Kkr Real Estate Finance Trust Inc. · NYSE:KREF
Kkr Real Estate Finance Trust — Q3 2020 Earnings Presentation
42 slides from Kkr Real Estate Finance Trust's earnings presentation, November 2020
Slide 1: KKR Real Estate Finance Trust Inc. Investor Presentation
KKR Real Estate Finance Trust Inc. Investor Presentation | November 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 Portfolio Balance Sheet $5.0 Billion $6.4 Billion 36% Investment Portfolio Financing Capacity KKR Ownership in KREF 99.5% 83% 78% $234 Billion $19 Billion Senior Loans Multifamily & Office Full
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 ~$234bn ~$19bn ~480 20 /15 Assets Under Management Internal Balance Sheet Investment Professionals Cities / Countries KKR Attributes KKR Real Estate Attributes ~$14 billion in AUM in Real Estate strategies globally(1) KKR operates with a sin
Slide 7: Integrated Americas Real Estate Platform
Integrated Americas Real Estate Platform RE Equity • REPA I / II / III: opportunistic ~$11bn of asset value(1) Integrated • KPPA: core plus Real Estate Platform • Differentiated access to • KREF: primarily senior loans on information and enhanced RE Senior Loans $5bn loan portfolio transitional prop
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% 83% 27% 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 3Q'20 At IPO 4Q'18 3
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 $42.2 billion of Deals Screened: $42.2 BN(1) financing opportunitie
Slide 17: Best In Class Investment Portfolio
Best In Class Investment Portfolio 17
Slide 18: KREF Loan Portfolio by the Numbers
KREF Loan Portfolio by the Numbers Total Portfolio Growth Investment Type(4) Interest Rate Type ($ in Millions) Current Portfolio: Mezz Fixed 0.5% 0.1% $5.2 billion(2) $5,221 $5,035 Including net funding and repayment activity subsequent to quarter-end $3,383 Senior Floating Loans 99.9% $1,812 99.5%
Slide 19: October Loan Originations – Case Studies
October Loan Originations – Case Studies Investment Denver Multifamily Arlington Multifamily Oakland Office Loan Type Floating-Rate Senior Loan Floating-Rate Senior Loan Floating-Rate Senior Loan Loan Size $40.0 million(1) $70.9 million(2) $159.7 million(3) Location Denver, CO Arlington, VA Oakland,
Slide 20: Multifamily and Office Loan Overview
Multifamily and Office Loan Overview Multifamily Office 53% of Loan Portfolio 30% 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 21: 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 22: 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 23: Portfolio Credit Quality Remains Strong
Portfolio Credit Quality Remains Strong • Loan portfolio is 99.9% performing Loan-to-Value(1,2) Risk Rating Distribution(2) (% of total portfolio) (% of portfolio) Weighted Average 76% Weighted Average 2Q'20 LTV(3): 66% 2Q'20 Risk Rating(3): 3.1 28% 27% 20% 17% 16% 3% 5% 0.1% 8% 1 2 3 4 5 2 2 27 7 1
Slide 24: Case Studies: Watch List Loans
Case Studies: Watch List Loans(1) (Risk Rating 4 & 5) Investment Portland Retail New York Condo Ft. Lauderdale Hotel New York Condo San Diego, Multifamily Brooklyn Hotel Queens Industrial Loan Type Floating-Rate Senior Loan Floating-Rate Senior Loan Floating-Rate Senior Loan Floating-Rate Senior Loa
Slide 25: Conservative Liability Management
Conservative Liability Management 25
Slide 26: Liability Management: 78% Non-Mark-To-Credit
Liability Management: 78% Non-Mark-To-Credit Conservative liability management focused on growing diversified non-mark-to-credit financing capacity Outstanding Secured Financing(1) IPO 4Q’18 3Q’20 Asset Specific Financing 1% Term Credit Facilities Term Lending CLO 22% Agreement Term 28% 22% Credit (
Slide 27: Diversified Financing Sources Totaling $6.4 Billion
Diversified Financing Sources Totaling $6.4 Billion Summary of Outstanding Financing Leverage Ratios ($ in Millions) Maximum Outstanding Weighted Avg. Advance Non- Capacity Face Amount Coupon Rate MTM 3.8x Term Credit Facilities $2,000 $911 L+1.6% 65.9% - (2) 0.2x Term Lending Agreement $900 $900 L+
Slide 28: Financing Overview: Term Credit Facilities
Financing Overview: Term Credit Facilities ($ in Millions) Counterparty Total / Weighted Average Drawn $414 $419 $78 $911 Capacity $1,000 $600 $400(1) $2,000 Collateral: Loans / Principal 5 Loans / $654 3 Loans / $568 2 Loans / $161 10 Loans / $1,383 Balance Stated Maturity November 2023 December 20
Slide 29: Liquidity Overview
Liquidity Overview Sources of Available Liquidity ($ in Millions) $800.0 $700.6 $700.0 $42.0 $22.2 $600.0 $500.0 $335.0 $400.0 $300.0 $301.4 $200.0 $100.0 $0.0 (2) Cash Undrawn Approved and Undrawn Loan Repayment Receivable Total Available Liquidity Corporate Revolver Credit Capacity (1) (1) Represe
Slide 30: Earnings Power from LIBOR Floors
Earnings Power from LIBOR Floors 30
Slide 31: Rate Floors Provide Earnings Benefit in a Declining Rate Environment
Rate Floors Provide Earnings Benefit in a Declining Rate Environment • 99.9% of the portfolio is indexed to one-month USD LIBOR • Portfolio benefits from current low rate environment given in place LIBOR floors 98% of the portfolio is subject to a LIBOR floor of at least 0.95% 9% of total outsta
Slide 32: Recent Operating Performance
Recent Operating Performance Net Income(1) and Core Earnings(2) Dividends and Book Value Per Share 3Q'19 2Q'20 3Q'20 ($ in Millions) 3Q'19 2Q'20 3Q'20 Net income: Dividend per share: $23.6 $28.6 $31.4 $0.43 $0.43 $0.43 Core earnings: Dividend yield on book value per share: $25.0 $25.0 $32.5 8.8% 9.3
Slide 33: Key Highlights
Key Highlights Best in class investment portfolio - 83% Fully integrated with KKR; aligned with multifamily and office; only 8% hospitality and retail shareholders – 36% ownership; ~$12b of real estate AUM Conservative liability management – 78% Experienced leadership & asset management diversified
Slide 34: Appendix
Appendix 34
Slide 35: 3Q'20 Financial Summary
3Q'20 Financial Summary Income Statement Balance Sheet ($ in Millions) 3Q20 ($ in Millions) 3Q20 Net Interest Income $38.9 Total Portfolio $5,034.5 Other Income 1.1 Term Credit Facilities 910.8 Operating Expenses and Other (8.7) Term Lending Agreement 900.0 CECL Provision for Credit Loss, Net 0.1 As
Slide 36: Portfolio Details
Portfolio Details Investment Committed Current Net Future (4)(5) Max Remaining Loan Per (4)(7) Risk # Investment Location Property Type (2) (3) Coupon (4)(6) LTV Date Principal Amount Principal Amount Equity Funding Term (Yrs) SF / Unit / Key Rating (1) Senior Loans 1 Senior Loan Brooklyn, NY Multif
Slide 37: Portfolio Details
Portfolio Details (1) Senior loans include senior mortgages and similar credit quality investments, including junior participations in our originated senior loans for which we have syndicated the senior participations and retained the junior participations for our portfolio and excludes vertical loa
Slide 38: Fully Extended Loan Maturities
Fully Extended Loan Maturities • Fully extended weighted average loan maturity of 3.5 years(1) Fully Extended Loan Maturities(1) ($ in Millions) $2,500 $2,282.1 $2,000 $1,500 $1,387.2 $1,000 $525.1 $500 $334.6 $258.6 $109.6 $101.7 $0 2020 2021 2022 2023 2024 2025 2026 (1) Excludes RECOP I CMBS B-Pie
Slide 39: Consolidated Balance Sheets
Consolidated Balance Sheets (in thousands - except share and per share data) September 30, 2020 December 31, 2019 Assets Cash and cash equivalents (1) $ 301,375 $ 67,619 Commercial mortgage loans, held-for-investment 4,895,974 4,931,042 Less: Allowance for credit losses (62,735) - Commercial mortgag
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, June 30, September 30, September 30, September 30, 2020 2020 2019 2020 2019 Net Interest Income Interest income $ 67,689 $ 67,219 $ 74,223 $ 205,987 $ 201,918 Interes
Slide 41: 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 September 30, 2020 June 30, 2020 September 30, 2019 Net Income (Loss) Attributable to Common Stockholders $ 31,351 $ 28,590 $ 23,617 Adjustments Non-cash equity compensation expense
Slide 42: 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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