KKR Real Estate Finance Trust Inc.

Good morning, and welcome to the KKR Real Estate Finance Trust, Inc. Fourth Quarter 2024 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. And I would now like to turn the conference over to Jack Switala of Investor Relations. Please go ahead.

Great. Thanks, operator. And welcome to the KKR Real Estate Finance Trust earnings call for the fourth quarter of 2024. As the operator mentioned, this is Jack Switala. This morning, I'm joined on the call by our CEO, Matt Salem, our president and COO, Patrick Mattson, and our CFO, Kendra Deschis. I'd 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-K for cautionary factors related to these statements. Before I turn the call over to Matt, I will go through our results. For the fourth quarter of 2024, we reported gap net income of $14.6 million, or 21 cents per share. Book value as of December 31st, 2024, is $14.76 per share, which is relatively flat quarter over quarter. Distributable loss this quarter was negative $14.7 million, or negative $0.21 per share. We have a $0.25 per share dividend, which yields 10% as of yesterday's closing price. With that, I'd now like to turn the call over to Matt.

Thank you, Jack. Good morning, everyone, and thank you for joining today. Before we begin, we first wanted to acknowledge the devastating wildfires in California Our thoughts are with everyone that has been impacted, and our heartfelt thanks to all the first responders. Before going into our results, I thought I would discuss our 2024 achievements. First, I wanted to highlight KKR's ability to leverage KKR's significant resources and information. KKR manages approximately 80 billion of real estate assets globally, with approximately 140 professionals we have been able to utilize all our resources across asset management, sourcing, underwriting, and capital markets. Just within real estate credit at KKR, we are active across the United States and Europe in both loans and securities, and we invest across the risk-reward spectrum through our bank, insurance, and transitional pools of capital. Our dedicated KSTAR asset management platform now has over 55 individuals with expertise in asset management, special servicing, underwriting, and REO. This team manages a portfolio of over $36 billion in loans and is named special servicer on an additional $45 billion of CMBS. Turning to KREX, this was the year of transition. Our posture during this challenging environment for real estate has been to transparently and proactively address issues, and we think this approach has led to better asset management outcomes. Over the course of the year, we have decreased our watch list percentage from 13% as of fourth quarter of 2023 to 8% today. As for our REO assets, We've begun to see green shoots in the office and life science sectors, and it's a reentering the market. And we have responded to a number of RFPs. Investor sentiment is slowly rebounding and liquidity is beginning to return for the highest quality assets. The CMBS market has seen a number of large office transactions with over three and a half billion of office SASB issuance in 2024. and a healthy 2025 pipeline. We think our patience on these high-quality assets will optimize shareholder value. As a reminder, as we repatriate the equity in the REO portfolio, we believe we could generate an additional 12 cents per share on our distributable earnings per quarter. With the assistance of our KKR capital markets team, Our liability structure remains a differentiator for the company. We have diversified financing, and 79 percent of our financing is non-mark-to-market. We have strong levels of liquidity, with $685 million available at the end of the fourth quarter. Although we don't have any corporate maturities until 2027, the debt capital markets are healthy, and we continue to watch for opportunities to optimize our capital structure and further extend maturities. Since our last call, sentiment around commercial real estate has continued to improve, and transaction volumes are increasing quarter over quarter. The higher U.S. Treasury market may dampen some acquisition activity, but we have a robust pipeline, and there should be ample opportunity to lend on reset values. In January, we closed two loans, for approximately $225 million. Looking ahead, we have consistently stated that while we are not fully out of the woods and anticipate further credit migration, we think we have dealt with the majority of the issues in the portfolio. Before I turn the call over to Patrick, I want to reiterate our optimism heading into 2025. We continue to feel confident in our offensive positioning and look forward to the opportunity that we have in front of us. With that, Patrick can take it from here.