TPG RE Finance Trust, Inc. (TRTX) Q1 2020 Earnings Call Transcript

TPG RE Finance Trust, Inc. (TRTX 3.02%)
Q1 2020 Earnings Call
May 12, 2020, 8:30 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Greetings, and welcome to the TPG RE Finance Trust first-quarter 2020 earnings conference call. [Operator instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Ms. Deborah Ginsberg, vice president, secretary, and general counsel.

Thank you. You may begin.

Deborah Ginsberg

Good morning, and welcome to TPG Real Estate Finance Trust's first-quarter 2020 conference call. I'm joined remotely today by Greta Guggenheim, chief executive officer; and Bob Foley, chief financial and risk officer. Greta and Bob will share some comments about the quarter, and then we'll open up the call for questions. Last night, we filed our Form 10-Q and issued a press release with a presentation of our operating results.

All of which are available on our website in the investor relations section. I'd like to remind everyone that today's call may include forward-looking statements, which are uncertain and outside of the company's control. Actual results may differ materially. For a discussion of some of the risks that could affect results, please see the Risk Factors section of our most recent 10-K, as well as our Form 10-Q.

We do not undertake any duty to update these statements, and we will also refer to certain non-GAAP measures on this call. And for reconciliations, you should refer to the press release and our 10-Q. With that, I'll turn the call over to Greta.

Greta Guggenheim -- Chief Executive Officer

Thank you, Deborah. Good morning, everyone. I wish good health to all of you and your families and want to express our tremendous gratitude to the public and private sector workers who are risking so much to protect all of us. Let me start with the obvious.

This was a tough quarter. We recorded losses of 203.5 million from the sale of our CRE CLO portfolio. There is no way to sugarcoat this. Based with the extraordinary disruption to the markets and no timetable for recovery, we made the decision to eliminate additional securities margin call risk, all of it, by selling our entire bond portfolio.

This was not an easy decision, but one that was necessary, given the rapid series of events that unfolded in a stunningly short period of time, the worst global health crisis in 100 years. The most severe economic shock to the world economy, since the great depression and the most volatile market conditions of my career, that dramatically affected all publicly traded securities' values, including our highly rated short duration LIBOR-based CLO securities. These historically liquid securities suddenly became significantly illiquid, requiring an unpredictable and significant diversion of capital. As a result, we sold the portfolio, as we felt it was important to eliminate future securities marginal risk and raise cash to protect the value of our 5.1 billion in UPB first mortgage portfolio.

Our portfolio today is comprised primarily of office and multifamily loans, 49 and 24%, respectively. Hotel and retail loans represent 13% and 0.6%, respectively. We remain focused on the top 10 markets, as well as other high employment growth major markets. Clearly, employment growth is now on pause.

68% of our portfolio is secured by bridge and light transitional assets. We have one construction loan with future funding obligations of 15 million. 50% of our loan portfolio is financed, with non mark-to-market debt. In April, 99.5% of our loan portfolio paid interest to us.

The one loan that is late is senior to an institutionally owned mezzanine loan, that is 120% of our senior loan. The basis of sub-50% LTV of our loan is very attractive and we are not concerned with the collectibility of principal and the interest on this loan. Also all of our hotel loans paid full debt service in April. As you know, interest is paid in arrears and the April payments effect -- reflect March performance, while the economic lockdown continues, it would be naive to not expect tenant, and therefore, borrower performance to become under increasing levels of stress. In Q1, before the market abruptly changed, we originated 437 million of loans, comprised 90% of multifamily assets and 10% office assets.

Consistent with the portfolio, as a whole, these are light-to-moderate transitional assets with an in-place debt yield of 5.6%. 90% were acquisition loans. At this time, market conditions are too uncertain to originate new loans. We are focusing all of our efforts on protecting the value of our portfolio.

In the current environment, this entails providing modifications to borrowers that need some payment timing relief during our country's lockdown period. Hotel and retail properties have been the most affected by COVID, and we have been working with borrowers, representing 13% of our portfolio to complete loan modifications. Most all of the borrowers are agreeing to infuse significant new equity to support their properties. As reported -- as we reported in the Form 10-Q, a borrower has very recently approached us to negotiate terms under which we would accept a deed in lieu.

The borrower's equity is from a very substantial global investment manager, and there are certain significant guaranteed financial obligations relating to completion and carry, that must be paid in connection with the deed in lieu. Our discussion are at a very early stage, and we are currently assessing the financial impact, if any, to us of this development. While we were not expecting this to occur, given the quality of the asset, location, sponsor, the substantial equity invested in the asset by the sponsor and the sponsor's recent infusion of capital into the borrower, we are prepared to take whatever action is necessary to secure the assets' value. Based on changes to individual loan ratings, our overall portfolio risk rating increased to 3.1.

The increase primarily results from moving all operating hotels that were pre-COVID, rated two or three to a four rating. We also moved one asset from a four to a five, based on our belief the borrower may default in the very near future, as the property is operating significantly below what we underwrote. We have great confidence in our country's ability to fight through the tremendous challenges we face, but we also realize that the economic strain, experienced by tenants and landlords will not just disappear. We will have to continue to work with our borrowers.

Regarding our financing counterparties, we have no margin calls and are in active discussions with our lenders to implement remargining holidays. Our lenders have worked cooperatively, with us, on all fronts. As an example, in the first week of this month, we had one, 500 million expiring facility that was renewed for one year with numerous extension options. Each of our lenders has been very responsive and supportive in improving loan modifications for higher stressed assets, such as hotels.

I would like to acknowledge and thank the TRT team, which has performed 24/7 with extraordinary dedication during these times. Also, the strength of the TPG platform and its senior level banking relationships have contributed significantly to our partnership with our lenders. And finally, and of utmost importance has been the wise guidance of our board of directors who have helped us weather this unprecedentedly difficult period. I thank each of you, for your dedication and tremendous commitment of time.

As we previously reported in the press, we have retained Houlihan Lokey to help us source new capital to both weather the current economic environment and allow us to go on the offense, once markets begin to stabilize. Finally, we believe that the long-term value of our portfolio is very strong and that the current disruptions to the cash flow will begin to dissipate, as the lockdowns are eased. And with that, I will now turn the call over to Bob Foley.

Bob Foley -- Chief Financial and Risk Officer

Thank you, Greta, and good morning, everyone. For the first quarter, we generated a GAAP net loss of 232.8 million or $3.05 per diluted share and core earnings of 168.3 million or $2.20 per diluted share. Net interest income from our transitional lending business was $40.8 million, and that's up 5.9% from the prior quarter. Our first-quarter results were driven by the losses sustained, in connection with the previously announced divestiture of our CRE debt securities portfolio.

From March 23rd through March 31st, we sold 179.3 million of bonds, generating a loss of $36.2 million. At quarter end, we recorded an impairment charge of 167.3 million against the 767.3 million face value of bonds we owned on that date. In sales executed over the next three weeks, we sold the entirety of our portfolio for a loss equal to the impairment charge, recorded at March 31st, offset by a very slight gain on a single bond. The reduction in book value, resulting from these sales was $2.65 per share.

Market volatility was extreme, liquidity was scarce and margin calls were frequent and material. Management and our board of directors opted to stop out our loss, via this complete exit from our securities portfolio. All securities-related financings were extinguished upon the last of our bond sales. And currently, our investment portfolio consists entirely of floating rate mortgage loans.

With regards to CECL, we recorded expense for CECL of $63.3 million, which is equal to the difference between the initial general reserve of 19.6 million, established on January 1, and the total general reserve of 83 million, recorded at March 31st. Quarterly CECL expense is a noncash expense and is an add-back to GAAP -- from GAAP net income to core earnings, which is consistent with the existing accounting practice in the terms of our management agreement with our external manager. Our CECL general reserve equals approximately 144 basis points of total commitments of $5.8 billion. When we established our initial reserve on January 1st, the comparable rate was 35 basis points.

The quadrupling of our reserve rate is due almost entirely to the impact of COVID-19 pandemic, which caused us to apply a sharply recessionary macroeconomic forecast against our loan portfolio data and historical loan data to estimate expected life of loan losses. The cumulative impact of CECL for the first quarter was to reduce book value per share by $1.08. A few additional comments about CECL. We've licensed from Trepp, a large database of performance default in loss data for first mortgage loans, stretching back to 1998 to provide a stable, broad data foundation to drive our estimate.

We use actual loan and collateral level performance data, Trepp data, a selected macroeconomic forecast and the loss given default Trepp model to develop our general allowance for credit losses. We do expect our CECL estimate will change, over time, based upon a variety of factors, including actual performance of our first mortgage loans and the underlying properties securing them, macroeconomic conditions, capital markets conditions and the pace of loan repayments and originations. It's challenging for any market participant to extract solid observable valuation inputs from the current commercial real estate markets, since transaction volume is light and the markets remained illiquid. Although, our liquidity has improved a bit over the past month.

We do expect the actual results and our CECL estimates in future forecasts to be highly dependent, upon the length and the severity of the COVID-19-induced recession. And we do not believe the CECL allowance, currently reflects the likely credit performance of our loan portfolio over the long term due to the extreme near-term impact of COVID-19 macroeconomic assumptions. Turning briefly to loans and credit. Our portfoliowide pre-COVID weighted average assets LTV is 65.7%, which is consistent with prior quarters and reflects our long-standing emphasis on prudent advance rates against quality properties in major markets.

Based on our loan amounts and these -- and third-party appraised values, our borrowers, have at risk approximately 2.9 billion of equity capital subordinate to our loans, providing meaningful downside protection to us and motivation for them to protect their investments. We do expect repayments to be restrained for several quarters due to COVID, and we expect early stage repayments most likely to occur in the multifamily sector, due primarily to support in that market from the GSEs. Regarding capitalization, 50% of our loan-related financing is non mark-to-market, nonrecourse term liabilities, including 1.8 billion from our two CLOs, plus private term financing and the syndication of a senior loan. Those CLO liabilities are extremely valuable.

The coupon is constant at roughly LIBOR plus 144 basis points until amortization begins after each reinvestment period ends. And the LIBOR floors for both transactions are zero. During the first quarter, we utilized the reinvestment features of our CLOs four times to finance 10 loans or participation interest, therein, and generate 92.4 million of cash to us. Our remaining funding is provided by eight different bank lenders under committed term credit facilities, all but one of which limit margin calls to credit marks for other than temporary declines in collateral value.

As Greta referenced, in early May, we extended for another year, our $500 million credit facility with Morgan Stanley. We expect to extend two other credit facilities, later this year, that in combination, represent almost 14% of our borrowings at March 31st, under our secured credit facilities. The bulk of our remaining secured credit facilities mature in 2022. And as a result of the divestiture of our entire securities portfolio, we no longer have any outstanding liabilities associated with securities.

At quarter end, our debt-to-equity ratio was 3.6:1, temporarily elevated due to the impairment charge recorded at March 31st, prior to bond sales in early April, totaling 571.7 million of face amount that repaid more than 429 million of net borrowings. Currently, our debt-to-equity ratio is approximately 3.2:1, only slightly above our typical operating level of 3.1 or less. Liquidity at quarter end was 168.8 million, comprised primarily of cash of 103.6 million and 60 million of near-term availability under our credit facilities. As of last Friday, we held approximately 180.6 million of cash on hand and approximately 600 -- I'm sorry, an approximately 62 million of near-term borrowing capacity.

Regarding rates, all of our loans have floating rate and all have LIBOR floors. At quarter end, our weighted average LIBOR floor was LIBOR plus 1.66%, and 94.8% of our loans measured by UPB at embedded floors that were in the money, in comparison to month and one-month LIBOR, which at that time was 99 basis points. As of last Friday, when one-month LIBOR was 20 basis points, all of our interest rate floors are now or will be on the next interest determination date in the money. These floors, when combined with our liabilities, which are largely unfloored, helpfully boost net interest margin.

Finally, a personal observation. I've been in this business for more than three decades. I experienced, the S&L crisis, 1987's Black Monday and its aftermath, the RTC, the Thai Baht, the Russian ruble, the dot-com and the global financial crisis. Every crisis was different, but each taught me and my colleagues lessons that we can and will apply in the face of the challenge of COVID-19 and its aftermath.

And with that, Greta and I are prepared to take your questions. Thanks very much. Operator?

Questions & Answers:

Operator

[Operator instructions] Stephen Laws of Raymond James. Please go ahead. Your line is open.

Stephen Laws -- Raymond James -- Analyst

Yes, hi good morning, thanks for taking my questions. Appreciate the disclosure and the color. Greta, can I ask you about a couple of loans, I guess, first, could you maybe provide a little bit more color on the five-rated loan. I think it's No.

19, the multifamily in Houston, if I have the numbers matched up correctly. But can you give us any color on that asset and discussions and any property details about that?

Greta Guggenheim -- Chief Executive Officer

Sure. I believe, we've referenced it before because it has been a four-rated loan for quite some time. This is the one that -- it is a Class A multifamily property. It was completely redone and redeveloped office building in Houston, won a very nice property.

However, rent concessions have not gone away in that market. There had been tremendous amount of new supply that continued for quite a while. And so this property hasn't been able to reduce concessions and rent growth has not been very significant as well. They have -- there's about 20,000 -- excuse me, 29,000 square feet of retail space that never leased on the ground floor as well.

So the bottom line is the property has underperformed. And given the extra stress on the overall industry caused by COVID, we don't see that improving in the near term. And we believe that it is appropriate to rate this of a five.

Stephen Laws -- Raymond James -- Analyst

Great. And then switching to the deed in blue, I think, is that No. 21, the Brooklyn office. And if so, and then just correct me if I'm wrong.

So with the deed in lieu process, I know you spent some time talking about it, but how do we think a resolution from a timing standpoint? Is this something that takes place in a matter of months? Or is it the balance of the year where this should be discussed? Can you give us an update on timing and options on the resolutions for this?

Greta Guggenheim -- Chief Executive Officer

We're very early stage on this. This just occurred, a matter of two weeks ago, and we're determining the best strategy now. But what we do know is that there are a significant financial obligations, many of which are guaranteed that the sponsor must comply with, in order to tender the property to us, and we're evaluating those now. This is a property in Brooklyn, as you mentioned, it's very well located, and it's got a very, very substantial sponsor, with very substantial equity in it.

We're trying to -- it's early stages. So I can't really comment too much on it, but we're doing -- we're very much diligent in what we think the best approach will be.

Stephen Laws -- Raymond James -- Analyst

Great. And then on the billing concern that was in the 10-Q. Can we talk to that as far as the analysis that went into the -- those 432 million of funding due in a year. I know, included in the press release, you talked about renewing the Morgan Stanley facility, and then that was mentioned in the prepared remarks, and I think, Goldman is in August.

But can you give us any color about that? And what steps need to be taken to have that removed?

Greta Guggenheim -- Chief Executive Officer

I'm going to ask Bob to address that question. Bob?

Bob Foley -- Chief Financial and Risk Officer

I'd be glad to. With respect to the going concern disclosures and going concern generally, this is a standard analysis that each registrant does or should do each quarter and at year end, I think, in our instance, well, in everyone's instance, the key focus of the analysis is on inbound and outbound cash flows and debt maturities. In our instance, Greta and I both mentioned earlier, the reduction in liquidity that resulted from the liquidation of our bond portfolio. We project, as I mentioned earlier, sharply reduced.

Loan repayments for the next several quarters and for us and other lenders, loan repayments are a typical and material source of cash for retiring existing debt and fueling new investment business. So I would say, that those were the two principal factors in our analysis. We do have two notable credit facilities, maturing later this year. As I said, about 14% of our secured credit facility borrowings.

One is with Goldman Sachs. They were our first lender, back in the early stages of the company, and we have successfully extended our credit facility with them before. The other is with BMO, where we have only one loan pledged. And as you mentioned and we discussed earlier, we just extended last week, Morgan Stanley, which has been another longtime lender of ours.

So management is comfortable and confident with our plans. And that's the answer.

Stephen Laws -- Raymond James -- Analyst

Great. And last question, Bob, kind of thinking about the portfolio and returns and potential dividend obligations. I appreciate the disclosure you provided, regarding the securities and losses will be carried forward, not off to the main. But can you talk a little bit about other things, we need to think about as far as adjustments to our core, to think about retaxable income.

I know there's some benefits of LIBOR floors. Can you maybe give us some -- a little bit of color on how to think about where retaxable income, what is the consideration to go around that?

Bob Foley -- Chief Financial and Risk Officer

Sure. As a technical matter, a couple of things. First is, we intend to maintain our status as a REIT to do so, we and other REITs need to dividend that out, at least 90% of their taxable income. There aren't that many REITs that have book to tax differences.

One of them, I would say, most notably, will be CECL, and there is the general reserve associated with that. And apart from that, the differences between how loan fees, for example, are accounted for between book and tax are not material nor are they for interest income for that matter. So I'd say the real issue is the CECL reserve, the biggest reconciling item.

Stephen Laws -- Raymond James -- Analyst

OK, thanks for the color. Appreciate the time this morning. I hope you and all your families go well. Thank you.

Bob Foley -- Chief Financial and Risk Officer

Thank you. Right back at you.

Operator

Steve Delaney of JMP Securities. Please go ahead. Your line is open.

Steve Delaney -- JMP Securities -- Analyst

Good morning Greta and Bob and I'm glad to hear you're both well. Just a couple from me. In addition to the one, delinquent loan, that you cited, Greta. Can you comment, if you have any other loans that you've placed on nonaccrual and have in more of a cost recovery mode than accruing interest?

Greta Guggenheim -- Chief Executive Officer

No, we do not have any.

Steve Delaney -- JMP Securities -- Analyst

OK. In that process, can you just comment briefly on, as you're looking at a loan, and maybe, it's using interest reserves. Is there a point that you look at a loan and say, OK, we're going to stop accruing interest on this loan and just start reducing our basis in the loan, and maybe just what conditions would you look for to put a loan on nonaccrual? Because we've seen some nonaccruals this quarter for the first time in this space, and that's why I'm asking.

Greta Guggenheim -- Chief Executive Officer

Yes --

Bob Foley -- Chief Financial and Risk Officer

Greta, you want me to take that? I'm sorry, go ahead.

Greta Guggenheim -- Chief Executive Officer

Well, I'll start, and I'm sure you will be able to fill in some gaps, that I will probably have. But I think, a key factor is, is it current in its debt service obligations. And presently, we just have that one loan, that we referenced. So to me, that is a key factor.

And typically, you would look for it to be delinquent beyond probably, up to 60, 90 days before we would start thinking about that. And we do not have that situation. And Bob, please add to that.

Bob Foley -- Chief Financial and Risk Officer

No, that's entirely accurate. And we do clearly disclose in the queue what our policy is with respect to nonaccrual, which is 90 days, unless we otherwise have a firm conviction that interest accrued is collectible, even if it hasn't been paid for 90 days, which is a rare, but not unheard of occurrence in the real estate business. But it's a clearly defined test, and it's one that we apply carefully.

Steve Delaney -- JMP Securities -- Analyst

That's helpful. And then switching to cash management. Now in the world, where securities are not going to be part of that. How should we think going forward, I know you commented repayments, you are not likely to be significant and you have some future fundings.

But as you have -- if you're in a position where you have excess cash over a hundred -- couple hundred million. What have you -- would you use that and pay down a revolver Term B loan? Or you think it will all go to specific loan financings to delever like you've done on your hotel loans and retail loans?

Greta Guggenheim -- Chief Executive Officer

Well, I do think -- as we disclosed, we are in discussions with our bespoke counterparts -- parties to work out an arrangement with them. I mean, we have no margin calls now, but we're in discussions to get a sort of a longer-term agreement for -- where they would forestall margining. And we're having active discussions on that right now. But presently, we are not seeing interesting opportunities for deploying capital.

I think, the asset sales market has slowed dramatically. And I think most lenders are hesitant to refinance properties, particularly, if their cash flows have been affected, albeit temporarily, while this pandemic is going on, but nevertheless, negatively affected by the pandemic. So we're not seeing a lot of opportunities. So we would, at this moment, hoard cash and pay down liabilities.

Steve Delaney -- JMP Securities -- Analyst

Great. And then, I guess, as the world is going, I think, hoarding cash is a great strategy right now, Greta. I was -- I just was trying to get to the question of you were keeping control over that cash as opposed to -- is there a balance between putting the cash somewhere where you can get it back? Or I guess that depends on your discussions with the banks on a specific loan, but just trying to figure out, how you view the different financings and which debt you choose to pay down, is kind of where it was going on that?

Greta Guggenheim -- Chief Executive Officer

Sure. Well, given the state of the world, we would probably pay down loans that are financing hotels, first. Because they're the most vulnerable. But all things else being equal, that's what we would do.

And then otherwise, we would look to pay the most expensive debt supply first.

Steve Delaney -- JMP Securities -- Analyst

Makes sense. And just final question. Stephen, I think, tried to get to this with his RTI question, but I'm just going to lay it out, I guess, directly, and that is, as I'm representing your dividend currently, in my comp table and talking to investors, I'm saying, for now the dividend has been suspended. And as we move forward here over the next few months or so, is that a proper way for me to reflect your view toward the dividend.

Greta Guggenheim -- Chief Executive Officer

Are you referring to Q2 dividends or Q1?

Steve Delaney -- JMP Securities -- Analyst

For any. Any, well, just Q1, you on, used to spend it, yes.

Greta Guggenheim -- Chief Executive Officer

Yes. So all I can say for that is that, we -- I would refer you back to our press release and really don't have any additional information or update on that, at this time.

Steve Delaney -- JMP Securities -- Analyst

Got it. That's exactly what I needed to know. Thank you both stay well.

Greta Guggenheim -- Chief Executive Officer

Thank you.

Bob Foley -- Chief Financial and Risk Officer

Thank you, Steve.

Operator

Arren Cyganovich with Citi. Please go ahead your line is open.

Arren Cyganovich -- Citi -- Analyst

Thanks. Bob, you had mentioned in your prepared remarks that you don't -- you do not believe that the CECL allowance currently reflects the likely credit performance. I'm assuming that means, you believe that it's over reserved for potential credit losses?

Bob Foley -- Chief Financial and Risk Officer

Well, what I believe is, what that statement was intended to convey, and perhaps, it was unclear, is that: a, CECL is a general reserve; b, it's life of the loan; and c, the impact of the new macroeconomic assumptions that we and others employed, in connection with first quarter reserves is severe. And so the impact over the life of the loan may or may not be the same as what the CECL reserve suggests today, depending upon many things, I'd say, most importantly, for how long do the after effects of COVID-19 persist. Does that answer your question?

Arren Cyganovich -- Citi -- Analyst

Yes. I mean, I imagined, it's very specific and you have various properties that are already struggling. And I think, the other thing that kind of stood out to me is you have two of the -- it seems like biggest problem challenge right now, or a multifamily in an office, which is not even the hotel and retail, and we've been focusing on from that risk perspective. It's, I guess, a little bit surprising to the extent that that you're having issues there at this point, but I suppose, Houston multifamily in this kind of environment makes sense, but nonetheless.

The borrower modifications you had, I think, Greta had mentioned, 13% modifications thus far, and you're coming with equity support, which is pretty nice. What's the underlying assets predominantly within this 13%.

Greta Guggenheim -- Chief Executive Officer

I'll take that, Bob. So the 13% is borrowers who have requested modifications. And that is, primarily, our hotel borrowers and our one, $30 million retail loan. And the modifications are really very bespoke and can until something as simple as allowing the borrower to access cash in an FF&E reserve for uses other than FF&E, such as paying debt service, in other cases, it could be relaxing an extension condition.

If you have a debt yield test based on trailing 12 NOI, and you know, you're not going to have much NOI in -- related to the COVID crisis. So there, each one is very different. But I can say in all cases, the borrower is committing additional capital. And then most of the cases, it's very significant capital.

Arren Cyganovich -- Citi -- Analyst

OK. And then just following up on the deed in lieu. It's just -- the process itself, I'm not too familiar with. Maybe you could just talk a little bit about how that works, any typical -- and maybe there's not a suggestion of what typical -- typically means for deed in lieu foreclosure.

I'm just trying to understand what's the benefit for you to negotiate this kind of transaction versus just to close on the property?

Greta Guggenheim -- Chief Executive Officer

I'm going to ask Deborah Ginsberg, our General Counsel, to address this. She will be much more legally precise than I will.

Deborah Ginsberg

Sure, Arren. So this sponsor has ongoing carry obligations to the property. And I think that their idea is they would like to tender it to cut off their ongoing carrier obligations. As you know, a foreclosure in New York could take, call it, two years, under the current circumstances? So -- but in order for them to tender and cut off those obligations there are significant concessions that they have to make toward us.

So that's kind of the process that we're starting now, expect it to take several weeks, possibly two months, I'm clear on the resolution. But idea for it to be less than the two years to actually foreclose.

Arren Cyganovich -- Citi -- Analyst

So it would be essentially then giving you the keys, but also giving you some cash along with that. Is that kind of the way that you would expect it to deploy?

Deborah Ginsberg

I would more express it as making sure it's complete and tying up all obligations at the property. But yes, that is probably the ultimate same end result.

Arren Cyganovich -- Citi -- Analyst

And then I suppose, just touching on the new capital sources that you're looking into? Do you have any idea of what kind of form that you expect that to come from. We've seen other firms do various types of new capital coming from their sponsor converts, etc. Have you thought about what form that might come in?

Greta Guggenheim -- Chief Executive Officer

Look, all I can report on that is what we've said publicly and that's -- that we have hired Houlihan Lokey to help us source capital. I know there's been a lot of reports in the press from others not us. A lot of that may be misleading. But I can say that, we've hired them to consider all sources of capital, and that's what we're doing.

Arren Cyganovich -- Citi -- Analyst

OK. Thank you.

Operator

[Operator instructions] Rick Shane from JP Morgan. Please go ahead. Your line is open.

Rick Shane -- J.P. Morgan -- Analyst

Guys, thanks for taking my questions this morning and I hope everybody's well. Regarding the deed in lieu transaction, I am curious, that was a property in 2018. So they've been in there for two years. It was 52% LTV in inspection.

This really sounds to me, given the way you described the sponsor like a strategic default, as opposed to them not having the dry powder to see the project thrill. I'm curious, if you could provide us some additional characteristics of the property, given that they're two years into the transition, is this a property that's generating rent? And what would it look like on the TRTX balance sheet as a REO in terms of income? And could you -- would your idea be to hold it, or to try to dispose off the property?

Greta Guggenheim -- Chief Executive Officer

We are very diligently evaluating all our options. What we like about the property is its location in Brooklyn. The sponsor -- it was originally a warehouse project in that part of Brooklyn. And the sponsorship bought it to -- convert it to creative office.

And I think, there wasn't a tremendous amount of demand for that. So we're looking at really all options to maximize value for the property. The sponsor has significant equity, 43% of equity at this point of cash equity invested. They've continuously contributed to the property since it's closed.

And we're in active discussions and diligence. It's just really premature to say, to come to any conclusions on this property at this time

Rick Shane -- J.P. Morgan -- Analyst

Got it. One follow-up on that and then one other follow-up. Related to that property was the idea that this was going to be co workspace? Is that one of the things that's changed?

Greta Guggenheim -- Chief Executive Officer

No. That was not a primary driver of that. I mean, is it possible they considered a co-working tenant at some point? Possible, but I don't have that knowledge. That was not the primary driver.

Rick Shane -- J.P. Morgan -- Analyst

Great. And then, as you enter renegotiations or extensions on the existing debt facilities, one of the benefits that you enjoy over the next 12 to 24 months is you have substantial floors in place on your assets, and you guys provide a good chart, in terms of how that impacts NII. I am curious, if you think that there will be terms associated with the extension of the secured facility that dampen that either floors on your borrowing or higher spreads on base rates in order to offset where the banks are in terms of low base rates right now?

Greta Guggenheim -- Chief Executive Officer

Well, for our existing facilities, nothing material has changed. So the arrangements pre-COVID still exist in most all cases. Do I expect to see floors in some type of bespoke financings? Yes, I think that's quite possible. I think, we've seen it with a couple of competitors who've recently refinanced and outside of the banks.

I don't know, if that's answering your question.

Rick Shane -- J.P. Morgan -- Analyst

I'm specifically wondering, as you cite the $432 million drawn on facilities and the extension of those facilities, if you think you'll see some efforts on behalf of those two banks to offset the low rate environment, either through higher floors or wider spreads.

Greta Guggenheim -- Chief Executive Officer

We -- it's to be seen. I think that there could be wider spreads for new borrowings for additional borrowings, but under the existing facilities, I believe they will honor the the terms of those facilities. And Bob, I don't know, if you have any further color on that?

Bob Foley -- Chief Financial and Risk Officer

No, I think that's accurately stated. I think that we've been -- we're always in constant contact with our lenders and that predates the COVID crisis. We're clearly engaged in negotiating, as Greta mentioned, in connection with these voluntary deleveraging arrangements with specific regard to the extensions. Generally speaking, lenders on extensions hold the firm to previous pricing for existing borrowings, on existing pledged assets.

Clearly, the financing markets have changed. And so for new borrowings, there could or could not be adjustments to pricing. I think that will depend on market circumstances and the facts at the time that that those deals are extended, which we expect would be between now and their next maturity dates, which are in August and September of this year. As Rick, you mentioned, we have substantial floors and good weighted average spreads on our loan.

So there's a strong basis from which to negotiate. I would like to revert to one point that Steve Delaney made earlier, with respect to our first-quarter dividend, and I can't comment, Steve, on your firm's sort of known inflators, but the first-quarter dividend was deferred. The company hasn't announced any suspension of its dividend.

Greta Guggenheim -- Chief Executive Officer

That is correct. Pursuant to the press release, yes, that is the wording, yes.

Bob Foley -- Chief Financial and Risk Officer

All right. Thank you.

Operator

Thank you. And as there are no further questions in the queue, I would like to turn the call back over to Greta Guggenheim, CEO, for any additional or closing remarks. Over to you, madam.

Greta Guggenheim -- Chief Executive Officer

Well, thank you all for calling in this morning. And great to hear your voices again and that you all are well and healthy, and we look forward to speaking to you next quarter.

Operator

[Operator signoff]

Duration: 44 minutes

Call participants:

Deborah Ginsberg

Greta Guggenheim -- Chief Executive Officer

Bob Foley -- Chief Financial and Risk Officer

Stephen Laws -- Raymond James -- Analyst

Steve Delaney -- JMP Securities -- Analyst

Arren Cyganovich -- Citi -- Analyst

Rick Shane -- J.P. Morgan -- Analyst

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