TRTX - Earnings call transcript Q3 2020 | TPG RE Finance Trust, Inc.

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Operator

Greetings and welcome to TPG Real Estate Finance Trust third quarter 2020 earnings conference call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions].

As a reminder, this conference is being recorded. pleasure and your General my Vice Deborah now Secretary President, Counsel. is to host, introduce Ginsberg, It Thank you.

You may begin.

Deborah Ginsberg

questions. we by the I Good the we morning third joined Officer call. Trust all statements, Officer. filed remind uncertain Coleman, and Chief about President and materially. to the section. and XX-Q which Estate Real call Chief are website and open issued a Yesterday today and will am company's presentation of Bob Relations press a may forward-looking differ Matt and welcome like comments evening, our Form quarter are everyone our Bob release then to XXXX will that quarter our of TPG some Greta for on Investor and of Executive Guggenheim, results up Financial would with Foley, operating Finance outside Actual Greta available today's the conference results, call in I share control. include which may

call Estate TPG call to certain our of a could any the the the statements press affect the of XX-Q. results, pleasure risks to Greta should XX-Q. my and We will Officer undertake non-GAAP these we discussion release to refer Guggenheim, duty also that do our Trust. our Executive update Real see With measures you Factors over this section reconciliations not Risk of and and turn please of For recent to and on Chief for most refer XX-K to Finance that, it's some

Greta Guggenheim

Thank you Deborah morning. and good

four to $XXX At the we a quarter-end, we to of portfolio questions. be to asset the distractions and loans the steady modified our includes declined Beginning REIT our progress office payments. collected at of eight realized by and are to this week at collections we loans with loans remained and quarter. multifamily deferral loans. with and or Hotel right quarter has of total two the last quarter. matters hotel much we slightly $X.X during with interest Total for our stick your report the of million to last third market X.X% steadily end for few occupancy best are We from interest property. resort were interests with We performance quarter during compares concise, really XXX% due get but This there the of with the loan million to UPB have interest loans the partial which for We four. management. since secured and $XXX high-end XX% spoke. have PIK million. our XX%, other what is mid-market caters increased so that one will RevPAR income each of made This of our on had PIK an very performance loans assets pleased property, a our

hotel gain interest sponsor was and $XX.X sold in or million was for We sold service our underlying to well, and in one XX% asset of on borrower additional increased months. interest a The asset's purchaser in loan service. another RevPAR is affect loan XX% is the the properties' $X.X The two the As at and and Subsequent of paid to the third-party deed also land market brought loan the that which no on our defaulted. six-month borrower business portfolio, capitalized closing XXXX pre-funded loan loan XX The a it largest The has well its existing expected TRT RevPAR. loan. has funded of was be quarter, $XX a approximately reserve for core and to JV cash is for million at new substantial by contribute mezzanine borrower guaranteed sponsor to have loan borrower. The property the due loan last select in assumed down select happens Midtown requested loss our investor. that strategic to service at plus $X.X and in a to million Strip. on institutional over of million our interest this. office million a Vegas reserves life Manhattan that past the other quite in occupancy a lieu. and on a liquidity October quarter-end, debt $X capitalized nine Las well. the days and securing defaulted office properties is Brooklyn This parcels our The by The a was building. in the an on of issues loans The its borrower office seven with performed loan new one properties contributed

loan million in after five rated asset. million including this and are reserve received We year-to-date, are $XXX million. a Repayments, quarter. the in repayments We repayments specific have third on this $XXX of taking received quarter-end a $XX.X

future is the by Additionally, aforementioned $X.X funding of mezzanine loan, we sold the $XX purchaser. assumed a obligation which million million

at Our is position net of quarter-end close cash covenant of increased million as yesterday's to and $XXX cash. $XXX million

the commitments six months. have unfunded existing We million $XXX loans and our and to $XXX for of next related million XX

fundings million, on $XX respectively. net million these are $XX cash expected Our and outlay

corporate extended liabilities our A credit With the no CLO loan, facilities $XX exception are financing financing. debt, secured April secured and with is our Note and our newest Las a of a land of agreement maturity FHLB Vegas solely XXXX million of credit

fully end, secured with term committed seven average weighted into million with facility loans on maturity Our $XXX a facility two a years. After quarter for mark-to-market three-year refinanced credit our credit no XXXX. hotel final extended is we September

financed result, with no brings financing debt. loans which total a mark-to-market our are overall of hotel XXX% for years XX.X% to of two risk As non-mark-to-market our

aforementioned outstanding have third been X.XX%. was per core million earnings per share $X.XX the WAC on $XXX the our earnings $X.XX share. facility level $X.XX earnings share. would diluted Had was been reflecting $X.XX Finally, per GAAP asset quarter, and Core per basic credit share, high of throughout

We future have and our still meaningful by continue demonstrate assets portfolio will to to to provide of particularly the end protect closer borrowers with and we that to our most assets our and upside of since significant continue strong to the and to seven crisis. the high-quality and value will the pandemic health value us work believe initial have returns, impacted are LTVs borrowers Low well. serve months

mark-to-market so our and we that of weathering We with storm is We management the value continue on book this our on term our on attentive extending our and liabilities. asset realize focus liquidity, our the believe shareholders. of focus reducing in and pandemic can value to the and the assets exposure for borrowers our high-quality proactive

deploying are in year. We also new preparing cash to the begin

our are Thank opportunities slowly. institutional has We gain Bob you. starting momentum, acquisition albeit activity mic sponsors as lending will see among begun to to now Foley. hand I to interesting over the

Bob Foley

good to as $X.XX Thank September due share. of $X.XX the for earnings diluted share We share yesterday per reported said, Greta the GAAP for quarter you prior from afternoon earnings GAAP morning and the XX, $X.XX per absence per earnings Greta in common quarter, That's entirely the the up per everyone. quarter almost were share last in by core $X.XX. and ending $X.XX on Book September of share $X.XX, increased share. of share, declared that share by recognized we October June. loss a per per $XX.XX quarter-over-quarter paid on on dividend the per earnings and exceeded on value share we XX of our $X.XX quarter to We the XX of quarter a per per third strength loan sold common dividend diluted ended about

basis were, dividend of by average quarter-over-quarter outstripped non-zero third, a two our second, scheduled our past have quarter. interest drivers in core XXX% during the money liabilities that first, primary that's XX LIBOR points of points a XXX% The in because floors interest, fell floor times. an all strong million collected of involve on because the from earnings second average are by during LIBOR earnings basis $XXX magnified quarters, of $X.X with and of million the and LIBOR the declined our expense of X.XX%, approximately floors which our a benefit borrowings only loans, X% we our XX an For decline X.XX that's of weighted LIBOR quarter finally, to average of our of

cash was the $XXX.X and October. of that in million loan occurred to repayments million of $XXX.X part In in liquidity, due quarter-end terms at hand on

We have $XXX million awaiting CLOs of cash reinvestment. in our

it and uncertainties, levels public Given positions believe At earnings not mitigant effective prudent selectively an mark-to-market It's early us hold were health to economic risk XXXX. through the non-recourse despite the we quarter-end, and cash and our in to provisions. political, loan liabilities undertake of to investments us it's XX% run normal the for higher than drag. subject short new year-end

the non-mark-to-market of Our two CLOs funding. represent most

continue $XXX will across the As soon features the mark-to-market loan further quarter-end gain credit exposure. loans secured to more the underlying engaged facilities With by will counterparties. $XXX exception, with declines marks, in liabilities based increase the our our will redeploy recycled million momentum, total million to CLOs collateral two and term When happens, our closely non-mark-to-market million from we reinvestment We facilities, currently one quarter, third XX.X% our absorb cash to of we credit another remain and and recycled since our $XXX only CLOs of our reducing secured credit have In our triggered CLOs. repayments non-temporary that value. in debt. of lending are our subject

business on of remains This five to XXXX from second one model All credit. profile in all among of Leverage during through are confident we quarter-end, maturity in of quarter, business extended the our we of peer of facilities. borrowed the separate was After our and extend credit asset the heels the three During secured initial set. of our platform, the lowest supportive our our million of quality maturity the counterparties. the management and liability. especially $XX.X which quarter, low, extensions serve October

September at roughly ceiling X.XX:X, XX X.X:X. below long-standing ratio leverage of Our our XX% was

have our we of credit secured terms facilities, In deleveraged. also

thus roughly our was counterparties, compared against underlying XX. XX.X% collateral XX.X% rates example, LTV LTV underlying XX Across seven collateral XX.X% average to only average on approved collateral March weighted advance For XX% that and the at pledge rate lenders number we our and XX%. quarter-end a the look-through same June our against at have is of collateral to at advance of and improved our

change million continue in of our total influencing basis the that assumes commitments, Regarding reserve CECL our economic that the basis a of reserve COVID-XX factors $XX.X will points view half into consistently XXX Important quarter-over-quarter quarter-end. second induced from was up cautious at prior to XXXX. included points macroeconomic recession CECL, or our XXX quarter-end,

now particular are we million specific Vegas among the $XX.X And the performance mortgage in important land loan. reserve improving operating many Las another CECL finally, against factor, Although the macroeconomic hotels. our operating COVID, of properties collateral assumptions we recorded first stable our The quarters was performance our three for quarters. stand of more underlying for we many least three at into assume

reserve Our will expectations our your of process. to that, estate an and the CECL analytical is based portfolio and knowledge involves our recent commercial represent with we Operator? result our take for for future It business expected estimate be entire it real markets. And exhaustive on the of the pleased questions. and our economy the losses current

Operator

[Operator Instructions].

line James. Our comes question with first question. proceed your the of Please Raymond Stephen with Laws from

Stephen Laws

in. Las you Good I give know non-accrual? some coming on in did contributed expected that think little know I you Vegas. that a Can on weeks interest a morning. you yet? there, QX us also that income, Greta, comments And Bob, to out if it's reaching it's a in much about provided color on timeline towards resolution now Hi. the how need more couple we asset loan that know,

Greta Guggenheim

morning Good Steve.

options. our evaluating are We

sense to really think of We the I terms pledge exploring on proceeding to our of or that, don't know the on, are also given relatively mortgage these the strong our control of the lieu. My security give it move But can't evaluate is, borrower's and really foreclosure the and deed position a and are timing. a in any unpredictable you of getting I happen quickly. collateral. willingness assurances I things could in equity

Stephen Laws

Okay. number? contribute, that you know how asset if that much Bob, did interest income And

Bob Foley

come the group to is up. computer frozen call. will this I during My back

that with quite on up it, access I the can't data So calling schedule and yet.

Stephen Laws

Greta, question. problem. No next

at type to of value value? of kind of new looking investment where stock you about portfolio You during the new type in prepared trades you Can remarks. know cited given are I some you returns for the the that versus relative the repurchase, confidence year seeing talk opportunities book your stock that and mentioned in there

you how to stock wanted investments thoughts I new So get on for your think about repurchase.

Greta Guggenheim

now over certainly second I still reached we peak year this we be uncertainty to in we Well, degree the and the at fourth have this day cases, prudent the quarter I remains still believe the There just defensive, is it. given our third in a there and of continue uncertainty. of And mean, in XXX,XXX. new it's Yes. and as election moment, are read in Coronavirus today, high of uncertainty. quarter, a

We newly the elected next all we are of the returns that will President on a a deploying will the considering by be maximize a speak, underway. be share look to is versus shareholder that's we impacted lot it's purchase. we vaccine is we who shareholders, helped that that to uncertainty and goal And price evaluate stock time at a value. hopeful get cash And will there there can return point, main which other bought will also and how see companies to with our therefore how their the shares, here

Stephen Laws

you the financing. of a made moving mark-to-market I Are Or to? know like there have other looking headway assets got say, and think are that Is Great. all should there are on months non-mark-to-market for you not in or so? that you hotel with you we percentage And are two where the get the loans number to would about increasing there six specifically to how other no financed of guys have that? next, loans? you the target? is a years. target a there Or lot Or do

Greta Guggenheim

City, even good been are than in look very you Manhattan, and steady than sales we It's at assets other apartments It's New at asset question. look levels a you pre-pandemic. multifamily portfolio, specific. traded market our performance-wise or better same York projects the at markets very seeing investment When when the many our very have

not maintain as physically we are as moderate assets, So concerned those about we leverage.

general, desirable why major CLO market your answer I question We We and like less But work feel well. are higher, quickly. about on will having options. of financing don't explain continue very guess, to are it's watch valuation returning so we financing mark-to-market our our be to long-winded, the is we office and in specific. we and to asset that getting as City going In have talk our at on office and York with comfortable more New office we looks concerns terms particularly it's assets can as

have don't in it specific mind. general, better. But the we depends So also type. is target In on more a asset

Stephen Laws

do market at L non-mark-to-market so follow-up that floor, last for on Or if was financing specific with I kind because is that. financing? little look a the that at line our the expense? X.X as recent now a therefore that Great. designed financing But the guess bip think one about is for hotel we How and the plus forecast higher that XX we costs? of loans

Greta Guggenheim

hotel was a it of middle health pandemic. specific think to I in loans the

Stephen Laws

That's helpful. Great. much very morning. comments Thanks this for

Bob Foley

the $XXX,XXX. loan is direct to earlier in approximately question, with basis the Vegas to Stephen, And land Las response your a NIM, monthly respect on

Stephen Laws

Great. Thanks Bob.

Operator

question your question. Please line Securities. with next Delaney Our JMP from comes with of the proceed Steve

Steve Delaney

respect comment the on little congrats And Bob. current a and the could progress your about Greta if and market. on Curious repayments. morning, you Good caution Hi. bit I simply

have a the $XXX you out during Do the You think, fourth positive Is may next rest the and early additional some. this visibility you quarter. coming year That's, have I $XXX million year? looking of some cited? there that million for be repayments beyond seen

Greta Guggenheim

to of XXX% really say, we our repay I health understand borrower quarter. great to would fourth And this third such pandemic is since projected, engagement. were in the spend loans a be position have came we And which we that much, really close accurate. trying a have the lot on, that to and time we pretty would because ones Ever of in

Steve Delaney

Sure.

Greta Guggenheim

But less within than get year, XX certain. $X.X and you expected are, are you slightly when a can feel it's out farther year, you billion. days, XX continue. confident. We a to billion. This Last $X will over more repayments have they little be pretty that little they The good were

the of year closer of in life that's the what between first of was somewhere minus. age of bit was, parts years. just our because two to on quarter the to think forward, loan I it's even based be of the did quarter this and of XXXX. the plus or And average a too going X.X the XXXX loans maybe early pre-COVID, also we going some fourth And and originate

and given So, the closer an of economy of assets, year's it's combination in the inefficient think I be to some a still newer to this going level.

Steve Delaney

opportunities, whether would it you current seem be prudent it's looking that Well, approaching to in it the would $X.X maybe it new in to is us to year-end, $XX.X the neighborhood further year modeling, from billion. portfolio are And early that at far then it something though the even $X could assume shrink at as somewhere the possible to might that shrink billion as of billion. for me

Greta Guggenheim

some mentioned, interesting I we As opportunities. are seeing

growth. So will I countering that think asset be some

Steve Delaney

Okay. All the right. the cited Thanks. about loan. the, asked Bob, rate Stephen on hotel

at you we great in point? It is financing, on kind blended compressed by push the to with you is interest on in financing portfolio situation? As like positive way a this which need accomplishment accruing the at the look are that spread NIM factor a look for you still the that is a net at sounds the that properties, interest of non-mark-to-market? non-recourse, slightly the a overall hotel and it net Or

Bob Foley

on which Right. funds clearly the very that respect super With you for Stephen's in the here transaction that of call, Well, think nature financing. thank underlying NIM, collateral I team up hotels. to and did of the important is cost the whole on a job following reflects

mortgage last the And month, frankly, private average there in have some to and XXX market some executed Several LIBOR over weighted the by today. call comps are pre-fees over instructed those LIBOR rate. think it in the by funds. XXX are commercial spreads public other over been REITs I debt CLOs CRE

is there two big those a range So between endpoints.

the our I capital. thinking rest be but recovery. points more probably costs the low-end our for weighted capital financing that's some so cost space, average the The you think towards and higher rest clearly of the legitimate of are basis should signs that XXX of of or range, than the that markets of showing

been an that more be seems as borrower. Obviously, and but an continue that sometimes is a we term strategic objective, important it we And have stated Greta at will to that a think one. be getting way. We always premium, cost-effective comes increasingly modest to

Steve Delaney

Okay.

final like there. you Stephen's to $XXX to just of cash, going sounds are one high better, comment Cash, the thing or follow-up Just the year. it million on and end stay on through

As XX% clarity consider the if the do would economy, on you value program? stock buyback this, you election, activating point to at book the that get the all the of XX% a in Board remains some range, believe

Greta Guggenheim

think will all I consider they alternatives.

can is lot of we need really don't back a year-to-date it. in discussions. it. alternatives price a you And Board to impactful done And it weigh And at in look the get and also just imagine, As these the have capital REIT, you to others covered through where how that market examples do to you stock that you numerous are grow.

So we the coming will underlying right of be in decision. our considerations goal will the of at important But interest weigh various what's the best all in shareholder. those fundamental up

Steve Delaney

comments. your you for Thank both

Bob Foley

Thank you Steve.

Greta Guggenheim

Thank you Steve.

Operator

[Operator Instructions].

of from Our Please Charlie Arestia JPMorgan. with proceed with your the question. line question next comes

Charlie Arestia

a guys transitional of if the so the light-to-moderate of loan today. moderate taken categories. portfolio, so how third also the the those have Bob. breakout wondering And at the about or I modifications I appreciate where place? the far am you for Very Greta on taking you commitments future just guys most that loans? of loan are disclosed funding good questions wondering morning, Thanks that's around thinking and With

Greta Guggenheim

of the is type funding comments, and we that is in not the hotel construction by XX% on range of thankfully we had loans unsurprisingly, There loans. I able type very is no. terms to was into we funding the obligations. and to correlation moderate had deferred in the affected which, loan opening deferred really property our a The In back pandemic categorization. loans to were none great briefly touched as related on correlation my And also any how badly level biggest falling modifications, that and our

the So I peer low deferred the REIT amount number, set, think, we I think a that fundings among is have. CM relatively of

things So one it's of something that worry not really have them. about, not we we -- that's

Charlie Arestia

Got it. color. I appreciate the Thank you.

Operator

questions closing at over further time. back no like for comments. have this the turn floor to to would we Guggenheim, I now Ms. you

Greta Guggenheim

well season. Well, on there calls all when again, look you time And thank you us. is better forward important great three holiday Have we all time. hopefully to a for taking speaking you. to for out taking and today. I know for as months of thank as that you other distractions numerous we the it's much times going Thank

Operator

today's and conclude gentlemen, Ladies this does teleconference.

a you time. your this You your participation day. may disconnect Thank and lines at wonderful for have

TPG RE Finance Trust (TRTX) 8 Nov 202020 Q3 Earnings call transcript