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KKR Real Estate Finance Trust (KREF)

Participants
Anna Thomas Head of Investor Relations
Matt Salem Chief Executive Officer
Patrick Mattson President & Chief Operating Officer
Mostafa Nagaty Chief Financial Officer
Jade Rahmani KBW
Stephen Laws Raymond James
Steve DeLaney JMP Securities
Charlie Arestia JP Morgan
Timothy Hayes BTIG
Matthew Howlett Wolfe Research
Call transcript
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Operator

Good morning, and welcome to the KKR Real Estate Finance Trust Incorporated Fourth Quarter and Full Year 2020 Financial Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Anna Thomas, Head of Investor Relations. Please go ahead.

Anna Thomas

operator. you, Thank KKR the the Finance earnings Trust Welcome quarter Real of for fourth XXXX. call to Estate We hope that continuing all of you and safe healthy. to your and stay families are Matt the Today, joined CFO, Mostafa Patrick call Salem; our our by Mattson; I and President on our am Nagaty. COO, and CEO, both refer the our call, which would reconciled which of of I will to to supplementary earnings financial the non-GAAP GAAP portion everyone remind certain like in release are in and measures presentation, we figures on Relations available that to on are the Investor website. our also forward-looking will call do This or contain not events guarantee future which performance. statements, Please XX-K for refer these filed statements. most to to recently cautionary factors our related

our call to provide turn results. I the I Before over recap Matt, will of a brief

had benefit by share, from quarter lower earnings our portfolio. quarter income per were or For net $XX.X $X.XX or Distributable per strong we of a million which driven million the included $X.X million the of this share, continued fourth GAAP performance CECL provision. a $XX.X XXXX, $X.XX

as presentation we as relabeled earnings core no a replace to prior supplementary Consequently, quarter, change began in earnings our metric the in results reflect change earnings. have using to quarter's been non-GAAP December This but distributable Book September per figures. $XX.XX reported included or calculation XX. the increased share XX, as to impact $X.XX of value as per to CECL compared of of XXXX, the which $XX.XX, share from

annualized dividend the With to paid XX, now the cash February closing turn we call Finally, reflects price fourth the mid-January, X.X%. on that, like of per Matt. dividend I Based stock share the of would would that note over respect to an quarter. a $X.XX I with to in yield on

Matt Salem

of a for and date where strongest and experienced hope a earnings in and pandemic by constant our despite a industry, Anna. spotlight $X.XX the dividend decrease thank KREF investor record our and today. year share. dividend times. the We and health investing healthy X.X volatility global delivered a economic significant to defensive with joining you and throughout rates, on our performance covered We base. Thank the increase we to us put allowing safe. interest In damage, a The its morning, held showcase us Good our our distributable strategy earnings all resulting you're you year

is best-in-class as KKR Our were fourth we was quarter. first the lenders among of liability This non-mark years million the financing, to demonstrated the demonstrates environment resilience. which resumed KREF. differentiate making, XX% originated market, transaction structure, the market, new to the its in which fully effort in take And tremendous $XXX the advantage in activity to across platform and the

from As we strategy. ahead, look conservative lending continue liability to our year KREF will into the benefit and

billion, was $X with Turning the to $XXX of total of XX, future or December our balance approximately X% as only obligations. our of million commitments portfolio, funding

Our is estate transitional, portfolio loan real senior sponsorship most the real and by on focuses multifamily, institutional and office located almost liquid A lighter secured in markets. exclusive properties predominantly Class estate and

quarterly in an senior rating. XX% portfolio the the size as is And with portfolio of on fourth direct loan on million. Our our our is updated every with collected portfolio of loans, of the the XX% Performance we securities. Through average interest loan approximately risk $XXX assign review strong, quarter. portfolio no investment holdings process, evaluate robust remains asset to

on was the those on weighted confident or the of risk a X X.X XXth. XX% about better. with And risk rating properties. feel a scale, the of rating average portfolio Our consistent average we X rated at September portfolio very risk had weighted point performance

we a list loans presentation. watch continue and supplemental in the in detailed breakout did third we our our second quarters, of provide to As

of number we X and same, the in rated the property of ongoing of credit a we expect to is are which loan. momentum portfolio properties, in remains Portland sponsor. This is discussions While remains our comprised with X% assets. to watch in our those list challenged, and seeing Approximately we primarily are positive lead trends our improving Retail

there believe to are continue adequate CECL We reserves.

last characterize As million a mentioned the call, compression we and during Despite the returned and broader quarter. market, fourth continues sector, our this earnings of as same. more on value returns loans there seven with structure. pre-COVID to offense for of I to in yield total to $XXX originated to relative during the similar the create be would with opportunities our more good loans lending

In by real multifamily on plans. see increased and the estate The industrial transitional fourth estate. also properties. and industrial continue real on by we light of focus for accelerated, commitment from lend high-quality the new XX% demand construction originations stemming started space COVID We've seeing opportunities We has opportunities quarter, business our to impact on to secured were are projects. to

an industrial park example, a Denver. the in for we For loan in December, located of $XX.X originated construction million

billion received repayment our In to including the $XXX fourth of during we market. the terms City exposure one York of quarter, of New largest the repayments,

loans and active all million remains several which expected are the of with under next exclusivity year-end aggregate, pipeline two closed in close to couple forward since months. $XXX loans of Our in totaling

in fully originations And While timing available to need exceed KREF will near-term, Origination to capital. of will the opportunities deployed. pipeline effectively repayments. continues the grow, the we to manage is likely

Patrick, I KKR's call of to Before estate wanted real the to turning on update everyone growth platform. over the

the part KREF franchise borrowers a and has only culture estate market strategies acquired highlighted our well KREF ranging to addition offer our of with and of of from benefits connect back everything collaboration. and Going life manages products equity, with to Today, the This more real billion, provider underwriting a products. with Atlantic, creating we sourcing $XX competitive platform business opportunistic of this opportunities from has market Global ahead It connectivity. credit leading our core a lending plus to about XXXX. we've in and equity, And the IPO, Recently, This we accelerated over business positioned contributes on value across scaled. asset increased KKR's to net KKR the the management larger to lease. capitalize do to remain as opportunities annuity to management. position being intermediaries. excited broadens is of can and clients, We liability

over turn to me the let Now, call Patrick.

Patrick Mattson

you, Good Matt. morning, everyone. Thank We you that stay hope safe. to continue

of only XX% balance financing to our non-mark of credit the XX% a marks. subject As quarter-end, market-leading completely remaining in-place was market. asset was And to

credit to financing structure. within non-mark will be financing, continue capital to a form prioritize and maintain secured an our we active we to continue our diversified of our While to balanced to expect efficient to expect facilities and and financing approach market

the time was to the financing maintain lower non-mark the leverage it on levels our intense volatility last while prior same to allowed our the focus us However, liabilities of to market pandemic at despite target year. that risk

a As and of ratio some times X.X The quarter-end, reflects were our X.X respectively. debt-to-equity ratio total decrease the leverage times given third leverage and quarter, from slight ratio repayments. recent

senior target leverage financing. source As on Xx on we new Xx to depending loans, a of the reminder, generally ratio have

Xx debt-to-equity in non-mark While we've would advance ratio total finance our XXs coming low quarters expect in been our market to our willing and ratio the to leverage expect loans range area. to be to in the this remain low rates we financing, at on

repayments net the expectation repayments difficult while with noted, the pace. And key portfolio In company to effective the some latter our floors it's current Matt continue weighted is a be predict deployment, our existing origination year near elevated to full certainty, driver XXXX. interest and with LIBOR have this additional to will always the As for from repayments will more near-term, half near-term with in-place duration of towards KREF of the benefit margins.

while only liabilities, floating of B the reminder, above X% LIBOR of least our portfolio rate, excluding a term As portfolio almost loan while is a the a entirely has the X%, at of have floor floor XX% X. loan

expect loan experience in we to expect to portfolio LIBOR close through our new rotation and compress floors rates. new set to As spot we repayments loans our effective over time. we on a NIMs And originations,

This at to position million cash corporate liquidity KREF's includes $XXX over access million revolver. over remained $XXX $XXX million. of our and total full Finally, strong

provide we at turn loans $XXX the touch to highlights. over the on call Mostafa our had of existing million some reported unencumbered liquidity, to I'll to financing to of sheet the With liquidity pledged XXXX addition balance In able to additional facilities. approximately on that that, are quarter-end, senior when

Mostafa Nagaty

Thank you, Patrick, and good morning, everyone.

Before capacity stock X on unprecedented to borrowing I the per change reported and fourth volatility million We Starting loan the performance let through accretively our liquidity. secured naming closed determine this way out earnings market record just distributable our the distributable reflect me which metric, with repurchased on better at remained in over XX% $XXX SEC, year-end, based share. we the we share, key we term with of non-cash $XXX We a our reported million, totaling exclude facilities. at average which highlights, year, million to indicator and quarter earnings call of a an to COVID year turn share of revolver key to $XX this earnings our to ended Historically, price this on comfortably the million assist to to million renamed challenging very change does are metric our have for as an undrawn clear, over certain position calculated of of purpose and $XX.XX To our the earnings a $XXX best-in-class serves facility, achieved non-GAAP and change the per $XXX conservatively our of ability guidance not dividend dividend. from increased metric, warehouse liquidity be a on XXXX, income earnings business. year. we historically structure, liability in our strong our non-mark $X.XX of cover non-GAAP and managed Reflecting with measure. to our the covering the the B, the and of items. financial shares as $X.XX which We convention million core the the updated maintained per metric initial of GAAP a net an financing

following questions. joining market loans in to And over results again and look we're the across this to strong We us your forward our We for shareholders. fourth offense with happy morning. also returned million risk-adjusted the to with returns originations take a deliver continuing shutdown, that, seven to quarter. Thank attractive $XXX you for

Operator

question first Please session. KBW. We The comes question-and-answer ahead. from Instructions] [Operator will begin go with Rahmani now Jade the

Jade Rahmani

Thank questions. you the taking very much for

consider being of of full to value the you CECL book I assets management trading unencumbered book stock comments value might what and position want In might pursue terms and of GAAP XX% liquidity be of about currently could options you a as your the considering? that the looking a surrounding at CLO perhaps assume with reserve, the whether capital as your convert, issuing you reported ex keep companies deployment, in you be consider? I'm unsecured below form are preferred. a you with some some to wondering it'd are a debt, if of wondering insurance. perhaps at. And I'm peers if What

Matt Salem

raising last and about if the is think It's the it without we I think stock right Matt. feels at mentioned big. Right you we'll course CECL, Jade. accretively. pipeline on Certainly, I joining Hey, now, price book repayments. managing so, are the through demand the can been over of Obviously, and continue there's to where very months. to Thank say, like some value question. originations focused we do we're pent-up primarily I'd nine for with versus that you appreciate now, us. the we and track six as the capital, look

And seeing so, opportunities we're good there.

of debt of things the levels. active equation mentioned. from strong I very the good think very of perspective, place. in been The a the now are going attractive certainly. and has on some is debt very to the from I The think we're liability take advantage we're pricing markets at you side, a market total side But CLO right

we to of expect don't change refinance obviously, take forms the we But, current environment. or to debt So, existing can some add facility of advantage of debt.

right I so to think accretively. So, do repayments extent we're now, the equity we on can and potential again focused most

Jade Rahmani

much. Thank very you

for knows seems to Looking has hotels. your Everyone watch at in there York the agree potential that, seeing I sales the improvement over The meaningful condo assets, uptick Florida ahead. be months. occupancy New list in in commentary rates a the quarters very with would is that the seen strong last overall, market two

would recently Even the a is Fort Lauderdale the Hotel, do So, Hotel I Brooklyn well. believe, constructed asset. I assume

be could it doing Industrial well. is good in So, position.

Diego San developed I So, a believe do assume, Scotland also property Queens Industrial, would is in well. also [ph] lease-up. multifamily, I recently

So, there's just that timing maybe a liquidity. lots and factor, of

in foot principal that the Portland So, be I it a potentially which leaves the comfortable low. $XXX. redevelopment. with location, square a know seem to $XXX And loan, does is past, but you've the basis you're Retail total seems of indicated

So, order. there a How on should risk if we you is I'm impairment you of think that that wondering risk? feel evaluate that

Matt Salem

-- think Matt again. Yes. Well, I it's

or of been We've one first I post the seen similar watch all, the a you said. hotel property to think, view I think as we loans, in condo list have tick number continued certainly at sector what you that There's quarter. much the in fourth -- COVID, sales improvement sector. including walk a of the through the in of

principal paydown we paydown call, these, positive loan some time. you the continue of and I one to on with seeing migration came modifications progress could on alluded recently there. So, credit in as the that I see loan. think our of And We've some a loans the over on hotel -- had

a the positive on proceeding So, manner things in list. definitely watch are

I of short-term only discussions it Currently, we a think, all, it's borrower. with perspective. portfolio business Lloyd plan. of a the to the So, while we asset. put X% are granting It's the complicated first just It's overall in Center, continue the extensions complicated

As both is multifamily, get The do and It's for mentioned, there office, drivers what use. it's take how to location. around format. a There's and you time. in good going real it you demand question mixed

look again, comfortable So, in at some on to will the we're existing more reserve on feel we discussions we it all to now time. the extent. this you I the when who keep think direct for appropriate details But still But point have forward. bit little those it's to where clarity loan. stage the of probably I in back path what comes most we that, think kind have to try reserved when sponsor more And that with CECL at give at a particular with we

Jade Rahmani

queue. the get in I'll back you. Thank

Operator

with James. The next Please question Laws is Stephen Raymond ahead. from go

Stephen Laws

Can changed, spend some months time -- XX you changed morning. you active what's versus origination the have new more talk Hi, these good talking on been loans hasn't as underwrite you Can you front. ago? what

Matt Salem

call it's And on -- thank Matt Sure. call, I the the for again. said Stephen. you

we're many I retail predominantly long a in a clearly estate biggest -- including The many similar how in their economic place, the still think the multifamily, timing take really underwriting environment transitional focused going where properties, real borrowers it's change is office. is in properties. in for difficult lighter business the to a implement to We're for plans. for --

some be obviously And flows the and in rates timing concession up. a a so, what going to off these could to concessions rates future element and can multifamily quickly about burn how and in be you of as holds the we you there's markets. potentially impact rise ramp and back COVID of rental cash larger see And rental the there's think then, as what

I rental difference So, around biggest the underwriting opportunity. But the really there's think the lots or that concessions is of rates in again, the timing. the and, of some

pipeline from never would then, are there I COVID. The come new to segue opportunities pent-up there's been has mentioned, demand. that I And As bigger.

seeing you in science demand the the are we as sector. life would on interest and imagine, sector, So, industrial increased

estate the of the the some are in out create new that for need of financing demand the can certainly winners So, really haves, and properties coming of COVID. take of some of that some advantage of space things in real to

Stephen Laws

the for color, Thanks Matt. right. All

It of how and looks to pre-COVID that we like G&A? level you back do we moving saw the on Let's talk of about could -- touch we're forward? think kind kind

Mostafa Nagaty

Hello. Yes.

place load COVID or And had disruption. higher connection had by lower compared in that think non-recurring took with QX mainly -- that's items to in I QX excluding we comp, So, the excluded stock QX, QX. the we G&A driven

forward, to quarter XXXX, going you G&A looking proxy in the we be expected costs. consistent spike our with -- of with expect seen have fairly in the load with QX first XXXX what an related So, of a with bit into consistent some the the and work little

Stephen Laws

Appreciate the you for Thanks my on today. that. questions color right. All taking

Operator

next ahead. Steve Please with go Securities. question The JMP from is DeLaney

Steven DeLaney

I Thanks this everyone. hello, ask And your Matt, taking my question strategy. you're co-origination wanted for about morning. to --

six loans so the number a You did of or on in fourth quarter. that --

You've that one XX-XX the diversification million and to on you own. would and ability certainly about your to how reduced one any fits adding into exposure Talk borrower. got make them $XXX project, the to loan why demonstrated split any

versus a view funded you how Just co-origination putting books on loan XXX% your KREF. Thanks. by

Matt Salem

for Yes, Steve. to the you. Thanks question. from hear Good

market. from lending think We transitional -- will primarily about all a segment first KREF And the start of does priority that fit so shot the allocation. out for senior that the on opportunities KREF properties, and first has at a that things does, with

of And things, of how financing other do do you question portfolio, at much so, we we opportunity. it then returns availability, how have the okay, capital of and just individual said, KREF, we some a for diversity the as becomes -- look optimize like each

I loan think million and if $XXX capital, most likely to -- KREF. available you're have right to say XXX% go comes that to in will that we

differences there in issued capital was of B, fourth some in at what loan some those some particular that in unclear quarter think I around moment timing we closures, where did available of time. early amount are etc., when we that term it a the was that repayments the

And of capital. other so, effectively across were allocated pools those

capital ROE, take financing optimization priority. from continue about then, as KREF a loans. think And I because to a So, from larger perspective it and to and of other that use risk can effectively originate real will management KREF positive ultimately a pools

other it's as we of solution so $XXX, up could to one-stop we very have our a loan, capital do available clients. that $XXX a show million So, can if helpful pools to

color that about gives hopefully, it. you how the I So, that's bit But, a more think think we positive. on net little

Steven DeLaney

put to the the work you situation it not in $XXX to about any where million if you're that Yes. split have anyone part No, capacity and required to you're helpful, need with else. especially that's

I to discretion choose you that's one quick really that split what your wanted hear to it be how So, thing really going Patrick. at And then, for to it's up.

versus XX% story So, probably financing non-mark obviously, did is that's market. good that not. financing, And that for Those of had XXXX. the those fully exceptional to

me just this. in the is extreme. hypothetical, This ask but Let

no to you just even financed in So on marks Portland loan -- property. a credit a Maybe that But even loan the you've no no point take a bank capital But At in I -- point, process may line. hypothetical you on what a of know. workout. those. foreclose would whole like a don't no going non-accrual. I'm to and more a may -- curious just some market on at not how far actual when marks okay, credit, don't actually no have Portland, be financed finance the And REO? come call that got okay, bank we say, and with goes markets

Patrick Mattson

That's Steve. good a Thanks, question.

depends talking repo to obviously the not say that a in non-mark So, I treated. credit financing might facilities, on default there about. to the facility typical market is on in what's about the facilities. it financed on defaulted be And facilities I are think that's how the when facilities, on even be loans meant -- differences those would you're loan are that

of treated a back. pay, paid are that's the up get ultimately obviously, to facility. on after like end equity, may enough of the are multifamily, right, of i.e., Obviously, facility, And property or be assets asset, of of than, depends another some And ability that's some may to sequential start generally there. your going back something asset cash it to say, so, you triggers let's that it to it's time and to on another to the those there's might financed you're for the And, purchase CLO the equal. all lenders your if defaults, required a something where of period a going trip of of Obviously, requirement more back. flipping impact to that's you no all not being different on type. get But if types purchase off sort to flow

Steven DeLaney

both, for comments. you, Thank Yes. it. your Appreciate

Operator

is Morgan. Charlie go Arestia ahead. with next question The from Please JP

Charlie Arestia

the corporate interesting, the was years. for given senior Thanks loan. wanted good I taking I that loans about on the morning, guys. thought to today. questions recent near-exclusively focus Hey, in ask

is And Just that multifamily. underlying plan. wondering the if real estate you could process more come I'm I XX the on give business loan, on highly decision a either. definitely plus mean LIBOR portfolio wondering the underlying color if little there

Patrick Mattson

all, in the Yes. jump multiple it's in I Thanks someone It's sponsor than existing to little us, we've we've times. went unique for a what Matt, the and a done But, situation. can questions. different of past for an there. first

are a assets. the relationship excellent and we And corporate know so, there we've got how And operating call they loan. it great

I think that's a good description.

collateral is -- package across entire properties, it's pretty majority more of the of some obviously If the a diversifying do asset loan and translate And really And to portfolio multifamily like are creating all you stabilization. in want estate of built that of some assets were the level collateral the a entire mezzanine-type level that base. for able more a position. real across that underlying speak, are strong into which we company, stabilization of to in so the

in market. the and overall, the COVID them. again And able and pricing advantage situations we or on that a in sponsor great one of So, certainly trying out like of take with the think some happy market to a we're the were unique well highly some strong it's be to with a done -- get we And something this was knew the of of to focused coming lot. very credit we

Charlie Arestia

kind guys like Okay. make unique XXXX? kind one-off sense was of that you situation? Got kind relatively you situation. diversify the that a and you getting of that it. Do a is Or going will And think, the opportunistic I'm in this this loans of forward,

Patrick Mattson

more going this created for well. in the a lending company a as kind pre-COVID obviously, of a and, reasons. markets the was for market it's of unique to that It activity like like senior market capital opportunity think We one-off. back I the number there

an entire they solution the and like about clients relationships with need up First to because don't issues. closing to we're showing or of our senior them worry all, it

of all best economics out the the being certainty figure So, senior them goes two, Number ROE. in obviously, a loan. there create optimize the it it that, is to we then package security us allows with the gives that to And best how along and of and -- execution. like capture financing that what then, the

going that's think to going I continue forward those for So, reasons.

Charlie Arestia

Understood. color. much Thanks very for the

Operator

The next go is BTIG. ahead. question from with Tim Hayes Please

Timothy Hayes

guys. we if Hey. you're on Hope through down right that are seeing execution pressure doing My just just execution the I'm on capital question side And on markets you for Good your if to your to well. comments a know then, of the first on now. given give mentioned interest kind versus And around accommodated morning, margin. B, us funds costs, you banks the lower any capital options there little you're repo curious market there. color here, portfolio? the all Can cost on are pipeline there existing net is, the of today the or my Part how the -- take all-in question coupons and you

know I of comments. a So, questions the couple but appreciate I there, that's

Patrick Mattson

call. one. take I'll you today. welcome to morning. Good Tim. the Hey, us with to have And here that Good

capital, guess, I thinking the clearly, guess, I existing just the cost financing from improved markets So, about first, standpoint. of

see And demonstrations across last basis beginning think That's seeing I credit our are we're a the the XX at this can the XXX portfolio, that the seeing on coupons there When existing points from CLO liabilities. on of So, market. we look facilities. of the about in down net our We're around end of margins, year. interest if at year. you the our tightening

had from XXX XX points But so, just spread. basis a And we point around XX our LIBOR saw the today. a only the that floors. points of demonstrates in dropped basis to LIBOR bit that little about from around basis we The benefit asset drop

remarkable. made point. we took essentially and loans fixed effectively So was almost loans at pretty floating them what rate rate And that

drop. obviously Our liabilities

you And it's so, effective of at look NIM north if X.X%. today, something our

of I of were say today closer XXXs. low would probably quoted that type to market XXXs Now, loans to in pre-COVID, some that, being mid-XXXs And is a area. high those

in to our originated the with basis I a blended a today, Xs portfolio. low think to you probably little was give we fourth say the in at somewhere got mid the high And somewhere coupon Xs. and some pipeline so, that's Look That on context that in bit, just in the around And if XXX X% would the walk about a we've area, there. loans around the senior quarter.

look our And we're just existing at in place. I so, at pretty as liabilities, given efficient the structure moment, our

Our at level ago. was priced attractive existing CLO two years a pretty

We our other of kind spreads again are facilities the predominantly continue then there. get in to it's benefit priced, over points. and attractively And basis equally LIBOR XXXs today, XX

we're of pull-through interest income. a with So, getting net lot

Timothy Hayes

Okay. it. That's a great walk through. appreciate I

double-digit vacuum. feel about to ROE, So, of kind in ability type this And the achieve core about I'm environment. calculating static to of I keep going that, to you how rates to recap able we're this just ROE this be a guess, maybe given in to all a of over XX% quarter. KREF's stay curious example I'm

you are how curious just able you ROE So feel about to the achieve.

Patrick Mattson

Yes.

in we've quarter look underwritten mean, the we are about. IRRs is our the fourth we at moment, non-senior you sort about IRR the a and I an there, -- kind again what we talking look But at feel of blended that's with got loans XX% talked you're this some now, that of think, good. context. I at of if number those

that But we'll at on So, the some market, on the good profile pressure that further a loans. we're continue level. moment, compression pretty we good been to see of environment asset in new deals. getting it's as see pretty Obviously, return make to

to for looks pipeline really And, gone we offense. the have we're good the obviously, on obviously, back So, to happy said, as us.

spot. we feel And so, like at the we're good a moment, in

Timothy Hayes

those more Okay. loan. the Portland then, from back there. appreciate comments retail just me, I to And one

status But quarter. on was there was could accruing placed impact the quarter-over-quarter? for that me, in you major collection any versus earnings last non-accrual I it were obviously, this If remind know, quarter you loan just that actual

Patrick Mattson

that were of earnings, kind repayments we say say the quarter, again. a the We, then, that would impacts I had sort kind those of quarter quarter. Patrick quarter originations that that we some origination upper of -- earlier mid-Xs. call we've third would it, impact this was fourth think spread the a coupon And received I or been certainly through lot rotation in back-ended. in when obviously, quarter, of of fourth another down good Xs to in being flowed one of about in from, the it's talking but obviously, about to as

quarter. were ended the But of those are this we the Obviously, driving quarter-over-quarter. over up. impact forces those where kind really some areas we saw with really So, where we're pleased

Timothy Hayes

again Thanks Okay. taking questions. my for

Operator

The with ahead. Wolfe go Matthew is from next Research. question Please Howlett

Matthew Howlett

Hey, in. But distributing going can XXX% assume under-deployed guys. a you modeling question. point my hear question is just But for that of were with on great dividend quarter. distributed on dividend. your it's would it maintained? what to that, in had NIM think coverage We coming don't a we the to -- IRRs, distributed on Thanks bit earnings? be you the question a fourth on with little you know sounds cushion from And a like I earnings. the then, And provide comments modeling your got couple about at for the I taking that you forecast me. of And quarters.

Matt Salem

there. Hey. in It's jump can Matt. I

with floors loans the are obviously previous there for the substantial year repayments, as factors existing we the to portfolio concerning quarter, that on LIBOR what are the we new and and think forward quarters, Patrick go I given that mentioned, are amount, two that described. now [ph] major right yield this then about think

like that repayments. So, think is what of And go portfolio we also, earnings to we perspective call, paid we a we more of as what do mentioned of be from into are now think business update see also not perspective first order trying credit quarter more level. to every of to pre-COVID predict through our historically repayment the we these assumptions, But look that's think as when get type we from be on normalized, I kind repayments going and year. a that this back-half before can difficult only the just will understand but from can

that out, if things plays to given sustainability some staying creates other same. that that of the So, earnings

mentioned, over the here. bit on loans So, the a quarters that the on seen albeit gives returns couple us LIBOR those floors. we've we're on of I not level able create, to And new think, of at then, Patrick power making, good same still go-forward a here, last earnings given that confidence we're the as little

terms we'll in of and look continue curve. we're earnings a end In at right rate of world to X% the if your last living question, look in at the effectively dividend, our now the look you at interest short --

as forward here. we The And so, make where with now, Board at. right that we'll we're make we're But will move determination comfortable that determination.

Matthew Howlett

that the get on parts Is is you seeing And then, market? prepayments, think rate going to strong visibility with sort just access of repaid? the and are how other to forecast just you really you lease-up what of

Matt Salem

it's a elongated to even -- But that's going I multifamily to a factors going transitional business take mean, simple on it's more think COVID little we're bit a of what property. at it's what lease-up to done plan, business on some that. up. of a think of, bit markets little Well, looking take because -- capital of simple part a that a about went longer about we is I that the time lease think number plan. a to has And

more And, little they a lease those You're another going that may therefore, to this more give it bit accomplish to concessions. -- or of sponsors the away to lease-up. may or two like burn some in market quarter wait up concessions a off to

time. Things pushed that are of got we'll just today. we've frankly, the got that, the just NIM out. and beneficiary bit it's progressing quite take things liabilities the the with more given portfolio in again it's the But to LIBOR be floors little So, And a well.

seeing So, that's we're on ground. really I the think what

Matthew Howlett

Great. And just one last one.

to In of loan the the What's of appetite? taking the them. terms what's You leverage. -- done haven't on you're that? many participation Any do more sale, structural appetite

Matt Salem

after feel I go. free mean -- Patrick, jump to in I

out I -- the a what optimize the think it how to we -- the we for financing. -- figure make us, then loan ROE through we take and

do we So, do on putting that best A bespoke kind financing look those we've we has at Each And where options sale, the we at much not time requirements. of different it do note financing in one of it's driving and place? options spent CLO, it terms fits facilities of so loan see have. really the finance each we all decisions on an of in different our that a

really to hard piece the originations we're like, I what where say, so, going Does and the more hard to pipeline it's in. what think sense? to today hey, right fits looks we're that that look going And it to on It's put sit sales CLO. or makes depends pick ultimately, and, like say. [indiscernible] the it do puzzle It -- in

Matthew Howlett

it. Appreciate does. you. it Yes, Thank

Operator

question from Please ahead. The Jade follow-up KBW. go a with Rahmani is next

Jade Rahmani

jump Thank you terms the in should list, Besides watch areas on of be out in focused that of on very investors risks? any others terms much. are loans that there

Patrick Mattson

stability I this last loans -- Through pretty loan, are from -- comment we in remarks, feel already there quarterly covered think we list quarterly of perspective. review loans. think on our where the last the we or we're No, I And don't good the and through ratings about the the each prepared credit non-watch watch and so. we made process a again, list

So, we those. of could on positive have migrations a few potentially some

Jade Rahmani

to mentioned and mean, seeing hated, that on be opportunities I Thanks. you side, sectors. most industrial the that one increased if hated, the the seems most of not you're

in So, easiest building warehouse I -- the develop. one protections additional protections you're historically are is underwriting? to assets that light since you definitely know of

into be market that that's that, that something could your risk a assume is factor I you there So, underwriting. oversupplied. that

Matt Salem

Yes.

-- of that our But, build. demand. think as It's just the I to increased don't course. hardest course, of from straightforward. adjusting not with underwriting to it's outside suggest, thing I it's Of think today you Industrial, has for mean, relatively changed I pre-COVID materially

of really rates about you KREF. it's we're got lease-up so, get within on relatively the entering are some cost And projects. been costs as And those these really on active But, in deals business very to -- strong We've as are pretty have the you're is our seeing the infill, clearly, high. there sector. still and side went you've think in done clearly And industrial equity quite we've the of -- good. some replacement the and infill we're demand more

it's I hopefully and we sector on, do like, we focus could we'll a So, continue to more. think

Jade Rahmani

KREF On a takes of a in an the the potentially of some equity the brings building otherwise interest? Portland assume venture redevelopment which kind one loan, of or to stake is options of in one joint in KKR's vehicles

Matt Salem

lot Yes. some this who's going sort. be haven't part that? a think question market possibility with KKR for is, capital think for And us. conflicts particular a time. that's particular don't of developers redevelopment be location. -- that other I ruled a from to that it's going we we've perspective. site But we don't I out I within the in of any And in up would partner point of interest the there's to options from think So, -- a [indiscernible] a at that

it see keep time, plays we'll our this we're to trying point So, But how at in available. options forward.

Jade Rahmani

you loans to-date the And of the able But some question, loan, Do maintain you a habit have giving kind last have in been perspective. And portfolio have modify sector just can percent this of enough the of been them interest couple answer. collections collections. and Okay. modified of something percentage you asked provide interest if peers a be then I've your high know since of the pandemic? a to that to I the has

how a pre-pandemic been what you previously? have relative XX% it portfolio, do also that know So, snapshot collections of the say, the to, just compares would to percentage interest

Patrick Mattson

Hi, Jade. It's Patrick.

that Let me one. take

-- think modifications. in I of terms So,

carried watch side, would the kind reality, interest where is that modifications. only Modifications are place we've been about of our the on interest the we partial year-end there good is about think But another rates current, set I I you're as look reserve, we've to it at. on not. this up rate Matt list or page two had are sort material of loans But where any mentioned a there's a of a part of to side, deferments done of on has been modification a deferred interest I been, as have we've in one In or brought pandemic handful about interest on has subsequent forbearances. a loans. think things was to on paydown of as of no modification certainly as a past, partial what's loan. loan. and right, those, cuts plans, hotel happened progressing, focused in the talked on partial the whether did that talked in I loans There think business the

that the But, that's don't of major would we consider that area think focused pretty So, you're on. I sort a modification. clearly,

what small think talked Retail is, are the We've the Portland about and so, loans And that on the mezzanine it that XX% -- number, then loan when those, non-accrual. I is two of asset. really mezzanine about both

quarter standpoint. when of a there on you and the at quoted, So, first kind number look our the else in even the interest quarter that loan change in and It's in that been has in sort is reduced those from change loans it's of the percentages denominator. of isn't paying fourth no a two are current, same performance. rate non-accrual. an sort But other Everything still we

think a about that's track think think modifications. when think we record. about I we what strong So, pretty And, we really obviously, that's

Jade Rahmani

relative portfolio well a like I performing Yes. there. clarity the on and basis Thank appreciate And Definitely certainly you very is much. the sounds also.

The million source the CMBS could I whether think equity But interest, portfolio. consider you that in $XX it's but to around you Lastly, supplement and in forming the the experience if conduit conduit. a collateral company's able wondering demand that's capital space, with could CMBS you is be provide to, also consider that formation longer-duration although contributed that as I management of to so, company the a GSEs CMBS -- Would company's to has are funds highly That considering stabilized of also competitive, the CMBS on a would of the comment lot a assets be comment could multifamily. probably or historical modest. market. sale loans be are of stream? team's high and would the the also one, scarce that And CMBS think of the in securitizations. Clearly, CMBS whether you or earnings

Matt Salem

we that It's of manage perspective, fund an obviously small sort have From a Hey, invest interest and position. in a we capital CMBS. Jade.

us think we that. don't really if that, I a about were capital you to mentioned, as sell of So, source for which like

fund in we'll in different is continue there fund. to security. investing and And, in invest think directly I a obviously, that liquidity

relates So, as the not to currently. it business, we're contemplating conduit, it's origination something

market. to origination think been in of is that deals. contribution and investing of lot space. a to still very opposed loans We're that investor So, to on changes the play that side best that way large in as I a there's the

Jade Rahmani

Thanks taking the questions. very much for

Operator

to like remarks. the closing would I session. Anna Thomas back turn conference question-and-answer our concludes any This over to for

Anna Thomas

Thank follow-ups. me team with you free Feel to the joining reach everyone. today. Thanks. out any our or call for Hi, to

Operator

conference you for attending now concluded. The Thank presentation. today's has

may disconnect. now You