TRTX - Earnings call transcript Q3 2021 | TPG RE Finance Trust, Inc.

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Operator

Greetings, and welcome to the TPG RE Finance Trust Third Quarter 2021 Earnings Call. [Operator Instructions].

As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Ms. Deborah Ginsberg, Vice President, Secretary for TPG RE Finance Trust. you. Thank

begin. may You

Deborah Ginsberg

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

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

Matthew Coleman

to everyone another and joining thanks report strong I'm you, Thank TRTX. to morning's for Deborah, for this call. quarter pleased

the strong Starting capital loan our third parts including we with originations, of markets. saw the all and from quarter, During originations. performance portfolio business,

markets our employment, multifamily-focused strong characteristics. and We continue income with execute strategy, education investment targeting to

demonstrates million. commitment with accelerated positive quarter, COVID. closed in-migration by the a Two that demographic we market of $XXX.X For loans a we trends including were in Tampa, seek, loans the total X amount

Life science increased we origination strong in class asset lending is to us. where the and rent multifamily the product focused demand compelling result, attention. opportunities a resulting growth, for other As for our has led strategy

where class our heightened asset back an closed lending in substantial is XXXX. space is inception of activity an ownership with significant strategic science this a among Private advantages, many our life adviser class focus relationships first Estate It's we and business, to Group. loan this we newer when TPG's almost While substantial Real TPG's asset through our have long-standing also sector lab insights and including where through dates Equity executive Healthcare our senior peers,

we best-in-class the relationships third direct the sixth business. loan best of During quarter, value the sponsor Diego. loan repeat This and a closed borrower, submarkets life X in to long-standing in X San of our to science reflecting this is

additional originations the Including closing year-to-date closing X of activity, the and in we Following $X.X quarter, that end closings, loans process. more exceed now the had X in and closed billion. have we

of One post-COVID our is end the quarter first loans hospitality after we closed loan.

the loan lingering the reentry with While with operating by strong transaction we very significant acquisition the of sponsor located strong loan asset property is watching space, carefully well-established and hospitality secured hotel an is in fresh on market, a the pandemic as our we're still equity. this point the the history chose was because a a effects pre-COVID

intellectual to competitive, us to returns. prepandemic source ROEs opportunities continue relationships, TPG provide with resident market the in Although The advantages selection market asset sourcing, specific lending is continue capital insights. in deliver generally competitive we and line compelling, that within and risk/reward connectivity

retail asset in be California. million to not multifamily which portfolio. received closed very originated million completion XX%. loan. received loan is of its transaction our for by loan a to Turning only week. a current repayment in plan, sponsor's to good active of estate. continue loans Interest lease-up COVID Subsequent a and Southern transitional quarter last the of life We is $XXX of sold strong in collections loan have of And example construction loans quarter We cycle The in natural $XXX provide mixed-use the while this the is during end, for of may defaulted full our and portfolio we excess and secured high-quality loan that and office repayments delayed across in business loan full real to this borrower the Houston, sales market X investment X by stabilization. our the and markets the slightly capital was loan capital that refinance in the XXXX

X sold positions enable X, transaction a in which new Our prior less in Vegas. our provide we now to loan brief like Las we've update higher-yielding, California into costs, and par X redeploy the Finally, I'd that on on hotel calls: covered land capital loan will assets on for Southern loan retail October to us investments.

and Regarding the to I expect the further update the have quarter. retail actively loan, is real work underlying estate that sell process continue next we to sponsors with underway. a to

to Turning a and million. entered with Airport $XX the McCarran which the County, Nevada, adjoining parcel operates We've to owns contract for Vegas. International sell Las into Clark XX-acre south

a which we're leverage, the individual turn expect it can available and loan Thanksgiving. we're encouraged before robust performance, I portfolio In that $XXX Timing will substantial of bit the more cover economic operating Las which Vegas. our that strong combined approximately in growth. over parcel. now we sell that hand, close pleased detail. seeing and vein, equity to a in on more have free results future to can north portfolio, resolutions, generate Simultaneously, third process quarter the to free sale to we originations relatively cash with we've We by use future we're on to to fluid, Bob up Across continue million XX-acre REO and liquidity launched fuel the process recovery remains but with earnings. with these low

Robert Foley

primarily million dividend net increased $X.XX book share due of income dividends lower September per diluted per share $XX.X of net a shareholders X.X%. on to value distributable sum $X.XX and $XX from to $XXX.X earnings $XX.XX $X.XX current September dividend yield and shares. decreased $XX loan GAAP share everyone. loan coverage exceeding good XX% of or loan to million approximately income from fundings per and a our X.Xx and current XX all dividend earnings due of of million. repayments of weighted for common morning, with new our coverage to along Book quarter yesterday X.XXx X.XX% Matt, $XX.XX of on dividend C X.X%, a per and coupon the margin declined price $XXX.X from to approximately originations diluted current X.XX% the which generates attributable share Thanks, on which interest our coupon We common value deferred paid the common to to and reported share, the X.XX% our We preferred million declined X.XX%, our quarter-over-quarter yield million, of current common share and to Net of our Series by $X.XX our book average of or average and increased $XX per shares represents to common to ended common in stock. X.X% preferred from to weighted floor quarterly million,

and operating hotel across par continued $XXX,XXX of loss X improvement related to Our newly the than loan the to existing loans. sale commitments to $XX our in million book, by loan longer CECL our at $XXX.X declined general with October reserve due reserve million loan subsequent performance an modestly quarter reclassification held-for-sale the offset by on end loan of duration at originated

with Book loan, value was before specifically points X reserved reserve contribute our efficient At of to utilization $XX.XX quarter debt loan reserve XX of portfolio excluding and XX% effect was our CLOs. common CRE nonmark-to-market Our construction capital and per our $XX.XX versus base second to rate, end, equity. share your basis XX quarter. points structure preceding compared the term giving Optimization XX% was the quarter. to basis in stable thoughtful CECL for capital shareholders' funded

Bank we X years Sachs X During America with Goldman for for quarter, the credit our of extended and facilities year.

ingredient for originate are spread average moderate to in weighted quality portfolio long-term liabilities values. at mortgage to ability first Low-cost, our loan X.XX%. Our was loans a borrowings key loan

of ROE reinvestment activity remaining $XX and outside facilities mitigate credit the million the financing CLOs. quarter our sale including Due the X in during on improve of X at the During funds the in our and secured separate XX%; financed repayments hotel property that or in term October XX%; rate this advance hotel to and end is par loan, of our X at to our fund reinvestment higher, our Multifamily, than loan CLOs the FLX, loans by following million we to types: created utilized quarter, quarter hotel, received cost office, $XXX.X only X equal thus reinvestments Generally, and third loans of capacity risk. FLX was is X%. our less and

soon California. remain loans fruit. The basis. retail short financed $XX.X repayment value Las hotel million Two in only Vegas a efforts other our the our our of carrying on loan, capital sale will and no-mark-to-market bear of of the parcel REO a All nonaccrual of south land sale recycling loan Southern

prior to or on the at reflect with space financing our average to absorb parcel a origination XX.X% capital from We on gains shareholder remained existing focus is the was any the capital utilize expect loss north comprised our We million quarter. south that carryforwards high ratings our At less future. of our $XXX commitment The originations our loans. in X.X from scheduled of Southeast, properties parcel Loan loan execution of located portfolio This ratio work. end, proportion growth, XXXX, in for fully sale United the multifamily may ratio business quarter-over-quarter. funded risk. market plans Due low to quarter Western XX% of at result tax collected emphasis life to in Southwest with total of states weighted markets, keeps interest. high XX.X%, XX.X% strong and quarters our was LTV XX%, in virtually prior loan reflecting in shorter consistent of the and top unchanged XX as-is and States. primarily commitment of sciences Risk unchanged and portfolio the continuing post-COVID

only repaid We loan nonaccrual be expect our will shortly.

was balance end a PIK $XXX,XXX outpacing mere only $X.X million almost accruals quarter of a to $XXX,XXX. of $X million, of at new Our quarter-over-quarter due repayments reduction PIK PIK

performing. our modified of are loans All

$XXX.X capital currently loan that be We of our eligible at investment compared available target have $XX.X of stands available million pledged financing arrangements defensive of in are to that $XXX.X to due a and undrawn existing unencumbered debt-to-equity and under investments capacity as million, X.X:X excess borrowing of capacity ratio cash, to substantial our million X.X:X.

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

Operator

[Operator Instructions].

the line of comes with question Tim Hayes first Our from BTIG.

Ethan Saghi

on got You Hayes. for Ethan Saghi Tim

you just that front. touch of on the see what a Could approach we could an I quarter and talked you've earnings, handily we the early possibly saw distributable conservative the on to the want taking for covering in of going forward? But raised September, another or was dividend Just the with increase next start, dividend you dividend all as is know trajectory quarter fourth about just year?

Matthew Coleman

It's Matt.

As regular doing in that's guidance. know, regularly with don't our review something we'll Board, that you keep of with dividend we We do, dividend however, give the them. and the cadence meeting

beyond quarter. to healthy pleased much I hard the So Obviously, we that, be coverage specific. we're by this think that it's more saw

Ethan Saghi

understand asset question right. really to classes sciences, I that. on more so for competitive target favors your multifamily is highly defensive just Yes, these portfolio be are how right. All about were quarter tighter? we going on and where originations next now. a yield yields My should And life have think focused Do right this All allocation impact assets as concentration the the you mix X sectors?

Matthew Coleman

would have loans a the see target. a healthy seeing. with of have I that real expect paying capital off do we proportion don't multifamily don't we markets also, -- a high you as we we're Well, estate mean

asset make to along year it And risk/reward higher and that there's so of the although percentage mix actually a portfolio compare originations. good new don't about of is obviously much change if classes. up it other ago, relative where you in And you with multifamily, both reflective see repayments a think does we

we post-COVID say You me loan. first in my our hospitality remarks, heard did

bit a well. as in quite we traditional life As office the And you earlier did some know, done sciences. of we've year,

focused we do in see we the not we're reported. risk/reward So exclusively, like the mix but of overall originations that we've that

overall the lot we've healthy the that pre-COVID. line at as portfolio, to said, with we're look do A that in to to the see accretive yields financings If we're very are you I continuing on that able get of and with remain liability on side, has with yields seen talked are historically. have But generally with so which led that Bob which spreads line what and in that his returns are ably before. we we've about generating when ROEs team seeing that and and combined financing

Ethan Saghi

ask question. And just Great. quick I'll then X last

the You guys West. in are exposure increasing

able are geographies? are most And those attractive? spread more in you markets which to get Just

Matthew Coleman

United States. in said the You Western

Ethan Saghi

Yes.

Matthew Coleman

Yes. like, us. across COVID. the the characterized very for of Mountain many a West, and classes, -- San asset sciences I been I that the do out market Diego good Arizona, of other we of think that secular like trends has been coming We patterns life demographic have see migratory we do well think many in

So like and and including San we found then sciences we we Coast investing life an attractive number where demographics a are good area, see them out West there Diego, reasons. as in for the and markets, obvious There of San Francisco West activity.

Ethan Saghi

with later. Tim to catching And you is looking forward up know I all

Matthew Coleman

We look forward to it.

Operator

Rick with of JPMorgan. next comes the Our from Shane question line

Richard Shane

housekeeping and One more then conceptual longer-term X thing question.

at was you sold par costs? is associated Or with that quarter, loan just In there said a so was transaction sold recover the costs, transaction correct can post terms we the get it modest within that Did loss transaction models? with our you costs. of hotel

Robert Foley

for We sold fees incurred this question modest that thanks of brokerage We Rick, the with transaction. slightly in your less at $XXX,XXX connection and than morning. loan legal par.

Richard Shane

Perfect. Okay.

through you presumably little a thinking a forward question with, is about take opportunity creating ROA a a transitional In your really creating think on if the of to on about some you pressure then as I'll the relatively looking ways, probably financial low think And function as we're rates guys you the this -- The ROA year And that? on perspective are industry. base in off for through ROA hopefully there second bit and 'XX but How given begin move rolling curve. at to some do leverage, the of pressure, important. that additional then an ultimately is rebound floors or we leverage. an year ROE more compression side offset that's

Robert Foley

we've than With our about in we put Sure. available respect consistent and summer, is is originate been in we're currently our or We'll information leverage. you clear ability out But range; under If answer are most look we on reverse some thereabouts, carry of substantially more at levered think the somewhere company recent which and do run and was that b, tune intend for a our you of currently billion, of use at leverage website. X.X:X listening it's over we corporate COVID that have, presentation, about to or to to we the if which levered order. we $X.X through those we the billion leverage, I to strategy, a, loans in use the more the $X.X intentional. X.X:X, little

rises should we that basically I I part And conformance the think during your think to floors, to curve which respect that weighted about see put is, yes, is was you'll the loans loans legacy prior our see book XX question, expect could originate your to quarter that so points to described. high end this our A from as you the XXXX the at on floor With quarter. have short question more the potential NIM whole leverage. across continue end answer That's strategy the of X.XX%. the very of down that -- compression with and basis that, average in as Matt pressure

floors with basis loans" new due obviously is that of repayment "legacy loans between putting on and points. XX and to of All XX

So cognizant. we are

to and in like of other the faster probably a And then from others rise do available impact part, to than or just of there would commercial immunize at a LIBOR. And are of Some why there us hedging. also us occur borrowers in tools it us immunize the least to reasons that. of function rising lot is do rates are repayments want

Operator

Instructions]. [Operator

the Our next line question Don comes Fargo. Wells from of Fandetti with

Donald Fandetti

to you that expect you up on that I about given office? potential comment of if -- also read robust? environment XX% terms then said change How you're New seeing of levels. that real And in market? XXXX curious what report towards you're rate recently I the if you the commercial are you feeling in 'XX, was a transactions just from as could remain kind if York estate look

Matthew Coleman

the Don, even Yes. think, I certainly not the the capital. And in. availability volume, level I'll We're which that of think, for very transaction of that have is COVID I of we're we've seen think that seeing, with if both rate pandemic, uptick that substantial in run in there that given to And surprising, others seeing to chime that be in start, Generally quarters as of I repayment continued this could available pipeline think are rates offset highlighted as to earlier. evaluate should low, we're quarter mixed-use and to debate comments, of term return the certainly more the continued the which repayments, changes and I first feeling earlier And our and on instance, seeing to that is. for transactions horizon, what that to compared that obviously, the it normalized alluded I loan we stimulus a we to about the our year. Houston how X of near us talked or the government are at impacts least and impact and finance. the strength my also

we conditions. certainly the affirm evaluate we that as So current

fears little hedge. instances with going rates. hard we very ahead, to to can and are They're estate a real be many As it's There going look get lower. I inflation inflation obviously not know presumably what's to in think a exactly, happen obviously effective

factors. other one a be impacts bit Obviously, pricing that of industry-wide be could a could So higher hand, with that further and there on tailwind. affect the rates

we're, a the kind even if have to rates were historically modest XXXX scheme next you at from of present, going to looking things, rates, the any chart measure, if there low rate other at day, to year. I still the look increases be by of in Although was

I interest think rates also seeing we're rates. cap spreads between totally normal and

another that estate ahead could in moves general, we to real markets so year. bullish on we remain outlook be capital estate And factor 'XX. also look next and real that the I think But as

Peter Smith

transaction Yes. even you're lot And little I'll what we seeing higher. XX% bit is Peter feels It jump yes, in I also. right. are and Don, like, might think more a saying a is there be This about Smith. volume

to as borrower lot a I do a lot can volume think to just capital, -- -- there's part which are primarily lot into spend because need of garbage of is and because this stewards lenders markets. means of now of a us lower, more certain what continue run lot caps that we for or from time more people just a paying stems cap there's low X to rates deals enthusiasm been transactional we push growth in the tighter a faster, to lot

bit [indiscernible] middle -- seeing still right on So range. we we're little to touched we into we're and actionable garbage as be that the our of vigilant more at seeing like really really need door, per deals foot, dollars see there. throw something And low upper a coupons quickly move X% a appears sense that. and Xs we're can then basis to And lot a when be you with makes little in per them in yes, from to to the tracking the look you on Matt coupons, where square the the a dollars in

And of and leasing that think lot now leases that pretty office, the how really leasing is than going signed right in didn't respect of people the York there good some I going that. or a and the surprised in deals, still book, there City of getting really but about that's group well feel portfolio and buildings York with haven't them. how New we New our some a office New collectively are were in a think. enthusiastic that, of is expect -- -- any the of lot York we City we more have we haven't see to on So acted But gotten about as City

Operator

any Ladies final back and I'll turn question-and-answer the session. Mr. comments. gentlemen, Coleman concludes for our to this floor

Matthew Coleman

Thank you, Melissa.

results you've we heard growth Thank assets further we've again forward New this earnings in early QX. positioned the speaking well in quarterly and morning, look again you are delivered you. We As with as for Year. enter and strong to

Operator

Thank concludes conference. you. This today's

your your You lines may Thank at for participation. time. you this disconnect

TPG RE Finance Trust (TRTX) 3 Nov 212021 Q3 Earnings call transcript