• Net Earning Assets Increase: 3% increase in the second half of 2024 due to $446 million of new loan commitments.
• Loan Commitments: $242 million of new loan commitments in the fourth quarter.
• Liquidity: $320.8 million at year-end.
• Leverage: 2.14 to 1.
• CECL Reserve: 187 basis points.
• Distributable Earnings: Covered the $0.96 annual dividend for 2024, with pre-realized loss earnings covering the dividend by 1.1 times.
• Dividend Yield: 11% at the current share price.
• Loan Portfolio Performance: 100% performing and current, with a weighted average risk rating of 3.0.
• REO Properties: Eight properties with an aggregate carrying value of $275.8 million, representing 7.4% of total assets.
• New Institutional Equity Capital: $60 million infusion into a New York City office building loan.
• Debt Yield: In-place debt yield of 11.7% and stabilized debt yield of 14.4% for a New York City office property.
• Share Price Performance: 61% cumulative return since January 2023.

• Warning! GuruFocus has detected 4 Warning Signs with TRTX.

Release Date: February 19, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• TPG RE Finance Trust Inc (NYSE:TRTX) maintained a 100% performing loan portfolio at year-end 2024, with stable credit risk ratings.
• The company generated distributable earnings that fully covered its $0.96 per share common dividend for 2024, with a pre-realized loss basis coverage of 1.1 times.
• TRTX increased net earning assets by 3% in the second half of 2024, driven by $446 million of new loan commitments, primarily in multi-family and industrial portfolios.
• The company has substantial liquidity of $320.8 million and a low leverage ratio of 2.14 to 1, providing a strong foundation for future growth.
• TRTX's share price performance was the strongest among its peers since January 2023, with a cumulative return of 61% through the end of 2024.

Negative Points

• The company foreclosed on two multi-family loans in the fourth quarter of 2024, indicating challenges in certain segments of its loan portfolio.
• There was a $4.6 million provision expense in the quarter, driven by macroeconomic factors impacting the general reserve.
• TRTX's REO (Real Estate Owned) properties represent 7.4% of total assets, with ongoing efforts needed to stabilize and sell these assets.
• The company faces potential challenges in the commercial real estate market due to elevated interest rate volatility and uncertain economic conditions.
• Despite strong performance, TRTX's dividend yield may decline as the market fully recognizes its prior performance and growth potential.

Q & A Highlights

Q: Can you discuss the foreclosure of the two multi-family loans and what led to this decision? A: Bob Foley, Chief Financial Officer, explained that the decision to foreclose was made after borrowers failed to meet modification terms, such as reducing principal and replenishing interest reserves. The properties are now under TRTX's control, with plans to stabilize and sell them, particularly the well-leased Chicago property.

Q: How do you expect leverage to scale through the year, and could we see a new CLO issuance? A: Bob Foley noted that TRTX has substantial liquidity and plans to deploy cash first, then back-leverage with existing facilities. The CRE CLO market is active, and while not committing, TRTX may participate in new issuances in 2025. Leverage is expected to increase as investment activity grows.

Q: What is your outlook on the impact of the steeper yield curve on the CRE market? A: Doug Bouquard, CEO, stated that the elevated interest rates could pressure borrowers to fix broken capital structures or seek new financing. This environment creates opportunities for TRTX, especially as interest rate volatility decreases, potentially increasing real estate activity.

Q: Can you provide an update on your life sciences exposure and how those loans are performing? A: Doug Bouquard mentioned that TRTX now has three life sciences transactions, all built out and not in shell condition. The focus is on high-quality borrowers, and there has been a slight uptick in leasing activity recently, despite slower business plans compared to previous years.

Q: How do you view the potential for portfolio growth in 2025? A: Bob Foley indicated that TRTX expects significant growth in net earning assets, driven by substantial liquidity and a favorable investment environment. While not providing specific guidance, he suggested that new investment activity would outpace loan repayments, leading to portfolio expansion.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.