TPG Real Estate Finance Trust Earnings 2021-03-31

Balance Sheet	Income Statement	Cash Flow

trtx-10q_20210331.htm

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, 2021

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

For the transition period from to

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, 35^th 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

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 30, 2021, there were 76,897,102 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, 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 this Form 10-Q and in our Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on February 24, 2021, 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 and competitive conditions in the markets in which we invest;

•

the level and volatility of prevailing interest rates and credit spreads;

•

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 the outbreak of novel 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 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 (as defined below);

•

the potential unavailability of the London Interbank Offered Rate (“LIBOR”) after December 31, 2021, or after June 30, 2023;

•

conflicts with TPG (as defined below) 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, the SEC, the Internal Revenue Service, the New York Stock Exchange 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.

Except where the context requires otherwise, the terms “Company,” “we,” “us,” and “our” refer to TPG RE Finance Trust, Inc., a Maryland corporation, and its subsidiaries; the term “Manager” refers to our external manager, TPG RE Finance Trust Management, L.P., a Delaware limited partnership; and the term “TPG” refers to TPG Global, LLC, a Delaware limited liability company, and its affiliates.

TABLE OF CONTENTS

Part I. Financial Information		1

Item 1.	Financial Statements	1

	Consolidated Balance Sheets as of March 31, 2021 (unaudited) and December 31, 2020	1

	Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) (unaudited) for the Three Months ended March 31, 2021 and March 31, 2020	2

	Consolidated Statements of Changes in Equity (unaudited) for the Three Months ended March 31, 2021 and March 31, 2020	3

	Consolidated Statements of Cash Flows (unaudited) for the Three Months ended March 31, 2021 and March 31, 2020	4

	Notes to the Consolidated Financial Statements (unaudited)	5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	40

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	64

Item 4.	Controls and Procedures	67

Part II. Other Information		68

Item 1.	Legal Proceedings	68

Item 1A.	Risk Factors	68

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	69

Item 3.	Defaults Upon Senior Securities	69

Item 4.	Mine Safety Disclosures	69

Item 5.	Other Information	69

Item 6.	Exhibits	70

Signatures		71

Part I. Financial Information

Item 1. Financial Statements

TPG RE Finance Trust, Inc.

Consolidated Balance Sheets (Unaudited)

(in thousands, except share and per share data)

	March 31, 2021			December 31, 2020
ASSETS⁽¹⁾
Cash and Cash Equivalents	$	301,607		$	319,669
Restricted Cash		813			—
Accounts Receivable		755			785
Collateralized Loan Obligation Proceeds Held at Trustee		310,070			174
Accounts Receivable from Servicer/Trustee		177			418
Accrued Interest and Fees Receivable		29,229			27,391
Loans Held for Investment		4,580,179			4,516,400
Allowance for Credit Losses		(56,641	)		(59,940	)
Loans Held for Investment, Net (includes $1,305,947 and $2,259,467, respectively, pledged as collateral under secured credit facilities)		4,523,538			4,456,460
Real Estate Owned		99,200			99,200
Other Assets		3,871			4,646
Total Assets		5,269,260		$	4,908,743
LIABILITIES AND EQUITY⁽¹⁾
Liabilities
Accrued Interest Payable	$	2,379		$	2,630
Accrued Expenses and Other Liabilities		10,440			14,450
Secured Credit Agreements (net of deferred financing costs of $5,869 and $8,831, respectively)		854,998			1,514,028
Collateralized Loan Obligations (net of deferred financing costs of $16,338 and $9,192, respectively)		2,851,709			1,825,568
Mortgage Loan Payable (net of deferred financing costs of $783 and $853)		49,217			49,147
Payable to Affiliates		5,094			5,570
Deferred Revenue		1,682			1,418
Dividends Payable		15,510			29,481
Total Liabilities		3,791,029			3,442,292
Commitments and Contingencies—See Note 15
Temporary Equity
Series B Cumulative Redeemable Preferred Stock ($0.001 par value per share; 13,000,000 and 13,000,000 shares authorized, respectively; 9,000,000 and 9,000,000 shares issued and outstanding, respectively)		201,003			199,551
Permanent Equity
Series A Preferred Stock ($0.001 par value per share; 100,000,000 shares authorized; 125 and 125 shares issued and outstanding, respectively)		—			—
Common Stock ($0.001 par value per share; 302,500,000 and 302,500,000 shares authorized, respectively; 76,897,102 and 76,787,006 shares issued and outstanding, respectively)		77			77
Additional Paid-in-Capital		1,559,685			1,559,681
Accumulated Deficit		(282,534	)		(292,858	)
Total Stockholders' Equity	$	1,277,228		$	1,266,900
Total Permanent Equity	$	1,277,228		$	1,266,900
Total Liabilities and Equity	$	5,269,260		$	4,908,743

(1)

The Company’s consolidated Total Assets and Total Liabilities at March 31, 2021 include assets and liabilities of variable interest entities (“VIEs”) of $3.5 billion and $2.9 billion, respectively. The Company’s consolidated Total Assets and Total Liabilities at December 31, 2020 include assets and liabilities of VIEs of $2.3 billion and $1.8 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 6 to the Consolidated Financial Statements for details.

See accompanying notes to the Consolidated Financial Statements

TPG RE Finance Trust, Inc.

Consolidated Statements of Income (Loss)

and Comprehensive Income (Loss) (Unaudited)

(in thousands, except share and per share data)

	Three Months Ended March 31,
	2021			2020
INTEREST INCOME
Interest Income	$	58,148		$	81,749
Interest Expense		(20,290	)		(38,457	)
Net Interest Income		37,858			43,292
OTHER REVENUE
Other Income, net		96			328
Total Other Revenue		96			328
OTHER EXPENSES
Professional Fees		1,198			1,819
General and Administrative		1,030			980
Stock Compensation Expense		1,456			1,401
Servicing and Asset Management Fees		328			276
Management Fee		5,094			5,000
Total Other Expenses		9,106			9,476
Securities Impairments		—			(203,493	)
Credit Loss Benefit (Expense)		4,038			(63,348	)
Income (Loss) Before Income Taxes		32,886			(232,697	)
Income Tax Expense, net		(931	)		(93	)
Net Income (Loss)	$	31,955		$	(232,790	)
Series A Preferred Stock Dividends		(4	)		(3	)
Series B Cumulative Redeemable Preferred Stock Dividends		(6,120	)		—
Net Income (Loss) Attributable to TPG RE Finance Trust, Inc.	$	25,831		$	(232,793	)
Earnings (Loss) per Common Share, Basic	$	0.32		$	(3.05	)
Earnings (Loss) per Common Share, Diluted	$	0.30		$	(3.05	)
Weighted Average Number of Common Shares Outstanding
Basic:		76,895,615			76,465,322
Diluted:		80,673,236			76,465,322
OTHER COMPREHENSIVE INCOME (LOSS)
Net Income (Loss)	$	31,955		$	(232,790	)
Unrealized Loss on Available-for-Sale Debt Securities		—			(974	)
Comprehensive Net Income (Loss)	$	31,955		$	(233,764	)

See accompanying notes to the Consolidated Financial Statements

TPG RE Finance Trust, Inc.

Consolidated Statements of

Changes in Equity (Unaudited)

(In thousands, except share and per share data)

	Permanent Equity																							Temporary Equity
	Series A Preferred Stock				Common Stock				Class A Common Stock
	Shares		Par Value		Shares		Par Value		Shares		Par Value		Additional Paid- in-Capital			Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)		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 Share-Based Compensation		—		—		—		—		—		—		1,456			—			—		1,456			—
Net Income		—		—		—		—		—		—		—			31,955			—		31,955			—
Dividends on Preferred Stock		—		—		—		—		—		—		—			(6,124	)		—		(6,124	)		—
Accretion of Discount on Series B Cumulative Redeemable Preferred Stock		—		—		—		—		—		—		(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

	Permanent Equity																							Temporary Equity
	Series A Preferred Stock				Common Stock				Class A Common Stock

Price	20.34	EPS	1
Shares	74	P/E	16
MCap	1,508	P/FCF	17
Net Debt	-100	EBIT	228
TEV	1,408	TEV/EBIT	6
TTM 2019-09-30, in MM, except price, ratios

10-Q	2021-03-31	Filed 2021-05-04
10-K	2020-12-31	Filed 2021-02-24
10-Q	2020-09-30	Filed 2020-11-04
10-Q	2020-06-30	Filed 2020-07-29
10-Q	2020-03-31	Filed 2020-05-11
10-K	2019-12-31	Filed 2020-02-19
10-Q	2019-09-30	Filed 2019-10-28
10-Q	2019-06-30	Filed 2019-07-29
10-Q	2019-03-31	Filed 2019-04-29
10-K	2018-12-31	Filed 2019-02-26
10-Q	2018-09-30	Filed 2018-11-05
10-Q	2018-06-30	Filed 2018-08-06
10-Q	2018-03-31	Filed 2018-05-07
10-K	2017-12-31	Filed 2018-02-26
10-Q	2017-09-30	Filed 2017-11-06
10-Q	2017-06-30	Filed 2017-08-24

8-K	2020-11-04
8-K	2020-09-15
8-K	2020-07-29
8-K	2020-07-13
8-K	2020-06-30
8-K	2020-06-17
8-K	2020-06-03
8-K	2020-05-29
8-K	2020-05-11
8-K	2020-03-18
8-K	2020-02-18
8-K	2019-10-28
8-K	2019-07-29
8-K	2019-05-21
8-K	2019-04-29
8-K	2019-03-14
8-K	2019-03-07
8-K	2019-02-25
8-K	2018-11-29
8-K	2018-11-05
8-K	2018-08-07
8-K	2018-08-06
8-K	2018-06-15
8-K	2018-05-23
8-K	2018-05-07
8-K	2018-02-26
8-K	2018-02-14

EX-31.1	trtx-ex311_6.htm
EX-31.2	trtx-ex312_9.htm
EX-32.1	trtx-ex321_8.htm
EX-32.2	trtx-ex322_7.htm

TRTX 10Q Quarterly Report

TPG Real Estate Finance Trust Earnings 2021-03-31