TRTX - Earnings call transcript Q2 2021 | TPG RE Finance Trust, Inc.

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Operator

Good day, and welcome to the TPG Re Finance Trust Second Quarter 2021 Earnings Conference Call. Today's call is being recorded. At this time, I'd like to turn the conference over to Deborah Ginsberg, General Counsel. Please go ahead.

Deborah Ginsberg

Good morning, and welcome to TPG Real Estate Finance Trust's conference call for the second quarter of 2021. Matt Smith, Bob Chief by Officer; Chief today Peter and Investment joined Coleman, Foley, President; Financial I'm Officer. questions. up Bob comments and call open about some for the the quarter, Matt and then will share we'll press Yesterday evening, we available all a our section. Form on results, our of operating which the release Investor issued our Relations XX-Q presentation of with and filed a are website in company's and control. may I'd include today's forward-looking outside remind of are which to the like call uncertain everyone statements, that Actual materially. differ results may

For the Risk our that turn and I Estate any press With see do discussion certain that, measures statements, the TPG call affect could to risks undertake President the XX-Q. refer release reconciliations, non-GAAP And call. to these of some on Factors of our will and this to Trust. results, Real please also we duty for not of Matt XX-Q. the to update over Finance of Coleman, will section refer We you should

Matthew Coleman

Deborah, another Thank covering earnings happy be to and second the this morning TRTX. quarter joining call company. for the quarter I'm you, for strong everyone, for thanks,

over is quarters. committee CEO retained ongoing, update that of I've frame today's dimensions out work book renewed coming optimization, to quarters, our performance, have brief done with with search. few Board key firm. portfolio search the will consistent I of for the further a of updates articulated first value. I'll proving expect search X we our The -- an and and over strategic the along As on TPG you capital have structure at discussion the But of TRTX's begin the pillars beginning established I year last the and originations first, a and executive committee's Directors representatives

cash Series of second preferred to using all XX% on in results of the and preferred were a Now, Series B stock, that take more rate of We stock. million first capital available $XXX.X our the turning originations. a $XXX a million proceeds CLO issuance, the than $X.XX with C outstanding capital CRE closed of We full lowering cost of in markets. preferred quarter, dividend advantage puts combination overall to new starting X.X/X% hand our of and day to together capital on quarter respect competitive very redeemed new of with XX%. company's billion issuance the very last able position us by robust our for This our markets, with

million we've quarter mark-to-market. now capital originations our fully obligations XX% including As a utilized also new we're year, momentarily, the of non fact the debt CLO. achievements, markets cover that through nearly of the result are that of second I'll proud company's of Midway $XXX ramp the the that feature

closed the in portfolio we're billion. grew than loans, to multifamily, was than Activity originations. the total. Taking new than at representing robust. was of to approximately originations XX% now focused loan We and our on million $XXX $X.X signed more Moving into sheets total; X which year-to-date, billion of quarter X.X% now end, life $X.X the quarter second sciences, and after XX% of more total term account of quarter-over-quarter more commitments,

Estate selection and connectivity within broadly, market insights. sourcing, capital and competitive relationships, TPG and afford Real the always, intellectual us As in resident TPG specifically, advantages asset-specific more

available which second originations million, and nearly the quarter, liquidity continued substantial we $XXX fuel As we of the additional portfolio of use future to can to have growth. end of

we the retail marketing collections California. than non interest our to process X.X% our have disposition We're to future. owned for Southern asset parcels. regarding being that selected have near sales turning to both PIK reasonably of a discussions update of to are have Las respect the portfolio. the With Vegas, beginning more the hope of XX%, had in for in and land broker of in a payer including only defaulted quarter, further and real with We Finally, the sale the asset in estate

respect as updates over well. have the Las to to quarters coming with Vegas expect We

During we office realizations, repayments, of mixed-use than consisting exposure of had largely office million $XX million additional across loans loan quarter, industrial. of $XXX in the second form X an nearly and of $XXX more the loan including both million and

released hotel hospitality capital $XX sold by enable million also ratings were our one We which quarter exposure that are, a of we midst assets, approximately generally I and us aligned will approximately spread objectives. the U.S. to At close stable with more reflecting risk this and our into cover the reduces million have reserve, opportunistically will CECL hotel to other good general, Bob environment. quarter-over-quarter, over the loan, continued Delta effects current In we science redeploy $X.X office, results classes, traditional the down With performance. Life economy. end, of saw life that, improved In X% paying including to improving for to performance of our and it was attention portfolio. our asset hotel of turn of macro course, quarter. the performance, it strong represented the on we financial science, variant to excluding XX.X%. and XX% may represented approximately across Accordingly,

Robert Foley

$XX XXXX. million loss of almost May and Series common June quarterly earnings B too on our That entirely current sum for stockholders income $XXX by attributable of quarter-over-quarter coverage to good of margin share common million, diluted share. and forma the everyone. XXXX, net common ending X.XXx yesterday preferred connection or issued dividend, loan preferred represents current the common despite we due issued per or to $XX.XX million in the per $X.XX $XX.X coverage $XXX charges onetime net quarter-over-quarter dividend repayments stock. quarter increased our million, of the $XX per of C $X or a to with our that of redemption per distributable Book XX, rate share $X.XX of incurred declined our plus million in Net Matt, X.XXx million. morning, and value diluted Series dividend newly run $XX.X stock million pro of interest to $X.XX Thanks, GAAP share reported We

paired XX% our million. capital by hotel was facility mortgage Goldman net we're our declined reserve a CECL million outlook XX.X%, response the loans, will $XX.X performance ingredient continuing $X.XX cost, now X million on forms extend end, important operating In virtually as macroeconomic sale a loan are years, structure the loss operating XXXX capital surpassed our now quarter thus quarter raised June, continue market immediately liabilities our a our slashed $XX.X liabilities, and single-borrower informs that our of of portfolio this to warrant by ratio on and ratings we Sachs, highly we which default CLOs, cost-efficient diluted we More To extended million. end, permanent temporary option rate X of Page sector-leading supplemental. positioned from earnings in first improvement loan at million May loans markets X mark-to-market or quality average perpetual At our $X.X XX% in Our originating in to demonstrated loan our transaction XX financing We values. dividend share of of the X financing, the our loan payment contained million in corporate first well non grow value plan. mortgages of to among key redeemed income Book onetime trends. quarter $XX.XX risk performance in versus loans issued unamortized this and $XX.XX other is before our of base, originate and summary, second second migration to B registering to our represent term positive with debt hotel across hotel net reserve basis $XXX unchanged model, cost our operating terms made detail And B quarter-over-quarter a of X improving secured condominium domestic a by our cash In one of quarter. stable modest redeemable billion stock improving credit wrote with the given resort both base $XXX with of regarding per remained portfolio, Capital Series CECL We levels. $XXX lender million, from longer-term costs performing equity XXXX. growth by be reserve coupon the further against the X low $XX.X to in secured LTV end, performance focus explore to Risk after at Lower make-whole as-is far from X, was X.X% of we've of year our of funded loan at per share based XX.X% X points the and believe, our At a our X, business progress When off on especially and to to per first we effect operating share quarter. net and strong operations issuing preferred points. team. our and XXX fair with of before accretive. quarter. in from up was to prior first of common quarter X.X/X% decline value and debt weighted our from in optimization $XXX.X a singular XXX structure basis upgraded and residential unchanged ability portfolio, our the redemption, per Series loan equity XX% a conditions million sector-leading quarter at years. the proceeds rate preferred remains replaced CRE share loan and for $X.X giving of counterparties. with and a we matched-term stock XX% We transaction after capital based

X rating one office loan collected X. weighted leasing interest. a was a X One And as which included X.X. of X sold mentioned from loan, loans hotel scheduled we with due office a and of was We XX.X% activity. average risk to downgraded loan earlier, one rated to Repayments a slow mixed-use

$X.X quarter PIK at only reduction million, million Our a was balance quarter-over-quarter. end $X.X of

to second directly million reductions further hand year, $XXX.X is cash million which one reinvestment our were X business June debt-to-equity plans to half million. achieve with to new of of a CLO and modest are which loan commitments, approximately the quarter rate quarter. after and performing. At our $XX.X be on of levels. decline million us loan period, loans was XX, we future capacity At had a volume $X.X commitments shareholders' returning investment a million, due reinvesting leverage million end, facilities was repayments achieved, capital. in tied requirements loan only ratio turn timing is hold originations repayments, our undrawn $XX.X all million of emphasis on reflects loans $XX this picking, our to decision credit are for expect utilization modified availability immediately investments. capacity the in end, that $XXX.X the our versus on our involve high X.XX:X, continuing plus total of and of Unfunded At our can of our CLOs currently of available with quarter since We X/X for to approximately during of only unleveraged of funding loan our pre-COVID a Reinvestment enable quickly short of the $XX.X loans of

term billion, billion. second quarter, support target given of borrowings mark-to-market we and in we on current earning $X.X and substantial during capital Based operations, the a our which delivered assets can markets earning growth very base performance capital appropriate, of a current X.XX:X, assets. $X.X in of recap, strong high is ratio base could non proportion equity To believe credit. debt-to-equity Our total reach

the offset million. growth $XXX we million outperformed loan fact, new Net by was on resurgent repayments strength of of quarter. In originations, the loan preceding of $XXX million $XXX

We pipeline. a strong loan have originations

current earnings and capital coverage our common significant dividend supported rate, base. We have we have -- our growth healthy distributable by capacity a X.Xx for by current current of

with So to floor that, we'll questions. Operator? open the

Operator

Fargo. from our Wells [Operator question first Instructions]. Fandetti Don with take We'll

Donald Fandetti

little terms debt and part if wondering you're in about How closer? the markets about was bit in of real could a And making of you're little are equity changes? talk your delta, estate seeing you are investors if portfolio a it? I you thinking what watching what

Matthew Coleman

negative and is public intersection local certainly reasonably early. is the tell. attention think something -- governments We're to portfolio impacts. a we're I think federal, honesty, seeing the best about it hard it said, relates all we're think, policy is, to I and not seeing, in as how that this. That health the attack of think, to. paying moment, We're to It of not state beginnings public It I as being performance little frankly our at

think had might is And broadly. concerning, Labor after to return thinking, it we office. it some for as bellwether Day think, questions, what raises people certainly I real However, paying look and about we're to. indicator been a return I like office is something close that as about to think, attention It

not said, we're impacts on our performance. as I seeing currently measurable Although direct portfolio or negative

Donald Fandetti

And can loan? and what about why talk loan hotel one also then you was the the sell downgraded market office you

Matthew Coleman

office that That office and is a leasing. -- one Sure. market County, just Orange in saw one slowdown we

on So releasing hotel an a a $X.XX. net were interesting a a dollar the price CECL loan, to maturity. value. move a quite accretive opportunity X book while positive that was a was and on pending specific achieve of The from there against with reserve impact to a reserve presented not I was able it, think, And basis, We X. to

opportunity attractive And at was so, a it price. good very execute to

Operator

next question Hayes BTIG. with from our take Tim We'll

Timothy Hayes

But there you're I'm to focusing loans? a My were a moderate floor asset was -- that of portfolio curious the highlighted. one, LIBOR is, this on spot construction guys transitional more loans just and wider quarter one would above wider bridge LIBOR how assume loans transitional loans, competition. the moderate on some I types? other more while types, than spreads bit highlighted focusing deck despite largely were on X able there's asset you spread average, X first new you just where loan you or more there a and in defensive X were where bit the get stable the

Matthew Coleman

Peter address Sure. Why have that? we don't

Peter Smith

-- think what being seeing. that in -- the on is just I and really we're quarter seeing we're of deals deals continued on sort the focus a the selective

to we a on We deals that heavier. quarter, had opportunities little second to And we -- now. and being now. and are we wanted really seeing in getting a lot selective on had a capital quickly and bit compete we're in really lot the that of out more focused invest first generally, little areas right we right a of money We're liked

Matt As for billion our of on way pointed $X.X billion, into year, year. we're out, about achieving well the the had goals the $X

-- selective year we're just second of being So more candidly, half the of we're the lot the quarter. in first -- and a the half second

followed plan and and our going been closed lot execution. their strong of helps lowers a of helps generally familiarity multifamily a we've know forward. previously. we signed to risk some track opportunity. a repeat good to That a been continue little also really deals date that of really and has It's -- that That been record. guys sponsors we pretty it term XX% are quite right as by efficient and with relationships. and And with So us, have more now. have our which borrowers, over with And are transacted bit, These XX% because know seeing closed We speaking life has their makes focus been well. of loans borrowers we capabilities, XX well, that actually long science, over up for us with repeat

Matthew Coleman

of because financing if that, was the I that. marginally add think for are. draw significantly going that, I Tim, think, a the they were and is we're I I were of options spreads mean, if ourselves. continuing I see trends where to mean, if to to lower very add seeing base And out that I just seeing, to obviously than to rate. think pre-pandemic. are We're to attractive trends you that going I to we're were that. better were I say,

Timothy Hayes

you've But loans compare you or good kind relates the to and far, off are the XQ life LTV staying the does they us the to to give just year? in of then guys through like what half pretty closing closed you on you maybe been science here? lane the have start. are of of activity of color closing again? Are fitting a -- kind that some that spread as that How multifamily, of first level in transition the can so And process in

Matthew Coleman

think pipeline seeing addition similar and LTV got it's focus trends are thrusts of that that continuing. in characterize think, to really -- will, and in trends about change Very well. billion spread, pipeline strategic life got in these as now. And in I for on seeing a similar. strategic high-growth you're current I We've not those, you're demographics. -- our say, the We're focused very would are those we've Obviously, These on science. us. we're $X.X with And and great focused terms year-to-date I markets multi

Timothy Hayes

mean know lifting and I done the of the in I And it's dividend quarter, then September probably has But -- but you on heavy next the you lot dividend, the I been a declare guys -- decision, Board a you just understand. have that for -- here.

Series the issued Cs You Series Bs. to refinance the

rightsized of kind capital there. you So cost the of

CRE You CLO. did the

You've than deploying a more the quarter. started you first were before lot capital

what, see a of to what platform. earnings just kind something pause doing you guys if to the further dividend prohibit Delta something curious the you before bit I'm give is need in that? resetting or opinion, before the your the variant And like you that core of little kind might power of So of reflect

Matthew Coleman

And we're income at and make carefully relationship recommendations we and the do distributable between looking the Yes. current to always Obviously, taxable dividend dividend. our Board.

our have the which a a portfolio, encouraged we're as we're think Credit extent we to factor comes matter, originations, which encouraged from an of capital for that The dividend, achievements by, into highlight, approach that. power that I our we're do markets also the are obviously, and outlook, earnings general There by. that the performance macro where well. changes factors change. steady you as into sustainable we smooth, a the that feed make to of looking taken As and number

I don't at So our level coming is to say this it dividend with we And of quarters. anything. be will, course, know, give over guidance, you think point discussing premature the Board we but as the

Operator

[Operator Instructions]. JP We'll go Rich next Shane Morgan. with to

Richard Shane

historically, -- the X.X% X.X When correlation an if business could you to there's would the that, that at of think ROE locking If a in the about current described LIBOR. ROE framework your we to terms have your X.X% of look X.X has think low to beta perhaps it's now, environment I rates do swapping -- changed? the customers are of your plus it base but as with to lower particularly construct, model we off borrowers formula, sort better Is are extending rates, loans. spread in the we LIBOR see come we ROE and the as duration and L potentially

Matthew Coleman

don't Bob it general as to and turn start I why Yes, observation, with over a I'll then well.

there's rate to in don't about specifics. light. you And over our fact the are I But upside general, our moments more said both a turn right when our few composition our and model, as think leverage spread why are of I rise. given Bob we ago, and think assets and ROE to if earnings base heavy now, the we rate, rates liabilities floating it for that some were do think I

Robert Foley

a Thanks to gets one, it and Matt. page all magic with. that right. Matt's question we're familiar The is good the

floor to different space a at lower everyone But LIBOR and we're now, loan that Spreads albeit still compensate still we position long will a is is bit are I environment. have to our as book think at from the vintage right of where as a that. least widened a a while, for floors, high in from persist sort outstanding. for rates floor transitioning, benefiting in high

real vary, the increase this decrease. company see quarters, curve to would transition. of low investment the the real shift. remain number so, And borrowers question believe, is, dependent each frankly, dependent. transitional will its of of future pace some of us going It's of future for And it's components dependent seems while, generally that I ROE over none will a will markets. estate yield less ROE total is or that of say, company-by-company. but the interest of the And we the to unchanged is than -- be extent, direction you'll the The it interest behavior one next in is upon and rates direction repayments The and plan space and know. thing Rick, business The rates

than ours So a that's on their lot they to say plans. hedge. on they're speaking, are of less But, business not borrowers don't that generally focused rate

to don't of of material we volume so, in be have And expect change floating number that we a over the to rate access next there transactions the quarters.

Richard Shane

a Guys, me? I frankly it look, ratio me. for payout it hear is what think, That's And can well. as you explains conservative

Matthew Coleman

questions? further Any

Operator

this back call session. That I'd or time, for closing to additional to will conclude question-and-answer turn over like remarks. our Mr. At Coleman the any

Matthew Coleman

Thank you, Katie.

on heard have results we're half with morning's in this our all call, the pleased the achievements you've As first and of year.

strength our the forward of positions again We with you quarter. a together next the for to year. successful sheet, balance Thank and half busy speaking team, us Our look of second well with you.

Operator

That your concludes appreciate participation. today's We call.

TPG RE Finance Trust (TRTX) 5 Aug 212021 Q2 Earnings call transcript