Financial Data and Key Metrics Changes - The company reported a GAAP net loss of $10.6 million or 15 cents per share for Q1 2025, with a book value of $14.44 per share, down approximately 2% compared to the prior quarter [4][13] - Distributable earnings for the quarter were $17 million or 25 cents per share, aligning with the dividend payout [4] Business Line Data and Key Metrics Changes - The company closed four loans totaling $376 million, with 80% secured by Class A multi-family properties, a weighted average loan-to-value (LTV) of 69%, and a coupon of SOFR plus 277 basis points [10] - Repayments in the quarter totaled $180 million, with net fundings reaching $220 million [10] Market Data and Key Metrics Changes - The real estate credit market remains active, with senior loan spreads approximately 10 to 15 basis points wider, and transitional loan sector spreads 15 to 20 basis points wider [7] - The pipeline is reported to be the largest ever at over $30 billion, indicating significant opportunity in the current market [9] Company Strategy and Development Direction - The company is focused on maintaining a defensive posture while also seeking to reinvest repayments into new originations, particularly in the European lending market [6][11] - The strategy includes diversifying the portfolio and adding duration, with a strong emphasis on high-quality assets [11] Management's Comments on Operating Environment and Future Outlook - Management expressed concerns about market volatility and recession expectations but believes real estate is better positioned compared to past cycles [5][6] - The company is monitoring macroeconomic factors closely, particularly job market impacts, but does not anticipate a significant downturn in real estate values [28] Other Important Information - The company has no corporate maturities until 2030 and has ample liquidity of over $700 million [7][19] - The debt-to-equity ratio stands at 1.9 times, with a leverage ratio of 3.9 times, which is within the target range [21] Q&A Session Summary Question: How does the company view the macro issues and their impact on specific properties? - Management is monitoring the broader economic environment and specific sectors, particularly industrial properties on the West Coast, due to trade slowdowns [29][30] Question: What is the company's stance on dividend policy given the current return on capital? - The company remains comfortable with its current dividend policy, evaluating it quarterly, and sees potential upside in REO assets that could enhance earnings [33][35] Question: What is the company's strategy for originating loans in Europe? - The company has been actively originating in Europe for a couple of years and expects to close deals soon, focusing on Western Europe and the UK [41] Question: How does the company plan to manage repayments and leverage levels? - The company anticipates matching repayments with new originations, maintaining leverage within target ranges [42][85] Question: What factors contributed to the downgrade of the Raleigh multifamily loan? - The downgrade was due to the inability to drive rents in that market, compounded by an approaching maturity date [54][56] Question: What is the outlook for the life science sector within the loan portfolio? - The company believes in the long-term fundamentals of the life science sector but acknowledges current cyclical headwinds [14][60]

KKR Real Estate Finance (KREF) came out with a quarterly loss of $0.15 per share versus the Zacks Consensus Estimate of $0.17. This compares to earnings of $0.39 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of -188.24%. A quarter ago, it was expected that this real estate finance company would post earnings of $0.30 per share when it actually produced earnings of $0.31, delivering a surprise of 3.33%.Over the last four quarter ...

Financial Performance - Net income attributable to common stockholders was $(10,550), compared to $(8,739) in the same period last year, indicating a worsening performance[17]. - Net income for the three months ended March 31, 2025, was a loss of $5,749,000 compared to a loss of $3,429,000 for the same period in 2024, indicating a decline in profitability[24]. - KREF reported a decrease in interest income from $48,860,000 in Q1 2024 to $36,971,000 in Q1 2025, a decline of 24.3%[154]. - KREF's net interest income for the three months ended March 31, 2025, was $11,913,000, down 17.9% from $14,495,000 in the same period of 2024[154]. - The company declared a dividend of $0.25 per share on common stock, totaling $16,956,000 for the quarter ended March 31, 2025[177]. Assets and Liabilities - Total assets increased to $6,554,529, up from $6,350,398 as of December 31, 2024, representing a growth of approximately 3.2%[15]. - Total liabilities rose to $5,190,974, an increase of 4.8% from $4,951,519 as of December 31, 2024[15]. - Total equity decreased to $1,363,555 from $1,398,879, a decline of approximately 2.5%[15]. - KREF's total assets amounted to $1,928,556,000, a decrease of 8.7% from $2,113,282,000 on December 31, 2024[154]. - KREF's total liabilities decreased from $1,770,201,000 on December 31, 2024, to $1,584,648,000 as of March 31, 2025, reflecting a reduction of 10.5%[154]. Credit Losses and Allowances - Provision for credit losses, net, was $24,863, a decline of 25.3% compared to $33,266 in the prior year[17]. - The allowance for credit losses increased to $142,337 from $117,103, reflecting a rise of 21.5%[15]. - The allowance for credit losses increased to $144.4 million as of March 31, 2025, up from $117.1 million at the end of 2024, reflecting a provision of $24.9 million for the first quarter[117]. - KREF's allowance for credit losses on commercial real estate loans decreased from $20,005,000 to $18,263,000, indicating improved credit quality[154]. Cash Flow and Investments - Cash flows from operating activities provided $15,916,000 in Q1 2025, down from $34,488,000 in Q1 2024, reflecting a decrease in operational cash generation[24]. - KREF reported a net cash used in investing activities of $220,466,000 in Q1 2025, contrasting with net cash provided of $236,756,000 in Q1 2024, highlighting a shift in investment strategy[24]. - Proceeds from principal repayments of commercial real estate loans were $182,095,000 in Q1 2025, compared to $334,680,000 in Q1 2024, showing a significant reduction in loan repayments[24]. Stock and Dividends - The company declared dividends of $0.25 per share for common stock, consistent with the previous year[17]. - KREF's common stock repurchase program allows for up to $100,000,000 in repurchases, with $80,200,000 remaining capacity as of March 31, 2025[171]. - During the three months ended March 31, 2025, KREF repurchased 889,100 shares at an average price of $11.03, totaling $9,800,000[171]. - KREF declared $0.4 million and $0.3 million of nonforfeitable dividends on unvested RSUs and outstanding deferred stock units (DSUs) for the three months ended March 31, 2025 and 2024, respectively[188]. Loan Portfolio and Risk Ratings - As of March 31, 2025, KREF's total loans held-for-investment amounted to $6,108,987, with a carrying value of $5,966,650[102]. - The loan portfolio activity for the three months ended March 31, 2025, included originations of $400,204 and repayments of $183,595, resulting in a net increase in amortized cost[105]. - KREF's commercial real estate loan portfolio had an average risk rating of 3.1 as of March 31, 2025, consistent with the previous quarter[113]. - The carrying value of loans rated 3 was $5.16 billion, representing 85% of the outstanding principal as of March 31, 2025[112]. - KREF had three risk-rated 5 loans on nonaccrual status as of March 31, 2025, with outstanding principal balances of $194.4 million, $112.2 million, and $85.2 million respectively[118][119][120]. Financing and Debt - KREF's secured financing agreements are treated as floating-rate collateralized financing arrangements carried at their contractual amounts, net of unamortized debt issuance costs[73]. - The weighted average funding cost for KREF's secured financing was 6.4% as of March 31, 2025[145]. - KREF's master repurchase agreements with Wells Fargo and Morgan Stanley had outstanding principals of $760,823 and $731,249, respectively, representing 47.8% of stockholders' equity[142]. - The total principal borrowings for the three months ended March 31, 2025, were $603,390, while principal repayments were $377,004[145]. Management and Strategy - KREF's management continues to focus on originating and acquiring transitional senior loans secured by commercial real estate assets, aligning with its business strategy as a mortgage REIT[27]. - KREF applies the Current Expected Credit Loss (CECL) model to estimate expected credit losses, incorporating historical experience and forward-looking information[61]. - KREF's board of directors may exclude one-time events and certain material non-cash income or expense items from distributable earnings for incentive compensation calculations[206].

Financial Performance - Reported net loss attributable to common stockholders of $10.6 million, or $0.15 per diluted share, for Q1 2025, compared to net income of $14.6 million, or $0.21 per diluted share, for Q4 2024[2][13] - Distributable Earnings for Q1 2025 were $17.0 million, or $0.25 per diluted share, compared to a Distributable Loss of $14.7 million, or $0.21 per diluted share, for Q4 2024[3][13] Liquidity and Capital Structure - Liquidity position of $720.3 million as of March 31, 2025, including $106.4 million in cash and $570.0 million in undrawn capacity on the corporate revolving credit agreement[6] - Increased Term Loan B to $550 million due March 2032, with interest at S+3.25%[6] - No corporate debt maturities until 2030, with diversified financing sources totaling $8.3 billion[6] - Entered into a new $300 million term lending agreement providing match-term financing on a non-mark-to-market basis[6] Loan Portfolio - Originated and funded $376.3 million in floating-rate loans with a weighted average loan-to-value (LTV) ratio of 69% and a coupon of S+2.8%[6][7] - Current loan portfolio totals $6.1 billion, with 99% floating rate and a weighted average unlevered all-in yield of 7.6%[6] Shareholder Returns - Repurchased and retired 889,100 shares at an average price of $11.03, totaling $9.8 million[6] - Common book value of $982.1 million, or $14.44 per share, as of March 31, 2025, including a CECL allowance of $144.4 million[6] Distributable Earnings - Distributable Earnings is a key indicator of the Company's ability to generate sufficient income to pay its quarterly dividends, which is crucial for yield/income investors[23] - The Company defines Distributable Earnings as net income attributable to common stockholders, excluding non-cash equity compensation, depreciation, and unrealized gains or losses[24] - Distributable Earnings should not be considered a substitute for GAAP net income, and its calculation methodology may differ from other REITs[25]

Core Insights - Pearl Gray is a proprietary investment fund and independent market research firm specializing in systematic analysis, focusing primarily on Bonds, Investment Funds, and REITs, with a primary emphasis on the Financials and Real Estate sectors [1] Group 1 - The mission of Pearl Gray is to discover actionable total return ideas at the intersection of rigorous academic theories, practical experience, and common sense [1] - The firm emphasizes that its published content is independent analysis and does not constitute financial advice [1][2] - Analysts at Pearl Gray have no stock, option, or similar derivative positions in any of the companies mentioned, nor do they plan to initiate any such positions within the next 72 hours [1] Group 2 - The content provided by Pearl Gray on platforms like Seeking Alpha is intended to set the tone for discussions among subscribers rather than serve as financial advice [2] - Seeking Alpha clarifies that past performance is not indicative of future results and that no recommendations are being made regarding the suitability of investments for particular investors [3]

This presentation has been prepared for KKR Real Estate Finance Trust Inc. (NYSE: KREF) for the benefit of its stockholders. This presentation is solely for informational purposes in connection with evaluating the business, operations and financial results of KKR Real Estate Finance Trust Inc. and its subsidiaries (collectively, "KREF" or the "Company"). This presentation is not and shall not be construed as an offer to purchase or sell, or the solicitation of an offer to purchase or sell, any securities, a ...

Financial Overview - KKR Real Estate Finance Trust Inc. (KREF) has a total committed capital base of $838.1 million, fully drawn prior to its IPO, which generated net proceeds of $225.9 million on May 5, 2017[21]. - As of December 31, 2024, KREF reported a common book value of $1,017.3 million and a diversified investment portfolio totaling $6,271.6 million, primarily consisting of performing senior commercial real estate loans[21]. - The company's aggregate investment portfolio totaled $6.3 billion as of December 31, 2024, consisting of $5.9 billion in senior and mezzanine loans, $335.8 million in real estate owned assets, and $35.6 million in CMBS B-Pieces[33]. - The common book value as of December 31, 2024, included a CECL allowance of $119.6 million[34]. - The total leverage ratio was 3.6-to-1 as of December 31, 2024, with plans to maintain appropriate leverage levels based on portfolio assessment[46]. Investment Strategy - KREF's investment strategy focuses on originating and acquiring transitional senior loans secured by institutional-quality commercial real estate properties located in top markets[20]. - KREF's target assets include senior loans, mezzanine loans, and preferred equity, focusing on investments where lending occurs at a substantial discount to intrinsic real estate value[31]. - The company aims to generate attractive risk-adjusted returns for stockholders primarily through dividends, emphasizing capital preservation[20]. - The company expects future investment activity to focus on originating floating-rate senior loans, which are less sensitive to interest rate fluctuations[48]. Management and Governance - KREF is externally managed by KKR Real Estate Finance Manager LLC, an indirect subsidiary of KKR, which reported $624.4 billion in assets under management (AUM) as of September 30, 2024[25]. - KKR Real Estate, which supports KREF, had $79.6 billion of AUM as of September 30, 2024, and is led by experienced professionals with over 35 years in real estate transactions[26]. - KREF's investment committee includes senior leaders from KKR, ensuring strategic oversight and alignment with investment guidelines and risk management[27]. - KKR beneficially owned 14.6% of the outstanding common stock as of December 31, 2024, giving it significant influence over company decisions[176]. Market and Economic Risks - The U.S. Federal Reserve increased interest rates eleven times since January 2022, adversely affecting commercial real estate property values and potentially leading to higher borrower default rates[67]. - Changes in economic conditions and real estate fundamentals could materially adversely affect the company's business, financial condition, and results of operations[65]. - The company faces risks associated with debt-oriented real estate investments, including increased default risk and challenges in generating attractive risk-adjusted returns[63]. - Economic slowdown and declining real estate values could impair investments and operations, increasing the likelihood of losses on loans in the event of default[118]. Regulatory and Compliance Risks - The company must maintain compliance with state licensing requirements to avoid material adverse effects on operations[188]. - The company conducts operations to avoid registration as an investment company under the Investment Company Act, limiting types of businesses it can engage in[190]. - The company is required to comply with significant laws and regulations as a public entity, including the Exchange Act and Sarbanes-Oxley Act[213]. - Changes in laws or regulations could negatively impact the company's operations, cash flow, or financial condition, particularly in the context of real estate debt transactions[202]. Conflicts of Interest - Conflicts of interest may arise due to KKR's dual role as both the Manager and a significant shareholder, affecting investment decisions[180]. - The Manager earns base management fees regardless of portfolio performance, which may reduce incentives to seek attractive risk-adjusted returns[174]. - The company may co-invest with KKR investment vehicles, which could result in less favorable economic terms for the company[182]. - There is no assurance that the policies in place will adequately address or mitigate conflicts of interest[179]. Financial Performance and Risks - The company may need to access capital markets to fund new investments, with unfavorable conditions potentially limiting access and increasing costs[152]. - The provision for credit losses is evaluated quarterly, requiring estimates based on uncertain factors, which could severely impact financial condition[137]. - The company may experience significant losses if it fails to obtain permanent financing to repay transitional loans[80]. - The company may face adverse consequences from information-sharing limitations with KKR, affecting investment decisions[184].

Financial Performance - Reported net income attributable to common stockholders for Q4 2024 was $14.6 million, or $0.21 per diluted share, and for the full year 2024 was $13.1 million, or $0.19 per diluted share[2][13] - Distributable loss for Q4 2024 was ($14.7) million, or ($0.21) per diluted share, and for the full year 2024 was ($70.7) million, or ($1.02) per diluted share[3][13] Liquidity and Capital Structure - The company has a liquidity position of $684.8 million, including $104.9 million in cash and $530.0 million of undrawn capacity on its corporate revolver[7] - Loan repayments totaled $1.5 billion in 2024, exceeding expectations and enhancing liquidity for new investments[6] - The company extended the maturity date of a $1.0 billion term credit facility to September 2029[7] Loan Portfolio - The current loan portfolio stands at $5.9 billion, with 99% floating rate and a weighted average unlevered all-in yield of 7.8%[7] - The weighted average loan-to-value (LTV) ratio of the portfolio is 65%[7] - In January 2025, the company originated loans totaling $224.3 million, with an average coupon of +3.1%[14] Shareholder Actions - The company repurchased 859,055 shares at an average price of $11.64, totaling $10.0 million[7] Performance Metrics - Distributable Earnings, a key performance indicator, is defined as net income attributable to common stockholders, adjusted for non-cash items and one-time events, providing insight into the Company's ability to pay dividends[25][26] - The Company cautions that its methodology for calculating Distributable Earnings may differ from other REITs, potentially affecting comparability[27] Forward-Looking Statements - The Company emphasizes that forward-looking statements reflect its current views on future operations and financial performance, subject to various risks and uncertainties[22]

Core Viewpoint - KKR Real Estate Finance (KREF) is expected to report a year-over-year decline in earnings and revenues for the quarter ended December 2024, with the actual results being crucial for stock price movement [1][3]. Earnings Expectations - The consensus estimate for KREF's quarterly earnings is $0.30 per share, reflecting a year-over-year decrease of 36.2% [3]. - Expected revenues for the quarter are $36.46 million, down 21.6% from the previous year [3]. Estimate Revisions - The consensus EPS estimate has been revised 10% lower in the last 30 days, indicating a reassessment by analysts [4]. - The Most Accurate Estimate matches the Zacks Consensus Estimate, resulting in an Earnings ESP of 0% [10][11]. Earnings Surprise Prediction - A positive or negative Earnings ESP reading indicates the potential deviation of actual earnings from the consensus estimate, with positive readings being more predictive of earnings beats [7][8]. - KREF's current Zacks Rank is 4 (Sell), complicating predictions of an earnings beat [11]. Historical Performance - KREF has beaten consensus EPS estimates in the last four quarters, with a notable surprise of +29.03% in the last reported quarter [12][13]. Industry Comparison - Annaly Capital Management (NLY), another player in the REIT and Equity Trust industry, is expected to report EPS of $0.67, with a year-over-year change of -1.5% and revenues expected to rise significantly [17]. - NLY's consensus EPS estimate has been revised 3.1% higher, but it has a negative Earnings ESP of -1.98% combined with a Zacks Rank of 2 (Buy) [18].

Core Insights - Binary Tree Analytics (BTA) aims to provide transparency and analytics in capital markets instruments and trades, focusing on Closed-End Funds (CEFs), Exchange-Traded Funds (ETFs), and Special Situations [1] - The company has over 20 years of investment experience and seeks to deliver high annualized returns with a low volatility profile [1] Group 1 - BTA has a background in investment banking cash and derivatives trading [1] - The company emphasizes analytics and transparency in its operations [1] - BTA's investment strategy is centered around CEFs, ETFs, and Special Situations [1] Group 2 - The company aims for high annualized returns while maintaining a low volatility profile [1] - BTA has a strong educational foundation with a Finance major from a top university [1]