KKR Real Estate Finance Trust (KREF)

Jack Switala IR
Matt Salem CEO
Patrick Mattson President and COO
Kendra Decious CFO
Jade Rahmani KBW
Stephen Laws Raymond James
Don Fandetti Wells Fargo
Rick Shane JP Morgan
Steve Delaney JMP Securities
Eric Hagen BTIG
Call transcript
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Good morning and welcome to the KKR Real Estate Finance Trust Inc.

First Quarter 2022 financial results conference call. All participants will be in listen only mode. Should you need assistance please signal conference specialist by pressing the star key followed by zero. After today’s presentation, there will be an opportunity to ask questions. this being note, Please Instructions] event recorded. is [Operator turn over to would now Switala, conference to like ahead. I Jack the please go

Jack Switala

operator. KKR the call quarter Welcome Finance XXXX. you, of earnings first for Real Trust the Thank Estate to

our non-GAAP remind Switala. refer CFO, and for As This on not measures I’m cautionary reconciled would Kendra refer events financial Matt statements. our or Decious. the relations is earnings portion Patrick years XX-Q to forward-looking COO, will supplementary to to in investor CEO these joined President our are guarantee future our website. I our certain Today, and call, the release do everyone by call presentation, Matson the this will which which both which operator Please of filed of the factors GAAP Salem, to performance. mentioned, certain also the that recently on to Jack most we call and on available like related contain our are for in statements

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

is book coupled which consecutive This accretive increased eighth value basic to the in share. driven share in share. and per of first we offering reported per we net $XX.XX, was $X.XX includes with per March of as which book our $X.XX impact million, per to Cecil XX. covering XXXX performance, quarter. For share, quarter QX have the $XX.X $X.XX quarter first $X.XX Book equity strong or as per as of XXXX, the cumulative income diluted were this dividend. Distributable million increase $X.XX earnings an GAAP portfolio $XX.X grown quarter This in share, or by $XX.XX XX, share share value per the of of of December per compared value

quarter. the would that, with closing Based an common yield turn Finally, With dividend to cash of per dividend like $X.XX to over reflects to in mid call respect I price, April, the now we first share annualized on X.X%. the Matt. paid a of yesterday’s

Matt Salem

thank Thanks, us you for everyone. Jack. Good morning, today. And joining

and today’s and Let KKR’s integration rep with by the K veteran, benefits Differentiated within partnering the sharing often which equity Financial and firm as Decious by markets. teams. from is We in about range Chief as Kendra macro talk Officer. RAS having finance real K to group. team financing most KKR our recently the KKR, a views joined with of start me estate capital Kendra Managing call KKR our the welcoming XXXX Director, served

our deep great We also talent. team having example benefit greatly a from Kendra And of join that. leadership of a bench is

first share, $X.XX K earnings share grew consecutive rep And Now quarter. our turning book we our quarter, to dividend. delivered covering $X.XX financial with results the of for per distributable strong value per eighth the

commitments in had investing basis. quarter, XX% origination and senior also be up property a billion, continues portfolio strong to funded record $XXX on our Multifamily XX% $X.XX a million, loans, our of bringing largest We total totaling year-over-year the portfolio. represented our loans a to originating type QX nine

lending secured fourth and These first approximately to quarter rent senior relative XX and quarter. addition highest industrial in volatility geopolitical growth, the heightened which environment. emphasis we more types, property the XX% on CRE life demonstrating and created of our In other XX% strong slightly are performing the the In multifamily, sciences. respectively. includes first types conservative placing basis to lending originations property by market widened Rates risks points a quarter, increased represented

strong risk in our strategy terms offers structure. and this environment. believe lending conservative We are lending with returns adjusted more We

And transitional of Increases front rent end market. for balance a rents also is so loans. making borrower to avoid and market. larger defensive capitalized a market our with solution industrial loans of increase do the K convert owned sponsors returns to of of by the a activity been over more has liquidity in sponsors be equity cushion. to sectors. from This in benefit with have the In the Pipelines XXX we’re Our seeking the single to strong short, also pronounced institutional single as well sheet need now real created as CMBS asset quality in by with time high mortgage remain volatility curve. in quarter lending provides yield And multifamily in more the first end. from estate secured sponsors the opportunities focus significant time million steepening place good on Rep to investment particularly

our continue see as in we large we our loan of subject to subsequent X.X we in floors part our activity ROEs at billion look quarter exclusivity rate on our place declined to liabilities approximately have end. while or rates and loans to under XXXX, floors. strong generated teens rate were portfolio either pipeline, to closed not mid due Throughout As

year. our the are with in we increases those higher second our earnings become expect rate would neutral forward now repaid, correlated we curve, loans As the in And with floors rates. positively minor in to of feel increases have half earnings based this on

four Finally, received by in XXX we QX, repayments. million driven

and with million. modest origination net Given growth repayments, continued volumes our funding of trend XXX our strong

feel to current the turn match Patrick. opportunities origination are over call continue With we I our in environment. repayments lending to and will with to positioned attractive well that, expect the We

Patrick Mattson

today and the Matt focus morning, on on front. I’ll you, and our Thank capital efforts liquidity everyone. good

transition. across a the entire LIBOR Some updates SOFR capital first the base. and the list on our quarter making watch had very active we’re progress We around to

our three there liability all market leading notable were On front, structure. of the which transactions, liability enhanced

running plus billion points, a cost CLO at two properties $X priced investment supported features allowed basis year to by the of which XXX% we in reinvestment February. market of capital The advanced and First, a period. to brand of rate achieved SOFR multifamily CLO a CRE successfully issuance our grow new CLO in This and continue grade us XX.XX%. priced is XXX

we and And availability XXX year remaining subsequent March, new our three subject million match Second, XXX in of existing million, fully to also our a from financing. with in non XXX maturity as target end, to to million March, increased mark-to-market to XXX further financing five the which our with term. credit XXX we to from credit balance These the mark-to-market quarter size years we marks. And achievements the extended revolving and bespoke facility date term to of facility end, only XX% the increased the upsize million upsized features XX% quarter revolver of fully non million. finally,

progress significant the front. made equity on also We

in percent. on follow at our six of XXX A million we proceeds light net a half series a First, for a through and of raised fixed cost issuance shares preferred

XXX in end. to XQ of of This total equity ratio X.X permanent a Additionally, accretive in XXX million common we leverage by which net through X.X times equity is increase offering, to million of book proceeds decreased raised per at share. $X.XX quarter from value our yearend as times

to times into target We and expect offering increase are deploy three in back QX QX. to equity over to this proceeds recent high and the mid from range continuing would the to leverage

total and exceeded included quarter end. revolver million available corporate XXX us million Our quarter to capacity liquidity strong as in XXX remains position end. This and in over undrawn cash as very XXX million of of

million unpledged senior have we this, unencumbered to addition and of loans. XXX In

a relative the returns have risk point the liquidity to risk I we line came this to previously, five mentioned in XX% given our market scale, our portfolio our opportunity current with risk our a quarter on list watch in last also update or a XX% quarter. Quarter-over-quarter to position. list. assets million are on of last the The environment decreased X.X list watch net Matt loans has generate three rating want off Three and current on quarter. adjusted attractive strong basis. As watch better, by of committed rated has XX

was our XXXX four rated bank. in January center loan based a a through hospitality with January First Brooklyn large which full money in repaid property refinance was in originated

originated coming industrial with of we equity. loan to the with new a fresh acquisition February, the new in sponsor in finance Queen’s property a Second,

four XXX New and at reduced the has loan York made conversion been a removed from progress condo loans watch a and Third, the our from to the good we risk list. rating unit loan three

remains terms have list, and the luxury remains assets loan our condo on asset that that watch been New the of added to York the In list.

As a paid is of and million. XXX had were in balance million reminder, recent to we this to margin sales have down where XX And loan initial well been.

four one remain be sold under Just contract. to with unit units

loans Philadelphia within our placed MSA. to office we’ve Both to list. occupancy the performing on watch sponsors. to added leasing reflect Philadelphia We very Lastly, softer with list are the office watch strong these in-place based loans loans velocity broader in two

basis mitigating we the LIBOR to Finally, transition strides risk this with of the period. SOFR goal throughout transition on made

and of XX% of were floating As were rate liabilities XX% of based assets our based. SOFR quarter our end SOFR

be We senior billion in funded million non basis. rate to an with record book to the finished year our our us originated expect post X.XX by a year expanded a portfolio, to million a perspective. market earnings of million to per X.XX and by rep value quarter the non share revolving XX% In $X.XX executed floating has on over summary, a bespoke facility facility XXX material XXX and which base the to CLO by QX equity upsize total end. We credit grew K a transition to XX% grown per We million. upsized grew SOFR nine share. We from for permanent billion XXX by financing and loans portfolio funding quarter mark XXX on by over total

to market Finally, generate lending positioned we current joining adjusted happy feel backdrop. your And we attractive, we’re have today. risk take on Thank questions. we ample today’s well in returns for us you now to the And market. capitalize liquidity are to


Thank you.

We and with from ahead. the go answer [Operator will And will Instructions]. question question KBW, session. now the Jade be first please begin Rahmani

Jade Rahmani

And to in said, the much. talk and very the Can from quarter’s as also you originations seeing underperform borrowers the you your at relative well as of what lenders? market and loans your to you current perhaps comments? where you’re Thank pace closing last competitor estimates did tone were

Matt Salem

you Matt, good Hi from the it’s question. hear thank to It’s you. Jade for

Just on of tone terms the the market. in

think especially healthy, level, pretty in. at level, relates you interest some relates look pretty the rate in the rent certainly of lot it inflation the feel environment. a when that to things we And estate down a property substantial we’re clearly it types term short uncertainty with macro of seeing sectors, real as to increases the I growth across invest lot geopolitical then increases, at as

long to And impact fundamentals understand of some we’ve about to so environment. increase is be we’re still on an real and good going inflation what that real trying and navigate market, real the as view term is investment estate, impact in estate the in within seeing the on dichotomy in if borrowers market, I think values. from or what inflation our people seeing term trying an we’re to prints short estate a to the that think inflationary as allocation you an hedge But seen

lot well. So active a and there’s it’s a of for acquisition as still real very today demand market estate,

side, today lending it’s the cautious On more sure. for

seen looking balance start sheet. Lenders the line capital other at markets. You’ve a in And markets substantially supply number market. the of bit little capital effect more our opportunities a of of space. we’re with as market in wouldn’t pretty into be certainly you re-price see market the the knock got to historically on come CMBS a out securitized That’s that on

there’s our an in structure, in So, cautious security leverage certainly mentioned a in tone. space, is we perspective, from whether the comments, it’s there’s more reduction But and everything the more lender’s or space it’s lending overall a functioning. as in

we close a a in were we I little the we it’s land market, quarter. in add first costly quarter. around second pretty them ask dollars obviously, slightly execute that that predict, you’d but as structure billion can quarter, a where with to can dollars it’s bit, and you And more bit hard either attached obviously around the the signed it’s We that you just on if together, well. said, And a under the, you it. quarter. in originations it’s billion So more then got up think little to in see always exactly. to And then And originated

But quarter. play, So number first changing. factors of was the environment are macro in it may the a be slightly behind obviously, there

the just we of deployment towards so first that raise pacing of a And for bit, were and mindful the the that, we half equity did back the was little quarter. schedule watching

that wasn’t us. So some capital of probably to available

it when gets just a you that good the number together, add the look So obviously, think year, But of two close if factors. it’s still we feel across I And about numbers. estimate. you to that pretty those

Jade Rahmani

I on really you. non influence market, think, be do the estate? has mean, that X a the month relevant believe is in market, What traded a I a real for not traded probably The non which if raising every having? capital. month, they’re that growth maybe. announce any, negative example, I it could example, with concern the do as be billion into acquisition of for you seems REIT setting know be in has pricing them you REITs REITs rising, view Thank that or or for Blackstone And impact areas star sector overall astonishing, to would positive a feeding to fact the that some multifamily. in a to and And REIT to continue been billion week, don’t deploy new

Matt Salem

impacting real I and the real do to basis. want opportunity. on I mean, we It’s day things a it’s how the that tell creating I finance more Yes, lot can broader it’s you how impacting comment markets, on a estate just estate lending to day wouldn’t

If unsecured. through you market, would, pretty the corporate think they use traded CMBS mortgage about themselves, historically, REITs, necessarily the the would they through market, not not would publicly heavily finance

market. in debt so a sadly that of the drove year. of single end And last market in asset, mortgage unsecured the issuance last that the single into from transfer the I see borrower of lot market think CMBS the you And

high to borrowers we, either. locally because quality they’re us it and a leverage I And more to opportunities net typically sponsors, not, here, lend so positive, gives it’s think sitting high

debt insurance business. So a with relatively our environment securities rep credit estate we’re you have, created our one across the lending of investing that K out And if it safe it’s good of and capital doing picket the think step take about capital a profile. certainly what back we for our platform, have real side with

Jade Rahmani

But them? lending you’re Okay, don’t what low so you’re are saying? to the that you is negative they are very I positive, leverage. because saying it’s that think probably that

Matt Salem

lending it’s great opportunities manage. for us some opportunities securities side both in as as private away lending we for K rep well side that of direct from funds and the Yes, the life that investing on the investing on


go be Stephen ahead. question from from The will next please Laws Raymond James,

Stephen Laws

Hi, good yields, Matt, started, etc. lot asset bigger one rate, morning, of moving picture costs, around a interest kind with financing

how counterparties. new get, fall, build versus today walk to maybe a dollar on maybe here looking into ROE coupon loan that say leverage, senior through and hourly So the financing looked at, either a, can put a multifamily your you kind the in of cost can you CLOs

Matt Salem

I take Yes, Stephen, for question. that. thank you the a at shot can

I think have asset spreads call on the points would and it relatively that I liability the so math XX basis say straightforward. is or widened, year.

alternatives use that leverage dispersion that haven’t you low do other to certainly out But pricing. us materially. So is are financing see end largely you if seek you those that as offsetting obviously today widened like And financing available as a of borrower places are the a there in wider largely market of can there’s to have more the cost other is so unchanged. in

from have to I where say bit you discerning an more So in little we’re overall, the would you’re basis, the certainly seeing more And is from lenders ROE impact more from little you the a the borrowing. it’s market, than a really of most be But basis of the market what of ROEs the And last just much forward thinking market, the it market probably bit we’re XXX the points, in in environment of a bit doing our or ROEs if there’s fall call, conservatism of will. curve. so we of kind year. of fall we’re about for so very more different lending up a posture obviously, and year, slightly And conservative today. last from more call now little lending maybe mentioned away the as posture is

Stephen Laws

in here there floors, could information, lumpiness Great, more Patrick, a become the money our but think to sensitivity standpoint? Certainly, anything any rate have thanks to from that Matt. more lumpiness repay look on guys at the we disclosure with we significant tend do those in about it’ll shifting things the or for that, provide. tailwind to trying you that a to loans any a average, comments, in are appreciate large need interest sensitivity, soon,

Patrick Mattson

Thanks Good Stephen. Sure. question. morning, for the

as positive, be right expected is repaid. this have beyond, can where the few some are, course year that we those think And the a I over of that’s we’d forecast to have meaning the sensitivity that we higher still to imagine, some of have LIBOR and are loans that floors. you loans larger as

in make get sort modest below new mind loans we or we that spot loans, repaid. keep rate. said that spot are those loans that, those So think that Obviously, are floors as there’s new at improvement any of as

So to the they’re sensitive movements. rate XXX%

obviously a snapshot, are as But are happening. of as is higher. think second quarter. we this the quarter, So first factors going the into One, rates two

And so the a you subsequent quarters. SOFR also second, bit. to LIBOR And a the we’re chart, in about little we’re those on chart increasingly over should bend kind point into which positive, shifting right this starting our of loans, think turning have the to new outlook loans

Stephen Laws

Patrick, Great, questions comments, appreciate for Thank you. my the morning. taking this thanks


is question Fargo. ahead. Don with go next from Wells Please Fandetti The

Don Fandetti

these maybe you a up office office? think little there’s broader a watch like just sort then the laggard were popping And list? you Do that two to on you a the do buildings related? Philadelphia comments risk about little still pandemic isn’t that credit talk of office just plans of, the the until added behind bit business situation Yes. watch Can where schedule list are

Matt Salem

called within two typical, the pretty Thank the up we we couple had was impact value do. question. office thanks joining it And for And They us. certainly a on lending leasing I profile typical added. for COVID COVID would overall the lease related. are both certainly Philadelphia think office market. were add on an you the A light comments plays for and

hard there. think list, that And why we we progress that say front them in put leasing on by seen haven’t it’s I to watch because that. our So wasn’t impacted the

us leasing business at originally plans cash from behind sponsors. them. are would a in behind or I occupancies bit Both behind from are have terms the where certainly, not a have of bit to The So little we but what a on we budgeted projected little went significant but similar materially say capital contributions closing equity would perspective.

keep say on monitor markets updated. sector, office bifurcated, So those growth and assets. feels the and Overall, we’ll I’d continue still everyone pretty to the high it quality

forward. a of for seeing leasing areas. demand strong that’s pretty the think space. markets the B play into those of, Whereas of type least office, where And stagnant you’re continue need or in I expectation do We’re more that’s play going really you will through that to amount the as And seeing our market. get Class through


Thank the Rick next please you. Shane ahead. Morgan, will question And from go from come JP

Rick Shane

deal So continuum? how different or would office talk probably end? at pricing? talked and great about you’ve emphasis all Can how at life expect competition what think landscape you competitive in sort Impacts be and term and a parts it Look, the a continue about other for segments basis science. little market. your in participate to the the that bit of to of of And given curious I’m the real differential deal obviously, of the a you down it’s multifamily the continual on is? to you multifamily on

Matt Salem

take And is more or tenancy here. and and the the of got the asset leverage to think it dialed or from depends so property other. think, we’re in I has generally about going pretty more And LTV office speaking, continuum has across XX% office is XX% X% and dialed every those see capital try more it types. office update interesting. you and, an last you on a XXs probably unique. to And of end than as again locally lot seeing of environment currently Overall, place, say office wide a probably certainly of to transitional uncertainty one clearly between all asking multifamily you’re back employees would is you transition I relative at on leverage leverage thinking that perspective, you’ve a kind of that feels as could that past. X% I’ll give you duration But about amount year. you’ve operating cost the from if leverage. And what I It’s multifamily at perspective. in not we’re Matt, on that, Multifamily It’s continuum call XX% to tight then were back, Again, leverage that that. Rick And some can from like high a be the the got of maybe around is the to profile. a but end leases. to XX range. the But end

has We’re twos seeing market called pricing SOFR very the and in over it. on that high handle three clearly today’s offices

So depending again, low be it dynamic quote, a little office, bit depending to on leverage, the probably would but threes there. on mid call the

in terms So office. gives bit the in say, range somewhere you probably that to and the than office things and little closer middle, the would is I end the pricing hopefully of but multifamily multifamily of of industrial a

Rick Shane

appreciate be specific. Now, it’s answer. to a I great effort the really that

very you thank much. So


Securities, go please will the Steve with JMP be Delaney And ahead. from question next

Steve Delaney


dividend also congratulations and coverage capital strong quarter the So activity. on markets

deal, depressed Let billion XXX the markets, combined. me start guess, the deal, I some capital with common

you a linkage the So did formation bad term your to facility increase the loan your in your way ability equity in quarter. direct of to and terms revolver

Patrick Mattson

equity the from facility subsequent It’s XXX our the There we’ve I you grown the non Patrick. to XXX, we’ve looked of but quarter last from back we also the grew XXX to XXX, to on to which number which grew revolver of what of I gone think Hi, end. couple quarter over as were base, mark this there. years, two mean, at examples that both to Certainly. facilities. as a market done we’ve we

a in we increase and loan million increase the So re-priced we term term did about that fall certainly, think we to We additional $XXX the B our had then that an equity, million. B, ability liabilities. XX upsize we loan with our as

see So grow up opportunities to to I we place. think us that size will continue as debt have the have pieces in you the company

are continuing and on and very we’re side. so focused the to still We evolving on financing not innovate diversity, done

financing. And clearly existing of one to at our that of to the some so sources top growing we’ll the facilities have, KKR But continue look goals. is, we add of markets other through relationship capital

Steve Delaney

it, Yes. And really got looked you’ve kind in thinking, over the Great, do makes would, watching to clearly high of got an non but as a was the you you’ve XX% mark you let’s more sensitive. see, I convert, funding. of market, your funding, the any I And market, okay, a I gap, opportunity, with lot call another or of diversity it and the yield, have would curious rate, obtaining fixed convert, some one notes which asset you small objective I’m if you’re if

Patrick Mattson

about how watch ones Sure, I track, we we we’ll that access closely and you those having, forward, going are be I the and markets, think, to thinking mentioned, mean, that two opportunistic, those.


The next from Eric go Hagen question with Please BTIG. ahead. is

Eric Hagen

think have I a couple. I

can loans coupon that than share more right you back how in to the loan CLO ask conditions detail on First, tighter what’s then April, understand in around issue loans on you some are it the the forward. about And But a a now? financing the the for about want in to multifamily just that potentially market. imagine may and I makes easier types little bit having multifamily CLO going come the originated other in spread have to be book. driving spread the little you

Matt Salem

take the first Yes, Eric for question. Thanks I part. Matt. could its the

the see mentioned in quarter see are that I these go April, Rick, multifamily think You’re area. that multifamily market in did did just and we market I first the to can spreads. as what on we back very multifamily in compare we spread with think on line to where But, from in I generally side. twos high deals we the perspective a that I current

And sorry, your line then in I’m question? this of that. can And is repeat sort you so with second

Eric Hagen

multifamily that in checking just I CLO seamless conditions issue. having a Yes, on the loans mean, it imagine market. the more potentially in little makes to I

financing but Another any CLO? how going are forward, types deal loan to detail other around

Patrick Mattson

its all of I be I’m CLO Eric, range about asset CLO an financeable about the did Patrick. take fits industrial, can financed it’s that so in only I that, We think mean, generally certainly, we quarter, all science, the assets received. CLO it major the I’ll life selection the think standpoint, the I market, relatively in asset that readily that in when think multifamily types office, was question. first market. from of wide. multifamily and the well

continue open finance an benefit that going that’s types. think to And a I so obviously the we’ll property reinvestment those have all the of is that But standpoint. from forward market of to

the efficiently. past. I not more the than year we’ve bit in can think spreads uncommon And where if capital of I differentiation look be range at property see think that’s in structures think when differ different, those different there’s been types they seen a away little the and probably this but a wide multifamily, still for from relatively I now, asset you you are spreads coupons financed


a question is Rahmani from next follow KBW. The go Please from Instructions] ahead. Jade [Operator up

Jade Rahmani

Thanks very much.

the on on that? put for watch or specific the what was up merely follow list watchlist Philadelphia to loans were loans, Just assets that they slowed Philly office reasons their because two and market the triggered index that

Matt Salem

of business plan, each of properties. profile with the net the positive we of Really just the leasing lot a asset at haven’t or absorption has net just seen and do leasing to each

market, broader the comment a assets So in but particular. these to through it’s on flowing it’s obviously Philadelphia

Jade Rahmani

back that timing or view seeing factor? legacy think to What need in we’re isn’t do in main office, does the your sluggish a explanation more it there the is? in be And is that Philadelphia office market of where that compelling the represent office you trend

Matt Salem

of is markets one of I that’s those that’s Philly markets COVID. one is and Philadelphia lagged during think those lagged


this gentlemen, our and would I session. any Switala closing like Jack question concludes conference to and the Ladies answer remarks. turn over for to back

Jack Switala

care. for any here or questions. to out Great. everyone, the joining Take Please call. team with follow reach me Thanks, today’s up


you, The for conference sir. thank attending now Thank today’s And you presentation. concluded. has

now may You disconnect.