TPG RE FINANCE TRUST, INC. The following discussion and analysis should be read in conjunction with the
unaudited and audited consolidated financial statements and the accompanying
notes included elsewhere in this Form 10-Q and in our Form 10-K filed with the
Overview
We are a commercial real estate finance company externally managed by
As of
We have made an election to be taxed as a REIT for
During the six months ended
Our Manager
We are externally managed by our Manager,
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Going Concern
The accompanying consolidated financial statements are prepared in accordance
with generally accepted accounting principles applicable to a going concern,
which contemplates the realization of assets and the satisfaction of liabilities
in the normal course of business. As of
During the three months ended
• Between April 1, 2020 and April 29, 2020 , sold 39 separate CRE debt
securities investments with an aggregate face value of $782.0 million ,
repaid related secured indebtedness of $581.7 million , and generated net
cash proceeds of $33.1 million .
• On May 4, 2020 , exercised an existing option to extend the maturity date
by one year to May 4, 2021 of our secured revolving repurchase agreement
with Morgan Stanley Bank, N.A.
• On May 28, 2020 , issued $225.0 million of Series B Cumulative Redeemable
Preferred ("Series B Preferred") Stock with the option to issue an
additional $100.0 million in two tranches of $50.0 million prior to
December 31, 2020 .
• On May 29, 2020 , made voluntary deleveraging payments totaling $157.7
million to seven lenders in connection with our secured revolving
repurchase agreements and senior secured credit facilities in exchange for
agreements to toll any margin calls for defined periods, subject to
certain conditions.
• On June 26, 2020 , exercised an existing option to extend the maturity date
to September 29, 2021 of our senior secured repurchase agreement with Bank
of America, N.A .
• On June 30, 2020 , exercised an existing option to extend the maturity date
to August 19, 2021 of our secured repurchase agreement with Goldman Sachs
Bank USA .
Key Financial Measures and Indicators
As a commercial real estate finance company, we believe the key financial
measures and indicators for our business are earnings per share, dividends
declared per share, Core Earnings, and book value per share. For the three
months ended
For the three months ended
Our book value per common share as of
Earnings Per Common Share and Dividends Declared Per Common Share
The computation of diluted earnings per share is based on the weighted average number of participating securities outstanding plus the incremental shares that would be outstanding assuming exercise of warrants, which are exercisable on a net-settlement basis. The number of incremental shares is calculated by applying the treasury stock method. We exclude participating securities and warrants from the calculation of basic earnings (loss) per share in periods of net losses since their effect would be anti-dilutive.
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The following table sets forth the calculation of basic and diluted net income
per share and dividends declared per share (in thousands, except share and per
share data):
Three Months Ended
June 30, 2020 March 31, 2020
Net Income (Loss) Attributable to TPG RE Finance
Trust, Inc.(1) $ 40,673 $ (232,793 ) Weighted Average Number of Common Shares Outstanding, Basic and Diluted(2)
76,644,038 76,465,322
Basic and Diluted Earnings (Loss) per Common Share(2) $ 0.52 $ (3.05 ) Dividends Declared per Common Share(2)
$ 0.20 $ 0.43
(1) Represents net income attributable to holders of our common stock after
deducting Series A and Series B Preferred Stock dividends.
(2) Weighted average number of shares outstanding, earnings per common share and
dividends declared per common share includes common stock.
Core Earnings
We use Core Earnings to evaluate our performance excluding the effects of certain transactions and GAAP adjustments we believe are not necessarily indicative of our current loan activity and operations. Core Earnings is a non-GAAP measure, which we define as GAAP net income (loss) attributable to our stockholders, including realized gains and losses not otherwise included in GAAP net income (loss), and excluding (i) non-cash equity compensation expense, (ii) depreciation and amortization, (iii) unrealized gains (losses), including an allowance for credit losses, and (iv) certain non-cash items. Core Earnings may also be adjusted from time to time to exclude one-time events pursuant to changes in GAAP and certain other non-cash charges as determined by our Manager, subject to approval by a majority of our independent directors. The exclusion of depreciation and amortization from the calculation of Core Earnings only applies to debt investments related to real estate to the extent we foreclose upon the property or properties underlying such debt investments.
We believe that Core Earnings provides meaningful information to consider in addition to our net income and cash flow from operating activities determined in accordance with GAAP. Although pursuant to our Management Agreement we calculate the incentive and base management fees due to our Manager using Core Earnings before incentive fee expense, we report Core Earnings after incentive fee expense, because we believe this is a more meaningful presentation of the economic performance of our common stock.
Core Earnings does not represent net income or cash generated from operating activities and should not be considered as an alternative to GAAP net income, or an indication of our GAAP cash flows from operations, a measure of our liquidity, or an indication of funds available for our cash needs. In addition, our methodology for calculating Core Earnings may differ from the methodologies employed by other companies to calculate the same or similar supplemental performance measures, and accordingly, our reported Core Earnings may not be comparable to the Core Earnings reported by other companies.
For additional information on the fees we pay our Manager, see Note 10 to our Consolidated Financial Statements included in this Form 10-Q.
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The following tables provide a reconciliation of GAAP net income attributable to
common stockholders to Core Earnings (in thousands, except share and per share
data):
Three Months Ended
June 30, 2020 March 31, 2020
Net Income (Loss) Attributable to Common
Stockholders(1) $ 40,105 $ (233,061 )
Non-Cash Stock Compensation Expense 1,686 1,401
Credit Loss Expense (Benefit)(2) (24,318 ) 63,348
Core Earnings $ 17,473 $ (168,312 ) Weighted-Average Common Shares Outstanding, Basic and Diluted(3)
76,644,038 76,465,322
Core Earnings (Loss) per Common Share, Basic and
Diluted(3) $ 0.23 $ (2.20 )
(1) Represents GAAP net income attributable to our common and Class A common
stockholders after deducting dividends paid on participating securities. For
more information regarding the calculation of earnings per share using the
two-class method, see Note 11 to our Consolidated Financial Statements in
this Form 10-Q.
(2) The Credit Loss Benefit for the quarter ended
realized loss of $13.8 million on one loan sold during the three months ended
June 30, 2020 included in Credit Loss Benefit (Expense) in our Consolidated
Statements of Income and Comprehensive Income.
(3) Weighted average number of shares outstanding includes common stock.
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