TPG RE Finance Trust, Inc.

Greetings and welcome to the TPGRE Finance Trust fourth quarter 2022 earnings conference call. At this time, all participants are in a listen-only mode. A brief 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. It is now my pleasure to introduce your host, Deborah Ginsberg, Vice President, Secretary, and General Counsel. Thank you, Deborah. You may begin.

Good morning, and welcome to TPG Real Estate Finance Trust's conference call for the fourth quarter and full year 2022. I'm joined today by Doug Bucard, Chief Executive Officer, 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-K 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 Factor section of our 10-K. 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 10-K. With that, I will turn the call over to Doug Bacard, Chief Executive Officer of TCG Real Estate Finance Trust.

Thank you, Deborah. I appreciate it. Good morning, and thank you all for joining the call today. The real estate market continues to adjust to a myriad of challenges and opportunities. On one hand, tighter financial conditions, reduced liquidity, and greater dispersion of risk appetite across property types and markets have put pressure on values. But on the other hand, a strong labor market and resilient economy continues to support a positive outlook on the long-term fundamental real estate valuation. Fortunately for TRTX, we identified and began to prepare for tightening financial conditions during the first half of 2022 as we bolstered our liquidity profile and increased our selectivity for new investments. For TRTX, this past quarter was no different in that we continued to selectively invest with a cautious eye on liquidity while proactively risk managing our existing portfolio. In 2022, TRTX originated or acquired $1.7 billion of new loans, approximately 80% of which were multifamily, industrial, or self-storage, three sectors we continue to target given their long-term fundamental tailwind. In addition, we've been very disciplined on the nature of our financing. 65% of our 2022 investments were financed on a non-mark-to-market basis. Furthermore, over the past year, we strategically increased our multifamily and industrial exposure by 62%, while reducing our office exposure by over 32%, which is the greatest year-over-year reduction of office exposure amongst our peers. In the aggregate, loan principal payments for the year 2022 equaled $1.5 billion, and our repayments attributable to our office loans comprised 44% of that number. While we continue to acknowledge the dislocation of lending markets and pressure on value within certain sectors and geographies, particularly office properties, you can see from our quarter-over-quarter CECL reserve reduction of approximately $11 million and stable portfolio risk ratings that we have anticipated these challenges and are actively working to address their impact on our portfolio. We continue to work collaboratively with our borrowers to maximize shareholder value. Our strategy for resolution remains the same. Whether we modify, extend, or foreclose, our focus is to maximize shareholder value in the most efficient manner possible given the facts and circumstances presented. From a liquidity perspective, we continue to risk manage from a position of strength. Our year-end liquidity exceeded $590 million. And for new investments, we had substantial liquidity via four main sources. Number one, the ANOTE market. Number two, existing CRE-CLO reinvestment capacity in both FL4 and FL5, potential new public and private CRE-CLO transactions, and our existing secured credit facilities. Over the past year, As a testament to the diversity in our funding sources, we have executed on each of the four aforementioned financing options, all while maintaining an industry-leading debt cost of funds of 203 basis points over the applicable benchmark rate across our liability structure. Our team's investing and asset management experience benefits from two distinct attributes. Number one, a leadership group with an average of 25-plus years of experience. investing across multiple economic cycles, combined with two, full integration into the broader TPG real estate ecosystem with an oversight of $20 billion of AUM across multiple investment strategies. Given the disruption in real estate markets, being aligned with a leading global alternative asset management firm, combined with tremendous information flow from a broad-reaching real estate equity and credit platform, allows TRTX to prudently navigate the current market. I'm incredibly excited about the prospects for TRTX. We have been front-footed in acknowledging the stress in real estate markets while positioning ourselves to benefit from an attractive lending environment. This proactive approach will serve our shareholders well as the current cycle evolves. Thank you. Bob, please go ahead.