Kkr Real Estate Finance Trust Inc. · NYSE:KREF
Kkr Real Estate Finance Trust — Investor Presentation (February 2020)
33 slides from Kkr Real Estate Finance Trust's investor presentation, February 2020
Slide 1: KKR Real Estate Finance Trust Inc. Investor Presentation
KKR Real Estate Finance Trust Inc. Investor Presentation February 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: 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 ~6-year operating history; IPO in May 2017 focuses on originating sen
Slide 4: 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
Slide 5: Successfully Executing on Business Strategy with Strong Growth
Successfully Executing on Business Strategy with Strong Growth Total Portfolio(1) Total Loan Originations ($ in Millions) ($ in Millions) CAGR CAGR +56% +45% $5,075 $3,112 $4,134 $2,729 Total Loan Originations $173 $1,483 Average Loan $2,083 Size $144 $124 2017 2018 2019 2017 2018 2019 Net Core Earn
Slide 6: 4Q'19 Financial Summary
4Q’19 Financial Summary Income Statement Balance Sheet ($ in Millions, except per share data) ($ in Millions, except per share data) 4Q19 4Q19 Net Interest Income $31.1 Total Portfolio $5,075.0 Term Credit Facilities 1,088.2 Other Income 1.8 Term Lending Agreement 870.1 Operating Expenses and Other
Slide 7: KKR Platform
KKR Platform • KREF is externally managed by KKR Real Estate Finance Manager LLC, a subsidiary of KKR (NYSE: KKR, Market Capitalization: $28.2BN(1)), a leading global investment firm with a 43-year history and a diverse mix of investments across multiple asset classes, including private equity, real
Slide 8: 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 9: 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 10: 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 11: 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 12: Rigorous Investment Screening and Selection Process
Rigorous Investment Screening and Selection Process • In 2019, KREF screened $48.6 billion of financing opportunities and originated $3.1 billion (6%) of senior loans Large opportunity set funneled through rigorous screening and approval process Rigorous Screening The “KKR Edge” Multidisciplinary Re
Slide 13: 4Q'19 Loan Activity
4Q’19 Loan Activity • 2019 Originations of $3.1 billion of floating-rate senior loans • December 31, 2019 total portfolio of $5.1 billion, up $1.0 billion or 23% since December 31, 2018 Summary of 4Q’19 Originations $764mm 100% 100% Committed to 6 New Loans Senior Loans Floating-Rate Loans 63% L+2.8
Slide 14: KREF Portfolio by the Numbers
KREF Portfolio by the Numbers • Outstanding total portfolio of $5.1 billion as of December 31, 2019 • 23% increase in portfolio size YoY. Increased 301% since June 30, 2017 (first quarter-end post IPO) • Multifamily and office loans comprise 84% of the portfolio Total Portfolio Growth Property Type(
Slide 15: KREF Loan Portfolio
KREF Loan Portfolio • $5.0 billion loan portfolio comprised of 39 investments • Portfolio weighted average LTV of 66%(1) Geography(2) Investment Type(3) Mezz <0.1% Senior Loans 99.9% Interest Rate Type Fixed <0.1% Floating 99.9% Other (<5%) 22% NY Property Type 22% Condo Industrial Student (Resident
Slide 16: Portfolio Credit Quality Remains Strong
Portfolio Credit Quality Remains Strong • KREF’s loan portfolio is 100% performing, with no defaulted or impaired loans Loan-to-Value(1,2) Risk Rating Distribution(2) (% of total portfolio) (% of portfolio) Weighted Average Weighted Average LTV(3): 67% Risk Rating(3): 2.9 3Q’19 3Q’19 87% 32% 25% 17%
Slide 17: Recent Operating Performance
Recent Operating Performance • 4Q'19 Net Income attributable to common stockholders of $24.8 million or $0.43 per diluted share; 2019 Net Income attributable to common stockholders of $90.5 million or $1.57 per diluted share • 4Q'19 Net Core Earnings(1) of $25.5 million or $0.44 per diluted share; 2
Slide 18: Financing Overview: 72% Non-Mark-To-Market
Financing Overview: 72% Non-Mark-To-Market • Diversified financing sources totaling $5.5 billion with $1.6 billion of undrawn capacity Summary of Outstanding Financing Leverage Ratios ($ in Millions) 3.6x 3.5x Weighted 3.4x Maximum Outstanding Average Capacity Face Amount Coupon 2.3x 2.0x 1.9x Term
Slide 19: Interest Rate Sensitivity
Interest Rate Sensitivity • 99.9% of the portfolio is indexed to one-month USD LIBOR • Portfolio benefits from decreasing rates given in place LIBOR floors • Approximately half of the loan portfolio is subject to a LIBOR floor of at least 2.00% Quarterly Per Share Net Interest Income Sensitivity to
Slide 20: Case Studies
Case Studies Herndon Multifamily Washington, DC Office Retail Portfolio Investment Acquisition of newly-built property Refinance of Class-A office building in Acquisition of grocery-anchored adjacent to Amazon Web Services’ premier location properties backed by an investment East Coast HQ grade rate
Slide 21: Case Studies
Case Studies Los Angeles Multifamily Irvine Office State College Student Housing Investment Refinance of a newly-constructed Refinance of a five property complex Acquisition of a five building student Class-A multifamily asset within the airport submarket of Irvine housing portfolio Loan Type Floati
Slide 22: Case Studies
Case Studies Austin Multifamily Denver Multifamily Atlanta Multifamily Refinance of newly-constructed, Refinance of newly-constructed, Refinance of renovated multifamily Investment Class-A, multifamily property in mixed-use asset in high growth property in liquid submarket with high-growth location
Slide 23: Case Studies
Case Studies Chicago Office Chicago Multifamily Arlington Multifamily Investment Refinance of a, Class A, Refinance of newly-constructed, ultra- Refinance and acquisition of office building luxury, multifamily asset multifamily portfolio Loan Type Floating-Rate Senior Loan Floating-Rate Senior Loan
Slide 24: 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 25: Appendix
Appendix 25
Slide 26: Portfolio Details
Portfolio Details ($ in millions) Investment Committed Current Net Future Max Remaining # Investment Location Property Type Coupon(4)(5) LTV(4)(7) Date Principal Amount Principal Amount Equity (2) Funding(3) Term (Yrs)(4)(6) Senior Loans (1) 1 Senior Loan Brooklyn, NY Multifamily 5/22/2019 $386.0 $3
Slide 27: Portfolio Details
Portfolio Details (1) Senior loans include senior mortgages and similar credit quality investments, including junior participations in our originated senior loans for which we have syndicated the senior participations and retained the junior participations for our portfolio and excludes pari passu a
Slide 28: Fully Extended Loan Maturities
Fully Extended Loan Maturities Fully extended weighted average loan maturity of 4.1 years(1) Fully Extended Loan Maturities(1) ($ in Millions) $2,500 $2,160.9 $2,000 $1,660.6 $1,500 $1,000 $500 $401.3 $318.7 $224.3 $125.0 $148.4 $0 2020 2021 2022 2023 2024 2025 2026 Fully extended maturity (1) Exclu
Slide 29: Consolidated Balance Sheets
Consolidated Balance Sheets (in thousands - except share and per share data) December 31, 2019 December 31, 2018 Assets Cash and cash equivalents $ 67,619 $ 86,531 Commercial mortgage loans, held-for-investment, net 4,931,042 4,001,820 Equity method investments 37,469 30,734 Accrued interest receiva
Slide 30: Consolidated Statements of Income
Consolidated Statements of Income (in thousands - except share and per share data) Three Months Ended Year Ended December 31, December 31, December 31, December 31, December 31, 2019 2018 2019 2018 2017 Net Interest Income Interest income $ 72,417 $ 59,623 $ 274,335 $ 183,575 $ 83,145 Interest expen
Slide 31: Reconciliation of GAAP Net Income to Core Earnings and Net Core Earnings
Reconciliation of GAAP Net Income to Core Earnings and Net Core Earnings 2019 4Q19 3Q19 2Q19 1Q19 ($ in thousands, except share and per share data) Net Income Attributable to Common Stockholders $ 90,492 $ 24,789 $ 23,617 $ 17,381 $ 24,705 Adjustments Non-cash equity compensation expense 4,091 1,017
Slide 32: Reconciliation of GAAP Net Income to Core Earnings and Net Core Earnings
Reconciliation of GAAP Net Income to Core Earnings and Net Core Earnings 2019 2018 2017 ($ in thousands, except share and per share data) Net Income Attributable to Common Stockholders $ 90,492 $ 87,293 $ 58,818 Adjustments Non-cash equity compensation expense 4,091 1,973 65 Incentive compensation t
Slide 33: 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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