Greetings, and welcome to the TPG RE Finance Trust First Quarter 2021 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]. As a reminder this conference is being recorded. I would now turn the conference over to your host, Deborah Ginsberg, Vice President, Secretary and General Counsel. Thank you, and over to you.

Good morning and welcome to TPG Real Estate Finance Trust Conference Call, for the first quarter of 2022. I'm joined today by Doug Bouquard, Chief Executive Officer, Matt Coleman, President, Bob Foley, Chief Financial Officer, and Peter Smith, Chief Investment Officer. Matt and Bob will share some comments about the quarter, and then we'll open up the call for questions. Yesterday evening we filed our Form 10-Q and issued a press release with a 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 results, please see the Risk Factors section of our Form 10-Q and 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, I will turn the call over to Matt Coleman, President of TPG Real Estate Finance Trust.

Thank you, Deborah. And thanks everyone for joining this morning's call. Before I turn to our results for the first quarter, I want to introduce Doug Bouquard, who formally joined us last week as the CEO of TRTX and as a TPG partner. As most of you are aware prior to joining TPG, Doug spent his entire 18-year career at Goldman Sachs, where he most recently served as the Managing Director and Head of U.S. Commercial Real Estate Debt in the global markets division. In that role, he had oversight of the firm's commercial real estate debt origination activities including securitize lending, balance sheet lending, and commercial real estate warehouse financing, as well as commercial real estate securities issuance. As I mentioned on our last earnings call, we've gotten to know Doug quite well over the last several months, and I couldn't be more pleased to welcome him to TRTX and to TPG. Doug's appointment is an important step for TRTX and the firm. And I look forward to partnering with him for many years to come. With that, let me pass it over to Doug for a few remarks.

Thank you, Matt. I'm incredibly excited to join the leadership team here at TRTX and TPG. I’ll start with what human capital is amongst the most important assets of any organization and despite starting just a few days ago, I've been incredibly impressed with the quality of our people, both within TRTX and TPG broadly. As financial market transition from the era of QE to QT the investing opportunity set for real estate credit markets will be compelling, and our company is well positioned to take advantage of this investing landscape. Lastly, I look forward to meeting many of you over the coming weeks I sell into my new role. And with that, I will turn it back to Matt to discuss the first quarter and the broader market environment.

Thanks, Doug. Turning out of the first quarter. Let me begin with a few comments. Needless to say 2022 has gotten off to a complicated start. From the Russian invasion of Ukraine to inflation at 40 year highs to rising interest rates and the continuance of a global pandemic. The environment is choppy. We're seeing the effects of this confluence of factors in public equity markets with the NASDAQ down approximately 20% year-to-date, and the S&P 500 also down double digits. On the other hand, many real estate asset classes particularly as reflected in private market valuations remain strong. Multifamily has proven thus far to be a very effective inflation hedge, rental rates and industrial continue to grow and demand for lab space continues to be robust. And while it's true that new office is winning in certain markets, it's also the case that the country's office recovery has been uneven at best. According to NAREIT [ph] four quarter NOI growth in office is the only negative reading across CRE property types. As a final complicating overlay, spreads widened significantly in the [indiscernible] and CLO markets, but have been slow to rise in the transitional lending space, although we're starting to see some movement on that front. So one at all of these factors affect TRTX during the first quarter. First as reflected in our Q1 originations we approach this quarter as we do all others from the perspective of being good stewards of investor capital. In light of the geopolitical and market uncertainties that I just highlighted, we invested selectively consistent with our strategic approach to geographies, asset classes, and sponsors that we think are best positioned to succeed. As a percentage of total commitments slightly more than half of our originations for the quarter were in multifamily, and…

Thank you, Matt. Good morning, everyone. It's now my turn to welcome Doug to the team. I've known Doug for many years and all of us here are thrilled that the firm and the Board of Directors selected him that Doug chose to join the TRTX team and that we're working together. Yesterday we reported earnings for the quarter ended March 31 as follows; GAAP net income of $23.8 million versus $44.9 million in the prior quarter. Net income attributable to common stockholders of $20.4 million or $0.25 per diluted share. A decrease of 51% versus the prior quarter. Distributable earnings of $26.6 million or $0.33 per diluted share, versus $18.5 million or $0.23 per diluted share in the fourth quarter. For all three of those earnings measures, the quarter-over-quarter difference was due primarily to the absence in the first quarter of the $15.8 million gain from our fourth quarter REO sale, and a write-off of a portion of a defaulted retail loan and an increase in the first quarter of $4.9 million in the CECL reserve. Distributable earnings from our basic transitional lending business were virtually unchanged quarter-over-quarter $26.6 million in the first quarter of this year, versus $26.7 million in the prior quarter. Once again distributable earnings comfortably covered our quarterly dividend of $0.24 per common share. Net interest margin increased slightly despite a one-time expense of approximately $1.1 million deferred financing costs related to loans previously financed on several of our secured credit facilities that were contributed in February 2022 into TRTX 2022 FL5, our latest CRE CLO. Drivers of net interest margin included a quarter-over-quarter increase in our weighted average loan coupon to 4.59% from 4.49%. A decline in the weighted average rate floor in our loan portfolio to 105 from 110 basis points due to…

[Operator Instructions] The first question comes from the line of Rick Shane with JP Morgan. Please go ahead.

Guys. Good morning. Thanks for taking the question. Given the environment, can you just talk a little bit about the structural protections that you build into your loans related to both higher interest rates but also to execution risk related to supply chain delays, prolonged construction and material inflation?

Sure. Peter, do you want to take that?

Yes, I can -- I'll jump in on that. So, when we're about -- we look at obviously, when we are aware that there's been a lot of issues with respect to people getting supplies and actually in labor and whatnot. For the most part, if you look at sort of our moderate left multifamily workforce housing deals that we've done in loans that we've closed. We're seeing a little bit of a slowdown and really on deliveries of mostly appliances and whatnot. And that really sort of moderates the pace of renovations. But what's interesting is a lot of these moderations in the slowdown in these renovating these units, where you renovate the units and then pop the rents a couple $100 per month, we're seeing the rent gains, you're getting a lot of rent gains, not doing those renovations. So we're really haven't been terribly impacted by those real supply chain issues, for the most part maybe slowed down a little bit on the margin, but nothing sort of material from our end on that.

The only thing I would add Rick, is, we haven't we haven't done straight construction loans post in during COVID. And I think generally, we've been living on lighter transitional renovation plans as opposed to heavier.

And also bars have been very quick to sort of reposition, for instance, we're looking at signing up relatively straightforward against 70, I think it's 75% LTC loan on a light renovation, and the borrower has already redirected loans for other assets in the market. He's directing a truckload of appliances from some of the assets he owns in New Jersey. So he's able to secure them and moving them down and putting them in a warehouse down in Texas, where he will end up using those over time. And then with respect to rate increases, I think it was the other part of your question. We actually do require rate caps on they've gotten a lot more expensive over the last two months. But generally, almost every one, I believe every one of our loans has a rate cap of a certain amount. Certain borrowers have chosen lower rate caps, and actually have profited quite well on it. But generally, we're looking at having about requiring borrowers red caps in the 2.5 to 3% strike price. And having buy that for three year terms.

And, the second part of my question, the rate caps, are the rate caps on the original term, are they on a fully extended basis?

It's generally a combination. For the most part, it's, we're getting for two years, and then I think the average life of our loan is 27 month or something like that. It could be off that number. But generally, they're buying for the most part in 24 months. So they'll buy a two-year rate cap. And that cost is really tripled over the last, 30 days or so 45 days. [Multiple Speakers]

Welcome, Doug. Nice to meet you on the phone.

As you're ready, as well, Rick.

Thank you. The next question comes from the line of Eric Hagen with BTIG. Please go ahead.

Hey, thanks. Good morning. Nice to meet you, Doug. Maybe a couple from me in the multifamily portfolio. Can you share expectations for rental rate increases that sponsors expect to pass longer renters and how you expect cap rates to maybe evolve as the Fed raises rates? And then in the office portfolio where you guys noted some business plans might be changing or adjusting? Can you talk about how that changes the pace of funding commitments going forward? Thanks.

Sure, I just start with some color on the multifamily question. We've seen real rental rate run in many markets already. And that's been great for many of the business plans that we've underwritten in for our borrowers success for our COVID and post COVID Vintage loans. At this point, when we're evaluating a multifamily business plan quickly when that involves light venerate, light renovations were mark-to-market rental increases. We're looking at a variety of factors as you know. We undertake a rigorous market and analysis where we're looking at demographics, we're looking at educational trends, we're looking at affordability, we're looking at rent versus own analysis, it's very hard to generalize, just because you've seen such a wide variety of differences across the country. But in general, as you know, the rental rate increases have been strong and broad base there, obviously, markets in Florida where we've seen 40% increases in rents over a 12-month period. That's not anything close to what we're underwriting or what our borrowers are required to underwrite to make these business plans work. But in general, we're continuing to see strong rental rate increases. Affordability is of course, a significant factor. Why don't I turn it over to Bob to talk about the capital deployment as it relates to slowing business plans in the office portfolio?

Sure. Eric a good question with respect to unfunded commitments, which at quarter end stood around $440 million or so. Interestingly, an increasing share of our unfunded commitments relate to our lending initiative and life sciences sector in which we've been active since 2015 2016. Those transactions typically involve, fairly substantial conversions of existing properties, we've got a theme there that we'd be happy to discuss separately, but we're generally as Matt said earlier, not doing roundup construction. So the factors that drive the pace at which dollars are infused into a life sciences transaction are decidedly well, they are the same, but the dynamics of the market are very different in life sciences than they are in office. Generally speaking, in our office portfolio, the unfunded commitment dollars relate to what we call good news money, which are TI expenditures and leasing conditions, those are typically shared between us in our borrow and proportion to our advance rate against the loan as a whole, which is typically in the 65% to 70% range. So those dollars are typically funded only when a qualifying lease that is a lease that meets our minimum leasing guidelines, and has been consented to by us is signed, the pace of those fundings during COVID has slowed, which is to be expected. And, you know, as different markets begin to rebound at different paces, we expect, we may see some additional increases in the future. But right now, it has been pretty slow. And we commented earlier on our liquidity position, which is quite strong. And we typically, when we do make a deferred funding, we typically finance a portion of that with one of our lenders, so that we'd be funding the equity component of our portion of the total draw, our lender would fund the other portion, and then our borrower would fund the last 25% to 30%. Hope that answers your question.

That's very helpful color. Thank you guys very much. One, follow up on the multifamily portfolio, is it fair to think that most of the loans can get takeout with an agency loan for permanent financing? How does it qualify?

Peter, do you want to take that?

Yes, we, in all of our deals, we run a refinance analysis. And we assume a couple of different ones, really current market conditions with respect to rating -- with the respective agencies. The Fannie, Freddie and whatnot. So we look at it a couple of ways. And then we also usually look at really another way of conduit so we usually have two or three refinance analysis. I would generally I would generally say, say yes, but not every one of them. It depends on what we're using going forward with respect to DSCR, and then projected interest rates. But for the most part, pretty -- yes.

Thank you guys very much. I appreciate you.

Thank you. Ladies and gentlemen. We have reached the end of question and answer session. And I would like to turn the call back to Matt Coleman, President for closing remarks. Thank you.

Thank you. As you heard this morning, we're proud of the patience and prudence that characterize Q1 for TRTX. We look forward to navigating the ensuing quarters from a position of strength with substantial dry powder to take advantage of evolving markets. We look forward to speaking with you again on next quarters call. Thank you.

Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.