TPG RE Finance Trust(US:TRTX)2025-04-29 21:09markdown 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)