TPG RE Finance Trust Inc (TRTX) Q1 2025 Earnings Call Highlights: Strong Loan Performance Amid ...

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01-05-2025

GAAP Net Income: $10 million or $0.12 per share.
Book Value per Common Share: $11.19.
Distributable Earnings: $0.24 per common share.
CRE CLO Issuance: $1.1 billion, extending maturities and reducing cost of funds.
Performing Loan Portfolio: 100% performing with a stable weighted average risk rating of 3.0.
General Reserve: Increased to $67.2 million or 199 basis points.
Share Repurchase: $1.1 million common shares for $8.8 million, boosting book value per share by $0.05.
Liquidity: $457.6 million, including $348 million of cash in excess of covenant requirements.
Non-Market to Market Financing: 91% of secured liabilities, up from 77% last quarter.
Total Leverage: Increased slightly to 2.2 times from 2.1 times last quarter.
Warning! GuruFocus has detected 3 Warning Signs with TRTX.
Release Date: April 30, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
TPG RE Finance Trust Inc (NYSE:TRTX) maintained a 100% performing loan portfolio with stable risk ratings.
The company closed two multi-family loans totaling $131 million and executed term sheets on another $310 million of transactions.
TRTX successfully priced and closed its 6th series CLO, generating $191 million of cash and increasing non-market to market financing exposure to 91% of total borrowings.
The company repurchased $9 million worth of TRTX common shares, enhancing shareholder value.
TRTX reported GAAP net income of $10 million and distributable earnings of $0.24 per common share, aligning with its quarterly dividend.
Global market adjustments to new tariffs have created uncertainty, impacting asset prices and credit spreads.
The cost of borrowing remains elevated, with transitional loans exceeding conduit loan costs.
Loan spreads have widened by 25 to 75 basis points, reflecting market volatility.
The average time to close deals has increased, delaying some transactions.
Uncertainty in the market could potentially slow down the pace of REO portfolio reduction.
Q: Can you provide insights into the risk profile of current originations and pipeline compared to the bridge loan market in 2021 and 2022? A: Doug Bouquard, CEO: The main difference now is the entry point. Loan spreads have moved in sympathy with corporate credit, but we haven't seen proceeds creep above the 70% loan-to-value threshold. Borrowers are more disciplined about debt levels due to elevated borrowing costs and market uncertainties.
Q: What is the expected range of levered return on equity for new bridge loans? A: Doug Bouquard, CEO: We executed a new CLO at favorable bond spreads, allowing us to deploy capital at wider loan spreads. Currently, loan spreads have widened by 25 to 75 basis points, and we are generating gross ROEs in the low to mid-10% range.
Q: Why were there no originations in the first quarter despite having over $300 million in live investment opportunities? A: Doug Bouquard, CEO: It was a combination of disciplined approach due to tightening loan spreads in January and February, and longer closing times due to market dislocation and heavy refinancing volumes. March and April have been more attractive for deploying capital.
Q: Are you still on track to reduce the REO portfolio by 50% by year-end? A: Robert Foley, CFO: We plan to stick to the cadence described last quarter. Recent market uncertainties have not yet affected the pace, and we are executing our plan to move forward with other properties.
Q: How do transaction prices for the two REOs compare to their carrying values? A: Robert Foley, CFO: We will report transaction prices upon closing. Historically, we have sold REO at prices exceeding carrying values, and we expect similar outcomes for these transactions.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.