TPG RE Finance Trust(TRTX) - 2025 Q2 - Quarterly Report

FORM 10-Q Filing Information Registrant Information This section provides the basic identification details for TPG RE Finance Trust, Inc. (TRTX) as an accelerated filer, including its incorporation state, IRS Employer Identification Number, principal executive offices, and registered securities on the New York Stock Exchange - TPG RE Finance Trust, Inc. (TRTX) is an accelerated filer, incorporated in Maryland, with its principal executive offices in New York, New York[4] Securities Registered | Title of each class | Trading Symbol(s) | Name of each exchange on which registered | | :---------------------------------------- | :---------------- | :---------------------------------------- | | Common Stock, par value $0.001 per share | TRTX | New York Stock Exchange | | 6.25% Series C Cumulative Redeemable Preferred Stock, par value $0.001 per share | TRTX PRC | New York Stock Exchange | - As of July 25, 2025, there were 78,590,582 shares of common stock outstanding[5] Cautionary Note Regarding Forward-Looking Statements This section advises readers that the Form 10-Q contains forward-looking statements subject to various risks and uncertainties, which could cause actual results to differ materially from projections - Forward-looking statements are identified by words like 'outlook,' 'believe,' 'expect,' 'potential,' 'continue,' 'may,' 'should,' 'seek,' 'approximately,' 'predict,' 'intend,' 'will,' 'plan,' 'estimate,' 'anticipate,' and their negatives[8] - Key risks and uncertainties include fluctuations in interest rates and credit spreads, adverse changes in real estate and capital markets, difficulty in obtaining financing, and adverse economic trends such as inflation, slower growth, or recession[9] - The Company undertakes no obligation to publicly update or revise any forward-looking statements, except as required by law[11] Table of Contents This section provides an organized listing of all the items and their corresponding page numbers included in the Form 10-Q, dividing the report into Part I (Financial Information) and Part II (Other Information) Part I. Financial Information Item 1. Financial Statements This section presents the unaudited consolidated financial statements of TPG RE Finance Trust, Inc. for the periods ended June 30, 2025, and December 31, 2024, including the balance sheets, statements of income and comprehensive income, statements of changes in equity, and statements of cash flows, along with detailed notes explaining significant accounting policies and financial statement line items Consolidated Balance Sheets The Consolidated Balance Sheets provide a snapshot of the Company's financial position as of June 30, 2025, and December 31, 2024, detailing assets, liabilities, and stockholders' equity Consolidated Balance Sheet Highlights (in thousands) | Item | June 30, 2025 | December 31, 2024 | | :----------------------------------- | :-------------- | :---------------- | | Total assets | $4,162,066 | $3,731,429 | | Loans held for investment, net | $3,707,729 | $3,217,030 | | Total liabilities | $3,071,229 | $2,617,388 | | Collateralized loan obligations, net | $2,442,868 | $1,681,660 | | Total stockholders' equity | $1,090,837 | $1,114,041 | - Total assets increased by approximately $430.6 million from December 31, 2024, to June 30, 2025, primarily driven by an increase in loans held for investment[18] - Total liabilities increased by approximately $453.8 million, largely due to a significant increase in collateralized loan obligations[18] Consolidated Statements of Income and Comprehensive Income The Consolidated Statements of Income and Comprehensive Income present the Company's financial performance for the three and six months ended June 30, 2025, and June 30, 2024, detailing revenues, expenses, and net income Key Income Statement Data (in thousands, except per share data) | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net interest income | $25,144 | $27,527 | $50,046 | $54,330 | | Total other revenue | $11,055 | $11,775 | $23,185 | $23,899 | | Total other expenses | $20,632 | $19,024 | $40,465 | $36,461 | | Gain on sale of real estate owned, net | $6,970 | $0 | $6,970 | $0 | | Credit loss (expense) benefit, net | $(1,778) | $4,537 | $(5,202) | $181 | | Net income | $20,631 | $24,715 | $34,350 | $41,459 | | Net income attributable to common stockholders | $16,881 | $21,026 | $26,841 | $34,081 | | Earnings per common share, basic | $0.21 | $0.26 | $0.33 | $0.43 | - Net income attributable to common stockholders decreased by $4.1 million for the three months ended June 30, 2025, compared to the same period in 2024, and by $7.2 million for the six months ended June 30, 2025, compared to the same period in 2024[22] - The Company recognized a significant gain on sale of real estate owned of $7.0 million in Q2 2025, which was not present in Q2 2024[22] Consolidated Statements of Changes in Equity This section details the changes in the Company's equity accounts for the three and six months ended June 30, 2025, and June 30, 2024, including common stock, preferred stock, additional paid-in capital, and accumulated deficit, reflecting transactions such as stock issuance, repurchases, net income, and dividend declarations Changes in Total Stockholders' Equity (in thousands) | Item | January 1, 2025 | March 31, 2025 | June 30, 2025 | | :--------------------------------- | :-------------- | :------------- | :------------ | | Total stockholders' equity | $1,114,041 | $1,103,531 | $1,090,837 | | Net income | — | $13,719 | $20,631 | | Dividends on common stock | — | $(19,915) | $(19,484) | | Dividends on preferred stock | — | $(3,148) | $(3,148) | | Retired common stock | — | $(3,185) | $(12,500) | - Total stockholders' equity decreased from $1.11 billion at January 1, 2025, to $1.09 billion at June 30, 2025[25] - Common stock shares issued and outstanding decreased from 81,003,693 at January 1, 2025, to 79,420,606 at June 30, 2025, partly due to retired common stock[25] Consolidated Statements of Cash Flows This section outlines the cash inflows and outflows from operating, investing, and financing activities for the six months ended June 30, 2025, and June 30, 2024, providing insight into the Company's liquidity and capital management Cash Flow Summary (in thousands) | Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $43,859 | $62,924 | | Net cash (used in) provided by investing activities | $(457,730) | $554,984 | | Net cash provided by (used in) financing activities | $389,810 | $(565,190) | | Net change in cash, cash equivalents, and restricted cash | $(24,061) | $52,718 | - Cash flows from investing activities shifted from a net inflow of $554.98 million in H1 2024 to a net outflow of $457.73 million in H1 2025, primarily due to increased loan originations and reduced principal repayments[29] - Cash flows from financing activities shifted from a net outflow of $565.19 million in H1 2024 to a net inflow of $389.81 million in H1 2025, largely driven by proceeds from collateralized loan obligations[29] Notes to the Consolidated Financial Statements (Unaudited) These notes provide detailed explanations and disclosures supporting the consolidated financial statements, covering the Company's business, significant accounting policies, specific financial instrument details, related party transactions, and other material financial information Note 1. Business and Organization TPG RE Finance Trust, Inc. operates as a REIT, primarily originating and acquiring a diversified portfolio of commercial real estate-related credit investments, mainly first mortgage loans and senior participation interests in institutional-quality properties in the U.S. It maintains an exclusion from Investment Company Act registration - The Company operates as a REIT for U.S. federal income tax purposes, generally not subject to federal income taxes on distributed REIT taxable income[32] - Its principal business is originating and acquiring commercial real estate-related credit investments, primarily first mortgage loans and senior participation interests[33] Note 2. Summary of Significant Accounting Policies This note outlines the key accounting principles and methods used in preparing the consolidated financial statements, including basis of presentation, use of estimates, revenue recognition, credit loss measurement (CECL model), real estate owned accounting, fair value measurements, and policies for various financial instruments and equity components - The Company operates in a single operating and reportable segment, with the CEO as the chief operating decision maker[36] - The Company applies the Current Expected Credit Loss (CECL) model for its allowance for credit losses on loans held for investment[44] - Loans are rated on a 5-point scale (1=least risk, 5=greatest risk), with a general initial rating of '3' (Medium Risk)[47][48] - Real estate acquired through foreclosure (REO) is initially measured at fair value and subsequently subject to impairment analysis[61][67] - The Company uses a three-tier fair value hierarchy (Level I, II, III) for financial instruments, with Level III valuations based on unobservable and significant inputs[71][72] - The Company qualifies as a REIT for U.S. federal income tax purposes and generally distributes at least 90% of its REIT taxable income[77] - The FASB issued ASU 2024-03 (Expense Disaggregation Disclosures) and ASU 2023-09 (Income Tax Disclosures), effective for the Company in 2027 and 2025, respectively, with impacts currently being evaluated[94][95] Note 3. Loans Held for Investment and the Allowance for Credit Losses This note details the Company's loan portfolio, including origination and repayment activity, overall statistics, seniority, risk ratings, and the allowance for credit losses. It highlights the increase in the allowance due to loan origination and macroeconomic uncertainty - During the six months ended June 30, 2025, the Company originated seven mortgage loans with aggregate commitments of $695.6 million and initial unpaid principal balance of $670.5 million[98] - Total loan repayments for the six months ended June 30, 2025, amounted to $193.8 million[98] Loans Held for Investment Portfolio Statistics (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :------------------------------------ | :-------------- | :---------------- | | Number of loans | 49 | 45 | | Total loan commitment | $3,899,345 | $3,412,016 | | Unpaid principal balance | $3,783,609 | $3,284,510 | | Unfunded loan commitments | $116,428 | $127,866 | | Amortized cost | $3,774,686 | $3,278,588 | | Weighted average credit spread | 3.5 % | 3.7 % | | Weighted average all-in yield | 8.0 % | 8.3 % | | Weighted average term to extended maturity (in years) | 2.7 | 2.4 | - The weighted average risk rating for the loan portfolio remained at 3.0 as of June 30, 2025, unchanged from December 31, 2024[109] - The allowance for credit losses increased by $4.8 million during the six months ended June 30, 2025, reaching $68.8 million, primarily due to loan origination activity and macroeconomic uncertainty[117] - As of June 30, 2025, none of the Company's first mortgage loans were on non-accrual status or subject to individual assessment under the CECL framework[120] Note 4. Real Estate Owned This note details the Company's Real Estate Owned (REO) portfolio, including the number and types of properties, their carrying values, and the results of REO operations. It also covers the sale of two office properties during the period and the associated gains - As of June 30, 2025, the Company held six REO properties: four multifamily and two office properties[125] - During the three and six months ended June 30, 2025, the Company sold two office properties for net cash proceeds of $39.4 million, recognizing a net gain of $7.0 million[126] REO Assets and Liabilities (in thousands) | Item | June 30, 2025 | December 31, 2024 | | :--------------------------------- | :-------------- | :---------------- | | Real estate owned, net | $223,235 | $256,404 | | Total assets (REO-related) | $264,581 | $300,964 | | Mortgage loan payable, net | $30,766 | $30,695 | | Total liabilities (REO-related) | $38,672 | $40,567 | REO Operations Net Loss (in thousands) | Period | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue from real estate owned operations | $8,231 | $8,281 | $18,510 | $15,503 | | Expenses from real estate owned operations | $10,256 | $8,882 | $20,606 | $17,228 | | Net (loss) from REO | $(2,025) | $(601) | $(2,096) | $(1,725) | Note 5. Variable Interest Entities and Collateralized Loan Obligations This note details the Company's use of Collateralized Loan Obligations (CLOs) through its Sub-REIT subsidiary, including the issuance of new CLOs (TRTX 2025-FL6), the redemption of older ones (TRTX 2019-FL3), and the consolidation of these Variable Interest Entities (VIEs) - On March 28, 2025, the Company issued a new $1.1 billion CLO (TRTX 2025-FL6) with $962.5 million of investment-grade bonds, providing additional liquidity for new loan investments[140] - On March 17, 2025, TRTX 2019-FL3 was redeemed, with $114.6 million of investment-grade bonds outstanding, and three loans were refinanced by TRTX 2025-FL6[145] - The Company consolidates the CLO Issuers as VIEs because it controls their significant activities and has the obligation to absorb losses and right to receive benefits[146] Sub-REIT Total Assets and Liabilities (in thousands) | Item | June 30, 2025 | December 31, 2024 | | :--------------------------------- | :-------------- | :---------------- | | Total assets | $2,917,419 | $2,120,953 | | Loans held for investment, net | $2,800,033 | $1,917,210 | | Total liabilities | $2,457,099 | $1,696,469 | | Collateralized loan obligations, net | $2,442,868 | $1,681,660 | - Assets held by these VIEs are restricted to settle their own obligations, and their liabilities are non-recourse to the Company[148] Note 6. Investment Portfolio Financing This note details the Company's financing arrangements for its investment portfolio, including collateralized loan obligations, secured credit agreements, a secured revolving credit facility, asset-specific financing arrangements, and a mortgage loan payable Investment Portfolio Financing Summary (in thousands) | Financing Type | June 30, 2025 | December 31, 2024 | | :--------------------------------- | :-------------- | :---------------- | | Collateralized loan obligations | $2,452,377 | $1,682,288 | | Secured credit agreements | $156,711 | $585,042 | | Asset-specific financing arrangements | $29,110 | $186,500 | | Secured revolving credit facility | $367,841 | $86,625 | | Mortgage loan payable | $31,200 | $31,200 | | Total | $3,037,239 | $2,571,655 | - The Company repaid $332.6 million of borrowings under secured credit agreements and $157.4 million under asset-specific financing arrangements due to collateral contributions to TRTX 2025-FL6[163][181] - The secured revolving credit facility was amended in Q1 2025, extending maturity by three years to February 13, 2028, and increasing borrowing capacity to $375.0 million[174] - The Company was in compliance with all financial covenants for its investment portfolio financing arrangements as of June 30, 2025, and December 31, 2024[187] Note 7. Schedule of Maturities This note provides a schedule of future principal payments for the Company's total indebtedness, disaggregated by financing type, for the next five years and thereafter, as of June 30, 2025 Future Principal Payments (in thousands) | Year | Total indebtedness | Collateralized loan obligations | Secured credit agreements | Secured revolving credit facility | Asset-specific financing arrangements | Mortgage loan payable | | :--- | :----------------- | :------------------------------ | :------------------------ | :-------------------------------- | :------------------------------------ | :-------------------- | | 2025 | $113,849 | $63,449 | $50,400 | $0 | $0 | $0 | | 2026 | $899,189 | $899,189 | $0 | $0 | $0 | $0 | | 2027 | $580,840 | $531,390 | $20,340 | $0 | $29,110 | $0 | | 2028 | $829,233 | $344,221 | $85,971 | $367,841 | $0 | $31,200 | | 2029 | $362,027 | $362,027 | $0 | $0 | $0 | $0 | | Thereafter | $252,101 | $252,101 | $0 | $0 | $0 | $0 | | Total | $3,037,239 | $2,452,377 | $156,711 | $367,841 | $29,110 | $31,200 | - The Company plans to meet debt obligations through strategies including exercising extension options, negotiating extensions, accessing capital markets, issuing new structured finance vehicles, establishing new financing arrangements, and selling assets[374] Note 8. Fair Value Measurements This note provides information on the fair value of the Company's financial assets and liabilities, categorizing them into Level I, II, and III based on the observability of inputs - Cash equivalents and restricted cash are classified as Level I fair value measurements[191] - Loans held for investment, CLOs, secured credit agreements, and asset-specific financing arrangements are considered Level III fair value measurements[191] - As of June 30, 2025, the estimated fair value of the Company's loans held for investment portfolio was $3.7 billion, approximating its carrying value[192] Note 9. Income Taxes This note discusses the Company's income tax status as a REIT, its ownership of Taxable REIT Subsidiaries (TRSs), and the recognition of deferred tax assets and liabilities - The Company qualifies as a REIT and generally avoids U.S. federal income tax on distributed REIT taxable income[195] - Excess Inclusion Income (EII) from CLOs is allocated to a Taxable REIT Subsidiary (TRS) and not to common stockholders, incurring an approximate 21% tax liability[198] Income Tax Expense (in thousands) | Period | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Income tax expense, net | $(128) | $(100) | $(184) | $(490) | - As of June 30, 2025, the Company has $194.1 million in capital losses carried forward, with $174.3 million expiring at the end of 2025 and $19.8 million expiring in 2028[201] Note 10. Related Party Transactions This note details the Company's financial arrangements with its external Manager, TPG RE Finance Trust Management, L.P., including base management fees, incentive compensation, and expense reimbursements - The Company pays its Manager a base management fee of 1.50% per annum of its 'Equity' (or $250,000 per annum, whichever is greater) and is eligible for incentive compensation based on Core Earnings[203] Management Fees Incurred (in thousands) | Period | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Management fees incurred | $5,194 | $5,044 | $10,347 | $10,031 | | Incentive management fee incurred | $0 | $0 | $0 | $0 | - No incentive management fee was earned during the three and six months ended June 30, 2025, and 2024[206] - The Company reimbursed the Manager $0.4 million and $0.8 million for personnel expenses for services rendered during the three and six months ended June 30, 2025, respectively[208] Note 11. Earnings per Share This note details the calculation of basic and diluted earnings per common share using the two-class method, accounting for preferred stock dividends and participating securities - Basic and diluted earnings per share are calculated using the two-class method, which allocates earnings to common shares and participating securities[213] - All Warrants were exercised on a net settlement basis on May 8, 2024, resulting in the issuance of 2,647,059 common shares, and no Warrants were outstanding as of June 30, 2025[214] Earnings Per Common Share (in thousands, except per share data) | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income attributable to common stockholders | $16,881 | $21,026 | $26,841 | $34,081 | | Weighted average common shares outstanding, basic | 79,474,862 | 79,456,745 | 80,221,098 | 78,662,740 | | Weighted average common shares outstanding, diluted | 80,208,877 | 80,907,705 | 80,918,798 | 79,604,665 | | Earnings per common share, basic | $0.21 | $0.26 | $0.33 | $0.43 | | Earnings per common share, diluted | $0.21 | $0.26 | $0.33 | $0.43 | Note 12. Stockholders' Equity This note details the Company's Series C Preferred Stock, including its issuance, dividend rate, and redemption terms. It also covers the exercise of Series B Warrants, the common stock repurchase program, and dividend declarations for both common and preferred stock - The Company's Series C Preferred Stock has a 6.25% dividend rate and a $25.00 per share liquidation preference, redeemable at the Company's option on or after June 14, 2026[219][220] - All Warrants to purchase common stock were exercised on May 8, 2024, resulting in the issuance of 2,647,059 common shares, with no Warrants outstanding as of June 30, 2025[224] - Under its share repurchase program, the Company repurchased 1,658,317 common shares for $12.5 million during the three months ended June 30, 2025, with $9.3 million remaining capacity[225] - The Board declared a cash dividend of $0.24 per common share ($19.5 million total) and $0.3906 per Series C Preferred Stock share ($3.1 million total) for Q2 2025[227][228] Note 13. Stock-based Compensation This note describes the Company's stock-based compensation arrangements for non-employee directors and Manager affiliates, primarily under the 2025 Equity Incentive Plan - The Company does not have employees; stock-based compensation is granted to Manager affiliates and Board members under the 2025 Equity Incentive Plan[232][233] Outstanding Common Stock Awards | Item | Common Stock | Weighted Average Grant Date Fair Value per Share | | :-------------------------- | :------------- | :----------------------------------------------- | | Balance as of December 31, 2024 | 2,377,123 | $7.98 | | Granted | 10,403 | $7.06 | | Vested | (854,456) | $8.24 | | Forfeited | (62,690) | $7.77 | | Balance as of June 30, 2025 | 1,470,380 | $7.76 | - Total unrecognized compensation costs were $11.0 million as of June 30, 2025, expected to be recognized over a weighted average period of 1.2 years[238] Note 14. Commitments and Contingencies This note outlines the Company's unfunded loan commitments and its status regarding litigation. It specifies the aggregate amount of unfunded commitments and confirms no material legal proceedings or accrued liabilities for loss contingencies - Aggregate unrecognized unfunded loan commitments totaled $116.4 million as of June 30, 2025[239] - An allowance for credit losses of $1.8 million was recorded for non-cancellable unfunded loan commitments as of June 30, 2025[240] - As of June 30, 2025, the Company was not involved in any material legal proceedings and had not recorded any accrued liability for loss contingencies[242] Note 15. Concentration of Credit Risk This note details the concentration of credit risk within the Company's loan portfolio by property type, geographic region, and loan category, providing a breakdown of total loan commitments and unpaid principal balances Loan Portfolio by Property Type (June 30, 2025, in thousands) | Property type | Loan commitment | % of loan commitment | Loan UPB | % of loan UPB | | :------------ | :-------------- | :------------------- | :------- | :------------ | | Multifamily | $2,120,401 | 54.5 % | $2,060,847 | 54.5 % | | Office | $584,547 | 15.0 | $566,737 | 15.0 | | Industrial | $352,169 | 9.0 | $330,223 | 8.7 | | Hotel | $348,400 | 8.9 | $338,825 | 9.0 | | Life Science | $348,053 | 8.9 | $343,477 | 9.0 | | Mixed-Use | $78,775 | 2.0 | $76,500 | 2.0 | | Self Storage | $67,000 | 1.7 | $67,000 | 1.8 | | Total | $3,899,345 | 100.0 % | $3,783,609 | 100.0 % | Loan Portfolio by Geographic Region (June 30, 2025, in thousands) | Geographic region | Loan commitment | % of loan commitment | Loan UPB | % of loan UPB | | :---------------- | :-------------- | :------------------- | :------- | :------------ | | West | $1,405,299 | 36.0 % | $1,367,782 | 36.1 % | | East | $958,749 | 24.6 | $948,348 | 25.1 | | South | $890,697 | 22.8 | $846,876 | 22.4 | | Various | $509,000 | 13.1 | $487,003 | 12.9 | | Midwest | $135,600 | 3.5 | $133,600 | 3.5 | | Total | $3,899,345 | 100.0 % | $3,783,609 | 100.0 % | Loan Portfolio by Loan Category (June 30, 2025, in thousands) | Loan category | Loan commitment | % of loan commitment | Loan UPB | % of loan UPB | | :---------------- | :-------------- | :------------------- | :------- | :------------ | | Bridge | $2,014,274 | 51.7 % | $1,973,327 | 52.2 % | | Moderate Transitional | $967,018 | 24.8 | $926,054 | 24.4 | | Light Transitional | $918,053 | 23.5 | $884,228 | 23.4 | | Total | $3,899,345 | 100.0 % | $3,783,609 | 100.0 % | Note 16. Subsequent Events This note discloses significant events that occurred after June 30, 2025, including new loan closings, full loan repayments, and further share repurchases - Subsequent to June 30, 2025, the Company closed or is closing two first mortgage loans with aggregate commitments of $112.3 million and initial fundings of $110.0 million[246] - The Company received full repayment of two first mortgage loans totaling $120.8 million in unpaid principal balance[246] - From July 1, 2025, to July 25, 2025, the Company repurchased 830,024 common shares for $6.8 million, leaving $2.5 million remaining capacity under its share repurchase program[246] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the Company's financial condition, results of operations, and cash flows, discussing key performance indicators, investment activities, financing strategies, liquidity, and critical accounting estimates for the periods presented Overview The Company is a commercial real estate finance company externally managed by TPG, focusing on originating and acquiring floating rate first mortgage loans secured by transitional commercial real estate in North America - The Company's objective is to provide attractive risk-adjusted returns through cash distributions and capital appreciation by originating and acquiring floating rate first mortgage loans on transitional commercial real estate[248] - Macroeconomic conditions, including high interest rates, inflation, and banking sector shifts, influenced loan origination volumes and capital allocation in H1 2025[250] - Seven first mortgage loans were originated in H1 2025, with aggregate commitments of $695.6 million and initial unpaid principal balance of $670.5 million[250] Our Manager The Company is externally managed by TPG RE Finance Trust Management, L.P., an affiliate of TPG, a global alternative asset manager. The Manager is responsible for investment selection, financing, and day-to-day operations, with investment decisions approved by an investment committee - The Company is externally managed by TPG RE Finance Trust Management, L.P., an affiliate of TPG, which had $251 billion in assets under management as of March 31, 2025[252] - The Manager is responsible for investment selection, origination, acquisition, sale of portfolio investments, financing activities, and providing investment advisory services[252] Second Quarter 2025 Activity This section summarizes the Company's operational, investment, and financing activities during the second quarter of 2025, highlighting net income, distributable earnings, loan originations, repayments, REO sales, and liquidity position - Net income attributable to common stockholders increased by $6.9 million to $16.9 million in Q2 2025 compared to Q1 2025[256] - Distributable Earnings were $19.0 million in Q2 2025, a slight decrease of $0.4 million from Q1 2025[256] - The Company originated seven first mortgage loans with aggregate commitments of $695.6 million and initial unpaid principal balance of $670.5 million[256] - Total loan repayments amounted to $172.3 million, and two office REO properties were sold for $39.4 million, generating a $7.0 million gain[256] - Near-term liquidity was $236.4 million as of June 30, 2025, including $165.9 million cash-on-hand and $66.1 million undrawn capacity under secured credit agreements[256] Key Financial Measures and Indicators This section discusses the Company's key financial performance metrics, including earnings per share, dividends declared, Distributable Earnings (a non-GAAP measure), and book value per common share, providing context for their calculation and significance - Diluted earnings per common share was $0.21 for Q2 2025, an increase of $0.09 from Q1 2025, primarily due to a gain on sale of real estate owned[258] - Distributable Earnings per diluted common share was $0.24 for Q2 2025, consistent with Q1 2025[259] - Book value per common share was $11.20 as of June 30, 2025, a decrease of $0.07 from December 31, 2024, mainly due to increased credit loss expense[261] Distributable Earnings Reconciliation (in thousands, except per share data) | Item | Three Months Ended June 30, 2025 | Three Months Ended March 31, 2025 | | :----------------------------------------------------------------- | :------------------------------- | :-------------------------------- | | Net income attributable to common stockholders | $16,881 | $9,960 | | Non-cash stock compensation expense | $1,997 | $2,019 | | Depreciation and amortization | $3,423 | $3,992 | | Credit loss expense, net | $1,778 | $3,424 | | GAAP Gain on sale of real estate owned, net | $(6,970) | $0 | | Adjusted Gain on sale of real estate owned, net for purposes of Distributable Earnings | $1,869 | $0 | | Distributable earnings | $18,978 | $19,395 | | Distributable earnings per common share, diluted | $0.24 | $0.24 | Investment Portfolio Overview This section provides an overview of the Company's investment portfolio, primarily consisting of floating rate first mortgage loans. It details loan activity, portfolio statistics, and interest rate floor characteristics as of June 30, 2025 - As of June 30, 2025, the loans held for investment portfolio comprised 49 first mortgage loans (or interests therein) with $3.9 billion in commitments and $3.8 billion in unpaid principal balance[272] - 99.7% of the loan commitments were floating rate loans, all of which were first mortgage loans[272] Loan Portfolio Activity (in thousands) | Activity | Three Months Ended June 30, 2025 | Three Months Ended March 31, 2025 | | :--------------------------------- | :------------------------------- | :-------------------------------- | | Loan originations and acquisitions — initial funding | $670,479 | $0 | | Other loan fundings | $8,785 | $13,603 | | Loan repayments | $(172,268) | $(21,500) | | Total loan activity, net | $506,996 | $(7,897) | - The weighted average interest rate floor on the mortgage loan investment portfolio was 2.19% as of June 30, 2025[280] Real Estate Owned This section provides details on the Company's Real Estate Owned (REO) properties, including their types, locations, and carrying values as of June 30, 2025. It also notes the sale of two office properties during the period - As of June 30, 2025, the Company owned two office properties and four multifamily properties, with an aggregate carrying value of $237.1 million[282][283] - Two office properties were sold during the three and six months ended June 30, 2025[282] Asset Management The Company actively manages its portfolio assets from closing to repayment or resolution, utilizing Situs Asset Management, LLC for dedicated asset management and servicing - The Company partners with Situs Asset Management, LLC for dedicated asset management and loan servicing, adhering to proprietary guidelines[284] - Asset management involves monitoring financial, legal, and quantitative aspects of investments, maintaining contact with borrowers and market experts, and enforcing rights as needed[284] Loan Portfolio Review The Company's Manager conducts a quarterly review of the entire loan portfolio, assigning risk ratings on a 5-point scale (1=least risk, 5=greatest risk). The weighted average risk rating remained stable at 3.0 as of June 30, 2025 - The Manager reviews the entire loan portfolio quarterly, assigning risk ratings from '1' (least risk) to '5' (greatest risk)[285] Loan Portfolio by Internal Risk Ratings (in thousands) | Risk rating | Number of loans (June 30, 2025) | Amortized cost (June 30, 2025) | Number of loans (December 31, 2024) | Amortized cost (December 31, 2024) | | :---------- | :------------------------------ | :----------------------------- | :---------------------------------- | :--------------------------------- | | 1 | 0 | $0 | 0 | $0 | | 2 | 1 | $62,767 | 1 | $62,716 | | 3 | 46 | $3,592,984 | 42 | $3,098,671 | | 4 | 2 | $118,935 | 2 | $117,201 | | 5 | 0 | $0 | 0 | $0 | | Totals | 49 | $3,774,686 | 45 | $3,278,588 | - The weighted average risk rating of the loan portfolio was 3.0 as of June 30, 2025, consistent with December 31, 2024[286] Loan Modification Activity The Company engages in loan modifications to address specific loan circumstances, typically involving extensions, waivers of performance tests, or deferrals of principal payments - Loan modifications often include additional time for refinancing, adjustment/waiver of performance tests, modification of interest rate cap terms, and/or deferral of principal payments[289] - In exchange for modifications, the Company typically receives partial principal repayment, short-term PIK interest, cash infusions for reserves, termination of unfunded commitments, additional call protection, and/or an increased loan coupon[289] Allowance for Credit Losses The Company's allowance for credit losses increased by $1.6 million in Q2 2025 and $4.8 million in H1 2025, reaching $68.8 million. This increase reflects loan activity and the impact of an uncertain macroeconomic environment, including geopolitical tensions, market volatility, and shifting office market fundamentals - The allowance for credit losses increased by $1.6 million in Q2 2025 and $4.8 million in H1 2025, totaling $68.8 million[290] - The increase is primarily attributed to loan activity and the uncertain macroeconomic environment, including geopolitical tensions, market volatility, sustained higher interest rates, and shifting office market fundamentals[290] Allowance for Credit Losses (June 30, 2025, in thousands) | Allowance for credit losses: | Unpaid principal balance | Unfunded commitments | Total commitments | Total basis points | | :--------------------------- | :----------------------- | :------------------- | :---------------- | :----------------- | | General reserve | $3,783,609 | $116,428 | $3,899,345 | 176 bps | | Specific reserve | $0 | $0 | $0 | 0 bps | | Total | $3,783,609 | $116,428 | $3,899,345 | 176 bps | Investment Portfolio Financing This section details the Company's financing strategies, including secured credit agreements, a secured revolving credit facility, asset-specific arrangements, and collateralized loan obligations (CLOs) - As of June 30, 2025, 94.8% of the Company's total loan portfolio borrowings were from non-mark-to-market financing sources, primarily CLOs[296] Investment Portfolio Financing Arrangements (in thousands) | Financing Type | June 30, 2025 Outstanding Principal Balance | December 31, 2024 Outstanding Principal Balance | | :--------------------------------- | :------------------------------------------ | :------------------------------------------ | | Collateralized loan obligations | $2,452,377 | $1,682,288 | | Secured credit agreements | $156,711 | $585,042 | | Asset-specific financing arrangements | $29,110 | $186,500 | | Secured revolving credit facility | $367,841 | $86,625 | | Mortgage loan payable | $31,200 | $31,200 | | Total | $3,037,239 | $2,571,655 | - The Company's three CLOs (TRTX 2025-FL6, TRTX 2022-FL5, TRTX 2021-FL4) totaled $2.5 billion, financing 75.3% of the loans held for investment portfolio[320] - The secured revolving credit facility's borrowing capacity increased to $375.0 million and its maturity was extended to February 13, 2028[315] Financial Covenants for Outstanding Borrowings This section confirms the Company's compliance with all financial covenants for its investment portfolio financing arrangements as of June 30, 2025, and December 31, 2024 - The Company was in compliance with all financial covenants for its investment portfolio financing arrangements as of June 30, 2025, and December 31, 2024[329] - Failure to satisfy covenants could lead to default, cross-defaults, acceleration of debt, termination of commitments, and limitations on financing alternatives, potentially impacting REIT qualification[330] Floating Rate Loan Portfolio The Company's business model aims to minimize interest rate exposure by matching assets and liabilities to similar benchmark indices. As of June 30, 2025, 99.8% of its loan investments were floating rate, resulting in a net floating rate exposure of $769.1 million, subject to interest rate floors on assets - 99.8% of the Company's loan investments by unpaid principal balance were floating rate as of June 30, 2025, financed with floating rate liabilities[332] - The weighted average interest rate floor on the mortgage loan investment portfolio was 2.19% as of June 30, 2025[332] Net Floating Rate Exposure (June 30, 2025, in thousands) | Item | Net exposure | | :-------------------------------- | :----------- | | Floating rate mortgage loan assets | $3,775,167 | | Floating rate mortgage loan liabilities | $(3,006,039) | | Total floating rate mortgage loan exposure, net | $769,128 | Interest-Earning Assets and Interest-Bearing Liabilities This section presents the average balances, interest income/expense, and weighted average yields for the Company's interest-earning assets and interest-bearing liabilities for the three and six months ended June 30, 2025, and March 31, 2025 (QoQ), and June 30, 2024 (YoY) Interest-Earning Assets and Liabilities (QoQ, in thousands) | Item | Average amortized cost (June 30, 2025) | Interest income / expense (June 30, 2025) | Wtd. avg. yield / financing cost (June 30, 2025) | Average amortized cost (March 31, 2025) | Interest income / expense (March 31, 2025) | Wtd. avg. yield / financing cost (March 31, 2025) | | :--------------------------------- | :------------------------------------- | :---------------------------------------- | :----------------------------------------------- | :-------------------------------------- | :----------------------------------------- | :------------------------------------------------ | | First mortgage loans | $3,336,212 | $70,668 | 8.5 % | $3,274,281 | $68,045 | 8.3 % | | Total interest-bearing liabilities | $2,802,397 | $45,524 | 6.5 % | $2,600,366 | $43,143 | 6.6 % | | Net interest income | | $25,144 | | | $24,902 | | Interest-Earning Assets and Liabilities (YoY, in thousands) | Item | Average amortized cost (June 30, 2025) | Interest income / expense (June 30, 2025) | Wtd. avg. yield / financing cost (June 30, 2025) | Average amortized cost (June 30, 2024) | Interest income / expense (June 30, 2024) | Wtd. avg. yield / financing cost (June 30, 2024) | | :--------------------------------- | :------------------------------------- | :---------------------------------------- | :----------------------------------------------- | :-------------------------------------- | :----------------------------------------- | :------------------------------------------------ | | First mortgage loans | $3,305,418 | $138,713 | 8.4 % | $3,368,040 | $160,299 | 9.5 % | | Total interest-bearing liabilities | $2,701,939 | $88,667 | 6.6 % | $2,756,961 | $105,969 | 7.7 % | | Net interest income | | $50,046 | | | $54,330 | | Our Results of Operations This section provides a detailed analysis of the Company's operating results, comparing the three months ended June 30, 2025, with March 31, 2025 (QoQ), and the six months ended June 30, 2025, with June 30, 2024 (YoY), covering net interest income, other revenues and expenses, gains on REO sales, and credit loss expense - Net interest income increased by $0.2 million QoQ to $25.1 million, primarily due to an increase in loan portfolio size, partially offset by increased financing arrangements[343] - Other revenue decreased $1.1 million QoQ, mainly due to lower revenue from real estate owned operations, partially offset by increased interest on cash balances[345] - A $7.0 million gain on sale of real estate owned was recognized in Q2 2025, with no comparable gain in Q1 2025[347] - Net interest income decreased by $4.3 million YoY to $50.0 million for the six months ended June 30, 2025, due to a decrease in the index rate and loan portfolio size[353] - Credit loss expense increased by $5.4 million YoY for the six months ended June 30, 2025, reflecting macroeconomic uncertainty and loan activity[358] Liquidity and Capital Resources This section details the Company's capitalization, debt-to-equity ratios, sources and uses of liquidity, and consolidated cash flows. It highlights the primary funding mechanisms and the impact of investment and financing activities on cash balances - As of June 30, 2025, the Company had $0.9 billion in stockholders' equity and $3.0 billion in outstanding borrowings[361] Debt-to-Equity and Total Leverage Ratios | Ratio | June 30, 2025 | December 31, 2024 | | :------------------ | :------------ | :---------------- | | Debt-to-equity ratio | 2.63x | 2.14x | | Total leverage ratio | 2.63x | 2.14x | Sources of Near-Term Liquidity (in thousands) | Source | June 30, 2025 | December 31, 2024 | | :--------------------------------------- | :-------------- | :---------------- | | Cash and cash equivalents | $165,850 | $190,160 | | Secured credit agreements (undrawn capacity) | $66,099 | $128,130 | | Asset-specific financing arrangements | $2,704 | $2,485 | | Collateralized loan obligation proceeds held at trustee | $1,778 | $0 | | Total | $236,431 | $320,775 | - Cash flows used in investing activities totaled $457.7 million in H1 2025, primarily due to new loan originations, while cash flows provided by financing activities totaled $389.8 million, mainly from CLO issuance[370][371] Material Cash Requirements This section outlines the Company's contractual obligations and commitments, including unfunded loan commitments and principal and interest payments on various financing arrangements Contractual Obligations and Commitments (June 30, 2025, in thousands) | Item | Total obligation | Less than 1 Year | 1 to 3 Years | 3 to 5 Years | More than 5 Years | | :--------------------------------------- | :--------------- | :--------------- | :----------- | :----------- | :---------------- | | Unfunded loan commitments | $116,428 | $45,243 | $57,685 | $13,500 | $0 | | Collateralized loan obligations—principal | $2,452,377 | $216,337 | $1,549,024 | $687,016 | $0 | | Secured credit agreements—principal | $156,711 | $50,400 | $20,340 | $85,971 | $0 | | Secured revolving credit facility—principal | $367,841 | $0 | $367,841 | $0 | $0 | | Asset-specific financing arrangements—principal | $29,110 | $0 | $29,110 | $0 | $0 | | Mortgage loan payable—principal | $31,200 | $0 | $0 | $31,200 | $0 | | Total | $3,615,219 | $497,699 | $2,245,362 | $872,158 | $0 | - The Company plans to meet obligations through maturity extensions, capital market access, new structured finance vehicles, asset sales, and loan repayments[374] - As a REIT, the Company must distribute at least 90% of its taxable income annually, which may constrain cash accumulation[376] Corporate Activities This section details the Company's dividend declarations for both common and Series C Preferred Stock for the second quarter of 2025 and 2024, emphasizing its commitment to REIT distribution requirements - The Board declared a cash dividend of $0.24 per common share ($19.5 million total) for Q2 2025, paid on July 25, 2025[380] - A cash dividend of $0.3906 per Series C Preferred Stock share ($3.1 million total) was declared for Q2 2025, paid on June 30, 2025[381] - For the six months ended June 30, 2025, common stock dividends of $39.4 million and Series C Preferred Stock dividends of $6.3 million were declared[383][231] Critical Accounting Estimates This section discusses the critical accounting estimates that require significant management judgment, particularly the allowance for credit losses under the CECL model and the valuation of Real Estate Owned (REO) - Significant estimates include the adequacy of the allowance for credit losses and the valuation inputs for loans and REO[386] - The CECL reserve is influenced by loan quality, risk ratings, delinquency, historical losses, and macroeconomic forecasts (e.g., unemployment, inflation, interest rates, property values)[392] - REO is initially measured at fair value, with subsequent impairment analysis based on estimated future undiscounted cash flows[399] - The allowance for credit losses was $68.8 million as of June 30, 2025, with a $1.6 million increase in Q2 2025 and a $4.8 million increase in H1 2025[394] Recent Accounting Pronouncements This section refers to Note 2 for a discussion of recently issued accounting pronouncements, including ASU 2024-03 (Expense Disaggregation Disclosures) and ASU 2023-09 (Income Tax Disclosures), which the Company is currently evaluating for impact - The Company is evaluating the impact of ASU 2024-03 (Expense Disaggregation Disclosures), effective for its 2027 annual reporting[94][401] - The Company is evaluating the impact of ASU 2023-09 (Income Tax Disclosures), effective for annual periods beginning after December 15, 2024[95][401] Subsequent Events This section refers to Note 16 for a discussion of events that occurred after the reporting period, including new loan closings, loan repayments, and further share repurchases - Subsequent events include closing or processing two new first mortgage loans totaling $112.3 million in commitments and receiving full repayment of two loans totaling $120.8 million[246][402] - The Company repurchased 830,024 common shares for $6.8 million between July 1 and July 25, 2025, with $2.5 million remaining capacity under its share repurchase program[246][402] Loan Portfolio Details This section provides a detailed loan-by-loan breakdown of the Company's loans held for investment portfolio as of June 30, 2025, including origination date, total loan commitment, principal balance, interest rate, all-in yield, maturity, property type, location, LTV, and risk rating - The loan portfolio consists of 49 senior loans with a total commitment of $3.9 billion and an unpaid principal balance of $3.8 billion[405] - The weighted average credit spread for the loans is 3.5%, and the weighted average extended maturity is 2.7 years[405] - The weighted average LTV for the portfolio is 66.1%, and the weighted average risk rating is 3.0[405] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section details the Company's exposure to various market risks, including interest rate risk, credit risk, prepayment risk, extension risk, non-performance risk, real estate risk, liquidity risk, capital markets risk, counterparty risk, and currency risk Investment Portfolio Risks This subsection addresses risks inherent in the Company's investment portfolio, such as interest rate fluctuations, credit defaults, and the timing of loan repayments. It explains how these risks are monitored and mitigated through underwriting and asset management processes - The Company aims to minimize interest rate exposure by match-indexing assets and liabilities; rising rates generally increase net interest income, while declining rates decrease it, subject to interest rate floors[407] Impact of Benchmark Interest Rate Changes on Net Interest Income (in thousands) | Change in Benchmark Rate | 25 Basis Point Increase | 25 Basis Point Decrease | 50 Basis Point Increase | 50 Basis Point Decrease | 75 Basis Point Increase | 75 Basis Point Decrease | | :----------------------- | :---------------------- | :---------------------- | :---------------------- | :---------------------- | :---------------------- | :---------------------- | | Total change in net interest income | $1,923 | $(1,923) | $3,846 | $(3,755) | $5,769 | $(5,373) | - Credit risk is managed through sponsor ability assessment, property cash flow monitoring, and enforcement of rights, while real estate risk is managed through underwriting and asset management[410][411][417] - Prepayment risk arises from principal repayments at different rates than anticipated, potentially reducing returns, while extension risk occurs if loan lives extend beyond financing terms, especially in rising interest rate environments[412][414] Operating and Capital Market Risks This subsection covers risks related to the Company's operations and access to capital markets, including liquidity, capital markets, counterparty, and currency risks. It outlines how global macroeconomic conditions can exacerbate these risks and the strategies employed for mitigation - Liquidity risk is associated with financing longer-maturity investments with shorter-term borrowings, exposing the Company to margin calls if collateral values decline[418] - Capital markets risk relates to the ability to raise equity and debt capital, which is constrained by REIT distribution requirements and impacted by macroeconomic conditions like inflation and interest rates[420][421] - Counterparty risk arises from financial institutions not fulfilling obligations and borrowers defaulting on payments, mitigated by engaging high credit-quality institutions and rigorous credit analysis[422][423] - Future foreign currency exposure would be hedged using forwards to fix U.S. dollar amounts of foreign currency denominated cash flows[425][426] Item 4. Controls and Procedures This section confirms that the Company's management, including the CEO and CFO, evaluated the effectiveness of its disclosure controls and procedures as of June 30, 2025, and concluded they were effective at a reasonable assurance level - The Company's disclosure controls and procedures were evaluated and deemed effective at the reasonable assurance level as of June 30, 2025[428] - No material changes in internal control over financial reporting occurred during the most recently completed fiscal quarter[429] Part II. Other Information Item 1. Legal Proceedings This section states that the Company was not involved in any material legal proceedings as of June 30, 2025, and refers to Note 14 for additional information on litigation - As of June 30, 2025, the Company was not involved in any material legal proceedings[432] Item 1A. Risk Factors This section states that there have been no material changes to the risk factors previously disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2024 - No material changes to the risk factors previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2024[433] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section provides information on the Company's common stock repurchase program during the three months ended June 30, 2025, detailing the number of shares repurchased, average price paid, and remaining capacity Issuer Purchases of Equity Securities (Three Months Ended June 30, 2025) | Period beginning | Period ending | Total number of shares repurchased | Average price paid per share | Total number of shares purchased as part of publicly announced program | Amounts paid for shares purchased as part of publicly announced program | Approximate dollar value of shares that may yet be purchased under the program | | :--------------- | :------------ | :--------------------------------- | :--------------------------- | :------------------------------------------------------------------- | :-------------------------------------------------------------------- | :-------------------------------------------------------------------- | | April 1, 2025 | April 30, 2025 | 889,623 | $7.34 | 889,623 | $6,547,356 | $15,231,142 | | May 1, 2025 | May 31, 2025 | 768,694 | $7.72 | 1,658,317 | $5,952,558 | $9,278,584 | | June 1, 2025 | June 30, 2025 | 0 | $0 | 1,658,317 | $0 | $9,278,584 | | Total/Average | | 1,658,317 | $7.52 | | $12,499,914 | | - The Company repurchased 1,658,317 common shares for $12.5 million during the three months ended June 30, 2025[434] - As of June 30, 2025, $9.3 million of remaining capacity was available under the share repurchase program[434] Item 3. Defaults Upon Senior Securities This section states that there were no defaults upon senior securities during the reporting period - No defaults upon senior securities occurred[435] Item 4. Mine Safety Disclosures This section states that mine safety disclosures are not applicable to the Company - Mine safety disclosures are not applicable to the Company[436] Item 5. Other Information This section indicates that there is no other information to report under this item - No other information to report[437] Item 6. Exhibits This section lists all exhibits filed as part of the Form 10-Q, including articles of incorporation, bylaws, preferred stock articles supplementary, common stock certificates, equity incentive plans, officer certifications, and XBRL interactive data files - Exhibits include corporate governance documents (Articles of Amendment and Restatement, Bylaws, Articles Supplementary for Preferred Stock)[439] - Key exhibits include the TPG RE Finance Trust, Inc. 2025 Equity Incentive Plan and related award agreements[439] - Officer certifications (Section 302 and 906 of Sarbanes-Oxley Act) and Inline XBRL interactive data files are also included[439] Signatures This section contains the required signatures of the Company's Chief Executive Officer and Chief Financial Officer, certifying the filing of the Form 10-Q - The report is signed by Doug Bouquard, Chief Executive Officer (Principal Executive Officer), and Robert Foley, Chief Financial Officer (Principal Financial Officer), on July 29, 2025[443][444]