TRTX Q1 2026 Earnings Call - Office Exposure Cuts to Under 5% as Balance Sheet Vintages Hit Record Highs

Operator: Greetings. Welcome to TPG RE Finance Trust first quarter 2026 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. Please note this conference is being recorded. I will now turn the conference over to Dan Cassell. Thank you. You may begin.

Dan Cassell, Investor Relations, TPG RE Finance Trust: Good morning, welcome to the TPG RE Finance Trust earnings call for the first quarter of 2026. Today’s speakers are Doug Bouquard, Chief Executive Officer, Brandon Fox, Interim Chief Financial Officer, and Ryan Roberto, 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 is 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. For a comprehensive discussion of risks that could affect results, please see the Risk Factors section of the company’s latest Form 10-K. The company does not undertake any duty to update our forward-looking statements or projections unless required by law. We will refer during today’s call to certain non-GAAP financial measures, which are reconciled to GAAP amounts in our earnings release and our earnings supplemental, both 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 RE Finance Trust: Good morning, and thank you for joining the call. The broader economic backdrop during the first quarter of the year continued to provide an encouraging environment for investment activity within the real estate sector. While concern over private credit and broader geopolitical tensions have permeated the market, real estate credit has been relatively stable. As we survey market opportunities, we are closely monitoring capital flows in both real estate and credit, which will allow us to identify real-time trends that will drive the investment landscape. These insights are further augmented by the depth and breadth of TPG’s global alternative investment platform. While real estate values have reset and our lending pipeline is robust, the recent steepening of the yield curve has put modest pressure on new acquisition activity.

That being said, many of the key themes we’ve previously described continue to remain in place, including heavy refinance volume driven by broken capital structures and reset values, which have been further exacerbated by sustained elevated interest rates and supported by a consistent supply of back leverage from bank balance sheets. Building on the momentum of 2025, a year where TRTX closed $1.9 billion of new investments and achieved 25% year-over-year growth in earning assets, we are pleased to report a strong start to 2026. For the first quarter, our performance reflects our disciplined approach to risk management as we maintain stable risk ratings and a 100% performing loan portfolio at quarter end. We saw no negative credit migration in the quarter, with risk ratings unchanged at 3.0 and CECL reserves essentially flat quarter-over-quarter.

In April, TRTX received the full payment of 575 Fifth Avenue, which was our largest office exposure, and a material partial repayment on another office loan. As a result, our office exposure is now less than 5% of our current balance sheet. As a natural consequence, the vintage of our balance sheet continues to compare favorably to our competitive set, with 67% of our balance sheet comprised of 2023 and newer loan originations. This is a direct result of the proactive risk management we’ve been consistent with over the past few years, combined with our strategic and measured approach to making new investments.

As I look at our origination and repayment pace for this year, I expect we will finish 2026 with a substantial majority of the balance sheet comprised of 2023 and newer loan origination dates, which will provide shareholders with a new vintage portfolio and attractive credit profile. Of note, we’ve been able to achieve this balance sheet transformation while generating steady earnings and remaining underlevered relative to our peers. From an investment perspective, thus far this year we’ve closed $324 million of loans and have another $535 million of executed term sheets, the majority of which are multifamily and industrial collateral, sectors we continue to target given their strong downside protection and solid long-term fundamentals.

Since the start of Q4 2025, we originated 12 loans with total commitments of $1.25 billion, with more than 90% of these from repeat borrowers underscoring the deep relationships we’ve cultivated within the real estate ecosystem, further amplified by the breadth of TPG’s integrated real estate debt and equity investment platform. Within the $535 million of executed term sheets that we have this quarter, the majority of those new investments are collateralized by multifamily and industrial exposure and are sponsored by high-quality borrowers across the U.S. From a liability perspective, we continue to expand our lender relationships and optimize the durability of our capital structure, building on the two series CLOs issued in 2025, which provide ample reinvestment capacity at an attractive cost of funds.

We ended Q1 2026 with $173 million of liquidity, 78% non-mark-to-market financing, and a debt-to-equity ratio of 3.1 times. This positioning affords TRTX flexibility to pursue accretive investment opportunities while maintaining balance sheet discipline. Our company is in an advantageous position from a capital allocation standpoint. Given our strong liquidity position, we are able to both increase net earning assets while also repurchasing shares that we believe are undervalued. Since the year began through April 27th, we repurchased over 1 million shares of common stock for a total consideration of $8.7 million at an average price of $8.07 per share. While we are proud of the foundation laid in 2025 and the strong start in Q1 2026, we remain focused on building on the success throughout the year.

Our objective remains to continue to grow net assets and the earnings power of our company. With the insights and reach of TPG’s real estate investment platform, a stable balance sheet, and an attractive opportunity set, we are confident in our ability to deliver continued strong performance. Despite the strength of our balance sheet and our growing earnings power, our stock trades at a valuation that we believe significantly undervalues our position relative to competitors and offers compelling value on an outright basis as well. Simply put, our balance sheet looks remarkably different from our peers with a newer vintage loan portfolio that provides steady earnings and credit stability.

Relative to our peers, we continue to distinguish ourselves, particularly when you look at a number of important metrics, including loan vintage as a percentage of the portfolio, multifamily and industrial exposure, office exposure, unfunded loan commitments, REO as a percentage of assets, and total debt-to-equity ratio. The offensive posture we’ve embraced, rooted in the strategic approach we laid out years ago, positions us well to sustain our momentum. Our performance in 2025 set a high bar, and we enter the remainder of 2026 with the capital, the team, and the drive to continue creating value for our shareholders. 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 RE Finance Trust: Thank you, Doug, and good morning. For the first quarter of 2026, TRTX reported GAAP net income of $15.2 million. Distributable Earnings for the quarter was $19.5 million, or $0.25 per common share, a 1.04 times coverage ratio of our first quarter common stock dividend of $0.24 per share. During the quarter, we repurchased 557,000 shares of common stock at a weighted average price of $8.06 per share for a total consideration of $4.5 million, which increased book value by $0.02 per share. As of March 31st, book value per share was $11.06.

During the first quarter, we originated 2 loans with total commitments of $148.4 million at a weighted average credit spread of 2.73% and received loan repayments of $123.6 million, including 2 full loan repayments of $92.7 million, where the underlying collateral was 40% multifamily, 35% hotel, and 25% industrial. Subsequent to quarter end, we originated a hotel loan with a total loan commitment and unpaid principal balance of $175.4 million at a weighted average credit spread of 3.0% and received 2 office loan repayments totaling $262.3 million, reducing our office loan exposure on a pro forma basis to less than 5%.

Quarter-over-quarter, net assets remained flat at $4.1 billion. Year-over-year, our net assets have grown 26% or $868.0 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 decreased slightly quarter-over-quarter to 179 basis points compared to 180 basis points at December 31st, 2025.

We ended the quarter with near-term liquidity of $172.8 million, consisting of $77 million of cash on hand available for investment, net of $15 million held to satisfy liquidity covenants, undrawn capacity under secured financing arrangements of $39.7 million, and CRE CLO reinvestment proceeds of $41.2 million. Additionally, we held unencumbered loan investments with unpaid principal balance of $106.8 million that are eligible to be pledged under our existing financing arrangements. The company’s liability structure is 78% non-mark-to-market across 10 financing sources and carries a weighted average cost of funds of 1.80%. Total leverage increased slightly quarter-over-quarter to 3.1x from 3.02x.

At quarter end, we held $1.5 billion of financing capacity available to support loan investment activity. We’re in compliance with all of our financial covenants. With that, we welcome your questions. Operator?

Operator: Thank you. We will now be conducting a question and answer session. One moment while we pull for questions. Our first question is from John Nicodemus with BTIG. Please proceed.

John Nicodemus, Analyst, BTIG: Hello, good morning, everyone. Thanks for taking the question. Doug and Brandon, you both provided some great color about sort of what you’re seeing for originations looking ahead. Doug, I know you mentioned the $535 million of executed term sheets. With the portfolio kind of flat quarter-over-quarter, but obviously up year-over-year, would love to hear just, you know, some more thoughts on how we could see portfolio growth trending throughout 2026, particularly with those term sheets in mind, but also the large repayment that’s already come in in the second quarter. Thanks.

Doug Bouquard, Chief Executive Officer, TPG RE Finance Trust: You know, look, I think that, you know, from a quarter-over-quarter perspective, obviously we had a, you know, pretty substantial Q4, you know, Q1, I think probably a touch of seasonality mixed in there, resulted in perhaps a lighter number relative to Q4. I really think the sort of big story is the trend, right? I mean, the trend is growth. You know, the trend remains that we have, you know, even having $535 million of term sheets executed at this point, that also doesn’t reflect the pipeline that we have beyond that.

You know, when we think about earnings growth and our ability to, you know, to really grow the company, our, you know, the stability of our balance sheet, the durability of our liability structure puts us in a great place. When you combine that with the sourcing and resources of TPG’s broader platform, you know, we feel, you know, we feel really excited about our ability to kind of continue on our path.

John Nicodemus, Analyst, BTIG: Great. Really appreciate that, Doug. Just one more from me. I believe on the last call you mentioned that we should see some further progress on the REO portfolio this year. I know it’s nothing huge, 5 assets, but was just curious if there are any assets, like 1 or 2 in particular of those 5, that we could expect to see come off sooner rather than later in 2026. Thanks.

Ryan Roberto, Head of Portfolio Management and Capital Markets, TPG RE Finance Trust: Hi, this is Ryan, and I’ll take that one. Thanks for the question. You know, as we demonstrated last year, we sold two office assets, and I think our plan this year kind of remains the same as Doug, you know, iterated last quarter, which is our plan is to sell some assets this year as well. The majority of our REO is focused in multifamily, which, you know, there is some seasonality to leasing and some other things that we’re kind of, you know, nearing a corner on. We’ll look to kind of update everyone with some progress there. Again, remains the plan to sell some REO this year.

John Nicodemus, Analyst, BTIG: Great. Thank you for the time. That’s all for me.

Operator: As a reminder to star one on your telephone keypad if you would like to ask a question. Our next question comes from Chris Muller with Citizens Capital Markets. Please proceed.

Chris Muller, Analyst, Citizens Capital Markets: Hey, guys. Thanks for taking the question. Congrats on a really solid quarter here. Looking at the subsequent origination at $175 million, that’s I guess above what your portfolio average is at about $80 million. You guys do have other loans in that size range. I guess the question is, are you guys starting to push into that larger loan space, or was this more of a one-off deal?

Doug Bouquard, Chief Executive Officer, TPG RE Finance Trust: Yeah. Look, I think from a, from a loan size perspective, you know, we’ve kind of generally averaged somewhere in the $85 million-$90 million range historically. I think that really when I think about going forward, it’ll just be a mix. You know, we’re still looking at loans that are $30 million, $40 million, $50 million, $60 million. If we see a really compelling, you know, high-quality asset or portfolio that, you know, is between $100 million-$200 million, we’re also happy to pursue that.

I’d say in short it basically has been a mix in the past and will continue to frankly, you know, remain a mix of, again, that sort of, $30 million-$60 million range combined with, you know, some assets that again just sort of warrant larger exposure based on, you know, borrower quality, asset quality, and sort of how it fits into our portfolio.

Chris Muller, Analyst, Citizens Capital Markets: Got it. It looks like multifamily and industrial have been the bulk of the recent activity. I guess aside from that 2Q origination, how is competition for these assets these days, and are there other asset types that you guys find attractive right now?

Doug Bouquard, Chief Executive Officer, TPG RE Finance Trust: Sure, yeah. I think first on the, on the competitive front, I think multifamily and industrial, you know, does have some competition. That being said, I think we have a, you know, pretty tremendous sourcing edge here at TPG. Also, like where we’ve probably been able to find some incremental value recently has been in the industrial space. I think that is a marginally less trafficked part of the market that I think people have a little bit less understanding of. We benefit from, you know, a fully integrated debt and equity platform that’s both an owner of industrial and also a lender on industrial. We feel like we have particular edge there.

I would say that, you know, multifamily I’d say is sort of been pretty steady in terms of the competitive dynamic there. I think industrial is a little bit spottier, and that’s where we found probably on the margin a little bit more value. Outside of multifamily and industrial, I think a lot of what we’ve done in the past, you know, we will continue to do so, which is, you know, right now with the funding of this recent hotel loan, that gets our pro forma hotel exposure to about 9%. You know, we’ve generally kind of tended to keep that, you know, sort of below 10%-15% as a target. We will look at other sectors.

We’re very selective, but I think at the core of, you know, where we’re focusing our energies is, you know, finding assets that have substantial downside protection in particularly two asset classes that we do feel like have strong long-term fundamentals.

Chris Muller, Analyst, Citizens Capital Markets: Got it. If I could just squeeze a quick housekeeping one in, probably for Brandon. Do you have the earnings contribution from the REO assets handy?

Brandon Fox, Interim Chief Financial Officer, TPG RE Finance Trust: Thanks, Chris, for the question. We do have the incremental Distributable Earnings contribution for the REO assets. On a quarterly basis, it is positive. I would say that you can probably expect, depending on seasonality to Ryan’s point, between about $0.02 and $0.03 per quarter as a good run rate.

Chris Muller, Analyst, Citizens Capital Markets: Got it. Very helpful. Congrats on a solid quarter again.

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

Doug Bouquard, Chief Executive Officer, TPG RE Finance Trust: All right. Thanks a lot. Really appreciate it.

Operator: As a reminder to star 1 on your telephone keypad, if you would like to ask a question. We will pause for a brief moment to pull for any final questions.

Doug Bouquard, Chief Executive Officer, TPG RE Finance Trust: Yeah. Just wanted to thank everyone for joining the call this morning. We look forward to updating you on our further progress. Thank you very much.

Operator: Thank you. This will conclude today’s conference. You may disconnect at this time. Thank you for your participation.