Kkr Real Estate Finance Trust Inc. · NYSE:KREF
Kkr Real Estate Finance Trust — Q3 2022 Earnings Presentation
42 slides from Kkr Real Estate Finance Trust's earnings presentation, November 2022
Slide 1: Investor Presentation November 2022
INVESTOR PRESENTATION NOVEMBER 2022
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: KKR Real Estate Finance Trust Inc. Overview
KKR Real Estate Finance Trust Inc. Overview Best In Class Conservative KREF’s Manager Fully Portfolio Balance Sheet Integrated with KKR $7.7 B $9.0 B 14% Investment Portfolio Financing Capacity KKR Ownership in KREF 99% 56% 76% $496 B $24 B Senior Loans Multifamily & Fully Non-Mark-to-Market(3) Glob
Slide 4: Investment Highlights
Investment Highlights 4 3 5 Differentiated Best in Class Investment Conservative Investment Portfolio 2 Liability Cycle Tested, Strategy Management Experienced Leadership Team 6 1 KKR Portfolio Sponsorship Benefits from Higher Rate Environment KKR Real Estate Finance Trust (“KREF”) benefits from its
Slide 5: KKR Sponsorship
KKR Sponsorship KREF
Slide 6: KKR Platform – A Leading Global Asset Manager
KKR Platform – A Leading Global Asset Manager Founded 1976 $496 B $24 B 810 22 / 17 Assets Under Management Internal Balance Sheet Investment Professionals Cities / Countries KKR Real Estate Attributes KKR operates with a single culture that rewards ~$64 billion in AUM in Real Estate strategies glob
Slide 7: Integrated Global Real Estate Platform
Integrated Global Real Estate Platform Founded in 2011 and fully integrated across both Real Estate Debt and Equity, as well as the Americas, Europe, and Asia Real Estate Loans $44B of Collateral Value(1) Integrated Real Estate Platform Own or lend on Real Estate $196B RE assets CMBS Equity $53B of
Slide 8: KREF Integration with KKR
KREF Integration with KKR KREF 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 KKR Private Equity $94B of AUM, 217 KKR Credit Integration Driv
Slide 9: Experienced Leadership Team
Experienced Leadership Team 9
Slide 10: KKR Real Estate Credit Investment Committee
KKR Real Estate Credit Investment Committee Diversity of Manager’s Investment Committee creates a thorough vetting process US Investment Committee Matt Salem Patrick Mattson Ralph Rosenberg Chris Lee Joel Traut CEO KREF President & COO KREF Chairman of KREF Board Vice Chairman of KREF Board Partner
Slide 11: KKR Real Estate Finance Trust Team
KKR Real Estate Finance Trust Team Leadership Team Ralph Rosenberg Chris Lee Matt Salem Patrick Mattson Kendra Decious Chairman of the Board Vice Chairman of the Board Chief Executive Officer President Chief Financial Officer Member of the Board Chief Operating Officer Treasurer Senior Investment Te
Slide 12: Differentiated Investment Strategy
Differentiated Investment Strategy 12
Slide 13: Differentiated, Conservative Investment Strategy
Differentiated, Conservative Investment Strategy Lending on institutional quality real estate owned by high-quality sponsors in top markets Institutional Quality Top Markets with High-Quality, Experienced & Commercial Real Estate Strong Underlying Fundamentals Well-Capitalized Sponsors 80% Select Ex
Slide 14: Targeted Strike Zone
Targeted Strike Zone Representative Terms on Newly-Originated Senior Loans Loan Size $50-$500+ million Collateral Primarily Transitional CRE Properties Sponsorship Well-Established, Capitalized & Experienced Geographies Top 30 U.S. Markets Property Types Multifamily, Office, Life Science, Industrial
Slide 15: Rigorous Investment Screening and Selection Process
Rigorous Investment Screening and Selection Process Large opportunity set funneled through rigorous screening and approval process Rigorous Screening The “KKR Edge” Multidisciplinary Review Over the last twelve months, KREF screened Deals Screened: $142.0B(1) $142.0 billion of financing opportunitie
Slide 16: Best In Class Investment Portfolio
Best In Class Investment Portfolio 16
Slide 17: KREF Loan Portfolio by the Numbers
KREF Loan Portfolio by the Numbers Total Portfolio Growth Investment Type(2) Interest Rate Type Non-Senior 100% Floating ($ in Millions) 1% $7,726 SOFR $5,826 36% $5,221 $5,035 LIBOR Senior 64% Loans 99% Property Type 3Q'19 3Q'20 3Q'21 3Q'22 Hospitality Other (4) 5% 6% Geography(1) Life Science (3)
Slide 18: Multifamily and Office Loan Overview
Multifamily and Office Loan Overview Multifamily: 44% of Loan Portfolio Office: 27% of Loan Portfolio $100 M 69% 0% $165 M 64% 2.4% Average Loan Size(1) W.A. LTV Construction Loans Average Loan Size(1) W.A. LTV(3) Co-Working Exposure 80% 91% 2016 69% 74% 7.6 years W.A. Occupancy W.A. Occupancy Media
Slide 19: Case Studies: Largest Three Multifamily Loans
Case Studies: Largest Three Multifamily Loans Investment Arlington Multifamily Los Angeles Multifamily Sunbelt Multifamily Portfolio Loan Type Floating-Rate Senior Loan Floating-Rate Senior Loan Floating-Rate Senior Loan Investment Date September 2021 February 2021 May 2019 912-unit Class-B+ and 198
Slide 20: Case Studies: Largest Three Office Loans
Case Studies: Largest Three Office Loans Investment Bellevue Office Mountain View Office Minneapolis Office Loan Type Floating-Rate Senior Loan Floating-Rate Senior Loan Floating-Rate Senior Loan Investment Date September 2021 July 2021 November 2017 Class-A Office Five Class-A Office Buildings Two
Slide 21: Case Studies: Largest Three Industrial Loans
Case Studies: Largest Three Industrial Loans Investment Western U.S. Industrial Portfolio Bronx Industrial U.S. Industrial Portfolio Loan Type Floating-Rate Senior Loan Floating-Rate Senior Loan Floating-Rate Senior Loan Investment Date April 2022 August 2021 June 2021 14 Class A/B Industrial Proper
Slide 22: 3Q'22 Loan Originations – Select Case Studies
3Q'22 Loan Originations – Select Case Studies Investment Boston Life Science San Francisco Area Life Science Loan Type Floating-Rate Senior Loan Floating-Rate Senior Loan Investment Date August 2022 September 2022 424k RSF Class A Four-Building, 656k SF Collateral Life Science Development Life Scien
Slide 23: Portfolio Credit Quality Overview
Portfolio Credit Quality Overview Collected 100% of interest payments due on loan portfolio Loan-to-Value(1,2) Risk Rating Distribution (% of total loan portfolio) (% of loan portfolio) Weighted Average Weighted Average 2Q'22 LTV(3): 67% 2Q'22 Risk Rating(3): 3.0 91% 32% 24% 19% 15% 10% 0% 5% 4% 0%
Slide 24: Case Studies: Watch List Loans (Risk Rating 5)
Case Studies: Watch List Loans (Risk Rating 5) Investment Minneapolis Office Philadelphia Office Loan Type Floating-Rate Senior Loan Floating-Rate Senior Loan Investment Date November 2017 April 2019 Two Class-A Office Buildings Collateral 4-Building, 711k RSF Office Portfolio totaling 1.1mm SF Loan
Slide 25: Case Studies: Watch List Loans (Risk Rating 4)
Case Studies: Watch List Loans (Risk Rating 4) Investment Mountain View Office Washington, D.C. Office Philadelphia Office Loan Type Floating-Rate Senior Loan Floating-Rate Senior Loan Floating-Rate Senior Loan Investment Date July 2021 December 2019 June 2018 Five Class-A Office Buildings Collatera
Slide 26: Conservative Liability Management
Conservative Liability Management 26
Slide 27: Financing Overview: 76% Non-Mark-To-Market
Financing Overview: 76% Non-Mark-To-Market Diversified financing sources totaling $9.0 billion with $3.0 billion of undrawn capacity Summary of Outstanding Financing Leverage Ratios Maximum Outstanding Weighted Advance Non- ($ in Millions) Capacity Face Amount Avg. Coupon(1) Rate MTM (2) Term Credit
Slide 28: Focused on Growing Non-MTM Financing Capacity
Focused on Growing Non-MTM Financing Capacity Creating a diversified liability structure built on non-mark-to-market financing has been a top priority Summary of Non-MTM Financing Growth Since June 30, 2021 $ in Millions $4,111 $641 Term Lending $1,350 Agreements $540 Bespoke Liabilities Asset Speci
Slide 29: Financing Overview: Term Credit Facilities
Financing Overview: Term Credit Facilities ($ in Millions) Total or Counterparty Weighted Average Drawn $716 $584 $124 $1,423 Capacity $1,000 $600 $240 $1,840 Collateral: Loans / 11 Loans / $979 11 Loans / $791 7 Loans / $288 29 Loans / $2,057 Principal Balance Final Stated Maturity(1) September 202
Slide 30: Liquidity Overview
Liquidity Overview In addition to the available liquidity below, KREF had $370 million of unencumbered senior loans that can be pledged to financing facilities subject to lender approval as of September 30, 2022 Sources of Available Liquidity ($ in Millions) $1,000 $916 $900 $123 $800 $700 $600 $500
Slide 31: Portfolio Positioned for Higher Rate Environment
Portfolio Positioned for Higher Rate Environment Portfolio rotated out of higher rate-floor loans positioning KREF to benefit from a rising rate environment 100% floating-rate loan portfolio; 64% indexed to one-month LIBOR and 36% to Term SOFR Annual Net Interest Income Per Share Sensitivity to Chan
Slide 32: Recent Operating Performance
Recent Operating Performance Net Income and Distributable Earnings Dividends and Book Value Per Share ($ in Millions) 3Q'21 2Q'22 3Q'22 3Q'21 2Q'22 3Q'22 Net income (loss)(1): Dividend per share: $32.0 $19.4 ($48.4) $0.43 $0.43 $0.43 Distributable earnings(2): Dividend yield on book value per share:
Slide 33: Key Highlights
Key Highlights Best in class investment portfolio – 56% Fully integrated with KKR; aligned with Multifamily and Industrial; 7% Life Science shareholders – 14% ownership; ~$64B of real estate AUM Scaled investment portfolio – +33% in net funded Experienced leadership & asset management portfolio grow
Slide 34: Appendix
Appendix KREF
Slide 35: Portfolio Details
Portfolio Details ($ in Millions) Committed Current Investment Total Whole Net Future Max Remaining Loan Per Risk # Investment Location Property Type (2) Principal Principal (3) (5)(6) Coupon LTV (5)(9) Date Loan (2) Equity Funding(4) Term (Yrs) (5)(7) SF / Unit / Key (8) Rating Amount Amount (1) Se
Slide 36: Portfolio Details
Portfolio Details ($ in Millions) Committed Current Investment Total Whole Net Future Max Remaining Loan Per Risk # Investment Location Property Type Principal Principal Coupon (5)(6) LTV (5)(9) Loan(2) (3) Date (2) Equity Funding(4) Term (Yrs)(5)(7) SF / Unit / Key(8) Rating Amount Amount Senior Lo
Slide 37: Portfolio Details
Portfolio Details (1) Senior loans include senior mortgages and similar credit quality investments, including junior participations in our originated senior loans for which we have syndicated the senior participations and retained the junior participations for our portfolio and excludes vertical loa
Slide 38: Fully Extended Loan Maturities
Fully Extended Loan Maturities Fully extended weighted average loan maturity of 3.4 years(1) Fully Extended Loan Maturities(1) ($ in Millions) $3,000 $2,879 $2,519 $2,500 $2,000 $1,500 $972 $1,000 $596 $500 $392 $194 $58 $0 2022 2023 2024 2025 2026 2027 2028 (1) Excludes CMBS B-Pieces held through a
Slide 39: Consolidated Balance Sheets
Consolidated Balance Sheets (in thousands - except share and per share data) September 30, 2022 December 31, 2021 Assets Cash and cash equivalents(1) $ 183,341 $ 271,487 Commercial real estate loans, held-for-investment 7,306,565 6,316,733 Less: Allowance for credit losses (110,798) (22,244) Commerc
Slide 40: Consolidated Statements of Income
Consolidated Statements of Income (in thousands - except share and per share data) Three Months Ended Nine Months Ended September 30, 2022 June 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021 Net Interest Income Interest income $ 114,627 $ 90,603 $ 75,320 $ 278,460 $ 207,235 Intere
Slide 41: Reconciliation of GAAP Net Income to Distributable Earnings
Reconciliation of GAAP Net Income to Distributable Earnings (in thousands - except share and per share data) Three Months Ended Per Diluted Per Diluted Per Diluted September 30, 2022 Share(1) June 30, 2022 Share(1) September 30, 2021 Share(1) Net Income (Loss) Attributable to Common Stockholders $ (
Slide 42: Key Definitions
Key Definitions “Distributable Earnings": Commencing for all periods ending on or after December 31, 2020, the Company has elected to present Distributable Earnings, a measure that is not prepared in accordance with GAAP, as a supplemental basis to KREF’s net income as determined in accordance with
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