TPG RE Finance Trust - Q1 2024

Transcript

Operator (participant)

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the TPG Real Estate Finance Trust First Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. Should you require operator assistance during the conference, please press star zero to signal an operator. Please note this conference is being recorded. It is now my pleasure to turn the call over to the company. Thank you. You may begin.

Chris Camp (Head of Investor Relations)

Good morning and welcome to TPG RE Finance Trust Conference Call for the first quarter of 2024. We're joined today by Doug Bouquard, Chief Executive Officer, and Bob Foley, Chief Financial Officer. Doug and Bob will share some comments about the quarter, and then we will open the floor for questions. Yesterday evening, the company filed its Form 10-Q and issued a press release and earnings supplemental with a presentation of operating results, all of which are available on the company's website in the Investor Relations section. As a reminder, today's call may include forward-looking statements which are uncertain and outside of the company's control. Actual results may differ materially. For discussion of risks that could affect results, please see the Risk Factor section of the company's Form 10-Q and Form 10-K.

The company does not undertake any duty to update these statements, and today's call participants will refer to certain non-GAAP measures. For reconciliations, you should refer to the press release and the Form 10-Q. At this time, I'll turn the call over to Doug Bouquard, Chief Executive Officer. Doug?

Doug Bouquard (CEO)

Thank you, Chris. Good morning, and thank you for joining the call. Since the beginning of the year, the economy and labor markets continue to be remarkably resilient across the U.S. The market remains highly confident in a soft landing for the U.S. economy, and global demand for risk assets remains strong. More recently, however, inflation has proved challenging to tame, and the interest rate market has adjusted its expectations for rate cuts in 2024 over the past few weeks. Further, the 10-year Treasury yield has moved nearly 80 bips during the first four months of the year and is now approaching 4.7%. Within broad credit markets, corporate credit spreads are at multi-year tights, while real estate credit spreads have rallied in certain areas but do continue to underperform on a relative basis. Once again, this combination of factors provides mixed signals to real estate investors.

On one hand, broad market demand for risk assets, a strong economy, and low unemployment should provide tailwinds for real estate valuation. We do see these trends flowing through in our portfolio. On the other hand, a volatile and elevated interest rate environment tends to reduce transaction activity, put pressure on values, and increase the financial burden on borrowers. This uncertainty is compounded by the shifts we are seeing within the real estate credit landscape from a lending perspective. Banks continue to retreat from direct lending and pivot their attention to loan-on-loan financing, which does benefit TRTX by providing attractive funding sources for its loan portfolio and new originations. We continue to invest TRTX's balance sheet with these competing forces in mind, and our quarterly results reflect our strategic positioning.

During the first quarter of the year, our approach to capital deployment and risk management remained consistent with prior quarters. Given the market backdrop, we continue to focus on, 1, maintaining elevated levels of liquidity, 2, proactively risk managing our investment portfolio, and then, 3, continuing to position our balance sheet to be able to take advantage of the dislocation in lending markets in 2024 and beyond. Over the past quarter, TRTX's performance reflects both the dedicated focus of our asset management team and the benefits of TPG's broad global investment platform. Our loan portfolio is 100% performing, and both our CECL reserve and risk ratings reflect very modest change over the past quarter. From a property-type perspective, 50% of our loan portfolio is multifamily. Despite the pressures on values within the multifamily sector, we continue to see ample liquidity for both debt and equity transactions.

While we acknowledge the Fed's signaling to slow rate cuts may put pressure on both near-term values and borrowing costs, we remain confident in the long-term underlying fundamentals of the housing sector broadly. In terms of new investments during the quarter, we originated three senior mortgage loans totaling $116 million, 100% of which these loans are secured by multifamily properties. We continue to prefer lending in this sector given the downside protections available in today's market environment. From a liquidity and leverage perspective, we ended the quarter with $370 million of liquidity across both cash and other available liquidity channels and a debt-to-equity ratio of 2.21. While the discount to book value at our current share price has compressed since we last spoke, we continue to believe that this discount is significant and that our shares offer a compelling value proposition at today's price.

To that end, on April 25th, our board of directors approved a share repurchase plan of up to $25 million, demonstrating the board and management's confidence in the value of TRTX shares. In summary, the past quarter represented an important turning point for TRTX as we began to deploy capital with a slightly more offensive bent. The resources and deep experience of TPG's real estate debt and equity investment platform grants us unique insights into valuation shifts and capital flows across the real estate landscape. While we acknowledge elevated borrowing costs may increase financial stress on our borrowers, we remain confident in our ability to navigate the ever-evolving real estate credit landscape and are pleased with how our company is positioned to create long-term shareholder value. With that, I will turn it over to Bob for a more detailed summary of this quarter's performance.

Bob Foley (CFO)

Thanks, Doug. Good morning, everyone, and thank you for joining us. Our first quarter results reflect the benefit of a 100% performing loan portfolio, a further reduction in interest expense due to continued optimization of our liability structure, including the reduction of interest expense quarter-over-quarter of $7.4 million or $0.10 per share, and nearly full deployment of approximately $247.2 million of reinvestment cash in our FL5 CRE CLO. For the quarter, GAAP net income attributable to common shareholders was $13.1 million as compared to $2.6 million for the preceding quarter. Net interest margin for our loan portfolio was $26.8 million versus $21.3 million in the prior quarter, an increase of $5.5 million or $0.07 per common share due to further optimization of our liability structure and the absence of higher-cost financing for non-performing loans, of which we have none.

Our weighted average credit spread and borrowings declined quarter-over-quarter to 195 basis points from 204 basis points. Distributable earnings were $23.3 million or $0.30 per share. Coverage in the quarter for the quarter of our $0.24 dividend was 1.25 times. Distributable earnings before realized credit losses was $23.3 million or $0.30 per share versus $24.4 million or $0.31 per share in the prior quarter due to an improvement in net interest margin offset by a reduction in non-cash credit loss expense. Our CECL reserve increased slightly to $74.1 million from $69.8 million due primarily to worsening macroeconomic and generic loan default and loss data embedded in the Trepp Database and model we use to forecast our general CECL loan loss reserve. We had no five-rated loans, no specifically identified loans, thus no specific CECL loan loss reserve at quarter end.

Our CECL reserve was 210 basis points versus 190 basis points in the prior quarter. Book value per share is $11.81 as compared to $11.86 last quarter due primarily to the slight increase in our CECL reserve. Multifamily now represents 50% of our loan portfolio. Office has declined 68% over the past nine quarters to 20.4%. Life Sciences is 11.4%. Hotel is 9.9%. No other property type comprises more than 3.3% of our portfolio. Regarding REO, we have 5 REO properties, 1 multifamily property, and 4 office properties with a total carrying value of $192.4 million and a blended current annualized yield on cost of 6%. REO represents a mere 5% of our total assets. Using the substantial resources of TPG Real Estate, we made significant progress during the quarter in advancing value creation and realization strategies for each REO investment.

Regarding our multifamily property in suburban Chicago, we've already improved lease occupancy by more than 10 points to 93%. Refer to footnote four of our financial statements for a snapshot of our REO portfolio. Regarding credit, our weighted average risk ratings were unchanged at 3.0. All of our loans were performing. We had a small number of changes in risk ratings during the first quarter. Refer to page 52 of our Form 10-Q for more detail. Regarding liabilities and our capital base, we remained focused on maintaining high levels of non-mark-to-market, non-recourse term financing. At quarter end, such arrangements represented 77.1% of our borrowings as compared to 73.5% of December 31st. Our total leverage declined further to 2.2 to 1 from 2.5 to 1 at December 31st. We have $4.7 billion of total financing capacity across 12 discrete financing arrangements.

During the quarter, we extended the investment period under our existing secured credit facility with Goldman Sachs for two additional years through 2026 and tacked on a two-year term-out provision through 2028. Our only scheduled debt maturity in 2024 is $1.8 million under a credit facility we expect to extend or repay and terminate during the second quarter. We were in compliance with all financial covenants at March 31st, 2024. At quarter end, we had $51 million of reinvestment capacity available, which we used in mid-April. We deployed into loans during the quarter roughly $196.2 million of reinvestment cash. The reinvestment windows are now closed for all three of our extant CRE CLOs, although we remain able to substitute and exchange loans under certain circumstances. Regarding liquidity, we maintain high levels of immediate and near-term liquidity, roughly 9.7% of total assets.

Cash and near-term liquidity was $370.7 million at quarter end, comprised of $188.1 million of cash in excess of our covenant requirements, $51 million of CLO reinvestment cash since deployed, and $116.6 million of undrawn capacity under our secured credit agreements. As of last Friday, our cash position in excess of covenant requirements was actually higher at $235.5 million due to loan repayments and receipt of a $26 million servicer receivable in connection with a loan sale that closed during the fourth quarter of 2023. During the quarter, we funded $10.7 million of commitments under existing loans. At quarter end, our deferred funding obligations under existing loan commitments totaled only $163.8 million, a mere 4.6% of our total loan commitments.

In summary, a quarter characterized by strong operating performance, solid credit, further optimization of our liability structure in terms of cost, non-mark-to-market borrowings, and extended tenor, and significant liquidity for a balanced stance versus the market. With that, we'll open the floor to questions. Operator.

Operator (participant)

Thank you. At this time, we will be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. If at any time you wish to remove your question from the queue, please press star two. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question is from Stephen Laws with Raymond James.

Stephen Laws (Managing Director for Mortgage REITs and Real Estate Finance)

Hi. Good morning. Congrats on a nice start to the year, Bob and Doug. Nice to see the stability here over the last couple of quarters. Wanted to touch on the CLO. I think it was around $50 million of replenishment capacity at quarter end. Did that get filled with a loan that was funded on a bank line, or were there some originations post-quarter end? Can you talk to that and maybe more generally kind of your origination pipeline and how you think about moving leverage from the current two-to over the course of this year?

Bob Foley (CFO)

Sure. Good morning, Stephen, and thanks for joining us. With respect to the $51 million of CLO cash that we deployed in April after quarter end, in that particular instance, we actually took an existing loan that had been financed with a bank and deposited it into the CLO, which actually generated about $11 million or $12 million of cash. We had borrowed less from our bank counterparty with respect to that loan than there was cash in the CLO. So we ended up netting about $11 million or $12 million on our balance sheet cash as a consequence of that redeployment. And the cost of funds was clearly lower in the CLO than it was on the bank financing. And the coupon on the loan didn't change. Its recourse is now different. It's the CLO, not a bank financing arrangement.

I'm going to ask Doug to address your question about investment activity.

Doug Bouquard (CEO)

Thanks, Stephen. So on the investment side, we're excited about the fact that we're kind of pivoting more offensive and have a very active pipeline currently. If you look at our originations in the first quarter, which were 100% multifamily, we do still favor that sector, particularly now being able to deploy capital at what is a lower LTV combined with obviously, values are lower than where they were in 2021 and 2022. So we still lean towards housing, one. But two, frankly, we're being selective. I think I had mentioned earlier in my remarks about the sort of mixed signals that we're getting from both the sort of macro picture and then also locally within real estate.

We're being respectful of where we are within the market cycle, but we are definitely able to play offense and will be continuing to pursue new investment opportunities to help drive earnings growth for the company.

Stephen Laws (Managing Director for Mortgage REITs and Real Estate Finance)

Great. Appreciate the color on both of those topics. Bob, wanted to touch base on the debt side. And you mentioned this at the end of your prepared remarks about the Morgan Stanley facility that matures, I think, at the end of this week. You really don't have anything drawn down on it, right? So curious to hear your thoughts on the pros and cons of extending it versus letting it expire. Even without it, you still have excess of $1 billion of capacity on your bank lines. What are the commitment fees that you would have to pay if you extend it? And then larger picture, debt covenants, coverage ratios. I know it reverted back to 1.4 at quarter end, and you're in compliance with that. Can you maybe update us on where you stand with the ratio?

Bob Foley (CFO)

Sure. So first, with respect to our particular arrangement with Morgan Stanley, Morgan Stanley has been an important financing partner of ours since we went public in 2017. We've got a great relationship with them and they with us. I think we don't have much borrowed with them right now for two reasons. One is we haven't recently found a commonality between our credit box and theirs. And two, our financing focus has, for a number of years now, shifted strongly in favor of non-mark-to-market, match-term, non-recourse financing, hence all the note-on-note and CLO financings that we've done since 2018. Bank financing has remained an important part of our financing strategy because it is very flexible and it moves quickly.

But we have spent a considerable amount of time over the last several quarters evaluating each of our counterparty relationships and determining where it makes sense to continue and where it may not make sense for us to continue. So that's that. With respect to financial covenants, we were in compliance at quarter end as we have been in each of the previous quarters. We had, as you pointed out, obtained from all of our lenders because we have harmonized financial covenants across all of our borrowing arrangements, a waiver arrangement that allowed our Debt Service Coverage Ratio to temporarily fall below 1.4 times. We're above that. We're very low-levered at this point.

We would expect, as we invest more and perhaps use more leverage, that since we don't use a ton of leverage, the interest coverage, even at the high benchmark rates that we experience today, will continue to be satisfied. So hope that answers that question. With that, I'll ask Doug. He's got a comment about the financing markets more generally.

Doug Bouquard (CEO)

Yeah. And Stephen, I think you do bring up a really important trend that we're seeing. And as I think about the first quarter, the demand from the banks for loan-on-loan business is definitely as strong as we've seen it, frankly, in a couple of quarters. And I think that's really determined by a few things. One is banks continue to pull back on direct lending. And if they are going to be doing direct lending, they're generally pivoting more towards CMBS execution rather than actually a long-term balance sheet investment. And then secondly, capital rules continue to kind of push banks towards providing back leverage to platforms like TRTX.

I think on the positive side, as we think about our pipeline through 2024 and beyond, that amount of demand, I think, is a really positive tailwind for our platform and is a trend that we expect to continue over the coming quarters.

Bob Foley (CFO)

I think Doug's earlier comment about mixed signals in the market, I think, sort of highlights this particular point, which is demand by banks to provide financing is quite strong. I mean, we have a ton of inbound inquiry from our existing counterparties about borrowing more from them. The nature of the financing that they're providing to the CRE world has clearly shifted, as Doug described. And honestly, spreads are coming in with respect to secured financing that can be obtained by lenders like us. The investment sales market for properties and the financing market for those transactions, that environment is a little more opaque and a little less clear right now, which is really the point that Doug was making earlier. So there's an interesting technical thing going on right now where financing costs are coming in, but loan spreads are kind of all over the place.

Stephen Laws (Managing Director for Mortgage REITs and Real Estate Finance)

Great. Really interesting comments. Appreciate getting both of your thoughts on that. Thank you.

Doug Bouquard (CEO)

Thanks, Stephen.

Operator (participant)

Our next question is from Rick Shane with J.P. Morgan.

Rick Shane (Senior Equity Research Analyst)

Hey, guys. Thanks for taking my questions. Steve actually covered a lot of the ground I was interested in on the facilities. One thing, looking at the extension of the Goldman facility, spread stays the same. I am curious if there are any changes to the terms that we should be aware of, any sort of refinement of the credit box going forward.

Bob Foley (CFO)

No. No material changes. We pay for financing on a pay-as-you-go basis. And Goldman has been another very important business partner of ours. They were actually our first credit counterparty when we were a private company. And your point about credit box, we've talked about this before. We view our portfolio liability providers, and the construction of that portfolio is being as important as constructing our investment portfolio. And everybody's credit box is a little bit different, but when stitched together, what we want and what we have is a mosaic that works for our business. In the case of Goldman, we're pretty simpatico. I wouldn't say that there's been a change in credit profile at all. And those decisions are made, honestly, on a deal-by-deal basis.

Rick Shane (Senior Equity Research Analyst)

Got it. Okay. That makes sense. And yeah, obviously, given the history with Goldman, that's a significant renewal. Look, the other question is, as you sort of change your footing and start to move back into making more loans, I'm curious what you're finding in the market. And is capital deployment going forward going to be idiosyncratic? Every quarter, we're going to hear about some deployment, and it's going to be very much a story, "Hey, we found this opportunity. This is why we love it." Or is it going to be thematic? There is something in the market that you're going to be targeting, whether it's a geo, a property type, or, like I said, a thematic approach to reemerging the market?

Doug Bouquard (CEO)

Yeah. I mean, I would say really for us at the top of the list, we do think about investing within the real estate space from a thematic lens. And that's really kind of born across both our debt and equity platform, one. As we think about themes, we really, I would say, are very much drawn to a few things. I would say, one, we've mentioned our sort of bias towards housing and actually do acknowledge that, again, multifamily values are down from the peak. But where we can make new loans today at 65 LTV, acknowledging that V is now potentially 15%-20% lower, is, I think, a really attractive entry point. So that's really one.

I would say, two, from a theme perspective, when you kind of get a little more granular and you're really out there looking at new investments, I'd say there's kind of two areas that I think are particularly attractive to really focus on. One is new acquisition activity is obviously going to be a big draw. I think wherever we see fresh capital coming in reflecting today's market values, that's attractive. And then I would say, secondly, if there was a part of the market that's probably most interesting, I mean, it really continues to be trafficking within the area of where regional banks had been lending. I think that still is probably it's a story that's obviously out there very broadly about banks pulling back. But acknowledging that of all the outstanding commercial real estate debt held by banks, about 75% resides within regional banks.

Those regional banks continue to really, I'd say, not fill up. And we've seen that in Q1 as we're out there competing on loans. So again, really view it as a bias towards housing, one. Second, a bias towards new acquisitions. And then as we think about capital deployment going forward, we've really positioned the balance sheet where we can navigate what I would describe as the sort of mixed signals that we're getting from the market broadly. And that's exactly kind of how we think about liquidity and really think about new investments going forward.

Rick Shane (Senior Equity Research Analyst)

Doug, that's really helpful. I am curious, as you start to look at multifamily, if you would just give some sort of context where cap rates were previously, where you see deals getting done today. And that's it for me. Thank you, guys.

Doug Bouquard (CEO)

Yeah, sure. I mean, look, I think multifamily, obviously, I'd say, is a very, very heavily debated sector right now, just kind of given all the kind of right at the heart of the confluence of some of the macro trends with interest rates and inflation. I think that where we're seeing new transactions get done, generally speaking, have been in the sort of mid- to high-5 to 5's cap rate range. That's, I'd say, a bit of a sweet spot. It feels like from a liquidity perspective, as multifamily cap rates get into the 6s, there is a lot of liquidity on the equity side. And I think as really cap rates get, let's call it, inside of 5.25 is where I would say that liquidity dries up.

So again, view it as the sort of midpoint is to pick a number, 5.75. And that's, again, what allows us to be making loans from a risk perspective at stabilized debt yields in the 7.5%-8.5% range, again, depending on the property type and some of the specifics to that certain asset.

Rick Shane (Senior Equity Research Analyst)

Got it. Thank you very much.

Doug Bouquard (CEO)

Thank you.

Operator (participant)

Our next question is from Eric Dray with Bank of America.

Eric Dray (Equity Research Associate)

Hey, guys. Good morning. Most of mine have been covered, but just wanted to ask about how have conversations with borrowers changed at all over the last month? Has kind of the rate outlook changed a bit? And kind of what you're hearing from your portfolio borrowers?

Doug Bouquard (CEO)

Yeah. No, I think that's a great question. I think that broadly, the narrative with, obviously, the slowing of expected rate cuts combined with, I would say, the sort of what feels like over the past few weeks, just a little bit of a slowdown in terms of transaction activity, I think that's been kind of more of the dialogue that we've been hearing about. Relative to our current portfolio, obviously, bearing in mind it's 100% performing, I think that we generally kind of would characterize the borrowing universe as still looking through the long-term in terms of, frankly, where long-term rates will settle and still kind of leaning positive in terms of their ability to kind of weather the storm with elevated stops for the near term. And that's, I'd say, the best way to characterize the mindset. So as that evolves, of course, happy to keep you updated.

But that's really kind of where the market is right now. And again, we're definitely at a pretty interesting point narrative-wise, just kind of what's going on within macro. And I would say that despite our intimate knowledge of what's going on on the ground within the real estate sector, given our sort of broad lens through which we invest, keeping an eye, frankly, on what the Fed is doing and saying, I think, is really important. And we're very attuned to that message.

Bob Foley (CFO)

Yeah. All eyes are on 2:15 P.M. Eastern Time today.

Eric Dray (Equity Research Associate)

Yeah, definitely. Okay. Awesome. And then real quick, just I guess for modeling purposes, I mean, do you think that kind of the $0.30 DE that you posted this quarter, I mean, is that kind of where you guys think the portfolio can kind of maintain here in the next few quarters or any one-time things to call out?

Bob Foley (CFO)

Hi Eric. We never provide guidance, but I think that backwarding into that number and its composition, I think it's pretty easy to see what's being generated by the loan book and what's being generated by our small REO portfolio. So we've been pretty clear about our dividend policy and our view about sustainable levels and distributable earnings and so on. But we're comfortable with our current position but can't provide any guidance.

Doug Bouquard (CEO)

Yeah. I think it's just to give perhaps a little bit more context, which is helpful, as you think about sort of levers that we have to grow earnings. I would just kind of think very clearly about kind of what the loan balance sheet looks like. First and foremost, we have a substantial cash balance that, combined with other available liquidity channels, totals approximately $371 million currently. Secondly, we are out there with a pipeline of potential investments that we could potentially pursue over the coming quarters. So just from a new investment perspective, that, of course, can drive earnings. And then lastly, again, to Bob's comment, we have approximately 5% REO. And frankly, as we navigate through those assets and maximize value, that also can be recycled into newer loan investments, which will also grow earnings over time.

So kind of view that as the sort of broader qualitative picture on that point.

Eric Dray (Equity Research Associate)

Okay. Great. Thank you, guys.

Doug Bouquard (CEO)

Thank you, Eric. Appreciate it.

Operator (participant)

Our final question is from Chris Muller with JMP Securities.

Chris Muller (Equity Research Associate)

Hey, guys. Thanks for taking the questions, and congrats on a great start to the year. So following up on some of the prior questions, so now that you guys are back to lending and the portfolio is cleaned up, should we expect to see some portfolio growth in the back half of this year, or will it be more of a flattish-type portfolio? And I guess the root of the question is, how aggressively do you guys want to match repayment with new loans over the coming quarters? Thanks.

Doug Bouquard (CEO)

I mean, look, I'd say that from a strategic perspective, we've really kind of built the balance sheet to be able to kind of stomach what I would describe as a sort of all-weather outcome here, again, acknowledging those mixed signals. Where we are kind of currently sitting today, I would say it definitely kind of leans more towards the offensive. So from a deployment perspective, I would expect us to be able to find new investments in the coming quarters. So as we think about kind of repayments, repayments so far definitely have slowed. I think that will be one of the byproducts, frankly, of both elevated rates but also more probably elevated-rate vol right now.

But I would say, generally speaking, as I mentioned earlier about the sort of three levers that we have to grow earnings, I would describe our ability and appetite to generate new investments is, frankly, at the top of the list to be able to grow earnings for the company.

Chris Muller (Equity Research Associate)

Got it. That's helpful. And then the other one I have, so with some of your CLO financing out of the reinvestment periods, can you just give your thoughts on if a new CLO is possible in 2024 and just how you guys are viewing that market today?

Doug Bouquard (CEO)

Yeah, sure. I mean, I think that there have, of course, been a handful of CRE CLOs done recently in the market. It's a bit of an interesting dynamic right now where the available financing that we're being provided from just bank balance sheets continues to be more attractive than what we see within the CRE CLO market. Given that we're active really in kind of both worlds, we're always looking on a daily basis to, frankly, the sort of delta between what kind of advance and spread in terms we can get from banks on their balance sheets versus what the sort of bond market will bear. And simply put, we will continue to optimize that going forward. So I would say spot right now, again, to my comment earlier on, banks just seem to have a lot of demand to put capital out.

They're restrained on putting out direct lending capital, and they definitely have a lot of demand to be providing loan-on-loan financing for us. So I think that's really how we're looking at it. But when we think about the securitized CLO market, securitized CLOs, of course, are a really important part of our capital structure. They do provide, say, frankly, a lot of flexibility from a financing perspective and then do, of course, offer the benefits of match-term, non-mark-to-market, non-recourse financing. So as we balance advance and spread, there also is the kind of structural side of things.

But again, I think at this point, CRE CLO spreads have really kind of lagged and really kind of haven't what I had been mentioning earlier about the sort of move in corporate credit spreads close to the tights, but you really haven't seen CRE CLO spreads move back to, frankly, where they were. If you think about the tights of the last three or four years, I mean, AAAs were really as tight as about, let's call it approximately, at the time, LIBOR plus 80. Now we're still seeing CRE AAA spreads in the kind of mid- to high 100s, best case. So there still is, I think, a lot of compression to happen on the CRE CLO spread side.

Chris Muller (Equity Research Associate)

Got it. Very helpful. Thanks for taking the questions.

Operator (participant)

Before we conclude the Q&A, we do have a follow-up from Rick Shane with J.P. Morgan. Please go ahead.

Rick Shane (Senior Equity Research Analyst)

Hey, guys. Thanks for taking my follow-up. Having asked so many questions over time about repurchases, and I think I'd be remiss not to address that. It's nice to see you guys announce a repurchase. I'm curious how you will approach that. It's a $25 million allocation. Do you expect to be pretty consistently in the market, or is that something that will just be there very defensively if you see some really bad days?

Doug Bouquard (CEO)

Yeah. Look, I think on the share repurchase side, first and foremost, it's a tool in our toolkit, which we acknowledge and have acknowledged over time as a really powerful way for us to both generate earnings for the company and also, I think, is a real statement about the fact that with the credit quality of our current book relative to book value, buying shares at today's market price for us does look very attractive. In terms of going forward, all I can say at this point, Rick, is that it will continue to be a tool in our toolkit, and I expect that over time, we will continue to use this as a potential way to drive earnings for the company.

Rick Shane (Senior Equity Research Analyst)

Okay. Great. Thank you for taking the question, guys.

Bob Foley (CFO)

Thank you, Rick.

Doug Bouquard (CEO)

Thanks, Rick. I appreciate it.

Operator (participant)

Ladies and gentlemen, we have reached the end of the question and answer session. I would like to turn the call back to management for closing remarks.

Doug Bouquard (CEO)

Just wanted to thank everyone for taking the time this morning on the call and look forward to speaking to all of you next quarter. Thank you very much.

Operator (participant)

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