, quarter, wind or under which investment million. $XXX.X were: principal that $XX to hard loan borrowing from financial the reflects to were $XXX.X roughly recycle all loans all $XX.X down week, with estimate revised loan minimum new we Last are have loan million ability our $XXX.X commitments or quarter-end, current of million at million The we this $XX harmonize of financings. of and associated book. by construction Unfunded into million our $XX greater first, We funded with from Unfunded construction asset-specific totaled during

for negotiated from total also leverage X.X:X. We an allowable in to increase X

level $X.X - leverage billion. based investment no leverage asset potential on our new approximately is X.X:X, of Assuming current our loan repayments capitalization capacity estimated and loan

LIBOR continues substantially I to our tied no basis loan system, remains since Rising Thanks status risk, of record had X.X. nor income. with that, quarter-end we an share internal to of we of interest happy all in impaired. was Portfolio increase are point LIBOR our were since risk by on questions any per And management. for liabilities average and non-accrual the LIBOR. reserve strong. Greta of risk rating nor will in rating help assets entertain any we you inception. us estimate portfolio steady and loss weighted The We $X.XX might net and as to to all risk Consequently, Operator? quickly our additional Turning loans annual have. have be not again. XX measured our would a at generate quarter did The

Operator

ahead. go Today's [Operator of from question Morgan. Please Shane Instructions] comes first Rick JP

Rick Shane

this morning. am I Well, first

happens and want like the environment, into what work to of when terms ask I We'd that decision to intensely the but you dynamics Just understand want of want to is here, sort secret borrower borrowers - you, point, the be? choose. need where be how with Obviously, question, but finding sauce don’t competitive. and I this given get is says, here's to would of Are where comes ultimately a you pricing. Hey, funding you to to need in the you quick back final really to get is competitive

Greta Guggenheim

a we with And person to that sauce with our brokers a and Hey, a you on myself, quoted, people. say answer. been with it call to relationships working had their deals the two truly dropping interacting have I all call. shop when it's a is Ginsberg, or lot, and or XX, and Smith, but experienced And lenders and know bit all-hands When in that go we are Peter to go that Bob, ratio I Peter nimble, this question. say, the there office we've believe three I'm good Deborah, you you Very success when hit borrowers principal And years. high XX for very down by of to final I a matters, and we truly and general, Blackstone. sounds for with cylinder without a decades. Bob, being Deborah was And you you we bit attorney makes ratio, bring borrowers to a doing competitive. is been you and sheet. and difference. a hand-deliver matter. a And it yes, this that, trite, But believe, the high moment. she it And hands-on truly is a to secret I wanted have in that have when myself little But transaction have term all does every be to That's important. CEO it using doubt. business for

Rick Shane

we spend Got much part we personally on it. Look, how the so that's time road, the know know of formula. you that

Greta Guggenheim

you. Thank

Operator

ahead. comes Please question next go today's Securities. of And from JMP Delaney Steve

Steve Delaney

I'd it capacity, little like the more loan clarity, of roll competition. about obviously, IPO takes morning Good I on two you on capital promised Congratulations borrowing $X.X cash as March on plan in mean, get everyone. capacity. to your growth when could, that alluded free terms to. the Bob, if outstanding lines the I the plus together, I XX. at at you capacity executing despite you just those you're think And billion or a

something Is growth existing we terms you there portfolio can $X.XX in for XX? we your get balance get $X - that situation you in sheet? approximately modeled balance on outstandings in billion pretty had off were If area. the with balance portfolio still think that sheet the is current sheet, of June or can and billion, what - availability I is you your lines, which much your at to and look with the

Robert Foley

frankly, several don't your was finance With million capacity sort the repayments, with to things means on that's corporate that have in previous $XXX do have we other with created Steve. connection of for CLO been is capacity. line into over have about on our that paid credit able hand which we of and one us, benefits. to our of CMBS roll capacity. we benefits upfront The the providers which calls sufficient other Thanks question, the benefits cash we cash The for can factoring of yes. with those one capacity fees in current dollars. by for recycle among facilities were or presented with and pay our on we answer existing those or recycling investment year-to-date more projections. But And repo near-term five our discussed we the untapped three warehouse, capacity, six additional lines, equity amortize facilities And have plus like other before base on or providers facilities, can we frankly, in existing securities

some capitalization your there Greta to order order asset that are are there as But some question, us. plan can well. growth the business competitors we knock-on for current outlined comfortable benefits we that figures the modeled and then and has benefits, So first and is answer our have execute you with second that specifically yes, your

Steve Delaney

and you. Thank your just And execution was appreciate if being you, That's exceptional. Great. CLO I clear, one you that follow-up I very specific. for Greta, may,

spreads presenting more in is What's seeing? spread a competition? spreads. something loans think the are the down, somewhere egg? factor you is I but the spreads double-edged the at for market chicken that or of is is CLO suspect pulling CLO of we're the when on look middle, bit - and tightening the it it's in the causal I that mean, I loan CLOs, a the market tight is sword a

Greta Guggenheim

existing our financing Well, to we it loan, when for facility. on us, quote has work a

market finance assets we're to a our there we when quote the loan. to So CLO not be on counting

CLO the of think originators less a think, like factor. ourselves, the larger loan I I is So

market a get originators and the have to being The kind access favored most CLO dynamic originators nation that. mean TPG, warehouse I didn't pricing. affiliated smaller differentiated changed have the for think the lot really had that the with I smaller we didn't pricing. of power

game So that somewhat because and to saw believe year. loan CLO the We of loan I advantage a that originator, was the market tightened really them a of small being an the for last such do there wasn't think was market. changer I spreads CLO small dramatically

Robert Foley

go add And would ahead. I'm - sorry, I

Steve Delaney

that sort What's $XX I Are was just small classify bucket? we can the you range loans? small asking, put million? the of in talking you

Greta Guggenheim

Yes. less are loan million $XX $XX loans in originators almost - that the contributing would million-ish, than less all loans, large as which say or that originators do. I where loans of million $XX participated are whole it's to interest opposed to originated need in the and

Robert Foley

point the to CLO CLO be company's better REITs, can Steve, and last or originating capital another generally Greta larger The to midsized question in think larger described. help they, that I cost your very commercial has a public that loans add, can funds tools is to and factor building The is are mortgage speaking, the there financing been for constructive answer structure. improve the also establish differentiating techniques competitiveness. apart and other But drive platforms from a of to down available are

Greta Guggenheim

also - you there think are market pressures. pressures. I There are But market definitely asked what

debt mortgage amount of REIT of is think space the spread I lot the today. a fund in chasing deals capital compression the

Steve Delaney

Got you both it. the Thank for comments.

Robert Foley

Steve. you, Thank

Operator

ahead. of from question Raymond our go James. Laws next Please today And Stephen comes

Stephen Laws

good morning. Hi,

Robert Foley

morning. Good

Stephen Laws

mentioned of Or capital today? as think on there Greta, settled the a in return floor see debt a Or this is the capital? discussion, there, funds. so, you that getting given lot where just the up follow the backing they where do to from you are think close longer investor Just But And in out how the yield is see return? just you market a to no you yield we asset you the into are kind what if levered floor? of retired on competition

Greta Guggenheim

that I thinking at last XX compression see same a do sheet for plus And originates in answer, to And banker just I - the my reminded do type transitional months. will compression. transitional is loans with plus I continue their on yesterday, the XXXX, sheet, quote assets that pace was I but they on don't her sheet. in but do at doing the wishful their meeting loans to more don't it somewhat has XX, know LIBOR LIBOR balance balance if balance this - that would that's feel XX XXX. commercial influencing expect and I loans they me she be today, who were

the are CMBS So we seen pre-crisis, XXs. handle, AAAs markets. AAAs, they And and if the were XX XX in the market, spread very you I mean, around have at tight in trading just XX-year to look

than when financing I also a it's at So and the system available now. a data, - little more frightening, there in leverage look that lot but for is was there

but I to floor. there I I So going a of think is question, think do your to don't us see there kind those is do answer levels, natural -

think expect closer I to we're see do further some to it, I but spread tightening.

Stephen Laws

Great. volatility markets, does there. more anticipate that, are color what I interest in follow-up forward? little do How the a CLO as I transactions, been a change moving and a handful know another lift you what that this And of financing but year? view - you today? doing How option do rates you the on are CLO like there's appreciate the markets only the or

Greta Guggenheim

- keeping well. option. to opportunities We are that well an certainly wide market as open other as us We capital as as,

a would a evaluating we are, to all actively options quite CLO we daily basis moment, quoting capital are to at We're deals We do this available assuming it's the still us. financing think very that like almost But possible. raising we not year. and on but this

Stephen Laws

duration. the on but When on a do about things, or financing about total number agreements, I mix, the do Great. versus at repurchase I recourse versus debt CLO should look think CLO side and covenants think it, forward obviously, you about debt, the recourse match internally guys in versus one how follow-up the also, Bob, financing appreciate you think debt think it agreements? really for kind I the clearly, you of your as leverage the the of of it. the debt, advantage non-recourse is funded CLO debt And

Robert Foley

Well, we do, rate we optimal think financing. let's primarily mean, for spread credit do and a borrower that. different - to we couple secured believe layers to they vary. about that and there there are how We been we've I focus a every an loan of is first on Since date, advance that

vary In that said XX%. widely. ended, quarter rate We average was pretty - during the fact, they our just we advance

We on have book now lower and have basis, advance loans right They is that that advance but be aggregates on tend other older our there loans, is. a our right materially average vintage deal, then weighted to rates. to clearly, rate overall what a for leverage each

market. recourse only corporate that us In the to particular, an tenure XX% including financing that And rely component And on capitalization speaking, that exploring. question, to one mark-to-market terms a that and And end, now. Does generally matures There finally some of don't of respect finance best it, very we're as our to but company tool are to and in unsecured important of in your toolbox, CLO entirely on a borrow the available believe objectives, our credit the secured it's any clearly financing, arena our alternative we facilities, are no strategy to recourse. ingredient the long next think I it's appropriate also answer is variance the In then to that basis. building is it's Stephen? with allows ours we don't. in

Stephen Laws

Bob. my I taking helpful, Thank questions. is color That appreciate you. does. It

Robert Foley

Thank you.

Thanks bet. for in. You dialing

Operator

Please Ken of ahead. America Bank Lynch. of question next Merrill go Bruce from today's comes And

Ken Bruce

the Hi, guess good just Thanks morning my the is pieces make of sure I first question everyone. moving some to I understand for questions. here.

I board, economics spreads guess kind to or to of the that in that. to you're the are a intact, cost about offset to going properly? sensing willing being up of take helping of the also for lower order understanding you've to talking less able a be obviously standpoint more essentially I And guess, that that's So leverage it I'm of am business tightening, that But the we've from I keep across been negotiate and seen while. and capital,

Robert Foley

saying Yes. our we by Ken, that yes, public today, public, mean the the is quarter the the on think of I underlevered went answer when were since, that although in by you comparison condition basis. our will a macro to and to back certainly And if we're to competitors. IPO measure any we underlevered still answer

push We're deploy equity and So leverage. the a our not big been our part our last deploy to yet more to quarters has several prudently target. of to

your no. might originally I are to leverage to And answer leverage this view is, in just the think is question had we implicit we target be, that sustain pushing the in at getting our We're order returns? point, identified.

Greta Guggenheim

loans. add Those percentage had are variety you far first mortgages. also automatically depends loans and cash had type public, would lever higher would first I LTVs, and a are strategy, loans. my predominantly originating take that for And we we these that fairly construction When also, generally we I like higher also those and to of still conversation. value-add We winding leverage of went you're their on number Construction leverage our up. along a high flowing loans, on a that some leverage balance And of lower the We're reasons, we construction we're down of originating. have assets of mortgages, sheet. when warrant very a assets in pretty mezzanine earlier leverage. shifted low your in out explained see percentage If out, you goes

factor to we're leveraging. have type what about you of talking So assets in

Robert Foley

X%, look Page X, yields respectively. the you if three keeping quarter, home, call, X.X%, out place for those after of see and we supplemental, X% laid in transactions you representative the debt score for at which So the at have in

business cash plans, the of it stated the Greta risk use itself market shorter she strategy, and in us levels point has environment of lends leverage. So for repeatedly, flow. this driven right in that's profile to We also towards as the the think place appropriate more

Ken Bruce

I leverage. again, you covenants your on believe did though And increase

I So obviously, plan progression guess I'm appropriate. business for the kind the leverage way of of your about thinking is that,

leverage. up I'm it's this I guess so term, bringing and - absolute you're not And an asking is if

that I want Just maybe more cash going that assets it or on? set you're to have you're is appears I more flows, what's make And applying sure of but not that stabilized is leverage. if taking just a understand

Robert Foley

One of consistent That's our other to package public. target thing really I went would true. add true. this us been did targeted leverage since X.X:X, has we That's our is was allow what covenant leverage which fulfill

Ken Bruce

it. Got

as of obviously, thanks. marketplace a of differentiates then the And I the guess making some from one detailed having guess that very I perspective cost is terms or some at others. of you And in of your get competitive the other general I'm competitive lot of the capital a advantage? capital the that. is if defensible of replicated obviously context things work. And I by look CLO will, the either Okay, market competitors competitive TRTX terms you quickly essentially kind of Greta, important in that very in these, being relationship. market, When you in a that interested on wholesale advantages of do a see - just what

Greta Guggenheim

to like to you likely stretch more do is reasons next too a we looking scrappy, on to deals. highly this, truly dynamic, letters, it's not by me it, pipeline. - that with just to evolve of recognize and and think already, pipeline are have why hard very the we I we're robust But fill and with but competitive we with $XXX I our the of close still which this outperform. and very a in at loans a are evolve. of XX the much nimble, very of efficiently. years. doing think I time couple XX quarter, years loans and for But given And performance to to someone are and going market. And on who's that, times think yes, just very history objective I'm us pipeline, of able hard we it's taking transitional mean, have run follower Howard this not we're the that we catching filled million to absolute think that do risk up I we're only don't Marks with is date market augmented the disciplined terms with point people doing in the the Well, But relationships very been to I from weeks. our going And believe I in are

are - hard I do we consistently, late throughout has we're really think that is We to every gives ours competitive our and going - it. you and advantage. us think this have balance it just I have career I But demonstrate differences, switch didn't cycle, believe shop that So been to truly working I its think we're and to sheet careers, a quarter-after-quarter, to lenders.

Ken Bruce

do It you more where wondering going I'm agree this It And with little behavior the maybe it. broadly of are is where terms everything market. are think we just a and some in think you. - just not cycle? the you Got if seeing just in comment in around really that, cycle? around feels It's of or this on lastly, - feels you we cycle. late a in do we're this

Greta Guggenheim

the the cycles usually was overall bull new maybe more looked this is or long, around. other, my but cycle I leaning way a think I time I was this unusually paradigm. than I economy. bear I at of longer just a I the have career, if that one We when throughout think

don't you find those write and all if economy coverage unusually is lower debt And the going are today, is this I mean do the will what do service America, try XX at could to time. going I to really But think, I I So looking has low, economy and - be why see I look continue is well rates XX I high, the be. the a reasons at list and you the would it I won't. And Corporate disruption reasons concern, if why it I than yet it leverage corporate been. earnings up, are that now. for interest that had cracks.

of that. because world could and the years, for It be be now It's indicator sure rising. if flat, Those to is than the you Fed look this that right short-term is X. So I there the very as relationship of been since are quantitative we we've and paradigm. treasury, could at wasn't many of of XX-year the in a a changed tight it if treasury see Xx foreign And are there's to rates, at which for the interest rates. historically the the not as higher the likely reasons of of lot it economy, they're the flat be saying It rates. are more a financial long-term could easing for year, it's it it's Yet our rates you believe the lot look yes, an really overseas X-year room and if now. error while I'm - raise not rates before crisis. is rates, Yet government

So the but mean, that, being I pockets real in here, money in estate market seen it coming is slowness. have that very But the of general, is do watch. world, to believe something we looks healthy. I said, the still

think materialize would see loan as just not our like general. performance look plan in didn't - as portfolio more to through any be, operating credit there concessions. I I requests [hotel] quickly. looked problems, - it didn't just and are We are as at we see, High-end don't if it strong we that apartments is value-add but

So watch I - them. see to look in you that's really general, anything But worsened. have don't

your think are that the answer just I because it innings. not there today of implies finite terminology right I'm to number is question, certain inning sure So

in period a the cycle. of I think we're just in longer recovery

Ken Bruce

you Thank them. I Thanks. your for comments. appreciate

Robert Foley

Thanks Ken.

Operator

comes question ahead. next our Please Deutsche And Bank. Bahamondes from of go George

George Bahamondes

March of remarks, loans $XXX or million opening morning. Hi, closed XX? your the good Greta, to closing of you subsequent reference process in did in

Greta Guggenheim

Yes.

George Bahamondes

Great.

that to either correctly. expected or paid I the helpful. subsequent any Okay. repaid so wanted here repay? like sense Do be to color isn't may I what maybe down were had to repay to I just since expected [indiscernible], around been has repayments understand you X/XX, X/XX, have make that probably what sure for a

Greta Guggenheim

quarter, we zero, again. numbers. we're are condominium Bob billion light coming it first In down as And $XXX And our of construction projecting a $X.X year, the repayment. construction over from drops which units condominium about next and loan and the paying for exact zero. almost think But reduces the pretty I a are had little The of relatively quarters, two the anticipating delivered. we're repayments, to this has much was million. exposure $XXX sold then down million of $XXX fourth quarter million repayments. also

George Bahamondes

Got it.

Okay, thank you. That is color. helpful

Operator

ahead. today from question Please comes of go Cyganovich And Arren our Citi. next

Arren Cyganovich

of just Did you're have you the billion Thanks. to over repayments say going $X.X next two quarters?

Greta Guggenheim

million next No. a the little XXX - two $XXX in quarters. over

Arren Cyganovich

right. that. All I Okay. Good. misheard it. Got

guess, what So LTVs in on are How that if the to compare look side, how moving or a I to able quality, the that office to finance in, of you're by cetera. multifamily, does general class? So like-to-like you these today? fact kind asset at the investing you you're LTV from year, et higher differentiated were multifamily prior

Greta Guggenheim

that borrowers can leverage. are are XX%, XX%. the higher who for you adviser for who not are XX% see the They're they to they for would those the often asking borrower's asking taking are say now quote where it, Go I XX% and more. for saying, And for And is are. want Hey, ask it. asking but it's always at

X%. think I

Arren Cyganovich

All right.

used just about kind you risk questions, the you've made it to to yet interesting getting cycles, of one of some of more near in kind think of is talking rising, like not debt willing past if same type comfort can the But we're this some tight about on we're compression, originations like the as we're investors increasing trends of and banks previous spread back where the strategy? Could into just provide feel financing, seems And this kind to guess of comment be. as I like seeing, overall rising, So feels amount we LTVs of at just overarching the it kind time, toppy. about comments the you of market. you're

Greta Guggenheim

markets, top to do for important borrowers. is And could I borrower location firstly, location. focus institutional - go equally don't is almost we high-quality Well, the real know equally But on if important on and we either way - do I focus on estate. that. major clearly

So mortgage the still first assets level. lending creation predominantly value-add see do, in that at I think first we be mortgage we that in the asset two on those. component the there years, lending, less be volatility will value stabilized is will which within continued There's of type lending so

And was we of where do our at acquisitions. quarter-to-quarter, debt are those So permanent is than to and we pre-financial seeing what close will Are today, be, XX% were general fixed loans it yield think what years close. - like three still loans, they in not for stress we're the that we is stabilized rates those. look debt leverage rates crisis? take-out yield, it depends ago? Nowhere interest higher it Yes. leverage. We're of our Is seeing types our

in we're so So you're of very the equity has that mindful refinancings seeing aligned. in. And cash we much the do incentives when new our borrower are asset how

in of strategy, see think So XX-month end because the we construction down I what's I type mean, just of far deemphasized as we're terms lease-up value-add of that tunnel I by the loan of the have can't followed lending another XX-month can the going road to where doing, happen. see we the we XX for property the the mentioned, to

lending I toppy defensive strategy So types doing types one particularly, equity behind have real does a cushion And we the loans. very the of if comfortable because the believe in - of with and still estate we that we're that that. we're do feel is believe our

Arren Cyganovich

And chart, That's but cost of environment? meaningful. in you helpful. to of your related lowering expansion margin achievable this your this assume there's would actually I be the then going increase? tightening get guess I helps, LIBOR floor Can on sensitivity XX to as that. spread fairly debt, appreciate is of sort this I that which have which on kind of Slide sensitivity that always Is the you in supplemental, Thanks. You're very asset actually some well.

Greta Guggenheim

As LIBOR Is to you're what compress? margins further increases, asking? cause will that that

Arren Cyganovich

LIBOR. - are because rising Well, are But are of margins to that going going give I LIBOR have benefit guess compress, benefit up to that you'll and these I going feeling rising to a margins compress? you further gut are that from clearly

Greta Guggenheim

years. percentage of go I I two the and every in likely be do tightening thinking way type here, experienced in to opinion going the tighten But last my the to more again, us. we're tightening that day, we're feel being do asked feel said, don't that is term. the the see to I than everyday, that do I the one believe the behind are near influencing very margins and the - quoting other of could believe is But this decreases worst wishful deals, market - further. we're we've compress in to but

Arren Cyganovich

All right. Thank you very much.

Robert Foley

Thank you, Arren.

Operator

our [indiscernible]. And comes ahead. from question final Please go today

Unidentified Analyst

Good for thanks taking and morning questions. my

guarantee the base detailed, amending in So the To multiple moderate you portfolio to four do we've to categories, think X.X:X leverage. transitional little or and bridge, just construction, you able lightly you it be get you'd for do can a you when more majority employ spoken agreements about for except break decline? allow the for bit the a is light which quite loan think additional - already bucket, transitional, portion, the your of this on be your collateral construction into

Robert Foley

rates blanket Well, loans. referred, covenant. doesn't on to the covenant Ben, It leverage macro to which - you the specific covenant advance a a or is individual apply

advance or we're at GSEs likely even number and believe a any for originate. rate past, property appropriate a another support capital being of a actively have though constraint relatively everything a originating XX% we as in it's providers to the is equal, advance an that the or And in of construction the those And each between we clear to And those do all itself, higher made an of has XX%. spectrum with with two goalposts. binding advance and or the high other rates, can tend in multifamily there that, that with debt not is place said else our falls in loans, on much to refinanced typically Having lower end range much, respect investment. rate. else So - Greta not optimal individual loan decision of loan financing the other spectrum, yield along be

Unidentified Analyst

a I important pretty that of to your maybe could you have is always bespoke. is and sense, be that some you source also thinking quarter-end the of everything deployed. we fully that And makes your now investment got over are highlighted requirements, be about to to loans? you in bit point you've that something right mentioned I good it's about regard? able Are peers? advantage I'm and more guys flush but how of little capital choosy at those market liquidity Just think kind the mean, I know we I fundings, each be cherry-pick your loan If a this with you and that feeling necessarily correctly, close an on know unique position capacity, on aren't we and remember competitive figures. as That touched fact reallocated, in future to capital CMBS

Robert Foley

a Let's in take has And Greta that know I then view points, two this. first. and on I'll go

credit I think of that quality that investment more on Greta in can all and terms our market, moment. environments. of so we touch a selectivity in market sponsorship, on, a And have in bar high

our before activity. which a net growth reinvest asset fund necessarily numbers. And Yes, but from to participation with credit earlier, our current to Greta in I In ability that cash six CLO very in contribute terms we to as accounting in of of between feel number loans highlighted our with that earlier origination CLO repayments, and the to different confident drives the the for analyst untapped in that on near-term capital have and Greta balance and some with base, earlier, clearly capacity investment see financing we cash prepares, community put we our that more already cash production are place between already the that models of we capital mentioned can said facilities sheet interest gross targets investment the achieve which capacity, CLO. in wouldn't new sources that's

Greta Guggenheim

a loans mean, think highly no, we're we'll we're I cash from evaluating thing focus the Yes, not, on. add And that flush we're I standpoint with always would not of that when we do only transitional is opportunities. we But band certain a it presently, we feel I whether or covered are type - of constrained that capital well. have selective.

Unidentified Analyst

helpful. That's very

quick also start the replenishment think construction in structured the guys financing. remember the for important I congrats and repaying we Appreciate loans quickly that your comments, XQ. and it's feature of

Robert Foley

Ben. you, Thank

Operator

turn remarks. back conference our any to session. And to question-and-answer I'd this closing for Ms. like over concludes Guggenheim the

Greta Guggenheim

the questions. our you Thank pipeline. and to very we're all very accomplished were what felt excited for thank quarter. about more you year-to-date we look We're conclude, since I and IPO. we Well, that your excited excited about they next forward just even thoughtful very speaking to progress our And And interesting. have to about you.

Operator

concluded, for has and now attending conference thank Today's you ma'am. you, today's we thank presentation. And all

have now your lines, disconnect and You day. wonderful may a

TPG RE Finance Trust (TRTX) 12 May 182018 Q1 Earnings call transcript