TPG RE Finance Trust (TRTX) Q1 2025 Earnings Call April 30, 2025 09:00 AM ET Speaker0 Good morning, ladies and gentlemen, and thank you for standing by. Welcome to TPG Real Estate Finance Trust First Quarter twenty twenty five Earnings Conference Call. 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 management. Thank you. You may begin. Sp ...

Core Insights - TPG RE Finance Trust reported a revenue of $37.03 million for Q1 2025, reflecting a year-over-year decline of 4.9% and an EPS of $0.24, down from $0.30 a year ago [1] - The reported revenue fell short of the Zacks Consensus Estimate of $37.24 million, resulting in a surprise of -0.56%, while the EPS also missed the consensus estimate of $0.26 by -7.69% [1] Financial Performance Metrics - Net Interest Income was $24.90 million, below the average estimate of $26.08 million from two analysts [4] - Other income, net, was reported at $1.85 million, compared to the average estimate of $2.45 million from two analysts [4] - Total other revenue reached $12.13 million, exceeding the average estimate of $10.59 million from two analysts [4] - Revenue from real estate owned operations was $10.28 million, surpassing the estimated $8.14 million from two analysts [4] Stock Performance - TPG RE Finance Trust shares have returned -9.1% over the past month, contrasting with the Zacks S&P 500 composite's -0.8% change [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating potential performance in line with the broader market in the near term [3]

Group 1: Earnings Performance - TPG RE Finance Trust reported quarterly earnings of $0.24 per share, missing the Zacks Consensus Estimate of $0.26 per share, and down from $0.30 per share a year ago, representing an earnings surprise of -7.69% [1] - The company posted revenues of $37.03 million for the quarter ended March 2025, missing the Zacks Consensus Estimate by 0.56%, and down from $38.93 million year-over-year [2] - Over the last four quarters, TPG RE Finance Trust has not surpassed consensus EPS estimates and has topped consensus revenue estimates only once [2] Group 2: Stock Performance and Outlook - TPG RE Finance Trust shares have declined approximately 12.8% since the beginning of the year, compared to a -6% decline in the S&P 500 [3] - The company's earnings outlook is crucial for investors, as it includes current consensus earnings expectations for upcoming quarters and any recent changes to these expectations [4] - The current consensus EPS estimate for the coming quarter is $0.25 on revenues of $37.52 million, and for the current fiscal year, it is $1.03 on revenues of $149.72 million [7] Group 3: Industry Context - The Real Estate - Operations industry, to which TPG RE Finance Trust belongs, is currently ranked in the bottom 34% of over 250 Zacks industries, indicating potential challenges for stock performance [8] - Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can impact TPG RE Finance Trust's stock performance [5][6]

```markdown Cover and Disclosures [Forward-Looking Statements and Other Disclosures](index=3&type=section&id=Forward-Looking%20Statements%20and%20Other%20Disclosures) This section outlines forward-looking statements and potential risks from market, interest rate, real estate, financing, and regulatory factors - The company identifies numerous risk factors that could materially affect its financial results and performance[4](index=4&type=chunk) - **Fluctuations in interest rates and credit spreads** are key risks[4](index=4&type=chunk) - **Adverse changes in the real estate and capital markets** pose significant risks[4](index=4&type=chunk) - **Difficulty in obtaining financing or raising capital** is a potential risk[4](index=4&type=chunk) - **Reductions in investment yields and increases in financing costs** are identified risks[4](index=4&type=chunk) - **Events leading to increases in the current expected credit loss (CECL) reserve** are a risk factor[4](index=4&type=chunk) - **Reduced demand for office space due to remote/hybrid work schedules** is a concern[4](index=4&type=chunk) - **Defaults by borrowers on debt service or principal payments** are also listed as risks[4](index=4&type=chunk) Financial and Portfolio Overview [Q1 2025 Highlights](index=5&type=section&id=TRTX%20By%20the%20Numbers) As of March 31, 2025, TRTX reported a **$3.4 billion** loan investment portfolio and **$457.6 million** in liquidity, declaring a **Q1 2025** common stock dividend of **$0.24** per share matching distributable earnings, with the portfolio characterized by a weighted average risk rating of **3.0** and **99.7%** floating rate Key Metrics as of March 31, 2025 | Category | Metric | Value | | :--- | :--- | :--- | | **Loan Portfolio** | Loan Investment Portfolio | $3.4 billion | | | Weighted Average Risk Rating | 3.0 | | | % Floating Rate | 99.7% | | | Weighted Average LTV | 66.1% | | **Liquidity & Capitalization** | Total Liquidity | $457.6 million | | | Financing Capacity | $4.8 billion | | | Debt-to-Equity Ratio | 2.2x | | | % Non-Mark-to-Market Financing | 91.0% | | **Dividend & Earnings** | 1Q25 Common Stock Dividend | $0.24 | | | 1Q25 GAAP Income per Diluted Share | $0.12 | | | 1Q25 Distributable Earnings per Diluted Share | $0.24 | | | Book Value per Share | $11.19 | [Q1 2025 Operating Results](index=7&type=section&id=1Q25%20Operating%20Results) For the first quarter of **2025**, **TRTX** reported GAAP Net Income Attributable to Common Stockholders of **$10.0 million**, or **$0.12** per diluted share, with Distributable Earnings of **$19.4 million**, or **$0.24** per diluted share, and book value per share slightly decreased from **$11.27** to **$11.19** primarily due to dividends and credit loss expense Q1 2025 Operating Results ($ in millions, except per share data) | Item | Net Income Attributable to Common Stockholders | Distributable Earnings | | :--- | :--- | :--- | | Net Interest Income | $24.9 | $24.9 | | Net Income Before Credit Loss Expense | $13.4 | $19.4 | | Credit Loss Expense | ($3.4) | - | | **Total** | **$10.0** | **$19.4** | | **Per Common Share, Diluted** | **$0.12** | **$0.24** | QoQ Change in Book Value per Share | Description | Amount per Share | | :--- | :--- | | Book Value 12/31/24 | $11.27 | | Net Income, Excluding Credit Loss Benefit | $0.21 | | Dividends on Common Shares | ($0.24) | | Dividends on Preferred Shares | ($0.04) | | Credit Loss Expense | ($0.04) | | Other (Issuance, Retirement, Equity Comp) | ($0.01) | | **Book Value 3/31/25** | **$11.19** | [Liquidity and Leverage](index=9&type=section&id=Liquidity%20and%20Leverage) As of March 31, 2025, the company's available liquidity increased to **$457.6 million** from **$320.8 million** in the previous quarter, while both the Debt-to-Equity ratio and Total Leverage Ratio rose to **2.23x** from **2.02x** - **Available liquidity** saw a significant increase in **Q1 2025**, rising to **$457.6 million**, primarily driven by an increase in cash and CLO reinvestment cash[14](index=14&type=chunk)[15](index=15&type=chunk) Leverage Ratio Trends | Date | Debt-to-Equity Ratio | Total Leverage Ratio | | :--- | :--- | :--- | | 12/31/2024 | 2.02x | 2.02x | | 3/31/2025 | 2.23x | 2.23x | [Loan Portfolio Overview](index=11&type=section&id=Loan%20Portfolio) The loan portfolio, with total commitments of **$3.4 billion**, is primarily composed of **multifamily properties (52.3%)**, followed by office (**17.3%**) and hotel (**10.3%**), concentrated in the West (**37.0%**) and East (**31.4%**) regions, with **99.7%** of loans being floating rate Portfolio Metrics (as of March 31, 2025) | Metric | Value | | :--- | :--- | | Total Loan Commitments | $3.4B | | Outstanding Principal Balance | $3.3B | | Weighted Average All-in Yield | 8.22% | | % Floating Rate Loans | 99.7% | - The loan portfolio is heavily weighted towards **multifamily properties**, which constitute **over half** of the total composition[19](index=19&type=chunk) Loan Portfolio Composition by Property Type | Property Type | Percentage | | :--- | :--- | | Multifamily | 52.3% | | Office | 17.3% | | Hotel | 10.3% | | Life Science | 10.9% | | Other | 9.2% | [Portfolio Risk Ratings](index=13&type=section&id=Risk%20Ratings) The weighted average risk rating of the loan portfolio remained **stable at 3.0** as of March 31, 2025, with the vast majority of loans (**42 out of 45**) rated '3' (Medium Risk), and the office portfolio carrying the highest average risk rating at **4.0** - The overall risk profile of the loan portfolio remained **stable quarter-over-quarter**, with a weighted average risk rating of **3.0**[28](index=28&type=chunk)[31](index=31&type=chunk) Dispersion of Risk Ratings (by Loan Count) | Risk Rating | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | 1 (Very Low) | 1 | 1 | | 2 (Low) | 0 | 0 | | 3 (Medium) | 42 | 42 | | 4 (High) | 2 | 2 | | 5 (Default) | 0 | 0 | - The weighted average risk rating for the **Office property portfolio was 4.0**, significantly higher than other property types like Multifamily (**3.1**) and Hotel (**3.0**)[29](index=29&type=chunk)[30](index=30&type=chunk)[31](index=31&type=chunk) [CECL Reserve](index=15&type=section&id=CECL%20Reserve) The allowance for credit losses (**CECL reserve**) increased to **$67.2 million** as of March 31, 2025, up from **$64.0 million** at the end of the prior quarter, representing **199 basis points** of total loan commitments, with no specifically identified loans requiring a reserve - The **CECL reserve increased by $3.2 million** during **Q1 2025**, from **$64.0 million** to **$67.2 million**[32](index=32&type=chunk) QoQ CECL Reserve Trend | Date | Reserve ($M) | Reserve as bps of Total Loan Commitments | | :--- | :--- | :--- | | 12/31/2024 | $64.0 | 187 | | 3/31/2025 | $67.2 | 199 | [Loan Financing Structure](index=17&type=section&id=Loan%20Financing) **TRTX** has a total financing capacity of **$4.8 billion**, with an outstanding principal balance of **$2.8 billion**, where **91.0%** of this financing is **non-mark-to-market**, primarily through Collateralized Loan Obligations (**CLOs**), and no significant debt maturities until **2027** - The company's financing is predominantly **non-mark-to-market (91.0%)**, providing stability against market volatility[36](index=36&type=chunk) - The company's debt maturity profile shows **no significant maturities until 2027**, indicating a well-laddered structure[37](index=37&type=chunk)[38](index=38&type=chunk) [Real Estate Owned (REO) Portfolio](index=19&type=section&id=Real%20Estate%20Owned) The Real Estate Owned (**REO**) portfolio has a current carrying value of **$272.2 million** and a net book equity of **$241.0 million** as of March 31, 2025, consisting of seven properties acquired between April **2023** and December **2024** REO Portfolio Summary (as of March 31, 2025) | Metric | Value ($ in millions) | | :--- | :--- | | Fair Value at Acquisition | $287.9 | | Carrying Value | $272.2 | | Mortgage Debt Outstanding | $31.2 | | Net Book Equity | $241.0 | [Interest Rate Sensitivity](index=21&type=section&id=Impact%20of%20Changing%20Rates) A **100 basis point (1.00%)** increase in the index rate (Term SOFR) is projected to have a positive impact of **$0.01** per share per quarter on net interest income, while a **100 basis point** decrease would have a negative impact of **$0.01** per share per quarter Portfolio Net Interest Income Sensitivity ($ Impact per Share per Quarter) | Change in Index Rate | Impact per Share | | :--- | :--- | | +1.00% | $0.01 | | +0.50% | $0.01 | | 0.00% | $0.00 | | -0.50% | ($0.01) | | -1.00% | ($0.01) | Appendix [Detailed Loan Portfolio](index=25&type=section&id=TRTX%20Loan%20Portfolio) This section provides a detailed breakdown of the company's **45** loans, totaling **$3.39 billion** in commitments, with the top **10** loans representing a significant portion and primarily secured by **multifamily**, office, and life science properties in key markets, and an overall portfolio weighted average LTV of **66.1%** and a risk rating of **3.0** Top 10 Loans by Commitment (as of March 31, 2025) | Loan | Commitment ($M) | Property Type | Location | Risk Rating | | :--- | :--- | :--- | :--- | :--- | | 1 | $256.3 | Multifamily | San Jose, CA | 3 | | 2 | $227.1 | Office | New York, NY | 3 | | 3 | $215.0 | Life Science | Daly City, CA | 3 | | 4 | $130.5 | Office | New York, NY | 3 | | 5 | $129.0 | Industrial | Various | 3 | | 6 | $113.0 | Multifamily | Towson, MD | 3 | | 7 | $113.0 | Multifamily | Various | 3 | | 8 | $106.0 | Multifamily | Various, NJ | 3 | | 9 | $102.6 | Life Science | Hayward, CA | 3 | | 10 | $96.0 | Multifamily | Phoenix, AZ | 3 | [Reconciliation of GAAP to Non-GAAP Measures](index=27&type=section&id=Per%20Share%20Calculations) This section provides reconciliations from GAAP Net Income to Distributable Earnings, where **Q1 2025** GAAP Net Income of **$13.7 million** was adjusted for non-cash items like stock compensation (**$2.0M**), depreciation (**$4.0M**), and credit loss expense (**$3.4M**) to arrive at Distributable Earnings of **$19.4 million**, and details the book value per common share of **$11.19** Reconciliation to Distributable Earnings (Q1 2025, in thousands) | Description | Amount | | :--- | :--- | | Net Income Attributable to Common Stockholders | $9,960 | | Non-Cash Stock Compensation Expense | $2,019 | | Depreciation and Amortization | $3,992 | | Credit Loss Expense (Benefit) | $3,424 | | **Distributable Earnings** | **$19,395** | Book Value Per Common Share Calculation (as of March 31, 2025, in thousands) | Description | Amount | | :--- | :--- | | Total Stockholders' Equity | $1,103,531 | | Less: Preferred Stock Liquidation Preference | ($201,375) | | Stockholders' Equity, Net of Preferred Stock | $902,156 | | Common Shares Outstanding | 80,626,997 | | **Book Value per Common Share** | **$11.19** | [Consolidated Balance Sheets](index=29&type=section&id=Consolidated%20Balance%20Sheets) The consolidated balance sheet as of March 31, 2025, shows total assets of **$3.96 billion**, an increase from **$3.73 billion** at year-end **2024**, driven by a rise in cash and **CLO** proceeds, while total liabilities increased to **$2.86 billion** from **$2.62 billion** mainly due to higher **CLO** balances, and total stockholders' equity slightly decreased to **$1.10 billion** Consolidated Balance Sheet Summary (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Total Assets** | **$3,961,943** | **$3,731,429** | | Cash and cash equivalents | $363,023 | $190,160 | | Loans held for investment, net | $3,206,817 | $3,217,030 | | Real estate owned, net | $254,441 | $256,404 | | **Total Liabilities** | **$2,858,412** | **$2,617,388** | | Collateralized loan obligations, net | $2,503,552 | $1,681,660 | | **Total Stockholders' Equity** | **$1,103,531** | **$1,114,041** | [Consolidated Statements of Income](index=31&type=section&id=Consolidated%20Statements%20of%20Income%20and%20Comprehensive%20Income) For the three months ended March 31, 2025, the company generated net interest income of **$24.9 million**, down from **$26.8 million** in the same period of **2024**, resulting in net income of **$13.7 million** compared to **$16.7 million** in **Q1 2024**, and a diluted EPS of **$0.12** for **Q1 2025**, down from **$0.17** in **Q1 2024** Consolidated Income Statement (in thousands, except per share data) | Account | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net interest income | $24,902 | $26,803 | | Total other revenue | $12,130 | $12,124 | | Total other expenses | $19,833 | $17,437 | | Credit loss expense, net | ($3,424) | ($4,356) | | **Net income** | **$13,719** | **$16,744** | | **Net Income Attributable to Common Stockholders** | **$9,960** | **$13,055** | | **Earnings per Common Share, Diluted** | **$0.12** | **$0.17** | [Consolidated Statements of Cash Flows](index=33&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) For the three months ended March 31, 2025, net cash provided by operating activities was **$19.1 million**, investing activities provided **$7.5 million** primarily from loan repayments, and financing activities provided a net **$146.3 million** driven by **CLO** proceeds, resulting in a net increase in cash of **$173.0 million** Consolidated Cash Flow Summary (in thousands) | Activity | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $19,132 | $37,371 | | Net cash provided by investing activities | $7,548 | $365,515 | | Net cash provided by (used in) financing activities | $146,277 | ($406,542) | | **Net change in cash** | **$172,957** | **($3,656)** | [Definitions](index=35&type=section&id=Definitions) This section defines key non-GAAP metrics and terms used throughout the report, including 'Distributable Earnings' as GAAP net income adjusted for non-cash items, 'Leverage Ratios' based on outstanding borrowings relative to equity, and 'Loan Risk Ratings' on a **5-point** scale - **Distributable Earnings**: A non-GAAP measure defined as GAAP net income attributable to common stockholders, adjusted to exclude non-cash stock compensation, depreciation, unrealized gains/losses (including CECL), and other certain non-cash items. It is a key measure for evaluating performance and determining dividend policy[65](index=65&type=chunk) - **Leverage Ratios**: The Debt-to-Equity Ratio is calculated as total outstanding borrowings less cash, divided by total stockholders' equity[69](index=69&type=chunk) - **Loan Risk Ratings**: A **5-point** scale from **1** (Very Low Risk) to **5** (Default/Loss Likely) used to evaluate loan risk quarterly. New loans are typically assigned a rating of '**3**' (Medium Risk) at origination[71](index=71&type=chunk) [Company Information](index=43&type=section&id=Company%20Information) **TPG RE Finance Trust, Inc.** (NYSE: **TRTX**) is a commercial real estate finance company focused on originating, acquiring, and managing **first mortgage loans** in the U.S., externally managed by a part of **TPG Real Estate**, with contact information and analyst coverage from firms including **BofA Securities**, **JP Morgan**, and **Wells Fargo** - **TRTX** is a commercial real estate finance company that primarily deals with **first mortgage loans** on institutional properties in the U.S. and is externally managed by TPG RE Finance Trust Management, L.P., part of TPG Inc. (NASDAQ: TPG)[74](index=74&type=chunk) - The company is covered by analysts from **BofA Securities, Citizens JMP, Wells Fargo, JP Morgan, and BTIG**[76](index=76&type=chunk) ```

Part I [Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) The company's financial statements for the quarter ended March 31, 2025, show total assets of $4.0 billion, a net income of $13.7 million, and net cash provided by operating activities of $19.1 million, with total liabilities increasing to $2.9 billion and stockholders' equity slightly decreasing to $1.1 billion [Consolidated Balance Sheets](index=5&type=section&id=Consolidated%20Balance%20Sheets) As of March 31, 2025, total assets were $3.96 billion, an increase from $3.73 billion at year-end 2024, driven by a rise in cash and collateralized loan obligation proceeds, while total liabilities increased to $2.86 billion from $2.62 billion, mainly due to higher collateralized loan obligations, which grew to $2.50 billion, and total stockholders' equity saw a slight decrease to $1.10 billion Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $363,023 | $190,160 | | Loans held for investment, net | $3,206,817 | $3,217,030 | | Real estate owned, net | $254,441 | $256,404 | | **Total Assets** | **$3,961,943** | **$3,731,429** | | Collateralized loan obligations, net | $2,503,552 | $1,681,660 | | Secured financing agreements, net | $248,764 | $670,727 | | **Total Liabilities** | **$2,858,412** | **$2,617,388** | | **Total Stockholders' Equity** | **$1,103,531** | **$1,114,041** | - The company's consolidated Total Assets and Liabilities include assets and liabilities of Variable Interest Entities (VIEs) of **$3.2 billion** and **$2.5 billion**, respectively, as of March 31, 2025, with these assets restricted to satisfying the obligations of the VIEs[19](index=19&type=chunk) [Consolidated Statements of Income and Comprehensive Income](index=6&type=section&id=Consolidated%20Statements%20of%20Income%20and%20Comprehensive%20Income) For the three months ended March 31, 2025, the company reported a net income of $13.7 million, a decrease from $16.7 million in the same period of 2024, with net interest income at $24.9 million, down from $26.8 million year-over-year, and diluted earnings per share at $0.12, compared to $0.17 in Q1 2024 Consolidated Income Statement Highlights (in thousands, except per share data) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net Interest Income | $24,902 | $26,803 | | Total Other Revenue | $12,130 | $12,124 | | Credit Loss Expense, net | $(3,424) | $(4,356) | | **Net Income** | **$13,719** | **$16,744** | | Net Income Attributable to Common Stockholders | $9,960 | $13,055 | | **Earnings Per Share, Diluted** | **$0.12** | **$0.17** | [Consolidated Statements of Changes in Equity](index=7&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Equity) Total stockholders' equity decreased from $1.114 billion at the start of 2025 to $1.104 billion at the end of Q1 2025, primarily driven by dividends on common and preferred stock totaling $23.1 million and common stock retirements of $3.2 million, partially offset by net income of $13.7 million Changes in Equity for Q1 2025 (in thousands) | Description | Amount | | :--- | :--- | | Beginning Equity (Jan 1, 2025) | $1,114,041 | | Net Income | $13,719 | | Dividends on Preferred Stock | $(3,148) | | Dividends on Common Stock ($0.24/share) | $(19,915) | | Retired Common Stock | $(3,185) | | Amortization of Stock Compensation | $2,019 | | **Ending Equity (Mar 31, 2025)** | **$1,103,531** | [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) For Q1 2025, net cash provided by operating activities was $19.1 million, investing activities provided $7.5 million mainly from loan repayments, and financing activities provided a significant $146.3 million, driven by $890.9 million in proceeds from collateralized loan obligations, which offset large repayments on other financing agreements, resulting in a net increase in cash of $173.0 million Consolidated Cash Flow Summary (in thousands) | Cash Flow Category | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net Cash from Operating Activities | $19,132 | $37,371 | | Net Cash from Investing Activities | $7,548 | $365,515 | | Net Cash from Financing Activities | $146,277 | $(406,542) | | **Net Change in Cash** | **$172,957** | **$(3,656)** | | Cash at Beginning of Period | $190,483 | $207,018 | | **Cash at End of Period** | **$363,440** | **$203,362** | - A major financing activity in Q1 2025 was the **$890.9 million** in proceeds from collateralized loan obligations, which was a significant inflow compared to none in Q1 2024, partially offset by large repayments on secured financing agreements (**$471.7 million**) and asset-specific financing (**$157.4 million**)[28](index=28&type=chunk) [Notes to the Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20the%20Consolidated%20Financial%20Statements) The notes detail the company's accounting policies, particularly for credit losses (CECL model), loan portfolio composition, financing arrangements, and stockholder equity, including a $3.3 billion loan portfolio with a $67.2 million allowance for credit losses, $2.8 billion in financing (primarily non-recourse CRE CLOs), and a $25.0 million share repurchase program, with the company operating as a single segment and maintaining its REIT status - The company's principal business is originating and acquiring commercial real estate credit investments, primarily first mortgage loans, operating as a REIT[32](index=32&type=chunk)[33](index=33&type=chunk) - The allowance for credit losses is determined using the Current Expected Credit Loss (CECL) model, which involves significant estimates regarding economic conditions, property values, and borrower performance[44](index=44&type=chunk)[50](index=50&type=chunk)[51](index=51&type=chunk) - The company finances its portfolio using various methods, including collateralized loan obligations (CLOs), secured credit agreements, and asset-specific financing, with three active CRE CLOs as of March 31, 2025[68](index=68&type=chunk)[130](index=130&type=chunk) - In Q1 2025, the company repurchased **379,868 shares** of common stock for **$3.2 million** under its **$25.0 million** share repurchase program[212](index=212&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=51&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In Q1 2025, the company reported net income of $10.0 million ($0.12/share) and Distributable Earnings of $19.4 million ($0.24/share), with the loan portfolio at $3.3 billion and an allowance for credit losses of $67.2 million (199 bps of commitments), enhancing liquidity by issuing a $1.1 billion CRE CLO and extending its secured revolving credit facility, maintaining primarily non-mark-to-market financing (91.0%) with a debt-to-equity ratio of 2.23x, and declaring a $0.24 per share common dividend consistent with Distributable Earnings [First Quarter 2025 Activity](index=52&type=section&id=First%20Quarter%202025%20Activity) Key activities in Q1 2025 included generating $10.0 million in net income, issuing a $1.1 billion CRE CLO (TRTX 2025-FL6), redeeming $114.6 million of bonds from a 2019 CLO, extending and upsizing its secured revolving credit facility to $375.0 million, and maintaining near-term liquidity of $457.6 million Q1 2025 Operating Results Highlights | Metric | Value | | :--- | :--- | | Net Income to Common Stockholders | $10.0 million | | Distributable Earnings | $19.4 million | | Common Stock Dividend Declared | $0.24 per share | | Allowance for Credit Losses Increase | $3.2 million | - Issued TRTX 2025-FL6, a **$1.1 billion** managed CRE CLO with a **30-month** reinvestment period and a weighted average interest rate of Term SOFR plus **1.83%**[242](index=242&type=chunk) - Maintained substantial near-term liquidity of **$457.6 million**, comprised of **$363.0 million** in cash-on-hand and undrawn capacity on credit facilities[242](index=242&type=chunk) [Investment Portfolio Overview](index=55&type=section&id=Investment%20Portfolio%20Overview) As of March 31, 2025, the loan portfolio consisted of 45 first mortgage loans with $3.4 billion in commitments and an unpaid principal balance of $3.3 billion, with 99.7% of the loans being floating rate, a weighted average LTV of 66.1%, and a weighted average risk rating of 3.0, while the company also holds eight REO properties with a carrying value of $272.2 million Loan Portfolio Statistics (as of March 31, 2025) | Metric | Value | | :--- | :--- | | Number of Loans | 45 | | Total Loan Commitments | $3.4 billion | | Unpaid Principal Balance | $3.3 billion | | Floating Rate Loans | 99.7% | | Weighted Average LTV | 66.1% | | Weighted Average All-in Yield | 8.2% | - The company holds **eight** Real Estate Owned (REO) properties with a total carrying value of **$272.2 million**, consisting of four office and four multifamily properties[257](index=257&type=chunk)[266](index=266&type=chunk) [Investment Portfolio Financing](index=60&type=section&id=Investment%20Portfolio%20Financing) The company's $2.8 billion in financing as of March 31, 2025, is dominated by non-mark-to-market sources (91.0%), primarily three CRE CLOs totaling $2.5 billion, with the remaining financing including $252.5 million from secured credit agreements (subject to credit marks only) and $29.1 million from asset-specific arrangements, a structure designed to match-fund assets and minimize risk from market volatility Financing Arrangements by Type (March 31, 2025, in thousands) | Financing Type | Outstanding Principal Balance | | :--- | :--- | | Collateralized loan obligations | $2,513,550 | | Secured credit agreements | $252,476 | | Asset-specific financing arrangements | $29,110 | | Mortgage loan payable | $31,200 | | **Total** | **$2,826,336** | - As of March 31, 2025, non-mark-to-market financing sources accounted for **91.0%** of total loan portfolio borrowings, reducing exposure to margin calls from general market volatility[278](index=278&type=chunk)[279](index=279&type=chunk) - The company's three CRE CLOs provide low-cost, non-recourse financing for **89.9%** of its loan portfolio borrowings, with a weighted average interest rate of Term SOFR plus **1.93%**[299](index=299&type=chunk) [Results of Operations](index=70&type=section&id=Results%20of%20Operations) Comparing Q1 2025 to Q4 2024, net income attributable to common stockholders increased by $3.1 million to $10.0 million, driven by higher revenue from REO operations and lower credit loss expense, while year-over-year, net income decreased by $3.1 million from Q1 2024, primarily due to lower net interest income as a result of a smaller loan portfolio and changes in interest rates Results of Operations Comparison (in thousands) | Metric | Q1 2025 | Q4 2024 | Q1 2024 | | :--- | :--- | :--- | :--- | | Net Interest Income | $24,902 | $24,680 | $26,803 | | Credit Loss Expense, net | $(3,424) | $(4,629) | $(4,356) | | Net Income Attributable to Common Stockholders | $9,960 | $6,909 | $13,055 | - The increase in net income from Q4 2024 to Q1 2025 was primarily due to a **$2.7 million** increase in revenue from REO operations and a **$1.2 million** decrease in credit loss expense[321](index=321&type=chunk)[325](index=325&type=chunk)[327](index=327&type=chunk) - The decrease in net interest income from Q1 2024 was primarily due to a smaller average loan portfolio size and a decrease in the index rate[331](index=331&type=chunk) [Liquidity and Capital Resources](index=74&type=section&id=Liquidity%20and%20Capital%20Resources) As of March 31, 2025, the company had total liquidity of $457.6 million, including $363.0 million in cash, with a debt-to-equity ratio of 2.23x, and primary uses of liquidity including funding $109.8 million in unfunded loan commitments, paying dividends, and executing its share repurchase program, with plans to meet obligations through operational cash flow, refinancing, and accessing capital markets Liquidity and Leverage Ratios | Metric | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Liquidity | $457.6 million | $320.8 million | | Debt-to-Equity Ratio | 2.23x | 2.14x | | Total Leverage Ratio | 2.23x | 2.14x | - Primary liquidity needs include **$109.8 million** in unfunded loan commitments, dividend distributions, operating expenses, and share repurchases[343](index=343&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=83&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risks include interest rate, credit, and liquidity risk, with interest rate risk managed by match-indexing floating-rate assets and liabilities, where a +/- 25 basis point change in rates would impact net interest income by approximately +/- $1.2 million annually, credit risk monitored through rigorous underwriting and active asset management, and liquidity risk mitigated by using primarily non-mark-to-market financing and maintaining significant cash reserves Interest Rate Sensitivity Analysis (Annual Impact, in thousands) | Change in Benchmark Rate | Impact on Net Interest Income | | :--- | :--- | | +75 Basis Points | $3,549 | | +50 Basis Points | $2,366 | | +25 Basis Points | $1,183 | | -25 Basis Points | $(1,183) | | -50 Basis Points | $(2,274) | | -75 Basis Points | $(3,125) | - The company's business model aims to minimize interest rate exposure by matching the duration and indices of its assets and liabilities, with **99.7%** of loans being floating rate as of March 31, 2025, resulting in a net floating rate exposure of **$473.2 million**[387](index=387&type=chunk)[312](index=312&type=chunk) - Liquidity risk is managed by maintaining diverse funding sources, with a focus on non-recourse, non-mark-to-market CRE CLOs, and holding sufficient cash, while being subject to margin call risk on its secured credit agreements, limited to credit-specific events, not general market movements[398](index=398&type=chunk) [Controls and Procedures](index=86&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective at a reasonable assurance level as of March 31, 2025, with no material changes to the company's internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were **effective** as of March 31, 2025[408](index=408&type=chunk) - No material changes were identified in the company's internal control over financial reporting during the first quarter of 2025[409](index=409&type=chunk) Part II. Other Information [Legal Proceedings](index=87&type=section&id=Item%201.%20Legal%20Proceedings) As of March 31, 2025, the company was not involved in any material legal proceedings - The company reports no material legal proceedings as of the end of the quarter[412](index=412&type=chunk) [Risk Factors](index=87&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2024 - No material changes to risk factors were reported for the period[413](index=413&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=87&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During the first quarter of 2025, the company repurchased 379,868 shares of its common stock at a weighted average price of $8.36 per share, for a total of $3.2 million, with $21.8 million remaining available under the share repurchase program as of March 31, 2025 Issuer Purchases of Equity Securities (Q1 2025) | Period | Total Shares Repurchased | Average Price Paid | Total Amount Paid | | :--- | :--- | :--- | :--- | | Jan 2025 | — | — | — | | Feb 2025 | — | — | — | | Mar 2025 | 379,868 | $8.36 | $3,184,669 | | **Total** | **379,868** | **$8.36** | **$3,184,669** | - As of March 31, 2025, the company had **$21.8 million** of remaining capacity under its share repurchase program[414](index=414&type=chunk) [Other Information](index=87&type=section&id=Item%205.%20Other%20Information) There is no other information to report for this item - None[417](index=417&type=chunk) [Exhibits](index=88&type=section&id=Item%206.%20Exhibits) The report includes several exhibits, such as agreements related to the TRTX 2025-FL6 collateralized loan obligation, and certifications by the CEO and CFO pursuant to the Sarbanes-Oxley Act - Key exhibits filed include the Indenture, Collateral Management Agreement, and Servicing Agreement for the TRTX 2025-FL6 CLO[419](index=419&type=chunk) - Certifications by the CEO and CFO under Sections 302 and 906 of the Sarbanes-Oxley Act are included as exhibits[419](index=419&type=chunk)

Core Viewpoint - TPG RE Finance Trust (TRTX) is currently viewed as a superior value option compared to Corporacion Inmobiliaria Vesta, S.A.B. de C.V. Sponsored ADR (VTMX) based on various valuation metrics [1][6]. Valuation Metrics - TRTX has a forward P/E ratio of 6.88, while VTMX has a forward P/E of 10.16 [5]. - The PEG ratio for TRTX is 1.48, indicating a more favorable valuation in relation to its expected earnings growth compared to VTMX's PEG ratio of 2.64 [5]. - TRTX's P/B ratio stands at 0.51, significantly lower than VTMX's P/B ratio of 7.77, suggesting TRTX is undervalued relative to its book value [6]. Earnings Outlook - Both TRTX and VTMX currently hold a Zacks Rank of 2 (Buy), indicating positive revisions to their earnings estimates and improving earnings outlooks [3]. - Despite both companies having solid earnings prospects, TRTX's valuation metrics suggest it is a better investment choice for value investors [6].

Company Overview - TPG RE Finance Trust (TRTX) shares increased by 5.6% to $7.18, following a significant trading volume, contrasting with a 19.1% loss over the past four weeks [1] - The rise in investor optimism is linked to President Donald Trump's announcement of a 90-day pause on reciprocal tariffs for most countries [1] Earnings Expectations - TPG RE Finance Trust is projected to report quarterly earnings of $0.25 per share, reflecting a year-over-year decline of 16.7% [2] - Expected revenues for the upcoming report are $36.67 million, down 5.8% from the same quarter last year [2] Stock Performance and Trends - The consensus EPS estimate for TPG RE Finance Trust has remained unchanged over the last 30 days, indicating a potential lack of momentum in stock price movement without earnings estimate revisions [3] - The stock currently holds a Zacks Rank of 3 (Hold), suggesting a neutral outlook [3] Industry Comparison - TPG RE Finance Trust is part of the Zacks Real Estate - Operations industry, where Bridge Investment Group Holdings Inc. (BRDG) also operates [3] - BRDG shares closed 16.8% higher at $8.97, but have experienced a -16.3% return over the past month [3] - The consensus EPS estimate for Bridge Investment Group has remained unchanged at $0.17, with a Zacks Rank of 4 (Sell) [4]

Financial Data and Key Metrics Changes - The company reported a 3% increase in net earning assets in the second half of 2024, driven by $446 million in new loan commitments, primarily in multifamily and industrial loans [9][16] - Distributable earnings for the year fully covered the $0.96 per share annual dividend, with a prerealized loss basis generating $1.08 per share, covering the dividend at 1.1 times [7][8] - The company maintained a 100% performing loan portfolio at year-end, with a weighted-average risk rating of 3.0, consistent over four quarters [17][32] Business Line Data and Key Metrics Changes - In 2024, the company originated 8 loans totaling $562.3 million, with 2 loans amounting to $242 million originated in the fourth quarter [18][68] - The company has a substantial investment pipeline with over $300 million in live investment opportunities in various stages of pursuit and diligence [9][30] Market Data and Key Metrics Changes - The company noted strong liquidity of $320.8 million and leverage of only 2.14:1, indicating a solid financial position to support growth [16][30] - The company expects real estate investment activity to increase in 2025, driven by elevated interest rates and the deployment of capital into new acquisitions [6][31] Company Strategy and Development Direction - The company aims to continue providing acquisition and tailored financing to recapitalize broken capital structures at reset valuations [6][12] - The management emphasized a focus on thoughtful, assertive, value-oriented risk and asset management to maximize shareholder value [10][12] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism for 2025, citing a favorable economic environment and a reduction in interest rate volatility, which is expected to drive real estate activity [5][49] - The company anticipates that existing loans are more likely to lengthen rather than prepay due to the current interest rate environment [70] Other Important Information - The company has a low share of REO and nonaccrual loans, with no nonaccrual loans for five consecutive quarters [32] - The company owns 8 REO properties with an aggregate carrying value of $275.8 million, representing 7.4% of total assets [22][24] Q&A Session Summary Question: Can you discuss the multifamily loans that went into foreclosure? - Management indicated that the decision to foreclose was made after it became clear that borrowers would not meet modification terms, and they are now stabilizing the properties for sale [36][39] Question: How do you expect leverage to scale through the year? - Management expects to deploy existing liquidity first and then back-leverage, with current leverage at 2.14:1, historically operating around 3x to 3.3x [41][45] Question: Can you provide an update on life sciences exposure? - The company currently has 3 life sciences transactions, all built out and focusing on high-quality borrowers, with a slight uptick in leasing activity noted [52][54] Question: How do you define "reasonably quickly" regarding REO sales? - Management expects to reduce the existing REO portfolio by about half by the end of 2025, with some properties already in the market [61][63] Question: What is the outlook for CECL reserves going forward? - Management anticipates that the CECL rate expressed in basis points will remain stable or decline, with the dollar amount of reserves expected to increase as the loan book grows [84][86]

Core Insights - TPG RE Finance Trust (TRTX) reported revenue of $34.74 million for the quarter ended December 2024, reflecting a year-over-year increase of 10.3% [1] - The earnings per share (EPS) for the quarter was $0.10, a significant improvement from -$2.05 in the same quarter last year [1] - The reported revenue fell short of the Zacks Consensus Estimate of $39.48 million, resulting in a revenue surprise of -12.00% [1] - The company experienced an EPS surprise of -64.29%, with the consensus EPS estimate being $0.28 [1] Financial Performance Metrics - Net Interest Income was reported at $24.68 million, below the average estimate of $28.21 million from two analysts [4] - Other income, net, was $2.53 million, also falling short of the average estimate of $3.60 million from two analysts [4] - Total other revenue amounted to $10.06 million, compared to the two-analyst average estimate of $11.28 million [4] - Revenue from real estate owned operations was $7.54 million, slightly below the estimated $7.68 million from two analysts [4] Stock Performance - TPG RE Finance Trust shares returned +2% over the past month, while the Zacks S&P 500 composite increased by +4.7% [3] - The stock currently holds a Zacks Rank 5 (Strong Sell), indicating potential underperformance relative to the broader market in the near term [3]

Core Viewpoint - TPG RE Finance Trust reported quarterly earnings of $0.10 per share, significantly missing the Zacks Consensus Estimate of $0.28 per share, representing an earnings surprise of -64.29% [1][2] Financial Performance - The company posted revenues of $34.74 million for the quarter ended December 2024, missing the Zacks Consensus Estimate by 12%, compared to revenues of $31.49 million a year ago [2] - Over the last four quarters, TPG RE Finance Trust has surpassed consensus EPS estimates only once [2] Stock Performance and Outlook - TPG RE Finance Trust shares have increased by approximately 2.1% since the beginning of the year, while the S&P 500 has gained 4% [3] - The current consensus EPS estimate for the upcoming quarter is $0.26 on revenues of $39.5 million, and for the current fiscal year, it is $1.07 on revenues of $161.12 million [7] Industry Context - The Real Estate - Operations industry, to which TPG RE Finance Trust belongs, is currently ranked in the bottom 14% of over 250 Zacks industries, indicating potential underperformance compared to higher-ranked industries [8] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which could impact TPG RE Finance Trust's stock performance [5][6]