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]

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]