KKR Real Estate Finance Trust (NYSE:KREF) Q3 2025 Earnings Call October 22, 2025 10:00 AM ET Company ParticipantsMatthew Salem - CEOJack Switala - Head of Investor RelationsPatrick Mattson - President and COOConference Call ParticipantsRick Shane - AnalystTom Catherwood - AnalystJade Rahmani - AnalystChris Miller - AnalystOperatorGood day, and welcome to the KKR Real Estate Finance Trust Inc. Third Quarter 2025 Financial Results Conference Call. All participants will be in a listen-only mode. Should you nee ...

Financial Data and Key Metrics Changes - For Q3 2025, the company reported GAAP net income of $8 million or $0.12 per share, with a book value of $13.78 per share, reflecting a decrease of 0.4% quarter over quarter [3][7] - The company reported a distributable loss of $2 million, primarily due to taking ownership of the Raleigh Multifamily property, with distributable earnings (DE) of negative $0.03 per share, or $0.18 per share excluding losses [3][6] - A cash dividend of $0.25 was paid for the third quarter [3] Business Line Data and Key Metrics Changes - The company expects over $400 million in originations for Q4 2025, having already closed $110 million across the U.S. and Europe [5][8] - The company has a current portfolio of $5.9 billion, with repayments of $480 million received in the quarter, totaling $1.1 billion year to date [7][8] - The weighted average risk rating of the current portfolio is 3.1 on a 5-point scale, with 85% of the loan portfolio rated 3 or better [10][11] Market Data and Key Metrics Changes - The commercial real estate lending market remains robust, with a $1.5 trillion wall of maturities expected over the next 18 months [4] - The debt markets are liquid, with banks returning to the market and increasing back leverage lending [4] - The company has strategically built its European real estate credit platform, originating over $2.5 billion to date [5] Company Strategy and Development Direction - The company is focused on optimizing its REO portfolio and redeploying capital efficiently for growth [12] - The company has built a dedicated asset management platform called K-Star, managing over $37 billion in loans [6] - The company aims to match repayments with originations, maintaining a disciplined approach to capital deployment [9][40] Management's Comments on Operating Environment and Future Outlook - Management expressed a positive sentiment towards the real estate market, noting strengthening fundamentals and lagging values [4] - The company anticipates greater than $1.5 billion in repayments in 2026, with a strong origination pipeline [8] - Management is optimistic about the recovery in the life sciences sector, seeing early signs of demand from tenants [26] Other Important Information - The company has no final facility maturities until 2027 and no corporate debt due until 2030, with near-record liquidity levels of $933 million [9][10] - The total CECL reserve at quarter end is $160 million, representing around 3% of the loan portfolio [11] Q&A Session Summary Question: Clarification on lower leverage and higher liquidity - Management indicated that the lower leverage and higher liquidity were primarily due to timing issues related to repayments and originations, rather than a defensive positioning [15][20] Question: Impact of repayments on future earnings - Management stated that while there may be a lag in earnings due to the timing of repayments and originations, they do not expect to be consistently behind in earnings [22][24] Question: Update on life science loan portfolio - Management noted a mix of tenant demand, with some early signs of recovery in the life sciences sector, particularly from larger pharma companies [25][26] Question: State of dialogue with life science sponsors - Management confirmed ongoing negotiations with sponsors, particularly regarding the Cambridge loan downgrade, but no significant discussions outside normal updates [30][31] Question: NPV analysis on sub-performing deals - Management regularly evaluates the trade-offs between holding and selling sub-performing assets, emphasizing the importance of quality real estate and potential future value [32][34] Question: Current ROE and timeline for improvement - Management outlined a timeline for improving ROE, with expectations to recover a significant portion of REO in the near term, particularly from specific assets [44][46] Question: Comparison of EU loans versus U.S. loans - Management highlighted similarities in quality and sponsorship between EU and U.S. loans, but noted differences in market structure and loan sizes [51][53]