Greetings, and welcome to the TPG RE Finance Trust Second Quarter 2019 Earnings Conference Call. At this time all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note this conference is being recorded. I would now like to turn the conference over to your host today,Deborah Ginsberg. Please proceed.

Good morning, and welcome to TPG Real Estate Finance Trust's second quarter 2019 conference call. I'm joined today by Greta Guggenheim, Chief Executive Officer; and Bob Foley, Chief Financial and Risk Officer. Greta and Bob will share some comments about the quarter, and then we'll open up the call for questions. Last night, we filed our Form 10-Q and issued a press release with the presentation of our operating results; all of which are available on our website in the Investor Relations section.I'd like to remind everyone that today's call may include forward-looking statements, which are uncertain and outside of the company's control. Actual results may differ materially. For a discussion of some of the risks that could affect our results, please see the Risk Factors section of our most recently filed 10-K. We do not undertake any duty to update these statements. And we will also refer to certain non-GAAP measures on this call, and for reconciliations, you should refer to the press release and our 10-Q.With that, it's my pleasure to turn the call over to Greta Guggenheim, Chief Executive Officer of TPG Real Estate Finance Trust.

Thank you, Deborah and good morning all and thank you for joining our second quarter earnings call. We are now celebrating our two year anniversary as a public company and are pleased to report our increased earnings, robust originations and the continuance of attractive ROEs on our newly originated loans. We originated $1.5 billion in loans for the first half of the year including $755 million in the second quarter.Total earning assets were $5.5 billion at quarter-end which generated net income of $32 million. Our weighted average spread of 364 basis points for Q2 combined with a 60% weighted average LTV indicates our continued focus on an ability to source exceptional credit assets with attractive yields. Our weighted average spread for the first half of the year of 380 basis points is very attractive relative to the market and is a testament to the quality of our team. Currently loans in the process of closing totaled $454 million and we have a very strong pipeline for this point in the quarter.We continue to focus on increasing earnings and the coverage of our dividend, CRE mortgage REITs have lumpy originations and repayments. So a key factor is cash management which we continually seek to optimize. We are particularly pleased with our earnings this quarter especially since we began the quarter with significant cash balances from our follow-on equity offerings. The core of our origination strategy is on Class A plus properties with institutional sponsors in the top 10 markets.We augment these with relationship driven opportunities in the top 25 markets. These are often up market transactions where the borrower or significant stakeholder wants to work with us and negotiate exclusively with us which was the case for more than half of our 2Q loans. As an example, our second largest loan…

Thanks Greta. For the second quarter, we generated core earnings of $32.7 million or $0.44 per diluted share, an increase of 13% compared to $28.9 million and $0.43 per diluted share for the preceding quarter. During the quarter, we declared dividend of $0.43 per share which was covered 1.02 times by our core earnings. Earnings growth was driven primarily by an increase in net interest margin of $4.6 million quarter-over-quarter due to the earnings of our $714 million of first quarter originations and investment earnings from our short-term investment portfolio. Net loan growth of $116.2 million was due to the closing of eight first mortgage loans representing total commitments of $755 million, initial fundings of $507.8 million, deferred fundings on existing loans of $59.7 million and repayments of $451.3 million.For new loan originations, the average loan size was $94.4 million, our weighted average credit spread was 364 basis points and the weighted average LTV was 60%. The weighted average spread of our loan portfolio at quarter-end was 377 basis points as compared to 389 basis points at March 31 due primarily to loan repayments. At quarter-end, portfolio wide loan level leverage increased to 77.3% from 74.1%. Our overall debt to equity ratio increased to 2.9 times from 2.5 times due to increased leverage on our loans and growth in our short-term investment portfolio.Book value per share grew quarter-over-quarter by $0.03 due primarily to unrealized gains in our short-term investment portfolio of $3.1 million. Unlike earlier in the year, lower rates now seem likely for the foreseeable future. Although one of our loans carry a LIBOR floor, the portfolio wide weighted LIBOR floor is 1.43%. The weighted average LIBOR floor for second quarter originations alone was 1.84% as compared to current LIBOR of approximately 225.On the right hand side of the…

Thank you. At this time, we will conduct a question-and-answer session. [Operator Instructions] Our first question comes from Steve Delaney with JMP Securities. Please proceed with your question.

Good morning everyone. Thank you. Your CLO investments have been increasing and when we saw the March follow-on offering, we certainly expected you would find a short-term place for that but I'm wondering now that the balance is up to $600 million, if we may continue to see this being a significant asset class on your balance sheet. And if you could Bob, if you could comment on sort of with the range of levered returns are on the CLOs versus the loan book. Thank you.

Sure. I'll start Steve and then hand it over to Bob. And yes we did purchased over $300 million of CLOs in the second quarter and 85%, 81% excuse me are single A or better and approximately 40% are AAA. So the purpose of these really was for cash management because of the liquidity position that we had and I don't expect to see these to materially increase and we do see them increase, it will be the same. It would be the same characteristics as the ones we've already purchased. We're not looking to acquire these in lieu of loans. It's really just to augment cash management.

Understood. Yes, that’s helpful. And the general range of returns, levered returns there?

Sure, they're little lower. I mean they range on average it's about 8.5% are on a levered ROE basis. Some are higher. Some are slightly lower. But we view that as appropriate given the liquidity of these positions, the significant subordination as Greta said we're generally A or better. The bulk of that is AAA. And the equity that we have deployed in this short-term investment portfolio can and will be redeployed as credit and Peter and the team see additional appropriate loan origination opportunities.

Great, yes, that’s helpful. And while it's lower that roughly the 8.5% roughly matches your dividend yield on your book value so obviously new ventures. Yes, thanks.

To be clear, just to be clear those ROEs are net ROEs of expenses, so that ROE is calculated on the same basis that we calculate ROE, yes.

Yes. Okay that's good to know. Okay and then switching over your information you've provided on floors is a little more specific there and appreciated relative to what we've been seeing. I think we'll be hearing more about that with the direction in rate. But when I'm thinking about the 184 weighted average floor, one month LIBOR for the second quarter was probably sort of in the 240-ish range maybe slightly below. Is it coincidence that that 184 is roughly 50 basis points below where actual one-month LIBOR, would that be a reasonable expectation for us in terms of the floors on new originations going forward?

No, it’s just how the average worked out. We try to get a floor at the money when we close every loans at that point of LIBOR and as time passes borrowers are getting more savvy to this and focusing on it a bit more. It’s because we have highly sophisticated institutional borrowers. It is a battle to get high floors. But we have succeeded in getting them at the money occasionally and submit 2% but some are much lower, so that just happens to be the average.

Sounds like just all part of the negotiation and how badly you want the loan et cetera et cetera?

Exactly we're negotiating a loan right now that we believe will get signed up soon in the borrowers come back and ask for X and we're going to go back and say okay put the floor back to LIBOR and you can have it. So we will see how that goes.

Yes, just to give you and others on the call a sense, this quarter the weighted average LIBOR on our new originations with respect to floors was 184, last quarter it was 219. So to Greta’s point, a lot of this is simple hand-to-hand combat so to speak or at least fierce negotiation spirited negotiation with our models.

Well thank you both for your comments, helpful.

Thank you.

[Operator Instructions] Our next question comes from Rick Shane with JPMorgan. Please proceed with your question.

Hey guys, thanks for taking my questions. Steve really sort of building on the floors of the new but really the question I'd like to explore is given relative size you guys have been very active in the CLO market in terms of issuance, I am curious how that strategy will be affected by the shift in policy from the Fed?

The shift in what, I’m sorry.

Policy from the Fed?

Well tomorrow will be here soon enough. Now that's a good question I guess I think your question is directed primarily by our behavior as an issuer of CLOs rather than an investor, correct?

Yes that's exactly it. Basically what I'm trying to understand is does that form of financing become more lapse or equally attractive in an environment where the Fed is more dovish?

Well I honestly in our business, let's talk first about our balance sheet and then demand for loans from our borrowers. In fact let's talk about demand for loans from our borrowers first because that's more important. As we've discussed before most of our borrowers borrow in the floating rate markets for reasons that are somewhat independent of the general level of rates. It's really a function of their business plan and what they intend to do with the property. So we don't view demand for floating rate transitional loans as being largely dependent on the general level of rates or LIBOR in particular or its replacement rate in several years.So we expect that demand for loans will continue in pretty strong fashion because the economy and the markets feel pretty good. With respect to repayments, lower rates at the margin make it easier for a given amount of cash flow for borrowers to repay loans and as Greta said earlier, we would expect to see more repayments in the second half of the year than we did in the first. In terms of accessing the CLO market as a source of nonrecourse non-mark-to-market term financing, we continue to see pretty strong, well very strong frankly investor interest.We get a lot of inbound inquiry from investors about when our next deal will be. There have been a couple of deals in the market over the last month that have done quite well and that demonstrates that floating rate fixed income investors are in the market in a big way and frankly if you think that rates are going down which everyone seems to believe then being floating and being in a position to be able to adjust is something that a lot of fixed income investors are interested in doing.

And Rick if your question is in part based on the fact that the AAA and other investors of CLOs are not wanting to are looking at where rates are going in the short term and the long term which would steer their decision to want to invest in short duration floating rate investments. I think it may help them on the margin and that it's clear they're not going to be missing any great investment opportunities at higher rates in the very near term. So it may actually, it could spur demand and make it the spread tightening on the sell side more attractive.

Got it. That's exactly the type of insight I was looking for, I asked question not necessarily knowing what the effort is going to be but that's what we want to try to understand that dynamic in terms of how you guys think about it and also how the CLO buyers think about it as well. Thank you.

Yes, thank you, Rick.

Thank you. There are no further questions in queue at this time. I would like to turn the call back over to Greta Guggenheim for closing comments.

Well thank you all for joining us on our call today. We're very excited about how we're starting the next quarter with a very high level of earning assets and with a very strong pipeline and we look forward to speaking to you next quarter.

Thank you. This does concludes today’s teleconference. You may disconnect your lines at this time and have a great day.