Q3 2024 TPG RE Finance Trust Inc Earnings Call
Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the TPG Real Estate Finance Trust 3rd Quarter 2024 Earnings Conference Call.
Speaker Change: At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. Please note this conference is being recorded. It is now my pleasure to turn the call over to the company. Thank you. You may begin.
Speaker Change: Thank you. Good morning and welcome to the TPG Real Estate Finance Trust earnings call for the third quarter of 2024. We're joined today by Doug Bouquard, Chief Executive Officer, and Bob Foley, Chief Financial Officer.
Speaker Change: Doug and Bob will share some comments about the quarter, and then we will open the call for questions.
Speaker Change: Yesterday evening, the company filed its Form 10-Q and issued a press release and earnings supplemental with a presentation of operating results, all of which are available on the company's website in the Investor Relations section.
Speaker Change: As a reminder, today's call is being recorded and may include forward-looking statements which are uncertain and outside of the company's control. Actual results may differ materially. For a discussion of risks that could affect results, please see the risk factor section of the company's most recent form, 10-K.
Speaker Change: The company does not undertake any duty to update these statements, and today's call participants will refer to certain non-GAAP measures, and for reconciliations, you should refer to the press release and the Form 10-Q. At this time, I'll turn the call over to Chief Executive Officer Doug Bouquard.
Doug Bouquard: Thank you.
Doug Bouquard: Over the past quarter, the Fed's initial rate cut and strong economic data across the board have fueled a remarkably broad rally in risk assets.
Doug Bouquard: For context, the forward price-to-earnings ratio of the S&P 500 is currently in the 97th percentile when compared to public market valuation multiples since the 1930s.
Doug Bouquard: Additionally, investment grade and high-yield corporate spreads continue to trade at the tightest spreads since the GFC.
Doug Bouquard: Meanwhile real estate is beginning to find its footing amidst the sentiment shift at large. Transaction activity has ticked up and with it an increase in price transparency across property types.
Doug Bouquard: While the REIT index has rallied approximately 15 percent since mid-summer, the aggregate real estate recovery still meaningfully lags the broader equity market rally since the Fed began its hiking cycle in 2022.
Doug Bouquard: Real estate values generally remain below the 2021 peak values.
Doug Bouquard: which continues to provide an attractive entry point for lenders with dry powder.
Doug Bouquard: TRTX is positioned exceptionally well to take advantage of this opportunity set.
Doug Bouquard: As this macro picture has evolved, we see the key elements of an attractive real estate lending market developing.
Doug Bouquard: First and foremost, banks continue to retreat from direct lending, and instead are aggressively pursuing loan-on-loan lending. We see no sign of this capital shift slowing, and continue to believe this tectonic shift will benefit the non-bank lending market for years to come.
Doug Bouquard: It reduces front-end competition for loan assets.
Doug Bouquard: and improve liquidity and economic terms of back leverage.
Doug Bouquard: Secondly, the anticipated decline in short-term rates should increase borrower appetite for floating rate loans, and when combined with a steepening yield curve, encourage some borrowers who plan to borrow from the fixed-rate conduit or agency markets to pivot to floating rate debt.
Doug Bouquard: As we assess the real estate credit landscape at large, we note four key ingredients that will drive the near-term investment opportunity set.
Doug Bouquard: and increase in transaction activity, which will drive further price transparency, combined with increased demand for floating rate borrowing, while banks continue to retrench.
Doug Bouquard: Fortunately, TRTX distinguishes itself in terms of, one, an offensively postured liquidity position, two, an active new investment pipeline, and three, a high-quality credit profile, as evidenced by stability in both risk ratings and CECL reserves.
Doug Bouquard: These attributes are further enhanced by the depth and breadth of TPG's broad and diversified investment experience combined with its best-in-class integrated real estate debt and equity investment platform.
Doug Bouquard: In terms of activity this past quarter, we received $149 million of repayments concentrated primarily in hotel, multifamily, and mixed-use property types.
Doug Bouquard: and made new investments totaling $204 million in sectors where we find compelling value, multifamily and hotels, at a weighted average LTV of 63%.
Doug Bouquard: Given our robust liquidity position, we're actively pursuing new investments. In fact, our forward pipeline of potential new investments is at a level not seen since the Fed began its interest rate hikes in 2022.
Doug Bouquard: We remain very selective with our capital and acknowledge that risk premia have compressed across many asset classes. We continue to be patient investors as we thoughtfully deploy dry powder into the current market.
Speaker Change: In summary, TRTX has a market-leading position as a plays offense, generates an 11.5% dividend yield.
Speaker Change: actively manages its loan portfolio and liability structure and thoughtfully allocates its investment capital. Furthermore, the real estate value recovery has lagged corporate value growth which amplifies the attractiveness of investing in today's real estate credit market on both a relative and absolute basis.
Speaker Change: From an earnings perspective, TRTX
Speaker Change: possesses many levers to grow including increased deployment using balance sheet cash, recycling of capital from REO, and utilizing untapped existing financing capacity.
Speaker Change: Our current stock price implies a 27% discount to book value and offers public equity investors a compelling entry point to take advantage of the real estate credit opportunity set enhanced by the insights of TPG's best-in-class real estate investing platform.
Speaker Change: With that, I will turn the call over to Bob to provide a detailed overview of this quarter's financial results.
Bob Foley: Thanks, Doug. Good morning, everyone, and thank you for joining us.
Bob Foley: Our strong third quarter results reflect the consistent and thoughtful capital allocation strategy we continue to execute.
Bob Foley: while maintaining a CECL reserve appropriate for our assessment of credit risk, actively managing our loan portfolio to encourage par repayments, and positioning TRTX to invest in new loans.
Bob Foley: with strong liquidity of $357 million, leverage of only 2.02 to 1.
Bob Foley: A CECL Reserve of 205 basis points.
Bob Foley: that's remained virtually unchanged for three quarters, a weighted average risk rating of 3.0 that hasn't wavered in four quarters.
Bob Foley: a 1.19 times dividend coverage ratio for year-to-date 2024 and an active investment team, TRTX is well positioned to realize on the earnings power and build shareholder value.
Bob Foley: Regarding operating results, gap net income attributable to common shareholders was $18.7 million for the quarter.
Bob Foley: compared to $21 million for the prior quarter, reflecting an increase of $1.8 million in net interest margin and a decrease in credit loss benefit of $4.2 million.
Bob Foley: Net interest margin for our loan portfolio was $29.3 million compared to $27.5 million in the second quarter.
Bob Foley: an increase of 1.8 million or two pennies per common share due to new loan investments and further optimization of our liability structure. Our weighted average credit spread on borrowings was virtually unchanged at 200 basis points compared to 197 basis points last quarter.
Bob Foley: Distributable earnings were 23 million or 28 cents per share compared to 22.3 million in the prior quarter. Coverage in the quarter for the quarter of our 24 cent dividend was 1.7 times and 1.19 times for the first nine months of 2024.
Bob Foley: Our Cecil Reserve declined by $0.3 million to $69.3 million from $69.6 million. This decline was due to solid collateral operating performance, slightly offset by new loan originations.
Bob Foley: We collected 100% of scheduled interest in the quarter. We had no five-rated loans, nor any specifically identified loans. Thus, we had no specific CECL loan loss reserve. Our CECL reserve was 205 basis points versus 208 basis points last quarter. We incurred no realized losses in the quarter.
Bob Foley: Consequently, book value per share increased to $11.41 from $11.40.
Bob Foley: We originated three loans totaling $204 million of commitments, funded $7.6 million of deferred fundings on existing loans, and collected loan repayments of $149.3 million.
Bob Foley: Total loan investments increased to nearly $3.4 billion.
Bob Foley: A quarter end multifamily represented 54.5% of a loan portfolio. Office has declined 73% over the past 11 quarters to 18.1%.
Bob Foley: Life Sciences is 11.7%, Hotel is 10.3, and no other property type comprises more than 2.3% of our portfolio. Our primary investment themes remain housing, industrial, lodging, and certain alternative property types including self-storage.
Bob Foley: We have 5 REO properties comprising 5.1% of our total assets, 1 multifamily property and 4 office properties with a total carrying value of $188.5 million.
Bob Foley: Our powerful TPG real estate platform continues to drive improved operating performance, identify appropriate holder sell strategies to optimize shareholder returns, and execute disposition strategies for properties targeted.
Bob Foley: These three properties are targeted for sale, and those properties are unencumbered by mortgage debt, thus their sale will generate substantial cash for reinvestment.
Bob Foley: We'll have more to report on those properties in February. Please refer to footnote 4 of our financial statements for a snapshot of our REO portfolio.
Bob Foley: We have two four-rated loans.
Bob Foley: These borrowers may take the curative steps we require to cause the loans to remain outstanding, or we may enforce our remedies, which include foreclosure. We'll have more to report on those loans in February after year end.
Bob Foley: Our weighted average risk rating was unchanged at 3.0. Year-to-date, our borrowers infused $50.2 million of cash to pay interest, fund capital improvements, make partial principal payments on our loans, or otherwise invest in their properties.
Bob Foley: Please refer to page 54 of our Form 10-Q for more detail.
Bob Foley: Our share of non-mark-to-market, non-recourse term financing increased at quarter end to 79.7% from 78.7% at June 30, reflecting our historical emphasis on non-mark-to-market term funding of our investment portfolio.
Bob Foley: Our Liquidity, Pricing, and Loan Investment ROEs continue to improve as we exploit TPG's Capital Markets platform to source new, accretive, non-mark-to-market financing.
Bob Foley: We expect all will help us further optimize our cost-efficient, highly non-mark-to-market liability structure, either refinancing existing CLOs, financing loan investments that are currently unencumbered, or to finance new loan investments.
Bob Foley: We were in compliance with all financial covenants since September 30th, 2024. We repurchased 4,603 shares during the third quarter under our share repurchase program.
Bob Foley: TRTX share price appreciation was 31.2%.
Bob Foley: for the first nine months of 2024, making TRTX the leading performer in the commercial mortgage REIT space.
Bob Foley: We've maintained an appropriate amount of immediate and near-term liquidity.
Bob Foley: at 9.7% of total assets to support our growing volume of investment activity. Cash and near-term liquidity was $357 million, comprised of $211 million of cash in excess of our covenant requirements.
Bob Foley: and $130.7 million of undrawn capacity under our secured credit agreements.
Bob Foley: We also have $35.7 million in aggregate unpaid principal balance of unencumbered loan assets.
Bob Foley: We have a strong investment team, low leverage, a liability structure that is 80% non-MARX market.
Bob Foley: Stable Credit Ratings and a Stable Cecil Reserve A loan portfolio that is 100% current with no 5-rated loans Strong potential for earnings growth An 11.5% dividend yield on current market value And we're trading at 73% of book value
Bob Foley: Despite all these market-leading attributes, the market still imposes a 27% discount to book value.
Bob Foley: This $245 million discount is 3.7 times our current CECL reserve of $66.7 million per fund and loan balances. This is inconsistent with empirical data. Our CECL track record
Bob Foley: In summary, TRTX again delivered the strong operating performance, growing investment activity, stable credit ratings and CECL reserve, low leverage, substantial liquidity, and capacity for earnings growth that are hallmarks of TRTX.
Bob Foley: and with that, we'd like to open the floor to questions. Operator?
Speaker Change: Thank you. We will now conduct a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue.
Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Once again, to ask a question at this time, please press star 1 on your telephone keypad. One moment while we poll for a first question.
Speaker Change: Our first question comes from Stephen Laws with Raymond James. Please proceed.
Stephen Laws: Hi, good morning.
Stephen Laws: Doug, you know, good morning. You mentioned a couple ways, bro, just curious on your thoughts around leverage in the loan book. Are you really comfortable here and focused more on reinvesting repayment proceeds or, you know, increasing leverage as we move through the next two quarters?
Doug Bouquard: Yeah, I mean, from a from a from an investment perspective, you know, we continue to see a number of levers where we can grow our earnings power, which I mentioned in
Doug Bouquard: My initial, my initial transcript and
Doug Bouquard: What we're seeing, you know, really on the ground is, you know, we are seeing repayments. I think that there's, there's, you know, a little bit of push and pull as to where the 10-year settles. I think as the 10-year creeps up a little bit, that in some ways can slow certain repayment activities if a borrower was considering, you know, a fixed-rate financing.
Doug Bouquard: But on the other side, that is, I think, pushing more borrowers towards the floating rate market. So that's kind of one comment on that.
Doug Bouquard: The rest of the market so so I I do anticipate that as we're out there deploying more capital that our leverage will increase
Doug Bouquard: And when we think about
Doug Bouquard: All the potential levers, as again, you know, Bob mentioned, we also have levers in terms of recycling capital from REO and then also utilizing untapped financing capacity.
Speaker Change: But again, from a balance sheet cash perspective, you know, I do expect that we will be using a portion of that balance sheet cash to also drive new investments and very likely increase leverage at the company level. Yeah, that's great. That was kind of a follow-up question I had was around those REOs.
Speaker Change: on it.
Speaker Change: and Bob mentioned maybe three, kind of evaluating sales, and you'll have more to say early next year. You know, if you think about recycling that capital, none of them have debt. So kind of what is the incremental return pickup as you think about that capital moving out of unlevered real estate investment, unlevered CRE loan pipeline?
Speaker Change: Douglas Goldstein, CFP®, is the director of Profile Investment Services and the host
Speaker Change: Yep, Bob, go ahead.
Bob Foley: Great, thanks.
Bob Foley: Good question, Stephen. You're right, the three properties that...
Bob Foley: We're currently marketing for sale. None of them are levered with mortgage debt.
Speaker Change: The straight answer to your question is it depends on which property is being sold but you know generally speaking ROEs in our loan investment business right now are you know above 9%.
Speaker Change: Some of the REO properties that we own have yields in excess of that. Others have yields that are below and that information is contained in the footnotes to our financial statement. So it sort of depends on
Speaker Change: which asset is sold, but generally speaking, we believe that, you know, recycling the capital as we repatriate it into new
Speaker Change: New loan investments will be accreted to the company's earnings in rough terms, and you can pick your own REO, ROE, excuse me, return on equity for our investments. Every hundred million dollars of deployed
Speaker Change: Equity Capital or Recycled Capital equates to about three pennies per share per quarter.
Speaker Change: Hope that answers your question.
Stephen Laws: Yeah, no, I appreciate the specifics there. That's great, Bob. And lastly, Doug, I want to touch on life sciences. A couple of your peers have said that
Stephen Laws: that are now on their watch list or REO. It's about 11 or 12% of your portfolio and two of your top 10 loans. So can you maybe touch on that property type, talk about in your general reserve, how you think about that allocation of the general reserve to those life sciences exposures.
Speaker Change: Make it up, Deborah.
Speaker Change: Those assets are in their business plans.
Speaker Change: Yeah well you know first I think as Bob had mentioned we you know I think we have a really strong track record around you know where we set our reserves as it you know is meant to reflect
Speaker Change: our expected view of loss over the life of a loan, one. Two, when you think about life sciences, first and foremost, it's an important sector within TPG broadly. The firm is built.
Speaker Change: a successful franchise investing in life science companies and then also on the real estate side within the equity business, we own and operate a large portfolio of life sciences properties. So in short, it's a sector that we know incredibly well from really a variety of angles.
Speaker Change: You know, when we think about it through the lending lens,
Speaker Change: We've been actively lending in this market since 2015. So again, very familiar, very knowledgeable. As it relates to our current portfolio, we have four loans in life sciences. Again, to your point, comprising a little over 10 percent of the portfolio. Two of the properties are nearly.
Speaker Change: stabilized with occupancy nearing or exceeding our underwriting.
Speaker Change: and then two that have been fully converted to lab space and are basically currently in lease-up. So when we think about our risk...
Speaker Change: We really kind of center on the tremendous depth of experience here at TPG and investing in the space, one, and then two, we really believe that the borrowers that we have here are the right sponsors to execute on these business plans. And frankly, there's been significant progress on each deal in that regard.
Speaker Change: Great. Appreciate the color on that, Doug. Thanks.
Speaker Change: Good morning, everyone. Thanks for taking the question. Congrats on...
Speaker Change: How you positioned your credit profile, it's really, it's exceptional, so congrats on that. Now that we are where we are, and you're not in workout mode,
Speaker Change: Just curious.
Speaker Change: And what you're seeing, Doug, in the marketplace as far as opportunities. Do you have sort of a target level, given the existing capital base, on where you think
Speaker Change: Over six, 12 months, you might be able to grow the portfolio. I mean, you are you are 5 billion
Speaker Change: back at the end of 2022. And admittedly, you know, there's a couple hundred million of equity that, you know, is not around anymore. But just curious, kind of a round figure of where, if you have a target of where you can be in the next six to 12 months in the loan book. Thank you.
Speaker Change: Yeah, look, I think that, you know, we're obviously, you know, can't provide forward guidance, but I'm happy to kind of share, I think, some more commentary on really a few of those levers. I really think all those levers point to
Speaker Change: growth in terms of our outstanding loan book.
Speaker Change: You know, again, I think that, you know, the first lever to be clear is going to be deploying balance sheet cash, right? I think that, you know, you can see from our liquidity profile, we have
Speaker Change: Ample liquidity. So, you know, I do expect that that's effectively
Speaker Change: One area where we'll be able to grow the balance sheet. If you use, you know, again, a two to one leverage ratio, let's just say on new investments.
Speaker Change: That means that, let's call it approximately $33 million of equity can fuel approximately $100 million of new loan investments.
Speaker Change: One one number and then Bob it sort of mentioned kind of what a hundred million dollars of investment activity will do in terms of you know Driving earnings on a on a quarterly basis
Speaker Change: Robert Foley, Unknown Executive, Deborah Ginsberg
Speaker Change: when
Speaker Change: We think about the other levers, you know, first of all the recycling capital, you know from REO I think it's Bob had mentioned. It's you know, we're in the market right now with Three of our five REO assets and we'll have a more robust update for the market, you know You know over the next quarter, but but that again will provide
Speaker Change: very clear path towards growing our outstanding loan balances. And then lastly, we are
Speaker Change: Robert Foley, Unknown Executive, Deborah Ginsberg
Speaker Change: in that we do have all of those levers, one, and then we're combining that with an opportunity set that we frankly haven't even experienced yet in sort of real estate lending with banks.
Speaker Change: Pulling back from direct lending.
Speaker Change: And then also being more aggressive, I would say, on the loan-on-loan side. And when we see the loan-on-loan quotes that we're getting, they are in many cases inside of...
Speaker Change: of the spread that we're seeing within the CRE CLO market. So it does provide a really great stable source for us to be able to grow our investment portfolio, you know, given really all those vectors that are kind of pointing in our direction.
Stephen Laws: Thanks for that, Doug. And, you know, applaud, I applaud the share buyback, certainly at the, you know, at the 25% discount to the stock on book. Just curious, as you look at the capital mix going forward,
Speaker Change: Do you see a place for for high-yield debt? I mean obviously the bond market sold off, but you know
Speaker Change: about 70 basis, 60, 70 basis points higher, I guess, now on the 10-year. But if things were to come back down as the Fed proceeds.
Speaker Change: Does the five-year notes, the five, seven-year unsecured notes make sense for TRTX, just to mix in a little corporate leverage to your financing mix? Thank you.
Speaker Change: Yeah, look, I mean, Bob and I are constantly looking at ways that we can appropriately and efficiently lever our balance sheets. So I think that in the past, we have a record of, I think, being really tactical and thoughtful as to how we capitalize ourselves.
Speaker Change: with, you know, risk premium in the corporate market continue to remain tight.
Speaker Change: You know, I think that I do expect that we will be looking into that market over time, frankly, as we, you know, lever our balance sheet back up.
Speaker Change: I think for us, you know, our sort of near term focus, again, is going to be, you know, maximizing those levers that I had, you know, that mentioned in terms of, you know, balance sheet cash, recycling of capital, and then and then, you know, utilizing untapped financing capacity as big drivers, but
Speaker Change: Tool in the Toolkit as it comes to appropriately levering the balance sheet.
Speaker Change: Appreciate the comments this morning. Thanks.
Speaker Change: Thank you. The next question comes from Don Finetti with Wells Fargo. Please proceed.
Don Finetti: Hi, can you talk about the risk of migration of 3-rated loans to 4-rated and I have a follow-up as well.
Speaker Change: A couple of points on that. First, as both Doug and I mentioned in our prepared remarks, we had no risk migration in any direction during the quarter just ended.
Speaker Change: I think more importantly, some comments on how we manage that process and what the empirical data tells us about migration behavior over time. First, we do...
Speaker Change: We spend a lot of time asset managing our loans, as I think people on the call are aware. We do portfolio reviews on a quarterly basis. We assign or revisit.
Speaker Change: risk ratings at least quarterly, and frankly, we review recent developments on some loans even more frequently than that.
Speaker Change: You know, we've looked at our risk rating migration over time, and I think that what's interesting to note We've mentioned this before on calls is that for us at least The majority about two-thirds of the loans that we see migrate from three to four
Speaker Change: end up resolving, you know, in a normal way. Typically, the borrower repays us either through a refinancing or a sale. And that's been true over the period that includes
Speaker Change: Keep up with their business, their underwritten business plan over time are going to migrate to four, or at least they have in the past, whether that happens in the future is a very loan by loan issue.
Speaker Change: And then, you know, obviously some assets do migrate to the five category, although that pace has slowed considerably over the last couple of years. So I hope that answers your questions. But the fundamental thing is
Speaker Change: You know, migration does happen. It hasn't happened in our portfolio recently. When it does and it's a migration to Ford, you know, the more likely than not outcome is that the loan is resolved at par.
Speaker Change: Don, you said you had a follow-up question?
Don Finetti: Yeah, as I think about book value near term, I guess.
Don Finetti: you know, the first of all, it's good to see another quarter of stability overall on credit. But as I kind of think about stressing the book value risk, I guess the four rated ones, the 200 million, you could potentially have to put more reserves on those if they move to five.
Don Finetti: But then I guess on REO, it sounds like you're feeling pretty good about your basis versus where.
Speaker Change: I think there are two questions there. Let's talk first about REO. The accounting rules and our business discipline are both very clear. When a company acquires an asset through
Speaker Change: foreclosure, deed inclusion, deed in lieu, what have you, and it becomes REO, you take that asset onto your books that then market value.
Speaker Change: All of our REO assets have been acquired over the past year, so they're, in our view, current.
Speaker Change: Values, or at least they were at the time that...
Speaker Change: If that were not the case, then we would have booked or we would need to book a write-down and we haven't
Speaker Change: and we'll have more as Doug said and as I said next quarter report on the outcome of these sales processes.
Speaker Change: With respect to, you know, the need to book more reserves, this gets to some fundamental issues about CECL and its application.
Speaker Change: You know, CECL by definition is intended to represent management's expected losses on a loan over its life of that loan.
Speaker Change: So, you know, needing to build more reserves.
Speaker Change: shouldn't be necessary based on what a registrant knows about its loan book today and what it expects will happen with that loan in the future.
Speaker Change: So, you know, we're comfortable with our CECL reserve. It's been very stable for almost a year.
Speaker Change: And if facts and circumstances on individual loans change over time, then that will get reflected in the following quarters.
Speaker Change: Cecil analysis, but you know if you as you've seen our Ratings have been quite stable the portfolios performing Well, we've identified the assets that are four is where we're pretty focused And we're just doing our work, and I think our body of work over time suggests that we do a good job
Speaker Change: in terms of asset managing and resolving credit challenge loans when they arise.
Speaker Change: Any further follow-up there?
Speaker Change: I'm all set.
Speaker Change: Okay, thank you.
Speaker Change: The final question comes from Rick Shane with J.P. Morgan. Please proceed.
Speaker Change: Hey, this is AJ on for Rick. Can you tell us a little bit more about what your origination pipeline looks like? Where are you seeing the most attractive, attractive opportunities right now?
Speaker Change: Correct.
Speaker Change: Right now, from an investment perspective, we continue really to focus
Speaker Change: primarily on multifamily and industrial. I think as we mentioned earlier in the call, we will look at other property types selectively.
Speaker Change: But you know
Speaker Change: Multifamily and industrial continue to be two sectors where, you know, we have strong conviction in terms of the long-term secular demand on the assets. One. Two, I think as
Speaker Change: We've seen transaction activity pick up on the margin. Again, we're nowhere near back to where we were, you know, a few years ago. That activity has largely been concentrated within multifamily and industrial. And I do expect that as...
Speaker Change: You know, we begin to see the front of the curve go, go a bit lower that that's only going to increase.
Speaker Change: acquisition activity and also borrowers willingness to frankly take on a transitional business plan, which is exactly really where we have, you know, the sort of core of our lending, you know, lending exposure currently and frankly where we will be lending.
Speaker Change: So when we look at the Forward Opportunity Set, again, it's primarily multifamily and industrial, one. Two, I think, you know, one thing that I sort of highlighted is
Speaker Change: When you look at the, you know, real estate values versus particularly even where, you know, the sort of corporate market is valued, real estate values, you know, have really lag on a relative basis.
Speaker Change: and why that matters for our company is that it just provides an incredibly attractive entry point from a loan to value perspective.
Speaker Change: So simply put, if we're lending today, you know, I mentioned that our investments this quarter blended to about 63 LTV.
Speaker Change: because values are generally down from the very peak.
Speaker Change: we're actually lending at a lower LTV relative to peak values.
Speaker Change: which is very different from most other parts of frankly broader credit markets.
Speaker Change: And then I would say, lastly, you know, again, I can't highlight enough the sort of appetite on the back leverage side. So what that also means is that not only do we have ample liquidity and generally attractive terms on the back leverage side as spread there.
Speaker Change: Go tighter that allows us to originate loans at marginally tighter spreads.
Speaker Change: on much lower credit risk assets.
Speaker Change: while still being able to generate.
Speaker Change: mid-teens gross returns on these investments. So it's a really powerful combination of, frankly, three big drivers.
Speaker Change: Okay, thank you. And then can you also just give us an update on your share repurchase plans? You know, how are you weighing against that against the current share price or versus doing more originations?
Speaker Change: I said that we we are looking at both actively and I shared a lot about kind of how we're thinking about originations and some of the levers that we have.
Speaker Change: that are at our disposal to be able to poll.
Speaker Change: Well, on the share repurchase side, look, I mean, we purchased, frankly, a modest amount of shares this past quarter. What I can share is that the, you know, repurchase plan remains in place. And frankly, we continue to view share repurchases as an attractive means of allocating shareholder capital.
Speaker Change: Great, thank you.
Speaker Change: Thank you for joining our call this morning, and we look forward to updating you on the progress here at TRTX in the next couple months. Thank you.
Speaker Change: [music]