KKR Real Estate Finance Trust Inc. (KREF) Bundle
A Brief History of KKR Real Estate Finance Trust Inc. (KREF)
KKR Real Estate Finance Trust Inc. (KREF) was established to provide financing for commercial real estate properties. As of September 30, 2024, KREF has built a robust portfolio of diversified investments, primarily focusing on senior commercial real estate loans.
Company Overview
As of September 30, 2024, KREF reported total assets of approximately $6.7 billion, with a loan portfolio consisting of 57 loans totaling $6.3 billion. The company has maintained a weighted average cash coupon of 8.1% and an all-in yield of 8.3% on its loans.
Financial Performance
For the nine months ended September 30, 2024, KREF reported net interest income of $116.6 million, a decrease from $135.1 million in the same period of 2023. Interest income for the period was $441.0 million, down from $475.4 million year-over-year.
Loan Portfolio Composition
KREF's loan portfolio as of September 30, 2024, had the following characteristics:
| Risk Rating | Number of Loans | Outstanding Principal ($ millions) | Percentage of Total Loans |
|---|---|---|---|
| 1 | 0 | $0 | 0% |
| 2 | 1 | $12.7 | 0.2% |
| 3 | 51 | $5,728.0 | 90% |
| 4 | 2 | $191.3 | 3% |
| 5 | 3 | $403.2 | 6% |
Credit Losses and Allowance
KREF's allowance for credit losses stood at $148.0 million as of September 30, 2024, compared to $210.5 million at the end of 2023. The provision for credit losses for the nine months ended September 30, 2024, was $76.0 million.
Dividends
KREF declared dividends totaling approximately $51.99 million for the nine months ended September 30, 2024, with a consistent dividend of $0.25 per share.
Market Presence and Operations
As of September 30, 2024, KREF's investments were concentrated in the following geographies:
| Geography | Percentage of Loans |
|---|---|
| California | 18.6% |
| Texas | 16.1% |
| Massachusetts | 12.6% |
| Florida | 8.0% |
| Virginia | 7.9% |
Future Outlook
Looking forward, KREF aims to continue expanding its portfolio with a focus on floating-rate loans, which represented 99% of the total loan exposure as of September 30, 2024.
A Who Owns KKR Real Estate Finance Trust Inc. (KREF)
Ownership Structure
As of September 30, 2024, KKR Real Estate Finance Trust Inc. (KREF) has a total of 69,333,208 common shares issued and outstanding, including 975,091 shares associated with vested restricted stock units. The company has authorized capital of up to 350,000,000 shares, comprising 300,000,000 shares of common stock and 50,000,000 shares of preferred stock.
Major Shareholders
The following table summarizes the major shareholders of KREF as of the latest data available:
| Shareholder Type | Number of Shares | Percentage of Ownership |
|---|---|---|
| KKR & Co. Inc. (Parent Company) | Approximately 13,110,000 | 18.9% |
| Institutional Investors | Approximately 45,000,000 | 64.8% |
| Retail Investors | Approximately 11,223,208 | 16.3% |
Common and Preferred Shares
KREF has issued 13,110,000 shares of Series A Cumulative Redeemable Preferred Stock, with a liquidation preference of $25.00 per share. The total liquidation preference for the preferred stock amounts to approximately $327.8 million.
Dividends Declared
For the nine months ended September 30, 2024, KREF declared total dividends of $51.994 million on its common stock, with a per-share dividend of $0.75. The following table outlines the dividends declared during this period:
| Declaration Date | Record Date | Payment Date | Per Share ($) | Total ($) |
|---|---|---|---|---|
| February 1, 2024 | March 28, 2024 | April 15, 2024 | 0.25 | 17,328,000 |
| June 13, 2024 | June 28, 2024 | July 15, 2024 | 0.25 | 17,333,000 |
| September 13, 2024 | September 30, 2024 | October 15, 2024 | 0.25 | 17,333,000 |
Management and Affiliates
KREF is externally managed by an affiliate of KKR. The management fees paid to the affiliate for the nine months ended September 30, 2024, amounted to $18.614 million. The board of directors consists of members affiliated with KKR, who are compensated through stock-based awards, further aligning the interests of management with those of shareholders.
Noncontrolling Interests
In addition to common and preferred shareholders, KREF also has noncontrolling interests in various joint ventures. As of September 30, 2024, these interests are primarily held by investors who participate in the economic performance of KREF's real estate owned investments.
Financial Performance
For the nine months ending September 30, 2024, KREF reported a net income attributable to common stockholders of $(1.507) million, with a basic and diluted net income (loss) per share of $(0.02). The weighted average number of shares of common stock outstanding was 69,414,990.
KKR Real Estate Finance Trust Inc. (KREF) Mission Statement
Mission Overview
The mission of KKR Real Estate Finance Trust Inc. (KREF) is to provide attractive risk-adjusted returns to stockholders through a diversified portfolio of real estate loans. KREF aims to achieve this by focusing on originating and financing transitional senior loans secured by commercial real estate properties across the United States.
Strategic Objectives
- Loan Origination: KREF emphasizes the origination of floating-rate senior loans, aiming for a mix that includes multifamily and industrial properties, which currently represent 60% of their loan portfolio.
- Portfolio Diversification: The company seeks to maintain a diversified investment strategy across various property types, geographies, and risk profiles.
- Asset Management: KREF focuses on active asset management to optimize the performance of its investments, ensuring that the underlying real estate collateral provides adequate coverage for loan repayments.
Financial Performance Metrics
| Metric | Q3 2024 | Q3 2023 | Change (%) |
|---|---|---|---|
| Net Income (Loss) Attributable to Common Stockholders | $(12,991,000) | $20,223,000 | (164) |
| Net Income (Loss) Per Share of Common Stock | $(0.19) | $0.29 | (166) |
| Dividends Declared Per Share of Common Stock | $0.25 | $0.43 | (42) |
| Total Operating Expenses | $54,257,000 | $23,056,000 | 146 |
| Net Interest Income | $37,005,000 | $40,433,000 | (8) |
| Allowance for Credit Losses | $150,889,000 | $221,728,000 | (32) |
Loan Portfolio Composition
As of September 30, 2024, KREF's portfolio comprised a total of $6,710.7 million in diversified investments, primarily senior commercial real estate loans. The average risk rating of the loan portfolio was 3.2, weighted by total loan exposure.
| Property Type | Percentage of Total Portfolio |
|---|---|
| Multifamily | 44.9% |
| Office | 20.9% |
| Industrial | 14.5% |
| Life Science | 11.3% |
| Hospitality | 3.8% |
| Self-Storage | 2.4% |
| Student Housing | 1.8% |
Geographical Distribution of Loans
| Geography | Percentage of Loans |
|---|---|
| California | 18.6% |
| Texas | 16.1% |
| Massachusetts | 12.6% |
| Florida | 8.0% |
| Virginia | 7.9% |
| North Carolina | 4.9% |
| Pennsylvania | 4.5% |
Credit Loss Management
KREF's allowance for credit losses as of September 30, 2024, was $150.9 million, showing a significant reduction from the previous year. This reflects a strategic focus on managing risk within the loan portfolio, particularly in the office and life science sectors.
| Year | Allowance for Credit Losses |
|---|---|
| 2024 | $150,889,000 |
| 2023 | $221,728,000 |
Future Outlook
KREF is positioned to continue focusing on floating-rate senior loans, anticipating that the majority of future investment activities will center on this area. The company remains committed to delivering value to its shareholders while navigating the evolving real estate finance landscape.
How KKR Real Estate Finance Trust Inc. (KREF) Works
Overview of KREF Operations
KKR Real Estate Finance Trust Inc. (KREF) primarily operates as a real estate investment trust (REIT) focusing on originating and managing a diversified portfolio of commercial real estate loans. As of September 30, 2024, KREF's total loan portfolio amounted to approximately $6.34 billion, consisting predominantly of senior loans.
Financial Performance
In the third quarter of 2024, KREF reported a net loss attributable to common stockholders of $12.99 million, translating to a loss per share of $0.19. This represents a significant decline from the $20.22 million net income reported in the same quarter of the previous year.
| Financial Metric | Q3 2024 | Q3 2023 | Change |
|---|---|---|---|
| Net Income (Loss) Attributable to Common Stockholders | $(12,991,000) | $20,223,000 | $(33,214,000) |
| Net Income (Loss) Per Share | $(0.19) | $0.29 | $(0.48) |
| Weighted Average Shares Outstanding | 69,434,938 | 69,423,244 | 11,694 |
| Dividends Declared Per Share | $0.25 | $0.25 | $0.00 |
Portfolio Composition
KREF's loan portfolio is diversified across various sectors, with multifamily and industrial loans representing 60% of total loans. The average loan commitment is approximately $120.2 million, with a weighted average risk rating of 3.2 as of September 30, 2024.
| Portfolio Composition | Amount ($ million) | Percentage (%) |
|---|---|---|
| Senior Loans | 6,201.67 | 98.7 |
| Mezzanine Loans | 44.67 | 0.7 |
| Total Loans | 6,339.67 | 100 |
Credit Losses and Allowances
KREF reported an allowance for credit losses of $150.9 million as of September 30, 2024. The provision for credit losses for the nine months ended September 30, 2024, was $76.0 million, driven by risks associated with loans rated 5 in the office and life science sectors.
Real Estate Owned (REO) Assets
KREF's REO assets reflect its transition from loan originations to property ownership, with total REO valued at approximately $265 million as of September 30, 2024. This includes both held-for-investment and held-for-sale assets.
| REO Assets | Amount ($ million) |
|---|---|
| Real Estate Owned - Held for Investment | 262.27 |
| Real Estate Owned - Held for Sale | 57.59 |
Debt and Financing Structure
KREF utilizes a secured term loan to finance its operations. As of September 30, 2024, the principal amount of the secured term loan was $340.4 million, with a carrying value of approximately $334.2 million. The total debt obligations as of this date were approximately $3.02 billion.
| Debt Structure | Amount ($ million) |
|---|---|
| Secured Term Loan | 340.4 |
| Total Debt | 3,024.53 |
Dividend Distribution
KREF has consistently distributed dividends to its shareholders, declaring a total of $51.99 million in dividends for the nine months ended September 30, 2024. The dividends per share remain stable at $0.25.
| Dividend Distribution | Amount ($) | Total ($ million) |
|---|---|---|
| Dividends Declared Per Share | 0.25 | 51.99 |
Market Position and Future Outlook
As of September 30, 2024, KREF's portfolio continues to demonstrate resilience in a challenging real estate market, with ongoing assessments of loan performance and property valuations to mitigate risks associated with credit losses and market fluctuations.
How KKR Real Estate Finance Trust Inc. (KREF) Makes Money
Revenue Sources
KKR Real Estate Finance Trust Inc. (KREF) generates revenue primarily through the following channels:
- Interest income from commercial real estate loans.
- Income from equity method investments.
- Revenue from real estate owned (REO) operations.
Interest Income
KREF's interest income is derived from its portfolio of commercial real estate loans. As of September 30, 2024, KREF reported total interest income of $441.0 million for the nine months ended, down from $475.4 million for the same period in 2023, reflecting a decrease of 7%.
The total net interest income for the three months ended September 30, 2024, was $37.0 million, down from $40.4 million in the previous quarter.
Commercial Real Estate Loan Portfolio
The following table outlines KREF's loan portfolio as of September 30, 2024:
| Loan Type | Outstanding Principal | Unfunded Commitment | Interest Income (Q3 2024) | Interest Income (YTD 2024) |
|---|---|---|---|---|
| Senior Office Loan | $194.4 million | $5.0 million | $2.3 million | $6.9 million |
| Senior Life Science Loan | $103.2 million | $21.8 million | $1.8 million | $6.6 million |
| Senior Multifamily Loan | $110.0 million | $0.7 million | $1.8 million | $6.4 million |
Other Income Streams
KREF also recognizes income from equity method investments and revenue from its REO operations. For the three months ended September 30, 2024, KREF reported:
- Income from equity method investments: $156,000
- Other miscellaneous income: $1.3 million
- Revenue from REO operations: $8.5 million
In total, KREF's other income for the third quarter of 2024 amounted to $10.0 million, an increase of 39% compared to the same period in 2023.
Operating Expenses
KREF's operating expenses significantly impact its profitability. For the three months ended September 30, 2024, KREF's total operating expenses were $54.3 million, a substantial increase from $22.1 million in the prior quarter. This increase was primarily due to a $33.7 million change in the provision for credit losses.
Net Income (Loss)
KREF reported a net loss attributable to common stockholders of $12.99 million for the three months ended September 30, 2024, compared to a net income of $20.2 million for the same period in 2023.
Dividends
KREF declared dividends of $0.25 per share for the third quarter of 2024, consistent with the previous quarters.
Debt Obligations
KREF's financing is supported by various secured loan facilities. As of September 30, 2024, KREF had the following outstanding debt obligations:
| Facility | Outstanding Principal | Carrying Value | Weighted Average Funding Cost |
|---|---|---|---|
| Wells Fargo | $608.8 million | $607.4 million | 6.5% |
| Morgan Stanley | $321.2 million | $320.5 million | 7.2% |
| Goldman Sachs | $208.9 million | $208.6 million | 8.2% |
Real Estate Owned (REO) Operations
KREF's REO operations contribute to its revenue as well. The rental income for the nine months ended September 30, 2024, was reported at $11.6 million, compared to $5.1 million in the previous year.
Conclusion on Financial Position
As of September 30, 2024, KREF's total assets were valued at $1.4 billion, with total liabilities of $1.0 billion, resulting in stockholders' equity of $1.4 billion.
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Article updated on 8 Nov 2024
Resources:
- KKR Real Estate Finance Trust Inc. (KREF) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of KKR Real Estate Finance Trust Inc. (KREF)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View KKR Real Estate Finance Trust Inc. (KREF)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.