TPG RE Finance Trust(TRTX) - 2025 Q1 - Quarterly Report

Part I Financial Statements 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 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] Consolidated Statements of Income and Comprehensive Income 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 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 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] Notes to the Consolidated Financial Statements 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][33] - 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][50][51] - 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][130] - 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] Management's Discussion and Analysis of Financial Condition and Results of Operations 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 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] - 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] Investment Portfolio Overview 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][266] Investment Portfolio Financing 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][279] - 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] Results of Operations 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][325][327] - 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] Liquidity and Capital Resources 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] Quantitative and Qualitative Disclosures About Market Risk 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][312] - 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] Controls and Procedures 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] - No material changes were identified in the company's internal control over financial reporting during the first quarter of 2025[409] Part II. Other Information Legal Proceedings 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] Risk Factors 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] Unregistered Sales of Equity Securities and Use of Proceeds 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] Other Information There is no other information to report for this item - None[417] Exhibits 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] - Certifications by the CEO and CFO under Sections 302 and 906 of the Sarbanes-Oxley Act are included as exhibits[419]