KKR Real Estate Finance Trust Inc.

Good morning and welcome to the KKR Real Estate Finance Trust Inc. Second Quarter 2026 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 one again. 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 second quarter of 2026. 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 Decious. 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 will go through our results. For the second quarter of 2026, we reported a gap loss of $122 million, or negative $1.95 per share. Book value as of June 30, 2026, was $10.24 per share. We reported a distributable loss of $36 million, or negative $0.58 per share. Distributable earnings before realized losses was $6 million for $0.10 per share. Lastly, we paid a $0.10 cash dividend with respect to the second quarter. With that, I'd now like to turn the call over to Matt.

Thanks, Jack. Good morning, everyone, and thank you for joining us today. Let me begin by acknowledging our announcement that KRS Board has initiated a review of strategic alternatives intended to enhance shareholder value. This process will be led by a strategic review committee composed solely of the board's independent directors. I recognize there may be questions regarding the process. However, given its early stage and the need to preserve the integrity of the committee's review, do not plan to comment further on this matter. But to preempt any questions, To be clear, KKR has not submitted a proposal for any transaction to date. As the committee does its work, KKR will evaluate its potential participation in any KREP transaction, but there's no guarantee that KKR would make any proposal in the future. KKR's stated goal as manager is to support the committee as effectively as possible. And as the largest shareholder, KKR is aligned with the committee's mandate to enhance shareholder value. We do not plan to comment any further on KKR's perspective on this matter as well. Let me turn to the results next. As we reach the midpoint of 2026, I'd like to focus on the progress we have made executing the action plan we outlined earlier this year. While there is still work ahead, We've made meaningful progress against our key priorities and believe the actions we've taken position CARA for book value stability and longer-term performance. Against that backdrop, we've reported distributable earnings before realized losses of 10 cents per share, covering our quarterly dividend. And as a reminder, we continue to expect 40 cents per year of dividend to be covered by our annual distributable earnings before realized losses as we execute our business plan. Our expectations are for earnings to trough later this year, but remain in this area over the next several quarters before the benefit of our portfolio repositioning emerges. Book value declined 13.7% during the quarter primarily reflecting actions taken to position our watch list assets and legacy office exposures for monetization. This quarter represents a significant step toward achieving our goals. We have adjusted reserves and carrying values to our current expectations for monetization of these assets. While we are still executing these resolutions and final outcomes could affect ultimate recovery levels, we believe the most significant book value impact is now behind us and that KRF is positioned for greater stability going forward. Let me provide an update on our progress against the goals laid out for the year. Legacy office. Legacy office exposure declined to 18% of the portfolio at June 30th compared to 21% at year end 2025. We remain focused on reducing that exposure below 10% by year-end 2026. Watch list. The watch list represents 16% of the portfolio as of June 30th. Nearly half of the assets are currently being marketed, and we continue to target a complete reduction by year-end. Life science. We entered the year having modified approximately 19% of our life science exposure. Today, that figure has increased to 39%. and we believe the vast majority of expected reserves have now been recognized. We remain on track to address substantially all of our life science exposure through modifications or other resolutions by year end. Lastly, new originations. Loans originated between 2024 and 2026 now represent approximately 32% of the portfolio, compared with 19% as of and more. We believe the portfolio we are building today will ultimately be more resilient and better positioned to support long-term earnings growth and book value stability. Importantly, each of these initiatives is interconnected. As we resolve watch list assets, we generate liquidity, that can be redeployed into newer vintage investments. This portfolio rotation is well underway and should continue through the remainder of the year. Turning to repayments. During the quarter, we received over $800 million of repayments. As a reminder, we continue to expect more than $2 billion of repayments throughout 2026. To put that in some perspective, This represents over 35% of the portfolio size at the beginning of the year and is larger than the approximately $1.5 billion of repayments in each of 2024 and 2025. This repayment activity has generated liquidity to support our broader strategy, including funding new originations, allowing us to reposition the portfolio into newer vintages, and execute share repurchases. Turning to capital allocation, During the quarter, we repurchased 38 million of common stock at a weighted average price of $6.63 per share, generating approximately 32 cents per share of book value accretion. Subsequent to quarter end, we repurchased an additional 10 million of common stock at a weighted average price of $7.24 per share. Future capital allocation decisions on share repurchases will be part of the strategic review process. Overall, we believe the actions we have taken over the past several quarters have meaningfully advanced our transition plan. While there is still work to do, we remain focused on advancing our action plan, resolving certain legacy assets, improving performance of the portfolio, and creating long-term shareholder value. With that, I will turn the call over to Patrick.