KKR Real Estate Finance Trust Inc. Q3 FY2025 earnings call

Commercial Real Estate Lending Market

• Number of real estate opportunities robust with $1.5 trillion wall of maturities over next 18 months. Debt markets liquid with banks returning and increasing back leverage lending. Despite whole loan spread tightening, still generating strong returns due to lower liability costs. Real estate credit offers attractive relative value with safety first and strong downside protection.

Originations

• Expect over $400 million in originations in Q4 and already closed $110 million in US and Europe. In October, closed first European real estate credit loan secured by 12 light industrial assets in France. Over the last couple of years, built European real estate credit platform with dedicated team and originated over $2.5 billion.

REO Portfolio

• Actively working on REO portfolio with progress being made. Stabilizing and selling assets to repatriate capital and reinvest in higher earning assets. Embedded earnings power of $0.13 per share per quarter to be unlocked over time.

Financing Activities

• Upsized Term Loan B by $100 million to $650 million with ~6.5 years remaining until 2032 maturity, repriced 75 basis points tighter. Upsized corporate revolver to $700 million from $610 million at start of year. Ended quarter with near record liquidity levels of $933 million including over $200 million cash and $700 million undrawn corporate revolver. 77% of financing is non-mark to market and no final facility maturities until 2027.

Share Repurchases

• Continued share repurchases totaling $4 million in the quarter, year-to-date repurchased $34 million, and since inception over $140 million of common stock repurchased.

For 2025, KKR Real Estate Finance Trust Inc. reported GAAP net income of $8 million or $0.12 per share. Book value as of 09/30/2025 was $13.78 per share. There was a distributable loss of $2 million primarily due to taking ownership of the Raleigh multifamily property. Prior to net realized losses, distributable earnings (DE) were $12 million or $0.18 per share. A $0.25 cash dividend was paid for the third quarter.

Forward-Looking Statements

• Expect over $400 million in originations in Q4. Year-to-date received $1.1 billion in repayments and originated $719 million with $400 million of originations expected in Q4. In 2026, expect greater than $1.5 billion of repayments and to continue matching repayments with originations. Currently at lower end of leverage ratio and expect to continue investing and originating in line with repayments.

Risk Factors

• Downgraded Cambridge Life Science loan from risk rated three to four, leading to increased CECL provisions. Technical difficulties during the call briefly disrupted the question and answer session.

Q: Triangulate on lower leverage and higher liquidity being timing issue or defensive positioning?

A: It's a timing issue. One large repayment this quarter (multifamily property outside DC refinanced by agencies) and originations in Europe taking longer to close. Expect to continue investing and originating in line with repayments.

Q: Update on state of dialogue with sponsors across life science deals and what drove Cambridge downgrade?

A: For other three rated life science loans, normal course leasing updates and property level financial updates. Cambridge downgrade due to negotiations and modification discussions with the sponsor.

Q: NPV analysis on sub-performing deals vs selling and reinvesting?

A: Continuously evaluate portfolio positioning. REO liquidation redeploys capital and increases earnings. Quality real estate evaluated for optimization, with some assets in short term (e.g., Raleigh multifamily, West Hollywood condo) and others in medium term (e.g., Mountain View asset).

Q: Contrast EU loans vs US loans?

A: Similar in quality of real estate and sponsorship, same program. EU opportunity set different, loan sizes bigger, more multi-jurisdictional. ROEs about same on hedge USD basis.

Q: Long Island family loan originations, ground up construction and transition projects?

A: Long Island loan is ground up construction with repeat sponsor. Bulk of opportunity in almost stabilized versus transitional lending, with stretch seniors (70% LTV mostly leased assets) offering most relative value.

Q: Interest in CMBS conduit business and M&A for scale?

A: Considered CMBS originations but no real plans yet as it doesn't overlap much with current client base. Continue to evaluate M&A opportunities for scale, liquidity, and portfolio diversification, but nothing currently in the works