KKR Real Estate Finance Trust (KREF) - 2024 Q3 - Quarterly Report

Financial Performance - Net interest income for the three months ended September 30, 2024, was $37,005, down 17.5$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$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].