TPG RE Finance Trust, Inc.TRTXNYSE
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Operator: Greetings, and welcome to the TPG RE Finance Trust, Inc. Fourth Quarter and Full Year 2025 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. Press 0 on your telephone keypad. A reminder, this conference is being recorded. It is now my pleasure to pass it off to our host, Dan Cassell. Thank you. You may begin. Good morning, and welcome to the TPG RE Finance Trust, Inc. earnings call for 2025.
Dan Cassell: Today's speakers are Doug Bouquard, Chief Executive Officer, and Brandon Fox, Interim Chief Financial Officer and Chief Accounting Officer. Doug and Brandon are joined by Ryan Roberto, Head of Capital Markets and Asset Management. Doug and Brandon will provide commentary regarding the company, its performance, and the general economy, and will answer questions from call participants. Yesterday afternoon, we filed our Form 10-K, issued a press release, and shared an earnings supplemental, all of which are available on the company's website in the Investor Relations section. This morning's call and webcast are being recorded. Information regarding the replay of this call is available in our earnings release and on the TRTX website. Recordings are the property of TRTX and any unauthorized broadcast or reproduction in any form is strictly prohibited. This morning's call will include forward-looking statements which are uncertain and outside of the company's control. Actual results may differ materially. For a comprehensive discussion of risks that could affect results, please see the Risk Factors section of the company's Form 10-K. The company does not undertake any duty to update our forward-looking statements or projections unless required by law. We will refer during today's call to certain non-GAAP financial measures which are reconciled to GAAP amounts in our earnings release and our earnings supplemental, both of which are available in the Investor Relations section of our website. Now I will turn the call over to Doug. Good morning, everyone, and thank you for joining the call.
Doug Bouquard: The broader economic backdrop continues to provide a solid foundation for investment activity within the real estate sector. With dislocation in certain parts of the corporate credit market appearing, we are observing a marginal trend of capital allocation oriented towards real estate credit. As we have observed at the start of the year, the combination of increased dry powder, a 10-year Treasury hovering just above 4%, and favorable real estate fundamentals should be drivers of continued growth investment activity for TRTX. Increased transaction volume is the essential catalyst to price discovery; as more real estate assets trade, investors can more clearly triangulate where valuations have reset, replacing speculation with hard market-clearing data. While we are almost four years removed from when the Fed began hiking rates, this price transparency forms the backdrop for what is shaping up to be an incredibly active year for both borrowers and lenders. 2025 was an important turning point for TRTX. We closed $1,900,000,000 of new investments, drove 25% year-over-year growth in earning assets, and generated distributable earnings of $0.97 per share, which outearned our dividend for the year. Furthermore, we were able to achieve this while maintaining stable risk ratings, further diversifying our liability structure, and ending the year with a 100% performing loan portfolio. From a recent investment perspective, the fourth quarter was incredibly active with $927,000,000 of new loans closed consisting of 62% multifamily and 38% industrial collateral, two thematic sectors that we continue to target. As a testament to the strength of our franchise, this quarter's investment activity was not only one of the most active quarters we have had since the company's founding, but over 90% of our new originations were with repeat borrowers. This demonstrates our deep relationships within the real estate ecosystem, further enhanced by the depth and breadth of TPG's real estate debt and equity investment platform. Capital markets velocity remains healthy on our balance sheet, as we received just under $1,000,000,000 of repayments this past year. Driven by the robust volume of newly originated loans in 2025 and the repayment of older vintage loans, our balance sheet has undergone a substantial evolution. For context, at the beginning of 2022, 30% of our balance sheet was exposed to multifamily and industrial collateral, whereas today, we have increased our combined exposure to those sectors to over 72% of our current balance sheet. In recent years, we have been able to accomplish transformation toward newer vintage loans while generating consistent earnings and maintaining a steady credit profile. From a liability perspective, we continue to grow our lender relationships, optimize our existing capital structure, and are fortunate to have recently issued two CRE CLOs in 2025, which afford the company ample reinvestment capacity over the next two years at an attractive cost of funds. While we are proud that 2025 was a year where we delivered on our strategic goals, we remain laser-focused on continuing to build on the success in 2026. With the insights of TPG's real estate investment platform, combined with a stable balance sheet and an attractive opportunity set, we are confident in our ability to deliver continued strong performance. Tactically, we plan to continue to pull the many levers for growth at our disposal, which include continued net asset growth through prudent investment and risk management, increasing our leverage ratio towards our target of full investment, and utilizing untapped liquidity. In summary, the offensive posture we were able to embrace this year is a direct result of the strategic approach we laid out years ago. Our performance in 2025 has set a high bar, and we enter 2026 with the capital, the team, and the momentum to continue to drive value for our shareholders. With that, I will turn the call over to Brandon to discuss our financial results in more detail. Thank you, Doug, and good morning.
Brandon Fox: For 2025, TRTX reported GAAP net income
Doug Bouquard: of $200,000. Distributable earnings for the quarter was $18,500,000 or $0.24 per common share. For the full year ending 12/31/2025, TRTX reported GAAP net income of $45,500,000 or $0.57 per share
Christopher Muller: and distributable earnings of $76,800,000 or $0.97 per common share, a 1.01 times coverage ratio of our annual dividend of $0.96 per share. We have covered our common stock dividend for each of the last two years. Book value per common share decreased quarter over quarter to $11.07 from $11.25. Our net asset growth during 2025 continues to reflect our focus on allocating capital to new loan investments and actively managing our portfolio. For the full year 2025, we originated 20 loans with total commitments of $1,900,000,000 at a weighted average credit spread of 2.82% and received loan repayments of $987,900,000, including full loan repayments of $931,500,000 on 15 loans where the underlying collateral was 64% multifamily, 20% hotel, 14% office, and 2% industrial. Year over year, we grew our net assets from $3,300,000,000 to $4,100,000,000, or 25%. At year end, our loan portfolio was 100% performing. Our weighted average risk rating for the loan portfolio is unchanged at 3.0. During the quarter, we upgraded two multifamily loans from a risk rating of 3 to 2 based on their continued strong operating performance and downgraded one multifamily loan from a risk rating of 3 to 4 due to operational challenges in the quarter. This loan represents approximately 1% of our total loan commitments at year end. Our CECL reserves slightly increased quarter over quarter to 180 basis points compared to 176 basis points at September 30. We ended the quarter with near-term liquidity of $143,000,000 consisting of $72,600,000 of cash on hand available for investment net of $15,000,000 held to satisfy liquidity covenants, undrawn capacity under secured financing arrangements of $51,400,000, and CRE CLO reinvestment proceeds of $4,000,000. Additionally, we held unencumbered loan investments with an aggregate unpaid principal balance of $127,100,000 that are eligible to pledge under our existing financing arrangements. The company's liability structure is 82% non-mark-to-market, an increase of 6% from 77% at 12/31/2024. Year over year, our cost of funds declined 18 basis points, or 9%, from 2.00% to 1.82%. The continued improvements to our liability structure in 2025 are primarily due to the issuance of our two CRE CLOs, TRTX FL6 and FL7, totaling $2,200,000,000. Total leverage increased quarter over quarter to 3.02 times from 2.64 times as a result of our substantial loan origination volume in the current quarter. At year end, we had $1,600,000,000 of financing capacity available to support loan investment activity and we were in compliance with all of our financial covenants. With that, we welcome your questions.
Operator: Thank you. We will now conduct a question-and-answer session. If you would like to ask a question, please press 1 on your telephone keypad. You may press 2 to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before the star keys. Once again, that is 1 to ask a question at this time. First question comes from Christopher Muller with Citizens Capital. Please proceed.
Christopher Muller: Congrats on a really strong quarter here.
Dan Cassell: So it looks like only one close, one loan
Gabe Poggi: closed so far in the first quarter. Do you guys expect origination to slow a little bit in the first quarter? Or will it be more just like later closing past February? And how are you guys thinking about the pace of originations in 2026
Doug Bouquard: or of the quarter rather. And frankly, a lot that did actually occur as well within Q4 for us where we had the bulk of our payoffs in Q4 happen, frankly, closer to the first month of the quarter, and then the bulk of our new fundings occurred really in the last month of the quarter. So we do see that trend continuing. Secondly, as it relates to pipeline, look, our pipeline is incredibly robust. We are seeing a lot of activity across all property types, all regions; a number of our borrowers, including repeat borrowers, have been very active. So I think that from a pacing and investment perspective, I do feel really positive about this year. I mentioned in my remarks that there are a lot of components that are driving that. I would say we are still seeing a lot of those kind of peak-of-the-market purchases from 2021 and 2022; many of those five-year loans are now in some stage of either coming due. When you combine that with the fact that a number of borrowers have generally not sold those assets yet, they are generally coming to us for typically a new financing, in some cases requiring cash in. So I think it is really a combination of a lot of those five-year loans coming due from when there was tremendously high activity. Then I think this year, what has been happening is, if you just look from a macro perspective, there is a little bit more clarity around the path of rates. You have got a 10-year hovering around 4%. And, all in all, credit spreads are relatively accommodative. So I do feel like that is pretty much a recipe for a very active year for us.
Gabe Poggi: Got it. So it sounds like the origination volumes in April are not really showing up in interest income yet, which is really good to hear. I guess the other question I have here is it looks like spreads on new loans are about 50 basis points below the portfolio average. Do you expect that type of drop-off on spreads for new loans to continue? And is that due to market competition or more so the type of assets you guys are originating?
Doug Bouquard: Yeah. I think it is a combination of really a few things. I would say, first, we have been very concentrated within multifamily and industrial and we have been keeping our LTVs in that sub-65% loan-to-value range. I would say, second, although loan spreads, particularly in the fourth quarter, were a touch tighter than prior quarters, we have seen our cost of funds really rapidly move in line, and that has really been the story the entire year, which is although loan spreads have come tighter, the demand and competition to provide us back leverage continues to be incredibly robust. We saw that both in the closing of our series CLO in Q4 with a weighted average cost of funds of about 1.67%, but then also what is maybe less obvious is the number of bank relationships that we have across the broader TPG franchise that are, I would say, incredibly aggressive right now in terms of leaning into providing us back leverage. So I think all of that has resulted in, despite loan spreads being a touch tighter, our ROE generated is generally static relative to prior quarters.
Gabe Poggi: Got it. Appreciate you guys taking the questions, and congrats again on a really solid quarter.
Doug Bouquard: Absolutely. Thanks a lot.
Operator: The next question comes from Gabe Poggi with Raymond James. Please proceed.
Dan Cassell: Hey, good morning, guys. Thanks for taking the question. Can you just talk about target leverage again? I know you are at 3x
Gabe Poggi: right now. Just remind us of kind of the ballpark comfort zone you would like to be as we go through the course of 2026. And then just a follow-up, I will give it to you now, is
Operator: I know that
Doug Bouquard: for an REO is not a lever you need to pull. You have optionality there. But any color you can provide on the REO assets at TRTX at the asset level and how you are thinking about
Gabe Poggi: those assets as the year progresses, especially if transaction volume picks up.
Operator: Thanks.
Doug Bouquard: Yes, sure. Absolutely. So I think first from a leverage perspective, I would say, right now, we are really targeting that 3.5 to 3.75 to 1 range as a target. I think that once we get to that point is where we will, likely, pause, but I feel like that gets us to what I would describe as close to fully invested.
Operator: And then
Doug Bouquard: secondly, from an REO perspective, last year, we sold two office assets. We do have some REO remaining.
Gabe Poggi: But I think you said it well, which is that
Doug Bouquard: when we think about levers to growth, we
Christopher Muller: I would say,
Doug Bouquard: prioritized getting fully invested given the opportunity set, and you are seeing us do that quarter by quarter. In terms of the REO, we do feel like this year is going to be a relatively attractive year to be continuing to sell down that REO. So you will see further progress out of us on our REO portfolio throughout the year.
Operator: Thanks, guys. Thank you. The next question comes from Richard Barry Shane with JPMorgan. Please proceed.
Doug Bouquard: Hey, guys. Thanks for taking my questions this morning. I have two actually. First is actually, I am going to have to get this right after REO. On ROE, your returns right now are about
Operator: call it,
Doug Bouquard: SOFR plus 5%. I am curious when you think about the business model
Operator: long term,
Doug Bouquard: what do you think the appropriate ROE target is as a function of a spread to SOFR. Yeah. Look. I mean, I think that we have generally been able to achieve an ROE in excess of that. And I think that
Dan Cassell: when
Doug Bouquard: we look at the ROE for a, frankly, lending business that does require some amount of back leverage, I think that really as the health of the back leverage market continues, frankly, it makes our business model incredibly relevant in the market. And so when I think about the longer-term trends, I mean, I think, again, that that 500 number is not too far off from what I would think these businesses, frankly, should look like. I think that when you zoom out more broadly, and obviously, you are hitting on a pretty kind
Operator: topical area.
Doug Bouquard: You know, real estate credit has been going through a pretty interesting evolution, frankly, over the last decade or two. And that evolution has been a combination of banks pulling back, agencies growing in the space, and then also all the nonbank lenders. We, of course, being one of those nonbank lenders and having a large platform. So when we think about the evolution of real estate lending and real estate credit, we as a platform are very much on the tip of the spear in terms of where that market evolves here. But, again, when I think about what is really driving a lot of the nonbank lending activity, I think that the sort of inside baseball does relate to the regulatory capital regime that is orienting banks towards back leverage. And I think that, again, is something that we are very focused on. And, again, that seems to be a trend that continues to grow. Got it. Okay. And then second question, and it is related. Obviously, there has been a significant transaction in the space with Apollo planning to sell their assets. You guys are ex—well, I would describe that in terms of sort of the continuum of recovery, you guys are very much on the front end of that or leading edge of that, I should say. And your stock is still trading at a, call it, 20% discount to book. I am curious how you think you can close that value gap or does it, you know, is the ARI transaction an indication that at least one sophisticated player in the space is not convinced that that is going to happen for the sector. Look, I mean, I think, you know, first thing, we have set a very clear record around maximizing shareholder value and have been incredibly clear about our strategic goals, and we look back about what we achieved last year and seek to achieve this year. I think that we are well on our way of closing that gap, and that is a big focus for us. I think, too, when I think about the ARI transaction and just other flows in the market, I can say that TPG broadly as a platform is constantly evaluating opportunities, and we are always looking for ways to maximize shareholder value to be creative. Obviously, the firm has a multiple-decade background in platform acquisition and being thoughtful around organic and inorganic growth. I can tell you that we are always thinking about it, and we are going to continue to be searching for opportunities to basically scale and grow. Got it. Look, I realize that is a tricky question, and I appreciate the answer very much. Thanks, Doug.
Operator: Yep. Thank you. Thank you. The next question comes from John Nickodemus with BTIG. Please proceed.
Doug Bouquard: Hi. Good morning, everyone. Most of my questions have been asked already, but I have one more for the team here. Industrial exposure. Notice that that has gone up a bunch, highlighted it in the prepared remarks. I believe you mentioned, 72% of the book is now in either multifamily or industrial. How are you thinking about target levels for industrial; should we expect to see that continue to rise, just sort of that trend over the course of 2026? Any details you could provide there would be great. Thank you. Yeah. Sure. I am happy to cover that. Obviously, we have mainly grown our industrial exposure from a few years back, frankly, less than 5% generally, and now we are just under 20%. One thing about an appropriate target level: it is probably somewhere in that 25% to 30% range would be an area where I think that perhaps we touch the brakes a little bit. But right now, what we are seeing is, again, as I mentioned, there are many transactions that were done over the last three to five years where there is some amount of recapitalization needed. So we still look at multi and industrial together as sectors that we think we can—you know, we have a particular edge in. Specific to industrial, across our platform we have been an owner of industrial assets. We have a lot of intelligence across the entire market around valuation, leasing activity, and otherwise. So we do feel like we as a platform have a bit of an edge relative to most of the lenders, given the depth and breadth of our franchise. But, again, I think you will see marginally more growth with industrial over time. And, I think as we get to that 25% range, we will, of course, assess and take our views of the market at that juncture.
Dan Cassell: Great.
Doug Bouquard: Appreciate the color, Doug. That is all for me.
Operator: Thank you. There are no further questions in queue at this time. I would like to turn the floor back to management for closing comments.
Doug Bouquard: Yes. Just want to thank everyone for joining the call today, and we look forward to keeping you updated on our progress. Have a great day.
Operator: Thank you. This does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a great day.