TPG RE Finance Trust, Inc. [TRTX] Filings

10-Q 1 trtx-20220331.htm 10-Q 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the quarterly period ended March 31, 2022


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to t

Commission file number 001-38156

TPG RE Finance Trust, Inc.

(Exact name of registrant as specified in its charter)

Maryland

36-4796967

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

888 Seventh Avenue, 35th Floor

New York, New York 10106

(Address of principal executive offices) (Zip Code)

(212) 601-4700

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001 per share	TRTX	New York Stock Exchange

6.25% Series C Cumulative Redeemable Preferred Stock, par value $0.001 per share	TRTX PRC	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large Accelerated Filer	☒	Accelerated Filer	☐
Non-accelerated Filer	☐	Smaller Reporting Company	☐
Emerging Growth Company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of April 29, 2022, there were 77,185,845 shares of the registrant’s common stock, $0.001 par value per share, outstanding.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which reflect our current views with respect to, among other things, our operations and financial performance. You can identify these forward-looking statements by the use of words such as “outlook,” “believe,” “expect,” “potential,” “continue,” “may,” “should,” “seek,” “approximately,” “predict,” “intend,” “will,” “plan,” “estimate,” “anticipate,” the negative version of these words, other comparable words or other statements that do not relate strictly to historical or factual matters. By their nature, forward-looking statements speak only as of the date they are made, are not statements of historical fact or guarantees of future performance and are subject to risks, uncertainties, assumptions or changes in circumstances that are difficult to predict or quantify. Our expectations, beliefs and projections are expressed in good faith, and we believe there is a reasonable basis for them. However, there can be no assurance that management’s expectations, beliefs and projections will occur or be achieved, and actual results may vary materially from what is expressed in or indicated by the forward-looking statements.

There are a number of risks, uncertainties and other important factors that could cause our actual results to differ materially from the forward-looking statements contained in this Form 10-Q. Such risks, uncertainties and other important factors include, among others, the risks, uncertainties and factors set forth under the heading “Risk Factors” in our Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on February 23, 2022, as such risk factors may be updated from time to time in our periodic filings with the SEC, which are accessible on the SEC’s website at www.sec.gov. Such risks, uncertainties and other factors include, but are not limited to, the following:

•

the general political, economic, regulatory, and competitive conditions in the markets in which we invest;

•

the level and volatility of prevailing interest rates and credit spreads, including as a result of the planned discontinuance of LIBOR and the transition to alternative reference rates such as term or compounded Secured Overnight Financing Rate ("SOFR");

•

adverse changes in the real estate and real estate capital markets;

•

general volatility of the securities markets in which we participate;

•

changes in our business, investment strategies or target assets;

•

difficulty in obtaining financing or raising capital;

•

reductions in the yield on our investments and increases in the cost of our financing;

•

adverse legislative or regulatory developments, including with respect to tax laws;

•

acts of God such as hurricanes, floods, earthquakes, wildfires, mudslides, volcanic eruptions, and other natural disasters, acts of war and/or terrorism and other events that may cause unanticipated and uninsured performance declines and/or losses to us or the owners and operators of the real estate securing our investments;

•

the ultimate geographic spread, severity and duration of pandemics such as coronavirus (“COVID-19”), actions that may be taken by governmental authorities to contain or address the impact of such pandemics, and the potential negative impacts of such pandemics on the global economy and our financial condition and results of operations;

•

changes in the availability of attractive loan and other investment opportunities, whether they are due to competition, regulation or otherwise;

•

deterioration in the performance of properties securing our investments that may cause deterioration in the performance of our investments, adversely impact certain of our financing arrangements and our liquidity, and potentially expose us to principal losses on our investments;

•

defaults by borrowers in paying debt service or principal on outstanding indebtedness;

•

the adequacy of collateral securing our investments and declines in the fair value of our investments;

•

adverse developments in the availability of desirable investment opportunities;

•

difficulty in successfully managing our growth, including integrating new assets into our existing systems;

•

the cost of operating our platform, including, but not limited to, the cost of operating a real estate investment platform and the cost of operating as a publicly traded company;

•

the availability of qualified personnel and our relationship with our Manager;

•

the potential unavailability of the London Interbank Offered Rate (“LIBOR”) after June 30, 2023;

•

conflicts with TPG and its affiliates, including our Manager, the personnel of TPG providing services to us, including our officers, and certain funds managed by TPG;

•

our qualification as a real estate investment trust (“REIT”) for U.S. federal income tax purposes and our ability to maintain our exemption or exclusion from registration under the Investment Company Act of 1940, as amended (the “Investment Company Act”); and

•

authoritative U.S. generally accepted accounting principles (or “GAAP”) or policy changes from such standard-setting bodies such as the Financial Accounting Standards Board (“FASB”), the Securities and Exchange Commission (“SEC”), the Internal Revenue Service (“IRS”), the New York Stock Exchange (“NYSE”) and other authorities that we are subject to, as well as their counterparts in any foreign jurisdictions where we might do business.

There may be other risks, uncertainties or factors that may cause our actual results to differ materially from the forward-looking statements, including risks, uncertainties, and factors disclosed under the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Form 10-Q. You should evaluate all forward-looking statements made in this Form 10-Q in the context of these risks, uncertainties and other factors.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. We caution you that the risks, uncertainties and other factors referenced above may not contain all of the risks, uncertainties and other factors that are important to you. In addition, we cannot assure you that we will realize the results, benefits or developments that we expect or anticipate or, even if substantially realized, that they will result in the consequences or affect us or our business in the way expected. All forward-looking statements in this Form 10-Q apply only as of the date made and are expressly qualified in their entirety by the cautionary statements included in this Form 10-Q and in other filings we make with the SEC. We undertake no obligation to publicly update or revise any forward-looking statements to reflect subsequent events or circumstances, except as required by law.

In this quarterly report, except where the context requires otherwise:

•

“Company,” “we,” “us,” and “our” refer to TPG RE Finance Trust, Inc., a Maryland corporation and, where applicable, its subsidiaries.

•

“Manager” refers to our external manager, TPG RE Finance Trust Management, L.P., a Delaware limited partnership.

•

“TPG” refers to TPG, Inc., a Delaware corporation (previously TPG Global, LLC, a Delaware limited liability company), and its affiliates.

•

“TPG Fund” refers to any partnership or other pooled investment vehicle, separate account, fund-of-one or any similar arrangement or investment program sponsored, advised or managed (including on a subadvisory basis) by TPG, whether currently in existence or subsequently established (in each case, including any related alternative investment vehicle, parallel or feeder investment vehicle, co-investment vehicle and any entity formed in connection therewith, including any entity formed for investments by TPG and its affiliates in any such vehicle, whether invested as a limited partner or through general partner investments).

TABLE OF CONTENTS


Part I. Financial Information		1

Item 1.	Financial Statements	1

	Consolidated Balance Sheets as of March 31, 2022 (unaudited) and December 31, 2021	1

	Consolidated Statements of Income and Comprehensive Income (unaudited) for the Three Months ended March 31, 2022 and March 31, 2021	2

	Consolidated Statements of Changes in Equity (unaudited) for the Three Months ended March 31, 2022 and March 31, 2021	3

	Consolidated Statements of Cash Flows (unaudited) for the Three Months ended March 31, 2022 and March 31, 2021	4

	Notes to the Consolidated Financial Statements (unaudited)	5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	42

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	67

Item 4.	Controls and Procedures	70

Part II. Other Information		71

Item 1.	Legal Proceedings	71

Item 1A.	Risk Factors	71

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	71

Item 3.	Defaults Upon Senior Securities	71

Item 4.	Mine Safety Disclosures	71

Item 5.	Other Information	71

Item 6.	Exhibits	72

Signatures		74

Part I. Financial Information

Item 1. Financial Statements

TPG RE Finance Trust, Inc.

Consolidated Balance Sheets (Unaudited)

(dollars in thousands, except share data)


	March 31, 2022			December 31, 2021
Assets(1)
Cash and cash equivalents	$	351,572		$	260,635
Restricted cash		847			404
Accounts receivable		127			12
Collateralized loan obligation proceeds held at trustee		260			204
Accounts receivable from servicer/trustee		745			176
Accrued interest and fees receivable		29,559			26,620
Loans held for investment		5,115,788			4,909,202
Allowance for credit losses		(46,307	)		(41,999	)
Loans held for investment, net (includes $1,633,812 and $1,697,481, respectively, pledged as collateral under secured financing agreements)		5,069,481			4,867,203
Real estate owned		60,622			60,622
Other assets		1,843			2,144
Total assets	$	5,515,056		$	5,218,020
Liabilities and stockholders’ equity(1)
Liabilities
Accrued interest payable	$	3,269		$	2,723
Accrued expenses and other liabilities		13,659			11,563
Secured financing agreements (net of deferred financing costs of $5,097 and $4,005, respectively)		1,192,956			1,162,206
Collateralized loan obligations (net of deferred financing costs of $14,489 and $10,297, respectively)		2,810,626			2,545,691
Payable to affiliates		6,153			5,609
Deferred revenue		1,784			1,366
Dividends payable		18,701			24,156
Total liabilities		4,047,148			3,753,314
Commitments and contingencies - see Note 14
Temporary equity
Series B Preferred Stock ($0.001 par value per share; 13,000,000 and 13,000,000 shares authorized, respectively; 0 and 0 shares issued and outstanding, respectively)		—			—
Permanent equity
Series A preferred stock ($0.001 par value per share; 100,000,000 and 100,000,000 shares authorized; 125 and 125 shares issued and outstanding, respectively) ($125 aggregate liquidation preference)		—			—
Series C Preferred Stock ($0.001 par value per share; 8,050,000 shares authorized; 8,050,000 and 8,050,000 shares issued and outstanding, respectively) ($201,250 aggregate liquidation preference)		8			8
Common stock ($0.001 par value per share; 302,500,000 and 302,500,000 shares authorized, respectively; 77,185,845 and 77,183,892 shares issued and outstanding, respectively)		77			77
Additional paid-in-capital		1,713,152			1,711,886
Accumulated deficit		(245,329	)		(247,265	)
Total stockholders' equity	$	1,467,908		$	1,464,706
Total permanent equity	$	1,467,908		$	1,464,706
Total liabilities and stockholders' equity	$	5,515,056		$	5,218,020

(1)

The Company’s consolidated Total Assets and Total Liabilities as of March 31, 2022 include assets and liabilities of variable interest entities (“VIEs”) of $3.4 billion and $2.8 billion, respectively. The Company’s consolidated Total Assets and Total Liabilities as of December 31, 2021 include assets and liabilities of VIEs of $3.2 billion and $2.6 billion, respectively. These assets can be used only to satisfy obligations of the VIEs, and creditors of the VIEs have recourse only to these assets, and not to TPG RE Finance Trust, Inc. See Note 5 to the Consolidated Financial Statements for details.

See accompanying notes to the Consolidated Financial Statements

TPG RE Finance Trust, Inc.

Consolidated Statements of Income

and Comprehensive Income (Unaudited)

(dollars in thousands, except share and per share data)


	Three Months Ended March 31,
	2022			2021
Interest income and interest expense
Interest income	$	61,017		$	58,148
Interest expense		(22,501	)		(20,290	)
Net interest income		38,516			37,858
Other revenue
Other income, net		18			96
Total other revenue		18			96
Other expenses
Professional fees		1,146			1,198
General and administrative		1,169			1,030
Stock compensation expense		1,266			1,456
Servicing and asset management fees		494			328
Management fee		5,709			5,094
Total other expenses		9,784			9,106
Credit loss (expense) benefit, net		(4,884	)		4,038
Income before income taxes		23,866			32,886
Income tax expense, net		(85	)		(931	)
Net income	$	23,781		$	31,955
Preferred stock dividends and participating securities' share in earnings		(3,345	)		(6,270	)
Series B Preferred Stock accretion, including allocated Warrant fair value and transaction costs		—			(1,452	)
Net income attributable to common stockholders - see Note 11	$	20,436		$	24,233
Earnings per common share, basic	$	0.26		$	0.32
Earnings per common share, diluted	$	0.25		$	0.30
Weighted average number of common shares outstanding
Basic:		77,183,957			76,895,615
Diluted:		81,788,723			80,673,236
Other comprehensive income
Net income	$	23,781		$	31,955
Comprehensive net income	$	23,781		$	31,955

See accompanying notes to the Consolidated Financial Statements

TPG RE Finance Trust, Inc.

Consolidated Statements of

Changes in Equity (Unaudited)

(dollars in thousands, except share and per share data)


	Permanent equity																				Temporary equity
	Series A preferred stock				Series C Preferred Stock				Common Stock
	Shares		Par value		Shares		Par value		Shares		Par value		Additional paid-in-capital		Accumulated deficit			Total stockholders' equity			Series B Preferred Stock
January 1, 2022		125	$	—		8,050,000	$	8		77,183,892	$	77	$	1,711,886	$	(247,265	)	$	1,464,706		$	—
Issuance of common stock		—		—		—		—		1,953		—		—		—			—			—
Amortization of stock compensation expense		—		—		—		—		—		—		1,266		—			1,266			—
Net income		—		—		—		—		—		—		—		23,781			23,781			—
Dividends on preferred stock		—		—		—		—		—		—		—		(3,148	)		(3,148	)		—
Dividends on common stock (dividends declared per share of $0.24)		—		—		—		—		—		—		—		(18,697	)		(18,697	)		—
March 31, 2022		125	$	—		8,050,000	$	8		77,185,845	$	77	$	1,713,152	$	(245,329	)	$	1,467,908		$	—


	Permanent equity																					Temporary equity
	Series A preferred stock				Series C Preferred Stock				Common Stock
	Shares		Par value		Shares		Par value		Shares		Par value		Additional paid-in-capital			Accumulated deficit			Total stockholders' equity			Series B Preferred Stock
January 1, 2021		125	$	—		—	$	—		76,787,006	$	77	$	1,559,681		$	(292,858	)	$	1,266,900		$	199,551
Issuance of common stock		—		—		—		—		110,096		—		—			—			—			—
Amortization of stock compensation expense		—		—		—		—		—		—		1,456			—			1,456			—
Net income		—		—		—		—		—		—		—			31,955			31,955			—
Dividends on preferred stock		—		—		—		—		—		—		—			(6,124	)		(6,124	)		—
Series B Preferred Stock accretion, including allocated Warrant fair value and transaction costs		—		—		—		—		—		—		(1,452	)		—			(1,452	)		1,452
Dividends on common stock (dividends declared per share of $0.20)		—		—		—		—		—		—		—			(15,507	)		(15,507	)		—
March 31, 2021		125	$	—		—	$	—		76,897,102	$	77	$	1,559,685		$	(282,534	)	$	1,277,228		$	201,003

See accompanying notes to the Consolidated Financial Statements

TPG RE Finance Trust, Inc.

Consolidated Statements of Cash Flows (Unaudited)

(dollars in thousands)


	Three Months Ended March 31,
	2022	2021
Cash flows from operating activities:

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