TPG RE Finance Trust, Inc. - Quarter Report: 2019 September (Form 10-Q)

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 September 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 October 25, 2019, there were 72,986,386 shares of the registrant’s common stock, $0.001 par value per share, and 1,138,665 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 September 30, 2019 (unaudited) and December 31, 2018	1

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

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

	Consolidated Statements of Cash Flows (unaudited) for the Nine Months ended September 30, 2019 and September 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	50

Item 4.	Controls and Procedures	52

Part II. Other Information		53

Item 1.	Legal Proceedings	53

Item 1A.	Risk Factors	53

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	53

Item 3.	Defaults Upon Senior Securities	53

Item 4.	Mine Safety Disclosures	53

Item 5.	Other Information	53

Item 6.	Exhibits	54

Signatures		55

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)

	September 30, 2019			December 31, 2018
ASSETS⁽¹⁾
Cash and Cash Equivalents	$	99,347		$	39,720
Restricted Cash		350			1,000
Accounts Receivable		6			38
Accounts Receivable from Servicer/Trustee		81,707			96,464
Accrued Interest Receivable		30,885			20,731
Loans Held for Investment, net (includes $3,897,526 and $2,219,574 pledged as collateral under secured revolving repurchase and secured credit agreements)		5,017,512			4,293,787
Investment in Available-for-Sale Debt Securities (includes $604,053 and $36,307 pledged as collateral under secured revolving repurchase agreements)		631,829			74,381
Other Assets, Net		1,325			669
Total Assets	$	5,862,961		$	4,526,790
LIABILITIES AND STOCKHOLDERS’ EQUITY⁽¹⁾
Liabilities
Accrued Interest Payable	$	6,837		$	6,146
Accrued Expenses		10,868			8,151
Secured Revolving Repurchase, Senior Secured, and Secured Credit Agreements (net of deferred financing costs of $14,081 and $10,448)		3,456,181			1,494,078
Collateralized Loan Obligations (net of deferred financing costs of $6,745 and $12,447)		773,688			1,509,930
Asset-Specific Financings (net of deferred financing costs of $443 and $129)		109,057			32,371
Term Loan Facility (net of deferred financing costs of $0 and $758)		—			113,504
Payable to Affiliates		7,768			5,996
Deferred Revenue		285			463
Dividends Payable		31,982			28,981
Total Liabilities		4,396,666			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; 72,986,386 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; 1,138,665 and 1,143,313 shares issued and outstanding)		1			1
Additional Paid-in-Capital		1,493,091			1,355,002
Accumulated Deficit		(28,177	)		(25,915	)
Accumulated Other Comprehensive Gain (Loss)		1,307			(1,985	)
Total Stockholders' Equity		1,466,295			1,327,170
Total Liabilities and Stockholders' Equity	$	5,862,961		$	4,526,790

(1)

The Company’s consolidated Total Assets and Total Liabilities at September 30, 2019 include assets and liabilities of variable interest entities (“VIEs”) of $1.0 billion and $790.3 million, 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 September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
INTEREST INCOME
Interest Income	$	92,362		$	69,863		$	257,217		$	193,921
Interest Expense		(47,874	)		(34,297	)		(133,667	)		(90,449	)
Net Interest Income		44,488			35,566			123,550			103,472
OTHER REVENUE
Other Income, net		160			(55	)		994			820
Total Other Revenue		160			(55	)		994			820
OTHER EXPENSES
Professional Fees		1,440			905			2,712			2,659
General and Administrative		1,530			965			4,529			3,162
Servicing and Asset Management Fees		960			767			1,904			2,301
Management Fee		5,482			4,879			15,948			14,346
Incentive Management Fee		2,104			1,168			5,517			3,240
Total Other Expenses		11,516			8,684			30,610			25,708
Income Before Income Taxes		33,132			26,827			93,934			78,584
Income Tax (Expense) Income, net		(107	)		(3	)		(528	)		(208	)
Net Income	$	33,025		$	26,824		$	93,406		$	78,376
Preferred Stock Dividends		(3	)		—			(10	)		(3	)
Net Income Attributable to TPG RE Finance Trust, Inc.	$	33,022		$	26,824		$	93,396		$	78,373
Basic Earnings per Common Share	$	0.44		$	0.42		$	1.29		$	1.27
Diluted Earnings per Common Share	$	0.44		$	0.42		$	1.29		$	1.27
Weighted Average Number of Common Shares Outstanding
Basic:		74,126,890			64,295,973			72,149,684			61,635,988
Diluted:		74,126,890			64,295,973			72,149,684			61,635,988
OTHER COMPREHENSIVE INCOME
Net Income	$	33,025		$	26,824		$	93,406		$	78,376
Unrealized Gain (Loss) on Available-for-Sale Debt Securities		74			523			3,292			(1,115	)
Comprehensive Net Income	$	33,099		$	27,347		$	96,698		$	77,261

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, Shelf Registration, 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, Shelf Registration, 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)		—		—		—			—		—			—		—			(31,494	)		—			(31,494	)
Dividends on Class A Common Stock (Dividends declared per Share of $0.43)		—		—		—			—		—			—		—			(491	)		—			(491	)
June 30, 2019		125	$	—		72,996,096		$	73		1,143,313		$	1	$	1,492,670		$	(29,220	)	$	1,233		$	1,464,757
Issuance of Common Stock		—		—		424			—		—			—		—			—			—			—
Conversions of Class A Common Stock to Common Stock		—		—		4,648			—		(4,648	)		—		—			—			—			—
Repurchase of Common Stock for Net Settlement of Share Based Compensation Taxes		—		—		(14,782	)		—		—			—		—			—			—			—
Equity Issuance, Shelf Registration, and Equity Distribution Agreement Transaction Costs		—		—		—			—		—			—		(31	)		—			—			(31	)
Amortization of Share Based Compensation		—		—		—			—		—			—		452			—			—			452
Net Income		—		—		—			—		—			—		—			33,025			—			33,025
Other Comprehensive Income		—		—		—			—		—			—		—			—			74			74
Dividends on Preferred Stock		—		—		—			—		—			—		—			(3	)		—			(3	)
Dividends on Common Stock (Dividends Declared per Share of $0.43)		—		—		—			—		—			—		—			(31,489	)		—			(31,489	)
Dividends on Class A Common Stock (Dividends declared per Share of $0.43)		—		—		—			—		—			—		—			(490	)		—			(490	)
September 30, 2019		125	$	—		72,986,386		$	73		1,138,665		$	1	$	1,493,091		$	(28,177	)	$	1,307		$	1,466,295



	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, 2018		125		$	—		59,440,112		$	60		1,178,618		$	1	$	1,216,112		$	(14,808	)	$	(34	)	$	1,201,331
Conversions of Class A Common Stock to Common Stock		—			—		24,071			—		(24,071	)		—		—			—			—			—
Repurchases of Common Stock		—			—		(443,570	)		—		—			—		(9	)		(8,351	)		—			(8,360	)
Redemption of Series A Preferred Stock		(125	)		—		—			—		—			—		(125	)					—			(125	)
Amortization of Share Based Compensation		—			—		—			—		—			—		177			—			—			177
Net Income		—			—		—			—		—			—		—			25,114			—			25,114
Other Comprehensive (Loss)		—			—		—			—		—			—		—			—			(214	)		(214	)
Dividends on Preferred Stock		—			—		—			—		—			—		—			(3	)		—			(3	)
Dividends on Common Stock (Dividends Declared per Share of $0.42)		—			—		—			—		—			—		—			(24,822	)		—			(24,822	)
Dividends on Class A Common Stock (Dividends declared per Share of $0.42)		—			—		—			—		—			—		—			(485	)		—			(485	)
March 31, 2018		—		$	—		59,020,613		$	60		1,154,547		$	1	$	1,216,155		$	(23,355	)	$	(248	)	$	1,192,613
Issuance of Common Stock		—			—		19,352			—		—			—		—			—			—			—
Amortization of Share Based Compensation		—			—		—			—		—			—		197			—			—			197
Net Income		—			—		—			—		—			—		—			26,438			—			26,438
Other Comprehensive (Loss)		—			—		—			—		—			—		—			—			(1,424	)		(1,424	)
Dividends on Common Stock (Dividends Declared per Share of $0.43)		—			—		—			—		—			—		—			(25,415	)		—			(25,415	)
Dividends on Class A Common Stock (Dividends declared per Share of $0.43)		—			—		—			—		—			—		—			(496	)		—			(496	)
June 30, 2018		—		$	—		59,039,965		$	60		1,154,547		$	1	$	1,216,352		$	(22,828	)	$	(1,672	)	$	1,191,913
Issuance of Common Stock		—			—		7,000,000			7		—			—		139,433			—			—			139,440
Conversions of Class A Common Stock to Common Stock		—			—		11,234			—		(11,234	)		—		—			—			—			—
Equity Issuance, Shelf Registration, and Equity Distribution Agreement Transaction Costs		—			—		—			—		—			—		(857	)		—			—			(857	)
Repurchases of Common Stock		—			—		(7,235	)		—		—			—		—			(148	)		—			(148	)
Amortization of Share Based Compensation		—			—		—			—		—			—		109			—			—			109
Net Income		—			—		—			—		—			—		—			26,824			—			26,824
Other Comprehensive (Loss)		—			—		—			—		—			—		—			—			523			523
Dividends on Common Stock (Dividends Declared per Share of $0.43)		—			—		—			—		—			—		—			(28,426	)		—			(28,426	)
Dividends on Class A Common Stock (Dividends declared per Share of $0.43)		—			—		—			—		—			—		—			(492	)		—			(492	)
September 30, 2018		—		$	—		66,043,964		$	67		1,143,313		$	1	$	1,355,037		$	(25,070	)	$	(1,149	)	$	1,328,886

See accompanying notes to the Consolidated Financial Statements

TPG RE Finance Trust, Inc.

Consolidated Statements of Cash Flows (Unaudited)

(In thousands)

	Nine Months Ended September 30,
	2019			2018
Cash Flows from Operating Activities:
Net Income	$	93,406		$	78,376
Adjustment to Reconcile Net Income to Net Cash Provided by Operating Activities:
Amortization and Accretion of Premiums, Discounts and Loan Origination Fees, net		(12,612	)		(11,867	)
Amortization of Deferred Financing Costs		14,607			12,103
Loss on Sales of Loans Held for Investment and Available-for-Sale Debt Securities		469			524
Stock Compensation Expense		1,966			483
Cash Flows Due to Changes in Operating Assets and Liabilities:
Accounts Receivable		32			103
Accrued Interest Receivable		(8,695	)		(4,012	)
Accrued Expenses		(2,936	)		1,113
Accrued Interest Payable		691			(360	)
Payable to Affiliates		1,772			1,677
Deferred Fee Income		(178	)		(101	)
Other Assets		(656	)		149
Net Cash Provided by Operating Activities		87,866			78,188
Cash Flows from Investing Activities:
Origination and Acquisition of Loans Held for Investment		(1,782,995	)		(1,622,084	)
Advances on Loans Held for Investment		(162,380	)		(207,657	)
Principal Repayments of Loans Held for Investment		1,248,745			858,130
Sales Proceeds from Loans Held for Investment		—			2,174
Purchase of Available-for-Sale Debt Securities		(632,346	)		(143,643	)
Sales and Principal Repayments of Available-for-Sale Debt Securities		66,695			146,016
Net Cash (Used in) Investing Activities		(1,262,281	)		(967,064	)
Cash Flows from Financing Activities:
Payments on Collateralized Loan Obligations		(732,103	)		—
Proceeds from Collateralized Loan Obligations		—			745,904
Payments on Secured Financing Agreements		(2,116,807	)		(1,432,221	)
Proceeds from Secured Financing Agreements		4,045,279			1,508,313
Payment of Deferred Financing Costs		(6,760	)		(18,818	)
Payments to Redeem Series A Preferred Stock		—			(125	)
Payments to Repurchase Common Stock		(42	)		(8,361	)
Proceeds from Issuance of Preferred Stock		125			—
Proceeds from Issuance of Common Stock		136,532			139,440
Payment of Equity Issuance and Equity Distribution Agreement Transaction Costs		(207	)		(251	)
Dividends Paid on Common Stock		(91,143	)		(72,857	)
Dividends Paid on Class A Common Stock		(1,475	)		(1,429	)
Dividends Paid on Preferred Stock		(7	)		(3	)
Net Cash Provided by Financing Activities		1,233,392			859,592
Net Change in Cash, Cash Equivalents, and Restricted Cash		58,977			(29,284	)
Cash, Cash Equivalents and Restricted Cash at Beginning of Period		40,720			75,737
Cash, Cash Equivalents and Restricted Cash at End of Period	$	99,697		$	46,453
Supplemental Disclosure of Cash Flow Information:
Interest Paid	$	118,369		$	78,707
Taxes Paid		393			208
Supplemental Disclosure of Non-Cash Investing and Financing Activities:
Principal Repayments of Loans Held for Investment Held by Servicer/Trustee, net		80,159			—
Principal Repayments of Available-for-Sale Debt Securities Held by Servicer/Trustee, net		1,388			870
Dividends Declared, not paid		31,982			28,918
Accrued Equity Issuance, Shelf Registration, and Equity Distribution Agreement Transaction Costs		321			606
Accrued Deferred Financing Costs		6,082			3,469
Accrued Share Based Compensation Taxes		—			147
Unrealized Gain (Loss) on Available-for-Sale Debt Securities		3,292			(1,115	)

See accompanying notes to the Consolidated Financial Statements

TPG RE Finance Trust, Inc.

Notes to the Consolidated Financial Statements

(Unaudited)

(1) Business and Organization

TPG RE Finance Trust, Inc. (together with its consolidated subsidiaries, “we,” “us,” “our” or the “Company”) is a Maryland corporation that was incorporated on October 24, 2014 and commenced operations on December 18, 2014 (“Inception”). We are organized as a holding company and conduct our operations primarily through TPG RE Finance Trust Holdco, LLC (“Holdco”), a Delaware limited liability company that is wholly owned by the Company, and Holdco’s direct and indirect subsidiaries. We conduct our operations as a real estate investment trust (“REIT”) for U.S. federal income tax purposes. We generally will not be subject to U.S. federal income taxes on our REIT taxable income to the extent that we annually distribute all of our REIT taxable income to stockholders and maintain our qualification as a REIT. We also operate our business in a manner that permits us to maintain an exclusion from registration under the Investment Company Act of 1940, as amended.

The Company’s principal business activity is to directly originate and acquire a diversified portfolio of commercial real estate related assets, consisting primarily of first mortgage loans and senior participation interests in first mortgage loans secured by institutional-quality properties in primary and select secondary markets in the United States and commercial real estate debt securities, including commercial mortgage-backed securities (“CMBS”) and commercial real estate collateralized loan obligation securities (“CRE CLO”). As of September 30, 2019, and December 31, 2018, the Company conducted substantially all of its operations through a Delaware limited liability company, TPG RE Finance Trust Holdco, LLC (“Holdco”), and the Company’s other wholly-owned subsidiaries.

(2) Summary of Significant Accounting Policies

Basis of Presentation

The interim consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). The interim consolidated financial statements include the Company’s accounts, consolidated variable interest entities for which the Company is the primary beneficiary, and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated.

Use of Estimates

The preparation of the interim consolidated financial statements in conformity with GAAP requires estimates of assets, liabilities, revenues, expenses and disclosure of contingent assets and liabilities at the date of the interim consolidated financial statements. Actual results could differ from management’s estimates, and such differences could be material. Significant estimates made in the interim consolidated financial statements include, but are not limited to: impairment; adequacy of provisions for loan losses; and valuation of financial instruments.

Principles of Consolidation

Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 810—Consolidation (“ASC 810”) provides guidance on the identification of a VIE (a variable interest entity for which control is achieved through means other than voting rights) and the determination of which business enterprise, if any, should consolidate the VIE. An entity is considered a VIE if any of the following applies: (1) the equity investors (if any) lack one or more of the essential characteristics of a controlling financial interest; (2) the equity investment at risk is insufficient to finance that entity’s activities without additional subordinated financial support; or (3) the equity investors have voting rights that are not proportionate to their economic interests and the activities of the entity involve or are conducted on behalf of an investor with a disproportionately small voting interest. The Company consolidates VIEs in which it is considered to be the primary beneficiary. The primary beneficiary is defined as the entity having both of the following characteristics: (1) the power to direct the activities that, when taken together, most significantly impact the VIE’s performance; and (2) the obligation to absorb losses and right to receive the returns from the VIE that would be significant to the VIE.

At each reporting date, the Company reconsiders its primary beneficiary conclusion to determine if its obligation to absorb losses of, or its rights to receive benefits from, the VIE could potentially be more than insignificant, and will consolidate or not consolidate accordingly (see Note 5 for details).

Revenue Recognition

Interest income on loans is accrued using the interest method based on the contractual terms of the loan, adjusted for credit impairment, if any. The objective of the interest method is to arrive at periodic interest income including recognition of fees and costs at a constant effective yield. Premiums, discounts, and origination fees are amortized or accreted into interest income over the lives of the loans using the interest method, or on a straight line basis when it approximates the interest method. Extension and modification fees are accreted into income on a straight line basis, when it approximates the interest method, over the related extension or modification period. Exit fees are accreted into income on a straight line basis, when it approximates the interest method, over the lives of the loans to which they relate unless they can be waived by the Company or a co-lender in connection with a loan refinancing. Prepayment penalties from borrowers are recognized as interest income when received. Certain of the Company’s loan investments have in the past and may in the future provide for additional interest based on the borrower’s operating cash flow or appreciation of the underlying collateral. Such amounts are considered contingent interest and are reflected as interest income only upon certainty of collection.

The Company considers a loan to be non-performing and places the loan on non-accrual status when: (1) management determines the borrower is incapable of, or has ceased efforts toward, curing the cause of a default; (2) the loan becomes 90 days delinquent; or (3) the loan experiences a maturity default. Based on the Company’s judgment as to the collectability of principal, a loan on non-accrual status is either accounted for on a cash basis, where interest income is recognized only upon receipt of cash for principal and interest payments, or on a cost-recovery basis, where all cash receipts reduce the loan’s carrying value, and interest income is only recorded when such carrying value has been fully recovered.

During the nine months ended September 30, 2019 and the year end December 31, 2018, no loans were placed on non-accrual status and no losses or impairments were recorded to our loan portfolio.

Loans Held for Investment

Loans that the Company has the intent and ability to hold for the foreseeable future, or until maturity or repayment, are reported at their outstanding principal balances net of any premiums, discounts, loan origination fees and loan loss allowances, if any. Loan origination fees and direct loan origination costs are deferred and recognized in interest income over the estimated life of the loans using the interest method, or on a straight line basis when it approximates the interest method, adjusted for actual prepayments.

The Company evaluates each loan classified as a loan held for investment for impairment on a quarterly basis. Impairment occurs when it is deemed probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan. If the loan is considered to be impaired, a loan loss allowance is recorded to reduce the carrying value of the loan to the present value of the expected future cash flows discounted at the loan’s contractual effective rate, or the fair value of the collateral securing the impaired loan, less estimated costs to sell such collateral, if recovery of the Company’s investment is expected solely from the sale of such collateral. As part of the quarterly impairment review, the Company evaluates the risk of each loan and assigns a risk rating based on a variety of factors, grouped as follows to include, among other factors: (i) loan and credit structure, including the as-is loan-to-value (“LTV”) ratio and structural features; (ii) quality and stability of real estate value and operating cash flow, including debt yield, property type, dynamics of the geographic, property-type and local market, physical condition, stability of cash flow, leasing velocity and quality and diversity of tenancy; (iii) performance against underwritten business plan; and (iv) quality, experience and financial condition of sponsor, borrower and guarantor(s). Based on a 5-point scale, the Company’s loans are rated “1” through “5,” from least risk to greatest risk, respectively, which ratings are defined as follows:

Outperform—Exceeds performance metrics (for example, technical milestones, occupancy, rents, net operating income) included in original or current credit underwriting and business plan;

Meets or Exceeds Expectations—Collateral performance meets or exceeds substantially all performance metrics included in original or current underwriting / business plan;

Satisfactory—Collateral performance meets or is on track to meet underwriting; business plan is met or can reasonably be achieved;

Underperformance—Collateral performance falls short of original underwriting, material differences exist from business plan, or both; technical milestones have been missed; defaults may exist, or may soon occur absent material improvement; and

Risk of Impairment/Default—Collateral performance is significantly worse than underwriting; major variance from business plan; loan covenants or technical milestones have been breached; timely exit from loan via sale or refinancing is questionable.

The Company generally assigns a risk rating of “3” to all newly originated loan investments during the most recent quarter, except in the case of specific circumstances warranting an exception.

Since Inception, the Company has not recognized any impairments on its loan portfolio and has not recorded any loan loss allowances against any of the loans in its portfolio. The Company’s determination of asset-specific loan loss reserves, should any such reserves be necessary, relies on material estimates regarding the fair value of loan collateral. Such losses could be caused by various factors, including, but not limited to, unanticipated adverse changes in the economy or events adversely affecting specific assets, borrowers, industries in which our borrowers operate or markets in which our borrowers or their properties are located. Significant judgment is required when evaluating loans for impairment.

The Company’s loans are typically collateralized by real estate, or in the case of mezzanine loans, by a partnership or similar equity interest in an entity that owns real estate. As a result, the Company regularly evaluates on a loan-by-loan basis the extent and impact of any credit deterioration associated with the performance and/or value of the underlying collateral property as well as the financial and operating capability of the borrower/sponsor. The Company also evaluates the financial strength of loan guarantors, if any, and the borrower’s competency in managing and operating the property or properties. In addition, the Company considers the overall economic environment, real estate sector, and geographic sub-market in which the borrower operates. Such impairment analyses are completed and reviewed by asset management personnel and evaluated by senior management, who utilize various data sources, including (i) periodic financial data such as property occupancy, tenant profile, rental rates, operating expenses, the borrower’s exit plan, and capitalization and discount rates, (ii) site inspections, (iii) sales and financing comparables, (iv) current credit spreads for refinancing and (v) other market data.

Commercial Mortgage-Backed and Commercial Real Estate Collateralized Loan Obligation Securities

The Company acquires CMBS and CRE CLO investments primarily for short-term cash management and investment purposes. On the acquisition date the Company designates CMBS and CRE CLO investments as available-for-sale debt securities. CMBS and CRE CLO investments that are classified as available-for-sale debt securities are recorded at fair value through other comprehensive income (loss) in the Company’s consolidated financial statements. Additionally, CMBS and CRE CLO investments that are not classified as held-to-maturity and which the Company does not hold for the purpose of selling in the near-term, but may dispose of prior to maturity, are also designated as available-for-sale and are carried at fair value. The Company’s recognition of interest income from its CMBS and CRE CLO investments, including its amortization of premium and discount, follows the Company’s revenue recognition policy as described under “Revenue Recognition” above. The Company uses a specific identification method when determining the cost of a security sold and the amount of unrealized gain or loss reclassified from accumulated other comprehensive income (loss) into earnings. Unrealized losses on securities that, in the judgment of management, are other than temporary are charged against earnings as a loss in the consolidated statements of income and comprehensive income. Significant valuation inputs are Level II in the fair value hierarchy as described below under “Fair Value Measurements”.

Portfolio Financing Arrangements

The Company finances certain loan and CMBS and CRE CLO investments using secured revolving repurchase agreements, asset-specific financing arrangements, senior secured and secured credit agreements, collateralized loan obligations, and a term loan facility. The related borrowings are recorded as separate liabilities on the Company’s consolidated balance sheets. Interest income earned on the investments and interest expense incurred on the related borrowings are reported separately on the Company’s consolidated statements of income and comprehensive income.

In certain instances, the Company creates structural leverage through the co-origination or non-recourse syndication of a senior loan interest to a third party. For all such syndications the Company has completed through September 30, 2019, the Company has transferred 100% of the senior mortgage loan that the Company originated on a non-recourse basis to a third-party lender and has retained as a loan investment a separate mezzanine loan investment secured by a pledge of the equity in the mortgage borrower. With respect to the senior mortgage loan transferred, the Company retains: no control over the mortgage loan; no economic interest in the mortgage loan; and no recourse to the purchaser or the borrower. Consequently, based on these circumstances and because the Company does not have any continuing involvement with the transferred senior mortgage loan, these syndications are accounted for as sales under GAAP and are removed from the Company’s consolidated financial statements at the time of transfer. The Company’s consolidated balance sheets only include the separate mezzanine loan remaining after the transfer, and not the non-consolidated senior loan interest sold or co-originated that the Company transferred.

As of December 31, 2018, the Company revised its “Note Payable” naming convention in its consolidated balance sheet to “Asset-Specific Financings”. No amounts reported in prior periods were reclassified between financial statement line items and there was no impact to the Company’s consolidated financial statements resulting from this naming convention change during the current fiscal year.

Fair Value Measurements

The Company follows ASC 820-10, Fair Value Measurements and Disclosures (“ASC 820-10”), for its holdings of financial instruments. ASC 820-10 defines fair value, establishes a framework for measuring fair value in accordance with GAAP and expands disclosure of fair value measurements. ASC 820-10 determines fair value to be the price that would be received for a financial instrument in a current sale, which assumes an orderly transaction between market participants on the measurement date. The Company determines the estimated fair value of financial assets and liabilities using the three-tier fair value hierarchy established by GAAP, which prioritizes the inputs used in measuring fair value. GAAP establishes market-based or observable inputs as the preferred source of values followed by valuation models using management assumptions in the absence of market inputs. The financial instruments recorded at fair value on a recurring basis in the Company’s consolidated financial statements are cash and cash equivalents, restricted cash and available-for-sale CMBS and CRE CLO investments. The three levels of inputs that may be used to measure fair value are as follows:

Level I—Valuations based on quoted prices in active markets for identical assets or liabilities that the Company has the ability to access.

Level II—Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.

Level III—Valuations based on inputs that are unobservable and significant to the overall fair value measurement.

For certain financial instruments, the various inputs that management uses to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the determination of which category within the fair value hierarchy is appropriate for such financial instrument is based on the lowest level of input that is significant to the fair value measurement. The assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the financial instrument. The Company may use valuation techniques consistent with the market and income approaches to measure the fair value of its assets and liabilities. The market approach uses third-party valuations and information obtained from market transactions involving identical or similar assets or liabilities. The income approach uses projections of the future economic benefits of an instrument to determine its fair value, such as in the discounted cash flow methodology. The inputs or methodology used for valuing financial instruments are not necessarily an indication of the risk associated with investing in these financial instruments. Transfers between levels of the fair value hierarchy are assumed to occur at the end of the reporting period.

Income Taxes

The Company qualifies and has elected to be taxed as a REIT for U.S. federal income tax purposes under the Internal Revenue Code of 1986, as amended, commencing with its initial taxable year ended December 31, 2014. To the extent that it annually distributes at least 90% of its REIT taxable income to stockholders and complies with various other requirements as a REIT, the Company generally will not be subject to U.S. federal income taxes on its distributed REIT taxable income. If the Company fails to continue to qualify as a REIT in any taxable year and does not qualify for certain statutory relief provisions, the Company will be subject to U.S. federal and state income taxes at regular corporate rates beginning with the year in which it fails to qualify and may be precluded from being able to elect to be treated as a REIT for the Company’s four subsequent taxable years. Even though the Company currently qualifies for taxation as a REIT, the Company may be subject to certain U.S. federal, state, local and foreign taxes on the Company’s income and property and to U.S. federal income and excise taxes on the Company’s undistributed REIT taxable income.

Deferred tax assets and liabilities are recognized for future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the periods in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period in which the enactment date occurs. Under ASC Topic 740, Income Taxes (“ASC 740”), a valuation allowance is established when management believes it is more likely than not that a deferred tax asset will not be realized. The Company intends to continue to operate in a manner consistent with, and to continue to meet the requirements to be treated as, a REIT for tax purposes and to distribute all of its REIT taxable income. Accordingly, the Company does not expect to pay corporate level federal taxes.

Earnings per Common Share

The Company utilizes the two-class method when assessing participating securities to calculate earnings per common share. Basic and diluted earnings per common share is computed by dividing net income attributable to common stockholders (i.e., holders of common stock and Class A common stock), by the weighted-average number of common shares (both common stock and Class A common stock) outstanding during the period. The preferences, rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications and terms and conditions of redemption of the Class A common stock are identical to the common stock, except (1) the Class A common stock is not a “margin security” as defined in Regulation U of the Board of Governors of the U.S. Federal Reserve System (and rulings and interpretations thereunder) and may not be listed on a national securities exchange or a national market system and (2) each share of Class A common stock is convertible at any time or from time to time, at the option of the holder, for one fully paid and non-assessable share of common stock. The Class A common stock votes together with the common stock as a single class. Shares of Class A common stock have been issued to, and are owned by, TPG RE Finance Trust Management, L.P., a Delaware limited partnership (the “Manager”), and certain individuals or entities who are or were affiliated with the Manager, and the sale or conversion to common stock by investors of such shares of Class A common stock is subject to certain restrictions.

Diluted earnings per common share is calculated by including the effect of dilutive securities. The Company accounts for unvested share-based payment awards that contain non-forfeitable dividend rights or dividend equivalents (whether paid or unpaid) as participating securities, which are included in the computation of earnings per share pursuant to the two-class method.

Share-Based Compensation

Share-based compensation consists of awards issued by the Company to certain employees of affiliates of our Manager and certain members of our Board of Directors. These share-based awards generally vest in installments over a fixed period of time. Deferred stock units granted to the Company’s Board of Directors fully vest on the grant date and accrue dividends that are paid-in kind on a quarterly basis. Compensation expense is recognized in net income on a straight-line basis over the applicable awards’ vesting period. Forfeitures of share-based awards are recognized as they occur.

Deferred Financing Costs

Deferred financing costs are reflected net of the collateralized loan obligations and secured financing arrangements on the Company’s consolidated balance sheets. These costs are amortized in interest expense using the interest method, or on a straight line basis when it approximates the interest method, over the shorter of the initial maturity of the obligation or financing arrangement.

Cash and Cash Equivalents

Cash and cash equivalents include cash held in banks or invested in money market funds with original maturities of less than 90 days. The Company deposits its cash and cash equivalents with high credit quality institutions to minimize credit risk exposure. The Company maintains cash accounts at several financial institutions, which are insured up to a maximum of $250,000 per account as of September 30, 2019 and December 31, 2018. The balances in these accounts may exceed the insured limits.

Restricted Cash

Restricted cash primarily represents deposit proceeds from potential borrowers which may be returned to borrowers, after deducting transaction costs paid by the Company for the benefit of the borrowers, upon the closing of a loan transaction.

Accounts Receivable from Servicer/Trustee

Accounts receivable from Servicer/Trustee represents cash proceeds from loan and CMBS and CRE CLO investment activities that have not been remitted to the Company based on contractual procedures previously agreed upon. Amounts are generally held by the Servicer/Trustee for less than 60 days before being remitted to the Company.

Recently Issued Accounting Pronouncements

In June 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). ASU 2016-13 significantly changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. ASU 2016-13 will replace the “incurred loss” model under existing guidance with an “expected loss” model for instruments measured at amortized cost, and require entities to record allowances for available-for-sale debt securities rather than reduce the carrying amount, as they do today under the other-than-temporary impairment model. Upon adoption, and resulting from this change, the Company expects that it will be required to record a loan loss reserve at origination or acquisition of an individual loan or a loan portfolio. ASU 2016-13 also simplifies the accounting model for purchased credit-impaired debt securities and loans. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019 and is to be adopted through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective.

The Company has a project plan in place, including running parallel production with a current expected credit loss (“CECL”) estimate during the second half of 2019, and adoption of the standard in the first quarter of 2020. Key project development activities for 2019 include the determination of relevant historical data sets for use in estimating expected credit losses, finalization of a credit loss model, development of the qualitative framework, completion and documentation of policies and procedures, additional disclosures, and control testing.

The CECL project plan establishes a parallel processing timeline that includes milestones for enhanced credit loss models and related analytics, development of the qualitative framework, and parallel decision processes. A suite of controls including governance, data, forecast, and model controls have been designed to support the parallel process. Controls will be challenged and enhanced throughout the remainder of 2019, specifically regarding the precision of the controls and extent of documentation.

Initial work to develop the analytical framework, and evaluate sensitivities, indicates that investment vintage, loan-to-value ratio, debt yield and debt service coverage, and economic growth rates are important drivers of estimated expected credit losses. The Company’s project plan incorporates steps to address qualitative adjustments, additional disclosures, and controls related to the credit loss model inputs and results.

The Company will continue to review and challenge its credit loss models, assumptions, methodologies and judgements. The impact to the Company’s financial statements at adoption will also be influenced by the composition and credit quality of its mortgage loan investment portfolio and available-for-sale debt securities at the adoption date, as well as the Company’s macroeconomic forecasts at that time. The cumulative impact of the Company’s estimated expected credit losses will be reflected as an adjustment to retained earnings at adoption. Subsequent increases and decreases to estimated expected credit losses will flow through the Company’s statement of operations.

(3) Loans Held for Investment

The Company currently originates and acquires first mortgage and mezzanine loans secured by commercial properties. These loans can potentially subject the Company to concentrations of credit risk as measured by various metrics, including without limitation property type collateralizing the loan, loan size, loans to a single sponsor and loans in a single geographic area. The Company’s loans held for investment are accounted for at amortized cost.

During the three months ended September 30, 2019, the Company originated or acquired six mortgage loans with a total commitment of $805.3 million, an initial unpaid principal balance of $654.0 million, and unfunded commitments at closing of $151.3 million. For the nine months ended September 30, 2019, the Company originated or acquired 25 mortgage loans with a total commitment of approximately $2.3 billion, initial unpaid principal balance of $1.8 billion, and unfunded commitments at closing of $0.5 billion (including a non-consolidated senior interest with a total loan commitment of $132.0 million). The following tables present an overview of the mortgage loan investment portfolio as of September 30, 2019 and December 31, 2018 (dollars in thousands):

	September 30, 2019
Loans Receivable	Outstanding Principal		Unamortized Premium (Discount), Loan Origination Fees, net			Carrying Amount
Senior loans	$	5,031,640	$	(18,810	)	$	5,012,830
Subordinated and mezzanine loans		5,000		(318	)		4,682
Subtotal before allowance		5,036,640		(19,128	)		5,017,512
Allowance for loan losses		—		—			—
Total	$	5,036,640	$	(19,128	)	$	5,017,512

	December 31, 2018
Loans Receivable	Outstanding Principal		Unamortized Premium (Discount), Loan Origination Fees, net			Carrying Amount
Senior loans	$	4,313,591	$	(19,804	)	$	4,293,787
Subordinated and mezzanine loans		—		—			—
Subtotal before allowance		4,313,591		(19,804	)		4,293,787
Allowance for loan losses		—		—			—
Total	$	4,313,591	$	(19,804	)	$	4,293,787

For the nine months ended September 30, 2019, loan portfolio activity was as follows (dollars in thousands):

	Carrying Value
Balance at December 31, 2018	$	4,293,787
Additions during the period:
Loans originated and acquired		1,782,995
Additional fundings		162,380
Amortization of origination fees		12,621
Deductions during the period:
Collection of principal		(1,234,271	)
Balance at September 30, 2019	$	5,017,512

During the nine months ended September 30, 2019, the Company co-originated a $167.0 million construction loan, of which $132.0 million is accounted for as a non-consolidated senior interest. At closing, the Company retained a mezzanine loan investment with a total loan commitment of $35.0 million, an initial unpaid principal balance of $5.0 million, and an interest rate of LIBOR plus 10.3%. During the three months ended September 30, 2019, no additional loan fundings were made under this loan.

At September 30, 2019 and December 31, 2018, there was no unamortized loan discount or premium included in loans held for investment at amortized cost on the consolidated balance sheets.

The table below summarizes the carrying values and results of the Company’s internal risk rating review performed as of September 30, 2019 and December 31, 2018 (dollars in thousands):

Rating	September 30, 2019		December 31, 2018
1	$	—	$	29,923
2		748,717		959,314
3		4,001,470		3,099,401
4		267,325		205,149
5		—		—
Totals	$	5,017,512	$	4,293,787

Weighted Average Risk Rating⁽¹⁾		2.9		2.8

(1)	Weighted Average Risk Rating calculated based on carrying value at period end.

The weighted average risk rating at September 30, 2019 was 2.9, an increase from the 2.8 weighted average risk rating at December 31, 2018. During the three months ended September 30, 2019, one loan was moved from the Company’s Category 3 risk rating into its Category 2 risk rating, resulting from recent improvements in the operating performance of the underlying collateral. Additionally, during the three months ended September 30, 2019, one loan was moved from the Company’s Category 3 risk rating into its Category 4 risk rating because of the decline in operating performance of the underlying collateral during the current period. The Company generally assigns a risk rating of “3” to all newly originated loan investments during the most recent quarter, except in the case of specific circumstances warranting an exception.

At September 30, 2019 and December 31, 2018, there were no loans on non-accrual status or that were impaired; thus, the Company did not record any allowance for loan losses.

(4) Available-for-Sale Debt Securities

During the nine months ended September 30, 2019, the Company purchased for short-term cash management and investment purposes 27 CRE CLO investments for an aggregate purchase price of $602.4 million. The purchased CRE CLO investments consist of floating rate, investment grade rated debt securities which, in the aggregate, had a weighted average coupon of LIBOR plus 2.0%.

As of September 30, 2019 and December 31, 2018, the Company had 29 and four CMBS and CRE CLO investments, respectively, designated as available-for-sale debt securities. During the three months ended September 30, 2019, the Company sold two of its CMBS investments, and sold a partial interest in one CMBS investment, for total net proceeds of $46.2 million, recognizing a loss on sale of $0.5 million in Other Income, net. Details of the carrying and fair values of the Company’s CMBS and CRE CLO investment portfolio are as follows (dollars in thousands):

	September 30, 2019
	Face Amount		Unamortized Premium (Discount), net		Gross Unrealized Gain (Loss)		Estimated Fair Value
Investments, at Fair Value
CMBS and CRE CLO Investments	$	630,302	$	220	$	1,307	$	631,829

	December 31, 2018
	Face Amount		Unamortized Premium (Discount), net			Gross Unrealized (Loss)			Estimated Fair Value
Investments, at Fair Value
CMBS and CRE CLO Investments	$	76,404	$	(38	)	$	(1,985	)	$	74,381

CMBS and CRE CLO investment fair values are considered Level II fair value measurements within the fair value hierarchy of ASC 820-10. The CMBS and CRE CLO investment fair values are based upon multiple market, broker, and counterparty or pricing services quotations, which provide valuation estimates, based upon reasonable market order indications. The Company reviews the fair value quotations, which are subject to significant variability based on market conditions such as interest rates, credit spreads and market liquidity, for reasonableness and consistency.

The Company’s CMBS and CRE CLO investments have a weighted average contractual maturity, based on estimated fair value, of 15.7 years. The amortized cost and estimated fair value of the Company’s CMBS and CRE CLO investments by contractual maturity are shown in the following table (dollars in thousands):

	September 30, 2019
	Amortized Cost		Estimated Fair Value
Maturity Date
Within five years	$	27,834	$	27,776
After five years		602,688		604,053
Total investment in CMBS and CRE CLO securities, at amortized cost and estimated fair value	$	630,522	$	631,829

	December 31, 2018
	Amortized Cost		Estimated Fair Value
Maturity Date
After one, within five years	$	37,929	$	38,076
After five years		38,436		36,305
Total investment in CMBS and CRE CLO securities, at amortized cost and estimated fair value	$	76,365	$	74,381

As of September 30, 2019, two of the Company’s CMBS and CLO investments were in an unrealized loss position. During the nine months ended September 30, 2019 and year ended December 31, 2018, these CMBS and CLO investments traded at, or near, their carrying values, and interest and principal payments are current. The CMBS and CLO investments that were in an unrealized loss position as of September 30, 2019 were not in an unrealized loss position for more than 12 months. Currently, all of the underlying mortgage loans are performing. No other-than-temporary impairments were recognized through income during the three and nine months ended September 30, 2019 or the year ended December 31, 2018.

(5) Variable Interest Entities and Collateralized Loan Obligations

On November 29, 2018 (the “FL2 Closing Date”), TPG RE Finance Trust CLO Sub-REIT, a subsidiary of the Company (“Sub-REIT”), entered into a collateralized loan obligation (“TRTX 2018-FL2”) through its wholly-owned subsidiaries TRTX 2018-FL2 Issuer, Ltd., an exempted company incorporated in the Cayman Islands with limited liability, as issuer (the “FL2 Issuer”), and TRTX 2018-FL2 Co-Issuer, LLC, a Delaware limited liability company, as co-issuer (the “FL2 Co-Issuer” and together with the FL2 Issuer, the “FL2 Issuers”). On the FL2 Closing Date, FL2 Issuer issued $872.6 million principal amount of notes (the “FL2 Notes”). The FL2 Co-Issuer co-issued $795.1 million principal amount of investment grade-rated notes which were purchased by third party investors. Concurrently with the issuance of the FL2 Notes, the FL2 Issuer also issued preferred shares, par value $0.001 per share and with an aggregate liquidation preference and notional amount equal to $1,000 per share (the “FL2 Preferred Shares” and, together with the FL2 Notes, the “FL2 Securities”), to TRTX 2018-FL2 Retention Holder, LLC, a Delaware limited liability company and wholly-owned subsidiary of the Sub-REIT (“FL2 Retention Holder”). Through FL2 Retention Holder, the Sub-REIT retained ownership of $205.0 million of FL2 Notes issued and FL2 Preferred Shares. Additionally, as of September 30, 2019, the Company holds as an investment $14.7 million (principal amount) of FL2 Notes, all of which were purchased during the three months ended March 31, 2019.

Proceeds from the issuance of the FL2 Securities were used by the FL2 Issuers to purchase two commercial real estate whole loans (the “FL2 Whole Loans”) and 23 fully-funded pari passu participations (the “FL2 Pari Passu Participations,” and, together with the FL2 Whole Loans and the FL2 Additional Interests (as defined below), the “FL2 Mortgage Assets”) in certain commercial real estate mortgage loans. The FL2 Mortgage Assets were purchased by the FL2 Issuer from TRTX CLO Loan Seller 2, LLC, a Delaware limited liability company, wholly-owned subsidiary of the Company and an affiliate of the FL2 Issuers. TRTX 2018-FL2 contains a reinvestment feature that, subject to certain eligibility criteria, allows the Company to contribute new loans or participation interests (the “FL2 Additional Interests”) in loans to TRTX 2018-FL2 in exchange for cash, which provides additional liquidity to the Company to originate new loan investments as underlying loans repay.

For the three months ended September 30, 2019, the Company utilized the reinvestment feature five times, contributing FL2 Additional Interests of $167.9 million, and receiving net cash proceeds of $53.2 million, after the repayment of $114.7 million of existing borrowings, including accrued interest, secured by the FL2 Additional Interests. For the nine months ended September 30, 2019, the Company utilized the reinvestment feature nine times, contributing FL2 Additional Interests of $269.2 million, and receiving net cash proceeds of $76.7 million, after the repayment of $192.5 million of existing borrowings, including accrued interest, secured by the FL2 Additional Interests.

The Company incurred $8.7 million of issuance costs which are amortized on an effective yield basis over the shorter of the remaining life of the loans that collateralized the FL2 Notes, or the FL2 Notes. As of September 30, 2019, the Company’s unamortized issuance costs were $6.7 million.

Interest expense on the outstanding FL2 Notes is payable monthly. For the three and nine months ended September 30, 2019, interest expense (excluding amortization of deferred financing costs) of $7.4 million and $22.7 million, respectively, is included in the Company’s consolidated statements of income and comprehensive income.

As of September 30, 2019, FL2 Mortgage Assets represented 18.3% of the aggregate unpaid principal balance of the Company’s loan investment portfolio and had an aggregate principal balance of $920.0 million.

On February 14, 2018 (the “FL1 Closing Date”), the Sub-REIT entered into a collateralized loan obligation (“TRTX 2018-FL1”) through its wholly-owned subsidiaries TPG Real Estate Finance 2018-FL1 Issuer, Ltd., an exempted company incorporated in the Cayman Islands with limited liability, as issuer (the “FL1 Issuer”), and TPG RE Finance Trust 2018-FL1 Co-Issuer, LLC, a Delaware limited liability company, as co-issuer (the “FL1 Co-Issuer” and together with the FL1 Issuer, the “FL1 Issuers”). On the FL1 Closing Date, FL1 Issuer issued $820.5 million principal amount of notes (the “FL1 Notes”). The FL1 Co-Issuer co-issued $745.9 million principal amount of investment grade-rated notes which were purchased by third party investors. Concurrently with the issuance of the FL1 Notes, the FL1 Issuer also issued preferred shares, par value $0.001 per share and with an aggregate liquidation preference and notional amount equal to $1,000 per share (the “FL1 Preferred Shares” and, together with the FL1 Notes, the “FL1 Securities”), to TPG RE Finance Trust 2018-FL1 Retention Holder, LLC, a Delaware limited liability company and wholly-owned subsidiary of the Sub-REIT (“FL1 Retention Holder”). Through FL1 Retention Holder, the Sub-REIT retained ownership of $186.5 million of the FL1 Notes issued and FL1 Preferred Shares.

Proceeds from the issuance of the FL1 Securities were used by the FL1 Issuers to purchase one commercial real estate whole loan (the “FL1 Whole Loan”) and 25 fully-funded pari passu participations (the “FL1 Pari Passu Participations,” and, together with the FL1 Whole Loan and the FL1 Contributed Companion Participation Interests (as defined below), the “FL1 Mortgage Assets”) in certain commercial real estate mortgage loans. The FL1 Mortgage Assets were purchased by the FL1 Issuer from TPG RE Finance Trust CLO Loan Seller, LLC, a Delaware limited liability company, wholly-owned subsidiary of the Company and an affiliate of the FL1 Issuers. TRTX 2018-FL1 contains a replenishment feature that, subject to certain limitations, allowed the Company to contribute companion participation interests (“FL1 Contributed Companion Participation Interests”) in loans in which TRTX 2018-FL1 already owned an interest in exchange for cash, which provided additional liquidity to the Company to originate new loan investments as underlying loans repay.

On August 16, 2019, the Company redeemed TRTX 2018-FL1 utilizing its contractual call option, by repurchasing all of the outstanding FL1 Securities for total consideration of $509.5 million. The collateral interests related to the redeemed FL1 Securities were refinanced with secured revolving repurchase agreement borrowings, which generated additional net cash proceeds of $32.2 million. For the three months ended September 30, 2019, as a result of the redeeming TRTX 2018-FL1, the Company expensed $0.04 million of unamortized issuance costs as interest expense in the consolidated statements of income and comprehensive income.

The Company incurred approximately $9.8 million of issuance costs which are amortized on an effective yield basis over the shorter of the remaining life of the loans that collateralized the FL1 Notes, or the FL1 Notes.

Interest expense on the outstanding FL1 Notes is payable monthly. For the three and nine months ended September 30, 2019, interest expense (excluding amortization of deferred financing costs) of $1.7 million and $11.6 million, respectively, is included in the Company’s consolidated statements of income and comprehensive income.

In accordance with ASC 810, the Company evaluated the key attributes of the FL2 Issuers and the FL1 Issuers to determine if they were VIEs and, if so, whether the Company was the primary beneficiary of their operating activities. This analysis caused the Company to conclude that the FL2 Issuers and FL1 Issuers were VIEs and that the Company was the primary beneficiary. The Company is the primary beneficiary of the VIEs because it has the ability to control the most significant activities of the FL2 Issuers and the FL1 Issuers, the obligation to absorb losses, and the right to receive benefits, that could potentially be significant to these entities. As a result, the Company consolidates the FL2 Issuers and FL1 Issuers.

The Company’s total assets and total liabilities as of September 30, 2019 and December 31, 2018 included the following VIE assets and liabilities of TRTX 2018-FL2 and TRTX 2018-FL1 (dollars in thousands):

	September 30, 2019			December 31, 2018
ASSETS
Cash and Cash Equivalents	$	2,215		$	3,896
Accounts Receivable from Servicer/Trustee		80,159			94,763
Accrued Interest Receivable		1,423			3,672
Loans Held for Investment		920,008			1,824,281
Total Assets	$	1,003,805		$	1,926,612
LIABILITIES
Accrued Interest Payable	$	(1,266	)	$	(2,637	)
Accrued Expenses		(619	)		(668	)
Collateralized Loan Obligations		(788,388	)		(1,514,790	)
Total Liabilities	$	(790,273	)	$	(1,518,095	)

The following table outlines TRTX 2018-FL2 and TRTX 2018-FL1 loan collateral and borrowings under the TRTX 2018-FL2 and TRTX 2018-FL1 collateralized loan obligations as of September 30, 2019 and December 31, 2018 (dollars in thousands):

September 30, 2019
Collateral (loan investments)				Debt (notes issued)
Outstanding Principal		Carrying Value		Face Value			Carrying Value
$	920,009	$	920,009	$	(795,133	)	$	(788,388	)

December 31, 2018
Collateral (loan investments)				Debt (notes issued)
Outstanding Principal		Carrying Value		Face Value			Carrying Value
$	1,824,281	$	1,824,281	$	(1,527,237	)	$	(1,514,790	)

Assets held by the FL2 Issuers and the FL1 Issuers are restricted and can only be used to settle obligations of the related VIE. The liabilities of the FL2 Issuers and the FL1 Issuers are non-recourse to the Company and can only be satisfied from the assets of the related VIE.

(6) Secured Revolving Repurchase Agreements, Senior Secured and Secured Credit Agreements, Term Loan Facility, and Asset-Specific Financing

At September 30, 2019 and December 31, 2018, the Company had secured revolving repurchase agreements, senior secured and secured credit agreements, a term loan facility and asset-specific financings for certain of the Company’s originated loans. In general, these financing arrangements bear interest at a rate equal to LIBOR plus a credit spread determined primarily by advance rate and property type. The financing arrangements contain covenants that include certain financial requirements, including maintenance of minimum liquidity, minimum tangible net worth, maximum debt to net worth ratio, current ratio and limitations on capital expenditures, indebtedness, distributions, transactions with affiliates and maintenance of positive net income as defined in the agreements.

The following table presents certain information regarding the Company’s secured revolving repurchase agreements, senior secured and secured credit agreements, and asset-specific financing as of September 30, 2019 and December 31, 2018. Except as otherwise noted, all agreements are on a non-recourse basis (dollars in thousands):

	September 30, 2019
Financing Arrangement	Maturity Date	Index Rate	Weighted Average Credit Spread			Interest Rate			Commitment Amount		Maximum Current Availability		Balance Outstanding		Principal Balance of Collateral
Secured Revolving Repurchase Agreements
Goldman Sachs⁽¹⁾	08/19/20	1 Month LIBOR		2.0	%		4.0	%	$	750,000	$	268,941	$	481,059	$	743,422
Wells Fargo⁽¹⁾	04/18/22	1 Month LIBOR		1.7			3.7			750,000		26,126		723,874		996,196
Barclays⁽¹⁾	08/13/22	1 Month LIBOR		1.5			3.6			750,000		453,396		296,604		370,900
Morgan Stanley⁽¹⁾	05/04/20	1 Month LIBOR		2.1			4.1			500,000		152,419		347,581		461,922
JP Morgan⁽¹⁾	08/20/21	1 Month LIBOR		1.7			3.7			590,290		—		590,290		753,045
US Bank⁽¹⁾	07/09/22	1 Month LIBOR		1.6			3.7			285,003		23,210		261,793		328,619
Subtotal - Loan Investments									$	3,625,293	$	924,092	$	2,701,201	$	3,654,104
Goldman Sachs⁽²⁾	10/07/19	1 Month LIBOR		1.0	%		3.1	%		27,494		—		27,494		32,942
JP Morgan⁽²⁾	10/16/19	1 Month LIBOR		0.9			2.9			396,189		—		396,189		453,635
Wells Fargo⁽²⁾	10/18/19	1 Month LIBOR		1.0			3.0			111,140		—		111,140		130,557
Royal Bank of Canada⁽²⁾	N/A	N/A	N/A			N/A				—		—		—		—
Subtotal - CMBS and CRE CLO Investments									$	534,823		—	$	534,823	$	617,134
Subtotal									$	4,160,116	$	924,092	$	3,236,024	$	4,271,238

Term Loan Facility
Institutional Asset Manager	10/31/19	1 Month LIBOR	N/A			N/A			$	750,000	$	750,000		—		—

Senior Secured and Secured Credit Agreements
Bank of America⁽¹⁾	09/29/20	1 Month LIBOR		1.8	%		3.8	%		500,000		298,363		201,637		253,954
Citibank⁽³⁾	07/12/20	1 Month LIBOR		2.3			4.3			160,000		127,400		32,600		14,572
Subtotal									$	660,000	$	425,763	$	234,237	$	268,526

Asset-specific Financing
BMO Harris Bank⁽¹⁾	04/09/20	1 Month LIBOR		2.7	%		4.7	%	$	32,500		—	$	32,500	$	45,000
Institutional Lender	10/09/20	1 Month LIBOR		4.2			6.2			77,000		—		77,000		112,000
Subtotal									$	109,500		—	$	109,500	$	157,000

Total									$	5,679,616	$	2,099,855	$	3,579,762	$	4,696,764

(1)	Borrowings under secured revolving repurchase agreements, a senior secured credit agreement, and one asset-specific financing arrangement with a guarantee for 25% recourse.

(2)

Borrowings under secured revolving repurchase agreements with a guarantee for 100% recourse. Maturity Date represents the sooner of the next maturity date of the CMBS and CRE CLO investment secured revolving repurchase agreement, or roll over date for the applicable underlying trade confirmation, subsequent to September 30, 2019. All of the financing arrangements were extended subsequent to period end.

(3)	Borrowings under the secured credit agreement with a guarantee for 100% recourse.

	December 31, 2018
Asset-specific Financing	Maturity Date	Index Rate	Weighted Average Credit Spread			Interest Rate			Commitment Amount		Maximum Current Availability		Balance Outstanding		Principal Balance of Collateral
BMO Harris Bank⁽¹⁾	04/09/20	1 Month LIBOR		2.7	%		4.0	%	$	32,500		—	$	32,500	$	45,000
Subtotal									$	32,500		—	$	32,500	$	45,000

Secured Revolving Repurchase Agreements
Goldman Sachs⁽¹⁾	08/19/19	1 Month LIBOR		2.2	%		4.6	%	$	750,000	$	558,836	$	191,164	$	474,243
Wells Fargo⁽¹⁾	05/25/19	1 Month LIBOR		1.8			4.3			750,000		503,792		246,208		339,012
Morgan Stanley⁽¹⁾	05/04/19	1 Month LIBOR		2.2			4.7			500,000		317,493		182,507		244,936
JP Morgan⁽¹⁾	08/20/21	1 Month LIBOR		2.2			4.6			400,000		214,471		185,529		254,026
US Bank⁽¹⁾	10/09/21	1 Month LIBOR		1.8			4.3			212,840		6,800		206,040		262,929
Goldman Sachs (CMBS and CRE CLO)⁽²⁾	01/02/19	1 Month OIS		0.6			2.9			100,000		67,303		32,697		38,517
Royal Bank of Canada (CMBS and CRE CLO)⁽²⁾	N/A	N/A	N/A			N/A				100,000		100,000		—		—
Subtotal									$	2,812,840	$	1,768,695	$	1,044,145	$	1,613,663

Senior Secured and Secured Credit Agreements
Bank of America⁽¹⁾	09/29/20	1 Month LIBOR		1.9	%		4.2	%	$	500,000	$	112,560		387,440		494,247
Citibank⁽³⁾	07/12/20	1 Month LIBOR		2.3			4.8			160,000		87,059		72,941		169,134
Subtotal									$	660,000	$	199,619	$	460,381	$	663,381

Total									$	3,505,340	$	1,968,314	$	1,537,026	$	2,322,044

(1)	Borrowings under secured revolving repurchase agreements, a senior secured credit agreement, and one asset-specific financing arrangement with a guarantee for 25% recourse.

(2)

Borrowings under secured revolving repurchase agreements with a guarantee for 100% recourse. Maturity Date represents the sooner of the next maturity date of the CMBS and CRE CLO investment secured revolving repurchase agreement, or roll over date for the applicable underlying trade confirmation, subsequent to December 31, 2018. All of the financing arrangements were extended subsequent to period end.

(3)	Borrowings under the secured credit agreement with a guarantee for 100% recourse.

Secured Revolving Repurchase Agreements

The Company frequently utilizes secured revolving repurchase agreements to finance the direct origination or acquisition of commercial real estate mortgage loans, and CMBS and CRE CLO investments. Under these secured revolving repurchase agreements, the Company transfers all of its rights, title and interest in the loans, CMBS and CRE CLO investments to the repurchase counterparty in exchange for cash, and simultaneously agrees to reacquire the asset at a future date for an amount equal to the cash exchanged plus an interest factor. The repurchase counterparty collects all principal and interest on related loans or CMBS and CRE CLO investments and remits to the Company only the net after collecting its interest and other fees. The loan and CMBS and CRE CLO investments related secured revolving repurchase agreements are 25% and 100% recourse to Holdco, respectively.

At September 30, 2019 and December 31, 2018, the Company had six and five secured revolving repurchase agreements to finance its loan investing activities, respectively. Credit spreads vary depending upon the collateral type and advance rate. Assets pledged at September 30, 2019 and December 31, 2018 consisted of 63 and 51 mortgage loans, or participation interests therein, respectively. The Company’s secured revolving repurchase agreements secured by commercial mortgage loans are considered long-term borrowings.

During the three months ended September 30, 2019, the Company closed a $750 million secured revolving repurchase agreement with Barclays Bank PLC with a maturity date of August 13, 2022.

At September 30, 2019 and December 31, 2018, the Company had four and two secured revolving repurchase agreements to finance its CMBS and CRE CLO investment activities, of which the commitment amounts are based on the assets pledged. Credit spreads also vary depending upon the collateral type and advance rate. CMBS and CRE CLO investments pledged consisted of 27 CRE CLO investments at September 30, 2019 and two CMBS investments at December 31, 2018.

The Company’s secured revolving repurchase agreements secured by CMBS and CRE CLO investments are considered short-term borrowings.

The following table summarizes certain characteristics of the Company’s secured revolving repurchase agreements secured by commercial mortgage loans and CMBS and CRE CLO investments, including counterparty concentration risks, at September 30, 2019 (dollars in thousands):

	September 30, 2019
Loan Financings	Commitment Amount		UPB of Collateral		Carrying Value of Collateral⁽¹⁾		Amounts Payable⁽²⁾		Net Counterparty Exposure⁽³⁾		Percent of Stockholders' Equity			Days to Extended Maturity⁽⁴⁾
Goldman Sachs Bank	$	750,000	$	743,422	$	745,105	$	481,852	$	263,253		18.0	%		1,054
Wells Fargo Bank		750,000		996,196		997,588		724,730		272,858		18.6			931
Barclays		750,000		370,900		370,299		297,045		73,254		5.0			1,048
Morgan Stanley Bank⁽⁴⁾		500,000		461,922		460,110		348,412		111,698		7.6		N/A
JP Morgan Chase Bank		590,290		753,045		750,018		590,820		159,198		10.9			1,420
US Bank		285,003		328,619		327,975		262,102		65,873		4.5			1,744
Subtotal / Weighted Average	$	3,625,293	$	3,654,104	$	3,651,095	$	2,704,961	$	946,134					1,184

CMBS and CRE CLO Investment Financings
Goldman Sachs Bank	$	27,494	$	32,942	$	33,138	$	27,594	$	5,544		0.4	%		7
JP Morgan		396,189		453,635		459,030		396,723		62,307		4.2			17
Wells Fargo		111,140		130,557		131,306		111,388		19,918		1.4			18
Royal Bank of Canada		—		—		—		—		—		—			—
Subtotal / Weighted Average	$	534,823	$	617,134	$	623,474	$	535,705	$	87,769					17

Total / Weighted Average - Loans, CMBS and CRE CLO	$	4,160,116	$	4,271,238	$	4,274,569	$	3,240,666	$	1,033,903					968

(1)

Loan amounts shown in the table include interest receivable of $14.4 million and are net of premium, discount and origination fees of $17.5 million. CMBS and CRE CLO investment amounts shown in the table include interest receivable of $4.7 million and are net of premium, discount, and unrealized gains of $1.6 million.

(2)	Loan amounts shown in the table include interest payable of $3.8 million and do not reflect unamortized deferred financing fees of $12.2 million. CMBS and CRE CLO investments shown in the table include interest payable of $0.9 million.

(3)

Loan amounts represent the net carrying value of the commercial real estate assets sold under agreements to repurchase, including accrued interest plus any cash or assets on deposit to secure the repurchase obligation, less the amount of the repurchase liability, including accrued interest. CMBS and CRE CLO investment amounts represents the net carrying value of available-for-sale securities sold under agreements to repurchase, including accrued interest plus any cash or assets on deposit to secure the repurchase obligation, less the amount of the repurchase liability, including accrued interest.

(4)

The secured revolving repurchase agreement provided by Morgan Stanley Bank is excluded from the “Days to Extended Maturity” column because it has no limit on the maximum number of permitted extensions, subject to satisfaction of certain conditions and approvals. CMBS and CRE CLO investment extended maturity represents the sooner of the next maturity date of the CMBS and CRE CLO investment secured revolving repurchase agreement, or roll date for the applicable underlying trade confirmation, subsequent to September 30, 2019.

	December 31, 2018
Loan Financings	Commitment Amount		UPB of Collateral		Carrying Value of Collateral⁽¹⁾		Amounts Payable⁽²⁾		Net Counterparty Exposure⁽³⁾		Percent of Stockholders' Equity			Days to Extended Maturity⁽⁴⁾
Goldman Sachs Bank	$	750,000	$	474,243	$	472,797	$	191,705	$	281,092		21.2	%		231
Wells Fargo Bank		750,000		339,012		338,531		246,635		91,896		6.9			876
Morgan Stanley Bank⁽⁴⁾		500,000		244,936		245,932		183,901		62,031		4.7		N/A
JP Morgan Chase Bank		400,000		254,026		253,145		185,892		67,253		5.1			1,693
US Bank		212,840		262,929		261,916		206,422		55,494		4.2			1,743
Subtotal / Weighted Average	$	2,612,840	$	1,575,146	$	1,572,321	$	1,014,555	$	557,766					1,125

CMBS and CRE CLO Investment Financings
Goldman Sachs Bank	$	100,000	$	38,517	$	36,414	$	32,984	$	3,430		0.3	%		2
Royal Bank of Canada		100,000		—		—		—		—		—			—
Subtotal / Weighted Average	$	200,000	$	38,517	$	36,414	$	32,984	$	3,430					2

Total / Weighted Average - Loans, CMBS and CRE CLO	$	2,812,840	$	1,613,663	$	1,608,735	$	1,047,539	$	561,196					1,083

(1)

Loan amounts shown in the table include interest receivable of $14.5 million and are net of premium, discount and origination fees of $17.3 million. CMBS and CRE CLO investment amounts shown in the table include interest receivable of $0.1 million and are net of premium, discount, and unrealized gains of $2.2 million.

(2)	Loan amounts shown in the table include interest payable of $3.1 million and do not reflect unamortized deferred financing fees of $6.7 million. CMBS and CRE CLO investment amounts shown in the table include interest payable of $0.3 million.

(3)

Loan amounts represent the net carrying value of the commercial real estate assets sold under agreements to repurchase, including accrued interest plus any cash or assets on deposit to secure the repurchase obligation, less the amount of the repurchase liability, including accrued interest. CMBS and CRE CLO investment amounts represent the net carrying value of available-for-sale securities sold under agreements to repurchase, including accrued interest plus any cash or assets on deposit to secure the repurchase obligation, less the amount of the repurchase liability, including accrued interest.

(4)

The secured revolving repurchase agreement provided by Morgan Stanley Bank is excluded from the “Days to Extended Maturity” column because it has no limit on the maximum number of permitted extensions, subject to satisfaction of certain conditions and approvals. CMBS and CRE CLO investment extended maturity represents the sooner of the next maturity date of the CMBS and CRE CLO secured revolving repurchase agreement, or roll date for the applicable underlying trade confirmation, subsequent to December 31, 2018.

The agreements include various covenants covering net worth, liquidity, recourse limitations, and debt coverage. The Company was in compliance with all covenants as of September 30, 2019 and December 31, 2018.

Term Loan Facility

The Company is the borrower under a term loan facility with an institutional asset manager as the lender. The term loan facility has capacity up to $750 million, bears interest at LIBOR plus 1.85%, and allows for an advance rate of no less than 70% and up to 85% based on the loans pledged to the facility. The term loan facility is non-recourse and has no mark-to-market provisions. As of September 30, 2019, the Company had no loan investments pledged to the term loan facility and no outstanding borrowings.

The agreement includes various covenants covering net worth, liquidity, recourse limitations, and debt coverage. The Company was in compliance with all covenants as of September 30, 2019 and December 31, 2018.

Senior Secured and Secured Credit Agreements

The Company has a senior secured credit agreement with Bank of America N.A. that has a maximum commitment amount of $500 million and $201.6 million outstanding as of September 30, 2019. The senior secured credit agreement bears interest at LIBOR plus 1.8%. The current initial maturity of this agreement is September 29, 2020.

The Company has a secured credit agreement (the “Credit Agreement”), as borrower, with Citibank, N.A. as administrative agent and lender, and Citigroup Global Markets Inc. as sole lead arranger and sole lead book running manager. The Credit Agreement governs a secured revolving credit agreement with aggregate secured borrowing capacity of up to $160.0 million, subject to borrowing base availability and certain other conditions, which the Company uses to finance originations or acquisitions of eligible loans on an interim basis until permanent financing is arranged. The Credit Agreement has an initial maturity date of July 12, 2020, and borrowings bear interest at an interest rate per annum equal to one-month LIBOR or the applicable base rate plus a margin of 2.25%. The initial advance rate on borrowings under the Credit Agreement with respect to individual pledged assets can vary up to 70%, and may decline over the borrowing term of up to a 90-day period, after which borrowings against that respective asset must be repaid. At September 30, 2019, $32.6 million was outstanding on the Credit Agreement.

Asset-Specific Financings

As of September 30, 2019 and December 31, 2018, the Company had two and one asset-specific financing arrangements, respectively, to finance certain of its lending activities.

On April 2, 2019, the Company entered into an asset-specific financing with an institutional lender that is secured by one loan held for investment. The asset-specific financing does not provide for additional advances. As of September 30, 2019, the asset-specific financing principal balance is $77.0 million and bears interest at LIBOR plus 4.2%. The current initial maturity of this agreement is October 9, 2020.

The BMO Harris asset-specific financing outstanding at September 30, 2019 allows for additional advances up to a specified cap and is secured by one loan held for investment. Holdco has delivered a payment guarantee in favor of BMO Harris, the lender, as additional credit support for the financing. The liability of Holdco under this guarantee is generally capped at 25% of the outstanding obligations of the special purpose subsidiary which is the primary obligor under the financing. In addition, Holdco has delivered a non-recourse carveout guarantee, which can trigger recourse to Holdco as a result of certain “bad boy” defaults for losses incurred by BMO Harris or the entire outstanding obligations of the financing borrower, depending on the nature of the “bad boy” default in question. As of September 30, 2019, the asset-specific financing principal balance is $32.5 million and bears interest at LIBOR plus 2.7%. The current initial maturity of this agreement is April 9, 2020. The BMO Harris asset-specific financing is guaranteed by Holdco, and the agreement includes guarantor covenants regarding liquid assets and net worth requirements.

The asset-specific financing agreements include various covenants covering net worth, liquidity, recourse limitations, and debt coverage. The Company was in compliance with all covenants as of September 30, 2019 and December 31, 2018.

(7) Schedule of Maturities

The future principal payments for the five years subsequent to September 30, 2019 and thereafter are as follows (in thousands):

	Collateralized loan obligations		Secured revolving repurchase agreements		Senior secured and secured credit agreements		Term loan facility		Asset-specific financing
2019	$	114,547	$	808,748	$	—	$	—	$	—
2020		254,323		1,103,299		234,237		—		109,500
2021		276,149		696,805		—		—		—
2022		135,414		627,172		—		—		—
2023		—		—		—		—		—
Thereafter		—		—		—		—		—
Total	$	780,433	$	3,236,024	$	234,237	$	—	$	109,500

(8) Fair Value Measurements

The Company’s consolidated balance sheet includes Level I fair value measurements related to cash equivalents, restricted cash, accounts receivable, and accrued liabilities. At September 30, 2019, the Company had $97.9 million invested in money market funds with original maturities of less than 90 days. The carrying values of these financial assets and liabilities are reasonable estimates of fair value because of the short-term maturities of these instruments. The consolidated balance sheet also includes Loans Held for Investment, the assets and liabilities of TRTX 2018-FL1 (as of December 31, 2018) and TRTX 2018-FL2 (as of September 30, 2019 and December 31, 2018), and secured financing arrangements that are considered Level III fair value measurements that are not measured at fair value on a recurring basis, but are subject to fair value adjustments utilizing the fair value of the underlying collateral when there is evidence of impairment. The Company did not have any non-recurring fair value items as of September 30, 2019 and December 31, 2018.

The following tables provide information about financial assets and liabilities not carried at fair value on a recurring basis in our consolidated balance sheet (dollars in thousands):

	September 30, 2019
			Fair Value
	Carrying Value		Level I		Level II		Level III
Financial Assets
Loans Held for Investment	$	5,017,512		—		—	$	5,044,210
Financial Liabilities
Term Loan Facility		—		—		—		—
Collateralized Loan Obligations		773,688		—		—		773,688
Secured Financing Arrangements		3,565,238		—		—		3,565,238

	December 31, 2018
			Fair Value
	Carrying Value		Level I		Level II		Level III
Financial Assets
Loans Held for Investment	$	4,293,787		—		—	$	4,317,844
Financial Liabilities
Term Loan Facility		113,504		—		—		113,504
Collateralized Loan Obligations		1,509,930		—		—		1,509,930
Secured Financing Arrangements		1,526,449		—		—		1,526,449

Level III fair values were determined based on standardized valuation models and significant unobservable market inputs, including holding period, discount rates based on LTV ratio, property type and loan pricing expectations developed by the Manager that were corroborated with other institutional lenders to determine a market spread that was added to the one-month LIBOR forward curve. There were no transfers of financial assets or liabilities within the fair value hierarchy during the three months ended September 30, 2019 or December 31, 2018.

At September 30, 2019 and December 31, 2018, the estimated fair value of Loans Held for Investment was $5.0 billion and $4.3 billion, respectively. The weighted average gross spread at September 30, 2019 and December 31, 2018 was 3.7% and 3.9%, respectively. The weighted average years to maturity at September 30, 2019 and December 31, 2018 was 3.8 years and 3.9 years, respectively, assuming full extension of all loans.

At September 30, 2019 and December 31, 2018, the carrying value of the secured financing agreements approximates fair value as current borrowing spreads reflect market terms. At September 30, 2019 and December 31, 2018, the carrying value of the assets and liabilities of TRTX 2018-FL1 and TRTX 2018-FL2 approximates fair value as current borrowing spreads reflect market terms.

(9) Income Taxes

The Company indirectly owns 100% of the equity of multiple taxable REIT subsidiaries (collectively “TRSs”), including certain of its TRTX 2018-FL1 and TRTX 2018-FL2 subsidiaries. Taxable REIT subsidiaries are subject to applicable U.S. federal, state, local and foreign income tax on their taxable income. In addition, as a REIT, the Company also may be subject to a 100% excise tax on certain transactions between it and its TRSs that are not conducted on an arm’s-length basis. The Company files income tax returns in the United States federal jurisdiction as well as various state and local jurisdictions. The filings are subject to normal reviews by regulatory agencies until the related statute of limitations expires, with open tax years for all years since the Company’s initial capitalization in 2014. The years open to examination generally range from 2015 to present.

ASC 740 also prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The Company has analyzed its various federal and state filing positions and believes that its income tax filing positions and deductions are well documented and supported. As of September 30, 2019 and December 31, 2018, based on the Company’s evaluation, there is no reserve for any uncertain income tax positions.

The Company’s policy is to classify interest and penalties associated with underpayment of U.S. federal and state income taxes, if any, as a component of general and administrative expense on its consolidated statements of income and comprehensive income. For the three and nine months ended September 30, 2019 and 2018, respectively the Company did not have interest or penalties associated with the underpayment of any income taxes.

For the three and nine months ended September 30, 2019 and 2018, the Company incurred no federal, state and local tax expense relating to its TRSs. For the three months ended September 30, 2019 and 2018, the Company recognized $0.1 million and $0.0 million, respectively, of federal, state and local tax expense. For the nine months ended September 30, 2019 and 2018, the Company recognized $0.5 million and $0.2 million, respectively, of federal, state and local tax expense. At September 30, 2019 and 2018, the Company’s effective tax rate was 0.6% and 0.3%, respectively.

At September 30, 2019 and December 31, 2018, the Company had no deferred tax assets or liabilities.

(10) Related Party Transactions

Management Agreement

The Company is externally managed and advised by the Manager pursuant to the terms of a management agreement, dated July 25, 2017, between the Company and the Manager (as amended, the “Management Agreement”). On May 2, 2018, the Company and the Manager amended the Management Agreement solely for the purpose of amending the definitions of “Equity,” “Core Earnings” and “Incentive Compensation” in the Management Agreement. The changes were effected to include equity issued by subsidiaries of the Company in the definition of Equity, and to exclude distributions on equity issued by subsidiaries from the calculation of the Manager’s Incentive Compensation.

Pursuant to the Management Agreement, the Company pays the Manager a base management fee equal to the greater of $250,000 per annum ($62,500 per quarter) or 1.50% per annum (0.375% per quarter) of the Company’s “Equity.” The base management fee is payable in cash, quarterly in arrears. As amended, “Equity” means (a) the sum of (1) the net proceeds received by the Company and, without duplication, the Company’s subsidiaries, from all issuances of the Company’s and the subsidiaries’ equity securities, including for the avoidance of doubt issuances of common stock and Class A common stock by the Company prior to the completion of the Company’s initial public offering (for purposes of calculating this amount, the net proceeds received by the Company from all issuances of the Company’s outstanding common stock and Class A common stock prior to the completion of the Company’s initial public offering equals approximately $1.0 billion), plus (2) the value of contributions, including, without limitation, contributions of assets or interests in assets in exchange for equity securities, made by persons other than the Company or a subsidiary of the Company, from time to time, to the capital of the Company or another subsidiary of the Company plus (3) the Company’s cumulative Core Earnings for the period commencing on the completion of the Company’s initial public offering to the end of the most recently completed calendar quarter, and (b) less (1) any distributions made by the Company to the holders of the Company’s equity securities and any distributions made by the Company’s subsidiaries to the holders of the subsidiaries’ equity securities (other than to the Company or another subsidiary of the Company) following the completion of the Company’s initial public offering, (2) any amount that the Company or any of the Company’s subsidiaries has paid to repurchase for cash the Company’s common stock or Class A common stock following the completion of the Company’s initial public offering and (3) any Incentive Compensation earned by the Manager following the completion of the Company’s initial public offering. With respect to that portion of the period from and after the completion of the Company’s initial public offering that is used in the calculation of Incentive Compensation or the base management fee, all items in the foregoing sentence (other than the Company’s cumulative Core Earnings) will be calculated on a daily weighted average basis.

The Manager is also entitled to incentive compensation which is calculated and payable in cash with respect to each calendar quarter following the completion of the Company’s initial public offering (or part thereof that the Management Agreement is in effect) in arrears in an amount, not less than zero, equal to the difference between: (1) the product of (a) 20% and (b) the difference between (i) the Company’s Core Earnings for the most recent 12-month period (or such lesser number of completed calendar quarters, if applicable), including the calendar quarter (or part thereof) for which the calculation of incentive compensation is being made (the “applicable period”), and (ii) the product of (A) the Company’s Equity in the most recent 12-month period (or such lesser number of completed calendar quarters, if applicable), including the applicable period, and (B) 7% per annum; and (2) the sum of any incentive

compensation paid to the Manager with respect to the first three calendar quarters of the most recent 12-month period (or such lesser number of completed calendar quarters preceding the applicable period, if applicable). No incentive compensation is payable to the Manager with respect to any calendar quarter unless Core Earnings for the 12 most recently completed calendar quarters (or such lesser number of completed calendar quarters following the completion of the Company’s initial public offering) is greater than zero. For purposes of calculating the Manager’s incentive compensation, the Management Agreement, as amended, specifies that equity securities of the Company or any of the Company’s subsidiaries that are entitled to a specified periodic distribution or have other debt characteristics will not constitute equity securities and will not be included in “Equity” for the purpose of calculating incentive compensation. Instead, the aggregate distribution amount that accrues to such equity securities during the calendar quarter of such calculation will be subtracted from Core Earnings, before incentive compensation for purposes of calculating incentive compensation, unless such distribution is otherwise excluded from Core Earnings.

As amended, “Core Earnings” means the net income (loss) attributable to the holders of the Company’s common stock and Class A common stock and, without duplication, the holders of the Company’s subsidiaries’ equity securities (other than the Company or any of the Company’s subsidiaries), computed in accordance with GAAP, including realized gains and losses not otherwise included in net income (loss), and excluding (i) non-cash equity compensation expense, (ii) the Incentive Compensation, (iii) depreciation and amortization, (iv) any unrealized gains or losses or other similar non-cash items that are included in net income for the applicable period, regardless of whether such items are included in other comprehensive income or loss or in net income and (v) one-time events pursuant to changes in GAAP and certain material non-cash income or expense items, in each case after discussions between the Manager and the Company’s independent directors and approved by a majority of the Company’s independent directors.

The Company is required to reimburse the Manager or its affiliates for documented costs and expenses incurred by it and its affiliates on the Company’s behalf except those specifically required to be borne by the Manager or its affiliates under the Management Agreement. The Company’s reimbursement obligation is not subject to any dollar limitation. The Manager or its affiliates is responsible for, and the Company will not reimburse the Manager or its affiliates for, the expenses related to the personnel of the Manager and its affiliates who provide services to the Company. However, the Company will reimburse the Manager for the Company’s allocable share of the compensation (including, without limitation, annual base salary, bonus, any related withholding taxes and employee benefits) paid to (1) the Manager’s personnel serving as the Company’s chief financial officer based on the percentage of his or her time spent managing the Company’s affairs and (2) other corporate finance, tax, accounting, internal audit, legal risk management, operations, compliance and other non-investment personnel of the Manager or its affiliates who spend all or a portion of their time managing the Company’s affairs, based on the percentage of time devoted by such personnel to the Company’s and the Company’s subsidiaries’ affairs.

Management Fees Incurred and Paid for the three and nine months ended September 30, 2019 and September 30, 2018

For the three and nine months ended September 30, 2019 and 2018, the Company incurred and paid the following management fees and incentive management fees pursuant to the Management Agreement (dollars in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Management Agreement fees incurred	$	7,586	$	6,047	$	21,465	$	17,586
Management Agreement fees paid		7,371		5,909		19,979		16,771

Management fees and incentive management fees included in payable to affiliates on the consolidated balance sheets at September 30, 2019 and December 31, 2018 are $7.6 million and $6.0 million, respectively.

The Company is responsible for reimbursing the Manager for certain expenses paid by the Manager on behalf of the Company or for certain services provided by the Manager to the Company. Expenses incurred by the Manager and reimbursed by the Company are reflected in the respective consolidated statements of income and comprehensive income expense category or the consolidated balance sheets based on the nature of the item. For the three months ended September 30, 2019 and 2018, the Company reimbursed the Manager $0.3 million, respectively for expenses that were incurred on its behalf. For the nine months ended September 30, 2019 and 2018, the Company reimbursed the Manager $0.9 million, respectively for expenses that were incurred on its behalf.

As of September 30, 2019, $0.2 million remained outstanding that was reimbursable by the Company to the Manager. As of December 31, 2018, no amounts remained outstanding that were reimbursable by the Company to the Manager.

Termination Fee

A termination fee will be payable to the Manager upon termination of the Management Agreement by the Company absent a cause event. The termination fee would also be payable to the Manager upon termination of the Management Agreement by the Manager if the Company materially breaches the Management Agreement. The termination fee is equal to three times the sum of (x) the average annual base management fee and (y) the average annual incentive compensation earned by the Manager, in each case during the 24-month period immediately preceding the most recently completed calendar quarter prior to the date of termination or, if such termination occurs prior to July 25, 2019, and such termination fee is payable, the base management fees and the incentive compensation will be annualized for the period from July 25, 2017 to July 25, 2019 based on such fees actually received by the Manager during such period.

(11) Earnings per Share

The Company calculates its basic and diluted earnings per share using the two-class method for all periods presented, as the unvested restricted shares of its common stock granted to certain current and former employees and affiliates of the Manager, qualify as participating securities. These restricted shares have the same rights as the Company’s other shares of common stock and Class A common stock, including participating in any dividends, and therefore have been included in the Company’s basic and diluted earnings per share calculation. For the three months ended September 30, 2019 and 2018, $0.1 million and $.03 million, respectively of common stock dividends declared and undistributed net income attributable to common stockholders were allocated to unvested shares of our common stock pursuant to stock grants made under the Company’s Incentive Plan (see Note 13 for details). For the nine months ended September 30, 2019 and 2018, $0.4 million and $0.1 million, respectively of common stock dividends declared and undistributed net income attributable to common stockholders were allocated to unvested shares of our common stock pursuant to stock grants made under the Company’s Incentive Plan.

The following table sets forth the calculation of basic and diluted earnings per common share (common stock and Class A common stock) based on the weighted-average number of shares of common stock and Class A common stock outstanding (in thousands, except share and per share data):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Net Income Attributable to TPG RE Finance Trust, Inc.	$	33,022		$	26,824		$	93,396		$	78,373
Participating Securities' Share in Earnings		(113	)		(27	)		(392	)		(96	)
Net Income Attributable to Common Stockholders	$	32,909		$	26,797		$	93,004		$	78,277
Weighted Average Common Shares Outstanding, Basic and Diluted		74,126,890			64,295,973			72,149,684			61,635,988
Per Common Share Amount, Basic and Diluted	$	0.44		$	0.42		$	1.29		$	1.27

(1)	Totals may not sum due to rounding

(12) Stockholders’ Equity

Equity Distribution Agreement

On March 7, 2019, the Company and the Manager entered into an equity distribution agreement with each of Citigroup Global Markets Inc., J.P. Morgan Securities LLC, JMP Securities LLC, Wells Fargo Securities, LLC and TPG Capital BD, LLC (each a “Sales Agent” and, collectively, the “Sales Agents”) relating to the issuance and sale by the Company of shares of its common stock, $0.001 par value per share, pursuant to a continuous offering program. In accordance with the terms of the equity distribution agreement, the Company may, at its discretion and from time to time, offer and sell shares of its common stock having an aggregate gross sales price of up to $125.0 million through the Sales Agents, each acting as the Company’s agent. The offering of shares of the Company’s common stock pursuant to the equity distribution agreement will terminate upon the earlier of (1) the sale of shares of the Company’s common stock subject to the equity distribution agreement having an aggregate gross sales price of $125.0 million and (2) the termination of the equity distribution agreement by the Sales Agents or the Company at any time as set forth in the equity distribution agreement.

Each Sales Agent will be entitled to commissions in an amount not to exceed 1.75% of the gross sales prices of shares of the Company’s common stock sold through it, as the Company’s agent. For the three and nine months ended September 30, 2019, no shares of common stock were sold pursuant to the equity distribution agreement.

Dividends

Upon the approval of the Company’s Board of Directors, dividends are accrued by the Company. Dividends are paid first to the holders of the Company’s Series A preferred stock at the rate of 12.5% of the total $0.001 million liquidation preference per annum plus all accumulated and unpaid dividends thereon, and then to the holders of the Company’s common stock and Class A common stock. The Company intends to distribute each year substantially all of its taxable income to its stockholders to comply with the REIT provisions of the Internal Revenue Code of 1986, as amended.

Preferred Stock

During the three and nine months ended September 30, 2019, a subsidiary of the Company declared and paid a dividend of $0.003 million and $0.01 million, respectively on the subsidiary’s outstanding Series A preferred shares. No dividends were paid on the subsidiary’s outstanding Series A preferred shares during the three and nine months ended September 30, 2018.

Common and Class A Common Stock

On September 17, 2019, the Company’s Board of Directors declared a dividend for the third quarter of 2019 in the amount of $0.43 per share of common stock and Class A common stock, or $32.0 million in the aggregate, which dividend was payable on October 25, 2019 to holders of record of our common stock and Class A common stock as of September 27, 2019. On September 18, 2018, the Company declared a dividend for the third quarter of 2018 in the amount of $0.43 per share of common stock and Class A common stock, or $28.9 million in the aggregate, which was paid on October 25, 2018 to holders of record of our common stock and Class A common stock as of September 28, 2018.

For the nine months ended September 30, 2019 and 2018, common stock and Class A common stock dividends in the amount of $95.6 million and $80.1 million were declared and approved, respectively.

As of September 30, 2019 and December 31, 2018, $32.0 million and $29.0 million, respectively, remain unpaid and are reflected in dividends payable on the Company’s consolidated balance sheets.

Other Comprehensive Gain (Loss) Income

For the three months ended September 30, 2019 and 2018, other comprehensive gain (loss) income was $0.1 million and $0.5 million, respectively. For the nine months ended September 30, 2019 and 2018, other comprehensive (loss) income was $3.3 million and $(1.1) million, respectively. Other comprehensive (loss) income is a result of unrealized (losses) gains on available-for-sale securities (CMBS and CRE CLO investments held at period-end).

(13) Share-based Incentive Plan

The Company does not have any employees as it is externally managed by the Manager. However, as of September 30, 2019, certain individuals employed by an affiliate of the Manager and certain members of the Company’s Board of Directors were compensated, in part, through the issuance of share-based instruments.

The Company’s Board of Directors has adopted, and the Company’s stockholders have approved, the TPG RE Finance Trust, Inc. 2017 Equity Incentive Plan (the “Incentive Plan”). The Incentive Plan provides for the grant of equity-based awards to the Company’s, and its affiliates’, directors, officers, employees (if any) and consultants, and the members, officers, directors, employees and consultants of our Manager or its affiliates, as well as to our Manager and other entities that provide services to us and our affiliates and the employees of such entities. The total number of shares of common stock or long term incentive plan (“LTIP”) units that may be awarded under the Incentive Plan is 4,600,463. The Incentive Plan will automatically expire on the tenth anniversary of its effective date, unless terminated earlier by the Company’s Board of Directors.

Generally, the shares vest in installments over a four-year period, pursuant to the terms of the award and the Incentive Plan. As of September 30, 2019, there were 263,000 shares of common stock that will vest as follows: 35,404 shares in 2019; 93,876 shares in 2020; 93,877 shares in 2021; and 39,843 shares in 2022. As of September 30, 2019, total unrecognized compensation cost relating to unvested share-based compensation arrangements was $4.2 million. This non-cash expense is expected to be recognized over a weighted average period of 1.5 years from September 30, 2019. For the three and nine months ended September 30, 2019, the Company recognized $0.5 million and $2.0 million, respectively of share-based compensation expense as general and administrative expense in the consolidated statements of income and comprehensive income. For the three and nine months ended September 30, 2018, the Company recognized $0.1 million and $0.5 million, respectively of share-based compensation expense as general and administrative expense in the consolidated statements of income and comprehensive income.

During the nine months ended September 30, 2019, the Company issued deferred stock units to the non-management members of the Company’s Board of Directors. The deferred stock units were fully vested on the grant date and accrue dividends that are paid-in kind on a quarterly basis. On May 14, 2019, the Company issued, and the non-management members of the Company’s Board of Directors received, deferred stock units with an aggregate fair value of $0.3 million, which is included in share-based compensation expense as general and administrative expense in the consolidated statements of income and comprehensive income.

During the three months ended September 30, 2019, the Company accrued 424 shares of common stock for dividends that are paid-in kind to non-management members of its Board of Directors related to the dividend payable to holders of record of our common stock and Class A common stock as of September 27, 2019.

(14) Commitments and Contingencies

Unfunded Commitments

As of September 30, 2019 and December 31, 2018, the Company had $661.4 million and $634.2 million, respectively, of unfunded commitments related to loans held for investment. These commitments are not reflected on the consolidated balance sheets.

Litigation

From time to time, the Company may be involved in various claims and legal actions arising in the ordinary course of business. The Company establishes an accrued liability for loss contingencies when a settlement arising from a legal proceeding is both probable and reasonably estimable. If a legal matter is not probable and reasonably estimable, no such liability is recorded. Examples of this include (i) early stages of a legal proceeding, (ii) damages that are unspecified or cannot be determined, (iii) discovery has not started or is incomplete or (iv) there is uncertainty as to the outcome of pending appeals or motions. If these items exist, an estimated range of potential loss cannot be determined and as such the Company does not record an accrued liability.

As of September 30, 2019 and December 31, 2018, the Company was not involved in any material legal proceedings and has not recorded an accrued liability for loss contingencies.

(15) Concentration of Credit Risk

Property Type

A summary of the loan portfolio by property type as of September 30, 2019 and December 31, 2018 based on total loan commitment and current unpaid principal balance (“UPB”) is as follows (dollars in thousands):

	September 30, 2019
Property Type	Loan Commitment		Unfunded Commitment		% of Loan Commitment			Loan UPB		% of Loan UPB
Office	$	2,581,098	$	424,828		45.2	%	$	2,156,270		43.0	%
Multifamily		1,391,725		70,433		24.4			1,321,292		26.2
Hotel		716,293		71,036		12.6			645,257		12.8
Mixed Use		703,725		86,968		12.4			616,757		12.2
Condominium		101,208		3,356		1.8			97,852		1.9
Retail		91,999		4,787		1.6			87,212		1.7
Other		112,000		—		2.0			112,000		2.2
Total	$	5,698,048	$	661,408		100.0	%	$	5,036,640		100.0	%

	December 31, 2018
Property Type	Loan Commitment		Unfunded Commitment		% of Loan Commitment			Loan UPB		% of Loan UPB
Office	$	1,898,511	$	316,510		38.5	%	$	1,582,001		36.8	%
Multifamily		1,247,860		131,177		25.2			1,116,683		25.9
Mixed Use		838,200		114,748		16.9			723,452		16.8
Hotel		508,450		10,896		10.3			497,554		11.5
Retail		233,555		50,247		4.7			183,308		4.2
Condominium		154,673		10,580		3.1			144,093		3.3
Industrial		66,500		—		1.3			66,500		1.5
Total	$	4,947,749	$	634,158		100.0	%	$	4,313,591		100.0	%

Geography

All of the Company’s loans held for investment are secured by properties within the United States. The geographic composition of loans held for investment based on total loan commitment and current UPB as of September 30, 2019 and December 31, 2018 is as follows (dollars in thousands):

	September 30, 2019
Geographic Region	Loan Commitment		Unfunded Commitment		% of Loan Commitment			Loan UPB		% of Loan UPB
East	$	2,519,990	$	223,043		44.2	%	$	2,296,947		45.5	%
South		1,236,798		120,045		21.7			1,116,753		22.2
West		1,034,479		185,646		18.2			848,833		16.9
Midwest		683,704		108,770		12.0			574,934		11.4
Various		223,077		23,904		3.9			199,173		4.0
Total	$	5,698,048	$	661,408		100.0	%	$	5,036,640		100.0	%

	December 31, 2018
Geographic Region	Loan Commitment		Unfunded Commitment		% of Loan Commitment			Loan UPB		% of Loan UPB
East	$	2,084,807	$	170,131		42.1	%	$	1,914,676		44.4	%
South		1,525,173		270,933		30.8			1,254,240		29.1
West		760,416		100,422		15.4			659,994		15.3
Midwest		577,353		92,672		11.7			484,681		11.2
Total	$	4,947,749	$	634,158		100.0	%	$	4,313,591		100.0	%

Category

A summary of the loan portfolio by category as of September 30, 2019 and December 31, 2018 based on total loan commitment and current UPB is as follows (dollars in thousands):

	September 30, 2019
Loan Category	Loan Commitment		Unfunded Commitment		% of Loan Commitment			Loan UPB		% of Loan UPB
Bridge	$	2,337,442	$	77,387		41.1	%	$	2,260,055		44.9	%
Light Transitional		1,700,366		179,674		29.8			1,520,692		30.2
Moderate Transitional		1,625,240		374,347		28.5			1,250,893		24.8
Construction		35,000		30,000		0.6			5,000		0.1
Total	$	5,698,048	$	661,408		100.0	%	$	5,036,640		100.0	%

	December 31, 2018
Loan Category	Loan Commitment		Unfunded Commitment		% of Loan Commitment			Loan UPB		% of Loan UPB
Bridge	$	2,414,456	$	199,397		48.8	%	$	2,215,059		51.3	%
Light Transitional		1,513,227		212,290		30.6			1,300,937		30.2
Moderate Transitional		1,020,066		222,471		20.6			797,595		18.5
Total	$	4,947,749	$	634,158		100.0	%	$	4,313,591		100.0	%

Loan commitments represent principal commitments made by the Company at September 30, 2019 and December 31, 2018, respectively.

(16) Subsequent Events

The following events occurred subsequent to September 30, 2019:

Investment Activity

From October 1, 2019 through October 28, 2019, the Company has closed, or is in the process of closing, five first mortgage loans with a total loan commitment amount of $475.8 million and an estimated initial unpaid principal balance of $428.9 million.

Senior Mortgage Loan Repayments

From October 1, 2019 through October 28, 2019, the Company received full loan repayments related to seven of its first mortgage loans with a total loan commitment and unpaid principal balance of $369.4 million and $365.9 million, respectively. These mortgage loan repayments consist of six Category 3 risk rated loans with a total loan commitment of $290.4 million and unpaid principal balance of $286.9 million, and a Category 2 risk rated loan with a total loan commitment of $79.0 million and unpaid principal balance $79.0 million, as of September 30, 2019. In connection with the repayment in full of a $45.0 million first mortgage loan, the Company retired the BMO Harris asset-specific financing totaling $32.5 million.

Financing Activity

On October 25, 2019 (the “FL3 Closing Date”), TPG RE Finance Trust CLO Sub-REIT, a subsidiary of the Company (“Sub-REIT”), entered into a collateralized loan obligation (“TRTX 2019-FL3”) through its wholly-owned subsidiaries TRTX 2019-FL3 Issuer, Ltd., an exempted company incorporated in the Cayman Islands with limited liability, as issuer (the “FL3 Issuer”), and TRTX 2019-FL3 Co-Issuer, LLC, a Delaware limited liability company, as co-issuer (the “FL3 Co-Issuer” and together with the FL3 Issuer, the “FL3 Issuers”). On the FL3 Closing Date, FL3 Issuer issued $1,230.3 million principal amount of notes (the “FL3 Notes”). The FL3 Co-Issuer co-issued $1,039.6 million principal amount of investment grade-rated notes which were purchased by third party investors. Concurrently with the issuance of the FL3 Notes, the FL3 Issuer also issued preferred shares, par value $0.001 per share and with an aggregate liquidation preference and notional amount equal to $1,000 per share (the “FL3 Preferred Shares” and, together with the FL3 Notes, the “FL3 Securities”), to TRTX Master Retention Holder, LLC, a Delaware limited liability company and wholly owned subsidiary of the Sub-REIT (“FL3 Retention Holder”). Through FL3 Retention Holder, the Sub-REIT retained ownership of $190.7 million of FL3 Notes issued and FL3 Preferred Shares.

Proceeds from the issuance of the FL3 Securities were used by the FL3 Issuers to purchase 2 commercial real estate whole loans (the “FL3 Whole Loans”) and 20 fully-funded pari passu participations in mortgage loans (the “FL3 Pari Passu Participations,” and, together with the FL3 Whole Loans and the FL3 Additional Interests (as defined below), the “FL3 Mortgage Assets”) in certain commercial real estate mortgage loans. The FL3 Mortgage Assets were purchased by the FL3 Issuer from TRTX Master CLO Loan Seller, LLC, a Delaware limited liability company, a wholly-owned subsidiary of the Company and an affiliate of the FL3 Issuers. TRTX 2019-FL3 contains a modification feature to allow the FL3 Issuer to modify certain economic terms, including without limitation, the interest rate and maturity date of FL3 Mortgage Assets, subject to certain limitations, to provide additional flexibility with respect to the underlying collateral where appropriate to do so. TRTX 2019-FL3 also contains a reinvestment feature that, subject to certain eligibility criteria, allows the Company during the 24 months after closing of FL3 to contribute new loans or participation interests (the “FL3 Additional Interests”) in loans to TRTX 2019-FL3 in exchange for cash, which provides additional liquidity to the Company to originate new loan investments as underlying loans repay.

Cash Dividend

On October 25, 2019, the Company paid a cash dividend on its common stock and Class A common stock of $0.43 per share, or $32.0 million, to stockholders of record as of September 27, 2019.

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

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 SEC on February 26, 2019. In addition to historical data, this discussion contains forward-looking statements about our business, results of operations, cash flows, and financial condition based on current expectations that involve risks, uncertainties and assumptions. See “Cautionary Note Regarding Forward-Looking Statements”. Our actual results may differ materially from those in this discussion as a result of various factors, including but not limited to those discussed under the heading Item 1A – “Risk Factors” in our Form 10-K filed with the SEC on February 26, 2019.

Overview

We are a commercial real estate finance company externally managed by TPG RE Finance Trust Management, L.P. and sponsored by TPG. We directly originate, acquire and manage commercial mortgage loans and other commercial real estate-related investments in North America for our balance sheet. Our objective is to provide attractive risk-adjusted returns to our stockholders over time through cash distributions and capital appreciation. To meet our objective, we focus primarily on directly originating and selectively acquiring floating rate first mortgage loans that are secured by high quality commercial real estate properties undergoing some form of transition and value creation, such as retenanting, refurbishment or other form of repositioning. The collateral underlying our loans is located in primary and select secondary markets in the U.S. that we believe have attractive economic conditions and commercial real estate fundamentals. We operate our business as one segment.

As of September 30, 2019, our mortgage loan investment portfolio consisted of 69 first mortgage loans (or interests therein) and one mezzanine loan with total loan commitments of $5.7 billion, an aggregate unpaid principal balance of $5.0 billion, a weighted average credit spread of 3.7%, a weighted average all-in yield of 6.0%, a weighted average term to extended maturity (assuming all extension options have been exercised by borrowers) of 3.8 years, and a weighted average LTV of 65.9%. As of September 30, 2019, 100.0% of the loan commitments in our portfolio consisted of floating rate loans, of which 99.9% were first mortgage loans and 0.1% was a mezzanine loan. As of September 30, 2019, we had $661.4 million of unfunded loan commitments, our funding of which is subject to borrower satisfaction of certain milestones.

In addition, as of September 30, 2019, we held for cash management and short-term investment purposes 29 CMBS and CRE CLO investments, with an aggregate face amount of $630.3 million and a weighted average coupon, including LIBOR, of 4.1%.

We have made an election to be taxed as a REIT for U.S. federal income tax purposes, commencing with our initial taxable year ended December 31, 2014. We believe we have been organized and have operated in conformity with the requirements for qualification and taxation as a REIT under the Internal Revenue Code and we believe that our organization and current and intended manner of operation will enable us to continue to meet the requirements for qualification and taxation as a REIT. As a REIT, we generally are not subject to U.S. federal income tax on our REIT taxable income that we distribute currently to our stockholders. We operate our business in a manner that permits us to maintain an exclusion or exemption from registration under the Investment Company Act.

Our Manager

We are externally managed by our Manager, TPG RE Finance Trust Management, L.P., an affiliate of TPG. TPG manages investments across multiple asset classes, including private equity, real estate, energy, infrastructure, credit and hedge funds. Our Manager manages our investments and our day-to-day business and affairs in conformity with our investment guidelines and other policies that are approved and monitored by our board of directors. Our Manager is responsible for, among other matters, (A) the selection, origination or purchase and sale of our portfolio investments, (B) our financing activities and (C) providing us with investment advisory services. Our Manager is also responsible for our day-to-day operations and performs (or causes to be performed) such services and activities relating to our investments and business and affairs as may be appropriate. Our investment decisions are approved by an investment committee of our Manager that is comprised of senior investment professionals of TPG, including a senior investment professional of TPG's real estate equity group. For a summary of certain terms of the management agreement between us and our Manager (the “Management Agreement”), see Note 10 to our Consolidated Financial Statements included in this Form 10-Q.

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 September 30, 2019, we recorded earnings per diluted common share of $0.44, an increase of $0.01 from the quarter ended June 30, 2019, primarily due to growth in our net interest income, offset by the impact of the issuance of 6.9 million common shares during the current year. Core Earnings per diluted common share was $0.45 for the three months ended September 30, 2019, an increase of $0.01 from the prior quarter.

For the three months ended September 30, 2019, we declared a cash dividend of $0.43 per share. Our book value per common share as of September 30, 2019 was $19.78, a $0.02 increase from our book value per common share as of June 30, 2019, primarily due to an increase in GAAP net income during the current period. As further described below, Core Earnings is a measure that is not prepared in accordance with GAAP. We use Core Earnings to evaluate our performance excluding the effects of certain transactions and GAAP adjustments that we believe are not necessarily indicative of our current loan activity and operations.

Earnings Per Common Share and Dividends Declared Per Common Share

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
	September 30, 2019		June 30, 2019
Net Income Attributable to TPG RE Finance Trust, Inc.⁽¹⁾	$	33,022	$	31,965
Weighted Average Number of Common Shares Outstanding, Basic and Diluted⁽²⁾		74,126,890		73,963,337
Basic and Diluted Earnings per Common Share⁽²⁾	$	0.44	$	0.43
Dividends Declared per Common Share⁽²⁾	$	0.43	$	0.43

(1)	Represents net income attributable to holders of our common stock and Class A common stock.

(2)	Weighted average number of shares outstanding includes common stock and Class A 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), 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 the 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 and Class A 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.

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
	September 30, 2019		June 30, 2019
Net Income Attributable to Common Stockholders⁽¹⁾	$	32,909	$	31,827
Non-Cash Compensation Expense		452		881
Depreciation and Amortization Expense		—		—
Unrealized Gains (Losses)		—		—
Other Items		—		—
Core Earnings	$	33,361	$	32,708
Weighted-Average Common Shares Outstanding, Basic and Diluted⁽²⁾		74,126,890		73,963,337
Core Earnings per Common Share, Basic and Diluted⁽²⁾	$	0.45	$	0.44

(1)	Represents GAAP net income attributable to our common and Class A common stockholders.

(2)	Weighted average number of shares outstanding includes common stock and Class A common stock.

Book Value Per Common Share

The following table sets forth the calculation of our book value per share (in thousands, except share and per share data):

	September 30, 2019		June 30, 2019
Total Stockholders’ Equity	$	1,466,295	$	1,464,757
Preferred Stock		125		125
Stockholders’ Equity, Net of Preferred Stock	$	1,466,170	$	1,464,632
Number of Common Shares Outstanding at Period End⁽¹⁾⁽²⁾		74,125,051		74,139,409
Book Value per Common Share⁽²⁾	$	19.78	$	19.76

(1)	Includes shares of common stock and Class A common stock.

(2)	Number of common shares outstanding at period end includes common stock and Class A common stock.

Third Quarter 2019 Highlights

Operating Results:

•

Generated GAAP net income of $33.0 million, an increase of $1.0 million, or 3.1%, as compared to the quarter ended June 30, 2019.

•

Increased Core Earnings to $33.4 million, or $0.45 per share, an increase of $0.7 million as compared to the quarter ended June 30, 2019.

•

Declared dividends of $32.0 million, or $0.43 per share, representing an annualized dividend yield of 8.7% on book value per common share of $19.78 as of September 30, 2019.

Investment Portfolio Activity:

•

Originated six loans with a total commitment of $805.3 million, an initial unpaid principal balance of $654.0 million, unfunded commitments upon closing of $151.3 million, a weighted average LTV of 70.1%, and a weighted average interest rate of LIBOR plus 2.89%.

•

Funded $45.2 million of commitments in connection with existing loans with future funding obligations.

•

Received proceeds of $511.9 million from principal repayments from our loan portfolio.

Portfolio Financing Activity:

•

On August 16, 2019, we redeemed TRTX 2018-FL1 utilizing its contractual call option, by repurchasing all of the outstanding FL1 Securities for total consideration of $509.5 million.

•

Closed a $750 million secured revolving repurchase agreement with Barclays Bank PLC with a maturity date of August 13, 2022.

Available Liquidity:

•

At September 30, 2019, we had unrestricted cash available for investment of $99.3 million, a portion of which is subject to certain liquidity covenants, and CMBS and CRE CLO investments with an aggregate face amount of $630.3 million available-for-sale.

•

At September 30, 2019, we had undrawn capacity (liquidity available to us without the need to pledge more collateral to our lenders) of $118.1 million under secured revolving repurchase agreements, senior secured and secured credit agreements, and a term loan facility, with nine lenders to finance our loan investment activity:

•

These financing arrangements have an aggregate maximum commitment amount of $5.0 billion and a weighted average interest rate of LIBOR plus 1.8%, providing stable financing, with mark-to-market provisions limited to asset and, in one instance, market-specific events and a weighted average term to extended maturity (assuming we have exercised all extension options and term out provisions) of 3.2 years.

•

As of September 30, 2019, we had $5.6 billion of financing capacity under secured revolving repurchase agreements, senior secured and secured credit agreements, and a term loan facility, provided by ten lenders to finance our loan and CMBS and CLO investment activities. Our ability to draw on this capacity is dependent upon our lenders’ willingness to accept as collateral loan or CMBS and CRE CLO investments we pledge to them to secure additional borrowings:

•

These financing arrangements have an aggregate maximum commitment amount of $5.6 billion and credit spreads based upon the LTV and other risk characteristics of collateral pledged, which together provide stable financing with mark-to-market provisions generally limited to asset and, in one instance, market-specific events, and a weighted average term to extended maturity (assuming we have exercised all extension options and term out provisions) of 2.7 years. These financing arrangements are generally 25% recourse to Holdco, except with respect to our secured credit agreement, which is 100% recourse to Holdco, and our term loan facility which is non-recourse.

•

Financing capacity available for CMBS and CRE CLO investments under four secured revolving repurchase agreements is based upon the haircut and other risk characteristics at the time the collateral is pledged. The weighted average term to extended maturity (assuming we have exercised all extension options and term out provisions and have obtained the consent of our lenders) of our outstanding borrowings is less than one month. These agreements are 100% recourse to Holdco.

Portfolio Overview

Loan Portfolio

During the three months ended September 30, 2019, we originated six loans with a total loan commitment amount of $805.3 million, of which $654.0 million was funded at closing. Other loan fundings included $45.2 million of deferred fundings related to previously originated loan commitments, and proceeds from loan repayments totaled $511.9 million. We generated interest income of $92.4 million, incurred interest expense of $47.9 million, and generated net interest income of $44.5 million during the three months ended September 30, 2019.

The following table details our loan activity by unpaid principal balance (dollars in thousands):

	Three Months Ended			Nine Months Ended
	September 30, 2019			September 30, 2019
Loan originations and acquisitions — initial funding	$	654,032		$	1,794,940
Other loan fundings⁽¹⁾		45,249			162,380
Loan repayments		(511,868	)		(1,234,271	)
Total loan fundings, net	$	187,413		$	723,049

(1)	Additional fundings made under existing loan commitments during the three months ended September 30, 2019.

The following table details overall statistics for our loan portfolio as of September 30, 2019 (dollars in thousands):

	Total Loan Portfolio			Balance Sheet Portfolio
Number of loans		71			70
Floating rate loans (by unpaid principal balance)		100.0	%		100.0	%
Total loan commitment	$	5,830,048		$	5,698,048
Unpaid principal balance	$	5,036,640		$	5,036,640
Unfunded loan commitments⁽¹⁾	$	661,408		$	661,408
Carrying value	$	5,017,512		$	5,017,512
Weighted average credit spread⁽²⁾		3.7	%		3.7	%
Weighted average all-in yield⁽²⁾		6.0	%		6.0	%
Weighted average term to extended maturity (in years)⁽³⁾		3.8			3.8
Weighted average LTV⁽⁴⁾		65.9	%		65.9	%

(1)

Unfunded loan commitments may be funded over the term of each loan, subject in certain cases to an expiration date or a force-funding date, primarily to finance property improvements or lease-related expenditures by our borrowers, to finance operating deficits during renovation and lease-up, and in some instances to finance development.

(2)

As of September 30, 2019, our floating rate loans were indexed to LIBOR. In addition to credit spread, all-in yield includes the amortization of deferred origination fees, purchase price premium and discount, loan origination costs and accrual of both extension and exit fees. Credit spread and all-in yield for the total portfolio assumes the applicable floating benchmark rate as of September 30, 2019 for weighted average calculations.

(3)

Extended maturity assumes all extension options are exercised by the borrower; provided, however, that our loans may be repaid prior to such date. As of September 30, 2019, based on the unpaid principal balance of our total loan exposure, 61.8% of our loans were subject to yield maintenance or other prepayment restrictions and 38.2% were open to repayment by the borrower without penalty.

(4)

Except for construction loans, LTV is calculated for loan originations and existing loans as the total outstanding principal balance of the loan or participation interest in a loan (plus any financing that is pari passu with or senior to such loan or participation interest) as of September 30, 2019, divided by the as-is real estate value at the time of origination or acquisition of such loan or participation interest. For construction loans only, LTV is calculated as the total commitment amount of the loan divided by the as-stabilized value of the real estate securing the loan. The as-is or as-stabilized (as appropriate) value reflects our Manager’s estimates, at the time of origination or acquisition of the loan or participation interest in a loan, of the real estate value underlying such loan or participation interest determined in accordance with our Manager’s underwriting standards and consistent with third-party appraisals obtained by our Manager.

See Note 16 to the Consolidated Financial Statements included in this Form 10-Q for details about our mortgage loan originations subsequent to September 30, 2019.

CMBS and CRE CLO Investment Portfolio

We invest from time to time in CMBS and CRE CLO investments as part of our investment strategy, often as a short-term cash management tool. As of September 30, 2019, our CMBS and CRE CLO investment portfolio consisted of two fixed rate and 27 floating rate securities, the underlying collateral of which consists of first mortgage loans secured by commercial real estate properties. The underlying real estate collateral is located across the United States, primarily in Texas, with no state representing more than 15.1% of an investment’s current face amount. Additionally, the payment of principal and interest on the securities on our CMBS investments at September 30, 2019 is guaranteed by a U.S. Government agency or a U.S. government sponsored enterprise (“GSE”). Our CRE CLO investments are floating rate securities with an expected weighted average life of 3.6 years.

The following table details overall statistics for our CMBS and CRE CLO investment portfolio as of September 30, 2019 (dollars in thousands):

				CRE CLO Investments⁽¹⁾			CMBS Investments⁽¹⁾
	Total Investments			Floating Rate			Fixed Rate
Number of CMBS and CRE CLO investments⁽¹⁾		29			27			2
CMBS and CRE CLO investments (by current face amount)		100.0	%		95.6	%		4.4	%
Initial Par value	$	640,437		$	602,437		$	38,000
Current face amount⁽¹⁾	$	630,302		$	602,433		$	27,869
Weighted average coupon⁽²⁾		4.4	%		4.4	%		4.5	%
Weighted average yield to expected maturity⁽³⁾		4.0	%		4.0	%		3.8	%
Weighted average life (in years)		3.4			3.6			0.5
Weighted average principal repayment window (in years)		3.3			3.4			0.3
Contractual maturity (in years)		15.7			16.4			0.6
Ratings range⁽⁴⁾	Unrated to AAA			BBB- to AAA			Unrated

(1)	CRE CLO investments exclude the Company’s holdings of TRTX 2018-FL2 Notes as of September 30, 2019. Current face amount is weighted by estimated fair value as of September 30, 2019.

(2)	Weighted average coupon includes LIBOR of 2.02% as of September 30, 2019. Amounts disclosed are before giving effect to unamortized purchase price premium and discount and unrealized gains or losses.

(3)	Weighted average yield to expected maturity based on expected principal repayment window.

(4)

The largest CMBS investment is a structured finance investment that is 100% collateralized by multifamily mortgage loans underwritten by the Federal Home Loan Mortgage Corporation (“FHLMC”), which loans are slated for near term securitization by FHLMC. Upon the contractual maturity of the structured finance investment, FHLMC is required to purchase all of the performing mortgage loans at par. Currently, all of the underlying mortgage loans are performing. The other CMBS investment is a structured finance investment issued by Fannie Mae which is backed by mortgage loans primarily on multifamily properties that satisfy GSE program requirements. These bonds are unrated but carry a government guaranty.

Asset Management

We actively manage the assets in our portfolio from closing to final repayment. We are party to an agreement with Situs Asset Management, LLC (“Situs”), one of the largest commercial mortgage loan servicers, pursuant to which Situs provides us with dedicated asset management employees for performing asset management services pursuant to our proprietary guidelines. Following the closing of an investment, this dedicated asset management team rigorously monitors the investment under our Manager’s oversight, with an emphasis on ongoing financial, legal and quantitative analyses. Through the final repayment of an investment, the asset management team maintains regular contact with borrowers, servicers and local market experts monitoring performance of the collateral, anticipating borrower, property and market issues, and enforcing our rights and remedies when appropriate.

Our Manager reviews our entire loan portfolio quarterly, undertakes an assessment of the performance of each loan, and assigns it a risk rating between “1” and “5,” from least risk to greatest risk, respectively. See Notes 2 and 3 to our Consolidated Financial Statements included in this Form 10-Q for a discussion regarding the risk rating system that we use in connection with our portfolio. The following table allocates the carrying value of our loan portfolio as of September 30, 2019 and December 31, 2018 based on our internal risk ratings (dollars in thousands):

	September 30, 2019				December 31, 2018
Risk Rating	Carrying Value		Number of Loans		Carrying Value		Number of Loans
1	$	—		—	$	29,923		1
2		748,717		10		959,314		12
3		4,001,470		52		3,099,401		41
4		267,325		8		205,149		6
5		—		—		—		—
Totals	$	5,017,512		70	$	4,293,787		60

For the period ended September 30, 2019 and December 31, 2018 the weighted average risk rating of our total loan exposure based on carrying value was 2.9 and 2.8, respectively.

Investment Portfolio Financing

Our portfolio financing arrangements during the period ended September 30, 2019 and December 31, 2018 included collateralized loan obligations, secured revolving repurchase agreements, senior secured and secured credit agreements, a term loan facility, and asset-specific financing arrangements. We had one outstanding non-consolidated senior interest at September 30, 2019, with a total loan commitment of $132.0 million, and no non-consolidated senior interests outstanding at December 31, 2018.

The following table details our portfolio financing arrangements at September 30, 2019 and December 31, 2018 (dollars in thousands):

	Portfolio Financing Outstanding Principal Balance
	September 30, 2019		December 31, 2018
Secured revolving repurchase agreements	$	3,236,024	$	1,044,145
Collateralized loan obligations		780,433		1,522,377
Senior secured and secured credit agreements		234,237		460,381
Term loan facility		—		114,262
Asset-specific financings		109,500		32,500
Total indebtedness⁽¹⁾	$	4,360,194	$	3,173,665

(1)	Excludes deferred financing costs of $21.3 million and $23.8 million as of September 30, 2019 and December 31, 2018, respectively.

Secured Revolving Repurchase Agreements

As of September 30, 2019, aggregate borrowings outstanding under our secured revolving repurchase agreements totaled $3.2 billion, of which $2.7 billion related to our mortgage loan investments. As of September 30, 2019, for our secured revolving repurchase agreements related to our mortgage loan investments, the weighted average interest rate was LIBOR plus 1.8% per annum, the weighted average all-in cost of credit, including associated fees and expenses, was LIBOR plus 2.1% per annum, and the weighted average advance rate was 77.9%. As of September 30, 2019, outstanding borrowings under these agreements for our mortgage loan investments had a weighted average term to extended maturity of 3.2 years (assuming we have exercised all extension options and term out provisions). The Morgan Stanley secured revolving repurchase agreement has an initial maturity date of May 4, 2020 and can be extended for additional successive one-year periods, subject to approval by the lender. The number of extension options is not limited by the terms of this agreement. These secured revolving repurchase agreements are 25% recourse to Holdco.

As of September 30, 2019, we had four secured revolving repurchase agreements to finance our CMBS and CRE CLO investing activities. Credit spreads vary depending upon the CMBS and CRE CLO investments and advance rate. These secured revolving repurchase agreements are 100% recourse to Holdco.

The following tables detail our secured revolving repurchase agreements (dollars in thousands):

	September 30, 2019
Lender	Commitment Amount⁽¹⁾		UPB of Collateral		Advance Rate			Approved Borrowings		Outstanding Balance		Undrawn Capacity⁽³⁾		Available Capacity⁽²⁾		Interest Rate				Extended Maturity⁽⁴⁾
Goldman Sachs	$	750,000	$	743,422		76.3	%	$	561,118	$	481,059	$	80,059	$	188,882		L+ 2.0	%		8/19/2022
Wells Fargo		750,000		996,196		77.0			750,000		723,874		26,126		—		L+ 1.7	%		4/18/2022
Barclays		750,000		370,900		80.0			296,604		296,604		—		453,396		L+ 1.5	%		8/13/2022
Morgan Stanley		500,000		461,922	77.4				356,882		347,581		9,301		143,118		L+ 2.1	%		N/A
JP Morgan		590,290		753,045		79.0			590,290		590,290		—		—		L+ 1.7	%		8/20/2023
US Bank		285,003		328,619		80.0			262,895		261,793		1,102		22,108		L+ 1.6	%		7/9/2024
Subtotal/Weighted Average—Loans	$	3,625,293	$	3,654,104		77.9	%	$	2,817,789	$	2,701,201	$	116,588	$	807,504		L+ 1.8	%
JP Morgan		396,189		453,635		87.4			396,189		396,189		—		—		L+ 0.9	%		10/16/2019	⁽⁵⁾
Wells Fargo		111,140		130,557		84.8			111,140		111,140		—		—		L+ 1.0	%		10/18/2019	⁽⁵⁾
Goldman Sachs		27,494		32,942		84.2			27,494		27,494		—		—		L+ 1.0	%		10/7/2019	⁽⁵⁾
Royal Bank of Canada		—		—		90.0			—		—		—		—	N/A				N/A
Subtotal/Weighted Average—CMBS and CRE CLO	$	534,823	$	617,134		86.7	%	$	534,823	$	534,823	$	—	$	—		L+ 0.9	%	⁽⁵⁾
Total/Weighted Average	$	4,160,116	$	4,271,238		79.3	%	$	3,352,612	$	3,236,024	$	116,588	$	807,504		L+ 1.6	%	⁽⁵⁾

(1)	Commitment amount represents the largest amount of borrowings available under a given agreement once sufficient collateral assets have been approved by the lender and pledged by us.

(2)	Represents the commitment amount less the approved borrowings, which amount is available to be borrowed provided we pledge and the lender approves additional collateral assets.

(3)	Undrawn capacity represents the positive difference between the borrowing amount approved by the lender against collateral assets pledged by us and the amount actually drawn against those collateral assets.

(4)

Our ability to extend our secured revolving repurchase agreements to the dates shown above is subject to satisfaction of certain conditions. Even if extended, our lenders retain sole discretion to determine whether to accept pledged collateral, and the advance rate and credit spread applicable to each borrowing thereunder. The secured revolving repurchase agreement provided by Morgan Stanley Bank is excluded from the “Extended Maturity” column because it has no limit on the maximum number of permitted extensions, subject to satisfaction of certain conditions and approvals.

(5)	Extended Maturity represents the sooner of the next maturity date of the agreement or roll over date for the applicable underlying trade confirmation, subsequent to September 30, 2019.

	December 31, 2018
Lender	Commitment Amount⁽¹⁾		UPB of Collateral		Advance Rate			Approved Borrowings		Outstanding Balance		Undrawn Capacity⁽³⁾		Available Capacity⁽²⁾		Interest Rate				Extended Maturity⁽⁴⁾
Goldman Sachs	$	750,000	$	474,243		76.7	%	$	355,051	$	191,164	$	163,887	$	394,949		L+ 2.2	%		8/19/2019
Wells Fargo		750,000		339,012	76.4				256,120		246,208		9,912		493,880		L+ 1.8	%		5/25/2021
Morgan Stanley		500,000		244,936	75.7				185,221		182,507		2,714		314,779		L+ 2.2	%		N/A
JP Morgan		400,000		254,026	75.4				190,541		185,529		5,012		209,459		L+ 2.2	%		8/20/2023
US Bank		212,840		262,929		79.0			207,344		206,040		1,304		5,496		L+ 1.8	%		10/9/2023
Subtotal/Weighted Average—Loans	$	2,612,840	$	1,575,146		76.6	%	$	1,194,277	$	1,011,448	$	182,829	$	1,418,563		L+ 2.0	%
Royal Bank of Canada		100,000		—		90.0			—		—		—		100,000	N/A				N/A
Goldman Sachs		100,000		38,517		90.0			32,697		32,697		—		67,303	OIS+ 0.6%				1/2/2019	⁽⁵⁾
Subtotal/Weighted Average—CMBS and CRE CLO	$	200,000	$	38,517		90.0	%	$	32,697	$	32,697	$	—	$	167,303	OIS+ 0.6%			⁽⁵⁾
Total/Weighted Average	$	2,812,840	$	1,613,663		77.0	%	$	1,226,974	$	1,044,145	$	182,829	$	1,585,866		L+ 2.0	%	⁽⁵⁾

(1)	Commitment amount represents the largest amount of borrowings available under a given agreement once sufficient collateral assets have been approved by the lender and pledged by us.

(2)	Represents the commitment amount less the approved borrowings, which amount is available to be borrowed provided we pledge and the lender approves additional collateral assets.

(3)	Undrawn capacity represents the positive difference between the borrowing amount approved by the lender against collateral assets pledged by us and the amount actually drawn against those collateral assets.

(4)

(5)

Extended Maturity represents the sooner of the next maturity date of the agreement or roll over date for the applicable underlying trade confirmation, subsequent to December 31, 2018. Weighted average interest rate includes the impact of the Overnight swap index (“OIS”) rate used for CMBS and CRE CLO investment, secured revolving repurchase agreements.

Borrowings under our secured revolving repurchase agreements are subject to the initial approval of eligible collateral loans (or CMBS and CRE CLO investments, depending on the agreement) by the lender. The maximum advance rate and pricing rate of individual advances are determined with reference to the attributes of the respective collateral.

The maximum and average month end balances for our secured revolving repurchase agreements during the nine months ended September 30, 2019 are as follows (dollars in thousands):

	Nine Months Ended September 30, 2019
	Carrying Value		Maximum Month End Balance		Average Month End Balance
JP Morgan	$	590,290	$	590,290	$	227,386
Goldman Sachs		481,059		545,152		406,521
Wells Fargo		723,874		723,874		514,787
Morgan Stanley		347,581		347,581		257,998
US Bank		261,793		261,793		224,443
Barclays		296,604		296,604		65,912
Subtotal / Averages - Loans⁽¹⁾	$	2,701,201	$	2,701,201	$	1,697,047
JP Morgan		396,189		401,628		212,933
Goldman Sachs		27,494		60,555		47,346
Wells Fargo		111,140		117,178		74,282
Royal Bank of Canada		—		—		—
Subtotal / Averages - CMBS and CRE CLO⁽¹⁾	$	534,823	$	534,823	$	314,623
Total / Averages - Loans, CMBS and CRE CLO⁽¹⁾	$	3,236,024	$	3,236,024	$	2,093,863

(1)	The maximum month end balance subtotal and total represents the maximum outstanding borrowings on all secured revolving repurchase agreements at a month end during the nine months ended September 30, 2019.

We use secured revolving repurchase agreements to finance certain of our originations or acquisitions of our target assets, which may be accepted by a respective secured revolving repurchase agreement lender as collateral. Once we identify an asset and the asset is approved by the secured revolving repurchase agreement lender to serve as collateral (which lender’s approval is in its sole discretion), we and the lender may enter into a transaction whereby the lender advances to us a percentage of the value of the asset, which is referred to as the “advance rate,” as the purchase price for such transaction with an obligation of ours to repurchase the asset from the lender for an amount equal to the purchase price for the transaction plus a price differential, which is calculated based on an interest rate. For each transaction, we and the lender agree to a trade confirmation which sets forth, among other things, the purchase price, the maximum advance rate, the interest rate, the market value of the loan asset and any future funding obligations which are contemplated with respect to the specific transaction and/or the underlying loan asset. For loan assets which involve future funding obligations of ours, the repurchase transaction may provide for the repurchase lender to fund portions (for example, pro rata per the maximum advance rate of the related repurchase transaction) of such future funding obligations. Generally, our secured revolving repurchase agreements allow for revolving balances, which allow us to voluntarily repay balances and draw again on existing available credit. The primary obligor on each secured revolving repurchase agreement is a separate special purpose subsidiary of ours which is restricted from conducting activity other than activity related to the utilization of its secured revolving repurchase agreement. As additional credit support, our holding company subsidiary, Holdco, provides certain guarantees of the obligations of its subsidiaries. The liability of Holdco under the guarantees related to our secured revolving repurchase agreements secured by CMBS and CRE CLO investments are in an amount equal to 100% of the outstanding obligations of the special purpose subsidiary, which is the primary obligor under the related agreement. The liability of Holdco under the guarantees related to our secured revolving repurchase agreements secured by loans is generally capped at 25% of the outstanding obligations of the special purpose subsidiary, which is the primary obligor under the related agreement. However, such liability cap under the guarantees related to our secured revolving repurchase agreements secured by loans does not apply in the event of certain “bad boy” defaults which can trigger recourse to Holdco for losses or the entire outstanding obligations of the borrower depending on the nature of the “bad boy” default in question. Examples of such “bad boy” defaults include, without limitation, fraud, intentional misrepresentation, willful misconduct, incurrence of additional debt in violation of financing documents, and the filing of a voluntary or collusive involuntary bankruptcy or insolvency proceeding of the special purpose entity subsidiary or the guarantor entity.

Each of the secured revolving repurchase agreements have “margin maintenance” provisions, which are designed to allow the repurchase lender to maintain a certain margin of credit enhancement against the loan assets which serve as collateral. The lender’s margin amount is typically based on a percentage of the market value of the loan asset and/or mortgaged property collateral; however, certain secured revolving repurchase agreements may also involve margin maintenance based on maintenance of a minimum debt yield with respect to the cash flow from the underlying real estate collateral. Market value determinations and redeterminations may be made by the repurchase lender in its sole discretion subject to any specified parameters regarding the repurchase lender’s determination, which may involve the limitation or enumeration of factors which the repurchase lender may consider when determining market value.

At September 30, 2019, the weighted average haircut (which is equal to one minus the advance rate percentage against collateral for our secured revolving repurchase agreements taken as a whole) was 20.7%, as compared to 23.0% at December 31, 2018.

Generally, when the repurchase lender’s margin amount has fallen below the outstanding purchase price for a transaction, a margin deficit exists and the repurchase lender may require that we prepay outstanding amounts on the secured revolving repurchase agreement to eliminate such margin deficit. In certain secured revolving repurchase agreements, the repurchase lender’s ability to make a margin call is further limited by certain prerequisites, such as the existence of enumerated “credit events” or that the margin deficit exceed a specified minimum threshold.

The secured revolving repurchase agreements also include cash management features which generally require that income from collateral loan assets be deposited in a lender-controlled account and be distributed in accordance with a specified waterfall of payments designed to keep facility-related obligations current before such income is disbursed for our own account. The cash management features generally require the trapping of cash in such controlled account if an uncured default remains outstanding. Furthermore, some secured revolving repurchase agreements may require an accelerated principal amortization schedule if the secured revolving repurchase agreement is in its final extended term.

Notwithstanding that a loan asset may be subject to a financing arrangement and serve as collateral under a secured revolving repurchase agreement, we are generally granted the right to administer and service the loan and interact directly with the underlying obligors and sponsors of our loan assets so long as there is no default under the secured revolving repurchase agreement and so long as we do not engage in certain material modifications (including amendments, waivers, exercises of remedies, or releases of obligors and collateral, among other things) of the loan assets without the repurchase lender’s prior consent.

Collateralized Loan Obligation

As of September 30, 2019, we had one collateralized loan obligation totaling $0.8 billion, financing existing first mortgage loan investments totaling $0.9 billion, generating an efficient cost of funds and providing matched-term, non-recourse financing for 20.4% of our loan portfolio borrowings. The collateralized loan obligation bears a weighted average interest rate of LIBOR plus 1.43%, weighted average advance rate of 79.5%, and includes a reinvestment feature that provides additional liquidity that allows us to originate new loan investments funded in part or in whole by the CLO. As of September 30, 2019, the loan investments contributed to the collateralized loan obligations represented 18.3% of the aggregate unpaid principal balance of our loan investment portfolio.

Senior Secured and Secured Credit Agreements

We have a senior secured credit agreement with Bank of America N.A. that has a maximum commitment amount of $500 million and $201.6 million outstanding as of September 30, 2019. The senior secured credit agreement bears interest at LIBOR plus 1.8%. The current extended maturity of this agreement is September 29, 2022.

We have a secured credit agreement (the “Credit Agreement”), as borrower, with Citibank, N.A. as administrative agent and lender, and Citigroup Global Markets Inc. as sole lead arranger and sole lead book running manager. The Credit Agreement governs a secured revolving credit agreement with aggregate secured borrowing capacity of up to $160.0 million, subject to borrowing base availability and certain other conditions, which we use to finance originations or acquisitions of eligible loans on an interim basis until permanent financing is arranged. The Credit Agreement has an extended maturity date of July 12, 2022, and borrowings bear interest at an interest rate per annum equal to one-month LIBOR or the applicable base rate plus a margin of 2.25%. The initial advance rate on borrowings under the Credit Agreement with respect to individual pledged assets can vary up to 70%, and may decline over the

borrowing term of up to 90 days, after which borrowings against that respective asset must be repaid. At September 30, 2019, we had $32.6 million outstanding under the Credit Agreement.

Term Loan Facility

We are the borrower under a term loan facility with an institutional asset manager as the lender. The term loan facility has capacity up to $750.0 million, bears interest at LIBOR plus 1.85%, and allows for an advance rate of no less than 70% and up to 85% based on the loans pledged to the facility. The term loan facility is non-recourse and has no mark-to-market provisions. As of September 30, 2019, no loan investments were pledged to the term loan facility and there was no outstanding borrowings.

Asset-Specific Financings

As of September 30, 2019 and December 31, 2018, we had outstanding two and one loan investments financed by two and one counterparties, respectively, as asset-specific financings. At September 30, 2019, our aggregate amount payable was $109.5 million that bears interest at a weighted average interest rate of LIBOR plus 3.7%. The asset-specific financings have initial maturity dates of April 9, 2020 and October 9, 2020.

In connection with the BMO Harris asset-specific financing, Holdco has delivered a payment guarantee in favor of the lender as additional credit support for the financing. The liability of Holdco under this guarantee is capped at 25% of the outstanding obligations of the special purpose subsidiary which is the primary obligor under the financing. In addition, Holdco has delivered to the lender certain non-recourse carveout guarantees, which can trigger recourse to Holdco as a result of certain “bad boy” defaults for losses incurred by the lender, or the entire outstanding obligations of the financing borrower, depending on the nature of the “bad boy” default. Examples of “bad boy” defaults include, without limitation: fraud; intentional misrepresentation; willful misconduct; incurrence of additional debt in violation of financing documents; and the filing of a voluntary or collusive involuntary bankruptcy or insolvency proceeding of the special purpose entity subsidiary or the guarantor entity.

Non-Consolidated Senior Interests

In certain instances, we create structural leverage through the co-origination or non-recourse syndication of a senior loan interest to a third party. In either case, the senior mortgage loan (i.e., the non-consolidated senior interest) is not included on our balance sheet. When we create structural leverage through the co-origination or non-recourse syndication of a senior loan interest to a third party, we retain on our balance sheet a mezzanine loan.

During the nine months ended September 30, 2019, the Company co-originated with an institutional lender a $167.0 million financing, including a $132.0 million non-consolidated senior interest. Upon closing, the total originated loan commitment was $167.0 million. As of September 30, 2019 the Company retained a mezzanine loan investment with a total loan commitment of $35.0 million, an unpaid principal balance of $5.0 million, and an interest rate of LIBOR plus 10.3%.

The following table presents our non-consolidated senior interests outstanding as of September 30, 2019 (dollars in thousands):

Non-Consolidated Senior Interests	Count		Loan Commitment		Principal Balance		Carrying Value		Credit Spread⁽¹⁾			Guarantee		Weighted Average Term to Extended Maturity⁽²⁾
Senior loan sold or co-originated		1	$	132,000	$	—		N/A		L+ 4.3	%		N/A	6/28/2025
Retained mezzanine loan		1	$	35,000	$	5,000	$	4,682		L+ 10.3	%		N/A	6/28/2025
Total loan		1	$	167,000	$	5,000	N/A			L+ 4.5	%		N/A	6/28/2025

Financial Covenants for Outstanding Borrowings

Our financial covenants and guarantees for outstanding borrowings related to our secured revolving repurchase agreements, senior secured and secured credit agreements, term loan facility, and one asset-specific financing require Holdco to maintain compliance with the following financial covenants (among others):

•

Cash Liquidity: maintenance of minimum cash liquidity of no less than the greater of $10.0 million and 5.0% of Holdco’s recourse indebtedness;

•

Tangible Net Worth: maintenance of minimum tangible net worth of at least 75% of the net cash proceeds of all prior equity issuances made by Holdco or the Company plus 75% of the net cash proceeds of all subsequent equity issuances made by Holdco or the Company;

•

Debt to Equity: maintenance of a debt to equity ratio not to exceed 3.5 to 1.0; and

•

Interest Coverage: maintenance of a minimum interest coverage ratio (EBITDA to interest expense) of no less than 1.5 to 1.0.

The Company was in compliance with all covenants for its secured revolving repurchase agreements, senior secured and secured credit agreements, term loan facility, and asset-specific financing as of September 30, 2019 and December 31, 2018.

Debt-to-Equity Ratio and Total Leverage Ratio

The following table presents our Debt-to-Equity ratio and Total Leverage ratio as of September 30, 2019 and December 31, 2018:

	September 30, 2019			December 31, 2018
Debt-to-equity ratio⁽¹⁾		2.91	x	2.36x
Total leverage ratio⁽²⁾		3.00	x	2.36x

(1)

Represents (i) total outstanding borrowings under financing arrangements, net, including collateralized loan obligations, secured revolving repurchase agreements, senior secured and secured credit agreements, a term loan facility, and asset-specific financing agreements, less cash, to (ii) total stockholders’ equity, at period end.

(2)

Represents (i) total outstanding borrowings under financing arrangements, net, including collateralized loan obligations, secured revolving repurchase agreements, senior secured and secured credit agreements, a term loan facility, and asset-specific financing agreements, plus non-consolidated senior interests sold or co-originated (if any), less cash, to (ii) total stockholders’ equity, at period end.

Floating Rate Portfolio

Our business model seeks to minimize our exposure to changing interest rates by match-indexing our assets using the same, or similar, benchmark indices, typically LIBOR, as well as durations. Accordingly, rising interest rates will generally increase our net interest income, while declining interest rates will generally decrease our net interest income, subject to the beneficial impact of LIBOR floors in our mortgage loan investment portfolio. As of September 30, 2019, 100.0% of our loans by unpaid principal balance earned a floating rate of interest and were financed with liabilities that require interest payments based on floating rates, which resulted in approximately $1.2 billion of net floating rate exposure that is positively correlated to rising interest rates, subject to the impact of interest rate floors on all but one of our floating rate loans. We had no fixed rate loans outstanding as of September 30, 2019.

Our liabilities are generally index-matched to each collateral asset, resulting in a net exposure to movements in benchmark rates that vary based on the relative proportion of floating rate assets and liabilities. The following table details our portfolio’s net floating rate exposure as of September 30, 2019 (dollars in thousands):

	Net Exposure
Floating rate assets⁽¹⁾	$	5,036,640
Floating rate debt⁽¹⁾⁽²⁾		(3,825,371	)
Net floating rate exposure	$	1,211,269

(1)	Floating rate mortgage loan assets and liabilities are indexed to LIBOR. The net exposure to the underlying benchmark interest rate is positively correlated to our assets indexed to the same rate. Excludes the impact of CMBS and CRE CLO investments and related liabilities.

(2)	Floating rate liabilities include secured revolving repurchase agreements, collateralized loan obligations, senior secured and secured credit agreements, a term loan facility, and asset-specific financings.

With the cessation of LIBOR expected to occur in late 2021, we continue to evaluate the documentation associated with our assets and liabilities to manage the transition away from LIBOR to an alternative rate endorsed by the Alternative Reference Rates Committee (“ARRC”) of the Federal Reserve System. We will continue to employ prudent risk management as it relates to the potential financial, operational and legal risks associated with the expected cessation of LIBOR, and to ensure that our assets and liabilities generally remain match-indexed following this event.

Interest-Earning Assets and Interest-Bearing Liabilities

The following table presents the average balance of interest-earning assets and related interest-bearing liabilities, associated interest income and interest expense, and financing costs and the corresponding weighted average yields for the three months ended September 30, 2019 and June 30, 2019 (dollars in thousands):

	Three months ended,
	September 30, 2019							June 30, 2019
	Average Carrying Value⁽¹⁾		Interest Income/ Expense		Wtd. Avg. Yield/ Financing Cost⁽²⁾			Average Carrying Value⁽¹⁾		Interest Income/ Expense		Wtd. Avg. Yield/ Financing Cost⁽²⁾
Core Interest-earning assets:
First mortgage loans	$	4,807,439	$	84,833		7.1	%	$	4,807,439	$	82,794		6.9	%
Retained mezzanine loans		1,550		224		57.8	%		1,550		7		1.8	%
CMBS and CRE CLO investments		565,619		7,305		5.2	%		565,619		5,453		3.9	%
Core interest-earning assets	$	5,374,608	$	92,362		6.9	%	$	5,374,608	$	88,254		6.6	%

Interest-bearing liabilities:
Asset-specific financings⁽³⁾	$	109,500	$	1,783		6.5	%	$	109,500	$	1,803		6.6	%
Secured revolving repurchase agreements		2,036,531		28,197		5.5	%		2,036,641		21,873		4.3	%
Collateralized loan obligations		1,236,839		10,121		3.3	%		1,236,839		14,366		4.6	%
Senior secured and secured credit agreements		457,758		3,988		3.5	%		457,758		6,252		5.5	%
Term loan facility		267,661		3,785		5.7	%		267,661		2,132		3.2	%
Total interest-bearing liabilities	$	4,108,289	$	47,874		4.7	%	$	4,108,399	$	46,426		4.5	%
Net interest income⁽⁴⁾			$	44,488						$	41,828

Other Interest-earning assets:
Cash equivalents	$	79,853	$	595		3.0	%	$	79,853	$	400		2.0	%
Accounts receivable from servicer/trustee		109,625		37		0.1	%		109,625		13		0.0	%
Total interest-earning assets	$	5,564,086	$	92,994		6.7	%	$	5,564,086	$	88,667		6.4	%

(1)	Based on carrying value for loans, amortized cost for CMBS and CRE CLO investments and carrying value for interest-bearing liabilities. Calculated balances as the month-end averages.

(2)	Weighted average yield or financing cost calculated based on annualized interest income or expense divided by calculated month-end average outstanding balance.

(3)	Weighted average financing cost for the three months ended September 30, 2019 reflects the addition of one asset-specific financing arrangement during the three months ended June 30, 2019.

(4)	Represents interest income on core interest-earning assets less interest expense on total interest-bearing liabilities. Interest income on Other Interest-earning assets is included in Other Income, net on the consolidated statement of income.

The following table presents the average balance of interest-earning assets and related interest-bearing liabilities, associated interest income and interest expense, and financing costs and the corresponding weighted average yields for the nine months ended September 30, 2019 and 2018 (dollars in thousands):

	Nine months ended,
	September 30, 2019							September 30, 2018
	Average Carrying Value⁽¹⁾		Interest Income/ Expense		Wtd. Avg. Yield/ Financing Cost⁽²⁾			Average Carrying Value⁽¹⁾		Interest Income/ Expense		Wtd. Avg. Yield/ Financing Cost⁽²⁾
Core Interest-earning assets:
First mortgage loans	$	4,624,839	$	242,472		7.0	%	$	3,642,732	$	185,890		6.8	%
Retained mezzanine loans⁽³⁾		775		231		39.7	%		36,725		5,381		19.5	%
CMBS and CRE CLO investments		397,948		14,514		4.9	%		117,646		2,650		3.0	%
Core interest-earning assets	$	5,023,562	$	257,217		6.8	%	$	3,797,103	$	193,921		6.8	%

Interest-bearing liabilities:
Asset-specific financings	$	71,000	$	4,031		7.6	%	$	53,086	$	10,626		26.7	%
Secured revolving repurchase agreements		1,740,381		65,461		5.0	%		1,605,921		56,110		4.7	%
Collateralized loan obligations		1,283,326		39,832		4.1	%		660,804		18,373		3.7	%
Senior secured and secured credit agreements		434,658		17,558		5.4	%		221,634		5,340		3.2	%
Term loan facility		235,390		6,785		3.8	%		—		—		0.0	%
Total interest-bearing liabilities	$	3,764,755	$	133,667		4.7	%	$	2,541,445	$	90,449		4.7	%
Net interest income⁽⁴⁾			$	123,550						$	103,472

Other Interest-earning assets:
Cash equivalents	$	73,672	$	1,413		2.6	%	$	110,435	$	705		0.9	%
Accounts receivable from servicer/trustee		74,967		53		0.1	%		12,440		6		0.1	%
Total interest-earning assets	$	5,172,201	$	258,683		6.7	%	$	3,919,978	$	194,632		6.6	%

(1)	Based on carrying value for loans, amortized cost for securities and carrying value for debt. Calculated as the month-end averages.

(2)	Weighted average yield or financing cost calculated based on annualized interest income or expense divided by average carrying value.

(3)	Retained mezzanine loans interest income for the nine months ended September 30, 2018 includes a minimum multiple payment related to the repayment of a mezzanine loan during the period.

(4)	Represents interest income on core interest-earning assets less interest expense on total interest-bearing liabilities. Interest income on Other Interest-earning assets is included in Other Income, net on the consolidated statement of income.

Our Results of Operations

Operating Results

The following table sets forth information regarding our consolidated results of operations (dollars in thousands, except per share data):

	Three Months Ended September 30,						2019 vs 2018			Nine Months Ended September 30,						2019 vs 2018
	2019			2018			$			2019			2018			$
INTEREST INCOME
Interest Income	$	92,362		$	69,863		$	22,499		$	257,217		$	193,921		$	63,296
Interest Expense		(47,874	)		(34,297	)		(13,577	)		(133,667	)		(90,449	)		(43,218	)
Net Interest Income		44,488			35,566		$	8,922			123,550			103,472		$	20,078
OTHER REVENUE
Other Income, net		160			(55	)		215			994			820			174
Total Other Revenue		160			(55	)		215			994			820			174
OTHER EXPENSES
Professional Fees		1,440			905			535			2,712			2,659			53
General and Administrative		1,530			965			565			4,529			3,162			1,367
Servicing and Asset Management Fees		960			767			193			1,904			2,301			(397	)
Management Fees		5,482			4,879			603			15,948			14,346			1,602
Incentive Management Fee		2,104			1,168			936			5,517			3,240			2,277
Total Other Expenses		11,516			8,684			2,832			30,610			25,708			4,902
Income Before Income Taxes		33,132			26,827			6,305			93,934			78,584			15,350
Income Tax Benefit (Expense)		(107	)		(3	)		(104	)		(528	)		(208	)		(320	)
Net Income	$	33,025		$	26,824		$	6,201		$	93,406		$	78,376		$	15,030
Preferred Stock Dividends		(3	)		—			(3	)		(10	)		(3	)		(7	)
Net Income Attributable to TPG RE Finance Trust, Inc.	$	33,022		$	26,824		$	6,198		$	93,396		$	78,373		$	15,023
Basic Earnings per Common Share	$	0.44		$	0.42			0.02		$	1.29		$	1.27			0.02
Diluted Earnings per Common Share	$	0.44		$	0.42			0.02		$	1.29		$	1.27			0.02
Dividends Declared per Common Share	$	0.43		$	0.43			—		$	1.29		$	1.28			0.01
OTHER COMPREHENSIVE INCOME
Unrealized Gain (Loss) on Available-for-Sale Debt Securities	$	74		$	523		$	(449	)	$	3,292		$	(1,115	)	$	4,407
Comprehensive Income	$	33,099		$	27,347		$	5,752		$	96,698		$	77,261		$	19,437

Comparison of the Three Months Ended September 30, 2019 and September 30, 2018

Net Interest Income

Net interest income increased $8.9 million, to $44.5 million, during the three months ended September 30, 2019 compared to the three months ended September 30, 2018. The increase was due primarily to mortgage loan and CMBS and CRE CLO investment growth of $1.4 billion, partially offset by a decline in the weighted average credit spread of our loan portfolio to 365 basis points from 415 basis points. The increase in interest income was partially offset by an increase in interest expense due to increased borrowings of $1.4 billion to fund loan and CMBS and CRE CLO investment growth and a higher average borrowing rate, due to an increase in LIBOR, offset in part by a decrease in the weighted average credit spread of our borrowings to 177 basis points from 185 basis points, at September 30, 2019 as compared to September 30, 2018.

Other Revenue

Other revenue is comprised of net gain/loss on the sale of certain loans and CMBS and CRE CLO investments, interest income earned on certain cash collection accounts, and miscellaneous fee income. Other revenue increased by $0.2 million during the three months ended September 30, 2019 compared to the three months ended September 30, 2018. The change in other revenue was primarily due to higher average cash balances during the three months ended September 30, 2019, offset by a loss on sale of certain CMBS investments of $0.5 million during the period.

Other Expenses

Other expenses are comprised of professional fees, general and administrative expenses, servicing and asset management fees, and management fees payable to our Manager. Other expenses increased by $1.9 million for the three months ended September 30, 2019 compared to the three months ended September 30, 2018. The increase in other expenses for the three months ended September 30, 2019 was primarily due to: (i) an increase in management fees to our Manager of $0.6 million due primarily to growth in the Company’s common stockholder’s equity base due to our equity issuances in August 2018 and March 2019, and growth in Core Earnings; (ii) an aggregate increase in general and administrative expenses and professional fees of $1.1 million, resulting from an increase in stock compensation expense, legal and other professional fee expenses; and (iii) an increase in servicing and asset management fees of $0.2 million due to continued loan investment growth.

See Note 10 to our Consolidated Financial Statements included in this Form 10-Q for details regarding our Management Agreement.

Incentive Compensation

The incentive compensation earned by our Manager increased by $0.9 million for the three months ended September 30, 2019 compared to the three months ended September 30, 2018. The change in incentive compensation to our Manager was due to growth in Core Earnings subject to an incentive fee.

See Note 10 to our Consolidated Financial Statements included in this Form 10-Q for details regarding our Management Agreement.

Dividends Declared Per Share

During the three months ended September 30, 2019, we declared cash dividends of $0.43 per share, or $32.0 million. During the three months ended September 30, 2018, we declared cash dividends of $0.43 per share, or $28.9 million.

Unrealized Gain (Loss) on CMBS and CRE CLO Investments

Other comprehensive income (loss) decreased $0.4 million during the three months ended September 30, 2019 compared to the three months ended September 30, 2018. The decrease is primarily related to fair value increases of our CMBS and CRE CLO investments, including the sale of CMBS investments that had estimated fair values less than par, and changes in the size and composition of our CMBS and CRE CLO investment portfolio, from the three months ended September 30, 2018.

Comparison of the Nine Months Ended September 30, 2019 and September 30, 2018

Net Interest Income

Net interest income increased $20.1 million, to $123.6 million, during the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018. The increase was due primarily to loan and CMBS and CRE CLO investment growth of $1.4 billion, and a higher average LIBOR on the underlying loans, partially offset by a decline in the weighted average credit spread of our loan portfolio to 365 basis points from 415 basis points. The increase in interest income was partially offset by an increase in interest expense due to increased borrowings of $1.4 billion to fund loan and CMBS and CRE CLO investment growth and a higher average borrowing rate, due to an increase in LIBOR, offset in part by a decrease in the weighted average credit spread of our borrowings to 177 basis points from 185 basis points, at September 30, 2019 as compared to September 30, 2018.

Other Revenue

Other revenue is comprised of net gain/loss on the sale of certain loans and CMBS and CRE CLO investments, interest income earned on certain cash collection accounts, and miscellaneous fee income. Other revenue decreased by $0.2 million during the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018. The change in other revenue was primarily due to higher average cash balances during the nine months ended September 30, 2019.

Other Expenses

Other expenses are comprised of professional fees, general and administrative expenses, servicing and asset management fees, and management fees payable to our Manager. Other expenses increased by $2.6 million for the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018. The increase in other expenses for the nine months ended September 30, 2019 was primarily due to: (i) an increase in management fees to our Manager of $1.6 million due primarily to growth in the Company’s common stockholder’s equity base due to our equity issuances in August 2018 and March 2019, and growth in Core Earnings; (ii) an increase in general and administrative expenses and professional fees in the aggregate of $1.4 million, resulting from an increase in stock compensation expense offset by a decline in other professional fee expenses; and (iii) a decrease in servicing and asset management fees of $0.4 million during the nine months ended September 30, 2019.

See Note 10 to our Consolidated Financial Statements included in this Form 10-Q for details regarding our Management Agreement.

Incentive Compensation

The incentive compensation earned by our Manager increased by $2.3 million for the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018. The change in incentive compensation to our Manager was due to growth in Core Earnings subject to an incentive fee.

See Note 10 to our Consolidated Financial Statements included in this Form 10-Q for details regarding our Management Agreement.

Dividends Declared Per Share

During the nine months ended September 30, 2019, we declared cash dividends of $1.29 per share, or $95.6 million. During the nine months ended September 30, 2018, we declared cash dividends of $1.28 per share, or $80.1 million. The increase in cash dividends per share and cash dividends declared was primarily due to continued growth in our loan portfolio and net income.

Unrealized (Loss) Gain on CMBS and CRE CLO Investments

Other comprehensive income (loss) increased $4.4 million during the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018. The increase is primarily related to fair value increases of our CMBS and CRE CLO investments and changes in the size and composition of our CMBS and CRE CLO investment portfolio, from the nine months ended September 30, 2018.

Liquidity and Capital Resources

Capitalization

We have capitalized our business to date through, among other things, the issuance and sale of shares of our common stock, borrowings under secured revolving repurchase agreements, collateralized loan obligations, senior secured and secured credit agreements, a term loan facility, asset-specific financings, and non-consolidated senior interests. As of September 30, 2019, we had outstanding 74.1 million shares of our common stock and Class A common stock representing $1.5 billion of stockholders’ equity, and $4.4 billion of outstanding borrowings used to finance our operations.

See Notes 5 and 6 to our Consolidated Financial Statements included in this Form 10-Q for additional details regarding our borrowings under secured revolving repurchase agreements, collateralized loan obligations, senior secured and secured credit agreements, a term loan facility, and asset-specific financings.

Sources of Liquidity

Our primary sources of liquidity include cash and cash equivalents, available borrowings under secured revolving repurchase agreements, senior secured and secured credit agreements, a term loan facility, and asset-specific financings, which are set forth in the following table (dollars in thousands):

	September 30, 2019		December 31, 2018
Cash and cash equivalents	$	99,347	$	39,720
Secured revolving repurchase agreements		116,588		182,829
Senior secured and secured credit agreements		1,526		53,410
Term loan facility		—		275
Asset-specific financings		—		—
Total	$	217,461	$	276,234

Our existing loan portfolio also provides us with liquidity as loans are repaid or sold, in whole or in part, of which some proceeds may be included in accounts receivable from our servicers until released, and the proceeds from such repayments become available for us to reinvest. The future sale of non-consolidated senior interests would also provide incremental liquidity.

Liquidity Needs

In addition to our ongoing mortgage loan origination activity, our primary liquidity needs include interest and principal payments under our $4.4 billion of outstanding borrowings under secured revolving repurchase agreements, collateralized loan obligations, senior secured and secured credit agreements, a term loan facility, and asset-specific financings, $661.4 million of unfunded loan commitments, dividend distributions to our stockholders, and operating expenses.

Contractual Obligations and Commitments

Our contractual obligations and commitments as of September 30, 2019 were as follows (dollars in thousands):

			Payment Timing
	Total Obligation		Less than 1 Year		1 to 3 Years		3 to 5 Years		More than 5 Years
Unfunded loan commitments⁽¹⁾	$	661,408	$	62,348	$	542,748	$	56,312	$	—
Secured debt agreements—principal⁽²⁾		4,360,194		2,316,097		2,044,097		—		—
Secured debt agreements—interest⁽²⁾		188,132		116,348		71,784		—		—
Total⁽³⁾	$	5,209,734	$	2,494,793	$	2,658,629	$	56,312	$	—

(1)	The allocation of our loan commitments is based on the earlier of the commitment expiration date and the loan maturity date.

(2)

The allocation of our secured debt agreements is based on the current maturity date of each individual borrowing under the respective agreement. Amounts include the related future interest payment obligations, which are estimated by assuming the amounts outstanding under our secured debt agreements and the interest rates in effect as of September 30, 2019 will remain constant into the future. This is only an estimate, as actual amounts borrowed and rates will vary over time. Our floating rate loans and related liabilities are indexed to LIBOR.

With respect to our debt obligations that are contractually due within the next five years, we plan to employ several strategies to meet these obligations, including: (i) applying repayments from underlying loans to satisfy the debt obligations which they secure; (ii) exercising maturity date extension options that exist in our current financing arrangements; (iii) negotiating extensions of terms with our providers of credit; (iv) periodically accessing the capital markets to raise cash to fund new investments or the repayment of indebtedness; (v) the issuance of additional structured finance vehicles, such as a collateralized loan obligations similar to TRTX 2018-FL1 or TRTX 2018-FL2, as a method of financing; (vi) term loans with private lenders; and/or (vii) selling loan or CRE CLO and CMBS investments to generate cash to repay our debt obligations.

We are required to pay our Manager a base management fee, an incentive fee, and reimbursements for certain expenses pursuant to our Management Agreement. The table above does not include the amounts payable to our Manager under our Management Agreement as they are not fixed and determinable. See Note 10 to our consolidated financial statements included in this Form 10-Q for additional terms and details of the fees payable under our Management Agreement.

As a REIT, we generally must distribute substantially all of our net taxable income to stockholders in the form of dividends to comply with the REIT provisions of the Internal Revenue Code. Our REIT taxable income does not necessarily equal our net income as calculated in accordance with GAAP or our Core Earnings as described above.

Cash Flows

The following table provides a breakdown of the net change in our cash, cash equivalents, and restricted cash balances for the nine months ended September 30, 2019 and 2018 (dollars in thousands):

	Nine Months Ended September 30,
	2019			2018
Cash flows provided by operating activities	$	87,866		$	78,188
Cash flows used in investing activities		(1,262,281	)		(967,064	)
Cash flows provided by financing activities		1,233,392			859,592
Net (decrease) in cash, cash equivalents, and restricted cash	$	58,977		$	(29,284	)

We experienced a net increase in cash, cash equivalents, and restricted cash of $59.0 million for the nine months ended September 30, 2019, compared to a net decrease of $29.3 million for the nine months ended September 30, 2018. During the nine months ended September 30, 2019, cash flows provided by operating activities totaled $87.9 million primarily related to net interest income, cash flows used in investing activities totaled $1.3 billion due primarily to loan originations and CRE CLO investment purchases, and cash flows provided by financing activities totaled $1.2 billion due primarily to proceeds from our equity issuance and net secured financing proceeds. We used the proceeds from our investing and financing activities, including cash provided by principal repayments, to originate new mortgage loans and purchase CRE CLO investments totaling $2.4 billion during the nine months ended September 30, 2019.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

Corporate Activities

Equity Distribution Agreement

Dividends

On September 17, 2019, we declared a cash dividend for the third quarter of 2019, to holders of record of our common stock and Class A common stock as of September 27, 2019, in the amount of $0.43 per share of common stock and Class A common stock, or $32.0 million in the aggregate, which dividend was paid on October 25, 2019.

Critical Accounting Policies

The preparation of our consolidated financial statements in accordance with GAAP requires our management to make estimates and judgments that affect the reported amounts of assets and liabilities, interest income and other revenue recognition, allowance for loan losses, expense recognition, tax liability, future impairment of our investments, valuation of our investment portfolio and disclosure of contingent assets and liabilities, among other items. Our management bases these estimates and judgments about current, and for some estimates, future economic and market conditions and their effects on available information, historical experience and other assumptions that we believe are reasonable under the circumstances. However, these estimates, judgments and assumptions are often subjective and may be impacted negatively based on changing circumstances or changes in our analyses.

If conditions change from those expected, it is possible that our judgments, estimates and assumptions described below could change, which may result in a change in our interest income and other revenue recognition, allowance for loan losses, expense recognition, tax liability, future impairment of our investments, and valuation of our investment portfolio, among other effects. If actual amounts are ultimately different from those estimated, judged or assumed, revisions are included in the consolidated financial statements in the period in which the actual amounts become known. We believe our critical accounting policies could potentially produce materially different results if we were to change underlying estimates, judgments or assumptions.

For a discussion of our critical accounting policies, see Note 2 to our Consolidated Financial Statements included in this Form 10-Q.

Recent Accounting Pronouncements

For a discussion of recently issued accounting pronouncements, see Note 2 to our Consolidated Financial Statements included in this Form 10-Q.

Subsequent Events

The following events occurred subsequent to quarter end:

Investment Activity

From October 1, 2019 through October 28, 2019, we closed, or are in the process of closing, five first mortgage loans with a total loan commitment amount of $475.8 million and an estimated initial unpaid principal balance of $428.9 million.

Senior Mortgage Loan Repayments

From October 1, 2019 through October 28, 2019, we received full loan repayments related to seven of its first mortgage loans with a total loan commitment and unpaid principal balance of $369.4 million and $365.9 million, respectively. These mortgage loan repayments consist of six Category 3 risk rated loans with a total loan commitment of $290.4 million and unpaid principal balance of $286.9 million and a Category 2 risk rated loan with a total loan commitment of $79.0 million and unpaid principal balance of $79.0 million, as of September 30, 2019. In connection with the repayment in full of a $45.0 million first mortgage loan, we retired our BMO Harris asset-specific financing totaling $32.5 million.

Financing Activity

Cash Dividend

On October 25, 2019, we paid a cash dividend on our common stock and Class A common stock of $0.43 per share, or $32.0 million, to stockholders of record as of September 27, 2019.

Loan Portfolio Details

The following table provides details with respect to our mortgage loan investment portfolio, and excludes our CMBS and CRE CLO investments, on a loan-by-loan basis as of September 30, 2019 (dollars in millions, except loan per square foot/unit):

Loan #	Form of Investment	Origination / Acquisition Date⁽²⁾	Total Loan		Principal Balance		Carrying Value⁽³⁾		Credit Spread⁽⁴⁾			All-in Yield⁽⁵⁾	Fixed / Floating	Extended Maturity⁽⁶⁾	City, State	Property Type	Loan Type	Loan Per SQFT / Unit	LTV⁽⁷⁾			Risk Rating⁽⁸⁾
First Mortgage Loans⁽¹⁾
1	Senior Loan	08/21/19	$	350.8	$	312.9	$	311.7		L+ 2.9	%	L +3.2%	Floating	9/9/24	New York, NY	Office	Light Transitional	$692 Sq ft		72.8	%		3
2	Senior Loan	08/07/18		223.0		167.8		166.2		L+ 3.4	%	L +3.6%	Floating	8/9/24	Atlanta, GA	Office	Light Transitional	$214 Sq ft		61.4	%		3
3	Senior Loan	12/19/18		210.0		141.7		140.4		L+ 3.6	%	L +4.0%	Floating	1/9/24	Detroit, MI	Office	Moderate Transitional	$217 Sq ft		59.8	%		3
4	Senior Loan	12/21/18		206.5		195.0		195.0		L+ 2.9	%	L +3.2%	Floating	1/9/24	Various, FL	Multifamily	Light Transitional	$181,299 Unit		76.6	%		3
5	Senior Loan	09/18/19		200.0		156.4		154.7		L+ 2.9	%	L +3.2%	Floating	9/9/24	New York, NY	Office	Moderate Transitional	$904 Sq ft		65.2	%		3
6	Senior Loan	06/28/18		190.0		182.3		182.3		L+ 2.7	%	L +3.0%	Floating	7/9/23	Philadelphia, PA	Office	Bridge	$177 Sq ft		73.6	%		3
7	Senior Loan	10/12/17		180.0		173.6		173.5		L+ 3.8	%	L +4.0%	Floating	11/9/22	Charlotte, NC	Hotel	Bridge	$257,143 Unit		65.5	%		2
8	Senior Loan	09/29/17		173.3		164.0		163.4		L+ 4.3	%	L +4.6%	Floating	10/9/22	Philadelphia, PA	Office	Moderate Transitional	$213 Sq ft		72.2	%		3
9	Senior Loan	02/14/18		165.0		159.4		159.0		L+ 3.8	%	L +4.0%	Floating	3/9/23	Various, NJ	Multifamily	Bridge	$132,850 Unit		78.4	%		3
10	Senior Loan	09/28/18		160.0		140.3		140.3		L+ 2.8	%	L +3.0%	Floating	10/9/23	Houston, TX	Mixed-Use	Light Transitional	$299 Sq ft		61.9	%		3
11	Senior Loan	05/15/19		143.0		101.6		101.6		L+ 2.6	%	L +2.9%	Floating	5/9/24	New York, NY	Mixed-Use	Moderate Transitional	$1,741 Sq ft		61.0	%		3
12	Senior Loan	05/20/19		135.0		123.9		123.9		L+ 4.2	%	L +4.5%	Floating	4/10/22	Various, Various	Office	Bridge	$186 Sq ft		67.0	%		3
13	Senior Loan	08/23/17		100.0		100.0		100.0		L+ 4.4	%	L +4.7%	Floating	7/26/22	Houston, TX	Multifamily	Bridge	$349,747 Unit		62.5	%		4
14	Senior Loan	03/28/19		112.0		112.0		111.3		L+ 6.8	%	L +7.8%	Floating	10/9/21	Las Vegas, NV	Land	Bridge	$93 Sq ft		42.6	%		3
15	Senior Loan	07/21/17		106.6		90.0		89.7		L+ 4.5	%	L +4.8%	Floating	8/9/24	Pittsburgh, PA	Multifamily	Bridge	$296,042 Unit		59.4	%		3
16	Senior Loan	12/20/18		105.9		92.3		92.3		L+ 3.3	%	L +3.4%	Floating	1/9/24	Torrance, CA	Mixed-Use	Moderate Transitional	$254 Sq ft		61.1	%		3
17	Senior Loan	02/27/18		90.0		80.2		79.7		L+ 5.1	%	L +5.3%	Floating	3/9/23	Brooklyn, NY	Office	Moderate Transitional	$195 Sq ft		52.2	%		3
18	Senior Loan	08/28/19		90.0		40.0		39.1		L+ 3.1	%	L +3.3%	Floating	9/9/24	San Diego, CA	Office	Moderate Transitional	$382 Sq ft		67.7	%		3
19	Senior Loan	10/14/15		90.0		90.0		90.0		L+ 3.9	%	L +4.1%	Floating	10/14/20	Brooklyn, NY	Mixed-Use	Light Transitional	$359 Sq ft		58.2	%		3
20	Senior Loan	09/29/17		89.5		82.7		82.7		L+ 3.9	%	L +4.2%	Floating	10/9/22	Dallas, TX	Office	Moderate Transitional	$106 Sq ft		50.7	%		2
21	Senior Loan	03/27/19		88.2		87.7		86.9		L+ 3.5	%	L +3.8%	Floating	4/9/24	Aurora, IL	Multifamily	Bridge	$211,394 Unit		74.8	%		3
22	Senior Loan	03/28/19		88.1		75.2		74.9		L+ 3.7	%	L +4.0%	Floating	4/9/24	Various, Various	Hotel	Moderate Transitional	$100,228 Unit		69.6	%		3
23	Senior Loan	02/01/17		85.0		85.0		84.9		L+ 4.7	%	L +5.0%	Floating	2/9/22	St. Pete Beach, FL	Hotel	Light Transitional	$222,382 Unit		60.7	%		3
24	Senior Loan	06/13/17		84.4		84.3		84.1		L+ 3.8	%	L +4.0%	Floating	7/9/22	Jersey City, NJ	Multifamily	Bridge	$148,330 Unit		81.0	%		3
25	Senior Loan	03/07/19		81.3		81.3		81.3		L+ 3.1	%	L +3.4%	Floating	3/9/24	Rockville, MD	Mixed-Use	Bridge	$256 Sq ft		67.2	%		2
26	Senior Loan	06/17/19		79.4		78.5		77.8		L+ 2.8	%	L +3.2%	Floating	7/9/25	Boston, MA	Office	Bridge	$187 Sq ft		70.7	%		3
27	Senior Loan	12/15/17		79.0		79.0		79.0		L+ 5.3	%	L +5.6%	Floating	1/9/23	Rochester & Buffalo, NY	Multifamily	Bridge	$57,164 Unit		59.6	%		2
28	Senior Loan	08/08/19		76.5		58.0		57.6		L+ 3.0	%	L +3.2%	Floating	8/9/24	Orange, CA	Office	Moderate Transitional	$225 Sq ft		64.2	%		3
29	Senior Loan	06/06/18		76.4		76.4		76.3		L+ 3.2	%	L +3.5%	Floating	6/9/23	Roseville, CA	Office	Bridge	$171 Sq ft		81.6	%		2
30	Senior Loan	03/29/18		75.0		71.7		71.7		L+ 3.8	%	L +4.0%	Floating	4/9/23	Hamilton, NJ	Office	Bridge	$154 Sq ft		72.3	%		3
31	Senior Loan	04/29/19		70.0		69.6		69.0		L+ 3.3	%	L +3.5%	Floating	5/9/24	Clayton, MO	Multifamily	Bridge	$280,000 Unit		74.9	%		3
32	Senior Loan	09/27/18		70.0		66.6		66.3		L+ 4.7	%	L +4.9%	Floating	10/1/20	Dallas, TX	Condominium	Light Transitional	$347 Sq ft		55.6	%		2
33	Senior Loan	09/20/17		64.9		59.6		59.4		L+ 4.3	%	L +4.6%	Floating	10/9/22	Glenview, IL	Multifamily	Light Transitional	$153,428 Unit		70.5	%		4
34	Senior Loan	11/29/18		64.2		46.6		46.3		L+ 3.3	%	L +3.5%	Floating	12/9/23	Brooklyn, NY	Multifamily	Moderate Transitional	$227,751 Unit		58.0	%		4
35	Senior Loan	06/28/19		63.9		53.9		53.9		L+ 2.5	%	L +2.7%	Floating	7/9/24	Burlingame, CA	Office	Light Transitional	$327 Sq ft		70.9	%		3
36	Senior Loan	11/16/17		63.0		63.0		62.9		L+ 3.4	%	L +3.6%	Floating	12/9/22	Brooklyn, NY	Multifamily	Bridge	$440,559 Unit		69.3	%		3
37	Senior Loan	06/25/19		62.0		46.8		46.6		L+ 3.1	%	L +3.3%	Floating	7/9/24	Calistoga, CA	Hotel	Moderate Transitional	$696,629 Unit		48.6	%		2
38	Senior Loan	09/12/19		61.2		61.2		60.9		L+ 2.7	%	L +2.9%	Floating	10/9/24	Glendale, AZ	Multifamily	Bridge	$177,907 Unit		78.0	%		3
39	Senior Loan	06/20/18		61.0		53.3		53.3		L+ 3.0	%	L +3.3%	Floating	7/9/23	Houston, TX	Office	Light Transitional	$162 Sq ft		74.9	%		3
40	Senior Loan	01/08/19		60.2		29.2		28.7		L+ 3.8	%	L +4.1%	Floating	2/9/24	Kansas City, MO	Office	Moderate Transitional	$92 Sq ft		74.3	%		3
41	Senior Loan	01/09/19		60.0		60.0		59.8		L+ 3.4	%	L +3.6%	Floating	1/9/24	Mountain View, CA	Hotel	Bridge	$375,000 Unit		64.2	%		3
42	Senior Loan	08/13/18		59.0		56.6		56.5		L+ 3.7	%	L +4.1%	Floating	9/9/22	Parma, OH	Retail	Light Transitional	$79 Sq ft		55.3	%		3
43	Senior Loan	08/06/18		55.0		51.4		51.2		L+ 6.0	%	L +6.3%	Floating	8/9/23	Boston, MA	Mixed-Use	Light Transitional	$529 Sq ft		53.1	%		3
44	Senior Loan	09/20/18		54.5		53.7		53.3		L+ 3.9	%	L +4.1%	Floating	10/9/23	Hilliard, OH	Multifamily	Bridge	$110,677 Unit		72.3	%		3
45	Senior Loan	01/23/18		54.1		50.3		50.4		L+ 3.4	%	L +3.6%	Floating	2/9/23	Walnut Creek, CA	Office	Bridge	$121 Sq ft		66.9	%		2
46	Senior Loan	01/22/19		54.0		50.4		50.4		L+ 3.4	%	L +3.6%	Floating	2/9/23	Manhattan, NY	Office	Light Transitional	$441 Sq ft		61.1	%		3

Loan #	Form of Investment	Origination / Acquisition Date⁽²⁾	Total Loan		Principal Balance		Carrying Value⁽³⁾		Credit Spread⁽⁴⁾				All-in Yield⁽⁵⁾			Fixed / Floating	Extended Maturity⁽⁶⁾	City, State	Property Type	Loan Type	Loan Per SQFT / Unit		LTV⁽⁷⁾			Risk Rating⁽⁸⁾
47	Senior Loan	06/15/18		53.6		32.8		32.6		L+ 3.1	%		L +3.3%			Floating	6/9/23	Brisbane, CA	Office	Moderate Transitional	$514 Sq ft			72.4	%		3
48	Senior Loan	12/20/17		51.0		51.0		50.8		L+ 4.0	%		L +4.3%			Floating	1/9/23	New Orleans, LA	Hotel	Bridge	$217,949 Unit			59.9	%		2
49	Senior Loan	06/15/18		50.0		42.2		41.9		L+ 3.7	%		L +3.9%			Floating	7/9/23	Atlanta, GA	Office	Bridge	$119 Sq ft			57.2	%		3
50	Senior Loan	03/29/19		48.5		39.5		39.1		L+ 3.2	%		L +3.5%			Floating	4/9/24	Various, VA	Multifamily	Moderate Transitional	$66,989 Unit			58.2	%		3
51	Senior Loan	03/30/18		46.2		42.2		41.9		L+ 3.7	%		L +3.9%			Floating	4/9/23	Honolulu, HI	Office	Light Transitional	$160 Sq ft			57.9	%		2
52	Senior Loan	03/21/17		45.0		45.0		44.9		L+ 5.3	%		L +5.5%			Floating	4/9/22	Chicago, IL	Hotel	Bridge	$172,414 Unit			60.2	%		3
53	Senior Loan	01/28/19		43.1		38.0		37.7		L+ 3.0	%		L +3.2%			Floating	2/9/24	Dallas, TX	Office	Light Transitional	$222 Sq ft			64.3	%		3
54	Senior Loan	03/07/19		39.2		32.7		32.3		L+ 3.8	%		L +4.0%			Floating	3/9/24	Lexington, KY	Hotel	Moderate Transitional	$107,221 Unit			61.6	%		3
55	Senior Loan	03/11/19		39.0		39.0		39.0		L+ 3.6	%		L +3.8%			Floating	4/9/24	Miami, FL	Hotel	Bridge	$295,455 Unit			59.3	%		3
56	Senior Loan	01/04/18		36.0		27.3		27.1		L+ 3.4	%		L +3.7%			Floating	1/9/23	Santa Ana, CA	Office	Light Transitional	$182 Sq ft			71.8	%		3
57	Senior Loan	06/04/19		34.7		32.0		31.7		L+ 3.5	%		L +3.8%			Floating	6/9/24	Riverside, CA	Mixed-Use	Bridge	$99 Sq ft			68.0	%		3
58	Senior Loan	12/21/18		33.8		27.8		27.6		L+ 3.2	%		L +3.5%			Floating	1/9/24	Loma Linda, CA	Mixed-Use	Bridge	$72 Sq ft			48.3	%		3
59	Senior Loan	05/27/18		33.0		30.6		30.4		L+ 3.7	%		L +3.9%			Floating	6/9/23	Woodland Hills, CA	Retail	Bridge	$498 Sq ft			63.6	%		4
60	Senior Loan	10/11/16		32.0		32.0		32.0		L+ 5.9	%		L +6.3%			Floating	10/11/21	Chicago, IL	Hotel	Bridge	$148,837 Unit			59.8	%		3
61	Senior Loan	08/28/18		32.0		30.3		30.1		L+ 3.9	%		L +4.1%			Floating	9/9/23	Austin, TX	Multifamily	Light Transitional	$80,605 Unit			71.9	%		3
62	Senior Loan	11/17/17		28.0		28.0		28.0		L+ 5.3	%		L +5.6%			Floating	12/9/22	Victor, NY	Multifamily	Bridge	$152,174 Unit			71.7	%		3
63	Senior Loan	09/13/19		26.7		25.5		25.2		L+ 2.8	%		L +3.0%			Floating	10/9/24	Austin, TX	Multifamily	Bridge	$135,051 Unit			77.5	%		3
64	Senior Loan	11/17/17		26.0		26.0		26.0		L+ 5.3	%		L +5.6%			Floating	12/9/22	Rochester, NY	Multifamily	Bridge	$154,762 Unit			69.1	%		3
65	Senior Loan	06/14/17		23.1		23.1		23.1		L+ 4.9	%		L +5.3%			Floating	7/9/20	Newark, NJ	Multifamily	Bridge	$151,660 Unit			62.2	%		3
66	Senior Loan	11/16/16		12.8		12.8		12.8		L+ 4.1	%		L +4.3%			Floating	5/9/21	Manhattan, NY	Condominium	Moderate Transitional	$697 Sq ft			49.8	%		4
67	Senior Loan	11/16/16		9.7		9.7		9.7		L+ 4.1	%		L +4.3%			Floating	5/9/21	Manhattan, NY	Condominium	Moderate Transitional	$891 Sq ft			43.3	%		4
68	Senior Loan	11/16/16		5.9		5.9		5.9		L+ 4.1	%		L +4.3%			Floating	5/9/21	Manhattan, NY	Condominium	Moderate Transitional	$878 Sq ft			40.7	%		4
69	Senior Loan	11/16/16		2.8		2.8		2.8		L+ 4.1	%		L +4.3%			Floating	5/9/21	Manhattan, NY	Condominium	Moderate Transitional	$530 Sq ft			46.6	%		4
Subtotal / Weighted Average				5,663.0		5,031.6		5,012.8	L +3.6%			⁽⁹⁾	L +4.0%				3.8 yrs							65.9	%		2.9
Mezzanine Loans:
70	Mezzanine Loan	06/28/19		35.0		5.0		4.7		L+ 10.3	%		L +10.8%			Floating	6/28/25	Napa, CA	Hotel	Construction	$818,195 Unit	⁽¹⁰⁾		41.0	%		3
Subtotal / Weighted Average				35.0		5.0		4.7		L+ 10.3	%			L+ 10.8	%		5.7 yrs							41.0	%		3
Total / Weighted Average⁽⁹⁾			$	5,698.0	$	5,036.6	$	5,017.5	L +3.7%				L +4.0%				3.8 yrs							65.9	%		2.9

(1)	First mortgage loans are whole mortgage loans unless otherwise noted. Loans numbered 66, 67, 68, and 69 represent 24.0% pari passu participation interests in whole mortgage loans.

(2)	Date loan was originated or acquired by us, which date has not been updated for subsequent loan modifications.

(3)	Represents unpaid principal balance net of unamortized costs.

(4)	Represents the formula pursuant to which our right to receive a cash coupon on a loan is determined.

(5)

In addition to credit spread, all-in yield includes the amortization of deferred origination fees, purchase price premium and discount, loan origination costs and accrual of both extension and exit fees. All-in yield for the total portfolio assumes the applicable floating benchmark rate as of September 30, 2019 for weighted average calculations.

(6)

Extended maturity assumes all extension options are exercised by the borrower; provided, however, that our loans may be repaid prior to such date. As of September 30, 2019, based on unpaid principal balance, 61.8% of our loans were subject to yield maintenance or other prepayment restrictions and 38.2% were open to repayment by the borrower without penalty.

(7)

Except for construction loans, LTV is calculated for loan originations and existing loans as the total outstanding principal balance of the loan or participation interest in a loan (plus any financing that is pari passu with or senior to such loan or participation interest) divided by the as-is real estate value at the time of origination or acquisition of such loan or participation interest. For construction loans only, LTV is calculated as the total commitment amount of the loan divided by the as-stabilized value of the real estate securing the loan. The as-is or as-stabilized (as appropriate) value reflects our Manager’s estimates, at the time of origination or acquisition of the loan or participation interest in a loan, of the real estate value underlying such loan or participation interest determined in accordance with our Manager’s underwriting standards and consistent with third-party appraisals obtained by our Manager.

(8)	For a discussion of risk ratings, please see Notes 2 and 3 to our Consolidated Financial Statements included in this Form 10-Q.

(9)	Represents the weighted average of the credit spread as of September 30, 2019 for the loans, all of which are floating rate.

(10)	Reflects the total loan amount, including non-consolidated senior interest, allocable to the property’s 135 hotel rooms.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk

Our business model is such that rising interest rates will generally increase our net interest income, while declining interest rates will generally decrease our net interest income, subject to the beneficial impact of contractual LIBOR floors within our mortgage loan investment portfolio. As of September 30, 2019, 100.0% of our loans by unpaid principal balance earned a floating rate of interest and were financed with liabilities that require interest payments based on floating rates, which resulted in an amount of net equity that is positively correlated to rising interest rates. As of September 30, 2019, we had no loans that earned a fixed rate of interest.

The following table illustrates the impact, assuming our existing floating rate mortgage loan investment portfolio and related liabilities, on our interest income and interest expense for the twelve-month period following September 30, 2019, assuming an immediate increase or decrease of 25 and 50 basis points in the underlying benchmark interest rate (dollars in thousands):

Assets (Liabilities) Subject to Interest Rate Sensitivity⁽¹⁾					25 Basis Point Increase			25 Basis Point Decrease			50 Basis Point Increase			50 Basis Point Decrease
$	5,036,640			Interest income	$	12,592		$	(5,155	)	$	25,183		$	(11,694	)
	(3,825,371	)	⁽²⁾	Interest expense		(9,563	)		9,563			(19,127	)		19,127
$	1,211,269			Total change in net interest income	$	3,029		$	4,408		$	6,056		$	7,433

(1)	Floating rate mortgage loan assets and liabilities are indexed to LIBOR. Excludes the impact of our CMBS and CRE CLO investments and related liabilities.

(2)	Floating rate liabilities include secured revolving repurchase agreements, collateralized loan obligations, senior secured and secured credit agreements, a term loan facility, and asset-specific financings.

Credit Risk

Our loans and other investments are also subject to credit risk. The performance and value of our loans and other investments depend upon the sponsors’ ability to operate the properties that serve as our collateral so that they produce cash flows adequate to pay interest and principal due to us. To monitor this risk, the asset management team reviews our portfolio and maintains regular contact with borrowers, co-lenders and local market experts to monitor the performance of the underlying collateral, anticipate borrower, property and market issues and, to the extent necessary or appropriate, enforce our rights as the lender.

In addition, we are exposed to the risks generally associated with the commercial real estate market, including variances in occupancy rates, capitalization rates, absorption rates and other macroeconomic factors beyond our control. We seek to manage these risks through our underwriting and asset management processes.

Prepayment Risk

Prepayment risk is the risk that principal will be repaid at a different rate than anticipated, causing the return on certain investments to be less than expected. As we receive prepayments of principal on our assets, any premiums paid on such assets are amortized against interest income. In general, an increase in prepayment rates accelerates the amortization of purchase premiums, thereby reducing the interest income earned on the assets. Conversely, discounts on such assets are accreted into interest income. In general, an increase in prepayment rates accelerates the accretion of purchase discounts, thereby increasing the interest income earned on the assets.

Extension Risk

Our Manager computes the projected weighted average life of our assets based on assumptions regarding the rate at which the borrowers will prepay the mortgages or extend. If prepayment rates decrease in a rising interest rate environment or extension options are exercised, the life of the fixed rate assets could extend beyond the term of the secured debt agreements. This could have a negative impact on our results of operations. In some situations, we may be forced to sell assets to maintain adequate liquidity, which could cause us to incur losses.

Capital Market Risks

We are exposed to risks related to the equity capital markets and our related ability to raise capital through the issuance of our stock or other equity instruments. We are also exposed to risks related to the debt capital markets and our related ability to finance our business through borrowings under secured revolving repurchase agreements, collateralized loan obligations, senior secured and secured credit agreements, term loans, or other debt instruments or arrangements. As a REIT, we are required to distribute a significant portion of our taxable income annually, which constrains our ability to accumulate operating cash flow and therefore requires us to utilize debt or equity capital to finance our business. We seek to mitigate these risks by monitoring the debt and equity capital markets to inform our decisions on the amount, timing and terms of capital we raise.

Counterparty Risk

The nature of our business requires us to hold our cash and cash equivalents and obtain financing from various financial institutions. This exposes us to the risk that these financial institutions may not fulfill their obligations to us under these various contractual arrangements. We mitigate this exposure by depositing our cash and cash equivalents and entering into financing agreements with high credit-quality institutions.

The nature of our loans and other investments also exposes us to the risk that our counterparties do not make required interest and principal payments on scheduled due dates. We seek to manage this risk through a comprehensive credit analysis prior to making an investment and rigorous monitoring of the underlying collateral during the term of our investments.

Non-Performance Risk

In addition to the risks related to fluctuations in cash flows and asset values associated with movements in interest rates, there is also the risk of non-performance on floating rate assets. In the case of a significant increase in interest rates, the additional debt service payments due from our borrowers may strain the operating cash flows of the collateral real estate assets and, potentially, contribute to non-performance or, in severe cases, default. This risk is partially mitigated by various factors we consider during our underwriting and loan structuring process, including but not limited to, requiring substantially all of our borrowers, to purchase an interest rate cap contract for the term of our loan.

Loan Portfolio Value

We may in the future originate loans that earn a fixed rate of interest on unpaid principal balance. The value of fixed rate loans is sensitive to changes in interest rates. We generally hold all of our loans to maturity, and do not expect to realize gains or losses on any fixed rate loan we may hold in the future, as a result of movements in market interest rates during future periods.

Real Estate Risk

The market values of commercial mortgage assets are subject to volatility and may be adversely affected by a number of factors, including, but not limited to, national, regional and local economic conditions (which may be adversely affected by industry slowdowns and other factors); local real estate conditions; changes or continued weakness in specific industry segments; construction quality, age and design; demographic factors; and retroactive changes to building or similar codes. In addition, decreases in property values reduce the value of the collateral and the potential proceeds available to a borrower to repay the underlying loans, which could also cause us to suffer losses.

Currency Risk

We may in the future hold assets denominated in foreign currencies, which would expose us to foreign currency risk. As a result, a change in foreign currency exchange rates may have an adverse impact on the valuation of our assets, as well as our income and distributions. Any such changes in foreign currency exchange rates may impact the measurement of such assets or income for the purposes of our REIT tests and may affect the amounts available for payment of dividends on our common stock.

We intend to hedge any currency exposures in a prudent manner. However, our currency hedging strategies may not eliminate all of our currency risk due to, among other things, uncertainties in the timing and/or amount of payments received on the related investments and/or unequal, inaccurate or unavailability of hedges to perfectly offset changes in future exchange rates. Additionally, we may be required under certain circumstances to collateralize our currency hedges for the benefit of the hedge counterparty, which could adversely affect our liquidity.

We may hedge foreign currency exposure on certain investments in the future by entering into a series of forwards to fix the U.S. dollar amount of foreign currency denominated cash flows (interest income, rental income and principal payments) we expect to receive from any foreign currency denominated investments. Accordingly, the notional values and expiration dates of our foreign currency hedges would approximate the amounts and timing of future payments we expect to receive on the related investments.

Item 4. Controls and Procedures

Disclosure Controls and Procedures. We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial Officer), to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As required by Rules 13a-15(b) and 15d-15(b) under the Exchange Act, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial Officer), of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2019. Based upon that evaluation, our Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial Officer) concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of September 30, 2019.

Changes in Internal Control Over Financial Reporting. There were no changes in our internal control over financial reporting (as such term as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we may be involved in various claims and legal actions arising in the ordinary course of business. As of September 30, 2019, we were not involved in any material legal proceedings. See the “Litigation” section of Note 14 to the Consolidated Financial Statements included in this Form 10-Q for information regarding legal proceedings, which information is incorporated by reference in this Item 1.

Item 1A. Risk Factors

For a discussion of our potential risks and uncertainties, see the information under the heading Item 1A - “Risk Factors” previously disclosed under Item 1A of our Form 10-K filed with the SEC on February 26, 2019. There have been no material changes to our principal risks that we believe are material to our business, results of operations, and financial condition from the risk factors previously disclosed in our Form 10-K filed with the SEC on February 26, 2019, which is accessible on the SEC’s website at www.sec.gov.

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

(a) Unregistered Sales of Equity Securities

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

The information set forth above in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Our Results of Operations—Subsequent Events—Financing Activity” is incorporated by reference into this Part II, Item 5.

Item 6. Exhibits

Exhibit Number		Description

3.1		Articles of Amendment and Restatement of TPG RE Finance Trust, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K (001-38156) filed on July 25, 2017)

3.2		Amended and Restated Bylaws of TPG RE Finance Trust, Inc. (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K (001-38156) filed on July 25, 2017)

4.1		Specimen Common Stock Certificate of TPG RE Finance Trust, Inc. (incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form S-11/A (333-217446) filed on June 21, 2017)

10.1		Seventh Amendment to Master Repurchase and Securities Contract Agreement, dated as of August 16, 2019, by and between Goldman Sachs Bank USA and TPG RE Finance 2, Ltd.

10.2		Eighth Amendment to Master Repurchase and Securities Contract Agreement, dated as of August 19, 2019, by and between Goldman Sachs Bank USA and TPG RE Finance 2, Ltd.

10.3		Master Repurchase Agreement, dated as of August 13, 2019, by and between Barclays Bank PLC and TPG RE Finance 23, Ltd.

10.4		Guaranty, dated as of August 13, 2019, made by TPG RE Finance Trust Holdco, LLC for the benefit of Barclays Bank PLC

10.5		Indenture, dated as of October 25, 2019, by and among TRTX 2019-FL3 Issuer, Ltd., TRTX 2019-FL3 Co-Issuer, LLC, TRTX Master CLO Loan Seller, LLC, Wilmington Trust, National Association and Wells Fargo Bank, National Association

10.6		Preferred Share Paying Agency Agreement, dated as of October 25, 2019, among TRTX 2019-FL3 Issuer, Ltd., Wells Fargo Bank, National Association and MaplesFS Limited

10.7		Collateral Interest Purchase Agreement, dated as of October 25, 2019, among TRTX Master CLO Loan Seller, LLC, TRTX 2019-FL3 Issuer, Ltd., TPG RE Finance Trust Holdco, LLC and TPG RE Finance Trust CLO Sub-REIT

10.8		Collateral Management Agreement, dated as of October 25, 2019, between TRTX 2019-FL3 Issuer, Ltd. and TPG RE Finance Trust Management, L.P.

10.9		Servicing Agreement, dated as of October 25, 2019, by and among TRTX 2019-FL3 Issuer, Ltd., TPG RE Finance Trust Management, L.P., Wilmington Trust, National Association, Wells Fargo Bank, National Association, TRTX Master CLO Loan Seller, LLC, Situs Asset Management LLC and Situs Holdings, LLC

31.1		Certificate of Greta Guggenheim, Chief Executive Officer and President, pursuant to Section 302 of the SarbanesOxley Act of 2002

31.2		Certificate of Robert Foley, Chief Financial and Risk Officer, pursuant to Section 302 of the SarbanesOxley Act of 2002

32.1		Certificate of Greta Guggenheim, Chief Executive Officer and President, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith)

32.2		Certificate of Robert Foley, Chief Financial and Risk Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith)

101.INS		Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH		Inline XBRL Taxonomy Extension Schema Document

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document

104		Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: October 28, 2019	TPG RE Finance Trust, Inc.

	(Registrant)

	/s/ GRETA GUGGENHEIM
	Greta Guggenheim
	Chief Executive Officer
	(Principal Executive Officer)


	/s/ ROBERT FOLEY
	Robert Foley
	Chief Financial and Risk Officer
	(Principal Financial Officer)