KKR Real Estate Finance Trust Inc
For the period ended Dec 31, 2024. Filed Feb 3, 2025.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Feb 3, 2025
KREF$5.66-0.9%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-02-06.
0001631596-24-000008
ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSCurrent report: 10-K
Period ended 2024-12-31; filed 2025-02-03.
0001631596-25-000012
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 229 previous paragraphs and 211 current paragraphs.
100 unchanged; 82 reworded; 27 added; 37 removed; 10 previous and 2 current paragraphs rearranged.
Tables are not compared: 19 previous and 17 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (27)
Current report
•Distributable Loss of $70.7 million, or ($1.02) per diluted share of common stock
Current report
•Repurchased 859,055 shares at an average price per share of $11.64 for a total of $10.0 million
Current report
•Took title to an office property and a life science property through deed-in-lieu of foreclosure, and wrote off uncollectible mezzanine/subordinated loans; these loan resolutions resulted in net realized losses of $173.5 million, or ($2.50) per diluted share of common stock
Current report
•Repaid $1.0 billion in financing, net, reducing our total leverage ratio to 3.6x
Current report
•Extended the final maturity of a $1.0 billion term credit facility to September 2029
Current report
(A) Excludes: (i) Real Estate Assets, (ii) CMBS B-Pieces and (iii) fully written off loans.
Current report
(D) LTV is generally based on the initial loan amount divided by the as-is appraised value as of the date the loan was originated. Weighted average LTV excludes risk-rated 5 loans.
Current report
(C) Represents a removal of $150.0 million of non-consolidated senior interests as our retained mezzanine loan was written-off during the three months ended June 30, 2024.
Current report
(B) Excludes fully written off loans.
Current report
(F) LTV is generally based on the initial loan amount divided by the as-is appraised value as of the date the loan was originated. Weighted average LTV excludes risk-rated 5 loans.
Current report
(A) Our total portfolio represents the current principal amount or investment amount on senior and mezzanine loans, real estate assets and other investments. Excludes loans that were fully written off.
Current report
(I) Represents real estate assets held through a Tenant-in-Common ("TIC") agreement between us and a KKR affiliate. We hold a 74.6% economic interest in the real estate assets and share decision-making with the KKR affiliate under the TIC agreement.
Current report
(A) Excludes fully written off loans.
Current report
In June 2024, we modified a risk-rated 5 mezzanine office loan located in Boston, MA, with an outstanding principal balance of $37.5 million. The terms of the modification included, among others, a restructure of the mezzanine loan into (i) a $12.5 million senior mezzanine note and (ii) a $25.0 million junior mezzanine note which is subordinate to a new $10.0 million sponsor interest. The senior and junior mezzanine notes earn a PIK interest rate of S+7.0% and have a maximum maturity of February 2028. Both mezzanine notes were deemed uncollectible and written off in June 2024.
Current report
In December 2024, we modified a risk-rated 5 senior life science loan located in San Carlos, CA, with an outstanding principal balance of $103.2 million. The terms of the modification included a $13.1 million principal repayment, and a restructure of the $90.1 million senior loan (after the $13.1 million repayment) into (i) a $89.1 million committed senior mortgage loan (with $34.9 million in unfunded commitment), and (ii) a $35.9 million subordinated note which is subordinate to a new $20.0 million sponsor interest. The restructured senior loan earns a coupon rate of S+1.00% and has a new term of three years. The $35.9 million subordinated note was deemed uncollectible and written off in December 2024. The loan modification was accounted for as a new loan for GAAP purposes. The restructured senior loan with an outstanding principal balance of $55.1 million was risk-rated 3 as of December 31, 2024.
Current report
(B) Including deferred financing costs and applicable index in effect as of December 31, 2024. Average weighted by the outstanding principal of the facility.
Current report
Real Estate Assets
Current report
In June 2024, we sold a portion of the portfolio for a gross sales price of $41.0 million and recognized a realized loss of $0.6 million after buyer credits and closing costs. Concurrently, we provided financing to the buyer through a senior loan with an initial principal balance of $30.1 million ($83.7 million total commitment). The senior loan earns a coupon rate of S+4.3% and has a maximum maturity of June 2029, assuming all extension options are exercised. The senior loan is presented within “Commercial real estate loans, held-for-investment, net” on the Consolidated Balance Sheets.
Current report
Mountain View Office —In 2021, we co-originated with a KKR affiliate a $362.8 million senior loan secured by an office property in Mountain View, CA. Our interest was 68.9% of the loan or $250.0 million. In June 2024, we and the KKR affiliate took title to the office property through a DIL and we accounted for the property on a consolidated basis. The transaction was accounted for as an asset acquisition under ASC 805. Accordingly, we recorded the property and its net assets on the Consolidated Balance Sheets with an estimated fair value of $174.7 million, which included $175.0 million of REO held for investment and ($0.3) million of net working capital. As a result, we recognized a $79.9 million loan write-off for the difference between our interest in the amortized cost of the foreclosed loan and our share of the fair value of the REO’s net assets and closing costs. The KKR affiliate's interest in the property was 31.1%, or $54.3 million, upon DIL and was presented within "Noncontrolling interests in equity of consolidated joint ventures" on the Consolidated Balance Sheets.
Current report
Seattle Life Science (Equity Method Investment) — In 2021, we co-originated with a KKR affiliate a $188.0 million senior loan secured by a life science property in Seattle, WA. Our interest was 74.6% of the loan or $140.3 million. In June 2024, we received a $14.3 million partial repayment, then along with the KKR affiliate took title to the life science property through a DIL under a Tenant-in-Common ("TIC") agreement. Under the TIC agreement, we and the KKR affiliate held an economic interest of 74.6% and 25.4%, respectively, and shared decision-making. Under ASC 970-810, we accounted for the TIC agreement as an undivided interest in the property and recorded an $82.0 million "Equity method investment, real estate asset" in the Consolidated Balance Sheets. As a result, we recognized a $18.6 million loan write-off for the difference between the amortized cost of the foreclosed loan and our share of the fair value of the property’s net assets and closing costs.
Current report
Total other income increased by $8.3 million during the year ended December 31, 2024, as compared to the prior year. This increase was primarily due to a $14.3 million increase in revenue from REO Operations, partially offset by a decrease in interest income earned on our cash balance.
Current report
Total operating expenses decreased by $87.1 million during the year ended December 31, 2024, as compared to the prior year period. This decrease was primarily due to a $94.5 million change in the provision for credit losses which was partially offset by an increase in expenses from REO Operations. The change in provision for credit losses during the year ended December 31, 2024 was due primarily to less incremental reserves on risk-rated 5 loans compared to the prior year.
Current report
Commencing in the second quarter of 2024, we have estimated CECL reserves using the Weighted-Average Remaining Maturity, or WARM method, which has been identified as a loss-rate method for estimating CECL reserves by the Financial Accounting Standards Board (“FASB”). In estimating a CECL reserve using the WARM method, we reference historical loan loss data across a comparable data set and apply such loss rate to each loan over its expected remaining term, taking into consideration expected economic conditions over the relevant timeframe. In certain instances, we might use other acceptable alternative approaches in the future depending on, among other factors, the type of loan, underlying collateral and availability of relevant historical market loan loss data.
Current report
To arrive at a CECL reserve using the WARM method, we considered various factors including (i) historical loss experience in the commercial real estate lending market, (ii) timing of expected repayments and expected loan future funding, (iii) and our current and future view of the macroeconomic environment for a reasonable and supportable forecast period. We derive a historical loss rate predominately based on a commercial mortgage-backed securities (“CMBS”) database with historical losses from 1998 through 2024 provided by a third party. We focus on the most relevant subset of CMBS data that is determined to be the most comparable to our own portfolio. The historical loss rate is further adjusted to consider expected macroeconomic conditions, such as commercial real estate price indices, unemployment rates and market liquidity, over reasonable and supportable forecast periods. There is significant uncertainty related to future macroeconomic conditions. Therefore, we also consider other loan specific credit quality factors such as the risk rating of the loan, a near-term maturity, nature of construction loans, and economic conditions specific to the property type of the underlying collateral.
Current report
Refer to Note 2 to our consolidated financial statements for the description of our significant accounting policies.
Current report
Recently Adopted Accounting Standards
Current report
In November 2024, the FASB issued ASU No. 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40), which requires a public business entity to provide disaggregated disclosures, in the notes to the financial statements, of certain categories of expenses that are included in expense line items on the face of the income statement. The guidance is effective for our 2027 annual reporting. The guidance is applied prospectively and may be applied retrospectively. We is evaluating the impact of ASU 2024-03.
Removed paragraphs (37)
Previous report
•Distributable Earnings of $57.6 million, or $0.83 per diluted share of common stock
Previous report
•Based on current market conditions, macroeconomic factors, and the status of our loan portfolio, we reduced our common stock dividend for the first quarter of 2024 to $0.25 per share. This level should support coverage of the dividend with operating earnings from our performing loan portfolio, while simultaneously managing our REO assets, as well as expectations for future interest rate reductions.
Previous report
•In December, we took title to the collateral of one defaulted senior office loan with an outstanding principal balance of $149.8 million (after a $6.0 million partial repayment). Accordingly, a $58.7 million, or ($0.85) per diluted share, realized loss was recognized
Previous report
•Extended a $600.0 million master repurchase agreement and a $500.0 million warehouse facility maturity date to March 2026
Previous report
•Upsized a $240.0 million master repurchase agreement to $400.0 million and extended the final maturity date to December 2027
Previous report
•Repaid $143.8 million convertible notes in cash
Previous report
(A)Excludes: (i) REO with net carrying value of$158.6 million, (ii) CMBS B-Piece investments held through an equity method investment and (iii) fully written off risk-rated 5 loans with a combined outstanding principal balance of $45.5 million.
Previous report
(B) Senior loans include senior mortgages and similar credit quality loans, including related contiguous junior participations in senior loans where we have financed a loan with structural leverage through the non-recourse sale of a corresponding first mortgage.
Previous report
(E) LTV is generally based on the initial loan amount divided by the as-is appraised value as of the date the loan was originated or by the current principal amount as of the date of the most recent as-is appraised value. Weighted average LTV includes non-consolidated senior interests and excludes risk-rated 5 loans.
Previous report
(A) Includes initial funding of new loans and additional fundings made under existing loans.
Previous report
(A)Excludes fully written off risk-rated 5 loans with a combined outstanding principal balance of$45.5 million.
Previous report
(G) LTV is generally based on the initial loan amount divided by the as-is appraised value as of the date the loan was originated or by the current principal amount as of the date of the most recent as-is appraised value. Weighted average LTV includes non-consolidated senior interests and excludes risk-rated 5 loans.
Previous report
(A) Our total portfolio represents the current principal amount on senior and mezzanine loans, net equity in RECOP I, which holds CMBS B-Piece investments, and net carrying value of our REO investments. Excludes one mezzanine loan with an outstanding principal of $5.5 million that was fully written off.
Previous report
For Senior Loan 11, the total whole loan is $375.0 million, co-originated and co-funded by us and a KKR affiliate. Our interest is 50% of the loan or $187.5 million, of which $150.0 million in senior notes were syndicated to a third party. Post syndication, we retained a mezzanine loan with a commitment of $37.5 million, fully funded as of December 31, 2023, at an interest rate of S+7.96%.
Previous report
For Senior Loan 58, the total whole loan is $205.5 million, co-originated and co-funded by us and a KKR affiliate. Our interest is 31% of the loan or $64.4 million, of which $54.3 million in senior notes were syndicated to third party lenders. Post syndication, we retained a mezzanine loan with a commitment of $10.1 million, of which$7.2 millionwas funded as of December 31, 2023, at an interest rate of S+13.02%.
Previous report
For Senior Loan 18, LTV is based on the current principal amount divided by the adjusted appraised gross sellout value net of sales cost.
Previous report
(I) Senior loans include senior mortgages and similar credit quality investments, including junior participations in our originated senior loans for which we have syndicatedthe senior participations and retained the junior participations for our portfolio and excludes vertical loan participations.
Previous report
(J) Senior Loan 14 and Senior Loan 18 were fully repaid in January 2024.
Previous report
(K) For Senior Loan 29, the Total Whole Loan, Committed Principal Amount, and Current Principal Amount excludes junior mezzanine notes with a total outstanding principal of $25.0 million that was fully written off.
Previous report
(L)For Senior Loan 33, the Total Whole Loan, Committed Principal Amount, and Current Principal Amount excludes a subordinated note with a total outstanding principal of $15.0 million that was fully written off.
Previous report
(M)For Senior Loan 50, the total whole loan facility is $153.0 million co-originated and co-funded by us and a KKR affiliate. Our interest was 50% of the facility, or $76.5 million. The facility is comprised of
Previous report
individual cross-collateralized whole loans. As of December 31, 2023, there were five underlying senior loans in the facility with a commitment of $76.5 million and outstanding principal of $63.7 million
Previous report
(A) Excludes three fully written off risk-rated 5 loans with a combined outstanding principal balance of$45.5 million as of December 31, 2023.
Previous report
Excludes one fully written off risk-rated 5 loan with an outstanding principal balance of $5.5 million as of December 31, 2022.
Previous report
In June 2023, we completed the modification of a risk-rated 4 senior multifamily loan located in West Hollywood, CA, with an outstanding principal balance of $102.0 million as of March 31, 2023. The terms of the modification included, among others, an additional borrower deposit in escrow in exchange for an upsize in the loan commitment structured as (i) an accompanying senior mezzanine note with a commitment of $4.2 million, at a fixed interest rate of 10.0%, and (ii) an accompanying junior mezzanine note with a commitment of $0.8 million, at a fixed interest rate of 10.0% with certain profit share provisions, as defined in the loan agreement. As of December 31, 2023, the senior mezzanine note had an outstanding principal balance of $2.3 million, while the junior mezzanine note was fully funded. The restructured whole loan with an outstanding principal balance of $105.1 million was risk-rated 4 as of December 31, 2023.
Previous report
Valuations for our CMBS B-Piece investments are prepared using inputs from an independent valuation firm and confirmed by our Manager via quotes from two or more broker-dealers that actively make markets in CMBS. As part of the quarterly valuation process, our Manager also reviews pricing indications for comparable CMBS and monitors the credit metrics of the loans that collateralize our CMBS B-Piece investments.
Previous report
(C)Collateral assets represent 31.0%of the principal of our commercial real estate loans as of December 31, 2023. As of December 31, 2023, 100% of our loans financed through the CLOs are floating-rate loans.
Previous report
(D)Including $5.0 million cash held in the KREF 2021-FL3 as of December 31, 2023.
Previous report
The following table details the subordinate interests retained on our balance sheet and the related non-consolidated senior interests (dollars in thousands):
Previous report
Real Estate Owned and Joint Venture
Previous report
Net interest income increased by $20.4 million during the year ended December 31, 2022, as compared to the year ended December 31, 2021. Interest income and interest expense both increased due to higher index rates. The increases were further due to increases in the weighted average principal of our loan portfolio and financing facilities for the year ended December 31, 2022, as compared to the year ended December 31, 2021.
Previous report
Total other income increased by $7.0 million during the year ended December 31, 2022, as compared to the year ended December 31, 2021. This increase was primarily due to (i) a $9.0 million increase in REO operating revenue, (ii) a $2.1 million increase in money market fund dividend income resulting from higher market rates and (iii) $1.3 million of profit sharing income in connection with the repayment of a senior loan. The increase was partially offset by a $5.1 million nonrecurring gain from the redemption of non-voting manager units during the year ended December 31, 2021.
Previous report
Total operating expenses increased by $127.6 million during the year ended December 31, 2022, as compared to the prior year. This increase was primarily due to a net increaseof $116.4 million in the provision for credit losses, and a $11.1 million increase in REO operating expenses.
Previous report
We have implemented loan loss forecasting models for estimating expected life-time credit losses, at the individual loan level, for our commercial mortgage loan portfolio. The CECL forecasting methods used by us include (i) a probability of default and loss given default method using underlying third-party CMBS/CRE loan database with historical loan losses from 1998 through 2023, and (ii) a probability weighted expected cash flow method, depending on the type of loan and the availability of relevant historical market loan loss data. We might use other acceptable alternative approaches in the future depending on, among other factors, the type of loan, underlying collateral, and availability of relevant historical market loan loss data.
Previous report
We estimate our CECL allowance for our loan portfolio, including unfunded loan commitments, at the individual loan level. Significant inputs to our forecasting methods include (i) key loan-specific inputs such as vintage year, loan-term, underlying property type, geographic location, and expected timing and amount of future loan fundings, (ii) performance against the underwritten business plan and our internal loan risk rating and (iii) a macro-economic forecast. In certain instances, we consider relevant loan-specific qualitative factors to certain loans to estimate its CECL allowance.
Previous report
In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides temporary optional expedients and exceptions to the US GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from LIBOR and other interbank offered rates to alternative reference rates. The guidance is effective upon issuance and generally may be elected over time through December 31, 2024, as extended under ASU No. 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848. We have not adopted any of the optional expedients or exceptions through December 31, 2023, but will continue to evaluate the possible adoption of any such expedients or exceptions during the effective period as circumstances evolve.
Previous report
In March 2022, the FASB issued ASU No. 2022-02, Financial Instruments — Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures, which eliminates the recognition and measurement guidance for a troubled debt restructuring for creditors that have adopted CECL and requires public business entities to present gross write-offs by year of origination in their vintage disclosures. On January 1, 2023, we adopted ASU 2022-02 on a prospective basis and the adoption had no significant impact on our consolidated financial statements.
Reworded paragraphs (82)
Previous wording
•Net Loss Attributable to Common Stockholders of $53.9 million, or $(0.78) per diluted share of common stock
Current wording
•Net Income Attributable to Common Stockholders of $13.1 million, or $0.19 per diluted share of common stock
Previous wording
•Declared dividends of $1.72 per common share. The fourth quarter dividend of $0.43 per common share produced an annualized yield of 13.00% on our closing stock price as of December 31, 2023
Current wording
•Declared dividends of $1.00 per common share. The fourth quarter dividend of $0.25 per common share produced an annualized yield of 9.9% on our closing stock price as of December 31, 2024
Previous wording
•Funded $684.3 million for loans closed in previous years and received loan repayments of $766.6 million
Current wording
•Funded $333.3 million for loans closed in previous years and received loan repayments of $1.5 billion
Previous wording
•$7.6 billion predominantly senior loan portfolio is 99% floating rate with a weighted average unlevered all-in-yield of 9.0% as of December 31, 2023
Current wording
•$6.3 billion predominantly floating-rate senior loan portfolio with a weighted average unlevered all-in-yield(1) of 7.8% as of December 31, 2024
Previous wording
•Multifamily and industrial assets represent 55% of loan portfolio
Current wording
•Multifamily and industrial assets represent 60% of loan portfolio
Previous wording
•Non-mark-to-market financing is $4.8 billion as of December 31, 2023, representing 76% of our secured financing.
Current wording
•Non-mark-to-market financing was $3.9 billion as of December 31, 2024, representing 79% of our secured financing.
Previous wording
•Had no corporate debt or final facility maturities due until the first quarter of 2026
Current wording
•No final facility maturities until 2026 and no corporate debt due until 2027
Previous wording
(E)In addition to cash coupon, all-in yield includes the amortization of deferred origination fees, loan origination costs and purchase discounts. The calculations of weighted average cash coupon and all-in yield excludes loans accounted for under the cost recovery method.
Current wording
(1) All-in yield includes amortization of deferred origination fees, loan origination costs and purchase discounts.
Previous wording
We also use Distributable Earnings (before incentive compensation payable to our Manager) to determine the management and incentive compensation we pay our Manager. For its services to KREF, our Manager is entitled to a quarterly management fee equal to the greater of $62,500 or 0.375% of weighted average adjusted equity and quarterly incentive compensation equal to 20.0% of the excess of (a) the trailing 12-month Distributable Earnings (before incentive compensation payable to our Manager) over (b) 7.0% of the trailing 12-month weighted average adjusted equity(1) (“Hurdle Rate”), less incentive compensation KREF already paid to the Manager with respect to the first three calendar quarters of such trailing 12-month period. The quarterly incentive compensation is calculated and paid in arrears with a three-month lag.
Current wording
We also use Distributable Earnings (before incentive compensation payable to our Manager) to determine the management and incentive compensation we pay our Manager. For its services to KREF, our Manager is entitled to a quarterly management fee equal to the greater of $62,500 or 0.375% of weighted average adjusted equity and quarterly incentive compensation equal to 20.0% of the excess of (a) the trailing 12-month Distributable Earnings (before incentive compensation payable to our Manager) over (b) 7.0% of the trailing 12-month weighted average adjusted equity (“Hurdle Rate”), less incentive compensation KREF already paid to the Manager with respect to the first three calendar quarters of such trailing 12-month period. For purposes of calculating incentive compensation under our Management Agreement, adjusted equity excludes: (i) the effects of equity issued that provides for fixed distributions or other debt characteristics and (ii) the unrealized provision for (reversal of) credit losses. The quarterly incentive compensation is calculated and paid in arrears with a three-month lag.
Previous wording
(A) Includes a $58.7 million write-off of a defaulted senior loan upon deed-in-lieu of foreclosure during the three months ended December 31, 2023, and a $15.0 million write-off of a subordinated loan during the three months ended September 30, 2023. Includes a $25.0 million partial write-off of a defaulted senior loan during the year ended December 31, 2022.
Current wording
(B) Includes (i) a $35.9 million write-off of a subordinated loan during the three months ended December 31, 2024; (ii) a $1.8 million write-off on a senior loan repaid during the three months ended September 30, 2024; and (iii) a combined $98.5 million write-off on two senior loans and a $37.5 million write-off of a mezzanine loan during the three months ended June 30, 2024. Includes a $58.7 million write-off on a senior loan during the three months ended December 31, 2023, and a $15.0 million write-off of a subordinated loan during the three months ended September 30, 2023.
Previous wording
We believe that book value per share is helpful to stockholders in evaluating the growth of our company as we have scaled our equity capital base and continue to invest in our target assets. The following table calculates our book value per share (amounts in thousands, except share and per share data):
Current wording
We believe that book value per share is helpful to stockholders in evaluating the growth of our company as we have scaled our equity capital base and continue to invest in our target assets.
Previous wording
Book value as of December 31, 2023 included the impact of an estimated CECL credit loss allowance of $212.5 million, or ($3.06) per share. See Note 2 — Summary of Significant Accounting Policies, to our consolidated financial statements included in this Form 10-K for detailed discussion of allowance for credit losses.
Current wording
Book value as of December 31, 2024 included the impact of an estimated CECL credit loss allowance of $119.6 million, or ($1.74) per share. See Note 2 — Summary of Significant Accounting Policies, to our consolidated financial statements included in this Form 10-K for detailed discussion of allowance for credit losses.
Previous wording
We have established a$7,752.3 million portfolio of diversified investments, consisting primarily of senior commercial real estate loans as of December 31, 2023.
Current wording
We have established a $6,271.6 million portfolio of diversified investments, consisting primarily of senior commercial real estate loans as of December 31, 2024.
Previous wording
During the year ended December 31, 2023, we collected 97.6% of interest payments due on our loan portfolio. As of December 31, 2023, the average risk rating of our loan portfolio was 3.2, weighted by total loan exposure. As of December 31, 2023, the average loan commitment in our portfolio was $121.6 million and multifamily and industrial loans comprised 55% of our loan portfolio.
Current wording
During the year ended December 31, 2024, we collected 98% of interest payments due on our loan portfolio. As of December 31, 2024, the average risk rating of our loan portfolio was 3.1, weighted by total loan exposure. As of December 31, 2024, the average loan commitment in our portfolio was $124.6 million and multifamily and industrial loans comprised 60% of our loan portfolio.
Previous wording
In addition, as a result of taking title to the collateral of defaulted senior loans, we owned REO assets with a net carrying value of $158.6 million, comprised of the fair value of the acquired properties and capitalized redevelopment costs, as of December 31, 2023. These properties are reflected on our Consolidated Balance Sheet.
Current wording
In addition, we owned Real Estate Assets with an investment amount of $335.8 million, comprised of the acquired properties (directly or indirectly) and capitalized redevelopment costs, as of December 31, 2024. These properties are reflected on our Consolidated Balance Sheets.
Previous wording
Since our IPO, we have continued to execute on our primary investment strategy of originating floating-rate transitional senior loans and, as we continue to scale our loan portfolio, we expect that our originations will continue to be heavily weighted toward floating-rate loans. As of December 31, 2023, 99% of our loans by total loan exposure earned a floating rate of interest. We expect the majority of our future investment activity to focus on originating floating-rate senior loans that we finance with our repurchase and other financing facilities, with a secondary focus on originating floating-rate loans for which we syndicate a senior position and retain a subordinated interest for our portfolio. As of December 31, 2023, all of our investments were located in the United States.
Current wording
We have executed on our primary investment strategy of originating floating-rate transitional senior loans and, as we continue to scale our loan portfolio, we expect that our originations will be heavily weighted toward floating-rate loans. As of December 31, 2024, substantially all of our loans by total loan exposure earned a floating rate of interest. We expect the majority of our future investment activity to focus on originating floating-rate senior loans that we finance with our repurchase and other financing facilities, with a secondary focus on originating floating-rate loans for which we syndicate a senior position and retain a subordinated interest for our portfolio. As of December 31, 2024, all of our investments were located in the United States.
Previous wording
The following charts illustrate the diversification and composition of our loan portfolio(A), based on type of investment, interest rate, underlying property type, geographic location, vintage and LTV as of December 31, 2023:
Current wording
The following charts illustrate the diversification and composition of our loan portfolio as of December 31, 2024, based on type of investment, interest rate, underlying property type, geographic location, vintage and LTV:
Previous wording
(C)We classify a loan as life science if more than 50% of the gross leasable area is leased to, or will be converted to, life science-related space.
Current wording
(B)We classify a loan as life science if more than 50% of the gross leasable area is leased to, or will be converted to, life science-related space.
Previous wording
(D) "Other" property type includes Condo (Residential) (2%), Self-Storage (2%), Student Housing (1%) and Single Family Rental (1%).
Current wording
(C) "Other" property type includes Self-Storage (2%), Student Housing (2%) and Mixed Use (1%).
Previous wording
(B) Includes $4.7 million of cost recovery interest applied as a reduction to loan principal during the three months ended December 31, 2023.
Current wording
(A) Includes a repayment of $38.6 million of non-consolidated senior interests as our retained mezzanine loan was fully repaid during the three months ended September 30, 2024. Includes $4.7 million of cost recovery interest applied as a reduction to loan principal during the three months ended December 31, 2023.
Previous wording
(C) Includes a $58.7 million write-off on a defaulted senior loan upon deed-in-lieu of foreclosure during the three months ended December 31, 2023, and a $15.0 million write-off of a subordinated loan during the three months ended September 30, 2023. Includes a $25.0 million partial write-off of a defaulted senior loan during the year ended December 31, 2022.
Current wording
(B) Includes a $35.9 million write-off of a subordinated loan during the three months ended December 31, 2024, a $1.8 million write-off on a senior loan repaid during the three months ended September 30, 2024, and a combined $98.5 million write-off on two senior loans and a $37.5 million write-off of a mezzanine loan during the three months ended June 30, 2024. Includes a $58.7 million write-off on a senior loan during the three months ended December 31, 2023, and a $15.0 million write-off of a subordinated loan during the three months ended September 30, 2023.
Previous wording
(C) Represents mezzanine notes with commitments of $79.4 million and $5.0 million, respectively, accompanying two senior loans. $77.5 million of loan principal was funded, of which $74.4 million was placed on nonaccrual status, as of December 31, 2023. The remaining $3.1 million funded principal earned a fixed interest rate of 10.0% as of December 31, 2023. Refer to Note 3 to our consolidated financial statements for additional information.
Current wording
(A) Represents mezzanine loans with commitments of $79.4 million and $10.2 million, respectively, accompanying two senior loans. $83.7 million of loan principal was funded, of which $74.4 million was placed on nonaccrual status, as of December 31, 2024. The remaining $9.3 million funded principal earned a fixed interest rate of 10.0% as of December 31, 2024. Refer to Note 3 to our consolidated financial statements for additional information.
Previous wording
(D) Unfunded commitments will primarily be funded to finance property improvements and renovations or lease-related expenditures by the borrowers. These future commitments will be funded over the term of each loan, subject in certain cases to an expiration date.
Current wording
(C) Unfunded commitments will primarily be funded to finance property improvements and renovations or lease-related expenditures by the borrowers. These future commitments may be funded over the term of each loan, subject in certain cases to an expiration date.
Previous wording
(A)In addition to cash coupon, yield/cost includes the amortization of deferred origination/financing costs.
Current wording
(D)In addition to cash coupon, all-in yield includes the amortization of deferred origination fees, loan origination costs and purchase discounts.
Previous wording
(F) Maximum maturity assumes all extension options are exercised by the borrower; however, our loans may be repaid prior to such date. As of December 31, 2023, based on total loan exposure,13.3% of our loans were subject to yield maintenance or other prepayment restrictions and 86.7%were open to repayment by the borrower without penalty.
Current wording
(E) Maximum maturity assumes all extension options are exercised by the borrower; however, our loans may be repaid prior to such date.
Previous wording
For Senior Loan 9, the total whole loan is $199.4 million, including (i) a fully funded senior mortgage loan of $120.0 million, at an interest rate of S+2.25% and (ii) a mezzanine note with a commitment of $79.4 million, of which $74.4 million was funded as of December 31, 2023, at a fixed interest rate of 4.5%. The mezzanine note interest is payment-in-kind (“PIK Interest”), which is capitalized, compounded, and added to the outstanding principal balance of the respective loans.
Current wording
For Senior Loan 8, the total whole loan is $199.4 million, including (i) a fully funded senior mortgage loan of $120.0 million, at an interest rate of S+2.25% and (ii) a mezzanine note with a commitment of $79.4 million, of which $74.4 million was funded as of December 31, 2024, at a fixed interest rate of 4.5%. The mezzanine note interest is payment-in-kind (“PIK Interest”), which is capitalized, compounded, and added to the outstanding principal balance of the respective loan.
Previous wording
For Senior Loan 31, the total whole loan is $107.0 million, including (i) a fully funded senior mortgage loan of $102.0 million, at an interest rate of S+3.06%, (ii) a senior mezzanine note with $2.3 million funded as of December 31, 2023, at a fixed interest rate of 10.0% and (iii) a fully funded junior mezzanine note of $0.8 million, at a fixed interest rate 10.0% with certain profit share provisions, as defined in the loan agreement.
Current wording
For Senior Loan 23, the total whole loan is $112.2 million, including (i) a fully funded senior mortgage loan of $102.0 million, at an interest rate of S+3.06%, (ii) a senior mezzanine note with $8.6 million funded as of December 31, 2024, at a fixed interest rate of 10.0% and (iii) a fully funded junior mezzanine note of $0.8 million, at a fixed interest rate of 10.0% with certain profit share provisions, as defined in the loan agreement.
Previous wording
(B) Total Whole Loan represents total commitment of the entire whole loan originated. Committed Principal Amount includes participations by KKR affiliated entities and third parties that are syndicated/sold.
Current wording
(B) Total Whole Loan represents the total commitment of the entire loan originated, including participations by KKR affiliated entities.
Previous wording
(C) Net equity reflects (i) the amortized cost basis of our loans, net of borrowings; and (ii) the cost basis of our investments in RECOP I and REO.
Current wording
(C) Net equity reflects (i) the amortized cost basis of our loans, net of borrowings; (ii) Real Estate Owned ("REO"), net of borrowings and noncontrolling interests, and (iii) the investment amount of equity method investments, net of borrowings.
Previous wording
(D) Weighted average is weighted by the current principal amount for our senior and mezzanine loans and by net equity for our RECOP I CMBS B-Pieces. Risk-rated 5 loans are excluded from the weighted average LTV.
Current wording
(D) Weighted average is weighted by the current principal amount for our senior and mezzanine loans and by the investment amount of CMBS B-Pieces. Risk-rated 5 loans are excluded from the weighted average LTV.
Previous wording
(E)Coupon expressed as spread over Term SOFR.
Current wording
(E) Coupon expressed as spread over Term SOFR.
Previous wording
(F) Max remaining term (years) assumes all extension options are exercised, if applicable.
Current wording
(F) Maximum remaining term (years) assumes all extension options are exercised, if applicable.
Previous wording
(G) Loan Per SF / Unit / Key is based on the current principal amount divided by the current SF / Unit / Key. For Senior Loans 2, 3, 6, 20, 25, 28, 37, 50, 51, and 69, Loan Per SF / Unit / Key is calculated as the total commitment amount of the loan divided by the proposed SF / Unit / Key.
Current wording
(G) Loan Per SF / Unit / Key is based on the current principal amount divided by the current SF / Unit / Key. For Senior Loans 2, 3, 5, 16 and 19, Loan Per SF / Unit / Key is calculated as the total commitment amount of the loan divided by the proposed SF / Unit / Key.
Previous wording
(H) For senior loans, LTV is generally based on the initial loan amount divided by the as-is appraised value as of the date the loan was originated or by the current principal amount as of the date of the most recent as-is appraised value; for mezzanine loans, LTV is based on the current balance of the whole loan divided by the as-is appraised value as of the date the loan was originated; for RECOP I CMBS B-Pieces, LTV is based on the weighted average LTV of the underlying loan pool at issuance. Weighted Average LTV excludes risk-rated 5 loans.
Current wording
(H) For senior loans, LTV is generally based on the initial loan amount divided by the as-is appraised value as of the date the loan was originated; for mezzanine loans, LTV is based on the initial balance of the whole loan divided by the as-is appraised value as of the date the loan was originated; for CMBS B-Pieces, LTV is based on the weighted average LTV of the underlying loan pool at issuance. Weighted Average LTV excludes risk-rated 5 loans.
Previous wording
For Senior Loans 2, 3, 6, 20, 25, 28, 37, 50, 51, and 69, LTV is calculated as the total commitment amount of the loan divided by the as-stabilized valueas of the date the loan was originated.
Current wording
For Senior Loans 2, 3, 5, 16 and 19, LTV is calculated as the total commitment amount of the loan divided by the as-stabilized value as of the date the loan was originated. For senior loans where an appraisal has been obtained post origination, the LTV, presented as follows, is calculated based on the current principal amount divided by the as-is appraised value as of the new appraisal date: Senior Loan 15 (64%); Senior Loan 17 (64%); Senior Loan 18 (78%); Senior Loan 20 (64%); Senior Loan 24 (57%); Senior Loan 25 (75%); Senior Loan 28 (83%); Senior Loan 30 (70%); Senior Loan 33 (81%); Senior Loan 34 (63%); and Senior Loan 39 (81%).
Previous wording
(N)Represents our investment in an aggregator vehicle alongside RECOP I that invests in CMBS B-Pieces. Committed principal represents our total commitment to the aggregator vehicle whereas current principal represents the current funded amount.
Current wording
(J) Represents our investment in an aggregator vehicle that invests in CMBS B-Pieces. Committed principal represents our total commitment to the aggregator vehicle whereas current principal represents the current funded amount.
Previous wording
As of December 31, 2023, the average risk rating of our loan portfolio was 3.2, weighted by total loan exposure, consistent with that as of December 31, 2022.
Current wording
As of December 31, 2024, the average risk rating of our portfolio was 3.1, weig hted by total loan exposure, as compared to 3.2 as of December 31, 2023.
Previous wording
(B) In certain instances, KREF finances its loans through the non-recourse sale of a senior interest that is not included in the consolidated financial statements. Total loan exposure includes the entire loan KREF originated and financed, including $188.6 million and $263.1 million of such non-consolidated interests as of December 31, 2023 and 2022, respectively.
Current wording
(B) In certain instances, we finance our loans through the non-recourse sale of a senior interest that is not included in the consolidated financial statements. Total loan exposure includes the entire loan we originated and financed, including $188.6 million of such non-consolidated interests as of December 31, 2023.
Previous wording
In January 2023, we completed the modification of a risk-rated 5 senior office loan located in Philadelphia, PA, with an outstanding principal balance of $161.0 million. The terms of the modification included, among others, a $25.0 million principal repayment and a restructure of the $136.0 million senior loan (after the $25.0 million repayment) into (i) a $116.5 million committed senior mortgage loan (with $5.5 million in unfunded commitment) and (ii) a $25.0 million junior mezzanine note. The restructured senior loan earns a coupon rate of S+2.75% and has a new term of up to four years, assuming all extension options are exercised. The $25.0 million junior mezzanine note is subordinate to a new $41.5 million committed senior mezzanine note held by the sponsor (with $16.5 million in unfunded commitment). As of December 31, 2022, $25.0 million of the loan was deemed uncollectible and written off, which was applied to the junior mezzanine note upon completion of the modification. This loan modification was accounted for as a new loan for GAAP purposes. The restructured senior loan with an outstanding principal balance of $114.3 million was risk-rated 3 as of December 31, 2023.
Current wording
In January 2023, we modified a risk-rated 5 senior office loan located in Philadelphia, PA, with an outstanding principal balance of $161.0 million. The terms of the modification included, among others, a $25.0 million principal repayment and a restructure of the $136.0 million senior loan (after the $25.0 million repayment) into (i) a $116.5 million committed senior mortgage loan (with $5.5 million in unfunded commitment) and (ii) a $25.0 million junior mezzanine note. The restructured senior loan earns a coupon rate of S+2.75% and has a new term of up to four years, assuming all extension options are exercised. The $25.0 million junior mezzanine note is subordinate to a new $41.5 million committed senior mezzanine note held by the sponsor (with $16.5 million in unfunded commitment) and was deemed uncollectible and written off in December 2022. The loan modification was accounted for as a new loan for GAAP purposes. The restructured senior loan with an outstanding principal balance of $114.3 million was risk-rated 3 as of December 31, 2024.
Previous wording
In June 2023, we completed the modification of a risk-rated 5 senior office loan located in Minneapolis, MN, with an outstanding principal balance of $194.4 million as of March 31, 2023. The terms of the modification included, among others, a restructure of the $194.4 million senior loan into (i) a $120.0 million senior mortgage loan (fully funded) and (ii) a $79.4 million mezzanine note (with $5.0 million in unfunded commitment). The restructured senior loan earns a coupon rate of S+2.25% and the mezzanine note earns a fixed 4.5% PIK interest rate. Post modification, the whole loan’s maximum maturity is July 2025, assuming all extension options are exercised. The restructured whole loan with an outstanding principal balance of $194.4 million was risk-rated 5 as of December 31, 2023.
Current wording
In June 2023, we modified a risk-rated 5 senior office loan located in Minneapolis, MN, with an outstanding principal balance of $194.4 million. The terms of the modification included, among others, a restructure of the $194.4 million senior loan into (i) a $120.0 million senior mortgage loan (fully funded) and (ii) a $79.4 million mezzanine note (with $5.0 million in unfunded commitment). The restructured senior loan earns a coupon rate of S+2.25% and the mezzanine note earns a fixed 4.5% PIK interest rate. Post modification, the whole loan’s maximum maturity is July 2025, assuming all extension options are exercised. The restructured whole loan with an outstanding principal balance of $194.4 million was risk-rated 5 as of December 31, 2024.
Showing the first 40 of 82 pairs. Open the source sections for the rest.
Rearranged current paragraphs (2)
Current report — wording carried from elsewhere
The following table calculates our book value per share (amounts in thousands, except share and per share data):
Current report — wording carried from elsewhere
As of December 31, 2024, the remaining REO assets and liabilities met the criteria to be classified as held for sale under ASC 360. As such, depreciation and amortization on the REO and related lease intangibles were suspended.
Rearranged previous paragraphs (10)
Previous report — wording carried elsewhere
(1) For purposes of calculating incentive compensation under our Management Agreement, adjusted equity excludes: (i) the effects of equity issued that provides for fixed distributions or other debt characteristics and (ii) the unrealized provision for (reversal of) credit losses.
Previous report — wording carried elsewhere
(B) In certain instances, we finance our loans through the non-recourse sale of a senior interest that is not included in our consolidated financial statements. Total loan exposure includes the entire loan we originated and financed.
Previous report — wording carried elsewhere
*Numbers presented may not foot due to rounding.
Previous report — wording carried elsewhere
(B) Represents the principal balance of the collateral assets.
Previous report — wording carried elsewhere
In August 2022, we entered into a $265.6 million loan financing facility with a financial institution ("KREF Lending XIII Facility"). The facility provides non-recourse match-term asset-based financing on a non-mark-to-market basis.
Previous report — wording carried elsewhere
In October 2022, we entered into a $125.0 million loan financing facility with a financial institution ("KREF Lending XIV Facility"). The facility provides non-recourse match-term asset-based financing on a non-mark-to-market basis.
Previous report — wording carried elsewhere
Concurrently with taking the title to the REO asset, we contributed a portion of the REO asset to a joint venture (the "REO JV") with a third party local development operator (“JV Partner”), whereby we have a 90% interest and the JV Partner has a 10% interest. As of December 31, 2023, the REO JV held REO assets with a net carrying value of $72.4 million. We have priority of distributions up to $78.1 million before the JV Partner can participate in the economics of the REO JV.
Previous report — wording carried elsewhere
(1) Comprised of collateralized loan obligations, term lending agreements, term loan facility, secured term loan, asset specific financing, warehouse facility, corporate revolver and non-consolidated senior interests.
Previous report — wording carried elsewhere
a borrower or sponsor is experiencing financial difficulty, and (ii) the loan is expected to be substantially repaid through the sale of the underlying collateral; such determination requires the use of significant judgment and can be based on several factors subject to uncertainty.
Previous report — wording carried elsewhere
In conjunction with reviewing commercial real estate loans held-for-investment for impairment, the Manager evaluates our commercial real estate loans at least once per quarter, assesses the risk factors of each loan, and assigns a risk rating based on a variety of factors, including, without limitation, underlying real estate performance, values of comparable properties, durability and quality of property cash flows, sponsor experience and financial wherewithal, and the existence of a risk-mitigating loan structure. Additional key considerations include debt service coverage ratios, loan structure, real estate and credit market dynamics, and risk of default or principal loss. Based on a five-point scale, our loans are rated "1" through "5," from less risk to greater risk.