KKR Real Estate Finance Trust Inc.

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. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. To withdraw your question, please press star, then two. 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.

Thank you, Operator. Welcome to the KKR Real Estate Finance Trust earnings call for the fourth quarter of 2020. We hope that all of you and your families are continuing to stay safe and healthy. Today, I am joined on the call by our CEO, Matt Salem, our president and COO, Patrick Mattson, and our CFO, Mustafa Nagati. I would like to remind everyone that we will refer to certain non-GAAP financial measures on the call, which are reconciled to GAAP figures in our earnings release and in the supplementary presentation, both of which are available on the investor relations portion of our website. This call will also contain forward-looking statements, which do not guarantee future events or performance. Please refer to our most recently filed 10-K for cautionary factors related to these statements. Before I turn the call over to Matt, I will provide a brief recap of our results. For the fourth quarter 2020, we had GAAP net income of $28.8 million, or 52 cents per share, which included a 3.4 million benefit from a lower CECL provision. Distributable earnings this quarter were $26.5 million, or 48 cents per share. driven by the continued strong performance of our portfolio. This quarter, we began using distributable earnings as a supplementary non-gap earnings metric to replace core earnings. Consequently, our prior quarter's results have been relabeled to reflect the change in presentation, but no change in the calculation or reported figures. Book value per share as of December 31, 2020, increased to $18.76. which included the impact of $1.09 per share from CECL as compared to 1873 as of September 30th. Finally, I would note that in mid-January, we paid a cash dividend of 43 cents per share with respect to the fourth quarter. Based on the closing stock price on February 12th, the dividend reflects an annualized yield of 9.2%. With that, I would now like to turn the call over to Matt.

Thank you, Anna. Good morning and thank you for joining us today. We hope you are all healthy and safe. In a year where we experienced a global pandemic and the resulting health and economic damage, KRF delivered its strongest performance to date with record distributable earnings of $1.95 a share. We held our dividend constant despite a significant decrease in interest rates. and our earnings covered our dividend by 1.13 times. The volatility throughout the year put a spotlight on the industry, allowing us to showcase our defensive investing strategy and increase our investor base. Our financing, which is 83% fully non-mark-to-market, demonstrated its resilience. This best in class liability structure, which was years in the making, demonstrates the tremendous effort across the KKR platform to differentiate KREF. And as transaction activity resumed in the market, we were among the first lenders to take advantage of the new environment and originated $565 million in the fourth quarter. As we look into the year ahead, KRF will continue to benefit from our conservative lending and liability strategy. Turning to our portfolio, as of December 31st, the balance was approximately $5 billion, with only $472 million, or 9% of our total commitments, of future funding obligations. Our almost exclusive senior loan portfolio focuses on institutional real estate and sponsorship, and is secured predominantly by Class A, lighter transitional, multifamily, and office properties located in the most liquid real estate markets. Our average loan size is $118 million, and our investment portfolio is 98% senior loans with no direct holdings of securities. Performance on the portfolio remains strong. with interest collected on approximately 98% of the portfolio as of the fourth quarter. Through our robust quarterly asset review process, we evaluate every loan in the portfolio to assign an updated risk rating. Our portfolio has a weighted average risk rating of 3.1 on a five-point scale, consistent with the weighted average risk rating at September 30th. 84% of the portfolio was risk-rated three or better, and we feel very confident about the performance on those properties. As we did in the second and third quarters, we continue to provide a detailed breakout of our watch list loans and our supplemental presentation. While our watch list remains the same, we are seeing improving trends in a number of properties, which we expect to lead to positive credit momentum in those assets. Approximately 2% of our portfolio is rated a 5 and is primarily comprised of our Portland retail loan. This property remains challenged and we are in ongoing discussions with the sponsor. We continue to believe there are adequate CECL reserves. As mentioned during our last earnings call, we returned to offense and originated a total of seven loans for 565 million during the fourth quarter. Despite the yield compression in the broader market, there continues to be good relative value in the sector with opportunities to create returns similar to pre-COVID on loans with more structure. I would characterize our lending as more of the same. We continue to focus on high quality real estate and light transitional business plans. In the fourth quarter, 55% of our originations by commitment were secured by multifamily properties. We have also started to see new opportunities stemming from the COVID impact on real estate. The demand for industrial space has accelerated and we are seeing increased opportunities to lend on industrial construction projects. For example, in December, we originated a $95.8 million loan for the construction of an industrial park located in Denver. In terms of repayments, we received 535 billion during the fourth quarter, including the repayment of our largest exposure to the New York City market. Our forward pipeline remains active. with two loans closed since year end and several loans under exclusivity totaling 497 million in aggregate, all of which are expected to close in the next couple of months. While the pipeline continues to grow, KREF is effectively fully deployed. Origination opportunities will likely exceed available capital. And in the near term, we will need to manage the timing of originations to repayments. Before turning the call over to Patrick, I wanted to update everyone on the growth of KKR's real estate platform. Going back to our IPO, we've highlighted the benefits to KREF of being part of a larger asset management platform with a culture of collaboration. It contributes value across everything we do, from sourcing and underwriting to liability management. This has only accelerated as the business has scaled. Today, KKR's real estate business manages over $25 billion, with strategies ranging from credit to opportunistic equity, core plus equity, and net lease. Recently, KKR acquired Global Atlantic, a leading provider of life and annuity products. This addition broadens the lending products we can offer our clients, creating more opportunities to connect with borrowers and intermediaries, and KREF is well positioned to capitalize on this increased connectivity. We remain excited about the competitive position of our franchise and the market opportunities ahead in 2021. Now, let me turn the call over to Patrick.