TRTX - Earnings call transcript Q2 2018 | TPG RE Finance Trust, Inc.

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Greetings and welcome to the TPG Real Estate Finance Trust Second Quarter 2018 Earnings Conference Call. At this time, all participants are in a listen only mode. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host Brad Cohen or ICR. Thank you.

begin. may You

Brad Cohen

welcome quarter and Real Finance Estate Good conference to call. second XXXX Trust's morning, TPG

June On today and and about the Mr. and the call Executive will the Bob XX-Q Chief call Bob presentation XX, Yesterday we'll Foley, release are with the quarter, supplemental earnings detailing Ms. the are for operating our press and Chief quarter open some questions. all Financial available share company coding Risk website Investor then XXXX, a ended Greta filed of which in Guggenheim, and Officer. comments issued Greta up its Relations for Officer; evening, its Form results on a section. the

and outside the Actual remind materially. may control. everyone of differ today's results me include that uncertain forward-looking may company's Let are call statements, which

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

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

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

Greta Guggenheim

of the in for August. loans a quarter, call. quarter Thank closing been established excellent you, us, the you through and $XXX million. an on results. we good strong continue year-to-date seven the early Thank second first quarter everyone and great quarter present was mortgage pace totaling we second It originations Brad, to morning the by as first joining In our it’s

XXX originated we first the credit of loans spread weighted billion XXXX, of six of months points. mortgage basis with For a $X.X average first

of have was The of Our the closed the seven we to to quarter quarter-over-quarter is year-to-date all XXth. in loan focus This size bridge comfortably to small $XX XX% The a volume have that since nearly leverage from average assets million weighted in originations by average loan equals million totaling loans originated support on loan process an loan lenders. ratio increased our average of are average million. higher on XXXX. closing reflects light in including XX%, originations us weighted since of billion our in amount value $XXX in of value second the value includes transitional the flowing advance our which are and June weighted close $XXX which cash to Year-to-date, higher value borrowers to end, which loan our to rates quarter us $X.X XX%.

For points. the second our average basis XXX credit was quarter, spread weighted

million mezzanine to a quarter's can large skew progress. as a originations compression has due one loan of late XXX in note is TRT’s basis on our points without $XXX to spread based resource a trends with these are the on over life $XXX spread in difficult construction was of end this broker weighted weighted points. source lumpy marketed our but the spreads deep that or subsequent closing origination Our relationships spread close these road mass quarter for of activity, million is loan. because basis quite LIBOR. it a fact spread to By has to basis achieved been Spread Having basis contrast, spread of at not able XXX is first with directly bars. part tightest XXX points credit us result. Please history. higher the is heavily It deals. we been and recently XXX block loan not Year-to-date, to rely Over million originated average mortgage average credit attractive credit $XXX our average to quarterly were points. This extrapolate have

its our deep and fire and credit successfully to have knowledge our a opportunities. the borrowers most in square provide added team evaluation. also to XX originations Our estate source has our second our additional extensive decades real to experience loan estate brokers of greatly lending investment attractive power, momentum is integration team million the during real of States, to equity this relationships utilized over with lending feet with our loan the quarter contributing our which senior We positive and sourcing commercial TPGs enhances established of and originator United team been ownership

during management for is business call every be Our in and investment engagement deep reputation results for next and asset our factor, TRT working. to differentiating we first borrower the another our the origination it’s suggest responsiveness stages of strive

For unwanted lending avoiding example, originated disciplined relationship. loans remaining tail remain the risk four seven [ph] We long-term have loans down three the and the with in in quarter brokers credit or were the we we within road. of and borrowers deep second routine or borrowers involve

example, and estate For sponsorship originations to a evident don’t real focus real our efforts construction deployment concentration risk strong focus of continued We and business the We skin mindful by and on underlying sponsor cycle. our diversified is loan our volume very our shorter in the We in quality with loans strong concentrate the estate with fundamentals. originations. geography, portfolio. given term size, in of mature disciplined new target believe year-to-date we in on plans, game prefer on loans property type

XXXX. is wide very the spread of encouraged entire fiscal year-to-date our billion, mortgage and While a with of first average transitional, weighted points. predominantly $X.X basis is of year equals volume for this our by loans are we nearly all over assets cash flowing are XXX market origination Again, competitive, production which

far risk top Credit Bob, excited With results. call we adjusted pipeline, of our underwriting long the and about discuss remains We to that, over are very very the I’d also turn to and in our our about to loan of the quality our returns. the many loans process. good which quality priority are feel robust like

Robert Foley

the performance Greta, detail good interest. supplemental contained last to operating my morning, indicators are we the remarks Thanks, I’ll everyone. particular a key This performance, and earnings per and regarding in limit XX-Q items of which few capital portfolio, and filed night. loan the other Since morning, base

as net $XXX bonds securities. share, costs per posted of that mark share, earnings. points of quarter X% and to we on quarter compared and as GAAP income end second largely per per increase million performance. growth two million, expense over in same our or in to available quarter-over-quarter. X driven for Earnings Book impact first-time at prior has quarter. $X.XX share quarter. XX% And continued of over adjustment as common growth a down the was various a average value to related weighted $XX.XX of X.X% was First, $XX.X a company. mid-June Mae an market $XX.XX primarily due share declared $XX.X for in of no We credit to quarter diluted and sale non-cash the borrowings preceding with $X.XX project paid we This share, net cash July, per end, account and or $X.XX public $X.X dividend in of $X.XX per was due by prior quarter expectations, up at Ginnie on quarter roughly loan assets of versus million, multi-family loan guaranteed diluted for approximately basis MG&A decline million a of XXXX, our spread line

Our on value and share quarter-end on book share annualized price per now $XX.XX. yield is Monday’s dividend X.X% at our closing X.X% of

with new first loan a fundings of under quarter, line our seven the totaling, with $XXX.X loans million, second commitments is $XXX.X we originated million. Initial $XXX million. the year During lifting expectations. were $XXX Loan which repayments to repayments million, totaled in half

weeks, loan initial loans investment second the through commitments the XX.X%, portfolio we average loan existing quarter, prior million short-term borrower high-grade construction for expected of including to continued a $XXX.X approximately Repayment late acquired number proceeds condominium South our of bridge approximately closings. this $XX.X highlights XXX of signed from almost end existing was commitments million again loan continue With business our to repaid with $XXX our from of CMBS, to to for $XX emphasis our XXX closed transitional the million $XX.X Accordingly, that’s purchase in pipeline. in is The of we sold contract the purposes work quarter loan to Florida, legacy loans its a repayments July, B that ratio our plans quarter at construction capital loans, eight on unfunded million, continue of limited loan more million deferred funding. to Second our daily fundings construction loan periods. put year. exposure of of execution discipline, when loan and with contracts included we our to reduce new entirety to legacy was in dwindling of relating we amounts share our of using which repayments. quarter-over-quarter Link $XXX million In down In and quarter. CMBS origination fund decline the our the eight

finance knowledge corporate result us the of both pick repo loan attributes average leverage with asset from on plus asset at to efficiently rose of quarter-over-quarter and improvement. structured Our points. place investments loan replenishments, prior targeting for XXX executed experience allowed to then continuing leading platform, quarter investing two or Portfolio yields by on repaying the at loan approved equity debt making, investment LIBOR prudent in value weighted and meaningful underwriting repayments to advanced commercial or average And CLOs XX% to produce attractive financing. risk. generally credit the first for LIBOR commercial quarter. wide our maintain consistent borrowings the other XXX pledged in and quarter, rates basis a was rate our lender of allows the compared periods spread in first with paper We up modest real $XX.X advanced commitment order return short XX.X% during a leverage XX.X% their and managed A which solid leveraging weighted us to the credit these basis management TPG estate origination, plus for in in pairing appropriate second yield the to XX.X% was disciplined and level during attentive direct demonstrating to our the generate million points, use of decision CLO ratios, recycle of cash loans as cost continued products. solid to We edge platforms and mortgage ROEs is them

were X.XXXX in leverage, X.XXX ratio success tap ROE debt-to-equity Our and growth. do debt and increase healthy. during key liabilities At drivers of cost of to further further position of quarter-end, dividend evidence We quarters private of in non-mark-to-market quarter structured liquidity in in to the tenure from funds, the our our markets our reduce of borrowings. the our ramping deployment are and capital prior finance use future our increased extend capital expect to non-recourse, which

At large did highly X.X, loss. loan even was CLO into near-term cash X.X quarter-end, currently to This by window targeted rating leverage initial otherwise. in better $XXX XXXX. In And into and In of the and up addition credit deployment that financing of table record we was late $XX allows million rated risk million transfer than the for $XXX near-term garnered Also, can $X.X $XXX.X capacity to driven we loans capacity non-core In average can new of our solid. it have from a I or us also whether status category our basis loan which our credit Deutsche quarter points or with process secured with of our closings of a repo to end, less generate CMBS and our X our slightly loan, estimated July, for July cash former as decision fixed in loan warehouse under or then available it quarter reserve financing repurchase loans originations end. close this than affords new quickly at sold a is is more agreements acquired the rating $X.X not nimble our quarter for new immediately during repayment from slightly since in us X with note which pipeline grade portfolio we investment represented $XXX At syndication, expected loan loan million which of to X% converted billion. the enable us We mentioned the balances non-accrual interest had strategy. full us earlier, Greta to loan remains total, to from we totaling borrower be loan, comparison, a large financing revolving facility. nearly a no closed Credit of as million, of the X.X Deutsche sold facilities, capacity. portfolio of $X closed quarterly secured not our capacity had new we Bank investment another funding usual, in closing originations The occasionally to participation prior investment weighted X $XXX this mentioned X meeting X, repurchase loans, pricing portfolio sale, than premium quarter-end, high approximately billion available recourse to note, X. requirements quick By or maturity. mortgage loans After portfolio’s on because million facility. late loan credit fund in of performance billion July, of more a or million optimize in under $XX.X a facility undrawn million potential million a book. we the rated investments consistent of loan rate and Citibank, category we $X.X represents X which available first committed of Bank our of

to since Finally, all liabilities our rising assets tied our all index. and substantially for positive same rates us, LIBOR are are the

we out from to service debt rate protect interest might our purchase rates the rates require addition, loans. your of Thanks be during cap would much. collateral Greta and term money their happy Donna? questions. underwrite generally borrowers the occurred conservative with And I of entertain value. impact the caps them future with to loans view us that, sharp we interest and rates in And on coverage, rises that In of and our and to our forward very

Operator

Stephen Please you. first questions. from James. open go now of coming Raymond Thank question Our [Operator The floor Instructions] is for is Laws ahead.

Stephen Laws

growth and on Bob a Greta Hi solid congratulations a morning, quarter. good portfolio solid and

Robert Foley

Thanks.

Stephen Laws

out Greta, try the sample since new of follow you're of draw assets, to remarks. and to on I on something have trend a know spreads I But the you seems things about those hated quarter-end. new how Is marketing? back a new seeing you sizes some that then origination going. are mentioned specifically Is a LIBOR you simply function small there It bit up yields and Maybe see first from where on rebounded in them investments here? prepared go in your like to little little of with going subsequent where more you the quarter second just quarter-end. a got detail asset and come volume investments, and can have

Greta Guggenheim

has Well, there than compression. XXXX spreads less mean I been XXX of are year definitely full spread spread. year-to-date our

having borrowers a the being come are high to and relationships I major deals, brokers where very XX trying other quarter-end marketed stay periods, as very our not so deep since size competitive is been maybe result time. mortgage is very solely lenders to comparing what part the that the mean the and are win. I it's compete quality loan the to to in get mass avoiding it able we of feel differentiated think will those in on originations getting I relying of more on believe we been flow. -- to national compare in And and far that clear in. But rely do force also, broker transactions, And on pricing loan. But because important it tightest on relationships chunks our direct quarter-to-quarter have the originations. spreads with deals. high-quality larger, strong indicate, those we And larger certainly So spreads but we and looking have clearly at said, our like I to

less million. as other that than in where a mortgage some $XXX larger a results million a thins Now from out, to And I there REIT our lot $XXX see is you're slightly but prove the you $XXX certain size it it's loan is size, private when think think public out. as our of well the million some of less competitive. funds. or I believe size debt We our And interest of average

Stephen Laws

question take MSAs I hit top-five my smaller actually to in you're the versus what smaller about markets loans place. on exactly the You XX or typically ask where seeing second guess

And it your low at Has changed sound competition own less at or it investment seeing go the continued individual each end. just so, the does has through focus terms. all, you're that like at its to look and pipeline on

Greta Guggenheim

originations. very our We're on major still high and the markets. focusing of percent

in the -- over I XX% are in top market of think the market. our XX top-XX it's portfolio

and loans not million the strategy sponsor it's You're $XXX million that. to chasing our in relationship see world. competing more to the not the shift with materially with going and $XXX

Stephen Laws

And prepayments, I maybe in the any prepays, maturity, goof as year. on the under will there know the the the extended second give this end. quarter gave the Bob, for you or you portfolio have where year, second of any prepays can we us maturity Right. the of fully think be you half Are has subsequent of loan maybe about good originations half information but table sense what’s a do state of insight

Robert Foley

loans question and other you many as very advantages Good can, have loan to Steve. of of large a And you and asset call the being we business you attentive as individually. management the know, intermediate the should in platform one manage on your and

each And often clearly – what try plans we repayment of by and some capital and business conditions. our forecast loan, underlying general is by constant every driven markets the so, accurately we’ve in touch we’re to quarter-over-quarter, variability, expect be will we there and the with more borrowers behavior

of actually say the occur what of that underlying that occur behavior be been to rest for that we advance, project did first operate could good signed variability little But the the second of are be expect the to in final South the actual but half, decision. would year project, year of and a to sponsor the experienced year as think vary. There deals. our example would with whole. mentioned rooms, a have can to year extremely your in We often what their thought. our aggregate we the borrowers rest amount the is Florida of that the particular was and the we question case that drive closed get repay half a close the But over should and at contracts two text we that deal than closing year not out the should the around that’s repayments look the will year. that second look consistent given sub that like deal variability investment very like the so in I dollar repayment and borrowers will of or premise as earlier. really be conference well the multiple first bring faster year expect that just one a bank in now That’s this of quarters all that or of would I year their expectations loans a half of repayments. to to taken check-in what They that is close first you the that the half I bank conduit for that

Stephen Laws

Bob. my I for appreciate on taking Great, question. color Thanks the that

Robert Foley

question. the for you Thank

Operator

you. Thank

ahead. Securities. question of from JMP Steve is Please Delaney, next Our go coming

Steve Delaney

large the and loan was XXX. office loan, taking that page highlighted priced Great, thank LIBOR mentioned be nine you large plus loan on the Good that at you morning the Philadelphia. Would in for the questions.

Greta Guggenheim

is. it Yes,

Steve Delaney

attractive Bob, of what second question it I the that some pretty on What that Could loan attractive just would loan. Okay. cause guess is LTV, in of anything loan comment than better would that part terms other loan, to made to that the be that looks that the loans. another there of would and about was finance specifically like much to you

putting than that the curious lot decision you through fact Just Thanks. of went it a was the other money if work? to process

Greta Guggenheim

borrowers high-quality our consistent But it markets, also originations [ph] to assets. with period long other it have of I that to personally strategy is signed The very time sponsor and our lent obviously most that of which business strong borrower Sure, good a excellent has of loan and documents have that and is and over very of the history look the with. with major us. executing a their is great experience they important abiding had by loan plan is at

more the you in So, that with and one may our to leaned this larger we win competitive see given are from one is bit as chose on to we I loans that before to to teemed us on mentioned be this it in lean sponsor, and a time-to-time. comfort

Steve Delaney

to the clients. your on Understand, that part, run of XX% the should holding where focus. to is, Kind that’s understand? loans part borrower, intentional any a we normal it’s and to quarter same multiple your notice the market directly office we, second part to big extension concentration behind there should that of on that management XX% and in good what relationship I a properties. in be going Was of the But loans anything always given the your quarter

Greta Guggenheim

wasn't out the our of portfolio. is quarter high set to have goal That a a concentration. that beginning of of XX% the Office at

away on very, selective We continue We're We're like hotel. to office. retail. from shying very

barrowers Not target, do we repeat financed selective. or leaves was borrowers it retail are office much that multifamily there. of are primary our And loans have TRTX. won't just there our as just a not to at focus. the more before hotel, in So, and happened. we it But say really this we're but Three

Steve Delaney

up and for I your -- Great, the to helps positioned And sale CMBS your your the capital Bob, mentioned well. in you. about growing of pipeline. comments deck to you. the thank as Liquid free fund talk you in you one asset in noticed,

in they XXX be should value at gain Thanks. anything third would GAAP the be accounting where fair recognized would carried standpoint, they from that that Just any if on quarter an we if whether above the mark? maybe curious, were consider sale, being

Robert Foley

with questions. a your exceptions. are few unlikely Thanks, I say would that's for all Steve, of

to primarily thoughtfully to the by for driven duration prior have activity cash it, Our rated loans. floaters. so, whole desire very And CMBS short-term generally buy AAA we is us and when we do our to investment invest deployment short primarily

some it intended life bonds to those cash as a should substitute. as given loans. And fixed the should that DVO, our losses that think price see activity. investment Sometimes be short is remaining low, expect be very a the consequence, consequence, that one volatility, is I to of material gains rate a But this don't CMBS people or from which

Steve Delaney

I it. God you. appreciate comments. the Thank

Robert Foley

Thank you, Steve.

Greta Guggenheim

you. Thank

Operator

Our Morgan. Instructions] is question next Please [Operator coming from go Rick Shane JP ahead. of

Rick Shane

Thanks guys. in eight to sure Hi or pipeline morning. efforts the not question page description? disclosure this on is the events six the I appreciate page origination to just I that for whether subsequent pipeline. taking pool my additional on the related we for loans want the reference same the with understand describing that that cited pipeline is on page of loan the indicates of footnotes make

Greta Guggenheim

does. it Yes,

Rick Shane

Okay.

basically And then fallout it So, of those closing. a this, process that not how in pipeline versus event page what you at I'm metrics are that pipeline not more bit and normally on look? almost loans. eight, those little favorable in are given we the subsequent or expect whether says, suggest you closed curious look does

Greta Guggenheim

of this week that these want least borrower that Many over, scheduled so No, will our of or doesn't the the at end expectation. approximately And will are closed by we miss to they these of acquisition we that's do also, close half and loans not. as believe deadline. be because

Rick Shane

that the when there level financing. from offset second seen place. well return look quarter helpful. that what calculation? through is quarter scale curious as assuming very quarter of disclosure of in presumably is isn't The to I'm half compression first fourth we there any make when estimated XXXX, run back that I asset at XXXX, by sort the and first of benefit away we've the of efficient you of spread in terms is more some going driven be financing In because great. was or am of in that ultimately Okay, XXXX overtime, the

Robert Foley

thank you question that and for take I’ll Rick, it.

the right as our asset-by-asset we net a that respect be as But we scale, start-up as discussed over we grows. believe grows whole on, a operating a MG&A book leverage expect business. You're public at quarters. we’re there and scale to have and with company into expenses gotten is last both ROE embedded past company couple which the ROE, and of We’ve an significant cost will good overtime the after on we’ve lot so previously basis. benefits do as the of a our especially

do there. we bluntly, our our overtime we quarter important at having of do. sort there to there’s available techniques good markets we’ve here those us us we big did are that exploit finance capital things markets to that the would deal reliance investment other think made an really was very in capital milestone bigger in is but on So, team in The benefit relationships their to team of direct good first think work the But for the headway use opportunities overtime. I to of the crop benefits improving team in ROE regard, have and terms but hope to some sustaining and still CLO especially or we for TPG decisions either making efficiently of skin cream our then the and

Rick Shane

it. Got

function and has spreads or say So, that static improve? a but really will that ultimately level pinpoint the dynamic it's yields asset to operating dynamic, has that that and it, been the to fair has -- have dynamic, been the on the been that Fair quarters. been for expenses provided with associated that say with funding metric ROE to spreads four so yields assumptions you’ve

Robert Foley

fact the that fees, you we don’t static, I expenses, in those down and sustainable been levels management see relevant closer spread quarters, volume, were but and think you’ll extended would like an servicing if are hawk for it’s say the it those MG&A, operating that our of we that slightly range the terms of fees that MG&A quarter-over-quarter way. expense results asset put professional business and -- on to was quarter several this last let’s have over flat operating in

Rick Shane

you, Thank guys. helpful. Great. That’s very Okay.

Operator

over Thank this like turn closing Ms. the Guggenheim At back to comments. you. I for time, floor would to

Greta Guggenheim

and Thank next this look summer. you forward over conference last you the weeks the the you road joining us and We for months. to few morning. again you on seeing with enjoy the on three circuit of interim, the we hope speaking In

Operator

gentlemen, and participation. This conference. your Ladies today’s you concludes thank for

disconnect this lines a have day. may You your time wonderful and at

TPG RE Finance Trust (TRTX) 7 Aug 182018 Q2 Earnings call transcript