Kkr Real Estate Finance Trust Inc. · NYSE:KREF
Kkr Real Estate Finance Trust — Investor Presentation (September 2020)
41 slides from Kkr Real Estate Finance Trust's investor presentation, September 2020
Slide 1: KKR Real Estate Finance Trust Inc. Investor Presentation
KKR Real Estate Finance Trust Inc. Investor Presentation | September 2020
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 & Diverse Fully Integrated with KKR Investment Portfolio Balance Sheet $5.3 Billion $6.1 Billion 36% Investment Portfolio Financing Capacity KKR Ownership in KREF 99.5% 81% 73% $207 Billion $19 Billion Senior Loans Multifamily &
Slide 4: Investment Highlights
Investment Highlights 3 4 Differentiated Best in Class Investment Investment Portfolio 2 Strategy 5 Cycle Tested, Conservative Experienced Liability Leadership Team Management 6 1 Earnings KKR Power from Sponsorship LIBOR Floors KKR Real Estate Finance Trust (“KREF”) is a differentiated company full
Slide 5: KKR Sponsorship
KKR Sponsorship 5
Slide 6: KKR Platform - A Leading Global Asset Manager
KKR Platform - A Leading Global Asset Manager Founded 1976 ~$222bn ~$19bn ~480 20 /15 Assets Under Management Internal Balance Sheet Investment Professionals Cities / Countries KKR Attributes KKR Real Estate Attributes ~$12+ billion in AUM in Real Estate strategies globally(1) KKR operates with a si
Slide 7: Integrated Americas Real Estate Platform
Integrated Americas Real Estate Platform Integrated platform generates differentiated access to information and enhanced relevance in Real Estate capital markets − One leadership team − Scaled and differentiated portfolio: own or lend on ~$78 billion of Real Estate assets − Growing “library” of info
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 ~$74BN of AUM, ~200 Integration Drives profe
Slide 9: Experienced Leadership Team
Experienced Leadership Team 9
Slide 10: KKR Real Estate Credit Investment Committee
KKR Real Estate Credit Investment Committee KREF Management Team KREF Directors MATT SALEM PATRICK MATTSON RALPH ROSENBERG CHRIS LEE CEO KREF President & COO KREF Chairman of KREF Board Vice Chairman of KREF Board Partner & Head of Managing Director & COO of Partner & Global Head Partner & Head of R
Slide 11: KKR Real Estate Finance Trust Team
KKR Real Estate Finance Trust Team Leadership Team RALPH ROSENBERG CHRIS LEE MATT SALEM PATRICK MATTSON 22 Investment professionals (12 team members at IPO) Mostafa Nagaty supported by fulsome Chairman of the Board Vice Chairman of the Board Chief Executive Officer President & Chief Operating Office
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 the most liquid markets Institutional Quality Most Liquid Markets, with Strong High-Quality, Experienced & Commercial Real Estate Underlying Fundamentals Well-Capitalized S
Slide 14: Conservative Portfolio Construction
Conservative Portfolio Construction Investment Portfolio Evolution Property Type Evolution <3% <1% 100% 100% 86% 27% 81% 80% 80% 6% 62% Multifamily Securities 60% 60% and Office Mezz Loan 97% 99% Hospitality and 40% Senior Loan 40% Retail 31% 67% 20% 20% 7% 8% 0% 0% At IPO 4Q'18 2Q'20 At IPO 4Q'18 2
Slide 15: Targeted Strike Zone
Targeted Strike Zone Representative Terms on Newly-Originated Senior Loans Loan Size $50-$400 million Collateral Primarily Light Transitional CRE Properties Sponsorship Well-Established, Capitalized & Experienced Geographies Top 30 U.S. Markets Property Types Multifamily, Office, Industrial, Hospita
Slide 16: 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 $45.2 billion of Deals Screened: $45.2 BN(1) financing opportunitie
Slide 17: Best In Class Investment Portfolio
Best In Class Investment Portfolio 17
Slide 18: KREF Loan Portfolio by the Numbers
KREF Loan Portfolio by the Numbers Total Portfolio Growth Investment Type(3) Interest Rate Type ($ in Millions) Current Portfolio: Mezz 0.5% Fixed 0.1% $5.3 billion(1) $4,952 $5,257 Including net funding and repayment activity subsequent to quarter-end $2,960 Senior Floating Loans 99.9% $1,265 99.5%
Slide 19: Multifamily and Office Loan Overview
Multifamily and Office Loan Overview Multifamily Office 53% of Loan Portfolio 28% of Loan Portfolio $146 mm 67% <1% $147 mm 64% <1% Average Loan Size W.A. LTV Construction Average Loan Size W.A. LTV Co-Working Exposure 53% 74% 2014 72% 78% 6.3 years W.A. Occupancy W.A. Occupancy W.A. Year Built W.A.
Slide 20: Case Studies: Largest Three Multifamily Loans
Case Studies: Largest Three Multifamily Loans Investment Brooklyn Multifamily Chicago Multifamily Arlington Multifamily Loan Type Floating-Rate Senior Loan Floating-Rate Senior Loan Floating-Rate Senior Loan Investment Date May 2019 June 2019 June 2019 Collateral 857-Unit Class-A Luxury Multifamily
Slide 21: Case Studies: Largest Three Office Loans
Case Studies: Largest Three Office Loans Investment Boston Office Plano Office Minneapolis Office Loan Type Floating-Rate Senior Loan Floating-Rate Senior Loan Floating-Rate Senior Loan Investment Date May 2018 February 2020 November 2017 Class-B+ Office Four Class-A- Office Buildings Two Class-A Of
Slide 22: Portfolio Credit Quality Remains Very Strong
Portfolio Credit Quality Remains Very Strong • Loan portfolio is 99.9% performing Loan-to-Value(1,2) Risk Rating Distribution(2) (% of total portfolio) (% of portfolio) Weighted Average Weighted Average 1Q'20 LTV(3): 66% 1Q'20 Risk Rating(3): 3.0 77% 28% 27% 20% 17% 14% 3% 6% 0% 8% 1 2 3 4 5 2 3 28
Slide 23: Case Studies: Watch List Loans (Risk Rated-4)
Case Studies: Watch List Loans(1) (Risk Rated-4) Investment New York Condo Ft. Lauderdale Hotel New York Condo Portland Retail San Diego, Multifamily Brooklyn Hotel Queens Industrial Loan Type Floating-Rate Senior Loan Floating-Rate Senior Loan Floating-Rate Senior Loan Floating-Rate Senior Loan Flo
Slide 24: Conservative Liability Management
Conservative Liability Management 24
Slide 25: Liability Management: 73% Non-Mark-To-Credit
Liability Management: 73% Non-Mark-To-Credit Conservative liability management focused on growing diversified non-mark-to-credit financing capacity Outstanding Secured Financing(1) IPO 4Q’18 2Q’20 Term Warehouse Term Loan Facility 1% Credit (2) Facility CLO Facilities Term 24% 28% 27% Credit (2) Fac
Slide 26: Financing Overview: Diversified, Non-MTC Financing Sources
Financing Overview: Diversified, Non-MTC Financing Sources • Diversified financing sources totaling $6.1 billion with $1.9 billion of undrawn capacity Summary of Outstanding Financing Leverage Ratios ($ in Millions) Maximum Outstanding Weighted Avg. Advance Non- Capacity Face Amount Coupon Rate MTM
Slide 27: Financing Overview: Term Credit Facilities
Financing Overview: Term Credit Facilities ($ in Millions) Counterparty Total / Weighted Average Drawn $469 $419 $200 $1,088 Capacity $1,000 $600 $400 $2,000 Collateral: Loans / Principal 5 Loans / $658 3 Loans / $558 3 Loans / $306 11 Loans / $1,522 Balance Stated Maturity November 2023 December 20
Slide 28: Liquidity Overview
Liquidity Overview Sources of Available Liquidity ($ in Millions) $500.0 $450.0 $431.1 $18.8 $400.0 $350.0 $300.0 $285.0 $250.0 $200.0 $150.0 $100.0 $127.3 $50.0 $0.0 Cash Undrawn Approved and Undrawn Total Available Liquidity Corporate Revolver Credit Capacity (1) (1) Represents under-levered amoun
Slide 29: Earnings Power from LIBOR Floors
Earnings Power from LIBOR Floors 29
Slide 30: Rate Floors Provide Protection in Current Rate Environment
Rate Floors Provide Protection in Current Rate Environment Net Interest Income Per Share Sensitivity to LIBOR Movements(1) $0.18 ($ Impact Per Share / Q) Portfolio benefits from current rates $0.16 $0.16 LIBOR as of given in place LIBOR floors: 6/30/2020 $0.14 $0.13 • 98% of the portfolio is subject
Slide 31: Recent Operating Performance
Recent Operating Performance Net Income(2) and Core Earnings(1) Dividends and Book Value Per Share 2Q'19 1Q'20 2Q'20 ($ in Millions) 2Q'19 1Q'20 2Q'20 Net income: Dividend per share: $17.4 ($35.2) $28.6 $0.43 $0.43 $0.43 Core earnings: Dividend yield on book value per share: $20.5 $25.3 $25.0 8.8% 9
Slide 32: Key Highlights
Key Highlights Best in class investment portfolio - 81% Fully integrated with KKR; aligned with multifamily and office; only 8% hospitality and retail shareholders – 36% ownership; ~$11b of real estate AUM Conservative liability management – 73% Experienced leadership & asset management diversified
Slide 33: Appendix
Appendix 33
Slide 34: 2Q'20 Financial Summary
2Q'20 Financial Summary Income Statement Balance Sheet ($ in Millions) 2Q20 ($ in Millions) 2Q20 Net Interest Income $36.7 Total Portfolio $5,256.8 Other Income 0.4 Term Credit Facilities 1,087.8 Operating Expenses and Other (9.9) Term Lending Agreement 900.0 CECL Provision for Credit Loss, Net 1.4
Slide 35: Portfolio Details
Portfolio Details Investment Committed Current Net Future Max Remaining Loan Per Risk # Investment Location Property Type Coupon(4)(5) LTV(4)(7) Date Principal Amount Principal Amount Equity (2) Funding(3) Term (Yrs)(4)(6) SF / Unit / Key Rating Senior Loans (1) 1 Senior Loan Brooklyn, NY Multifamil
Slide 36: Portfolio Details
Portfolio Details (1) Senior loans include senior mortgages and similar credit quality investments, including junior participations in our originated senior loans for which we have syndicated the senior participations and retained the junior participations for our portfolio and excludes vertical loa
Slide 37: Fully Extended Loan Maturities
Fully Extended Loan Maturities • Fully extended weighted average loan maturity of 3.7 years(1) Fully Extended Loan Maturities(1) ($ in Millions) $2,500 $2,255.9 $2,000 $1,452.8 $1,500 $1,000 $516.3 $500 $405.5 $334.6 $125.0 $131.0 $0 2020 2021 2022 2023 2024 2025 2026 (1) Excludes RECOP I CMBS B-Pie
Slide 38: Consolidated Balance Sheets
Consolidated Balance Sheets (in thousands - except share and per share data) June 30, 2020 December 31, 2019 Assets Cash and cash equivalents $ 127,250 $ 67,619 Commercial mortgage loans, held-for-investment 5,113,531 4,931,042 Less: Allowance for credit losses (62,399) - Commercial mortgage loans,
Slide 39: Consolidated Statements of Income
Consolidated Statements of Income (in thousands - except share and per share data) Three Months Ended Six Months Ended June 30, 2020 March 31, 2020 June 30, 2019 June 30, 2020 June 30, 2019 Net Interest Income Interest income $ 67,219 $ 71,079 $ 62,944 $ 138,298 $ 127,695 Interest expense 30,563 39,
Slide 40: Reconciliation of GAAP Net Income to Core Earnings
Reconciliation of GAAP Net Income to Core Earnings (in thousands - except share and per share data) Three Months Ended June 30, 2020 March 31, 2020 June 30, 2019 Net Income (Loss) Attributable to Common Stockholders $ 28,590 $ (35,164) $ 17,381 Adjustments Non-cash equity compensation expense 1,374
Slide 41: Key Definitions
Key Definitions • "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. Core Earnings is a measure that is not prep
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