Q3 2025 TPG RE Finance Trust Inc Earnings Call

Speaker #3: Greetings and welcome to the TPG Real Estate Finance Trust . Third quarter 2020 Earnings Conference call . At this time , all participants are in a listen only mode .

Speaker #3: A question and answer session will follow the formal presentation . If anyone should require operator assistance , please press Star Zero on your telephone keypad .

Speaker #3: As a reminder , this conference is being recorded . It is now my pleasure to introduce Bob Foley . Thank you . You may begin .

Speaker #4: Good morning and welcome to the TPG re Finance Trust earnings call for the third quarter of 2025 . Today's speakers are Doug Bouquard Chief Executive Officer Brandon Fox , interim chief financial officer .

Speaker #4: And Ryan Roberto , head of capital markets and asset management . Doug and Brandon will provide commentary regarding the company , its performance and the general economy in which TRX operates .

Speaker #4: Doug , Brandon and Ryan will answer questions from call participants . 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 and the Investor Relations section .

Speaker #4: 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 TRX website .

Speaker #4: Recordings are the property of TRX and any unauthorized broadcast or reproduction in any form is strictly prohibited . This morning's call will include forward looking statements , which are uncertain and outside of the company's control .

Speaker #4: Actual results may differ materially . 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 #4: The company does not undertake any duty to update our forward looking statements or projections unless required by law . 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 #4: Today's earnings call is my last . After more than 12 years with TPG and ten years as CFO of TRX . My wife and I decided I will retire at year end to become a senior advisor to TPG Real Estate , which was announced via press release six weeks ago .

Speaker #4: As a senior advisor, I will remain a member of the Investment Review Committees of TRX and our other real estate vehicles. Brandon Fox has assumed the role of interim CFO, and Ryan Roberto has assumed all duties regarding capital markets and portfolio management.

Speaker #4: The succession plan was in place prior to my decision to retire, and Brandon and Ryan had been growing into their new roles for several years.

Speaker #4: The final stages of this transition will be complete by the holiday season . I've worked with Brandon and Ryan for seven and ten years , respectively , and I have every confidence in their well-developed abilities and judgment .

Speaker #4: Brandon and Ryan have been strong teammates to Doug as he continues to drive TRX success . It's been a privilege to work with my TPG colleagues since 2015 to transform TRX from a $2.5 billion loan portfolio purchased from a bank into a market leading commercial mortgage REIT .

Speaker #4: Important memories for me include 17.9 billion of loan investments , Trx's 2017 initial public offering . Early entry into the CRE , clo market and establishment of a strong brand as issuer and collateral manager .

Since both FL6 and FL7 were issued in 2025 and have 30-month reinvestment periods.

These two vehicles will provide for the next 30 months approximately $1.9 billion of financing capacity at a blended cost of funds of SOFR plus 175.

These stable cost-effective flexible financing will accelerate earnings growth and provide substantial balance for years to come.

Is continued to ability to deliver on the Strategic goals year-over-year. Our loan portfolio has grown by 1.2 billion dollars for 12% net. We intend to continue our growth and approve.

Better.

BRTX shares are currently trading at a 20% discount to book value, which we believe offers substantial value.

This value continues to be realized. As we pull the many levers for growth, including deploying excess liquidity and currently increasing our debt to equity ratio to meet our full investment objectives.

Combining these growth levers with the differentiated sourcing and investment capabilities of tbgs. Integrated real estate platform fuels our ability to create value for TTX shareholders.

With that, I will turn the call over to Brandon to discuss our results.

Thank you, Doug and good morning.

Before I review our third quarter, operating results. I also want to recognize

Bob and his impact on TPG RE Finance Trust, Inc. and my professional career.

Through his tenacity and commitment Bob's reach and influence, is felt across trtx and tpg.

His mentorship over our seven years together has been invaluable to me, and I wish him all the best.

Thank you, Bob.

For the third quarter of 2025, TPG RE Finance Trust, Inc. reported GAAP net income of $18.4 million, or $0.23 per common share.

And distributable earnings of $19.9 million, or $0.25 per common share.

Covering our quarterly dividend of 24 cents per common share.

Book value per common share, increase quarter over quarter to 11 dollars from 11 dollars and 20 cents due to our share repurchase program and another solid quarter of operating results.

Our operating results reflect the continued execution of our investment strategy, which is supported by our Nimble Capital allocation approach and durable liability structure.

During the third quarter, we originated 4 loans, with total commitments of 279.2 million at a weighted average credit spread of 3.22%.

received loan repayments of 415.8 million including 6, full loan repayments of

405.8 million across our loan portfolio.

These repayments were primarily multifamily and hotel loans originated in 2021 and 2022.

These par loan repayments continue to demonstrate the ability of our borrowers to execute their business plans.

And validate the credit performance of our loan portfolio.

We repurchased, 1.1 million, common shares, the total consideration of 9.3 million or 8.29 cents per common share.

generating 4 cents per common, share of Book value accretion

In total the company. Repurchased 3.2 million shares of common stock at a weighted average, price of $7.89, per share, resulting, in 13 cents per share of Book value accretion in the current year.

We remain a market leader in optimizing. Our capital structure.

On Monday, we announced the pricing of trtx 2025 fl7.

A 1.1 billion managed crao.

Which will settle on or about November 17th.

The company marketed to institutional investors, approximately 957 million of investment. Grade Securities that will provide trtx non-market to Market non-recourse term financing.

Fl7 includes a 30-month reinvestment period and advanced rate of 87% and a weighted average interest rate at issuance of terms sulfur plus 1.67%. Before transaction costs,

Simultaneously with the issuance of fl7, we expect to redeem, tortx 2021 fl4.

The fl7 issuance and fl4 Redemption are expected to produce. Roughly 100 million dollars of liquidity to fund, new loan Investments.

16.4 million, consisting of 77.2 million of cash on hand available for investment.

net of 16.4 million held to satisfy liquidity covenants under the company's secured

Financing agreements.

Undrawn capacity under secured, financing Arrangements of 78.6 million.

And collateralized Loan obligation reinvestment proceeds of 44.2 million.

Our net earning assets have grown year-over-year by 377.3 million or 12%.

Driven by 1.2 billion, dollars of loan originations.

At quarter end our loan portfolio was again, 100% performing with no negative credit migration.

Our weighted average risk rating for the loan portfolio is 3.0 consistent with the prior 7 quarters.

Our Cecil Reserve decreased by 2.6 million quarter over quarter primarily due to loan repayments. While the reserve rate of 176 basis, points is flat from June 30th.

The company's liability structure is 87% non-market to Market reflecting our long-held preference for liabilities that are stable.

Long-dated and low cost.

Total leverage was flat quarter over quarter at 2.6 times.

At quarter end, we had 1.6 billion dollars of financing capacity available to support loan investment activity and were in compliance with all Financial Covenants.

our third quarter, operating results again, demonstrate that the company's disciplined approach to Capital, allocation

Asset Management.

And capital markets execution will continue to deliver quality earnings growth and enhanced shareholder value.

We remain focused on sustaining.

Our momentum to further narrow, the current Share Price to Book value discount.

With that, we welcome your questions, operator.

Thank you. 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. A confirmation code will indicate your line is in the question, too.

You may press star 2 to remove yourself from the queue for participants using speaker equipment and may be necessary to pick up your handset before pressing the star key.

First question comes from Steve Delaney, the citizen fan, please go ahead.

Hi, good morning, everyone. And first Bob, congratulations to you on a wonderful career and all the best and what I would call your semi retirement, uh, given that you can remain an advisor, a trusted advisor. Um,

So, um, now this is a special call for just that reason. Um, friends, I'm just curious, when you look at the portfolio, which is performing exceptionally well, um, but at $3.7 billion.

When you, when you look at that and you look at your 2.6 debt to equity, do you feel that the the company has some amount of organic portfolio growth available to it um with the current capital base?

Thank you for your question and I do believe that that is the case. Um, we have previously discussed the

Potential growth of the balance sheet as it's currently constructed. Um in June we put out materials that show as you lever. The company's balance sheet to 2 and a half 3 3 and a half times that there's incremental de growth on a

Uh, on a per-share basis of $0.04 to $0.06, depending on the ROEs of the loans originated and the timing of when that occurs during the quarter.

Um, this afternoon, we'll hopefully get a cut from the FED. Um, as you

and your, um,

Your partners are there. If you talk to borrowers, do you feel that there is CRA equity money for transitional properties that is sort of waiting for a more attractive rate environment? And would you expect...

For your primary Bridge Loan product.

Yeah. It's a, it's an important question that this is done by the way. Good morning. Um, I think that from a, you know, from an investment activity perspective, we're already starting to see some of that acceleration. Um, you know, I I I mentioned that when you combine the loans that, you know, we close this past quarter, what we have closed thus far in Q4, and what we have signed up that holds about 1.1 billion dollars just in q1 and sorry just in Q3 and Q4 of this year. So we we're just kind of starting to see some of that um, as I look forward to the next year. Um, I think those are sort of a few things that that I expect will increase the demand for our product. I think 1

You know. So for actually going lower, I think will be a big driver that will probably on the margin push some of those acquisition dollars for transitional assets um um into into our sector 1. Um and then 2 simply put as there's more

Uh as as there's a reduction in interest rate volatility is when you tend to see um, you know, more appetite for real estate transactions generally speaking. So I think I think when you think about our our current pipeline of the portfolio I think as I've shared in Prior quarters, it's been you know, I'd say predominantly refinanced, focused, typically, give or take about 80%. Um and and what we're expecting um at least for next year is to have perhaps a little bit more balanced in between acquisition activity and refinance activity driven Again by you know, part of what

You know, the the, the pets actions will be but also there's just a, you know, kind of, to my earlier comments about broader asset classes. There is, uh, you know, there's been a pretty dramatic rally across all asset classes globally. Um, I would say that real estate is not fully participated in that rally. And I think it does put our asset class at at a particularly attractive spot in terms of risk, appetite.

Appreciate the comments this morning. Thank you.

Thank you.

Next question, John. They could be missed with you, please listen.

Hello, good morning everyone. And before I start just want to congratulate you, Bob on a fantastic career at tpg and elsewhere. Um always was a pleasure working with you. Uh since we started picking up coverage. Uh first off similar question to what Steve LED off with. Um obviously saw leverage stay flat quarter over quarter uh Brandon you just noted the sort of pickup and earnings power from Raising that leverage. So I was curious you know both headed into the end of this year as well as next year given the new cllo given what appears to be a ramp and origination volumes. Sort of how you see the Cadence of that leverage as as we assume going up, you know, both at the end of 2025 and into 2026 just how you're thinking about the timing there. Thanks.

Sure. Yeah I think you know I think what Brandon alluded to you know back to that kind of path to growth chart does map out you know again a bit of as we lever up and and frankly have that can flow into de. I think that what you're seeing within let's call this quarter and I think thus far what we've seen so far in Q4 is there you know, you're not really seeing that kind of full earning of our new investment activity. Because even in Q4 exactly what we're seeing is that the, you know,

The the repayments for Q4 have largely happened within the, you know, sort of first half of the, of the quarter and the bulk of the new Investments, we expect will close towards the end of the quarter. So, as we're, I think, you know, 1 of those players in the market, who is pretty pretty, pretty meaningfully growing, our balance sheet, we will have that lag that can be, you know, 45 to 60 days in between when Loans pay off, and when we make new Investments and, you know, we continue to want to, you know, kind of keep that keep that that day count as short as possible. But that's a little bit of what you're seeing and I'd say Q3 earnings and and I think that will be a dynamic over the, you know, kind of coming quarter to as we continue to kind of scale and grow our balance sheet.

Great. Thank you so much. Doug that's really helpful for us.

And then my other question um a little more minutia here but notice that your largest new loan of the quarter was actually on a Nashville Hotel. Um know this is been in recent quarters an area that you've been reducing exposure. Obviously have been more focused on multifamily and Industrial so just curious what went into this loan. If it was just sort of a unique opportunity uh just kind of something that caught our eye when we were looking through the new loans for the quarter. Thank you.

Time. So, uh,

A good, uh, RoE for the company and, uh, an interesting investment today.

Great. That's all for me. Thanks, everyone.

Once again, if you would like to ask a question, please press star 1 on your telephone keypad. Next question comes from Rick, Shane, with JP Morgan. Please go ahead.

Hey guys. Thanks for uh taking my question. Uh, Bob I'm sure we'll catch up afterwards but I think we've followed your companies for approaching 20 years and it is truly been a pleasure um really appreciate all of the uh wisdom and and uh consideration over the years in terms of thoughtfulness, so thank you. Um, is is sorry, I thank you. Um,

Is we think about the levers that are available? You've had questions today, uh, about whether or not you can take operating, leverage it up, you've done a great job, um, managing down not across. So the portfolios are crewing, is the opportunity at this point to enhance Roe. Um, a function of taking down that Rao portfolio, um, having more leverageable Capital there and obviously having, uh, you know, a portfolio that no longer drags out earnings is that is that the next leg? Uh, as we

Move forward. In terms of enhancing Roa.

Yeah, no, I I think that that's really not the not the path specifically. I think that it really is just, you know, net balance sheet growth is the single most important driver. Um, I think unlike many of our competitors are Aro. Portfolio is really not a material drag. In terms of our de, um, I think more of what, you know, really will will will frankly Drive. Our growth is, is just a growth in our net balance sheet over time. Um, our liquidity position, you know, continues to get, you know, further but risks even even by this recent series Co. So I think for us

You know, the next, you know, kind of coming quarters will be uh, you know, focusing on just frankly, growing our balance sheet and really moving our debt to equity ratio. You know, up from you know we've kind of been in the mid twos recently and I think getting closer to 3 3 and a half over time is really that's that's the important driver. Um, frankly less. So in terms of Ario dispositions

Okay. And and that's

Perhaps I misunderstood the earlier answers that I wasn't as confident, um, about increasing that leverage until the specificity of the hazards that that seems to me to be where the opportunity is and is part of this. Um, a function of the CL Market is going to given the efficiency there. Give you incremental, leverage based on sort of recent transactions

Yeah. No. That that that definitely does give us, give us more leverage uh 1 and also that it both gives us more leverage but also it lowers the cost of capital of the company and you know the deal has has price but is not closed yet. So these are all things that you'll start to see flowing through and coming quarters.

Got it. Hey Doug, thank you. And and Bob, like I said we'll catch up later but thank you for everything over the years.

Thank you.

Thank you. I would like to turn the floor over to management for closing remarks.

Thank you, everyone, for taking the time this morning. We look forward to updating you on further progress in the future. Thank you very much.

This concludes today's teleconference, see my disconnect your lines at this time and thank you for your participation.