KKR Real Estate Finance Trust Inc.

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 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 Jack Switala. Please go ahead.

Thank you, Operator. Welcome to the KKR Real Estate Finance Trust earnings call for the first quarter of 2022. As the Operator mentioned, this is Jack Switala. Today, I'm joined on the call by our CEO, Matt Salem. our President and COO, Patrick Mattson, and our CFO, Kendra Deschis. 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'll provide a brief recap of our results. For the first quarter of 2022, we reported gap net income of $29.8 million, or 47 cents per basic share and 46 cents per diluted share. Distributable earnings this quarter were $29.8 million, or $0.47 per share, covering our $0.43 per share Q1 dividend. Book value per share as of March 31, 2022, increased to $19.46, which includes the cumulative CECL impact of $0.33 per share, as compared to $19.37 as of December 31st. This increase in book value was driven by strong portfolio performance coupled with an accretive equity offering in the first quarter. This is the eighth consecutive quarter in which we have grown book value per share. Finally, in mid-April, we paid a cash dividend of 43 cents per common 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.

Thanks, Jack. Good morning, everyone, and thank you for joining us today. Let me start today's call by welcoming Kendra Deschis to the KREF team as our Chief Financial Officer. Kendra is a KKR veteran, having joined the firm in 2006, and most recently served as a Managing Director in KKR's finance group. We often talk about the benefits of KREF's integration within KKR, which range from sharing views with our macro and real estate equity teams to differentiated financing by partnering with KKR Capital Markets. We also benefit greatly from a deep bench of talent, and having Kendra join our leadership team is a great example of that. Now, turning to the first quarter, KREF delivered strong financial results with distributable earnings of 47 cents per share, covering our 43 per share dividend. And we grew our book value for the eighth consecutive quarter. We also had a strong investing quarter, originating nine senior loans, totaling $844 million, bringing our total funded portfolio to a record $7.25 billion, up 36% on a year-over-year basis. Multifamily loans represented 55% of our Q1 origination commitments. It continues to be the largest property type in our portfolio. In addition to multifamily, we are placing emphasis on other strong performing property types demonstrating the highest rent growth, which includes industrial and life sciences. These property types represented 18% and 15% of our first quarter originations respectively. In the first quarter, increased volatility and heightened geopolitical risk created a more conservative lending environment. Threads in the senior secured CRE lending market widened slightly by approximately 25 basis points relative to the fourth quarter. We are lending with more conservative terms and structure. We believe our lending strategy offers strong risk-adjusted returns in this environment. Our focus on first mortgage loans secured by high-quality real estate owned by institutional sponsors provides a defensive investment with significant equity cushion. And our returns also benefit from the steepening of the front end of the yield curve. Pipelines remain strong. with an increase in activity from larger sponsors seeking a balance sheet solution to avoid the volatility in the single asset, single borrower CMBS market. Increases in market rents have also created more transitional lending opportunities for KREF, as sponsors need more time to convert in-place rents to market. This has been particularly pronounced in the multifamily and industrial sectors. In short, now is a good time to be making loans and we are well capitalized to do so with over 750 million of liquidity as of quarter end. As we look at our pipeline, we continue to see strong activity and have approximately 1.3 billion of loans either closed or under exclusivity subsequent to quarter end. Throughout 2021, we generated mid-teens ROEs as rates declined due to our in-place rate floors on our loan portfolio, while our liabilities, in large part, were not subject to rate floors. As those loans with higher floors have repaid, we now feel our earnings are neutral to minor increases in rates, and based on the forward curve, we would expect earnings to become positively correlated with rate increases in the second half of this year. Finally, in Q1, we received $282 million driven by four repayments. Given our strong origination volumes and modest repayments, our growth trend continued with net funding of $462 million. We expect to continue to match our repayments with attractive origination opportunities and feel we are well positioned in the current lending environment. With that, I will turn the call over to Patrick.