Kkr Real Estate Finance Trust Inc. · NYSE:KREF
Kkr Real Estate Finance Trust — Investor Presentation (March 2018)
29 slides from Kkr Real Estate Finance Trust's investor presentation, March 2018
Slide 1: KKR Real Estate Finance Trust Inc. Investor Presentation
KKR Real Estate Finance Trust Inc. Investor Presentation March 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 (KREF)
Overview of KKR Real Estate Finance Trust (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 Three-year operating history; IPO in May 2017 focuses on originating senio
Slide 4: KKR Platform
KKR Platform • KREF is externally managed by KKR Real Estate Finance Manager LLC, a subsidiary of KKR (NYSE: KKR, Market Capitalization: $18.7B(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 5: 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 6: KKR Real Estate Credit Investment Team
KKR Real Estate Credit Investment Team • 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 Jamie Weinstein Membe
Slide 7: Targeted KREF Strike Zone
Targeted KREF Strike Zone • KREF focuses on a targeted asset class comprised of 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 Primari
Slide 8: 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 • Favorable market dynamics owners in the market
Slide 9: Rigorous Investment Screening and Selection
Rigorous Investment Screening and Selection • For the year ended December 31, 2017, KREF has screened $29.7 billion of financing opportunities and originated $1.5 billion of senior loans Large opportunity set funneled through rigorous screening and approval process Rigorous Screening The “KKR Edge”
Slide 10: 2017 Loan Originations
2017 Loan Originations • For the year ended December 31, 2017, originations of $1.5 billion of floating-rate senior loans, up 175% from 2016 • Outstanding total loan portfolio of $2.1 billion as of December 31, 2017, up 148% from 2016 year-end • Subsequent to quarter end, originated a $75.5 million
Slide 11: Recent Operating Performance
Recent Operating Performance • 4Q 2017 Net Income attributable to common stockholders decreased to $17.0 million, down 2% QoQ; Net Core Earnings(1) increased to $17.1 million, up 4% QoQ • Paid 4Q dividend of $0.37 per share on January 12, 2018, equating to a 7.6% annualized dividend yield(2) Net Inc
Slide 12: Diversified Portfolio with Strong Fundamentals
Diversified Portfolio with Strong Fundamentals • $2.1 billion portfolio comprised of 33 investments • Portfolio weighted average LTV of 67%(1) Investment Type(2) Interest Rate Type Mezz Fixed CMBS 4% 7% 6% Senior Loans Floating 90% 93% Property Type(3) Geography(3) Industrial/ Hospitality Flex 2% 7%
Slide 13: Portfolio Credit Quality Remains Strong
Portfolio Credit Quality Remains Strong • KREF’s loan portfolio is 100% performing, with no defaulted or impaired loans • The securities portfolio is performing as expected Loan-to-Value(1,2) Risk Rating Distribution(2,4) ($ in Millions) ($ in Millions) $657 Weighted Average Weighted Average $1,792
Slide 14: Illustrative Implementation of Senior Loan Leverage
Illustrative Implementation of Senior Loan Leverage Bifurcated Financing Strategy to Optimize Risk-Adjusted Returns Levered Senior Loan Original Senior Levered Senior Loan Direct Leverage Loan Structural Leverage Facility Advance Syndication of Senior 75% of Original Interest to Third Party Senior L
Slide 15: Access to Efficient Capital Drives Financing Strategy
Access to Efficient Capital Drives Financing Strategy • Upsized Goldman Sachs term credit facility by $150 million and extended maturity to 2022 on a fully-extended basis • Upsized Morgan Stanley term credit facility by $100 million(1) and extended maturity to 2021 on a fully-extended basis • Termin
Slide 16: Interest Rate Sensitivity Provides a Benefit in a Rising Rate Environment
Interest Rate Sensitivity Provides a Benefit in a Rising Rate Environment • KREF benefits in a rising rate environment • 93% 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 $2.8 million or $0.05 per share ove
Slide 17: Case Studies
Case Studies Refinance of a newly renovated office building in a Recapitalization of a stabilized class-A office property submarket with strong trends St. Paul Office Minneapolis Office Loan Type Floating-Rate Senior Loan Loan Type Floating-Rate Senior Loan Loan Size $76 million Loan Size $182 milli
Slide 18: Case Studies
Case Studies Acquisition of a newly-constructed class-A multifamily Refinance of a newly-constructed class-A multifamily rental property in a residential market with positive macro rental property in a high barrier desirable market trends New Jersey Multifamily Honolulu Multifamily Loan Type Floatin
Slide 19: Case Studies
Case Studies Acquisition of office buildings in an institutional, liquid Remaining inventory in a newly-constructed luxury office market residential condominium in Manhattan Atlanta Office New York City Residential Condo Loan Type Floating-Rate Senior Loan Loan Type Floating-Rate Senior Loan Loan Si
Slide 20: Case Studies
Case Studies Refinance of a class-A multifamily rental property in a Value-enhancing repositioning of two well located dense, infill location with strong demographics industrial buildings Denver Multifamily Queens Industrial Loan Type Floating-Rate Senior Loan Loan Type Floating-Rate Senior Loan Loa
Slide 21: 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 22: Appendix
Appendix 22
Slide 23: KKR Real Estate Finance Trust Management Team & Investment Committee
KKR Real Estate Finance Trust Management Team & Investment Committee Chris Lee: Chris has served as Co-Chief Executive Officer and Co-President of our company and of our Manager since October 2015 and March 2016, respectively, and is also a member of our Manager’s investment committee. Mr. Lee joine
Slide 24: KKR Real Estate Finance Trust Management Team & Investment Committee
KKR Real Estate Finance Trust Management Team & Investment Committee Ralph Rosenberg: Ralph has served as a director since October 2014 and is the Chairman of our board of directors. Mr. Rosenberg is also a member of our Manager’s investment committee. Mr. Rosenberg joined KKR in 2011 and is a Membe
Slide 25: Portfolio Details
Portfolio Details ($ in millions) Max Committed Current Remaining Investment Principal Principal Net Future Term # Investment Location Property Type Date Amount Amount Equity(2) Funding(3) Coupon(4)(5) (Yrs)(4)(6) LTV(4)(7) Senior Loans(1) 1 Senior Loan New York, NY Condo (Resi) 8/4/2017 $239.2 $205
Slide 26: Consolidated Balance Sheets
Consolidated Balance Sheets (in thousands - except share and per share data) December 31, December 31, 2017 2016 Assets Cash and cash equivalents $ 103,120 $ 96,189 Restricted cash and cash equivalents 400 157 Commercial mortgage loans, held-for-investment, net 1,888,510 674,596 Commercial mortgage
Slide 27: Consolidated Statements of Income
Consolidated Statements of Income (in thousands - except share and per share data) For the Three Months Ended For the Year Ended Dec 31, 2017 Dec 31, 2016 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Net Interest Income Interest income $ 28,385 $ 11,775 $ 83,145 $ 32,659 $ 12,536 Interest expense 8,632 3,
Slide 28: Reconciliation of GAAP Net Income to Core Earnings and Net Core Earnings
Reconciliation of GAAP Net Income to Core Earnings and Net Core Earnings 4Q17 3Q17 2Q17 ($ in thousands, except share and per share data) Net Income Attributable to Common Stockholders $17,034 $17,339 $14,081 Adjustments Non-cash equity compensation expense 25 25 15 Incentive compensation to affilia
Slide 29: 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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