Kkr Real Estate Finance Trust Inc. · NYSE:KREF
Kkr Real Estate Finance Trust — Investor Presentation (August 2018)
26 slides from Kkr Real Estate Finance Trust's investor presentation, August 2018
Slide 1: KKR Real Estate Finance Trust Inc. Investor Presentation
KKR Real Estate Finance Trust Inc. Investor Presentation August 2018
Slide 2: Legal Disclosures
Legal Disclosures This presentation has been prepared for KKR Real Estate Finance Trust Inc. (NYSE: KREF) for the benefit of its stockholders. This presentation is solely for informational purposes in connection with evaluating the business, operations and financial results of KKR Real Estate Financ
Slide 3: Overview of KKR Real Estate Finance Trust Inc. (KREF)
Overview of KKR Real Estate Finance Trust Inc. (KREF) Focused on larger, senior floating-rate loans Direct origination platform Fully integrated within KKR Real Estate KREF is a publicly traded externally managed REIT that ~4-year operating history; IPO in May 2017 focuses on originating sen
Slide 4: Successfully Executing on Business Strategy
Successfully Executing on Business Strategy Solidify Market Execute on Incubate Business Presence Strategy KREF Progress May 2017 Since IPO(1) • Completed IPO for net proceeds of $226MM $2.1BN LTM Originations January 2015 • Hired team of nine professionals including Matt 100% Floating‐Rate Seni
Slide 5: KKR Platform
KKR Platform • KREF is externally managed by KKR Real Estate Finance Manager LLC, a subsidiary of KKR (NYSE: KKR, Market Capitalization: $22.3BN(1)), a leading global investment firm with an over 40-year history and a diverse mix of investments across multiple asset classes, including private equity
Slide 6: Integration with KKR Differentiates KREF in the Marketplace
Integration with KKR Differentiates KREF in the Marketplace • KREF further differentiates itself by seeking opportunities where it has sourcing, underwriting and execution advantages through KKR’s brand, industry knowledge, relationships and deep bench of investment professionals Best-in-class fin
Slide 7: KKR Real Estate Credit Investment Committee
KKR Real Estate Credit Investment Committee • Diversity of Manager’s Investment Committee creates a thorough vetting process that enables KREF to evaluate potential transactions through multiple lenses Manager Investment Committee Chris Lee Matt Salem Patrick Mattson Ralph Rosenberg Co-CEO & Co-Pres
Slide 8: Targeted KREF Strike Zone
Targeted KREF Strike Zone • KREF focuses on floating-rate senior loans collateralized by high-quality commercial real estate: Representative Terms on Newly-Originated Key Attributes of KREF’s Investments Senior Loans Loan Size $50 - $400 million Collateral Primarily Transitional CRE Properties Prima
Slide 9: Key Investment Decision-Making Factors
Key Investment Decision-Making Factors Disciplined Evaluation of Potential Investments Market Dynamics Attractive Basis • High barrier-to-entry markets • Discount to replacement cost • Infill locations • Borrower basis at a discount to competitive owners in the market • Favorable market dynamics
Slide 10: Rigorous Investment Screening and Selection Process
Rigorous Investment Screening and Selection Process • For LTM June 30, 2018, KREF has screened $41.5 billion of financing opportunities and originated $2.1 billion (5%) of senior loans Large opportunity set funneled through rigorous screening and approval process Rigorous Screening The “KKR Edge” Mu
Slide 11: YTD Loan Originations
YTD Loan Originations • YTD June 30, 2018, originations of $1.1 billion of floating-rate senior loans • Subsequent to quarter end, originated two floating-rate senior loans totaling $416 million, bringing YTD originations to $1.6 billion Summary of YTD 2Q’18 Originations Growth in Total Loan Origina
Slide 12: KREF Portfolio by the Numbers
KREF Portfolio by the Numbers • Outstanding total portfolio of $3.0 billion as of June 30, 2018 • 42% increase in portfolio size since December 31, 2017 • Office and multifamily loans compromise 80% of the portfolio Total Portfolio Growth Property Type(2) ($ in Millions) ($ in Millions) Current Port
Slide 13: KREF Portfolio by the Numbers
KREF Portfolio by the Numbers • $3.0 billion portfolio comprised of 37 investments. Office and multifamily loans compromise 80% of the portfolio • Portfolio weighted average LTV of 67%(1) Geography(2) Investment Type(3) CMBS Mezz 1% 1% Senior Loans 97% Interest Rate Type Fixed 2% Floating 98% Note:
Slide 14: Portfolio Credit Quality Remains Strong
Portfolio Credit Quality Remains Strong • KREF’s loan portfolio is 100% performing, with no defaulted or impaired loans • The securities portfolio is performing as expected Loan-to-Value(1,2) Risk Rating Distribution(2,4) (% of total portfolio) (% of portfolio) Weighted Average Weighted Average LTV(
Slide 15: Recent Operating Performance
Recent Operating Performance • 2Q 2018 Net Income attributable to common stockholders increased to $23.5 million • Net Core Earnings(1) increased to $37.5 million. $19.4 million, or $0.37 per share, of Net Core Earnings increase was related to the gain on sale of CMBS B-Piece investments • Book valu
Slide 16: Financing Overview
Financing Overview • Total financing capacity of $2.6 billion(1) with $0.8 billion of undrawn capacity as of June 30, 2018 • Entered into $600 million term loan financing facility providing matched-term financing on a non-mark to market and non- recourse basis • Issued $144 million of 6.125% convert
Slide 17: Interest Rate Sensitivity
Interest Rate Sensitivity • KREF benefits in a rising rate environment • 98% of the portfolio is indexed to one-month USD LIBOR • A 50 basis point increase in one-month USD LIBOR would increase net interest income by $3.5 million or $0.07 per share over the next 12 months(1)(2) Net Interest Income S
Slide 18: Case Studies
Case Studies Atlanta & Tampa Multifamily Atlanta Industrial Philadelphia Office Investment Refinance of high-quality, renovated Refinance of well-located industrial Refinance of two office buildings multifamily that is 88% occupied property with 84% occupancy with 77% occupancy and strong in-place c
Slide 19: Case Studies
Case Studies Boston Office Queens Office New York Multifamily Investment Acquisition of recently renovated office Refinance of 71% occupied office Refinance of newly-constructed building with 79% occupancy located in property with strong, long-term in- multifamily in infill location with 87% an inst
Slide 20: Key Investment Highlights
Key Investment Highlights Established and growing business with strong operating and execution track record Differentiated platform and origination capabilities Large and compelling market opportunity Focused investment strategy with proven scale and access to capital Disciplined underwrit
Slide 21: Appendix
Appendix KKR 21 REAL ESTATE FINANCE TRUST
Slide 22: Portfolio Details
Portfolio Details Committed Current Future Max Remaining # ($ in millions) Investment Location Property Type Investment Date Principal Amount Principal Amount Net Equity(2) Coupon(4)(5) LTV(4)(7) Funding(3) Term (Yrs)(4)(6) (1) Senior Loans 1 Senior Loan Queens, NY Office 5/9/2018 $350.0 $211.7 $107
Slide 23: Consolidated Balance Sheets
Consolidated Balance Sheets (in thousands - except share and per share data) June 30, 2018 December 31, 2017 Assets Cash and cash equivalents $ 40,762 $ 103,120 Restricted cash - 400 Commercial mortgage loans, held-for-investment, net 2,844,702 1,888,510 Equity method investments, at fair value 22,6
Slide 24: Consolidated Statements of Income
Consolidated Statements of Income (in thousands - except share and per share data) For the Three Months Ended For the Six Months Ended June 30, 2018 March 31, 2018 June 30, 2017 June 30, 2018 June 30, 2017 Net Interest Income Interest income $ 40,363 $ 31,694 $ 17,446 $ 72,057 $ 30,352 Interest expe
Slide 25: Reconciliation of GAAP Net Income to Core Earnings and Net Core Earnings
Reconciliation of GAAP Net Income to Core Earnings and Net Core Earnings 2Q18 1Q18 4Q17 3Q17 ($ in thousands, except share and per share data) Net Income Attributable to Common Stockholders $23,483 $23,280 $17,034 $17,339 Adjustments Non-cash equity compensation expense 273 1,018 25 25 Incentive com
Slide 26: Key Definitions
Key Definitions • "Core Earnings" and “Net Core Earnings”: Used by the Company to evaluate the Company's performance excluding the effects of certain transactions and GAAP adjustments the Company believes are not necessarily indicative of the current loan activity and operations. The Company also us
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