Financial Data and Key Metrics - GAAP net loss of $13 million or $0.19 per share, driven by a CECL allowance increase of $0.52 per share due to the downgrade of two loans [3] - Book value per share decreased 2.6% quarter-over-quarter to $14.84 per share as of September 30, 2024 [3] - Distributable earnings were $25.9 million or $0.37 per share, covering the $0.25 per share dividend [3] - Received $290 million in loan repayments compared to $55 million in fundings in Q3 [7] - Year-to-date repayments exceeded $1 billion, surpassing the original expectation of $1 billion for the full year [8] Business Line Data and Key Metrics - Commercial real estate lending pipeline averages $20 billion per week, up 40% from the beginning of the year [4] - U.S. banks are shifting from direct mortgage origination to financing alternative lenders through loan-on-loan facilities, creating opportunities for non-bank lenders and CMBS [5] - KREF's four-rated loans now represent only 3% of the total portfolio, the lowest since Q4 2019 [6] - Office loan exposure reduced to 18% of the loan portfolio after selling a $138 million office loan at par [12] Market Data and Key Metrics - Increased transaction volumes in commercial real estate, with acquisition-oriented activity rising to 20% of the pipeline, up from 10% last year [18] - Multifamily, industrial, and student housing assets are seeing the most transaction activity, while office remains challenged [19] - Cap rates have come down across property types as the rate complex has cleared up, with expectations of a more normal transaction volume in 2025 [20] Company Strategy and Industry Competition - KREF plans to actively reinvest repayments into new loan originations and evaluate share repurchases [5] - The company is focusing on maintaining portfolio size and optimizing the REO portfolio, with potential to generate $0.12 per share in distributable earnings per quarter [10] - KREF is exploring opportunities in data centers and European markets, leveraging its global platform and relationships [24][25] Management Commentary on Operating Environment and Future Outlook - Management believes the company is well-positioned with ample liquidity and reduced leverage, expecting 2025 to be an active origination year [15] - The office market is showing signs of liquidity returning, with institutional investors re-entering the market for high-quality assets [42] - KREF expects to resolve watch list loans and REO assets over the next year, with potential upside in certain assets like the Portland and Philadelphia properties [30][36] Other Important Information - KREF has $8.3 billion in financing capacity, including $3 billion of undrawn capacity, with no corporate debt due until 2027 [11] - The company's K-Star asset management platform manages over $33 billion in loans and is named special servicer on an additional $46 billion of CMBS [9] Q&A Session Summary Question: Price discovery and transaction activity trends [17] - Transaction volumes are picking up, with acquisition activity rising to 20% of the pipeline, still below the historical average of 50% [18][19] - Values are settling in favored asset classes like multifamily, industrial, and student housing, with cap rates declining [20] Question: Impact of loans on cost recovery on distributable earnings [21] - The downgrade of two loans to five resulted in a $0.02 per share impact on interest income in Q3 [21] Question: Focus areas for new loan originations [23] - KREF will focus on multifamily, industrial, student housing, data centers, and European markets [24][25] Question: Note-on-note financing and spreads [26] - KREF has strong relationships with financing providers, with leverage typically in the 75% to 80% range and pricing around SOFR plus 150 to 175 basis points [27] Question: Timing for resolving watch list and REO assets [30] - Watch list loans are expected to be resolved over the next year, with REO assets like Portland and Mountain View likely taking longer [31][32] Question: Office market outlook and buyer profile [42] - Institutional investors are returning to the office market, focusing on high-quality assets with long lease terms [42] Question: Transitional loan opportunities and origination timing [45] - Demand for transitional loans is increasing, with KREF having sufficient liquidity to start new originations ahead of 2025 repayments [46][48] Question: Portfolio size and CLO financing efficiency [50] - KREF expects to maintain its current portfolio size, with potential to refinance CLOs as the market improves [51][52] Question: Loan portfolio sales and credit risk transfers [55] - Loan portfolio sales from banks remain muted, but credit risk transfer activity is beginning to develop [55][56]

Core Insights - KKR Real Estate Finance (KREF) reported a revenue of $37.01 million for the quarter ended September 2024, reflecting a 17.1% decrease year-over-year and a surprise of -6.36% compared to the Zacks Consensus Estimate of $39.52 million [1][2] - The earnings per share (EPS) for the quarter was $0.40, down from $0.47 in the same quarter last year, but exceeded the consensus EPS estimate of $0.31, resulting in a surprise of +29.03% [1] Financial Performance Metrics - Total net interest income was reported at $37.01 million, which is a decline of 17.1% compared to the previous year and below the average estimate of $39.52 million from two analysts [2] - Total other income reached $10.02 million, slightly below the average estimate of $10.09 million, but showed a significant year-over-year increase of +84% [2] - Other income from equity method investments was $0.16 million, which fell short of the average estimate of $0.63 million [2] - Revenue from real estate owned operations was reported at $8.54 million, exceeding the average estimate of $7.46 million from two analysts [2] Stock Performance - KKR Real Estate shares have experienced a -4.5% return over the past month, contrasting with the Zacks S&P 500 composite's +4.5% change [2] - The stock currently holds a Zacks Rank 3 (Hold), indicating it may perform in line with the broader market in the near term [2]

Group 1: Earnings Performance - KKR Real Estate Finance (KREF) reported quarterly earnings of $0.40 per share, exceeding the Zacks Consensus Estimate of $0.31 per share, but down from $0.47 per share a year ago, representing an earnings surprise of 29.03% [1] - The company has surpassed consensus EPS estimates in all four of the last quarters [1] - Revenues for the quarter ended September 2024 were $37.01 million, missing the Zacks Consensus Estimate by 6.36% and down from $44.61 million year-over-year [1] Group 2: Stock Performance and Outlook - KKR Real Estate shares have declined approximately 9% since the beginning of the year, contrasting with the S&P 500's gain of 23% [2] - The future performance of the stock will largely depend on management's commentary during the earnings call and the company's earnings outlook [2][3] - The current consensus EPS estimate for the upcoming quarter is $0.31 on revenues of $40.65 million, and for the current fiscal year, it is $1.47 on revenues of $159.76 million [4] Group 3: Industry Context - The REIT and Equity Trust industry, to which KKR Real Estate belongs, is currently ranked in the bottom 38% of over 250 Zacks industries, indicating potential challenges for stock performance [5] - Another company in the same industry, Apollo Commercial Finance (ARI), is expected to report quarterly earnings of $0.25 per share, reflecting a year-over-year decline of 32.4% [5]

Financial Performance - Net interest income for the three months ended September 30, 2024, was $37,005, down 17.5% from $44,612 in the same period of 2023[13]. - Net loss attributable to common stockholders for the three months ended September 30, 2024, was $(12,991), a decrease from a profit of $21,401 in 2023[13]. - Basic and diluted net income (loss) per share of common stock was $(0.19) for the three months ended September 30, 2024, compared to $0.31 in the same period of 2023[13]. - The net income for the quarter ending September 30, 2024, was a loss of $7,328,000, compared to a net income of $25,528,000 for the previous quarter[14]. - For the three months ended September 30, 2024, KREF reported a net loss of $7.388 million compared to a net income of $27.141 million for the same period in 2023, representing a significant decline[150]. - For the nine months ended September 30, 2024, KREF's net income was $15.336 million, compared to a net loss of $17.964 million for the same period in 2023[150]. Asset and Liability Changes - Total assets decreased from $7,547,618 to $6,774,042, a decline of approximately 10.2% from December 31, 2023, to September 30, 2024[12]. - Total liabilities decreased from $6,143,436 to $5,362,661, a decline of approximately 12.7% from December 31, 2023, to September 30, 2024[12]. - Cash and cash equivalents decreased from $135,898 to $108,795, a decline of approximately 20%[12]. - As of September 30, 2024, total equity for KKR Real Estate Finance Trust Inc. was $1,411,381,000, reflecting a decrease from $1,439,232,000 at June 30, 2024[14]. - The accumulated deficit increased to $(367,871,000) as of September 30, 2024, from $(340,437,000) at March 31, 2024[14]. Credit Losses and Provisions - Provision for credit losses increased significantly to $38,200 for the three months ended September 30, 2024, compared to $8,814 in the same period of 2023, marking a rise of 333.5%[13]. - The company reported a provision for credit losses of $76,011, down from $125,616 in the previous year[18]. - KKR's allowance for credit losses increased from $(210,470) thousand as of December 31, 2023 to $(148,013) thousand as of September 30, 2024[84]. - As of September 30, 2024, the allowance for credit losses was $150.9 million, with a CECL provision of $76.0 million for the nine months ended September 30, 2024, primarily due to additional reserves for risk-rated 5 loans in the office and life science sectors[89]. Dividends and Shareholder Returns - Dividends declared per share of common stock decreased to $0.25 from $0.43 in the same period of 2023, a reduction of 41.9%[13]. - KREF's board of directors declared total dividends of $51.994 million on common stock for the nine months ended September 30, 2024, compared to $89.143 million for the same period in 2023[137]. - KREF declared a dividend of $0.25 per share of common stock for stockholders of record as of September 30, 2024, and a dividend of $0.41 per share for its 6.50% Series A Cumulative Redeemable Preferred Stock, representing an annual dividend of $1.625 per share[57]. Loan Portfolio and Financing - KREF's commercial real estate loans held-for-investment, net, were $2,240,673,000 as of September 30, 2024, down from $2,273,784,000 at the end of 2023, indicating a decrease of about 1.5%[117]. - The total outstanding principal for commercial real estate loans was $7.37 billion as of September 30, 2024, compared to $7.34 billion as of December 31, 2023, reflecting a slight increase[87]. - The total principal amount of senior loans is $9,496.6 million, with an outstanding principal of $6,339.7 million[200]. - The company has future funding commitments of $508.9 million related to investments in commercial real estate loans as of September 30, 2024[154]. - The weighted average coupon rate was 8.1% with a floating rate loan percentage of 98.7% as of September 30, 2024[77]. Real Estate Owned (REO) Operations - Real estate owned, held for investment, net increased from $82,091 to $262,267, reflecting a significant growth in this asset category[12]. - Total revenue from REO operations for the nine months ended September 30, 2024, was $19.3 million, up from $6.0 million in the same period of 2023[103]. - KREF's rental income for the three months ended September 30, 2024, was $2.43 million, compared to $1.65 million for the same period in 2023[103]. Risk Management and Credit Quality - KREF evaluates credit quality indicators of loans classified as held-for-investment at least quarterly, using a five-point risk rating scale from "Very Low Risk" to "Impaired/Loss Likely"[66]. - KREF's loans are placed on nonaccrual status when principal or interest is 90 days or more past due, unless the loan is well secured and in the process of collection[65]. - The company actively manages its portfolio and assesses credit quality by quarterly evaluating property performance and borrower financials[204]. - The company evaluates macroeconomic conditions, real estate fundamentals, and micro-market dynamics in its risk assessment[204]. Market Conditions and Economic Outlook - The macroeconomic environment has been characterized by significant volatility, impacting commercial real estate values and transaction activity[182]. - The Federal Reserve's interest rate reduction of 50 basis points on September 18, 2024, has not fully alleviated the challenges posed by elevated interest rates[183]. - Future outlook includes potential market expansion and new product development in the life science sector, which is currently a focus area[198].

KKR REAL ESTATE FINANCE TRUST INC. REPORTS THIRD QUARTER 2024 FINANCIAL RESULTS New York, NY, October 21, 2024 - KKR Real Estate Finance Trust Inc. (the "Company" or "KREF") (NYSE: KREF) today reported its financial results for the quarter ended September 30, 2024. Reported net loss attributable to common stockholders of ($13.0) million, or ($0.19) per diluted share of common stock, for the three months ended September 30, 2024, compared to net income attributable to common stockholders of $20.2 million, or ...

KKR Real Estate Finance (KREF) shares soared 5.7% in the last trading session to close at $12.24. The move was backed by solid volume with far more shares changing hands than in a normal session. This compares to the stock's 8.4% gain over the past four weeks. Shares of KREF witnessed a strong price increase as long-term bond yields have declined with the Fed's announcement of an interest rate cut starting this month. This resulted in a decline in mortgage rates. Housing affordability challenges are expecte ...

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The upward trend in estimate revisions for this real estate finance company reflects growing optimism of analysts on its earnings prospects, which should get reflected in its stock price. After all, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements. Our stock rating tool -- the Zacks Rank -- has this insight at its core. Consensus earnings estimates for the next quarter and full year have moved considerably higher for KKR Real Est ...

KKR Real Estate Finance Trust Inc. (NYSE:KREF) Q2 2024 Earnings Conference Call July 23, 2024 10:00 AM ET Company Participants Jack Switala - Investor Relations Matt Salem - Chief Executive Officer Patrick Mattson - President & Chief Operating Officer Conference Call Participants Stephen Laws - Raymond James Rick Shane - JPMorgan Don Fandetti - Wells Fargo Jade Rahmani - KBW Steve Delaney - JMP Securities Tom Catherwood - BTIG Operator Good morning, and welcome to the KKR Real Estate Finance Trust Incorpora ...

JULY 22, 2024 | --- | --- | |-------|-----------| | | | | Senior loans secured primarily by | | | transitional, institutional | Conservative liability management focused on | | multifamily and industrial | diversified non-mark-to-market | | properties owned by high quality sponsors | financing | Dividend declared per share | --- | --- | --- | --- | --- | --- | --- | --- | |-----------------|---------|--------|-------------|-------|--------|--------|---------| | ($ in Millions) | | Net Income and Distributab ...