Q1 2025 TPG RE Finance Trust Inc Earnings Call
Operator: Good morning, ladies and gentlemen and thank you for standing by. Welcome to TPG Real Estate Finance Trust first quarter 2025 earnings conference call. At this time, all participants are in a listen only mode.
Good morning, ladies and gentlemen, and thank you for standing by and welcome to TPG Real estate Finance Trust first quarter 2025 earnings Conference call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation.
Operator: The question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded.
What you require operator assistance during the conference. Please press Star Zero on your telephone keypad. Please note. This conference is being recorded its now my pleasure to turn the call over to management. Thank you you may begin.
Operator: It is now my to turn the call over to management. Thank you. You may begin.
Doug Bouquard: Good morning, and welcome to the TPG RE Finance Trust earnings call for the first quarter of 2025.
Speaker Change: Good morning, and welcome to TPG R E Finance Trust earnings call for the first quarter of 2025 todays speakers are Doug Blue card, Chief Executive Officer, and Bob Foley, Chief Financial Officer, Doug and Bob will provide commentary regarding the company its performance.
Doug Bouquard: Today's speakers are Doug Bouquard, Chief Executive Officer, and Bob Foley, Chief Financial Officer. Doug and Bob will provide commentary regarding the company, its performance, and the general economy, and will answer questions from call participants.
Speaker Change: And the general economy, and we will answer questions from call participants.
Operator: Yesterday evening, we filed our Form 10-Q, issued a press release, and shared an earnings supplemental, all of which are available on the company's website in the Investor Relations section. This morning's call and webcast is being recorded. Information regarding the replay of this call is available in our earnings release and on the TRTX website.
Speaker Change: Yesterday evening, we filed our Form 10-Q issued a press release and Sheridan earnings supplemental all of which are available on the company's website in the Investor Relations section.
Speaker Change: This morning's call and webcast is being recorded information regarding the replay of this call is available in our earnings release and on the <unk> website.
Operator: Recordings are the property of TRTX and any unauthorized broadcasts or reproduction in any form is strictly prohibited.
Speaker Change: Recordings are the property of <unk> and any unauthorized broadcast or reproduction in any form is strictly prohibited.
Operator: This morning's call will include forward-looking statements which are uncertain and outside of the company's control. Actual results may differ materially.
Speaker Change: This morning's call will include forward looking statements, which are uncertain and outside of the company's control.
Speaker Change: Actual results may differ materially.
Operator: For a comprehensive discussion of risks that could affect results, please see the risk factors section of the company's latest Form 10-K. The company does not undertake any duty to update our forward-looking statements or projections unless required by law.
Speaker Change: For a comprehensive discussion of risks that could affect results. Please see the risk factors section of the company's latest Form 10-K.
Speaker Change: The company does not undertake any duty to update our forward looking statements or projections unless required by law.
Operator: We will refer during today's call to certain non-GAAP financial measures which are reconciled to GAAP amounts in our earnings release and our earnings supplemental, both of which are available in the investor relations section of our website.
Speaker Change: We will refer to during today's call starting to non-GAAP financial measures, which are reconciled to GAAP amounts in our earnings release and our earnings supplemental both of which are available in the Investor Relations section of our website.
Doug Bouquard: Now I'll turn the call over to Doug. Over the past quarter, global markets continue to adjust to the new tariff regime as investors wrestle with the potential short and long-term effects of a protracted global crisis. Initially, asset prices reacted violently with a sharp sell-off in equities and then accompanying widening of credits. across all parts of the market, including In general, real estate credit spreads have moved in sympathy with broader credit markets. However, investor sentiment at this stage indicates that real estate credit is considered somewhat of a safe haven, relative to corporate credit and equity. Certain corporate borrowers have direct first-order risk to the new tariffs, which can drive defaults sooner.
Doug Bluecard: Now I'll turn the call over to Doug.
Doug Bluecard: Over the past quarter global markets continue to adjust to the new tariff regime as investors wrestle a short and long term effects of a protracted global trade.
Doug Bluecard: Initially asset prices reacted wildly with a sharp selloff in equities and then accompanying widening of credit spreads across all parts of the market, including real estate right.
Doug Bluecard: In general real estate credit spreads have moved in sympathy with broader credit markets. However, investor sentiment at this stage indicates that real estate credit has could see somewhat of a safe haven relative to corporate credit.
Doug Bluecard: Yes.
Doug Bluecard: Certain corporate borrowers have direct first quarter rest of the new tariffs, which could drive fault sooner by contrast, real estate credit has more indirect exposure as we expect the effects of tariffs will likely lag.
Doug Bouquard: By contrast, real estate credit has more indirect exposure. Hence, we expect the effects of tariffs will likely lag on a relative basis. Consequently, TRTX remains on offense, but with its usual cautious eye towards downside protection and tailspin. We continue to prefer the housing sector, particularly multifamily, given its resilient and stable NOI process. However, our pipeline contains transactions across various property types and geographies, driven by the thematic insights of TPG's integrated real estate debt and equity investment platform. Despite the broader market disruption, we made steady, positive progress toward our strategic goal. From a balance sheet perspective, we maintain substantial liquidity, a 100% performing long portfolio and stable risk.
Doug Bluecard: Correct.
Doug Bluecard: Consequently, CRT X remains on offense, but with its usual cautious eye towards downside protection and tell us.
Doug Bluecard: We continue to prefer the housing sector, particularly multifamily given it's resilient and stable NOI profiles. However.
Doug Bluecard: However, our pipeline contains transactions across various property types and geographies driven by the thematic insights to tpg's integrated real estate debt and equity investment platform.
Doug Bluecard: Despite the broader market disruption, we've made steady positive progress toward our strategic goals.
Doug Bluecard: From a balance sheet perspective, we maintain substantial liquidity at 100% performing loan portfolio and stable risk ratings.
Doug Bouquard: From a capital allocation perspective, we closed two multifamily loans after quarter end, totaling $131 million, and have executed term sheets on another $310 million of transactions. We also repurchased $9 million worth of TRTX common shares, which we continue to believe delivers value and liquidity to our shareholders. From a liability perspective, we priced and closed our sixth series CLO, FL6, which generated $191 million of cash to our balance sheet and provided another stable, long-term financing vehicle for our loan. This increased our non-mark-to-market financing exposure to 91% of total. Our Capital Markets team did an excellent job driving the execution of the transaction before bond spreads widened out dramatically beginning in late March.
Doug Bluecard: From a capital allocation perspective, we closed two multifamily loans after quarter end totaling $131 million and executed term sheets on another $310 million of transactions.
Doug Bluecard: We also repurchased 9 million worth of <unk> common shares, which we continue to believe delivers value and liquidity to our shareholders.
Doug Bluecard: From a liability perspective, we priced and closed our sixth CRE CLO, FL, six which generated $191 million of cash to our balance sheet and provided another stable long term financing vehicle travel in investor activity. This increased our non mark to market exposure to 91% of total borrowings.
Doug Bluecard: Our capital markets team did an excellent job driving the execution of the transaction before bond spreads widened dramatically beginning in late March as a reminder.
Doug Bouquard: As a reminder, This series CLO financing provides us with match term non mark to market non recourse financing with a 30 month reinvestment. The attractiveness, tenor, and stability of this financing creates tremendous long-term value for TRTX. We've discussed for several quarters the many levers TRTX possesses to drive growth in distributable earnings, including, one, deployment of excess liquidity, two, utilizing untapped financing capacity, three, recycling equity currently invested in REO, and four, creating additional liquidity via capital markets equity. I'm pleased to report that we've pulled each of the four levers to our advantage. Number one, we have closed or executed term sheets on approximately $441 million of new investments and repurchased approximately $9 million worth of shares.
Doug Bluecard: The CRE CLO financing provides us with matched term non mark to market nonrecourse financing with a 30 blocks reinvestment the attractiveness tenor and stability of this financing creates tremendous long term value for <unk> shareholders.
Doug Bluecard: We've discussed for several quarters, the many levers TRT extra vessels to try to promote the distributable earnings including one deployment of excess liquidity.
Doug Bluecard: To utilizing untapped financing capacity three recycling equity currently invested in Oreo and for creating additional liquidity or capital markets activity.
Doug Bluecard: I am pleased to report that we've pulled each of the four levers toward advantage.
Doug Bluecard: Number one we have closed our executed term sheets on approximately $441 million of new investments and repurchased approximately $9 million worth of shares.
Doug Bouquard: Number two, we expect to close shortly the sale of two office properties within our REO portfolio. Number three, we lowered our cost of funds from SOFR plus 200 to SOFR plus 194. And fourth, we redeemed FL3 and issued FL6, which generated net liquidity of $260 million for deployment and coverage. Lastly, we achieved all of this without any credit migration. and while increasing liquidity quarter over quarter by $137 million. From a market comparable perspective, we are uniquely positioned amongst our competitors to take advantage of the attractive real estate credit. In particular, the last few weeks have seen our investment pipeline grow dramatically, especially as certain lenders have paused or slowed their activity driven by the broader market pullback.
Doug Bluecard: Number two we expect to close shortly the sale of two office properties within our Oreo portfolio.
Doug Bluecard: Three we lowered our cost of funds from Sofa, plus 200 to silver plus 194.
Doug Bluecard: And fourth we redeemed F L three and issued six which generated net liquidity of $260 million for deployment in coming quarters.
Doug Bluecard: Lastly, we achieved all of this without any credit migration.
Doug Bluecard: And while increasing liquidity quarter over quarter by $137 million.
Doug Bluecard: From a market comparable perspective, we are uniquely positioned amongst our competitors to take advantage of the attractive real estate credit lines. In particular, the last few weeks have seen our investment pipeline grow dramatically, especially as certain lenders have paused or slowed their activity driven by the broader market pullback.
Doug Bouquard: A combination of $457 million of dry powder, a 91% non-market-to-market liability structure, a credit-stable balance sheet, and the real-time insights gained from TPG's global real estate provide TRTX with a comparative advantage in a dislocated, opportunity-rich investment.
Doug Bluecard: Combination of $457 million of dry powder, and 91% non mark to market liability structure, a credit stable balance sheet and the real time insights gained from Tpg's Global real estate business provides <unk> with a comparative advantage dislocated opportunity rich investing.
Doug Bluecard: Furthermore, <unk> shares trading at a 13% dividend yield and a 33% discount to book value offer a compelling value proposition to the market, even after considering product and uncertainty.
Bob Foley: With that, I will turn it over to Bob to provide a detailed summary of our financials. Thank you, Doug. Good morning, everyone. Thanks for joining. For the first quarter of 2025, we reported gap net income of $10 million or $0.12 per common share. Book value per common share of $11.19 and distributable earnings of $0.24 per common share in line with our quarterly dividend of $0.24 per common share. We registered wins in every aspect of our business and capital markets. We issued a new $1.1 billion CRE CLO, thus further extending our maturities, reducing our cost of funds and increasing our proportion of non-marked market, non-recourse term match liabilities to 91 percent.
Doug Bluecard: With that I will turn it over to Bob to provide a detailed summary of our financial results.
Bob Foley: Thank you Doug good morning, everyone. Thanks for joining us.
Bob Foley: For the first quarter of 2025, we reported GAAP net income of $10 million or 12 cents per common share.
Speaker Change: It looks like a common share of $11 19.
Speaker Change: And distributable earnings of <unk> 24 per common share in line with our quarterly dividend of <unk> 24 per common share.
Speaker Change: We registered wins in every aspect of our business and capital markets, We issued a new $1 $1 billion CRE CLO.
Speaker Change: Further extending our maturities, reducing our cost of funds and increasing our proportion of non mark to market nonrecourse match liabilities to 91%.
Bob Foley: In asset management, we maintained a 100% performing loan portfolio and unchanged weighted average risk rating of 3.0 with no credit migration and slightly increased our general reserve to 67.2 million or 199 basis points from 64 million or 187 basis points. In capital allocation, we've repurchased thus far in 2025 1.1 million common shares for an aggregate purchase price of $8.8 million, boosting book value per share by five cents. Roughly 16.1 million of share repurchase capacity remains under existing board authorization. And after quarter end, we originated two multifamily mortgage loans totaling $131 million with a weighted average as is LTV of 68% and a weighted average credit spread of 284 basis points.
Speaker Change: In asset management, we maintained a 100% performing loan portfolio and unchanged weighted average risk rating of three point out with no credit migration and slightly increased our general reserve to $67 2 million or 199 basis points from $64 million 187 basis points.
Speaker Change: And capital allocation, we repurchased thus far in 2025, $1 1 million common shares for an aggregate purchase price of $8 $8 million boosting book value per share by five cents roughly $16 1 million of share repurchase capacity remains in your existing board authorization and App.
Speaker Change: At quarter end, we originated two multifamily mortgage loans totaling $131 million with a weighted average as is LTV of 68% and a weighted average credit spread of 284 basis points currently three loans totaling $310 million for subjects assigned loan applications.
Bob Foley: Currently, three loans totaling $310 million are subject to signed loan applications and are in the closing process. TRTX's share price performance remains the strongest among its peers since January of 2023, with a cumulative return of 47% through yesterday's close. Regarding our loan portfolio, 100% of our loan portfolio is performing and current. We have only two four-rated loans and no five-rated loans. Our weighted average risk rating is 3.0, consistent with the prior five quarters. Portfolio composition is largely unchanged and reflects our continuing focus on our key investment themes of multifamily and industrial. Regarding CECL, our general reserve increased to 67.2 million from 64 million or 199 basis points from 187 basis points, due primarily to assumptions in the loan loss forecasting model that reflect higher interest rates, the potential impact of likely tariffs, and an increased probability of an economic recession.
Speaker Change: And are in the closing process CRT.
Speaker Change: <unk> share price performance remains the strongest among its peers since January of 2023 with a cumulative return of 47%.
Speaker Change: Through yesterday's close.
Speaker Change: Regarding our loan portfolio, 100% of our loan portfolio was performing and current.
Speaker Change: We have only two four rated loans and no five rated malls, our weighted average risk rating of three point out consistent with the prior five quarters portfolio composition is largely unchanged and reflects our continuing focus on our key investment themes of multifamily and industrial.
Speaker Change: Regarding Cecil our general reserve increased to $67 2 million from $64 million or 199 basis points from 187 basis points due primarily to assumptions in the loan loss forecasting models reflect higher interest rates.
Speaker Change: The potential impact of likely tariffs and an increased probability of an economic recession.
Bob Foley: We are on track to monetize our REO to optimize shareholders' returns. Our two California office buildings are in the market for sale. One is under contract, the other is expected to be very short. Please refer to footnote four of our financial statements for additional information regarding our REO portfolio. Regarding liabilities in our capital base, during the first half of March, we redeemed TRTX 2019 FL3 and priced TRTX 2025-FL6, a $1.1 billion CRE CLO with a weighted average spread of 183 bases. TRTX has traditionally been a first quarter issuer and 2025 was no exception. These two capital transactions boosted balance sheet cash by $191M and added $69.2M of investment cash to FL6.
Speaker Change: We are on track to monetize our Oreo to optimize shareholders returns our two California office buildings are in the market for sale.
Speaker Change: One is under contract the other is expected to be very shortly these.
Speaker Change: Please refer to footnote four of our financial statements for additional information regarding our Oreo portfolio.
Speaker Change: Regarding liabilities in our capital base during the first half of March we redeemed TR T X 2019 F. L. Three and price TR T X 2025 Dash F O six and $1 $1 billion CRE CLO with a weighted average spread of 183 basis points.
Speaker Change: <unk> has traditionally been a first quarter issue. Our 2025 was no exception.
Speaker Change: These two capital transactions boosted balance sheet cash by $191 million and added $69 $2 million of investment cash to F. L. Six.
Bob Foley: We also enlarged our table funding facility by $85 million to $375 million. added an additional lender to the syndicate and extended the facility for three years. Non-mark-to-market, non-recourse term financing is now an industry-leading 91% of our secured liabilities, up from 77% last quarter. Our total leverage increased very slightly to 2.2 times from 2.1 times last week. We have $2 billion of financing capacity available to support loan investment. We are in compliance with all financial covenants, March 31st, 2020. Regarding liquidity, at 11.6% of total assets, our liquidity is strong and highly supportive of our capital allocation strategy.
Speaker Change: We also enlarged our table funding facility by $85 million to 375 doctors added an additional lender to the syndicate and.
Speaker Change: And extended the facility for three years now.
Speaker Change: Non mark to market Nonrecourse term financing is now an industry, leading 91% secured liabilities up from 77% last quarter.
Speaker Change: Our total leverage increased very slightly to two two times from two one times last quarter, we had $2 billion of financing capacity available to support investment activity.
Speaker Change: We were in compliance with all financial covenants at March 31, 2025.
Speaker Change: Regarding liquidity at 11, 6% of total assets, our liquidity is strong and highly supportive of our capital allocation strategy and.
Bob Foley: On March 31st, on the heels of settlement of FL6, our liquidity was $457.6 million including $348 million of cash in excess of our covenant requirements, $25.4 million of undrawn capacity under our secured credit agreements, and $69.2 million of CRE-CLO investment cash. We funded, during the quarter, $13.6 million of commitments under existing loans. At quarter end, our deferred funding obligations under existing loan commitments were $109.8 million, only 3.2% of our total loan commitments. TRTX is optimally positioned to navigate the uncertain current market and capture the special situation and other lending opportunities in our current and future pipeline.
Speaker Change: At March 31 on the heels of settlement. That's all six our liquidity was $457 6 million, including $348 million of cash in excess of our covenant requirements $25 4 million of Undrawn capacity under our secured credit agreements and $69 2 million of CRE CLO investor.
Good catch.
Speaker Change: We funded during the quarter of $13 6 million of commitments under existing loans at quarter end, our deferred funding obligations under existing loan commitments were $109 $8 million only three 2% of our total loan commitments.
Speaker Change: Crts is optimally positioned to navigate the uncertain current market and capture the special situation in other lending opportunities in our current and future pipeline, we have strong liquidity low leverage substantial low cost financing capacity, 91% of our liabilities are non mark to market nonrecourse match term.
Bob Foley: We have strong liquidity, low leverage, substantial low cost financing capacity. 91% of our liabilities are non-mark-to-market, non-recourse and match term, and a 100% performing loan portfolio with stable risk.
Speaker Change: And a 100% performing loan portfolio with stable risk ratings were poised to drive growth in net earning assets and distributable earnings and are not reliant on loan payments to do so.
Bob Foley: We're poised to drive growth and net earning assets and distributable earnings and are not reliant on loan repayments to do And with that, we'll open the floor to questions. Operator? Thank you.
Speaker Change: And with that we'll open the Florida questions operator.
Speaker Change: Yeah.
Operator: We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. The confirmation tone will indicate your line is in the question queue. You may press star 2 to remove your question. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Speaker Change: Thank you we will now be conducting a question and answer session.
Speaker Change: Like to ask a question. Please press star one on your telephone keypad comp.
Speaker Change: A confirmation tone will indicate your line is in the question queue ebay.
Speaker Change: You May press star two to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys, one moment. Please while we poll for your questions.
Operator: One moment, please, while we poll for your questions.
Steve DeLaney: Our first questions come from the line of Steve DeLaney with JMP Securities. Please proceed with your question. Hey, good morning, everyone. Congrats on a strong quarter, and we certainly applaud the buyback. Doug, if I could start with you, sort of big picture. provide us with any color about the risk profile that you're seeing in your current originations and pipeline. Compare it to what the bridge loan market looked like in 2021-2022, both from maybe a loan structure, but also a borrower attitude. It just seems like that there is a more realistic or healthier market, but that's my observation.
Speaker Change: Our first questions come from the line of Steve Delaney with JMP Securities. Please proceed with your questions.
Steve DeLaney: Hi, good morning, everyone. Congrats on a strong quarter and we certainly applaud the buybacks.
Steve DeLaney: Doug if I could start with you.
Speaker Change: Sort of Big picture.
Speaker Change: Can you provide us with any color about the risk profile that you're seeing in your Clark originations and pipeline.
Speaker Change: Compared to what the bridge loan market look like in 2021 2022, both from a maybe a loan structure, but also a bar where attitude. It just seems like that there is.
Speaker Change: A more realistic or a healthier market.
Speaker Change: Those are my.
Speaker Change: So basically I'd love to hear your view.
Steve DeLaney: I'd love to hear your... of the comparative opportunity today from a risk-reward profile in bridge lending versus that post-COVID period. Thank you.
Speaker Change: Of the comparative opportunity that today from a risk reward profile and bridge lending versus that post COVID-19.
Speaker Change: Thank you.
Doug Bouquard: Sure, and thank you, Steve. So I would say first, just as you kind of zoom out, and it's an interesting kind of arc of time to think through. You know, one of the biggest differences from, you know, 2021 and 22 versus now is just frankly, entry point, you know, I think, despite the fact that, you know, we have seen, you know, loan spreads kind of what's called probably move in sympathy with perhaps corporate credit. And we've, we've been most excited about the fact that we really haven't on the margin seen any kind of proceeds creep.
Speaker Change: Sure.
Speaker Change: Thank you Steve So I would say first just as you kind of zoom out and it's an interesting kind of arc of time to think through.
Speaker Change: One of the biggest differences from 2021 and 22 versus now is just frankly entry point.
Speaker Change: I think despite the fact that we have seen loan spreads kind of let's call. It probably move in sympathy with perhaps corporate credit.
Speaker Change: <unk>.
Speaker Change: We've.
Speaker Change: And most excited about the fact that you really have it on the margin seen any kind of proceeds creep I think that was a lot of what characterized that.
Doug Bouquard: I think that was a lot of what characterized that that that moment in time was you saw loans that, you know, we're kind of creeping above that. 70% loan to value threshold. First and foremost, it's definitely it's definitely proceeds. I would add. Secondly. From a, you know, from a borrower mentality perspective, I think that, look, just looking at the available alternatives in terms of cost of funds. I mean, right now, in sort of round numbers, you know, agency borrowing is about a 6% cost. You know, a conduit loan is about a 7% cost. And then, you know, transitional loans are obviously in excess of conduits.
Speaker Change: At that moment in time was you saw loans that are kind of creeping above that 70% loan to value threshold generally speaking, so I'd say first and foremost it's Jeff.
Speaker Change: It's definitely proceeds I would add secondly.
Speaker Change: From a from a borrower mentality perspective.
Speaker Change: I think that look just looking at the available alternatives in terms of cost of funds I mean right now.
Speaker Change: And sort of round numbers agency borrowing is about a 6% cost of conduit loan is about a 7% cost.
Speaker Change: And then you know transitional loans are obviously in excess of conduit. So, let's just call. It kind of generally sofa plus $2 75 to 400, depending on the on the risk profile. So the cost of borrowing is elevated but I think that borrowers are being a bit more disciplined about the amount of debt to pay.
Doug Bouquard: So let's just call it kind of generally, so for plus, you know, 275 to 400, depending on the risk profile. So the cost of borrowing is elevated, but I think that borrowers are being a bit more disciplined about the amount of debt that they want to put on an asset, just acknowledging also some of the uncertainties more broadly.
Speaker Change: What to put on an asset just acknowledging also some of the uncertainties more broadly in the market.
Doug Bouquard: Very helpful. And could you just roughly estimate, I know you've got a new CLO and we could use that for the financing side of things, but could you estimate what your kind of range of expected levered return on equity is on the new bridge loans that you're making? Yeah, sure. So I think, you know, from from that perspective, you know, first, just worth highlighting that we just from a timing perspective, did a fantastic job of executing that series CLO. And in the kind of simplest sense, I would describe it as we were able to lock in bond spreads, which really kind of drive our cost of financing, when they were they were kind of closer to the tights of the year.
Speaker Change: Very helpful and could you just roughly estimate yeah, I know you've got a new CLO and we could use that for.
Speaker Change: For the financing.
Speaker Change: Side of things, but could you estimate what your kind of range of expected Levered return on equity is on the new bridge loans that youre, making.
Speaker Change: Yeah sure so I think from that perspective.
Speaker Change: First just worth worth highlighting that we just from a timing perspective did a fantastic job of executing that CRE CLO and they're kind of simplest sense I would describe it as we were able to lock in bond spreads, which really kind of drive our cost of financing.
Speaker Change: They were they were kind of closer to the types of the year.
Doug Bouquard: Whereas now we're actually able to use that financing as we're out there deploying new capital at much wider loan spreads. So when you do think about our ROEs, that that's kind of all been kind of moving in our favor. They really haven't seen yet flow into a lot of our numbers. But that'll be one of the benefits that our balance sheet has versus competitors is that we were able to, again, kind of lock that deal in just before we saw a very meaningful widening, you know, within bond spreads. But, you know, generally speaking, right now, we've seen loan spreads over the last, let's let's call it four to six weeks, you know, move anywhere from, you know, 25 basis points to 75 basis points wider, that's definitely very much a moving target.
Speaker Change: Whereas now we're actually able to use that financing as for after deploying new capital at much wider loan spreads and when you do think about our ROE.
Speaker Change: That's kind of all been kind of moving in our favor that you really havent seen yet flow into a lot of our numbers, but that'll be one of the benefits that our balance sheet has versus competitors that we were able to again kind of locked that deal and just before he said.
Speaker Change: All are very meaningful widening with advanced breast, but generally speaking right now we've seen loan spreads.
Speaker Change: Last.
Speaker Change: Let's call it four to six weeks.
Speaker Change: Yes move anywhere from <unk>.
Speaker Change: 25 basis points to 75 basis points wider that's definitely very much a moving target.
Doug Bouquard: And I think if anything, you're seeing a little bit of a steepness, where, you know, loans that are, you know, perhaps are more challenging property types or more challenging markets, you can see even, you know, the cost of borrow outside of that 75 basis point range, as I mentioned. But when we're out there, you know, making investments, we, you know, we're generally still generating gross ROEs in the low to mid-teens range.
Speaker Change: If anything youre seeing a little bit of a steepness where loans that are.
Speaker Change: Perhaps there are more challenging property types of our more challenged markets you could see.
Speaker Change: The cost of borrow outside at 75 basis point range as I mentioned.
Speaker Change: But when we're out there.
Speaker Change: Making investments, we're generally still generating.
Speaker Change: Gross Roes in the low to mid teens range.
Speaker Change: Instantly.
Steve DeLaney: Thank you so much for the caller. Thank you.
Speaker Change: Thank you so much for the color.
Speaker Change: Thanks, Steve.
Speaker Change: Thank you our next questions come from the line of John Davis with B T. I G. Please proceed with your questions.
John Nicodemus: Our next questions come from the line of John Nicodemus with BTIG. Please proceed with your question. Morning, everyone. Thanks for taking my question. You noted in your prepared remarks during your last call that TRTX had over $300 million of live investment opportunities. Obviously, none came in in the first quarter, saw the $131 million come in so far in the second quarter. Was that just a question of timing, why there weren't any originations in the first quarter?
John Davis: Good morning, everyone. Thanks for taking my question.
John Davis: You noted in your prepared remarks during your last call that T. R. T X had over $300 million of alive investment opportunities. Obviously, none came in in the first quarter. So the 131 come in so far in the second quarter was that just a question of timing why there weren't any originations in the first quarter or is it something broader that your team saw.
John Nicodemus: Or was it something broader that your team saw that led to you holding off, or something else entirely? Thanks. Yeah, sure. You know, it was a really a combination of a few things. First, You know, when we looked at loan spreads in January, February, you know, the market, particularly as we got into February, you know, was getting kind of tighter and tighter. So we were very disciplined in terms of loans that we signed up and kind of where we were pursuing new investments. And that's one. Two, I think just as a function of the dislocation in markets and a lot of the Frankly, the heavy refinancing volume that we're seeing in our pipeline, loans have been just taking longer to close, frankly.
John Davis: That led to your holding off or something else entirely. Thanks.
John Davis: Yeah sure Yeah. It was really I'd say a combination of a few things first.
John Davis: When we looked at loan spreads in January February.
John Davis: The market, particularly as we got into February.
John Davis: This was getting tighter and tighter. So we were very disciplined in terms of loans that we signed up.
John Davis: And kind of where we were pursuing new investments and that's one.
John Davis: Two I think just as a function of the dislocation in markets and a lot of the.
John Davis: The fact that the heavy refinancing volume that we're seeing.
John Davis: In our pipeline loads have been just taking longer to close frankly.
Doug Bouquard: We're really pleased that if you think about kind of how we've been able to time our entry into markets, March and April for us have been a very attractive moment for us to be deploying capital, as evidenced in the $441 million of transactions that we either have closed or committed to. So again, just to kind of put it in the simplest terms, there was a lot of discipline with the team in Jan and Feb as we saw deals get a little bit And then I would say secondly, you know, the sort of average time to close deals has been probably a little bit longer than our typical historical experience.
John Davis: We're really pleased that you know if you think about kind of how we've been able to time our entry into markets March and April for US has been a very.
John Davis: Tractive moment for us to be deploying capital as evidenced in the $441 million of transactions that we either have closed or committed to.
John Davis: So again just to kind of put it in the simplest terms there was a lot of discipline with team and Shannon fab as we saw deals get a little bit.
John Davis: Yes.
John Davis: Too tight and then I would say secondly.
Speaker Change: The sort of average time to close deals has been probably a little bit longer than our typical historical experience against some of that a mix of the heavy refined the pipeline and also just driven by the sort of broader market backdrop that of course, just accretion just increases uncertainty and can extend out the close timing.
John Nicodemus: Again, some of that a mix of the heavy refine, the pipeline, and also just driven by the sort of broader market backdrop that of course, just increases, just increases uncertainty and can extend out the closing time. Great. Thanks, Doug.
Speaker Change: Great. Thanks, Doug that's really helpful.
John Nicodemus: That's really helped.
John Nicodemus: And then my other question just goes into REO.
Speaker Change: Then my other question just goes into Oreo you mentioned that you're close on the sale of the two California office properties, which is exciting.
John Nicodemus: You mentioned that you're close on the sale of the two California office properties, which is exciting. Just another call back to the last call. You mentioned you thought the REO portfolio could be reduced by about half by year end. Is this sort of still how you're viewing the pacing there, or has that changed at all, you know, given some of the broader market moves since last call? Thanks.
Speaker Change: Just another call back to the last call. You mentioned you thought the Oreo portfolio could be reduced by about half by year end is this sort of still how you're viewing the pacing there or has that changed at all given some of the broader market moves since last call.
Speaker Change: <unk>.
Doug Bouquard: Thanks for your question, John. We are excited about the prospect of these two near term sales in California. I would say that our our plans and expectations are to stick to the cadence that we described. The events of the last four to six weeks have certainly increased uncertainty and unsettledness in the market, but whether they cause the pace to slow down is not yet clear, but I can assure you that For more information visit www.FEMA.gov You know, we have a plan, we've been executing it, we would expect to move. We have teed up over the next several.
John Davis: Thanks for your question John.
Speaker Change:
Speaker Change: We are excited about the prospect of.
Speaker Change: These two near term sales in California.
Speaker Change: I would say that our.
Speaker Change: Our plans and expectations are to stick to the cadence that we described on last quarter's call.
Speaker Change: The events of the last four to six weeks and.
And certainly increased uncertainty and softness in the market whether they.
Speaker Change: Cause the pace to slow down its not yet clear, but I can assure you that we are.
Speaker Change: We have a plan we've been executing it we would expect to move forward with some of the other properties, we have teed up.
Speaker Change: Several quarters.
John Nicodemus: Great.
Speaker Change: Great. Thanks, so much Bob that's all for me. Thank you.
John Nicodemus: Thanks so much, Bob.
John Nicodemus: That's all for me. Thank you. Yep. Thank you.
Thank you our next questions come from the line of Rick Shane with J P. Morgan. Please proceed with your questions.
Rick Shane: Our next question has come from the line of Rick Shane with J.P. Morgan. Please proceed with your question.
AJ: Hey, this is AJ, Oscar, Rick. For the two REOs that it sounds like you're about to sell, how do the transaction prices compare to the carrying values? Should we expect any gains or losses on those?
Speaker Change: Hey, this is AJ Oster Rick.
Speaker Change: For the two RVO is that it sounds like you are about to sell how does the transaction prices compared to the carrying values should we expect any gains or losses on those.
Bob Foley: Good morning, AJ. Thanks for your question. When the transactions close, we'll obviously report the prices at which we close those deals. We're in contract on one and we're just about to be in contract on the other. So we and I don't believe it's appropriate to share that information right now. But you're familiar with the company and our track record with respect to REO prices in excess of our carrying dollars.
Speaker Change: Good morning, a J. Thanks for thanks for your question well when the transactions close we'll obviously.
The prices at which we close those deals.
Speaker Change: We are in contract on one of them were just about to be in contract on the other so we and I don't believe it's appropriate to.
Speaker Change: Sure that information right now, but youre familiar with the company and our track record with respect to our REO dispositions in the past and we've generally are.
Speaker Change: Sold Oreo at prices in excess of our carrying value.
AJ: OK, fair enough.
Speaker Change: Okay Fair enough and then just one more.
Bob Foley: And then just one more. Are there any other kind of like REO resolutions in the pipeline that are getting close to resolution where that might be worth lagging? As I said in my last answer, there's nothing else that we are actively marketing at this time, but we have a plan for each of our REO assets, which we've discussed on previous calls. There are some properties that are sort of next in queue, and as these two properties clear, then we'll... address and enter.
Speaker Change: Are there any other kind of like are you resolutions in the in the in the pipeline that are getting close to resolution where that might be worth lagging right now.
Speaker Change: As I said in my last answer there there is nothing else that we are actively marketing at this time.
Speaker Change: But there.
Speaker Change: We have a plan for each of our Oreo assets, which we've discussed on previous calls there.
Speaker Change: There are some properties that are sort of next in queue.
Speaker Change: And as these two properties clear.
Speaker Change: Then well.
Speaker Change: Address and entered the market with the next tranche for lack of a better term.
AJ: Thank you very much. That's all for me.
Speaker Change: Okay. Thank you very much the property.
AJ: Thank you, AJ. Thank you.
Speaker Change: Thank you AJ.
Speaker Change: Thank you as a reminder, if you would like to ask a question. Please press star one on your telephone keypad.
Operator: As a reminder, if you would like to ask a question, please press star 1 on your telephone keypad.
Operator: We have reached the end of our question and answer session.
Speaker Change: We have reached the end of our question and answer session I would now like to turn the floor back over to management for any closing comments.
Doug Bouquard: I would now like to turn the floor back over to management for any closing. I just wanted to thank everyone for joining the call this morning and we look forward to updating you on our progress in about one quarter. Thank you very much. Thank you.
Speaker Change: I just wanted to thank everyone for joining the call. This morning, and we look forward to updating you on our progress in.
Speaker Change: And about one quarter. Thank you very much.
Speaker Change: Thank you. This does conclude today's teleconference. We appreciate your participation you may disconnect your lines at this time.
Operator: This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.
Speaker Change: The rest of your day.
Speaker Change: [music].