KKR Real Estate Finance Trust Inc.

Good morning and welcome to the KKR Real Estate Finance Trust Inc. First Quarter 2025 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.

Great. Thanks, Operator, and welcome to the KKR Real Estate Finance Trust earnings call for the first quarter of 2025. 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-Q for cautionary factors related to these statements. Before I turn the call over to Matt, I'll go through our results. For the first quarter of 2025, we reported a gap net loss of $10.6 million, or 15 cents per share. Book value as of March 31st is $14.44 per share. Distributable earnings this quarter was $17 million, or 25 cents per share, which is in line with our 25 cent per share dividend. With that, I'd now like to turn the call over to Matt.

Thank you, Jack. Good morning, and thanks for joining our call today. Since our last earnings call and tariff implementations, market volatility and recession expectations have increased significantly, creating uncertainty for both businesses and and households. The early recovery of real estate has likely been put on hold until we have more clarity on the scale and impact of the tariff regime. That said, we do believe real estate is better positioned for this environment compared to past cycles and other asset classes, given the reset in values over the last three years. In times like this, the first thing we think about is defense. It's a get your house in order mentality. And to that end, we are in a very good position. We have no corporate maturities until 2030, having just upsized and extended our corporate revolver for a new five-year term and refinanced our Term 1B with a new seven-year facility. We have ample liquidity with over $700 million today. Given this secure position, we will remain on offense and actively looking to reinvest repayments into new originations. In terms of what we are seeing in the real estate credit market, it is still functioning, and all market participants remain active, including the banking sector. Warehouse financing and senior loan spreads are approximately 10 to 15 basis points wider, while the transitional loan sector spreads are approximately 15 to 20 basis points wider. CMBS spreads have been more volatile, and are currently 50 to 75 basis points wider. Many owners are now coming to us for a balance sheet solution to avoid the capital market's volatility. From an opportunity perspective, it's significant. Our pipeline is the largest it's ever been, totaling over $30 billion, and is very high quality. I expect this market will lead our sponsors to seek out more short-term bridge loans instead of testing the investment sales market. Interestingly, our repayment expectations have increased since our last call. As we articulated last quarter, repayments are expected to exceed $1 billion this year, and we are tracking well above that. We had an active quarter and closed four loans for a total of $376 million, 80% of which were secured by Class A multifamily properties. It had a weighted average LTV of 69% and a coupon of SOFR plus 277 basis points. Repayments in the quarter were 184 million. And along with future funding from existing loans, our net fundings totaled 222 million. We are actively looking at opportunities to diversify our portfolio and add duration. To that end, We are focused on the European lending market. We have built a strong team over the last few years. We are also looking at new issue CMBS conduit B pieces, where we can leverage our position as one of the largest market participants, as well as KSTAR, which is our rated special servicer. Turning next to risk ratings, we downgraded two loans this quarter. First, a Raleigh, North Carolina multifamily loan from a four-rated loan to a five-rated loan. We are still evaluating numerous scenarios for this loan and are engaged in workout discussions, which could lead to an ownership position. Second, Boston Life Science from a three-rated to a four-rated loan due to current occupancy trends. With the two downgrades in the quarter and therefore increased CECL provisions, book value per share is $14.44, down approximately 2% compared to the prior quarter. We will continue to be transparent and proactive in managing the KREF portfolio, and we'll provide updates on those two loans in the coming quarters. Before turning it over to Patrick, I will touch on our life science exposure. This is a sector that we believe has long-term positive fundamentals and but faces cyclical headwinds, which could be exacerbated by an economic downturn or NIH funding costs, funding cuts. As a reminder, 12 percent of our loan portfolio is life science, and we have one RER property. We thought it would be helpful to provide additional details in our supplemental, which is on page 10 of the presentation. At a high level, 100% of our loan exposure is located in the top two life science markets, Boston and South San Francisco. And we provided construction financing for over half of our exposure. So these are very high quality and purpose built for life science. We've seen some green shoots as well. In March, we executed a 32,000 square foot lease in our Seattle Life Science REO property to the Institute for Protein Design at the University of Washington. The tenant has created AI technologies and computationally designed protein medicines and is led by a recent Nobel Prize winner for chemistry. With that, I'll turn it over to Patrick.