Kkr Real Estate Finance Trust Inc. · NYSE:KREF
Kkr Real Estate Finance Trust — Investor Presentation (February 2021)
44 slides from Kkr Real Estate Finance Trust's investor presentation, February 2021
Slide 1: Investor Presentation | February 2021
Investor Presentation | February 2021
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 Fully Integrated with KKR Portfolio Balance Sheet $5.0 Billion $6.1 Billion 36% Investment Portfolio Financing Capacity KKR Ownership in KREF 98.5% 81% 83% $252 Billion $20 Billion Senior Loans Multifamily & Office Fully Non-Mark
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 $252bn $20bn ~480 20 / 15 Assets Under Management Internal Balance Sheet Investment Professionals Cities / Countries KKR Attributes KKR Real Estate Attributes ~$16 billion in AUM in Real Estate strategies globally(1) KKR operates with a sing
Slide 7: Integrated Americas Real Estate Platform
Integrated Americas Real Estate Platform RE Equity • REPA I / II / III: opportunistic ~$13bn of asset value(1) Integrated • KPPA: core plus Real Estate Platform • Differentiated access to • KREF: primarily senior loans on RE Senior Loans transitional properties in the top information and enhanced $6
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, ~180 Integration Drives profes
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 MOSTAFA NAGATY Chairman of the Board Vice Chairman of the Board Chief Executive Officer President & Chief Operating Officer Chief Financial Officer & Treasurer Senior Investment Team JOEL TRAUT JU
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% <2% 100% 100% 86% 27% 81% 80% 80% 6% Senior Loan 62% Multifamily 60% 60% and Office Mezz/Other 97% 98% Loan Hospitality and 40% 40% 31% Retail Securities 67% 20% 20% 7% 9% 0% 0% At IPO 4Q'18 4Q'20 At IPO 4
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 $44.1 billion of Deals Screened: $44.1bn(1) financing opportunities
Slide 17: Best In Class Investment Portfolio
Best In Class Investment Portfolio 17
Slide 18: KREF Loan Portfolio by the Numbers
KREF Loan Portfolio by the Numbers Total Portfolio Growth Investment Type(3) Interest Rate Type ($ in Millions) Mezz/Other Current Portfolio: 1.5% Fixed 0.1% $5.3 billion(1) Including net funding and repayment $5,075 $4,998 activity subsequent to quarter-end $4,134 Senior Floating $2,083 Loans 99.9%
Slide 19: 4Q’20 Loan Originations – Select Case Studies
4Q’20 Loan Originations – Select 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 Oak
Slide 20: 4Q’20 Loan Originations – Select Case Studies
4Q’20 Loan Originations – Select Case Studies Investment Denver Industrial Austin Multifamily Washington D.C. Multifamily Loan Type Floating-Rate Senior Loan Floating-Rate Senior Loan Floating-Rate Senior Loan Loan Size $95.8 million $80.0 million $69.0 million Location Denver, CO Austin, TX Washing
Slide 21: Multifamily and Office Loan Overview
Multifamily and Office Loan Overview Multifamily: 50% of Loan Portfolio Office: 31% of Loan Portfolio $122 mm 70% <1% $141 mm 62% <1% Average Loan Size W.A. LTV Construction Average Loan Size W.A. LTV Co-Working Exposure 54% 73% 2005 71% 72% 6.7 years W.A. Occupancy W.A. Occupancy W.A. Year Built W.
Slide 22: Case Studies: Largest Three Multifamily Loans
Case Studies: Largest Three Multifamily Loans Investment Chicago Multifamily Arlington Multifamily Sunbelt Multifamily Portfolio Loan Type Floating-Rate Senior Loan Floating-Rate Senior Loan Floating-Rate Senior Loan Investment Date June 2019 June 2019 May 2019 Collateral 800-Unit Class-A Luxury Mul
Slide 23: Case Studies: Largest Three Office Loans
Case Studies: Largest Three Office Loans Investment Boston Office Minneapolis Office Irvine Office Loan Type Floating-Rate Senior Loan Floating-Rate Senior Loan Floating-Rate Senior Loan Investment Date May 2018 November 2017 November 2019 Class-B+ Office Two Class-A Office Buildings Two Class-A Off
Slide 24: Portfolio Credit Quality Remains Strong
Portfolio Credit Quality Remains Strong • Loan portfolio is 97.7% performing Loan-to-Value(1,2) Risk Rating Distribution(2) (% of total portfolio) (% of portfolio) Weighted Average Weighted Average 3Q'20 LTV(3): 66% 3Q'20 79% Risk Rating(3): 3.1 29% 27% 17% 18% 14% 5% 2% 0% 9% 1 2 3 4 5 0 2 27 6 2 0
Slide 25: Case Studies: Watch List Loans
Case Studies: Watch List Loans(1) (Risk Rating 4 & 5) Investment Portland Retail(2) New York Condo Ft. Lauderdale Hotel San Diego Multifamily New York Condo Brooklyn Hotel Queens Industrial Loan Type Floating-Rate Senior Loan Floating-Rate Senior Loan Floating-Rate Senior Loan Floating-Rate Senior L
Slide 26: Conservative Liability Management
Conservative Liability Management 26
Slide 27: Liability Management: 83% Non-Mark-To-Market
Liability Management: 83% Non-Mark-To-Market Conservative liability management focused on growing diversified non-mark-to-market financing capacity Outstanding Secured Financing(1) IPO 4Q’18 4Q’20 Asset Specific Financing 2% Term Credit Facilities 17% Term Credit CLO 28% Senior Loan Term Loan Facili
Slide 28: Diversified Financing Sources Totaling $6.1 Billion
Diversified Financing Sources Totaling $6.1 Billion Summary of Outstanding Financing Leverage Ratios ($ in Millions) Maximum Outstanding Weighted Avg. Advance Non- Capacity Face Amount Coupon Rate MTM Term Credit Facilities $1,840 $673 L+1.6% 63.3% - (1) 3.6x 0.2x Term Lending Agreement $900 $900 L+
Slide 29: Financing Overview: Term Credit Facilities
Financing Overview: Term Credit Facilities ($ in Millions) Counterparty Total / Weighted Average Drawn $446 $150 $77 $673 Capacity $1,000 $600 $240 $1,840 Collateral: Loans / Principal 5 Loans / $684 3 Loans / $221 2 Loans / $158 10 Loans / $1,063 Balance Final Stated Maturity(1) November 2023 Decem
Slide 30: Liquidity Overview
Liquidity Overview • In addition to the available sources of liquidity noted below, KREF had $274.7 million of unencumbered senior loans that can be pledged to financing facilities subject to lender approval, as of December 31, 2020. Sources of Available Liquidity ($ in Millions) $600.0 $500.0 $481.
Slide 31: Earnings Power from LIBOR Floors
Earnings Power from LIBOR Floors 31
Slide 32: Portfolio Benefits from Attractive in the Money LIBOR Floors
Portfolio Benefits from Attractive in the Money LIBOR Floors • 99.9% of the loan portfolio is indexed to one-month USD LIBOR • Portfolio benefits from current low rate environment given in-place LIBOR floors 85% of the portfolio is subject to a LIBOR floor of at least 1.0% Portfolio weighted ave
Slide 33: Recent Operating Performance
Recent Operating Performance Net Income(1) and Distributable Earnings(2) Dividends and Book Value Per Share 1Q'20 2Q'20 3Q'20 4Q'20 ($ in Millions) 1Q'20 2Q'20 3Q'20 4Q'20 Net income: Dividend per share: ($35.2) $28.6 $31.4 $28.8 $0.43 $0.43 $0.43 $0.43 Distributable earnings: Dividend yield on book
Slide 34: Key Highlights
Key Highlights Best in class investment portfolio - 81% Fully integrated with KKR; aligned with multifamily and office; only 9% hospitality and retail shareholders – 36% ownership; ~$16bn of real estate AUM Conservative liability management – 83% Experienced leadership & asset management diversified
Slide 35: Appendix
Appendix 35
Slide 36: 4Q'20 Financial Summary
4Q'20 Financial Summary Income Statement Balance Sheet ($ in Millions) 4Q20 ($ in Millions) 4Q20 Net Interest Income $34.4 Total Portfolio $4,905.4 Other Income 1.3 Term Credit Facilities 673.1 Operating Expenses and Other (10.3) Term Lending Agreement 900.0 Benefit From Credit Loss Provision 3.4 As
Slide 37: Portfolio Details
Portfolio Details Committed Investment Total Whole Current Net Future Max Remaining Loan Per Risk # Investment Location Property Type Principal Coupon(5)(6) LTV(5)(8) Date Loan(2) Principal Amount Equity (3) Funding(4) Term (Yrs)(5)(7) SF / Unit / Key Rating Amount(2) Senior Loans (1) 1 Senior Loan
Slide 38: Portfolio Details
Portfolio Details (1) Senior loans include senior mortgages and similar credit quality investments, including junior participations in our originated senior loans for which we have syndicated the senior participations and retained the junior participations for our portfolio and excludes vertical loa
Slide 39: Fully Extended Loan Maturities
Fully Extended Loan Maturities • Fully extended weighted average loan maturity of 3.3 years(1) Fully Extended Loan Maturities(1) ($ in Millions) $2,500 $1,971.3 $2,000 $1,500 $1,394.2 $1,000 $773.8 $500 $353.1 $208.7 $261.0 $0 2021 2022 2023 2024 2025 2026 (1) Excludes RECOP I CMBS B-Piece investmen
Slide 40: Consolidated Balance Sheets
Consolidated Balance Sheets (in thousands - except share and per share data) December 31, 2020 December 31, 2019 Assets Cash and cash equivalents $ 110,832 $ 67,619 Commercial mortgage loans, held-for-investment 4,844,534 4,931,042 Less: Allowance for credit losses (59,801) - Commercial mortgage loa
Slide 41: Consolidated Statements of Income
Consolidated Statements of Income (in thousands - except share and per share data) Three Months Ended Year Ended December 31, September 30, December 31, December 31, December 31, December 31, 2020 2020 2019 2020 2019 2018 Net Interest Income Interest income $ 63,201 $ 67,689 $ 72,417 $ 269,188 $ 274
Slide 42: Reconciliation of GAAP Net Income to Distributable Earnings
Reconciliation of GAAP Net Income to Distributable Earnings • Commencing for all periods ending on or after December 31, 2020, we have elected to present Distributable Earnings, a measure that is not prepared in accordance with GAAP, as a supplemental method of evaluating our operating performance.
Slide 43: Reconciliation of GAAP Net Income to Distributable Earnings
Reconciliation of GAAP Net Income to Distributable Earnings (in thousands - except share and per share data) Year Ended December 31, 2020 December 31, 2019 December 31, 2018 Net Income (Loss) Attributable to Common Stockholders $ 53,553 $ 90,492 $ 87,293 Adjustments Non-cash equity compensation expe
Slide 44: 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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