Earnings call transcript Q2 2023

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Operator

Good morning, and welcome to the KKR Real Estate Finance Trust Inc.

Second Quarter 2023 Financial Results Conference Call. All participants will be in a listen-only mode. [Operator Instructions] Please note, this event is being recorded.

I would now like to turn the conference over to Jack Switala. ahead. go Please

Jack Switala

and Trust operator, XXXX. the Real KKR Great. call welcome for Finance earnings of the Estate Thanks, to second quarter

As our is on the Mattson; and President this Today, Kendra Patrick operator joined Decious. CFO, I'm and Jack COO, the Matt CEO, Switala. by our Salem; our call mentioned,

Investor website. for the XX-Q which This will also in to events everyone both in Relations guarantee or will refer filed not the to recently refer cautionary which statements are forward-looking which I'd our call, factors call on our portion non-GAAP release to of most certain presentation, remind Please reconciled like performance. related figures the to our are contain to available that we do future GAAP of statements. earnings and on supplementary financial measures certain these

Before provide I'll to I results. a brief over the turn of our Matt, call recap

we $XX.X a $X.XX GAAP quarter June share. For a $X.XX X.X% of net quarter reported Distributable second of earnings provision was value CECL diluted XXXX, a of of loss $X.XX $XX.XX, per million Book share million this per $XX.X of per the per or $XX.X XX, or as diluted negative or share, quarter-over-quarter. XXXX, were decline million share. including

conditions. Our last X risk-rated senior from share quarter. increased due CECL share additional allowance well reserves on office macroeconomic to $X.XX The as primarily per $X.XX per as to increase was loans

XX.X%. a cash reflects closing the dividend we of price, Finally, to yesterday's of second share annualized paid in on respect yield an per Based June, dividend $X.XX common quarter. with the

call over turn I'd that, Matt. to the With like to now

Matt Salem

benefit another of per of distributable share earnings to environment. $X.XX today. to Distributable you from KREF $X.XX thank Thanks, Jack. strong the higher and rate Good for dividend. continue interest our quarter relative earnings per generated share joining morning us

asset valuations. markets this earnings declining created real commercial rates little While with capital an higher from beneficial liquidity dynamic estate interest standpoint, has are and for challenges

the foreseeable commercial the anticipate Borrowers persist have assets and of mature infusions $X current estate for the center back We volatility real while recapitalize, need will from banks in equity cautious. associated take market money banks will approximately Regional as pulling future. sell or trillion loans larger dislocation XXXX to and begun remain XXXX.

lending a highly This for building had with front particular in duration CRE is the discipline, competitive KREF. active. and in-favor we considerations insurance with and liabilities assets on Notably, warrants mind market stabilized focus very patience environment durability, capital with of have

progress the have we number initiatives. Despite volatility, seen of on a

on the a risk-rated late X process in Philadelphia of stages our sales loan. we're First,

a progress our risk-rated leases stabilization having our the asset occupancy year-to-date the the total with Second, amount borrowers to marketing signed initial square high XXs. X on after loan million foot significant property The is above plan. from with low D.C. increasing XX,XXX business XXs office of near over $XXX indications

Third, sponsors many of are signing leases. our other office

I Excluding including XX over leases assets just feet largest mentioned, in the have the lease Philadelphia months. our leasing year-to-date, XXX,XXX signed in of square office

the with Oakland, end, by in connection and expect repayment Finally, PACE we California subsequent of full paid office summer was XX% modification lease quarter down our loan in XXXX. and to financing, the

navigating on levels the has high of sources over maintaining past KREF's steady this liquidity crucial few non-mark-to-market focus building of proved and years environment. in financing kind

liquidity corporate no had of $XXX to the a of including million revolver have We capacity. we robust as new of quarter with quarter maintaining million liquidity, position. million cash and focused ending on originations this loan $XXX continue We availability, ample $XXX

today well portfolio rent second our of The continues comprised XX% nearly weighted quarter, the of million. closer borrowers risk-rated versus $XXX rate and multifamily, end, totaled to to average properties, net refinancings. at year-over-year. mid-X% to of for of beginning portfolio opt for a X% With rate see portfolio In creating takeout repayments $XXX quarter of financing was with perform reduction X.X% portion fixed million, we multifamily coupons loan X types. office increases industrial stabilized floating are our At property

across insurance which actively allows base, SMAs to is including CRE KKR debt diverse the stay funds, and service strong private bank client lending and capital us in active our relationships. KREF, Beyond market to

broader Our integration real-time with both billion business of $XX knowledge KKR's and us real that estate provides equity. across market with manages assets debt

capital XXX approximately a of provider. strong best-in-class team Our a solutions as has reputation professionals

of franchise. part We also long-standing from relationships continue benefit KKR banking to our the as broader

full continues of by have the over in we the expect security anticipate we should A repayments stated, XXXX previously quarter, that rating modestly was to quarter. risk future offset loan existing this a market portfolio lack downgraded challenge an capital list by turn driven reserve of the office As to reserves a funding the primarily be year. for in watch X sector. and future higher to We on increased

ratings we identified believe our not we further point, issues all the watch migration have loans. X-rated the this within do At office anticipate potential list and office in

focused loans, X-rated solutions we are resolve expect watch modifying we long-term While have at of work loans taking properties. and we other is where are we and liquidity, tools value, have disposal including we'll through a options, our managing list shareholder title maximize to various outcomes seek dearth on I as loans. the seeking there to and to

for built moments like was this. KREF

real strong no maturities with KREF we debt estate reputation equity, facility or XXXX. of while $XXX million late having debt upsized $XXX out And have We all our debt liquidity. are non-mark-to-market. across asset financing with secured XX% million, repurchase real was to master our succeeding final million until as a a and management. robust terming We estate fully due end $XXX agreement corporate KREF quarter and of business operating a of with from

of is alignment in held sector and shares is our and ownership approximately demonstrates the today, we KREF's manager managers' REIT percentage KKR worth mentioning meaningful it of XX% mortgage Finally, highest believe KREF. by a between outstanding which the

With over Patrick. to that, I'll turn the call

Patrick Mattson

watch the list reserve followed our update, Thank you, CECL on efforts and front. I'll Matt. and begin Good a by liquidity morning, everyone. by providing capital

on increase reserve was million $XXX due $XX a of for This of a recorded our our reserve in our balance. our reserve CECL or mainly office that principal most the total at Mountain to XX. loan addition we a in $XXX office reserves with of additional June risk loan rated increase principal the million million basis notably points X, had balance XXX View, quarter, This loans California taken of

quarter Approximately placed reserve total Class loans. in we At leasing work office The is may transitioned the we X-rated transition challenged loan watch considering CECL Mountain list And X/X sponsor on more asset is status campus high-quality this to are was against steps for A which are of our taking recently View next our ownership two renovated, third the held very properties with but initially The XXXX. the a time, in as plan. the nonaccrual include asset, market. a in located June. on we office

a risk we expectation. As our rating, meaningful a there's to from prior loss five have move generally increase noted loans four quarters, when in in

our million office, current million property and loan after Regarding in has we with of note, feet terms mortgage capture the market. and loan testing last square proceeds this a modify positioned sales on loan is one is The mezzanine fully million $XXX and $XX the restructured both into two-year over Minneapolis location was quarter to as it's funded interest term best the $X have The a $XXX decided including over buildings months. demand million to of senior quality a for July. tenant market contractual bifurcated leased the well leasing. of senior future payments XXX,XXX loan the through This in XX and

expect in adequate cash leased preserves A costs with optionality of packages, we Class XX% And is buildings well-capitalized service. momentum. is capitalized the to offer debt senior building this flow for seek approach The can nearly space property we the attractive further ensures renovated optimize loan tenants the that The positive the fund feel asset cover to leasing KREF. to leasing as as extension value

this earnings. one loan, we sponsor. the added recognize On loan the X sponsor the distributable of short We a office leased, occurs, given will If is Boston first our sale The in identifying existing cash through we initial secured downgraded list working conservative on new maturity to provide we approach in is located A Street. downtown the a office ahead loan-to-value to in Philadelphia risk-rated the metric XX% equity Boston a our Cambridge quarter sale the with concern, property Class process elevated this loan, which given watch of by financing which quarter, though we'll are loan's to assets currently loss XXXX. a on office of

under office which continues median a portfolio, from list just balance with term to leased In seven X.X properties average principal average of properties well debt equates weighted office credit are yield metrics. these office segment, of of Away the XX% the X.X% attractive X half and has the to remaining. outstanding risk-rated perform watch underlying X of and aggregate, risk-rated a weighted years lease representing are the

we foresee mentioned don't any Matt on ratings Importantly, as negative loans. our office remaining X-rated earlier, migration

The and average consistent rating of portfolio or better. prior of portfolio risk quarter X.X, XX% with the risk-rated was is the X our

rate. rate. floating market SOFR, floating now quarter, And our second the all assets in convention XX% and benchmarked is completed the portfolio are and to to rate Our we our transition liabilities

its One composition balance non-mark-to-market, fully is the is remains of to credit structure. the of of outstanding differentiators and only. financing financing key marked XX% remaining KREF's our

million. repurchase and agreement million the optimize in master second quarter, upsized to continue we We a $XXX $XXX to

fourth quarter end. are no final leverage of XXXX. or debt-to-equity of is with well corporate as Excluding X.Xx until match a term ratio there KREF and secured of maturities debt ratio facility financing, total look-through X.Xx capitalized quarter

of volatility. structure, million independence for on coupled corporate $XXX public capital markets As $XXX XX, resiliency the during of Thank KREF side with of The liability June capital million KREF financing buffers markets, of and our you had us our joining of times the revolver available. today. from capacity cash

Now take questions. your to we're happy

Operator

begin comes Shane first now [Operator session. question question-and-answer will We with today Instructions] from The JPMorgan. the Rick

Rick Shane

XXX is, portion on PIK surprises things about on little Obviously, first coupon of the think, is disadvantage like kind I for still component is if cut I rate, the me, I'm some up, this the and the so senior. transaction. the bps. on one spread thing fixed on below deal question on being Minneapolis -- by floating The this the a it's you the some the mezz that of I'd apologize. actually The to to the trip background rate bit data talk and about I pulling

And you? Did was sponsor that benefit things. that of the optionality couple is the you What in the where is deal additional sell property, extent a presumably time the upside the guess is restructured order participate buy equity? and put guys additional extended, the in if to to do of transaction? in this I where of So, the sponsor sort this for

Patrick Mattson

Rick, I'll take the Patrick. question, it's

additional there no deal. answer specifically, sponsor no, into was to this equity So

As a cash know, is asset. we've this said and as you flowing

that here, forward is sell an optionality it flow optionality also not service some is got here So, asset capital clearly continue have play leased. that It's support environment. to us gives an can asset XX% obviously we've what's sponsor at really got basis, that allowed attractive benefits structuring the gives one the the cash to of markets great not the that here, we a us nearly to debt finance but into and

So At said, we're asset. like the to look time, leasing for capital able to a continue I forward exit exit. can a look markets and asset, better better maintain it work this sponsor, continue we play the with time to the same to for sort at of

Rick Shane

that's a note in a so so actually situation? will goes non-accrual cash the I that. size side then reported million. this is, at non-accrual Would tighter on have put the shrinking pickup because have guys is you from see made before the of One even accrual at $XXX at what flow on comment was just the that it that Patrick, you trying look spread side loan in up, a other coupon smaller spread? note the or is and to the the the interest to income this it's but the loan the it. And prior follow-ups two is and this to prior -- was you it on if covered basis, shrinking been senior at covered that at Got

Patrick Mattson

Rick. second part first, take the I'll

and there. You're observant right

loan. We off this nonaccrual of and performing will on see a move some asset as this pickup senior we now it be will

And loan Clearly, senior the -- Xx to our the through interest. so the and and coupon, excess asset you'll and here. DSCR. close here leasing lower a that prior within within that utilized to can for then allows very to restructuring the cash at smaller very net proactively be The see captured was continuing that asset with this being a flow recut to the be cash efforts

Rick Shane

my to in captured related like a a principal to non-accrued to there catch-up third interest that? last about. no sure there of the apologize running the that to that just I'm it. noise will I to Is Got I peers. there's the need And reversal be quarter question. going line anything ask be one we through -- make thinking want or was

Patrick Mattson

recapture. No, there's no

Operator

comes question Sarah ahead. go from next Barcomb BTIG. The with Please

Sarah Barcomb

we pre-COVID bucket, since, issues, Can see but more expectations how now? call it, some issues starting you just saw of talk course, can post-COVID. downgrade given the Mountain to about there. those So, were list watch the And office seen to I'm to speak for crop see XXXX early added have bucket the group hoping those View that we've to that office cropping in up in office originated both Boston post-COVID the you Both of issues that the and of up. changed

Matt Salem

the question that. or think for I joining pre-COVID you Sarah, it's particularly try the it's morning. Matt. anything to and that take experiencing don't are or us properties different. the Thank can loans this for post-COVID, whether I

I illiquidity think the an is market space. it's real office to and and as fundamental we adjust just as demand well work just what home from softness on overall

underlying we that's when either impacting almost materially It illiquidity value office stabilized today bit. bar leased cap have market same think what It's would The with a was loan building Boston is. world a certainly it was was so asset a moved when raised -- the as little theme fully just I you're when the lending the about post-COVID. made office wasn't of pre- the transitional it's here maybe and now leased question was So, a really XX% post-COVID, It's for still that's say out. a asset. highlighting a and on or asset. rates and our

in going just bit little same some at be the the asset going some of occupancy, strategy But View and The clearly someday. down long office around space concerns on particular to may a will quality point a this not of to one is the very have market, That's overall subject asset. from and It's time. that the a what's high-quality asset, It's to just leased to lease-up given Mountain takes different. how origination. generic the rate that is more that XXX% we come get as this of in lease

context just more that hopefully, So you bit gives a little to that question.

Sarah Barcomb

a with at to balance just growing you sheet environment, over maybe the on other Fed current repo, has given capital thinking moment here. especially then was office and you're just a raising exposure and we've about on Wednesday, list of more where where how to for still And we that assets hear yes. the amount equity. the Okay, could depending the for I move that's liquidity meeting messaging side in seen on net hoping combined speak reset the more to the of valuation of lower watch KREF the

in mentioned are remarks center cautious. pretty the also banks prepared money And you that the

liquidity are about about going point loan you're forward. the what just corporate I'm to that? thinking term thinking how trying markets, needs the you tap your would gauge At you markets? B debt How So,

Matt Salem

immediate absolutely Yes, Matt need saying It's we're we I do anything opportunistic at take first right be of something. say not market can in no I'd ample more we liquidity again. need -- now. nature. really the liquidity we have that. do all, looking would There's It's not would so to for

You there. can so ample $XXX have million liquidity, see we there's of liquidity

recovered broader say these we're to monitor markets. along two, markets. number all the to with going They've I'd continue

The we at pay of did in our we was but one attractive, this the certainly convert paid small off off. to It the that's past quarter. thing is So find something extent mind could our that. it back we look we

watching road, and could So, turn really attractive, where at was say but out that. to if point do be of may there that overall, opportunity in moment some the a an immediate the no opportunity at kind it to just down market look I'd for But a time need. we're waiting potential we

Operator

comes go The Jade KBW. ahead. Please from next question with Rahmani

Jade Rahmani

on see the good some office side. to updates positive And

far more are? is first you than and be you say the along risks the of you Would scoping that assessment X-rated the loans, halfway or long would question do So, you we mention to negative feel much through fair I credit how pains well on that risk portfolio that? with think surprises leased don't any take office did expect is duration. a long

few we've and where hiccups. a touched multifamily, we However, even industrial haven't seen hotels, on sciences, life

just So on can question? comment that broad you

Matt Salem

Sure, Jade. much because you office along. start the for let's that's It's joining. that. I'll Well, obviously, with Matt, further take Thank

feel the happens those with kind there of X-rated question to end it, path -- the where be as don't side up I end with office identifying this we of think down what the could we certainly a potential of is some think towards there. X we of issues. migrating the and like of loans I to walk are all those continue

against it feels As got X-rated like pretty we've reserves. sizable the those reserves appropriate loans, that and to relates

pretty we've So I the office, been think transparent.

I think peers more identifying of reserving issues bit than front-footed a loans. our we've some been little in

I feel the the So for the think side. far road, far but us, down finished on we pretty road not office pretty down

storm estate from the property early be it's well as which any than seen say. of and there. on markets because obviously obviously to what across side, liquidity, it's we changes we as have increased getting As cost not the is And perfect see the cost board bit valuation I so of capital been a hit capital to well fundamentals of It severe as the higher anywhere near But office the haven't as a little as it types, values there. issues could with have hard clearly, mean, real capital. changed relates other

even KREF, Really a of if any outside portfolio beyond closely. accounts look our got service haven't all seen we portfolio across So, we're broader we've mortgage But of issues different outside the manage. watching that $XX billion you portfolio very we or almost the office.

property down to I the So be issues is of that are because a today. won't cost lot types that's well high those -- debt say not there positioned, road think the burden quite and the

will And so certain that impact sponsors.

you that storm. see side, that think -- level of going perfect would issues, the office kind the severity you'll a you're have see don't of on level I again doubt to even But we're which seeing if I caught have

but our or So, it's answer on portfolio outside portfolio anything we're haven't broader monitoring in office. KREF's yet and question -- seen to we a hard it, certainly of

Jade Rahmani

rate? And I mentioned X.X%. to rent multifamily on the refinance, so resilient are dynamics multifamily in think we're lender far. the preferreds the you growth, side, lenders the seen being the preferred counted performance successfully able a LTV be we multifamily mean requirements that have providing have can Do those order or type X.X% Nevertheless, gets interesting for seeing other interest senior as equity. some pretty X% you to meet because where to loans deals stomach

Matt Salem

and I assets think that their lot there's a think What's I basically of tenure at from the time looking multifamily to rate? are timing and issue a bridge there's trying sponsors question period today the is. long-term of there now. the

asset. the into So rate interest bit lower to little pretty good their about which when going at point, value they're you feel get of a environment,

is in Class the upgrading in view. at of say to we the KREF, estate. mostly feel are And And I'd bit it. will the middle is, good liquidity my in pretty your that bridge there's But renovating going It's have liquid a least and real this for portfolio markets. to that get It's in plans A middle within our units certainly about caught they're like little gap? that business be question people and does sponsor

may multi it is I And bit amount And there. and liquidity always of the some the muted that debt surface up equity little the both side. tremendous There one multi liquidity on -- on thing me the is be the a under of about surprises the the of amount propped the sector I issues think values that a and side.

think it directly, So, people intermediate I capital that of thinking are your more temporary, about on so question I think a more to is and answer that, basis. cost

Operator

Don from The next ahead. Fandetti question Wells Fargo. Please go with comes

Don Fandetti

you're wondering still it's has obviously, some was on in I the sentiment for been opportunistic if you negative. seeing extremely are capital Is industry side. debt I the that forming seeing whether mean sort case office, or the or green of any shoots? equity

Matt Salem

that. answer say limited. it's Don, it's I Matt. I would can

have I capital a an large is think office have it. most part to a on kind reserving debt with you property or and everyone the And existing they of investors, assets and -- with exposure investor their those. challenge with significant dealing of whether type is it's you're whatever equity investor,

seeing should we're seeing being today. a the market given think don't we're And be raised the large pretty extraordinary around opportunity, it institutional in that investing But I certainly office. illiquidity really capital

Operator

Laws from comes with Stephen Raymond question James. next Please ahead. The go

Stephen Laws

love would to follow Patrick, up.

that a a X-rated I the you how as of is event much comment the Philly in over X/X second on it's to maybe the And applies goes? a made reserve, the think short of as timing the gauge roughly Can get sometime sale half XQ you help reserve or that? far on loans office. kind us specific of the

Patrick Mattson

the didn't give are process want numbers, obviously that sales the mindful at on a if and you're that specific that. what's still We working north implied other We're loss but and you be expectations about X-rated I by of XX% to so there, of assets. that asset talking through potentially look number

progressing certainly timing, And could as to But it think are of of in of a kind slip, a of not market impossible. or certainly to weeks these couple month in there right stages one so types event. like is terms for the XQ transactions difficult be this a it's here I well. feels in things we're Matt predict later the hand, now. said, On

be happen by And to but expect XQ we could event, seeing we're why certainly so, XQ. would a that's it

Stephen Laws

resi expect that the quarter. looking loan, I quarter a is came maybe repayments like than year, reiterated I It for, in asset during a a you what repaid looking multifamily like actually. it But bit kind you can condo talk about Manhattan. in a into talk trends modest of But But looks repayments higher a And small Florida, over any we to was seems little little think, that? consistent you than in read was higher and today Great. for can with can I which last the bit?

Patrick Mattson

Sure, Stephen.

You're had last we and near Yards, units paid its that multis is Hudson fixed-rate which three right. paid And sell asset through off. condo asset, did off actually our There paid They were that off. were a refinancing. have other

to to we're a these so, some are look in refinance in X% that's at particular, on a assets, margin as to closer index the plans, of multifamily the business when at And the continuing that real see SOFR side take reach coupons and their on rate to X%. you X% opportunity plus the

So, we activity. that saw some of

And one industrial there where But And X. paid certainly our one you had X think risk-rated recall, was number were of would out repayments, those that where at asset clearly here. then a we guess risk-rated loans, loans condo partial the asset sales. multifamily thing of obviously, were we on repayments par paid at highlight, -- I I Stephen, about off smaller some if point, they're a as and just was those asset

to if pretty year of we expectations. And that as muted more I fourth the we still quarter. to they're we the as terms back expect think opposed third think a in of forward, half would see quarter repayments, those, good quarter terms I repayment the So, of look be in toward

Stephen Laws

Great.

deals do? And feel looking macro? your you've Are good you about I what past are problems looking the to see of of here? like need you about Matt, start months pretty kind the seems to looking feel you're what's good like originations guys to top to Lastly, mean, about at not it new Or more forward remaining for in are think rates those? out? Is you that having and it to do look you doing office decided X-rated. what currently what improve couple identified

Matt Salem

and through some equity very Sure. get list lending today, get items making down the it to back I create that down working. portfolio. I'd returning very some find to to forward will It's able into we so we new we're to opportunities comes sure a market really, in much then, get home, would just say a to being working looking watch say, just interesting these environment them, it that. of through that we come and And the

And repayments, can go that, through outside then that we moment, we of reinvest out we're it. once as I and think get

the of dealing really that's with part through of have we them with of But have going the portfolio to opportunity these we want market to environment. is really been attractive. make to down it's that reason in the I issues, to trying aggressive is why today much we the So current market to advantage take seeing because more existing some come sure we're them, get identifying the what because think very very

Operator

comes The next Please ahead. question from Arren Cyganovich go with Citi.

Arren Cyganovich

you and was the a the behind June. West about talk what the modified Hollywood that in there? could you outcome that And little loan if wondering was bit I reasoning

Patrick Mattson

I'll asset. the the sponsor be was of capital modification, as additional that rate starting modification, put cap it's the did renewal movement agreed point Sure. here When to into the we Arren, the Patrick. to take and part the just The interest had real one. that executed.

initial cover So help of entered capital well will buying as above of the additional carry basis. additional addition to its participation in this into as debt maturity as capital modification, our we profit through added service, to a that part and to loan asset that date, add some cap, help agreed structure some part

environment. good sort and the standpoint day, this sort operate from location, asset is in of current of for rate a a great footing watching occupancy end of this we asset But So that's an on the here. the closely. asset And the something, really net-net, it better in basis to our obviously, continues about at we're The puts mid-XXs feel high-quality really here.

Operator

Securities. question go Delaney The comes next ahead. Please JMP with from Steve

Steven Delaney

three, or was that of started starting prepared solution worked you've loans any and an foreclosure, I the behold, actually on saw the showed actual the when us short lo the you you've ask Q&A about progress. two call and congrats potential X-rated out, so to you we of if something three and

these look pieces, curious we from the moving were as at and Philly and look them all those you sale know as Just that resolutions, loans. recorded? net restructuring you at both out I sufficient general assume, on as will you perspective, you specific two out, to your those X-rated maybe right, are two in this, I Minneapolis. reserves, once Do -- to a kind transactions But specific on the of a if the are of general think reserve transactions you model these of flat your move forward, you be accounting have

Matt Salem

Matt. Thank mean, for reserves when look these I you the current the it's us. we think sale that expectations. think match I Steven, of modification, and joining the at kind value we yes,

that's think I is assets. get we're think two you're question appropriately on those trying I to reserved through a

Steven Delaney

CECL? those be the And that that distributable there reserve analysts -- the whatever these Exactly. struggle -- Do kind with when impact whatever will a that you -- this, distributable. and we with any had the is then just we out this of distributable this issue there going respect with -- gap think be there we all obviously, about will on and Jack, modeling? that an respect accounting well transactions, fact you and I'm up beyond to can trying you're to the that understand follow reserved thinking be be should off-line. could it to issue be to get

Matt Salem

Yes.

translate is if going mean, DE. a through to have I loss, the So to we CECL

well. the we remarks mentioned as think on I prepared that

reserved is reserve, DE Philly, think where appropriate one at sale we we we're obvious if flush will, to on most the through, you if sale. CECL will get our a So

CECL expect yes, So, what to to. you'd we'll realized. we see some point in some these at be get But reserves of time,

Steven Delaney

Great.

you back, the you Mountain I to that you're at and let's point, say, hold fair you're it, property assume actually to would on it REO a and it optimize of take foreclose going that View. At in for Now on years like a value. come case that operate going couple

be value actually is would from realized loan at situation the So foreclose, fair a if do where a you loss? that also booked to that could it REO, a REO convert current trigger

Matt Salem

basis our the realized value. said, on and would Yes, value yes. that to between would you went and like title, If the take a we we we loss asset difference

Steven Delaney

Okay, request. maybe a And great. That's question guess I but a is helpful. this not

anticipated, closed. to X-K as community guys situations or is the could maybe alerting press with analysts an play now be just that, a that release, you the respect it'd investment these of So actual great transaction closings if out and consider these

therefore, to And or Matt in it to love out see your with tweak could that line, XQ opportunity of distributable the we're it not your XQ, you mentioned, slide does where to in coming, happen like DE. you respect so to will, if We'd XQ? have

your for and thanks just I'll for comments. it much very -- you So leave there, thank

Operator

next Jade comes [Operator Instructions] ahead. go question from KBW. Rahmani with Please The

Jade Rahmani

make where Just deals you decisions you you on, have do with multiple discussions having it's an have or because of to curious, respect is if borrower case by deals relationship-based a deal? and issues, the individual in you're case one everything

Matt Salem

issue the I and Jade. mean, a it's trying really a issue much we an dealing loan. I trying outcome the basis, mean, got with to on if we're we're optimize case-by-case -- we've are sponsor, very

can seeing So, I we what to. taking of kind think individually outcome and we're get those

Jade Rahmani

So, the let's position, aware the several anticipating, but could same say same that there road just sponsor at level. risk issues in have deals on not they're has that other some it's not you're and down they the of Minneapolis, the

You're not holistically? to going talk

Matt Salem

different be say involved, you portfolios it have depends. equity I same have mean, really although sponsor as in we capital different or many same it funds It different may sponsor, you cases, the in well. but may

equity us just how they could a not conversation. we So, a a KREF holistic same have to typically course, of bilateral to about like, That's sponsor base that solution, negotiation the want the extent it's it goes. with has on and that talk

and You're in on of that. just negotiating one deal front usually them

Jade Rahmani

Okay.

was a question, hit point on asking put was just book what already really reserved? Steve fine going and what's also what earlier, asking Steve short Delaney second sale, that than sale, to further Philadelphia to is value The the the

Matt Salem

in appropriately expectation It's not at price. market this current done. we we're kind our of But anticipation. until it's Nothing's of reserved done think sale the

Operator

I to session. conference Switala turn the question-and-answer closing any our would concludes for Jack back to like This over remarks.

Jack Switala

today. for operator, thanks, everyone, Thanks, Great. and joining

out care. questions. with reach me team here to any the can You or Take

Operator

has conference attending Thank today's presentation. The concluded. now for you

now may You disconnect.

KKR Real Estate Finance Trust (KREF) 25 Jul 232023 Q2 Earnings call transcript