KKR Real Estate Finance Trust Inc.

We'll begin in approximately one minute. We just kindly ask that you please remain on the line, and we appreciate your patience. Once again, the KKR Real Estate Finance Trust, Inc., will begin in approximately one minute. Good morning and welcome to the KKR Real Estate Finance Trust Inc. First Quarter 2021 Financial Results Conference Call. All participants will be in a 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 that this event is being recorded. I would now like to turn the conference over to Jack Sotali. Please go ahead, sir. Great.

Thank you, operator. Welcome to the KKR Real Estate Finance Trust earnings call for the first quarter of 2021. We hope that all of you and your families are safe and healthy. As the operator mentioned, this is Jack Switala. I recently joined KKR and going forward will serve as the head of investor relations for KRES. I'm looking forward to connecting with you directly. Today, I'm 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 certain forward-looking statements, which do not guarantee future events or performance. Please refer to our most recently filed 10-Q for cautionary factors related to these statements. Before I turn the call over to Matt, I will provide a quick recap of our results. For the first quarter of 2021, we had gap net income of $29.2 million or 52 cents per share, which included a $1.6 million benefit from a lower CECL provision. Distributable earnings this quarter were $30.4 million or 55 cents per share, driven by the growth of our portfolio and continued strong asset performance. Book value per share as of March 31st, 2021 increased to $18.89, which includes the CECL impact of $1.06 per share, as compared to $18.76 as of December 31st. Finally, I would note in mid-April, we paid a cash dividend of 43 cents per share with respect to the first quarter. Based on yesterday's closing price, the dividend reflects an annualized yield of 8.7%. With that, I would now like to turn the call over to Matt.

Thank you, Jack, and welcome to the team. Good morning, everyone, and thank you for joining us today. We hope you're all healthy and safe. KREF is off to a great start this year in terms of financial results, another outstanding quarter. with distributable earnings of 55 cents per share, covering the 43 cent dividend by 1.3 times. This is a continuation of the success we had in 2020, where distributable earnings covered our dividend by over 1.1 times, despite the global pandemic. Our earnings continued to benefit from strong portfolio performance and existing LIBOR floors. We are seeing good progress on property business plans, which we expect to lead to elevated repayments in the back half of the year, after which earnings will begin to normalize. On the origination front, we remained active, with a continued focus on high-quality real estate owned by premier sponsors. In the first quarter, we originated three loans, totaling $535 million. comprised of two office properties and one multifamily property. Net funding this past quarter exceeded 330 million and our portfolio grew to over 5.3 billion as of March 31st. Our pipeline remains robust with approximately 750 million of loans either closed or under exclusivity subsequent to quarter end. To support this growing opportunity set, Earlier this month, we raised $172.5 million of perpetual preferred stock at a fixed-for-life cost of 6.5%. This permanent capital allows us to take advantage of current market opportunities, service our institutional clients, and grow our portfolio, which should lead to improved operating leverage over time. On the origination front, I want to highlight the Dallas office loan we recently closed. COVID has impacted the office market, so I thought it would be helpful to give a little color on how we are approaching the sector. The short answer is we are marginally more conservative on office, but we'll continue with our same approach as pre-COVID with a focus on growth markets and a cautious approach to the gateway markets. The first thing we start with on all loans is sponsorship. In this case, it's a premier sponsor with over $100 billion of real estate AUM and a deep knowledge of the Dallas-Fort Worth market. Second is asset quality and location. This is a Class A property located in an infill suburban location in close proximity to affluent housing and decision makers that value convenience. Third, the business plan is consistent with our light transitional target profile. The property has recently undergone a CapEx plan and is currently 75% occupied to a diverse tenant base. And the sponsor intends to increase occupancy and rent as tenant leases expire. Finally, we have a low cost, low basis on acquisition financing at 65% loan to cost. Turning to our forward pipeline, we've been active in the market with six senior loans that are either closed or under exclusivity, which represents $750 million in committed principal amount for KRF. Our activity reflects our desire to capitalize on attractive opportunities in the current market, some of which stem from COVID's impact on real estate. While we continue to target similar profiles to our pre-COVID activity, like multifamily and select office, we are increasing our focus and activity in the life science and industrial sectors. I'd note that this current pipeline is underwritten to weighted average IRR in the 13 to 14% range. Our portfolio composition remains consistent and is comprised of predominantly lighter transitional floating rate senior loans secured by institutional quality real estate. 85% of the portfolio is comprised of multifamily and office properties. Hospitality and retail continue to be underweight and represent just 6% of the portfolio. Performance of the loan portfolio remains strong with interest collected on approximately 97% of the portfolio as of the first quarter. To summarize, we had a successful quarter across earnings, originations, and portfolio performance. We're excited about our franchise and our competitive positioning in the market as we head into the second quarter and beyond. With that, I will turn the call over to Patrick.