Earnings call transcript: TPG RE Finance Q2 2025 beats EPS forecast, shares rise

TPG RE Finance Trust Inc. (TRTX) reported its second-quarter earnings for 2025, surpassing expectations with an earnings per share (EPS) of $0.24, compared to the forecasted $0.22. The revenue also exceeded predictions, coming in at $36 million against an anticipated $35.57 million. Following the earnings release, TRTX shares rose by 5.43% during regular trading hours, closing at $8.38, and continued to climb 2.03% in premarket trading, reaching $8.55. According to InvestingPro data, the stock currently trades below its Fair Value, with a price-to-book ratio of just 0.64, suggesting potential upside opportunity.

Key Takeaways

• TPG RE Finance Trust outperformed EPS estimates with a 9.09% surprise.
• Revenue exceeded forecasts by 1.21%, reaching $36 million.
• Shares surged 5.43% post-announcement, reflecting investor optimism.
• The company repurchased 1.7 million shares, enhancing shareholder value.
• Strong liquidity and a diversified loan portfolio position TRTX well for future growth.

Company Performance

TPG RE Finance Trust demonstrated robust performance in the second quarter of 2025, driven by strategic investments in the multifamily and industrial sectors. The company’s net income was $16.9 million, translating to $0.21 per common share. This performance aligns with its strategy to capitalize on attractive lending opportunities amidst a backdrop of tightening corporate credit markets and banks’ reluctance to lend directly.

Financial Highlights

• Revenue: $36 million, up from the forecasted $35.57 million.
• Earnings per share: $0.24, exceeding the $0.22 forecast.
• Book value per common share: $11.20, a slight increase from the previous quarter.
• Dividend yield: 11.5%, maintaining a strong return for investors.
• Share repurchase: 1.7 million shares for $12.5 million.

Earnings vs. Forecast

TPG RE Finance Trust delivered an EPS of $0.24, surpassing the forecasted $0.22 by 9.09%. The revenue surprise was 1.21%, with actual revenue standing at $36 million compared to the expected $35.57 million. This marks a positive deviation from previous quarters, where the company often met but did not exceed expectations.

Market Reaction

Following the earnings announcement, TRTX shares experienced a notable increase, rising 5.43% during regular trading hours. The stock continued its upward trend in premarket trading, gaining an additional 2.03%. This positive movement reflects investor confidence in the company’s strategic direction and financial health, especially as it trades at a 25% discount to book value.

Outlook & Guidance

Looking ahead, TPG RE Finance Trust remains focused on expanding its investments in the multifamily and industrial sectors. The company expects to maintain an elevated pace of new investments and has a positive outlook on multifamily market fundamentals. Additionally, plans to sell more REO properties are underway, potentially bolstering future earnings. While InvestingPro data indicates analysts anticipate a sales decline in the current year, the company’s strong liquidity position and proven profitability over the last twelve months suggest resilience. For detailed analysis and comprehensive insights, investors can access the exclusive Pro Research Report, available to InvestingPro subscribers.

Executive Commentary

• CEO Doug Bucard stated, "We continue to see a very attractive lending opportunity as banks have continued to basically pull back."
• CFO Bob Foley highlighted the company’s proactive management strategy: "Historically we’ve been very aggressive about managing the performance of properties we take back and then moving them to market relatively quickly."
• Bucard also emphasized the strength of the multifamily sector: "The picture for multifamily remains very strong."

Risks and Challenges

• Potential volatility in global markets due to ongoing tariff negotiations.
• Tightening corporate credit markets could impact loan origination.
• A significant discount to book value might reflect underlying investor concerns.
• Rising interest rates could affect borrowing costs and investment returns.
• The company’s high dividend yield may not be sustainable if earnings fluctuate.

Q&A

During the earnings call, analysts inquired about the sustainability of high origination volumes and the company’s loan size strategy. Executives confirmed their positive expectations for REO property sales and addressed credit risk and reserve considerations, reinforcing confidence in TRTX’s financial stability and strategic direction.

Full transcript - TPG RE Finance Trust Inc (TRTX) Q2 2025:

Conference Operator: Good morning, ladies and gentlemen, and thank you for standing by. Welcome to TPG Real Estate Finance Trust Second Quarter twenty twenty five Earnings Conference Call. A question and answer session will follow the formal presentation. Please note this conference is being recorded. It is now my pleasure to turn the call over to management.

Thank you. You may begin.

Investor Relations, TRTX: Good morning, and welcome to the TPGRE Finance Trust earnings call for the 2025. Today’s speakers are Doug Bucard, Chief Executive Officer and Bob Foley, Chief Financial Officer. Doug and Bob 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 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 ks.

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. Before we discuss our results for

Doug Bucard, Chief Executive Officer, TRTX: the quarter, we wanted to share that our hearts are heavy in the wake of Monday’s senseless attack at 345 Park Avenue. We are grieving with our friends and neighbors at Blackstone and the NYPD, and our thoughts are with the teams at KPMG, the NFL and all those impacted by this tragedy. Many of us at TPG had the utmost privilege of working alongside of Wesley LaPatner at Blackstone across her career. You’ll be remembered for her exceptional talent, her kindness, and most importantly, as a loving wife and mother of two children. Our industry has lost a leader and we have lost a friend.

We are grateful for the swift response and dedication of local law enforcement, first responders and security personnel. At this profoundly difficult moment, we are mourning with those who have lost loved ones and colleagues, and we stand in solidarity with all those affected. Turning to our quarterly results. Global markets have continued to adjust to the effects of ongoing tariff negotiations. Over the past week, U.

S. Equity markets have rallied meaningfully as the S and P 500 reached yet another all time high yesterday. Equity markets remain very well bid and corporate credit markets have tightened to levels not seen since early March of this year. Meanwhile, in real estate credit markets, tariff volatility drove widening in loan spreads, while banks continued their reluctance to lean into direct lending. This market backdrop afforded TRTX an excellent window of opportunity during the quarter, as widening direct loan spreads outpaced the widening of back leverage spreads, thus generating attractive risk adjusted returns for new investments on behalf of our shareholders.

During the second quarter, TRTX delivered a standout performance, decisively executing the plan we previously outlined to drive earnings growth and maximize shareholder value. In previous earnings calls, we outlined the many levers available to DRTx to grow earnings, including: one, deployment of excess liquidity two, utilizing untapped financing capacity three, recycling equity currently invested in REO and four, creating additional liquidity via capital markets activity. During the second quarter, we pulled on each lever to build a strong foundation for high quality earnings growth. The deep sourcing and investing capabilities of TPG’s integrated real estate debt and equity platform drove our 15% net earning loan growth in the second quarter. Our balance sheet is poised for further capital deployment with $236,000,000 of available liquidity, a stable and 100% performing loan portfolio, a continued reduction in our REO portfolio and a debt to equity ratio now at 2.6 times that is still materially less than our peers.

Despite the tariff driven market disruption earlier in the second quarter, our investment team took advantage of this opportunity and buoyed by substantial dry powder and a stable liability structure, closed seven new loans totaling $696,000,000 with a weighted average loan to value ratio of 68. This investment activity was concentrated in our thematic sectors of multifamily and industrial and was diverse across geographic markets and institutional borrowers. In addition, we currently have more than $200,000,000 of newly executed term sheets and an extensive pipeline, which will fuel continued growth in earnings for TRTX shareholders. In capital markets, we continue to take advantage of our industry leading liquidity position in terms of dry powder and 95% non mark to market liability structure. In addition, the sale of two REO office properties generated a $7,000,000 GAAP gain, reduced our REO exposure to approximately 5% of total assets, and our remaining REO exposure is now 74% multifamily, with office REO now representing approximately 1% of our balance sheet.

These REO sales proceeds are being deployed actively in the new loan investments, demonstrating our well established ability to efficiently redeploy capital. Lastly, in the second quarter, we repurchased common stock, which generated $08 per share of net book value accretion. Our second quarter investment activity and operating results demonstrated our ability to leverage every available tool to grow earnings, recycle and allocate capital efficiently, all while maintaining a disciplined approach to credit risk and liquidity. TRTX currently trades at a 25% discount to book value and an 11.5% dividend yield. We continue to believe our current share price presents a compelling investment opportunity, backed by a 100% performing loan book, a stable liability structure, an offensively oriented liquidity position, and led by the investment insights of TPG’s industry leading integrated debt and equity real estate platform.

With that, I will turn it over to Bob to review our financial results.

Bob Foley, Chief Financial Officer, TRTX: Thank you, Doug. Good morning, everyone. Thank you for joining us. For the 2025, TRTX reported GAAP net income of $16,900,000 or $0.21 per common share and distributable earnings of $0.24 per common share, which again covered our quarterly dividend of $0.24 per common share. Book value per common share was $11.2 versus $11.19 for the previous quarter.

Our results reflect accelerating execution of our business strategy, which is predicated on a durable liability structure, strong liquidity, prudent and commercial portfolio construction, rigorous asset management, and disciplined capital allocation. Regarding capital allocation, we directly originated seven loans with total commitments of $695,600,000 $675,000,000 of initial unpaid principal balance and a weighted average credit spread of 2.86%. We repurchased 1,700,000.0 common shares for an aggregate price of $12,500,000 or $7.52 per share, generating approximately $08 per share of book value accretion. At quarter end, dollars 9,300,000.0 of repurchase capacity remained under existing Board authorization. In capital markets, we financed our nearly $700,000,000 of new loan investments using reinvestment capacity in TRTX 2025 FL6 of $172,200,000 including $103,000,000 of cash from loan repayments and $69,200,000 of ramp cash.

We used our secured revolver, pending transfer primarily to non mark to market term financing arrangements, balance sheet cash intentionally deployed to reduce idle liquidity and lessen earnings drag and defer borrowings to reduce interest expense. Our liquidity management strategy reflects our 100% performing loan book and 95% non mark to market liability structure. We’ll back lever in future quarters and recycle borrowed cash into new loan investments as we originate them. In asset management, we maintained a 100% performing loan portfolio with an unchanged weighted average risk rating of three point zero and no credit migration. We sold two REO properties, both at gains, which combined to a GAAP gain of $7,000,000 and a contribution to distributable earnings of $1,900,000 Consequently, our REO carrying value declined by $32,500,000 or approximately 12%.

We intend to launch sales processes for several more REO investments in the coming quarters. Refer to footnote four of our financial statements for additional information regarding our REO investment portfolio. Regarding our loan portfolio, it grew by 15% during the second quarter, driven by strong origination volume and repayments consistent with our expectations. 100% of our loan portfolio is performing. We have no five rated loans and only two four rated loans.

Our weighted average risk rating is three point zero, consistent with the prior six quarters. Our CECL reserve rate declined to 176 basis points from 199 basis points. This 12% decline reflects our 100% performing loan book and 15% growth in our loan portfolio quarter over quarter. Portfolio composition is detailed on page seven of our earnings supplemental, where you will note growth in multifamily and industrial exposure, accompanied by declines in life sciences, hotel and office. Non

Speaker 4: mark

Bob Foley, Chief Financial Officer, TRTX: to market financing increased to 95% from 91% of our secured liabilities, reinforcing our industry leading position. Total leverage increased modestly to 2.6 times from 2.2 times in support of loan portfolio growth. At quarter end, we had $1,700,000,000 of financing capacity available to support loan investment activity, and we were in compliance with all financial covenants. Regarding liquidity, we deployed balance sheet cash into new loan investments and share repurchases. Quarter end liquidity of $236,400,000 or 5.7% of total assets included $165,900,000 of cash, including $20,700,000 to satisfy our covenant requirements $66,100,000 of undrawn capacity under our secured credit agreements and asset specific financing arrangements and $1,800,000 of CRE CLO investment cash.

We funded during the quarter $8,800,000 of commitments under existing loans. At quarter end, our deferred funding obligations under existing loan commitments were $116,400,000 only 3% of our total loan commitments. In summary, our second quarter results demonstrate the disciplined execution of our business plan translates into loan portfolio growth. We maintained book value, delivered stable earnings and enhanced shareholder value through disciplined capital deployment, including loan investments and share repurchases. TRTX has strong liquidity, a 100% performing loan portfolio with stable risk ratings, low leverage, a cost efficient stable liability structure that is 95% non mark to market, and meaningful capacity for continued growth.

TRTX’s share price performance continues to lead its peers with a cumulative return of 68% since January 2023. We remain focused on sustaining that momentum to eliminate the gap between our share price and book value. And with that, we’d like to open the floor to questions. Operator?

Conference Operator: Thank you. We will now be conducting a question and answer You may press star two if you would like to remove your question from the queue. And again, that is star one if you would like to ask a question. And our first question comes from John Nicodemus with BTIG.

John Nicodemus, Analyst, BTIG: Hi, good morning everyone. We were obviously excited to see almost $700,000,000 of originations during the quarter with $112,000,000 already in the pipeline so far in July. Just curious how we should think about quarterly origination volumes going forward. That is to say, will volumes like that of second quarter become the norm or is that higher than what we’ll likely see the rest of this year? Thanks.

Conference Operator: And speakers, believe your line is on mute. Can you unmute your line? Please stand by.

Doug Bucard, Chief Executive Officer, TRTX: Hello?

Conference Operator: Yes, we can hear you. Please continue.

Doug Bucard, Chief Executive Officer, TRTX: Yep, apologies there for the technical difficulty. Yes, so as we think about pacing, again, first and foremost, we have a number of levers available to us on our balance sheet I’d shared in my prepared remarks. What we found recently is that, know, it’s really kind of two things happening. One is we continue to see a very attractive lending opportunity as banks have continued to basically pull back. And then I would say secondly, from a pacing perspective, because we have a number of these levers, we’re not really bound by the pace of repayments or really other sort of balance sheet related constraints from a pacing perspective.

So I think that it’s safe to say that you’ll continue to see, I would say, an elevated pace of new investments over coming quarters as we begin to relever and frankly grow our balance sheet.

John Nicodemus, Analyst, BTIG: Great. Thanks so much, Doug. That’s super helpful. Then for my other question, similar lines I wanted to ask about loan size. We noticed that two of your loans originated last quarter are now in your top five largest loans in your book.

Was that an active decision by your team to target loans of that size? Or did those opportunities just sort of present themselves that way? Thanks a lot.

Doug Bucard, Chief Executive Officer, TRTX: Yeah, sure. So I think, you know, our scale and size of loans that we’re investing in has generally remained somewhat consistent, you know, over the past number of years. Specific to the larger loans that are included, these are institutional borrowers and institutional assets. So we like the fact that we can traffic in the, I’ll call it like the 40,000,000 to $100,000,000 range, which I’d say is more of a middle market type of lending. But then also given the size and scale of our balance sheet, we can also kind of scale up into loans that are in the context of $200,000,000 And additionally, with some of these larger loans, we are able to within those loans actually have diversity.

And, you know, for example, one of the largest transactions that we did, which was an industrial portfolio, that provided diversification of industrial exposure, frankly, across The U. S. So we do like where we can gain a little bit more diversity through the form of a larger size loan.

John Nicodemus, Analyst, BTIG: Awesome. Thank you so much, Doug. And that’s all for me. Thanks.

Speaker 4: Thank you.

Conference Operator: Our next question comes from Chris Muller with Citizens Capital Markets.

Speaker 4: Hey guys, thanks for taking the question and congrats on a really solid quarter. So I wanted to hit on some of the REO. It’s great to see that gain you guys got on those sales there. And I know you won’t be able to give specifics or guidance on this. But given the timing of when you took back some of the other REO properties compared to current market valuations, could we see some other gains come through when those properties get sold?

Bob Foley, Chief Financial Officer, TRTX: Hey, Chris. Thanks for your question. We’re always hesitant to provide forward guidance, but I’ll make a couple of general observations about our experience in REO. The first is that historically we’ve been very aggressive about managing the performance of properties we take back and then moving them to market relatively quickly, and frankly, with good results. And by that, I mean to say that to date, every piece of REO that we’ve sold, we’ve sold at a book gain.

We have plans in place with respect to our remaining REO properties. We’ve improved the operating performance of virtually all of them, and we will be moving to market several of them for sale in the not too distant future.

Speaker 4: Got it. That’s helpful. And then I guess kind of following up on that a little bit. On the multifamily REO you guys have on the book still, it looks like you don’t have any financing against those assets. Is that mainly just due to expecting those properties getting listed for sale in the coming quarters?

Bob Foley, Chief Financial Officer, TRTX: You’re correct. We don’t have secured financing against them. And the frictional cost of financing investments that we think will be relatively short term in nature is a reason, or one of the principal reasons we haven’t financed those. But we always have that option to finance them if we choose to do so, and they’re eminently financeable.

Speaker 4: Got it. Well, thanks for taking the questions and glad to see you guys firing on all cylinders over there.

Bob Foley, Chief Financial Officer, TRTX: Thanks very much.

Conference Operator: Next question comes from Rick Shane with JPMorgan.

Rick Shane, Analyst, JPMorgan: Hey guys, good morning and thanks for taking my questions. Look, when we consider activity in commercial real estate lending and property sales throughout the country, There’s really a pretty wide discrepancy both geographically by property type. As you look at portfolio opportunity and repositioning, where are you going to be trying to lean in on the offensive side? And where do you want to continue to be defensive?

Doug Bucard, Chief Executive Officer, TRTX: Thanks, Rick. Yeah, an important question. So I think that from what you’ve seen from our past quarter, we still remain, I would say, concentrated within multifamily and industrial. Those are two markets or I should say property types that are both liquid, there still are transactions occurring there, but also they’re just two sectors that we prefer thematically across our entire integrated real estate debt and equity platform. And also I think that we’ve seen over the cycles that these assets tend to perform better just from a loss and default perspective as you kind of go through economic cycles.

But that being said, we’re not just limited to multifamily and industrial. We are in sort of regular pursuit of other asset classes. For example, student housing, to pick one sector. But the bulk of the activity right now has been primarily multi and industrial. When we think about what we’re seeing in our pipeline, there’s also another sort of underlying trend that really has remained consistent the last two years, which is that we’re still seeing primarily refinancings within our pipeline.

That’s one trend that we’re really kind of keeping an eye on. We obviously would like to see some more acquisition loans within our pipeline ultimately closing under our balance sheet. But that’s one trend that we do think as there’s perhaps a little bit more clarity in terms of the path of interest rates and frankly as the gap between where buyers and sellers will transact narrows, we do expect acquisitions to pick up. But I think that’s I’d that’s sort of the next big trend that we are very closely monitoring.

Rick Shane, Analyst, JPMorgan: Got it. Look, one of the other big themes that’s emerging is it does appear that we’re sort of approaching peak delivery of multifamily. There’s going to be a little bit of a lag as we approach peak lease up there. Are you starting to see the underlying economics in multifamily from a cash flow perspective improve? And as we sort of get as the market digests that additional capacity, are you starting to have conversations about any sort of resurgence in or resurgence is probably an overstatement rebound in multifamily development as well for new build?

Doug Bucard, Chief Executive Officer, TRTX: Yeah, look, I think that what we’ve seen, first of all, just within our portfolio specifically, our experience has been really across nearly every market, generally very strong fundamentals in terms of multifamily. I think that’s been buoyed by number one, as you mentioned, slowing in terms of new construction. Secondly, you know, elevated borrowing rates on the residential side, frankly, I just kind of kept renters, you know, within their existing units. And then I would say, you know, thirdly, I think you’re seeing it a bit in some of the, you know, some of the home sales data where there is, you know, a little bit of, I would say, pause from a risk perspective from your, you know, generic homeowner about kind of, you know, buying that next home. So again, I think all those factors lean sort of heavily into strong fundamentals for multifamily.

And that’s definitely a trend that we continue to expect. So kind of come over time. As it comes to multifamily starts, I would say that we do have a broad integrated debt and equity platform that clearly is kind of has its finger on the pulse of any new activity. And we’re really not seeing, I would say, a sort of large and growing wave of new construction deals really across either debt or equity. So I think, again, that just kind of creates a little bit of a sort of, you know, stronger moat around our current multifamily exposure.

And then I think lastly, what we are starting to see is, even in a few of the Sunbelt markets that perhaps had some of the greatest supply over the last couple of years, they are beginning to absorb that supply. So it does kind of seem like as you look out one to two years, the sort of picture for multifamily remains very strong.

Rick Shane, Analyst, JPMorgan: Got it. Okay, thank you very much. And I really appreciate your thoughtful comments about everything that happened yesterday. I think everybody’s feeling it and you expressed it for you articulated it so well for all

Doug Bucard, Chief Executive Officer, TRTX: of us. So thank you. Thank you, Rick.

Conference Operator: And our final question will come from Don Fandetti with Wells Fargo.

Investor Relations, TRTX: Yes. How are you thinking about credit risk migration from here? It’s been very stable. And I guess, let’s say the Fed does not cut, would that lead you to need some additional reserves? Or do you feel like that scenario is baked into your current reserves?

Bob Foley, Chief Financial Officer, TRTX: Thanks for your question, Don. Taking them in reverse order, under CECL, registrants’ reserves should always reflect their future expectations. So we’ve incorporated into our current estimates forecasts about changing interest rates and inflation, GDP growth and so on. So I don’t think those factors in particular would directly weigh on the future direction of our CECL reserve. In terms of credit migration and portfolio performance, our risk ratings have been very stable.

We’ve had virtually no credit migration. And as it stands right now, we wouldn’t expect any. Specific circumstances can change, but right now we feel good about the profile of our loan book. And in connection with multifamily, in particular, some of the factors that Doug just mentioned are really important in our assessment.

Investor Relations, TRTX: Great. Thanks, Bob.

Conference Operator: This now concludes our question and answer session. I would like to turn the floor back over to management for closing comments.

Doug Bucard, Chief Executive Officer, TRTX: Yes, I just want to thank everyone for joining the call today. We’re very proud of the team’s accomplishments this quarter and look forward to providing further updates to the market. Thank you.

Conference Operator: Ladies and gentlemen, thank you for your participation. This does conclude today’s teleconference. You may disconnect your lines and have a wonderful day.

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