"TPG Real Estate Finance Trust" Q2 2026 Earnings Call - Liability Structure Transformed as Office Exposure Collapses to 4.3%

Conference Call Operator: Welcome to the TPG Real Estate Finance Trust second quarter 2026 earnings conference call. At this time, all participants will be in a listen-only mode. A question and answer session will follow the formal presentation. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. Please note this conference is being recorded. I will now turn the conference over to Ashwin Rao. You may begin. Thank you.

Ashwin Rao, Investor Relations, TPG Real Estate Finance Trust: Good morning, and welcome to the TPG Real Estate Finance Trust earnings call for the second quarter of 2026. Today, I’m 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 in our earnings supplemental. All of which are available in the investor relations section of our website. Now I’ll turn the call over to Doug.

Doug Bouquard, Chief Executive Officer, TPG Real Estate Finance Trust: Good morning, and thank you for joining the call. Over the past quarter, market activity was shaped by several competing forces, including heightened geopolitical tensions and continued debate around the path of inflation and interest rates. Despite this uncertainty, both equity and credit markets have remained broadly resilient. In real estate, the environment has remained largely consistent with prior quarters. Elevated interest rates and ongoing rate volatility continue to suppress transaction activity, while the gap between buyer and seller expectations remains wide. As a result, lending demand continues to be driven primarily by refinancing activity, particularly within the multifamily and industrial sectors, two of the most liquid areas of the real estate market. Importantly, this activity continues to be supported by both bank balance sheets and CRE CLO bond buyers, where credit spreads tightened further during the quarter.

Against this market backdrop, TRTX continues to differentiate itself through disciplined growth and prudent risk management. Over the past year, we have closed $1.7 billion of new loan investments, driving $551 million or 15% net asset growth. During the second quarter, we closed $466 million of new loan investments and an additional $72 million subsequent to quarter end, continuing the steady growth of our earning asset base. Looking ahead, we have approximately $380 million of executed term sheets, providing good visibility into future deployment opportunities. We remain focused on prudently growing the portfolio while maintaining the disciplined underwriting and risk management approach that has differentiated TRTX throughout the cycle. From a credit perspective, portfolio performance remains stable, with CECL reserves and risk ratings largely unchanged quarter-over-quarter. Meanwhile, the balance sheet transformation we have discussed over the past several years continues to advance.

As of June 30th, 69% of our portfolio is comprised of loans originated in 2023 or later. This continued reinvestment into newer vintage assets enhances the overall credit profile of the portfolio and further differentiates TRTX relative to many of our peers. The second quarter also marked an important milestone in the continued evolution of our liability structure. During the quarter, we issued a $400 million Term Loan B with a seven-year maturity, added a new $100 million corporate revolving credit facility, upsized two existing secured financing arrangements by a combined $600 million, and entered into a new $500 million secured financing arrangement. Importantly, these actions were effectively leverage and cost of funds neutral, allowing us to significantly strengthen and diversify our liability structure without sacrificing current earnings power.

Beyond enhancing liquidity and financial flexibility, these transactions introduced a new source of long-duration, covenant-like corporate capital and further broadened our funding base. The expanding financing toolkit positions us to continue growing earning assets while maintaining our target leverage profile, particularly as we execute on our REO monetization strategy and recycle capital into new investment opportunities. Collectively, these transactions demonstrate the strength of the TRTX platform and our ability to access multiple forms of capital, including bank, syndicated loan, and public bond markets, representing another important step in TRTX’s evolution as a corporate borrower. Finally, we continue to view share repurchases as an attractive tool for creating shareholder value. During the quarter, we repurchased 1.3 million shares of common stock for a total consideration of $10.8 million at an average share price of $8.26 per share.

Which allows us to invest additional capital into our business at what we believe is a meaningful discount to intrinsic value. As we enter the second half of 2026, we are operating from a position of strength. We have continued to grow the portfolio, maintained stable credit performance, enhanced our financing profile, and increased our financial flexibility. At the same time, we continue to see attractive investment opportunities and believe our competitive position has never been stronger. While market conditions remain dynamic, our strategy remains clear and consistent. Responsibly grow earning assets, maintain disciplined risk management, strengthen our balance sheet, and allocate capital in a manner that maximizes long-term shareholder value.

We continue to believe the market is not fully recognizing the earnings power of our platform, including the strength of our balance sheet, the breadth of TPG’s integrated real estate debt and equity investment platform, and our unique ability to take advantage of the current opportunity set relative to competitors. We believe the foundation we have built and the strategy we have executed over the past several years leaves us well positioned for continued success over the long term. With that, I will turn the call over to Brandon to discuss our financial results in more detail.

Brandon Fox, Interim Chief Financial Officer, TPG Real Estate Finance Trust: Thank you, Doug, and good morning. For the second quarter of 2026, TRTX reported GAAP net income of $9.4 million. Distributable Earnings for the quarter was $17.6 million, or $0.23 per common share. For the full year 2026, Distributable Earnings was $37.1 million, or $0.48 per common share, covering our common stock dividend of $0.48 per common share through June 30th. As Doug mentioned, we repurchased 1.3 million shares of common stock during the quarter and have $9.3 million remaining on the company’s share repurchase plan at June 30th. Book value per common share was $10.95 at quarter end.

During the second quarter, we originated three first mortgage loans with total commitments of $466 million at a weighted average credit spread of 2.79%, and received loan repayments of $274.4 million, including one full office loan repayment of $227.1 million, which reduced our office exposure to 4.3% of total loan commitments as of June 30th. Quarter-over-quarter, net assets increased $190.4 million, or 5%, to $4.3 billion. Year-over-year, our net assets have grown 15%, or $551.4 million. At quarter end, our loan portfolio was 100% performing. During the quarter, we did not have any credit migration in our loan portfolio. Our weighted average risk rating for the loan portfolio is unchanged at 3.0. Our CECL reserve was flat quarter-over-quarter at 179 basis points. In total, our CECL reserve increased $3.5 million to $80.7 million, primarily due to net asset growth quarter-over-quarter.

As of June 30th, 2026, our loan portfolio was 76.4% multifamily and industrial collateralized assets. Office now only makes up 4.3% of our loan portfolio at quarter end, down from 52.9% in June of 2021. From a capital markets perspective, this was an active and transformational quarter. During the quarter, we closed, one, a $400 million Term Loan B due in 2033, priced at 99.75%, carrying a 2.75% credit spread. Two, a $100 million corporate revolver due in 2031 with a 2.00% credit spread. Three, an upsize of two existing secured financing arrangements by a total of $600 million. And four, a new $500 million secured financing arrangement.

As part of these capital markets transactions, we were able to amend and align our financial covenants across our capital structure to industry leading terms, including maximum total debt to total assets ratio of 83.33%, and an interest coverage ratio of not less than 1.3 times. We accomplished this capital structure transformation while remaining leverage and cost of funds neutral. We ended the quarter with near-term liquidity of $488.2 million, consisting of $65.6 million of cash on hand, including amounts held to satisfy liquidity covenants, undrawn capacity under secured financing arrangements of $317.4 million, $100 million of undrawn capacity on the corporate revolver, and CRE CLO reinvestment proceeds of $5.2 million. Additionally, we held unencumbered loan investments with an unpaid principal balance of $186 million that are eligible to be pledged under our existing financing arrangements.

The company’s liability structure is now 85.2% non-marked market across 11 financing sources and carries a weighted average cost of funds of 1.83%. Total leverage increased to 3.32 times from 3.1 times at March 31st, 2026, as a result of our investment activity during the quarter. At quarter end, we had $1.8 billion of financing capacity available to support loan investment activity and were in compliance with all of our financial covenants. With that, we welcome your questions. Operator?

Conference Call Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. One moment while we pull for questions. Our first question today will come from Gabe Pogor with Raymond James.

Gabe Pogor, Analyst, Raymond James: Hey, good morning, guys. Thanks for taking the question. Can you talk about loan origination repayment timing in the quarter? It looks like the large New York office loan was repaid early in the quarter, and you had a couple loans closed very late. Just help us kind of reconcile timing as it pertains to 1Q run rate to 2Q run rate, and how you think about that in the back half of the year. Thanks.

Doug Bouquard, Chief Executive Officer, TPG Real Estate Finance Trust: Yeah, sure. I think, as always, Gabe, you’re sort of spot on. From a timing perspective, it was a pretty chunky group of repayments that all happened within the first three weeks of the month. The largest of which was that New York City office deal that paid off. As we sort of saw that repayment coming, we began to sign deals up, but really about 70% of our new originations closed in the last three days of the quarter. That really is the kind of short version for what drove that drop in sort of DE quarter-over-quarter is just largely due to timing. Which, as we’ve said in the past, is just going to be the nature of the beast as we scale and grow our balance sheet.

We’re going to be making investments and risk decisions based on high-quality credits and aren’t going to push the envelope. For us, this is sort of a unique moment where we had, again, a sort of chunky flow of repayments the first few weeks of the quarter, and then the loans that closed all closed, or largely all closed at the end of the quarter. The only thing I’ll add to that is with investment activity and kind of as we look through to the rest of the year, it’s very clear to us, as we’ve mentioned in prior calls, that a lot of the activity in our market remains refinancings. As those that have lived and breathed the lending business know, when it’s a refinancing, sometimes the pressure for the borrower to close can be eased.

What we’ve seen is just longer times from when we execute term sheets to closing, which can sometimes expose us to maybe a small amount of difference relative to our expected run rate. I think when you kind of get to maybe your final question around the next few quarters, I mean, look, I think looking at our sort of aggregate net asset growth combined with our aggregate debt-to-equity ratio is sort of a better sign for where we’re headed in terms of our expected DE. Again, we’re going to be growing prudently and carefully, and there can be times where there are these sort of gaps between, again, when we receive repayments and when we make new investments.

Gabe Pogor, Analyst, Raymond James: Thanks, Doug. That’s helpful. A follow-up to what you kind of just said is total leverage is 3.3x. Considering the macro, I know you guys have talked about 3.5x-3.75x. Is that still the zone for the kind of the here and now with rate vol and what you just talked about with the refinancing environment, et cetera? Are we still on target for that target leverage ratio?

Doug Bouquard, Chief Executive Officer, TPG Real Estate Finance Trust: I’d say the short answer is yes. Where we’ve been really consistent, I would say that there’s really no change at all to kind of how we’re thinking about our strategy. I would say that, first and foremost, our sort of investment paradigm is centered on making great credit investments. That will continue to kind of drive both the sort of growth in our balance sheet and also the timing of our DE growth over time.

Gabe Pogor, Analyst, Raymond James: Thanks, guys, appreciate it.

Doug Bouquard, Chief Executive Officer, TPG Real Estate Finance Trust: Thanks, Gabe.

Conference Call Operator: Next, we’ll hear from Hong Zheng with JPMorgan Chase & Co.

Hong Zheng, Analyst, JPMorgan Chase & Co.: Hey, this is Hong on for Rick Shane. Could you provide an update on your REO portfolio? I think last quarter you talked about potentially looking forward to selling a couple of assets by the end of the year. I’m just wondering if that’s still the expectation.

Ryan Roberto, Head of Portfolio Management and Capital Markets, TPG Real Estate Finance Trust: Thanks. This is Ryan. As we communicated last quarter, you are correct. We continue to make good progress on the REO front. We still continue to expect to monetize and recycle a portion of that portfolio this year. In the interim, operating fundamentals continue to improve. We hope to share an update in the coming months on that.

Hong Zheng, Analyst, JPMorgan Chase & Co.: Got it. If I could sneak one other question in. Your office loan exposure shrunk dramatically with the repayments. Looking forward, do you expect to just reduce your office exposure further, potentially to zero, or are you okay with that level going forward?

Doug Bouquard, Chief Executive Officer, TPG Real Estate Finance Trust: That’s a great question. I mean, look, I think that really the substantial reduction in office has been primarily, or I’d say exclusively, really kind of driven by what I’ll call kind of legacy office deals that we had originated many years ago. When we think about new investments, although we do not have any office deals currently signed up, there are office deals in our pipeline more broadly that we are evaluating. I wouldn’t say that we are a no to office. I’d say that simply put, we’re just being very selective. Frankly, wouldn’t surprise me if we did an office deal or two between now and year-end, again, nothing signed up and just being very selective in that sector. Got it. Thanks.

Ryan Roberto, Head of Portfolio Management and Capital Markets, TPG Real Estate Finance Trust: Thank you.

Conference Call Operator: Next we’ll move to Thomas Catherwood with BTIG.

Thomas Catherwood, Analyst, BTIG: Thanks. Good morning, everybody. Maybe building on Gabe’s first question, how did the balance sheet optimization, all the work you did there, impact 2Q results? What else needs to happen to get the balance sheet to where you kind of are in a perfectly optimized state?

Ryan Roberto, Head of Portfolio Management and Capital Markets, TPG Real Estate Finance Trust: Yeah, thanks. This is Ryan. I’ll answer the first part of this question. Maybe Doug or Frank will have a add-on. This quarter, as you kind of noted, we opportunistically kind of accessed the corporate loan market at what we believe are historically attractive terms. I think as to why now? Why did we do it this quarter? It was a unique period of time where we could immediately deploy the $400 million that we raised without really creating any earnings drag or increasing our cost of capital. What we were able to do is on a leverage-neutral basis and really a cost-of-funds basis, deploy $400 million to retire a legacy liability structure that was just in amortization mode and getting more expensive via each repayment. If you think long term, there’ll be a lot of accretion to the balance sheet over time.

That’s kind of the rationale. Again, there wasn’t much of an impact from a P&L standpoint.

Thomas Catherwood, Analyst, BTIG: Got it. That accretion to-

Ryan Roberto, Head of Portfolio Management and Capital Markets, TPG Real Estate Finance Trust: Yeah, look.

Thomas Catherwood, Analyst, BTIG: Sorry, go ahead, Doug.

Ryan Roberto, Head of Portfolio Management and Capital Markets, TPG Real Estate Finance Trust: Oh, sorry. Go ahead. No, please go ahead.

Thomas Catherwood, Analyst, BTIG: No, I was just going to ask if that accretion to the balance sheet was from the structure the way it is today, or was that retiring that older CLO and then kind of getting a new CLO out the door just to make the cost of capital more efficient? What drives that accretion?

Ryan Roberto, Head of Portfolio Management and Capital Markets, TPG Real Estate Finance Trust: Well, I think just having a piece of our liability structure that is long-dated, low cost, non-mark-to-market. We know that over the next seven years, spreads are going to move in probably both directions. Just having a very stable part of our liability structure that allow us to be offensively oriented, I think it’s a good thing to have long term. We think just, again, as we try to position the company for earnings growth and kind of an all-weather balance sheet, we think it’s just the right thing to do. That’s at least how we thought about it.

Doug Bouquard, Chief Executive Officer, TPG Real Estate Finance Trust: Yeah. Look, I was going to add one other thing is, huge credit to Ryan, who leads our capital markets team, and frankly, our whole franchise on just what we were able to do on the liability side of our balance sheet. I think on page 12 of our supplemental, there’s a sort of updated, pretty thoughtful summary. When you look at sort of all corners of it in terms of the really high percentage of non-mark-to-market, the long duration of the liability set, and we really have built, I’d say, a sort of fortress liability structure. I think a lot of that is a credit to, A, the sort of de-risked balance sheet that we have relative to competitors. Also I think it was great to get the acknowledgement from the corporate loan market that in fact we have that clear strategy.

We have a very low-risk balance sheet. Again, I think we’ve been kind of rewarded by what I’ll call the sort of debt side of our balance sheet very resoundingly. Big congrats to Ryan and the team.

Thomas Catherwood, Analyst, BTIG: Got it. Appreciate that color. Last one for me, maybe Doug, a bit of a broader question on rates and the impact on CRE. You mentioned that almost 70% of your portfolio is newer vintage post-2023 loans. As the 10-year stays 4% 6%, and above, how does that increase the potential for some of those legacy loans to just not be able to refinance? There’s no equity left, and we end up getting more watch list migration. On the flip side, are you seeing kind of new origination opportunities where buyers would normally be going to agency financing and they’re choosing bridge loans just because the rates are more attractive than what they would get in a longer-term fixed rate? How is it impacting both sides of the equation right now?

Doug Bouquard, Chief Executive Officer, TPG Real Estate Finance Trust: Sure. Yeah. I’ll say first, again, I guess we’ll find out later today exactly the sort of path of the Fed, it’ll be interesting. I think first and foremost, I think the current rate complex is definitely driving two very clear trends in our market. I think one is both marginally elevated rates, but more particularly actually rate volatility tends to reduce transaction activity. I think that that reduced transaction activity, I think, has led to two things. One is I’d say we are on the margin seeing slower repayments. Two, I think what you’re seeing is just frankly a new origination market where we’re still seeing primarily refinancing. Those are kind of the two kind of like first order effects.

When I think about our balance sheet versus the market, probably where we’re different is if we had a portfolio of, let’s just say 100% loans that were originated, let’s say pre-Fed hike, I think a move higher in rates could really kind of exacerbate the sort of breaking of those capital structures and potentially some further credit stress. Whereas our balance sheet is generally different from the rest of the market in that close to about 70% of it is originated post-Fed hike. In some ways we view a higher rate complex as on the margin a positive for us because that ultimately, I think that’s on page 14 of the supplemental, you can look at sort of moves in the index rate and how that affects our earnings. Simply put, as SOFR goes higher, that’s going to be a net positive for our platform.

Again, somewhat unique in that I think because we have newer vintage collateral, we’ve done $1.7 billion of new loans over the past year. We’re going to have, I think, probably a more positive earnings outcome if rates do either stay or frankly rise from here.

Thomas Catherwood, Analyst, BTIG: Got it. That’s it for me. Thanks everyone.

Doug Bouquard, Chief Executive Officer, TPG Real Estate Finance Trust: Appreciate it. Thanks, Tom.

Conference Call Operator: Next we’ll hear from Chris Muller with Citizens Capital Markets.

Chris Muller, Analyst, Citizens Capital Markets: Hey, guys. Thanks for taking the question and congrats on all the progress on the balance sheet. I guess following up on a prior question on the new financings. I hear you guys on the cost of funds and leverage neutral, were there fees or any drag on earnings that hit in the quarter? I’m just trying to think through the earnings run rate and if there was an impact from that in the quarter or not.

Brandon Fox, Interim Chief Financial Officer, TPG Real Estate Finance Trust: Yeah, no, that’s a very good question. Obviously there were fees associated with the transaction. The transaction closed mid-quarter, middle of May. You will have some amortization of the fees in the quarter for the quarter. Within our debt footnote, you can see the components of it. There were about $8 million or so of fees that got partially amortized in. It’s over the life of the instrument itself, so between five and seven years, given the Term Loan and the corporate revolver maturity dates.

Chris Muller, Analyst, Citizens Capital Markets: Got it. That’s helpful. I guess changing gears a little bit to repayments. Repayments, excluding a large office loan, were pretty low. I guess, what are you guys expecting in terms of repayments in the back half of the year? Is the slower pace of repayments just due to a slower lending pace you guys did back in 2023 and 2024?

Doug Bouquard, Chief Executive Officer, TPG Real Estate Finance Trust: I think there’s a few things. I think one does dovetail with what I mentioned earlier as it relates to Tom’s question. From a balance sheet perspective, because we have, again, largely post-fed hike collateral, what we’re seeing is that those loans are more recently originated and in many cases have call protection. We’re just going to see just from an organic perspective, I think a lower level of repayments versus competitors that probably have more pre-fed hike exposure. That’s one. Two, look, I think that it can be idiosyncratic, as I’ve shared. I mean, even that New York City office deal that I mentioned paid off early in the quarter. The sort of timing on that was definitely moving around.

We sort of knew it was going to happen, but at the same time, sometimes as you know, kind of getting a buyer and a seller and a new lender all in the same room to close on the same day can be challenging. That’s kind of what we’re seeing. I think it’s that dynamic, I think combined with. Look, I think that conviction level, I think across our borrower base is not incredibly high right now. We’re obviously both a debt and equity platform, so we’re seeing both sides of the coin. I think that if you’re on the real estate equity side of the coin right now, it’s a tricky market to really want to deploy capital in sort of in the face of a lot of the different kind of trends that are happening.

I think those are the two factors that I’d probably highlight as it relates to repayments. I think, again, the last thing I’ll add perhaps is when we look at our repayments going forward, again, I think that we have also primarily multi-family and industrial collateral, and the business plans there are relatively straightforward and sort of allow for us to have perhaps a better window into what that repayment profile is going to look like over the next coming quarters.

Chris Muller, Analyst, Citizens Capital Markets: Got it. That’s all very helpful. Appreciate you guys taking the questions today.

Doug Bouquard, Chief Executive Officer, TPG Real Estate Finance Trust: Yep, no problem. Thanks a lot.

Conference Call Operator: There are no further questions at this time. I would like to turn the floor back to management for closing remarks.

Doug Bouquard, Chief Executive Officer, TPG Real Estate Finance Trust: This is Doug Bouquard. Again, just wanted to thank everyone for taking the time this morning on the call. We look forward to updating you on further progress. Thank you very much.

Conference Call Operator: Thank you. This does conclude today’s teleconference. We thank you for your participation. You may disconnect your lines at this time.