TPG RE Finance Trust, Inc. Common Stock 2026 Q3 Earnings Call

Good morning, and welcome to the TPG Real Estate Finance Trust earnings call for the third quarter of 2026. Today, I am joined by Doug Bouquard, our Chief Executive Officer, Brandon Fox, our Interim Chief Financial Officer, and Ryan Roberto, our Head of Portfolio Management and Capital Markets. Doug, Brandon, and Ryan 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-Q, 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 from those set forth in or implied by these forward-looking statements. For a discussion of risks that could affect results, please see the risk factors section of the company's latest Form 10-K and Form 10-Q. The company does not undertake any duty to update our forward-looking statements unless required to do so by law. We will refer during today's call to certain non-GAAP financial measures, which are reconciled to GAAP amounts in our Form 10-Q, our earnings release, and our earnings supplemental, all of which are available in the investor relations section of our website. Now I will turn the call over to Doug.

Thank you, Ashvin. Over the past quarter, the U.S. economy continued to navigate a complex and evolving environment. While economic growth has remained relatively resilient and labor market conditions generally healthy, inflation has proven more persistent than many anticipated, contributing to a prolonged period of elevated interest rates and tighter financial conditions. As a result, businesses and investors continue to adapt to a higher cost of capital that differs meaningfully from the conditions that prevailed for much of the last decade. Within real estate, these dynamics have created both challenges and opportunities. Elevated rates, declining property values across certain sectors, and significant refinancing activity continue to pressure many real estate owners. With that backdrop, we continue to view the current market as an attractive investing environment, and we remain highly disciplined in our approach.

We are not pursuing growth for growth sake, but rather seeking to deploy capital into opportunities that offer compelling risk-adjusted returns. Importantly, one of our greatest advantages in the current environment is the breadth and depth of TPG's integrated real estate debt and equity platform. The ability to evaluate markets through both the debt and equity lens provides valuable insight into property values, capital flows, refinancing risks, and emerging trends across the market. This perspective helps us identify risks earlier, make better underwriting decisions, and proactively position the portfolio for changing market conditions. Against this backdrop, TRTX continues to execute on the business plan we outlined several years ago. During the third quarter, we closed $773 million of new investments and increased net earning assets by $600 million.

Since September 2025, we've originated $2.3 billion of loan investments, representing nearly 45% of our current loan portfolio and contributing to a 36% year-over-year growth in net earning assets while maintaining a disciplined approach to underwriting, portfolio construction, and risk management. Notably, that growth is beginning to translate into earnings. Net interest income increased approximately 13% from the second quarter, and a significant portion of our third quarter originations closed toward the end of the quarter and did not contribute meaningfully to third quarter earnings. As these loans begin contributing over a full reporting period, the earnings capacity of the platform will become increasingly evident. From a credit perspective, portfolio performance continues to validate the disciplined approach we have taken throughout this cycle. Despite an evolving real estate market, our earnings remain resilient without any meaningful volatility to our risk ratings or CECL reserves.

Throughout this period, we have sought to be proactive rather than reactive. We have maintained a transparent approach to risk ratings, established reserves that accurately reflect evolving market conditions, and actively managed credit exposures as market fundamentals changed. While these decisions have not always been easy, we believe they have positioned the company favorably relative to competitors that continue to work through these credit issues for investments made prior to 2023. Our portfolio consists of 59 loan investments secured by over 150 underlying properties, representing $5.2 billion of total commitments. The average loan size is $88 million, and multifamily and industrial assets comprise approximately 75% of our investment portfolio. The diversification of the portfolio, combined with our continued focus on institutional sponsorship and high-quality assets, positions us well to navigate a challenging market environment while delivering stable earnings. We have applied the same proactive philosophy to liability management.

We have diversified our funding sources, extended liability duration, reduced mark-to-market exposures, and improved liquidity. As a result, the balance sheet optimization we have discussed throughout this cycle is now largely complete. Today, approximately 75% of our leverage is funded through series CRE CLOs and our term loan B providing stable, long duration capital that supports earning visibility, dividend stability and continued portfolio growth. An important example of this progress is the recent closing of FL8, our eighth series CRE CLO. The transaction securitized approximately $1 billion of collateral that was approximately 95% multifamily and industrial, and is expected to be accretive to our cost of funds and increased our percentage of non-mark-to-market liabilities to over 85%. We are particularly pleased with this execution given the subsequent widening of series CRE CLO spreads and softer market conditions.

Beyond improving our financing profile, FL8 established a new 30-month reinvestment period, that when combined with the existing reinvestment windows in FL6 and FL7, provide significant flexibility to recycle capital and continue to grow earnings in the coming years. This embedded reinvestment capacity represents a meaningful competitive advantage and further differentiates TRTX within the real estate credit sector. Loan spreads widen from current levels. These reinvestment vehicles provide us with the ability to capitalize on those opportunities and potentially enhance future earnings power. We remain focused on allocating capital where it can generate the greatest value for shareholders. During the quarter, we fully exhausted our existing $25 million share repurchase plan, repurchasing shares of what remains a meaningful discount to book value. Consistent with that belief, our board subsequently approved a new $50 million share repurchase plan.

We view these repurchases as a compelling use of capital and an effective way to create long-term shareholder value while our shares continue to trade at levels that understate the quality of the platform and its earnings potential. As we look ahead, TRTX is operating from a position of considerable strength. Throughout the cycle, we have proactively managed both sides of our balance sheet, strengthened our liability structure, and created significant embedded reinvestment capacity. We continue to believe the market is not fully recognizing the earnings stability embedded within our platform or the quality of our investment portfolio. We acknowledge that this higher interest rate environment will continue to stress legacy capital structures. Fortunately, the majority of our balance sheet was originated over the past two years, and these investments were sized and structured in a higher rate environment.

We are well-positioned to continue delivering resilient earnings given TRTX's granular, diverse portfolio in tandem with a low cost, stable liability structure. The significant increase in our Q3 NIM is beginning to show the impact of our 2026 investments and the quality of the company's earnings. The foundation we've built leaves TRTX exceptionally well-positioned, not only to navigate this cycle, but to further differentiate from our competitive set while creating long-term value for shareholders. With that, I will turn the call over to Brandon to discuss our financial results in greater detail.

Thank you, Doug, and good morning. For the third quarter of 2026, TRTX reported GAAP net income attributable to common stockholders of $5.8 million or $0.08 per diluted common share. Distributable earnings were $5.1 million or $0.07 per diluted common share after a $13 million realized loss associated with the conversion of one multifamily loan to real estate owned. Distributable earnings before realized losses were $18.1 million or $0.24 per diluted common share, covering our common stock dividend for the quarter. Net interest income increased $3 million or 13% from the second quarter, reflecting quarter-over-quarter growth in our loan portfolio. As Doug mentioned, we fully utilized the remaining capacity under our share repurchase plan. During the quarter, we repurchased 1.2 million shares of common stock at a weighted average price of $8 per share for a total consideration of $9.3 million.

These repurchases increased book value per common share by $0.04. Subsequent to quarter end, our board approved a new $50 million share repurchase program, doubling the size of our prior authorization. Book value per common share was $10.85 at quarter end, a decline of $0.10 from June 30th, primarily reflecting credit loss expense associated with the significant growth in our loan portfolio and macroeconomic conditions during the quarter. For the three months ended September 30th, we made nine first mortgage loan investments representing total commitments of $772.7 million at a weighted average credit spread of 3.02%. We funded $71.8 million of future funding obligations on our existing loans and received $119.6 million of loan repayments, including one full multifamily loan repayment of $106 million. Subsequent to quarter end, we received $72.2 million of additional loan repayments related to one full multifamily repayment and one industrial partial repayment.

Quarter-over-quarter, net earning assets increased by $599.5 million or 14% to $4.9 billion. Total loan commitments increased to $5.2 billion. Over the last 12 months, we made $2.3 billion of loan investments, contributing to the 36% year-over-year growth in our net earning assets through September 30th. At quarter end, our loan portfolio was 100% performing and our weighted average risk rating remained unchanged at 3.0. Our CECL reserve declined by $4.5 million to $76.1 million, or 147 basis points of total loan commitments, compared with 179 basis points at June 30th. The decrease reflects the conversion of a multifamily loan to REO during the quarter. The conversion to REO did not have an impact to book value because it was fully reserved. This reduction in the CECL reserve was partially offset by growth from the loan portfolio.