KKR Real Estate Finance Trust (KREF) - 2025 Q2 - Quarterly Results

Second Quarter 2025 Financial Results Overview 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 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 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] Operational and Strategic Achievements - 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] - Received $450.1 million in loan repayments[6] - Resolved a risk-rated 5 loan by taking title to a multifamily property, resulting in a realized loss of $20.4 million[6] - Sold certain real estate owned assets for a combined gain of $1.2 million[6] - Invested $9 million in CMBS B-Pieces[6] - Repurchased and retired 2,170,904 shares at an average price per share of $9.21 for a total of $20.0 million[6] Portfolio and Financial Position - 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] - 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] - Multifamily and industrial assets represent 62% of the loan portfolio[6] - Collected 99.9% of interest payments due on the loan portfolio[6] - Average risk rating of the loan portfolio was 3.1, weighted by outstanding principal amount[6] - 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] - 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] - 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] Detailed Financial and Portfolio Information 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 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] Portfolio Summary 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] Non-GAAP Financial Measures 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) 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][21] Company Information and Disclosures This section provides essential company information, investor relations contacts, forward-looking statement disclaimers, and key financial definitions About KKR Real Estate Finance Trust Inc. 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] - 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] Investor Relations and Media 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] - Webcast available on the Company's website at www.kkrreit.com, with a replay available for 30 days[13] - Supplemental information slide presentation accessible via the investor relations section of the Company's website[14] - Contact information provided for Investor Relations (Jack Switala, kref-ir@kkr.com) and Media (Lauren McCranie, media@kkr.com)[19] Forward-Looking Statements 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] - 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] - 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] 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] - 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][21] - 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]