TPG RE Finance Trust, Inc.

and welcome to TPGRE Finance Trust second quarter 2022 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Deborah Ginsburg, Vice President and Secretary. Please go ahead, ma'am.

Good morning, and welcome to TPG Real Estate Finance Trust's conference call for the second quarter of 2022. I'm joined today by Doug Bacard, Chief Executive Officer, Matt Coleman, President, and Bob Foley, Chief Financial Officer. Doug and Bob will share some comments about the quarter, and then we'll open up the call for questions. Yesterday evening, we filed our Form 10-Q and issued a press release and earnings supplemental with a presentation of our operating results, all of which are available on our website in the Investor Relations section. I'd like to remind everyone that today's call may include forward-looking statements which are uncertain and outside of the company's control. Actual results may differ materially. For a discussion of some of the risks that could affect results, please see the Risk Factors section of our 10-Q. We do not undertake any duty to update these statements, and we will also refer to certain non-GAAP measures on this call. And for reconciliations, you should refer to the press release and our 10Q. With that, it's my pleasure to turn the call over to Doug Bacard, Chief Executive Officer of TPG Real Estate Finance Trust. Thank you, Debra.

I appreciate it. Good morning, everyone, and thank you for joining the call. As I complete my first quarter as CEO, I first just want to thank the TRTX team and TPG more broadly for welcoming me into the firm. It's been a pleasure to collaborate with such a talented group of colleagues and access the depth and breadth of TPG's global investing platform. Furthermore, the connectivity among TPG's integrated real estate group comprised of $18 billion in AMM across debt and equity strategies provides TRTX with a broad perspective across the entire real estate landscape. First, I'd like to discuss the market over the past quarter. In an attempt to tame inflation, Central bank policies have begun to slow economic growth, and uncertainty regarding the forward path of the economy has intensified. The effects of tightening liquidity have spread across nearly all asset classes, and frankly, real estate has been no exception. Within the real estate lending market, we've seen a reduction in leverage, a widening of credit spreads, and have begun to observe business plans readjusting with more modest assumptions. Simply put, We find ourselves in a more lender-friendly investing environment, and TRTX has begun to take advantage of this part of the cycle. Earlier in the year, we intentionally slowed originations and bolstered our liquidity. And as we head into the second half of the year, this decision has allowed us to do two things. One, deploy capital at more favorable terms and structure. And two, provide ample cushion in the event of further market deterioration and or negative credit outcomes in our loan portfolio. While this quarter the risk rating shift was more muted than the prior quarter, we did materially increase our CECL reserve to reflect deteriorating broader market trends and loan-specific credit concerns, particularly within the office sector. This move is consistent with our transparent approach to reporting. For context, we have 12 loans totaling $1.3 billion with extensions or maturity dates between now and year end. As such, I want to highlight that the expected range of potential outcomes may significantly vary as near-term maturities approach, particularly during the second half of 2022. As the credit markets evolve and potential credit issue loans move toward resolution, we will continue to be steadfast in our risk management approach and laser-focused on maximizing value for our shareholders. Consistent with the conservatism of the prior quarter, we continue to be incredibly focused on our liquidity position and ended the quarter with more than $770 million of total liquidity. That's broken out $339 million of available cash and $365 million of reinvestment capacity within our existing series CLOs. In addition, we have closed on new note-on-note and term funding facilities that provide term non-market-to-market financing for our lending, and this allows us to diversify away from the CRE-CLO market and complement our existing repurchase facilities. Regarding our existing loan portfolio, during the quarter we received loan repayments of a total of $757 million, which is comprised primarily of 35% office, 22% multifamily, 22% hotel, and the remaining amounts are split between life science and mixed use. these metrics by individual quarter, it can skew the picture, especially where any repayment may slip by a week or two, taking it into a subsequent quarter. And as a function of the market uncertainty, predicting repayment timing will continue to be a challenge for all lenders, including TRTX. However, we were pleased to have the ability to redeploy that capital in today's increasingly attractive lending environment. To provide one highlight on the range of outcomes with respect to loan resolutions in today's market, One of the loans repaid in Q2 was a $165 million four-rated loan on a convention center hotel. I highlight this just to reinforce that risk ratings are not necessarily a predictor of losses. In addition, since quarter end, we received $226 million of full loan repayments, both of which were office loans. On the new origination side, we committed to $380 million of new loans at an average rate LTV of 65% and a weighted average spread of term SOFR plus 421. Consistent with the investment approach, sorry, consistent with the investment focus we have previously articulated, 87% of the second quarter's loan originations were multifamily loans. Furthermore, since the quarter ended and during the month of July, we increased our origination velocity meaningfully with another $386 million of loans closed, and another $171 million of loans under executed term sheet. And within that population post-quarter end, 88% of those loans are also multifamily with comparable credit metrics to the prior quarter's originations. In terms of our general focus, again, I would say that we remain consistent in favoring multifamily and industrial credits in select markets with institutional borrowers. We have high conviction that these sectors currently present the most attractive risk-adjusted returns for our shareholders, while also affording the most flexibility in terms of financing options. Based on our portfolio as of today, multifamily is now our largest property-type exposure at 41% of our loan commitments. Lastly, with regard to interest rates, I would like to highlight that TRTX's portfolio is now positively exposed to increases in short-term interest rates. For context, as of June 30, a 2% increase in short-term benchmark rates is expected to result in additional $0.05 per share on a quarterly basis going forward. While I've been in my new role for only three months, I'm very excited about what we've been able to accomplish in a short period of time. Our mission is to prudently deploy our capital for the benefit of our shareholders, boost earnings, and position ourselves to increase the quarterly dividend when appropriate. I believe we are well positioned to do so. In summary, lending conditions have materially improved in TRTX's favor, We have a strong pipeline of origination transactions. We have over $770 million of liquidity and a debt to equity ratio that is well below our target. And we have a stable financing base with ample capacity to support sustained growth. With that, I will turn it over to Bob to provide more detail on our results.