Document Contents

Toggle SGML Header (+)

<ACCESSION-NUMBER>0001564590-19-026625
<TYPE>10-Q
<PUBLIC-DOCUMENT-COUNT>83
<PERIOD>20190630
<FILING-DATE>20190729
<DATE-OF-FILING-DATE-CHANGE>20190729
<FILER>
<COMPANY-DATA>
<CONFORMED-NAME>TPG RE Finance Trust, Inc.
<CIK>0001630472
<ASSIGNED-SIC>6798
<IRS-NUMBER>000000000
<STATE-OF-INCORPORATION>MD
<FISCAL-YEAR-END>1231
</COMPANY-DATA>
<FILING-VALUES>
<FORM-TYPE>10-Q
<ACT>34
<FILE-NUMBER>001-38156
<FILM-NUMBER>19981878
</FILING-VALUES>
<BUSINESS-ADDRESS>
<STREET1>C/O TPG CAPITAL, L.P.
<STREET2>345 CALIFORNIA STREET, SUITE 3300
<CITY>SAN FRANCISCO
<STATE>CA
<ZIP>94104
<PHONE>415-743-1500
</BUSINESS-ADDRESS>
<MAIL-ADDRESS>
<STREET1>C/O TPG CAPITAL, L.P.
<STREET2>345 CALIFORNIA STREET, SUITE 3300
<CITY>SAN FRANCISCO
<STATE>CA
<ZIP>94104
</MAIL-ADDRESS>
</FILER>

Section 1: 10-Q (10-Q)

trtx-10q_20190630.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 June 30, 2019.

☐	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 July 26, 2019, there were 72,943,213 shares of the registrant’s common stock, $0.001 par value per share, and 1,143,313 shares of the registrant’s Class A 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 Item 1A – “Risk Factors” in our Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on February 26, 2019, 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;

•

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 and potentially principal losses to us;

•

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);

•

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 June 30, 2019 (unaudited) and December 31, 2018	1

	Consolidated Statements of Income and Comprehensive Income (unaudited) for the Three and Six Months ended June 30, 2019 and June 30, 2018	2

	Consolidated Statements of Changes in Equity (unaudited) for the Six Months ended June 30, 2019 and June 30, 2018	3

	Consolidated Statements of Cash Flows (unaudited) for the Six Months ended June 30, 2019 and June 30, 2018	5

	Notes to the Consolidated Financial Statements (unaudited)	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	51

Item 4.	Controls and Procedures	53

Part II. Other Information		54

Item 1.	Legal Proceedings	54

Item 1A.	Risk Factors	54

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	54

Item 3.	Defaults Upon Senior Securities	54

Item 4.	Mine Safety Disclosures	54

Item 5.	Other Information	54

Item 6.	Exhibits	55

Signatures		56

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)

	June 30, 2019			December 31, 2018
ASSETS⁽¹⁾
Cash and Cash Equivalents	$	70,042		$	39,720
Restricted Cash		450			1,000
Accounts Receivable		42			38
Accounts Receivable from Servicer/Trustee		213,410			96,464
Accrued Interest Receivable		30,923			20,731
Loans Held for Investment, net (includes $2,807,240 and $2,219,574 pledged as collateral under secured revolving repurchase and secured credit agreements)		4,830,235			4,293,787
Investment in Available-for-Sale Debt Securities (includes $641,426 and $36,307 pledged as collateral under secured revolving repurchase agreements)		679,178			74,381
Other Assets, Net		354			669
Total Assets	$	5,824,634		$	4,526,790
LIABILITIES AND STOCKHOLDERS’ EQUITY⁽¹⁾
Liabilities
Accrued Interest Payable	$	9,604		$	6,146
Accrued Expenses		6,084			8,151
Secured Revolving Repurchase, Senior Secured, and Secured Credit Agreements (net of deferred financing costs of $9,823 and $10,448)		2,749,126			1,494,078
Collateralized Loan Obligations (net of deferred financing costs of $7,945 and $12,447)		1,179,464			1,509,930
Term Loan Facility (net of deferred financing costs of $1,023 and $758)		266,638			113,504
Asset-Specific Financings (net of deferred financing costs of $564 and $129)		108,936			32,371
Payable to Affiliates		7,649			5,996
Deferred Revenue		391			463
Dividends Payable		31,985			28,981
Total Liabilities		4,359,877			3,199,620
Commitments and Contingencies—See Note 14
Stockholders’ Equity:
Preferred Stock ($0.001 par value per share; 100,000,000 shares authorized; 125 and 0 shares issued and outstanding, respectively)		—			—
Common Stock ($0.001 par value per share; 300,000,000 shares authorized; 72,996,096 and 66,020,387 shares issued and outstanding, respectively)		73			67
Class A Common Stock ($0.001 par value per share; 2,500,000 shares authorized; 1,143,313 shares issued and outstanding)		1			1
Additional Paid-in-Capital		1,492,670			1,355,002
Accumulated Deficit		(29,220	)		(25,915	)
Accumulated Other Comprehensive Gain (Loss)		1,233			(1,985	)
Total Stockholders' Equity		1,464,757			1,327,170
Total Liabilities and Stockholders' Equity	$	5,824,634		$	4,526,790

(1)

The Company’s consolidated Total Assets and Total Liabilities at June 30, 2019 include assets and liabilities of variable interest entities (“VIEs”) of $1.6 billion and $1.2 billion, respectively. The Company’s consolidated Total Assets and Total Liabilities at December 31, 2018 include assets and liabilities of VIEs of $1.9 billion and $1.5 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)

(in thousands, except share and per share data)

	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
INTEREST INCOME
Interest Income	$	88,254		$	64,693		$	164,855		$	124,058
Interest Expense		(46,426	)		(30,154	)		(85,793	)		(56,152	)
Net Interest Income		41,828			34,539			79,062			67,906
OTHER REVENUE
Other Income, net		412			509			834			875
Total Other Revenue		412			509			834			875
OTHER EXPENSES
Professional Fees		593			855			1,272			1,754
General and Administrative		1,674			1,089			2,999			2,197
Servicing and Asset Management Fees		431			767			944			1,534
Management Fee		5,323			4,763			10,466			9,467
Incentive Management Fee		2,048			1,146			3,413			2,072
Total Other Expenses		10,069			8,620			19,094			17,024
Income Before Income Taxes		32,171			26,428			60,802			51,757
Income Tax (Expense) Income, net		(202	)		10			(421	)		(205	)
Net Income	$	31,969		$	26,438		$	60,381		$	51,552
Preferred Stock Dividends		(4	)		—			(7	)		(3	)
Net Income Attributable to TPG RE Finance Trust, Inc.	$	31,965		$	26,438		$	60,374		$	51,549
Basic Earnings per Common Share	$	0.43		$	0.44		$	0.85		$	0.86
Diluted Earnings per Common Share	$	0.43		$	0.44		$	0.85		$	0.86
Weighted Average Number of Common Shares Outstanding
Basic:		73,963,337			60,175,373			71,144,696			60,283,992
Diluted:		73,963,337			60,175,373			71,144,696			60,283,992
OTHER COMPREHENSIVE INCOME
Net Income	$	31,969		$	26,438		$	60,381		$	51,552
Unrealized Gain (Loss) on Available-for-Sale Debt Securities		3,112			(1,424	)		3,218			(1,638	)
Comprehensive Net Income	$	35,081		$	25,014		$	63,599		$	49,914

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)

	Preferred Stock				Common Stock					Class A Common Stock				Additional						Accumulated Other
	Shares		Par Value		Shares			Par Value		Shares		Par Value		Paid- in-Capital			Accumulated Deficit			Comprehensive Income (Loss)			Total Equity
January 1, 2019		—	$	—		66,020,387		$	67		1,143,313	$	1	$	1,355,002		$	(25,915	)	$	(1,985	)	$	1,327,170
Issuance of Common Stock		—		—		6,000,000			6		—		—		119,094			—			—			119,100
Repurchases of Common Stock		—		—		(2,324	)		—		—		—		—			(42	)		—			(42	)
Issuance of Series A Preferred Stock		125		—		—			—		—		—		125			—			—			125
Equity Issuance and Equity Distribution Agreement Transaction Costs		—		—		—			—		—		—		(300	)		—			—			(300	)
Amortization of Share Based Compensation		—		—		—			—		—		—		633			—			—			633
Net Income		—		—		—			—		—		—		—			28,412			—			28,412
Other Comprehensive Income		—		—		—			—		—		—		—			—			106			106
Dividends on Preferred Stock		—		—		—			—		—		—		—			(3	)		—			(3	)
Dividends on Common Stock (Dividends Declared per Share of $0.43)		—		—		—			—		—		—		—			(31,160	)		—			(31,160	)
Dividends on Class A Common Stock (Dividends declared per Share of $0.43)		—		—		—			—		—		—		—			(492	)		—			(492	)
March 31, 2019		125	$	—		72,018,063		$	73		1,143,313	$	1	$	1,474,554		$	(29,200	)	$	(1,879	)	$	1,443,549
Issuance of Common Stock		—		—		978,033			—		—		—		17,432			—			—			17,432
Equity Issuance and Equity Distribution Agreement Transaction Costs		—		—		—			—		—		—		(197	)		—			—			(197	)
Amortization of Share Based Compensation		—		—		—			—		—		—		881			—			—			881
Net Income		—		—		—			—		—		—		—			31,969			—			31,969
Other Comprehensive Income		—		—		—			—		—		—		—			—			3,112			3,112
Dividends on Preferred Stock		—		—		—			—		—		—		—			(4	)		—			(4	)
Dividends on Common Stock (Dividends Declared per Share of $0.43)		—		—		—