Financial Data and Key Metrics Changes - For Q2 2025, the company reported a GAAP net loss of $35 million, or negative $0.53 per share, with a book value per share of $13.84 [3] - The distributable loss was $3 million, primarily due to taking ownership of the West Hollywood property, while prior to realized losses, distributable earnings were $16 million, or $0.24 per share [3][4] - A cash dividend of $0.25 was paid for the second quarter [4] Business Line Data and Key Metrics Changes - Originations in the quarter totaled $211 million, consisting of two loans secured by industrial and multifamily properties [7] - The company had two full repayments and six partial repayments totaling $450 million, with projections of nearly $1 billion in incremental repayments for the second half of the year [7] - The Life Science sector represented 12% of the portfolio, with six assets located in top Life Science markets [10] Market Data and Key Metrics Changes - The real estate credit market has seen a recovery in transaction activity and loan demand, with significant opportunities in the loan pipeline [5] - Competition has returned, with most lenders active in the market, leading to a compression of loan spreads back to pre-tariff levels [21] - The company is diversifying its portfolio geographically into Europe and creating more duration through CMBS investments [8] Company Strategy and Development Direction - The company is focused on diversifying its portfolio and has an active pipeline in the European loan market, anticipating new originations by year-end [8] - The strategy includes a focus on high-quality assets and stabilized properties, with a goal to maximize shareholder value through proactive portfolio management [16][17] - The company is evaluating capital allocation between share buybacks and loan origination, with a robust liquidity position of $757 million available [15][16] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the lending opportunities, citing healthy fundamentals across most property types and a decrease in construction starts, which may lead to stronger rental growth [6] - The management team is actively managing the watch list and REO assets, with plans for condo sellouts and other developments expected to generate capital [11][12] - The company anticipates a more favorable market environment for rental increases and property values due to reduced supply and increased tenant demand [34][68] Other Important Information - The company downgraded a Boston Life Science asset and a Chicago office loan due to market deterioration, with plans to extend the loans [9][10] - The REO portfolio represents approximately $352 million of pro forma equity, which could generate over $0.12 per share per quarter on distributable earnings [14] Q&A Session Summary Question: Can you talk about the level of ROEs and loan spreads in the current market? - Management indicated that the pipeline is robust, with loan spreads compressing back to pre-tariff levels, and ROEs are in the mid-11s to end of the 13s range [19][24] Question: What kind of originations do you expect in the second half? - Management expects to actively originate loans to match the anticipated $1 billion in repayments, with no significant near-term maturities on the radar [25][27] Question: Can you provide insight into the 2026 maturity wall? - Management noted that many maturities are being pulled forward, and they expect to see less credit issues around maturities as the market remains active [31][36] Question: What is the timeline for repatriating capital from the REO portfolio? - Management provided a timeline for various assets, indicating that some could be repatriated within 12 to 18 months, while others may take longer [78][85]

Financial Data and Key Metrics Changes - For Q2 2025, the company reported a GAAP net loss of $35 million, or negative $0.53 per share, with a book value per share of $13.84 as of June 30, 2025 [3] - The distributable loss was $3 million, primarily due to taking ownership of the West Hollywood property, while prior to realized losses, distributable earnings were $16 million, or $0.24 per share [3][4] - A cash dividend of $0.25 was paid for the second quarter [4] Business Line Data and Key Metrics Changes - Originations in the quarter totaled $211 million, consisting of two loans secured by industrial and multifamily properties [7] - The company had two full repayments and six partial repayments totaling $450 million, with projections of nearly $1 billion in incremental repayments over the second half of the year [7] - The company downgraded a Boston Life Science asset from a four-rated loan to a five-rated loan and a Chicago office loan from a three-rated loan to a four-rated loan due to market deterioration [8][9] Market Data and Key Metrics Changes - The real estate credit market has seen a recovery in transaction activity and loan demand, with significant opportunities in the loan pipeline [5] - Competition has returned, with most lenders active in the market, leading to attractive lending opportunities driven by the ability to lend on reset values below replacement costs [6] - The Life Science sector represents 12% of the portfolio, with 60% of the assets being newly constructed and purpose-built properties targeting larger pharmaceutical tenants [10] Company Strategy and Development Direction - The company is focusing on diversifying its portfolio geographically into Europe and creating more duration through CMBS investments [7] - An active pipeline in the European loan market is anticipated, with new originations expected by the end of the year [7] - The company aims to maximize shareholder value through proactive management of the portfolio and capital allocation across share buybacks and loan origination [16] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the lending opportunity remaining highly attractive despite competition, with healthy fundamentals across most property types [6] - The company is closely monitoring leverage ratios and expects to match repayments with new originations [26] - Management noted that many borrowers are pulling financing forward to buy time for asset recovery, indicating a positive outlook for rental increases and property values [33] Other Important Information - The company repurchased $20 million of KREF stock in Q2 at a weighted average price of $9.21, with nearly $40 million repurchased over the last three quarters [15] - At quarter-end, the company had $757 million of liquidity available, including $108 million in cash and $620 million of undrawn corporate revolver capacity [16] Q&A Session Summary Question: Can you talk about the level of ROEs and loan spreads in the current market? - Management indicated that the pipeline is robust, with ROEs in the mid-11s to end of the 13s, and loan spreads have compressed back to pre-tariff levels [20][25] Question: What kind of originations do you expect in the second half? - Management expects to actively originate loans to match the anticipated $1 billion in repayments, with no significant near-term maturities on the radar [26][27] Question: Can you provide insight into the 2026 maturity wall? - Management noted that many maturities are being pulled forward, and they expect less credit issues around maturities as most problems have already surfaced [30][34] Question: How do you differentiate between refinancing and extensions? - The majority of refinancings are new credits, while modifications and extensions are less common, indicating a focus on new opportunities [39] Question: What is the timeline for repatriating capital from the REO portfolio? - Management provided a timeline for various assets, indicating that some could see capital repatriation within 12 to 18 months, while others may take longer [79][87]

Financial Performance - The company reported a net loss of $354 million, or ($053) per diluted share, which includes a CECL provision of $50 million, or ($074) per diluted share[9, 10] - Distributable loss was ($29) million, or ($004) per diluted share, including a realized loss of $20 million, or ($030) per diluted share[9, 10] - Book Value per Share (BVPS) is $1384, which includes a CECL allowance of $174 million, or ($264) per share as of June 30, 2025, representing 300 basis points of loan principal balance[9] Portfolio Activity - Originated and funded $211 million and $210 million, respectively, relating to two floating-rate loans[9] - The company's loan portfolio is predominantly senior, totaling $58 billion, with a weighted average unlevered all-in yield of 76%[8, 9] - Multifamily and industrial assets represent 62% of the loan portfolio[8, 9] - Received $450 million in loan repayments and funded $20 million for existing loans[9] - The company collected 100% of interest payments[9, 21] Liquidity and Capitalization - Available liquidity is $757 million, including $108 million of cash and $620 million of undrawn capacity on the corporate revolver[8, 9] - Diversified financing sources total $82 billion, with $32 billion of undrawn capacity[8, 9, 34] - 78% of secured financing is fully non-mark-to-market, with the remaining balance marked-to-credit only[8, 9, 35] - Repurchased 2 million shares at an average price of $921 per share, totaling $20 million[9]

Core Insights - KKR Real Estate Finance (KREF) reported a quarterly loss of $0.53 per share, significantly worse than the Zacks Consensus Estimate of a loss of $0.16, marking an earnings surprise of -231.25% [1] - The company posted revenues of $30.17 million for the quarter ended June 2025, missing the Zacks Consensus Estimate by 2.55% and down from $40.43 million a year ago [2] - KKR Real Estate shares have declined approximately 12.1% year-to-date, contrasting with the S&P 500's gain of 7.2% [3] Earnings Outlook - The future performance of KKR Real Estate's stock will largely depend on management's commentary during the earnings call and the earnings outlook [4] - The current consensus EPS estimate for the upcoming quarter is $0.12 on revenues of $29.92 million, and for the current fiscal year, it is $0.33 on revenues of $121.86 million [7] Industry Context - The REIT and Equity Trust industry, to which KKR Real Estate belongs, is currently ranked in the top 38% of over 250 Zacks industries, indicating a favorable outlook compared to lower-ranked industries [8] - Another company in the same industry, Ellington Credit, is expected to report quarterly earnings of $0.21 per share, reflecting a year-over-year decline of 41.7% [9]

Part I - Financial Information [Item 1. Condensed Consolidated Financial Statements (Unaudited)](index=5&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) KREF's unaudited condensed consolidated financial statements, including balance sheets, income, equity, and cash flows, are presented [Condensed Consolidated Balance Sheets (Unaudited)](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20(Unaudited)%20as%20of%20June%2030,%202025%20and%20December%2031,%202024) Total assets increased to **$6.76 billion** by June 30, 2025, driven by secured financing and CMBS trust consolidation | Metric | June 30, 2025 (in millions) | December 31, 2024 (in millions) | Change (in millions) | | :----------------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Total Assets | $6,755.27 | $6,350.40 | +$404.87 | | Total Liabilities | $5,462.13 | $4,951.52 | +$510.61 | | Total Equity | $1,293.14 | $1,398.88 | -$105.74 | | Commercial real estate loans, held-for-investment, net | $5,605.55 | $5,771.52 | -$165.97 | | Allowance for credit losses | $(171.59) | $(117.10) | +$54.49 | | Secured financing agreements, net | $2,948.25 | $2,798.67 | +$149.57 | | Collateralized loan obligations, net | $1,447.84 | $1,766.10 | -$318.26 | | Secured term loan, net | $535.05 | $333.85 | +$201.20 | | Variable interest entity assets, CMBS trust, at fair value | $492.04 | $0.00 | +$492.04 | | Variable interest entity liabilities, CMBS trust, at fair value | $482.97 | $0.00 | +$482.97 | [Condensed Consolidated Statements of Income (Unaudited)](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income%20(Unaudited)%20for%20the%20Three%20and%20Six%20Months%20Ended%20June%2030,%202025%20and%202024) Net loss of **$(35.4) million** for Q2 2025, down from **$20.2 million** net income YoY, primarily due to higher credit loss provision | Metric (in millions) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change (YoY) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change (YoY) | | :----------------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Net Interest Income | $30.17 | $40.43 | -25.4% | $61.51 | $79.58 | -22.7% | | Total Other Income | $5.70 | $7.22 | -21.0% | $9.58 | $14.84 | -35.5% | | Total Operating Expenses | $66.44 | $22.05 | +201.3% | $107.41 | $72.20 | +48.8% | | Provision for credit losses, net | $49.85 | $4.55 | +996.7% | $74.71 | $37.81 | +97.6% | | Net Income (Loss) Attributable to Common Stockholders | $(35.43) | $20.22 | -275.2% | $(45.98) | $11.48 | -500.3% | | Basic and Diluted EPS | $(0.53) | $0.29 | -282.8% | $(0.68) | $0.17 | -500.0% | [Condensed Consolidated Statements of Changes in Equity (Unaudited)](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Equity%20(Unaudited)%20for%20the%20Three%20and%20Six%20Months%20Ended%20June%2030,%202025%20and%202024) Total KREF Stockholders' Equity decreased to **$1.24 billion** by June 30, 2025, due to net losses and common stock repurchases | Metric (in millions) | December 31, 2024 | March 31, 2025 | June 30, 2025 | | :----------------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Total KKR Real Estate Finance Trust Inc. Stockholders' Equity | $1,345.03 | $1,309.82 | $1,240.05 | | Repurchase and retirement of common stock | N/A | $(9.83) | $(20.06) | | Net income (loss) | N/A | $(4.86) | $(29.73) | | Common dividends declared | N/A | $(16.96) | $(16.42) | [Condensed Consolidated Statements of Cash Flows (Unaudited)](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20(Unaudited)%20for%20the%20Six%20Months%20Ended%20June%2030,%202025%20and%202024) Operating cash flow decreased to **$37.0 million** in H1 2025, while investing activities shifted to providing **$16.2 million** | Metric (in millions) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change (YoY) (in millions) | | :----------------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by (used in) operating activities | $37.04 | $65.13 | -$28.09 | | Net cash provided by (used in) investing activities | $16.21 | $464.77 | -$448.56 | | Net cash provided by (used in) financing activities | $(49.84) | $(565.54) | +$515.70 | | Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash | $3.41 | $(35.64) | +$39.05 | | Cash, Cash Equivalents and Restricted Cash at End of Period | $109.96 | $112.67 | -$2.71 | [Notes to Condensed Consolidated Financial Statements (Unaudited)](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) Detailed explanations of KREF's business, accounting policies, and specific financial statement line items are provided [Note 1. Business and Organization](index=11&type=section&id=Note%201.%20Business%20and%20Organization) KREF operates as a mortgage REIT, externally managed by KKR, focusing on transitional senior loans secured by commercial real estate - KREF operates as a mortgage REIT, focusing on originating and acquiring transitional senior loans secured by commercial real estate assets[30](index=30&type=chunk) - KREF is externally managed by KKR Real Estate Finance Manager LLC, an indirect subsidiary of KKR & Co Inc[32](index=32&type=chunk) - As of June 30, 2025, KKR beneficially owned **15.2%** of KREF's outstanding common stock[33](index=33&type=chunk) [Note 2. Summary of Significant Accounting Policies](index=12&type=section&id=Note%202.%20Summary%20of%20Significant%20Accounting%20Policies) This note details KREF's accounting policies, including consolidation principles, fair value measurement, and CECL model adoption - KREF prepares its financial statements in accordance with GAAP and consolidates entities it controls or is the primary beneficiary of VIEs (CMBS trusts, CLOs, REO joint ventures)[37](index=37&type=chunk)[39](index=39&type=chunk)[40](index=40&type=chunk) - KREF recognizes and measures allowance for credit losses under the Current Expected Credit Loss (CECL) model, using the Weighted-Average Remaining Maturity (WARM) method, incorporating historical loss data and forward-looking macroeconomic conditions[71](index=71&type=chunk)[72](index=72&type=chunk)[74](index=74&type=chunk) - KREF elected the fair value option for assets and liabilities of consolidated CMBS trusts, presenting changes in net assets within the Condensed Consolidated Statements of Income[47](index=47&type=chunk) [Note 3. Commercial Real Estate Loans](index=22&type=section&id=Note%203.%20Commercial%20Real%20Estate%20Loans) KREF's loan portfolio decreased to **$5.78 billion**, with allowance for credit losses increasing to **$171.6 million**, primarily for risk-rated 5 loans | Metric (in millions) | June 30, 2025 | December 31, 2024 | Change (in millions) | | :----------------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Outstanding Principal | $5,790.98 | $5,900.16 | -$109.18 | | Amortized Cost | $5,777.14 | $5,888.62 | -$111.48 | | Carrying Value (net of allowance) | $5,605.55 | $5,771.52 | -$165.97 | | Allowance for credit losses | $171.59 | $117.10 | +$54.49 | | Weighted Average Floating Rate Loan % | 98.7% | 98.6% | +0.1% | | Weighted Average Coupon | 7.4% | 7.5% | -0.1% | | Weighted Average Life (Years) | 1.9 | 2.0 | -0.1 | | Risk Rating | June 30, 2025 (Carrying Value in millions) | December 31, 2024 (Carrying Value in millions) | Change (in millions) | | :----------------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | 2 (Low Risk) | $465.12 | $0.00 | +$465.12 | | 3 (Medium Risk) | $4,670.84 | $5,393.33 | -$722.50 | | 4 (High Risk/Potential for Loss) | $202.36 | $193.69 | +$8.67 | | 5 (Impaired/Loss Likely) | $438.82 | $301.60 | +$137.22 | - The CECL provision of **$74.7 million** for the six months ended June 30, 2025, was primarily due to additional reserves for risk-rated 5 loans in the life science, office, and multifamily sectors[131](index=131&type=chunk) [Note 4. Real Estate Owned](index=26&type=section&id=Note%204.%20Real%20Estate%20Owned) KREF sold portions of Portland and Philadelphia properties, recognizing gains, and acquired a West Hollywood condo through foreclosure - KREF sold portions of its Portland, OR Retail/Redevelopment property for **$6.0 million**, recognizing a **$0.7 million** gain in June 2025[139](index=139&type=chunk) - KREF sold a portion of its Philadelphia, PA Office portfolio for **$25.3 million**, recognizing a **$0.5 million** gain in May 2025[143](index=143&type=chunk) - Acquisition of West Hollywood, CA Condo through assignment-in-lieu of foreclosure resulted in a **$20.4 million** loan write-off[144](index=144&type=chunk) | REO Operations (in millions) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :----------------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Revenue from REO operations | $4.03 | $5.77 | $6.91 | $10.76 | | Expenses from REO operations | $(6.18) | $(6.34) | $(11.65) | $(11.89) | | Total (Net Loss) | $(2.15) | $(0.58) | $(4.74) | $(1.13) | [Note 5. Debt Obligations](index=29&type=section&id=Note%205.%20Debt%20Obligations) Secured financing agreements, net, increased to **$2.95 billion** by June 30, 2025, with a weighted average funding cost of **6.4%** | Debt Type | June 30, 2025 (Carrying Value in millions) | December 31, 2024 (Carrying Value in millions) | Weighted Average Funding Cost (June 30, 2025) | | :----------------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Master Repurchase Agreements | $1,097.53 | $1,609.24 | 6.4% | | Term Loan Facility | $542.42 | $692.61 | 6.4% | | Term Lending Agreements | $791.26 | $1,304.27 | 6.0% | | Asset Specific Financing | $359.17 | $400.00 | 7.4% | | Revolving Credit Agreement | $40.00 | $80.00 | 6.5% | | Total Secured Financing Agreements, net | $2,948.25 | $2,798.67 | 6.4% | - KREF was in compliance with its financial debt covenants as of June 30, 2025, and December 31, 2024[164](index=164&type=chunk) [Note 6. Collateralized Loan Obligations](index=32&type=section&id=Note%206.%20Collateralized%20Loan%20Obligations) KREF's CLOs decreased to **$1.45 billion** by June 30, 2025, providing match-term, non-mark-to-market financing | Metric (in millions) | June 30, 2025 | December 31, 2024 | Change (in millions) | | :----------------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Collateralized loan obligations, net | $1,447.84 | $1,766.10 | -$318.26 | | Weighted Average Funding Cost | 6.0% | N/A | N/A | | CLO Net Interest Income (in millions) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :----------------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Net interest income | $11.96 | $15.08 | $23.87 | $29.58 | [Note 7. Secured Term Loan, Net](index=33&type=section&id=Note%207.%20Secured%20Term%20Loan,%20Net) KREF refinanced its secured term loan in March 2025, increasing the principal to **$548.6 million** and extending maturity to March 2032 - KREF refinanced its secured term loan in March 2025, increasing it to **$550.0 million** (from **$339.5 million**) due March 2032, with a total cost of S+3.6%[171](index=171&type=chunk)[172](index=172&type=chunk) | Metric (in millions) | June 30, 2025 | December 31, 2024 | Change (in millions) | | :----------------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Principal | $548.62 | $339.50 | +$209.12 | | Carrying value | $535.05 | $333.85 | +$201.20 | [Note 8. Variable Interest Entity Assets and Liabilities, CMBS Trust, at Fair Value](index=34&type=section&id=Note%208.%20Variable%20Interest%20Entity%20Assets%20and%20Liabilities,%20CMBS%20Trust,%20at%20Fair%20Value) KREF consolidated a CMBS trust from June 18, 2025, reporting its assets at **$492.0 million** and liabilities at **$483.0 million** at fair value - KREF consolidated a CMBS trust from June 18, 2025, reporting its assets and liabilities at fair value[176](index=176&type=chunk) | Metric (in millions) | June 30, 2025 | December 31, 2024 | | :----------------------------------- | :----------------------------- | :----------------------------- | | Variable interest entity assets, CMBS trust, at fair value | $492.04 | $0.00 | | Variable interest entity liabilities, CMBS trust, at fair value | $482.97 | $0.00 | [Note 9. Other Assets and Liabilities](index=35&type=section&id=Note%209.%20Other%20Assets%20and%20Liabilities) Other assets increased to **$17.3 million** and other liabilities to **$10.6 million** by June 30, 2025 | Metric (in millions) | June 30, 2025 | December 31, 2024 | Change (in millions) | | :----------------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Total Other Assets | $17.30 | $8.85 | +$8.45 | | Deferred financing cost, Revolver | $6.19 | $2.81 | +$3.38 | | Loan principal repayments held by a servicer | $4.50 | $0.00 | +$4.50 | | Total Other Liabilities | $10.61 | $8.52 | +$2.09 | | Liabilities related to real estate owned, held for investment | $6.20 | $4.30 | +$1.90 | [Note 10. Consolidation and Equity Method Investments](index=36&type=section&id=Note%2010.%20Consolidation%20and%20Equity%20Method%20Investments) KREF consolidates CMBS trusts, CLOs, and REO joint ventures, and holds equity method investments in a Seattle life science property and CMBS B-Pieces - KREF consolidates CMBS trusts, CLOs, and REO joint ventures where it is the primary beneficiary due to control over significant activities and obligation/right to absorb losses/benefits[181](index=181&type=chunk)[182](index=182&type=chunk)[183](index=183&type=chunk)[184](index=184&type=chunk) - KREF holds a **74.6%** economic interest in a Seattle life science property through an equity method investment[185](index=185&type=chunk) - KREF holds a **3.5%** interest in RECOP I, an unconsolidated VIE that primarily acquires junior tranches of CMBS[186](index=186&type=chunk) [Note 11. Equity](index=37&type=section&id=Note%2011.%20Equity) Common stock outstanding decreased to **65.7 million** shares, with **$29.8 million** in repurchases and **$60.2 million** remaining capacity - As of June 30, 2025, **65,676,132** common shares were issued and outstanding[189](index=189&type=chunk) - KREF repurchased and retired **3,060,004** shares of common stock for **$29.8 million** during the six months ended June 30, 2025, with **$60.2 million** remaining capacity under the share repurchase program[191](index=191&type=chunk) - No shares were issued or sold under the ATM program during the six months ended June 30, 2025, with **$93.2 million** remaining available[193](index=193&type=chunk) | Dividends Declared (in millions) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :----------------------------------- | :----------------------------- | :----------------------------- | | Common Stock Dividends | $33.38 | $34.66 | | Series A Preferred Stock Dividends | $10.65 | $10.65 | [Note 12. Stock-based Compensation](index=39&type=section&id=Note%2012.%20Stock-based%20Compensation) KREF adopted the 2025 Omnibus Incentive Plan with **2.75 million** shares available, incurring **$4.3 million** in stock-based compensation expense - KREF adopted the 2025 Omnibus Incentive Plan, making **2,750,000** shares of common stock available for awards to directors and Manager employees[199](index=199&type=chunk)[200](index=200&type=chunk)[201](index=201&type=chunk) - Stock-based compensation expense was **$4.3 million** for the six months ended June 30, 2025, with **$9.9 million** of unrecognized expense remaining[204](index=204&type=chunk) [Note 13. Earnings (Loss) per Share](index=41&type=section&id=Note%2013.%20Earnings%20(Loss)%20per%20Share) Basic and diluted EPS was **$(0.68)** for the six months ended June 30, 2025, a significant decrease from **$0.17** in the prior year | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :----------------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Net Income (Loss) Attributable to Common Stockholders (in millions) | $(35.43) | $20.22 | $(45.98) | $11.48 | | Basic and Diluted Common Share EPS | $(0.53) | $0.29 | $(0.68) | $0.17 | [Note 14. Commitments and Contingencies](index=42&type=section&id=Note%2014.%20Commitments%20and%20Contingencies) KREF had **$388.7 million** in future funding commitments for loans and was not involved in any material legal proceedings - KREF had future funding commitments of **$388.7 million** for commercial real estate loans as of June 30, 2025[219](index=219&type=chunk) - KREF had a remaining commitment of **$4.3 million** to RECOP I as of June 30, 2025[220](index=220&type=chunk) - KREF was not involved in any material legal proceedings as of June 30, 2025[217](index=217&type=chunk) [Note 15. Related Party Transactions](index=43&type=section&id=Note%2015.%20Related%20Party%20Transactions) KREF pays its Manager management fees and incentive compensation, with total fees incurred with affiliates reaching **$19.4 million** in H1 2025 - The Manager receives a quarterly management fee (greater of **$62,500** or **0.375%** of weighted average adjusted equity) and quarterly incentive compensation (**20.0%** of distributable earnings exceeding a **7.0%** Hurdle Rate)[225](index=225&type=chunk) | Fees Incurred (in millions) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :----------------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Management fees | $5.74 | $6.37 | $11.53 | $12.71 | | Expense reimbursements | $1.15 | $0.87 | $2.63 | $2.08 | | Structuring fees (KCM) | $0.59 | $0.00 | $5.05 | $0.00 | | Diligence and servicing fees (K-Star) | $0.10 | $0.00 | $0.20 | $0.00 | | Total | $7.58 | $7.24 | $19.41 | $14.79 | [Note 16. Fair Value of Financial Instruments](index=45&type=section&id=Note%2016.%20Fair%20Value%20of%20Financial%20Instruments) Commercial real estate loans and consolidated CMBS trust assets/liabilities are classified as Level 3, valued using discounted cash flow models - KREF classifies commercial real estate loans and consolidated CMBS trust assets/liabilities as Level 3 in the fair value hierarchy due to illiquidity and reliance on unobservable inputs[59](index=59&type=chunk)[60](index=60&type=chunk) | Level 3 Unobservable Inputs (June 30, 2025) | Weighted Average | Range | | :----------------------------------- | :----------------------------- | :----------------------------- | | Discount margin (Commercial real estate loans) | 4.0% | 2.3% - 5.7% | | Discount rate (Commercial real estate loans) | 10.6% | 9.1% - 11.0% | | Capitalization rate (Commercial real estate loans) | 9.0% | 5.1% - 10.3% | [Note 17. Income Taxes](index=47&type=section&id=Note%2017.%20Income%20Taxes) KREF maintains REIT status, generally avoiding federal and state income tax on distributed income, with no material deferred tax assets or liabilities - KREF maintains REIT status, requiring distribution of at least **90%** of REIT taxable income to avoid federal and state income tax[244](index=244&type=chunk) - No material deferred tax assets or liabilities were present as of June 30, 2025, and December 31, 2024[245](index=245&type=chunk) [Note 18. Subsequent Event](index=48&type=section&id=Note%2018.%20Subsequent%20Event) In July 2025, KREF paid **$16.4 million** in common stock dividends for the second quarter of 2025 - KREF paid **$16.4 million** in common stock dividends (**$0.25** per share) in July 2025 for Q2 2025[247](index=247&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=49&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses KREF's financial performance, condition, and outlook, considering macroeconomic factors, key measures, and portfolio strategies [Overview](index=49&type=section&id=Overview) KREF is a mortgage REIT externally managed by KKR, focusing on transitional senior loans, facing challenges from elevated interest rates and slowing economic growth - KREF is a mortgage REIT focused on originating and acquiring transitional senior loans secured by institutional-quality CRE assets, aiming for capital preservation and attractive risk-adjusted returns[249](index=249&type=chunk) - KREF is externally managed by KKR Real Estate Finance Manager LLC, an indirect subsidiary of KKR & Co Inc[250](index=250&type=chunk) - Elevated interest rates and slowing economic growth continue to adversely impact the real estate industry, leading to challenges in commercial real estate values and transaction activity[251](index=251&type=chunk)[252](index=252&type=chunk) [Key Financial Measures and Indicators](index=50&type=section&id=Key%20Financial%20Measures%20and%20Indicators) KREF reported a net loss of **$(35.4) million** for Q2 2025, with diluted EPS of **$(0.53)** and book value per share decreasing to **$13.84** | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended March 31, 2025 | | :----------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) attributable to common stockholders (in millions) | $(35.43) | $(10.55) | | Net income (loss) per share, basic and diluted | $(0.53) | $(0.15) | | Dividends declared per share | $0.25 | $0.25 | - Distributable Earnings (non-GAAP) is a key indicator for dividend payment ability; for Q2 2025, Distributable Earnings was **$(2.9) million**, compared to **$17.0 million** in Q1 2025[255](index=255&type=chunk)[260](index=260&type=chunk) | Metric (in millions) | June 30, 2025 | December 31, 2024 | Change (in millions) | | :----------------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Common stockholders' equity | $912.30 | $1,017.28 | -$104.98 | | Total shares outstanding at period end | 65,916,054 | 68,919,708 | -3,003,654 | | Book value per share | $13.84 | $14.76 | -$0.92 | [Our Portfolio](index=52&type=section&id=Our%20Portfolio) KREF's **$6.24 billion** investment portfolio, primarily senior CRE loans, collected **99.9%** of interest payments in Q2 2025, with an average risk rating of 3.1 - KREF's investment portfolio totaled **$6,242.5 million** as of June 30, 2025, primarily senior commercial real estate loans[263](index=263&type=chunk) - **99.9%** of interest payments were collected in Q2 2025, and the average risk rating was **3.1**; multifamily and industrial loans constituted **62%** of the portfolio[264](index=264&type=chunk) | Loan Activity (in millions) | 3 Months Ended June 30, 2025 | 3 Months Ended March 31, 2025 | 3 Months Ended December 31, 2024 | 3 Months Ended September 30, 2024 | | :----------------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Loan originations | $210.65 | $376.27 | $0.00 | $0.00 | | Loan fundings | $230.23 | $405.67 | $53.04 | $55.34 | | Loan repayments | $(450.05) | $(183.60) | $(457.03) | $(290.04) | | Net fundings | $(219.82) | $222.07 | $(403.99) | $(234.71) | | Net write-offs | $(20.43) | $0.00 | $(35.90) | $(1.83) | | Transfer to REO | $(91.77) | $0.00 | $0.00 | $0.00 | | Portfolio Statistics (June 30, 2025) | Value | | :----------------------------------- | :----------------------------- | | Number of loans | 53 | | Principal balance (in millions) | $5,790.98 | | Unfunded loan commitments (in millions) | $388.69 | | Weighted average cash coupon | 7.4% | | Weighted average all-in yield | 7.6% | | Weighted average maximum maturity (years) | 1.9 | | Weighted average LTV | 66% | [Portfolio Surveillance and Credit Quality](index=57&type=section&id=Portfolio%20Surveillance%20and%20Credit%20Quality) KREF's Manager actively monitors credit quality, maintaining an average risk rating of 3.1, with two risk-rated 5 loans modified in 2024 - KREF's Manager actively monitors the portfolio quarterly, assessing credit quality based on property performance, valuations, sponsor financial strength, and macroeconomic trends[279](index=279&type=chunk)[282](index=282&type=chunk) - The average risk rating of the loan portfolio was **3.1** as of June 30, 2025, consistent with December 31, 2024[283](index=283&type=chunk) - A risk-rated 5 mezzanine office loan in Boston, MA, was restructured and partially written off in June 2024; a risk-rated 5 senior life science loan in San Carlos, CA, was also restructured and partially written off in December 2024[286](index=286&type=chunk)[287](index=287&type=chunk) [Total Financing](index=58&type=section&id=Total%20Financing) KREF's total financing includes **78%** Non-Mark-to-Market sources and **22%** master repurchase agreements, with recent upsizing of its corporate Revolver and secured term loan - Non-Mark-to-Market Financing Sources (CLOs, term lending, term loan, warehouse, asset specific, Revolver) constitute **78%** of total financing and are not subject to mark-to-market provisions[290](index=290&type=chunk) - Master repurchase agreements, comprising **22%** of total financing, are subject only to credit marks[290](index=290&type=chunk) - KREF upsized its corporate Revolver to **$660.0 million** and extended its maturity to March 2030[300](index=300&type=chunk) - KREF refinanced its secured term loan to **$550.0 million** due March 2032[302](index=302&type=chunk) | Financing Type (in millions) | June 30, 2025 Borrowings Outstanding Principal | December 31, 2024 Borrowings Outstanding Principal | | :----------------------------------- | :----------------------------- | :----------------------------- | | Master Repurchase Agreements | $1,100.18 | $1,038.07 | | Collateralized Loan Obligations | $1,447.87 | $1,766.23 | | Term Lending Agreements | $910.55 | $789.65 | | Term Loan Facility | $542.55 | $553.97 | | Asset Specific Financing | $361.72 | $343.22 | | Revolver | $40.00 | $80.00 | | Secured Term Loan | $548.62 | $339.50 | | Total leverage | $4,951.49 | $4,910.63 | [Real Estate Assets, Held For Investment](index=61&type=section&id=Real%20Estate%20Assets,%20Held%20For%20Investment) KREF holds a **90%** interest in a Portland retail property and a **68.9%** interest in a Mountain View office property, with a portion of the Portland property sold for a **$0.7 million** gain - KREF holds a **90%** interest in a Portland, OR retail property REO JV and a **68.9%** interest in a Mountain View, CA office property JV with a KKR affiliate[310](index=310&type=chunk)[311](index=311&type=chunk) - A portion of the Portland property was sold for **$6.0 million**, recognizing a **$0.7 million** gain in June 2025[310](index=310&type=chunk) [Real Estate Assets, Held For Sale](index=61&type=section&id=Real%20Estate%20Assets,%20Held%20For%20Sale) Philadelphia Office and West Hollywood Condo properties were classified as held for sale, with a portion of the Philadelphia portfolio sold for a **$0.5 million** gain - Philadelphia, PA Office and West Hollywood, CA Condo properties were classified as held for sale as of June 30, 2025[312](index=312&type=chunk)[315](index=315&type=chunk) - A portion of the Philadelphia office portfolio was sold for **$25.3 million**, recognizing a **$0.5 million** gain in May 2025[315](index=315&type=chunk) - The acquisition of the West Hollywood multifamily property resulted in a **$20.4 million** loan write-off[316](index=316&type=chunk) [Real Estate Asset, Equity Method Investment](index=62&type=section&id=Real%20Estate%20Asset,%20Equity%20Method%20Investment) KREF holds a **74.6%** economic interest in a Seattle life science property through an equity method investment - KREF holds a **74.6%** economic interest in a Seattle life science property through a Tenant-in-Common (TIC) agreement with a KKR affiliate, accounted for as an equity method investment[317](index=317&type=chunk) [Results of Operations](index=63&type=section&id=Results%20of%20Operations) KREF experienced a significant decline in net income for both the three and six months ended June 30, 2025, primarily due to increased provision for credit losses [Three Months Ended June 30, 2025 Compared to Three Months Ended March 31, 2025](index=63&type=section&id=Three%20Months%20Ended%20June%2030,%202025%20Compared%20to%20Three%20Months%20Ended%20March%2031,%202025) Net interest income decreased by **$1.2 million** QoQ, while operating expenses surged by **$25.5 million** due to a higher credit loss provision | Metric (in millions) | 3 Months Ended June 30, 2025 | 3 Months Ended March 31, 2025 | Change (QoQ) (in millions) | Percentage Change (QoQ) | | :----------------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Total net interest income | $30.17 | $31.34 | $(1.17) | (4)% | | Total other income | $5.70 | $3.88 | $1.82 | 47% | | Total operating expenses | $66.44 | $40.96 | $25.48 | 62% | | Provision for credit losses, net | $49.85 | $24.86 | $24.99 | 100% | | Net Income (Loss) Attributable to Common Stockholders | $(35.43) | $(10.55) | $(24.88) | (236)% | - Net interest income decreased due to additional loans placed on nonaccrual status and a decline in overall portfolio size[319](index=319&type=chunk) - The increase in other income was primarily due to a **$1.2 million** gain on sale of REO investments[320](index=320&type=chunk) - The increase in operating expenses was primarily due to a **$25.0 million** change in the provision for credit losses, mainly for risk-rated 5 loans in the office and life science sectors[321](index=321&type=chunk) [Six Months Ended June 30, 2025 Compared to Six Months Ended June 30, 2024](index=65&type=section&id=Six%20Months%20Ended%20June%2030,%202025%20Compared%20to%20Six%20Months%20Ended%20June%2030,%202024) Net interest income decreased by **$18.1 million** YoY, and operating expenses increased by **$35.2 million**, leading to a **$(46.0) million** net loss | Metric (in millions) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change (YoY) (in millions) | Percentage Change (YoY) | | :----------------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Total net interest income | $61.51 | $79.58 | $(18.07) | (23)% | | Total other income | $9.58 | $14.84 | $(5.26) | (35)% | | Total operating expenses | $107.41 | $72.20 | $35.21 | 49% | | Provision for credit losses, net | $74.71 | $37.81 | $36.90 | 98% | | Net Income (Loss) Attributable to Common Stockholders | $(45.98) | $11.48 | $(57.46) | (500)% | - Net interest income decreased due to a reduced loan portfolio size and lower index rates[324](index=324&type=chunk) - Other income decreased primarily due to a **$3.8 million** decrease in revenue from REO operations and a **$2.1 million** operating loss related to the real estate asset equity method investment[325](index=325&type=chunk) - Operating expenses increased primarily due to a **$36.9 million** change in the provision for credit losses, mainly on risk-rated 5 loans in the office and life science sectors[326](index=326&type=chunk) [Liquidity and Capital Resources](index=67&type=section&id=Liquidity%20and%20Capital%20Resources) KREF's total available liquidity was **$756.7 million** as of June 30, 2025, with debt-to-equity increasing to **2.0x** - Primary liquidity sources include **$107.7 million** cash, **$620.0 million** available on the corporate Revolver, and **$29.0 million** from other financing arrangements[329](index=329&type=chunk)[337](index=337&type=chunk) | Metric | June 30, 2025 | December 31, 2024 | | :----------------------------------- | :----------------------------- | :----------------------------- | | Debt-to-equity ratio | 2.0x | 1.6x | | Total leverage ratio | 3.9x | 3.6x | | Cash Flows (in millions) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change (YoY) (in millions) | | :----------------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Operating Activities | $37.04 | $65.13 | -$28.09 | | Investing Activities | $16.21 | $464.77 | -$448.56 | | Financing Activities | $(49.84) | $(565.54) | +$515.70 | [Contractual Obligations and Commitments](index=70&type=section&id=Contractual%20Obligations%20and%20Commitments) KREF's total contractual obligations and commitments amounted to **$6.41 billion** as of June 30, 2025, including secured financing, CLOs, and future funding | Obligation Type (in millions) | Total | Less than 1 year | 1 to 3 years | 3 to 5 years | Thereafter | | :----------------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Total secured financing agreements | $2,954.99 | $417.61 | $2,064.50 | $372.88 | $100.00 | | Collateralized Loan Obligations | $1,447.87 | $0.00 | $0.00 | $0.00 | $1,447.87 | | Secured Term Loan | $548.62 | $5.50 | $11.00 | $11.00 | $521.12 | | Interest payable | $1,063.46 | $302.07 | $404.91 | $286.88 | $69.60 | | Future funding obligations | $388.69 | $289.16 | $97.34 | $2.19 | $0.00 | | Total Contractual Obligations and Commitments | $6,407.97 | $1,018.66 | $2,577.75 | $672.96 | $2,138.60 | [Subsequent Events](index=70&type=section&id=Subsequent%20Events) Subsequent events are detailed in Note 18, primarily concerning the payment of common stock dividends in July 2025 - Subsequent events are detailed in Note 18, primarily concerning the payment of common stock dividends in July 2025[352](index=352&type=chunk) [Critical Accounting Policies and Use of Estimates](index=70&type=section&id=Critical%20Accounting%20Policies%20and%20Use%20of%20Estimates) KREF's financial statements rely on management estimates, particularly for credit loss allowance under CECL, with no material policy changes - KREF's financial statements require management to make estimates and assumptions, particularly for the allowance for credit losses under the CECL model[353](index=353&type=chunk)[354](index=354&type=chunk) - No material changes to Critical Accounting Policies and Use of Estimates since the Annual Report on Form 10-K[353](index=353&type=chunk) [Recent Accounting Pronouncements](index=71&type=section&id=Recent%20Accounting%20Pronouncements) KREF is evaluating the impact of ASU No 2024-03, effective for its 2027 annual reporting - KREF is evaluating the impact of ASU No 2024-03, "Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures," effective for its 2027 annual reporting[359](index=359&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=72&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) KREF manages various market risks, including credit, interest rate, prepayment, financing, and real estate risks [Credit Risk](index=72&type=section&id=Credit%20Risk) KREF's investments are exposed to credit risk, monitored through property performance and sponsor financial health, with macroeconomic factors potentially impacting collateral values - Investments are subject to credit risk, including default, monitored through property performance and sponsor financial health[361](index=361&type=chunk) - Inflation, rising interest rates, and global trade tensions may negatively impact collateral values and borrower performance[362](index=362&type=chunk) [Credit Yield Risk](index=72&type=section&id=Credit%20Yield%20Risk) Increasing supply and reduced demand for credit-sensitive financial instruments can lead to higher required yields and lower prices for KREF's holdings - Increasing supply and reduced demand for credit-sensitive financial instruments can lead to higher required yields and lower prices for KREF's holdings[363](index=363&type=chunk) [Interest Rate Risk](index=72&type=section&id=Interest%20Rate%20Risk) KREF's floating-rate portfolio means rising interest rates generally increase net income, while declining rates decrease it, with rate floors offering some offset - Rising interest rates generally increase KREF's net income, while declining rates decrease it, with rate floors potentially offsetting some impact[364](index=364&type=chunk)[366](index=366&type=chunk) | Index Rate Change | Expected Cash Flow Impact (3 months) (in millions) | Per Common Share Impact (3 months) | | :----------------------------------- | :----------------------------- | :----------------------------- | | -50 basis points | -$0.8 | -($0.01) | | -100 basis points | -$1.5 | -($0.02) | | +50 basis points | +$0.8 | +$0.01 | | +100 basis points | +$1.6 | +$0.02 | [Prepayment Risk](index=73&type=section&id=Prepayment%20Risk) Prepayment risk involves earlier principal repayment, potentially reducing returns, while higher interest rates may decrease prepayment speeds and increase borrower extension options - Prepayment risk means principal may be repaid earlier than anticipated, potentially reducing returns[368](index=368&type=chunk) - Higher interest rates may decrease prepayment speeds and increase borrower extension options, potentially impacting liquidity and leading to losses[369](index=369&type=chunk) [Financing Risk](index=73&type=section&id=Financing%20Risk) Market weakness or volatility could limit financing availability or increase costs, impacting KREF's liquidity - Market weakness or volatility could limit financing availability or increase costs, impacting KREF's liquidity[370](index=370&type=chunk) [Real Estate Risk](index=73&type=section&id=Real%20Estate%20Risk) Commercial real estate asset values are volatile and can be adversely affected by economic conditions, local market factors, and construction issues - Commercial real estate asset values are volatile and can be adversely affected by economic conditions, local market factors, and construction issues, potentially reducing collateral value and increasing losses[371](index=371&type=chunk) [Item 4. Controls and Procedures](index=74&type=section&id=Item%204.%20Controls%20and%20Procedures) KREF's management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting [Evaluation of Disclosure Controls and Procedures](index=74&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) KREF's CEO and CFO concluded that disclosure controls and procedures were effective as of June 30, 2025 - KREF's CEO and CFO concluded that disclosure controls and procedures were effective as of June 30, 2025[373](index=373&type=chunk) [Changes in Internal Control over Financial Reporting](index=74&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2025 - No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2025[374](index=374&type=chunk) Part II - Other Information [Item 1. Legal Proceedings](index=75&type=section&id=Item%201.%20Legal%20Proceedings) KREF was not involved in any material legal proceedings as of June 30, 2025 - KREF was not involved in any material legal proceedings as of June 30, 2025[375](index=375&type=chunk) [Item 1A. Risk Factors](index=75&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the Annual Report on Form 10-K - No material changes to risk factors previously disclosed in the Form 10-K[376](index=376&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=75&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) KREF repurchased **2,170,904** shares for **$20.0 million** during Q2 2025, with **$60.2 million** remaining capacity [Issuer Purchases of Equity Securities](index=75&type=section&id=Issuer%20Purchases%20of%20Equity%20Securities) KREF repurchased **2,170,904** shares of common stock for **$20.0 million** during Q2 2025, with **$60.2 million** remaining capacity | Period | Total shares purchased | Average price paid per share | Amounts paid for shares purchased as part of publicly announced program (in millions) | Approximate dollar value of shares that may yet be purchased under the program (in millions) | | :----------------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | April 1, 2025 - April 30, 2025 | 68,207 | $9.56 | $0.65 | $79.54 | | May 1, 2025 - May 31, 2025 | 1,267,000 | $9.23 | $11.70 | $67.84 | | June 1, 2025 - June 30, 2025 | 835,697 | $9.15 | $7.65 | $60.20 | | Total/Average (Q2 2025) | 2,170,904 | $9.21 | $20.00 | N/A | - As of June 30, 2025, KREF had **$60.2 million** of remaining capacity to repurchase shares under the program[378](index=378&type=chunk) [Item 3. Defaults Upon Senior Securities](index=75&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) No defaults upon senior securities - No defaults upon senior securities[379](index=379&type=chunk) [Item 4. Mine Safety Disclosures](index=75&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Mine Safety Disclosures are not applicable - Mine Safety Disclosures are not applicable[380](index=380&type=chunk) [Item 5. Other Information](index=75&type=section&id=Item%205.%20Other%20Information) No other information to disclose - No other information to disclose[381](index=381&type=chunk) [Item 6. Exhibits](index=76&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including the 2025 Omnibus Incentive Plan and CEO/CFO certifications - Exhibits include the KKR Real Estate Finance Trust Inc **2025 Omnibus Incentive Plan**, restricted stock unit grant notices, CEO/CFO certifications (Sarbanes-Oxley Act), and Inline XBRL documents[382](index=382&type=chunk) [Signatures](index=77&type=section&id=Signatures) The report was signed by Matthew A Salem (CEO) and Kendra L Decious (CFO and Treasurer) on July 22, 2025 - The report was signed by Matthew A Salem (CEO) and Kendra L Decious (CFO and Treasurer) on July 22, 2025[386](index=386&type=chunk)

[Second Quarter 2025 Financial Results Overview](index=1&type=section&id=Second%20Quarter%202025%20Financial%20Results%20Overview) This section provides an overview of KKR Real Estate Finance Trust Inc.'s Q2 2025 financial results, detailing headline performance, operational achievements, and portfolio position [Q2 2025 Headline Financial Performance](index=1&type=section&id=Q2%202025%20Headline%20Financial%20Performance) KKR Real Estate Finance Trust Inc. reported a net loss attributable to common stockholders of (**$35.4**) **million**, or (**$0.53**) per diluted share, for Q2 2025, worsening from the previous quarter. The company also reported a Distributable Loss of (**$2.9**) **million**, or (**$0.04**) per diluted share, a significant decline from Distributable Earnings in Q1 2025 Key Financial Performance (QoQ Comparison) | Metric | Q2 2025 (Ended June 30, 2025) | Q1 2025 (Ended March 31, 2025) | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net Loss Attributable to Common Stockholders | ($35.4) million | ($10.6) million | | Net Loss Per Diluted Share | ($0.53) | ($0.15) | | Distributable Earnings (Loss) | ($2.9) million | $17.0 million | | Distributable Earnings (Loss) Per Diluted Share | ($0.04) | $0.25 | [Second Quarter 2025 Highlights](index=1&type=section&id=Second%20Quarter%202025%20Highlights) KREF's CEO highlighted robust opportunities in real estate credit and expansion into CMBS, while the President emphasized strong liquidity and no near-term corporate debt maturities. Key achievements include significant loan repayments, new originations, and strategic investments, despite an increase in CECL allowance primarily due to watchlist loans in office and life science sectors - CEO Matt Salem noted robust opportunities in real estate credit and expansion into CMBS, while President Patrick Mattson highlighted **$634 million in year-to-date repayments**, **over $750 million in liquidity**, and **no corporate debt due until 2030**, positioning KREF well for the current investing environment[5](index=5&type=chunk) [Operational and Strategic Achievements](index=1&type=section&id=Operational%20and%20Strategic%20Achievements) - Originated and funded **$210.7 million** and **$210.4 million**, respectively, relating to two floating-rate loans, with a **weighted average LTV of 71%** and coupon of **S+2.4%**[6](index=6&type=chunk) - Received **$450.1 million** in loan repayments[6](index=6&type=chunk) - Resolved a risk-rated 5 loan by taking title to a multifamily property, resulting in a realized loss of **$20.4 million**[6](index=6&type=chunk) - Sold certain real estate owned assets for a combined gain of **$1.2 million**[6](index=6&type=chunk) - Invested **$9 million** in CMBS B-Pieces[6](index=6&type=chunk) - Repurchased and retired **2,170,904 shares** at an average price per share of **$9.21** for a total of **$20.0 million**[6](index=6&type=chunk) [Portfolio and Financial Position](index=1&type=section&id=Portfolio%20and%20Financial%20Position) - Liquidity position: **$756.7 million**, including **$107.7 million** of cash and **$620.0 million** of undrawn capacity on corporate revolving credit agreement as of June 30, 2025[6](index=6&type=chunk) - Current loan portfolio: **$5.8 billion**, **99% floating rate** with a **weighted average unlevered all-in yield of 7.6%** and **weighted average LTV of 66%**[6](index=6&type=chunk) - **Multifamily and industrial assets represent 62% of the loan portfolio**[6](index=6&type=chunk) - **Collected 99.9% of interest payments** due on the loan portfolio[6](index=6&type=chunk) - **Average risk rating of the loan portfolio was 3.1**, weighted by outstanding principal amount[6](index=6&type=chunk) - Diversified financing sources totaling **$8.2 billion** with **$3.2 billion of undrawn capacity**; **78% of secured financing is fully non-mark-to-market**[6](index=6&type=chunk) - Common book value: **$912.3 million**, or **$13.84 per share**, inclusive of a CECL allowance of **$173.9 million**, or (**$2.64**) per share[6](index=6&type=chunk) - CECL allowance increased by **$49.8 million**, or (**$0.74**) per share, for the three months ended June 30, 2025, primarily due to additional reserves for watchlist loans in the office and life science sectors[6](index=6&type=chunk) [Detailed Financial and Portfolio Information](index=2&type=section&id=Detailed%20Financial%20and%20Portfolio%20Information) This section details KREF's Q2 2025 loan originations and provides a comprehensive summary of its current portfolio composition and key metrics [Second Quarter 2025 Loan Originations](index=2&type=section&id=Second%20Quarter%202025%20Loan%20Originations) During Q2 2025, KREF committed and funded two new floating-rate senior loans totaling **$210.4 million** in initial principal, primarily in multifamily and industrial sectors, with a weighted average LTV of **71%** and a coupon of **S+2.4%** Q2 2025 Loan Originations | Description/Location | Property Type | Month Originated | Committed Principal Amount ($ thousands) | Initial Principal Funded ($ thousands) | Coupon | Maturity Date | LTV | | :------------------- | :------------ | :--------------- | :------------------------------------- | :----------------------------------- | :----- | :------------ | :-- | | Senior Loan, North Palm Beach, FL | Multifamily | May 2025 | 85,650 | 85,400 | S+2.3% | June 2030 | 72% | | Senior Loan, Raleigh, NC | Industrial | June 2025 | 125,000 | 125,000 | S+2.4% | July 2030 | 71% | | **Total/Weighted Average** | | | **210,650** | **210,400** | **S+2.4%** | | **71%** | - The Senior Loan in Raleigh, NC, was part of a **$407.6 million** whole loan co-originated by the Company and KKR affiliates, with KREF's interest being **31% of the loan**[8](index=8&type=chunk) [Portfolio Summary](index=2&type=section&id=Portfolio%20Summary) As of June 30, 2025, KREF's total committed principal across its portfolio was **$6.6 billion**, with an outstanding principal of **$6.2 billion**. Senior loans constitute the largest portion at **$5.8 billion** outstanding, with a weighted average LTV of **66%** and a maximum remaining term of **1.9 years**. The portfolio also includes real estate assets and CMBS investments Portfolio Summary as of June 30, 2025 | Investment | Committed Principal / Investment Amount ($ millions) | Outstanding Principal / Investment Amount ($ millions) | Carrying Value ($ millions) | Net Equity ($ millions) | Max Remaining Term (Years) | Weighted Average LTV | | :----------------- | :------------------------------------------------- | :----------------------------------------------------- | :-------------------------- | :---------------------- | :------------------------- | :------------------- | | Senior Loans | 6,179.7 | 5,791.0 | 5,605.5 | 1,510.3 | 1.9 | 66% | | Real Estate Assets | 407.0 | 407.0 | 407.0 | 311.0 | n.a. | n.a. | | CMBS Investments | 49.1 | 44.6 | 44.6 | 44.6 | 5.2 | 55% | | **Total/Weighted Average** | **6,635.8** | **6,242.5** | **6,057.1** | **1,865.8** | **1.9** | **65%** | - Carrying value for senior loans represents amortized cost, net of applicable allowance for credit losses. Net equity reflects the amortized cost basis of loans (net of borrowings) and real estate assets (net of borrowings and noncontrolling interests). Max remaining term assumes all extension options are exercised, and weighted average LTV excludes loans with a risk rating of 5[10](index=10&type=chunk) [Non-GAAP Financial Measures](index=2&type=section&id=Non-GAAP%20Financial%20Measures) This section provides a reconciliation of Distributable Earnings (Loss), a key non-GAAP financial measure, to GAAP net income (loss) attributable to common stockholders [Reconciliation of Distributable Earnings (Loss)](index=2&type=section&id=Reconciliation%20of%20Distributable%20Earnings%20%28Loss%29) KREF provides a reconciliation of Distributable Earnings (Loss), a non-GAAP measure, to net income (loss) attributable to common stockholders. For Q2 2025, Distributable Loss was (**$2.9**) **million**, significantly impacted by a **$20.4 million** realized loss on loan write-offs and a **$49.8 million** provision for credit losses Reconciliation of Distributable Earnings (Loss) to Net Income (Loss) Attributable to Common Stockholders ($ thousands) | Metric | Q2 2025 (June 30, 2025) | Q1 2025 (March 31, 2025) | Q2 2024 (June 30, 2024) | | :------------------------------------------ | :---------------------- | :----------------------- | :---------------------- | | Net Income (Loss) Attributable to Common Stockholders | (35,425) | (10,550) | 20,223 | | Per Diluted Share | (0.53) | (0.15) | 0.29 | | Adjustments: | | | | | Non-cash equity compensation expense | 2,141 | 2,127 | 2,226 | | Depreciation and amortization | 740 | 740 | — | | Unrealized (gains) or losses, net | 238 | (131) | 145 | | Provision for credit losses, net | 49,848 | 24,863 | 4,545 | | (Gain) loss on sale of investments | (1,192) | — | 615 | | Distributable Earnings before realized gains or losses | 16,350 | 17,049 | 27,754 | | Realized loss on loan write-offs, net | (20,434) | — | (135,811) | | Realized gain (loss) on sale of investments | 1,192 | — | (615) | | **Distributable Earnings (Loss)** | **(2,892)** | **17,049** | **(108,672)** | | **Per Diluted Share** | **(0.04)** | **0.25** | **(1.57)** | | Diluted weighted average common shares outstanding | 67,191,309 | 68,765,877 | 69,423,244 | - Distributable Earnings is a non-GAAP measure used to assess the Company's ability to generate sufficient income to pay quarterly dividends. It adjusts GAAP net income by excluding non-cash equity compensation, depreciation and amortization (for foreclosed properties), unrealized gains/losses, and certain one-time non-cash items, while including realized losses not otherwise in GAAP net income[20](index=20&type=chunk)[21](index=21&type=chunk) [Company Information and Disclosures](index=3&type=section&id=Company%20Information%20and%20Disclosures) This section provides essential company information, investor relations contacts, forward-looking statement disclaimers, and key financial definitions [About KKR Real Estate Finance Trust Inc.](index=3&type=section&id=About%20KKR%20Real%20Estate%20Finance%20Trust%20Inc.) KKR Real Estate Finance Trust Inc. (KREF) is a real estate investment trust (REIT) focused on originating or acquiring transitional senior loans collateralized by institutional-quality commercial real estate. It is externally managed by KKR Real Estate Finance Manager LLC, an indirect subsidiary of KKR & Co. Inc., a leading global alternative investment firm - KREF is a real estate investment trust (REIT) that primarily originates or acquires transitional senior loans collateralized by institutional-quality commercial real estate assets in liquid markets with strong underlying fundamentals. Its target assets also include mezzanine loans, preferred equity, and other debt-oriented instruments[15](index=15&type=chunk) - The Company is externally managed and advised by KKR Real Estate Finance Manager LLC, an indirect subsidiary of KKR & Co. Inc., a leading global alternative investment firm with **$664.3 billion** of assets under management as of March 31, 2025[15](index=15&type=chunk) [Investor Relations and Media](index=3&type=section&id=Investor%20Relations%20and%20Media) KREF provided details for its Q2 2025 earnings teleconference and webcast, scheduled for July 23, 2025, and noted that supplemental information is available on its investor relations website. Contact information for investor relations and media inquiries was also provided - Q2 2025 earnings teleconference call: Wednesday, July 23, 2025, at 10:00 a.m. Eastern Time[12](index=12&type=chunk) - Webcast available on the Company's website at www.kkrreit.com, with a replay available for 30 days[13](index=13&type=chunk) - Supplemental information slide presentation accessible via the investor relations section of the Company's website[14](index=14&type=chunk) - Contact information provided for Investor Relations (Jack Switala, kref-ir@kkr.com) and Media (Lauren McCranie, media@kkr.com)[19](index=19&type=chunk) [Forward-Looking Statements](index=3&type=section&id=Forward-Looking%20Statements) This section contains a standard disclaimer regarding forward-looking statements, emphasizing that they are based on current views and subject to various risks and uncertainties, including general economic conditions, property performance, and financing access. The company disclaims any obligation to update these statements - The release contains forward-looking statements reflecting current views on future operations and financial performance, identifiable by words such as "outlook," "believe," "expect," "potential," etc[17](index=17&type=chunk) - These statements are not historical facts or guarantees of future performance and are subject to various risks and uncertainties, including general political, economic, and competitive conditions, global economic trends (e.g., inflation, interest rates), deterioration in property performance, and difficulty accessing financing or raising capital[17](index=17&type=chunk) - The Company undertakes no obligation to publicly update or review any forward-looking statements, whether as a result of new information, future developments or otherwise, except as required by law[18](index=18&type=chunk) [Definitions](index=4&type=section&id=Definitions) This section provides definitions for key financial terms used in the report, specifically "Loan-to-value ratio" (LTV) and "Distributable Earnings," clarifying their calculation and purpose - **Loan-to-value ratio (LTV):** Generally based on the initial loan amount divided by the as-is appraised value as of the date the loan was originated. For CMBS B-Pieces, LTV is based on the weighted average LTV of the underlying loan pool[19](index=19&type=chunk) - **Distributable Earnings:** A non-GAAP measure, a key indicator of the Company's ability to generate sufficient income to pay quarterly dividends. It is defined as net income (loss) attributable to common stockholders, adjusted for non-cash equity compensation, depreciation and amortization (for foreclosed properties), unrealized gains or losses, and certain one-time non-cash income or expense items, while including realized losses not otherwise included in GAAP net income (loss)[20](index=20&type=chunk)[21](index=21&type=chunk) - **Caution:** Distributable Earnings should not be considered a substitute for GAAP net income or taxable income, and its methodology may differ from other REITs[22](index=22&type=chunk)

Financial Highlights - Net income attributable to common stockholders was $17 million, or $032 per share[6,8] - Core Earnings were $171 million, or $032 per share[6,49] - The company paid a dividend of $037 per share[6,8] - Book value per share was $973[6] Portfolio and Originations - Originated $15 billion of floating-rate senior loans in 2017, a 175% increase from the prior year[6,13,14] - The portfolio totaled $21 billion, a 15% increase from the previous quarter, with a weighted average LTV of 67%[6,20] - 93% of the portfolio is indexed to one-month USD LIBOR[6,33] Financing and Interest Rate Sensitivity - Total financing capacity of $18 billion with $856 million of undrawn capacity[28] - A 50 basis point increase in one-month USD LIBOR would increase net interest income by $28 million, or $005 per share, over the next 12 months[33] - The company's Debt-to-Equity Ratio is 08x and Total Leverage Ratio is 10x[8,27]

Financial Performance - Net income attributable to common stockholders for Q4 2018 was $197 million, or $034 per share[6] - Net Core Earnings for Q4 2018 were $222 million, or $038 per share[6] - Book value was $1,1323 million, or $1966 per share in Q4[6] - A dividend of $043 per share was paid for Q4, equating to an 85% annualized dividend yield[6] Portfolio Activity - Originated $9080 million of floating-rate senior loans in Q4 2018[6] - Total loan originations for 2018 reached $27 billion[6] - The outstanding total loan portfolio was $41 billion, a 98% increase from Q4 2017[6] - 98% of the portfolio is floating-rate[6] Capitalization and Financing - $13 billion of undrawn financing capacity was available[6] - The non-mark-to-market term loan financing facility was increased by $4000 million to $10 billion[6] - A $10 billion managed collateralized loan obligation was issued, providing $8100 million of non-mark-to-market financing[6] Interest Rate Sensitivity - A 50 basis point increase in one-month USD LIBOR would increase net interest income by $44 million, or $008 per share, over the next twelve months[6]

Financial Performance - Net Income attributable to common stockholders was $24.8 million, or $0.43 per diluted share in 4Q'19[7] - Net Core Earnings were $25.5 million, or $0.44 per diluted share in 4Q'19[7] - The company paid a 4Q dividend of $0.43 per share, equating to an 80% annualized dividend yield[7] - Book value was $1,1220 million, or $1952 per share[7] Portfolio and Originations - The company originated $7641 million of floating-rate senior loans in 4Q'19[7] - Total loan originations for 2019 reached a record of $31 billion, a 14% increase from 2018[7] - The outstanding total portfolio was $51 billion, up 23% from 4Q'18[7] - Senior loans had a weighted average LTV of 66%[7] Financing and Interest Rate Sensitivity - The company had $16 billion of undrawn financing capacity[7] - 72% of outstanding portfolio financing was non-mark-to-market[7] - 999% of the loan portfolio was floating-rate[7]

KKR Real Estate Finance Trust Inc. Fourth Quarter and Full Year 2020 Supplemental Information February 16, 2021 Legal Disclosures 2 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 no ...