KKR Real Estate Finance Trust Inc.
For the period ended Mar 31, 2025. Filed Apr 23, 2025.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2025 · Filed Apr 23, 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-Q
Period ended 2024-09-30; filed 2024-10-21.
0001631596-24-000039
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-03-31; filed 2025-04-23.
0001631596-25-000029
Item 2. 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 195 previous paragraphs and 181 current paragraphs.
121 unchanged; 52 reworded; 6 added; 21 removed; 1 previous and 2 current paragraphs rearranged.
Tables are not compared: 18 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 (6)
Current report
(I) Senior Loan 24 assignment-in-lieu of foreclosure closed in April 2025.
Current report
Our term lending agreements provide us with asset-based financing on a non-mark-to-market basis, are match-term to the underlying loans and are partial recourse.
Current report
Our asset specific financing facilities provide us with asset-based financing on a non-mark-to-market basis, are match-term to the underlying loans and are non-recourse.
Current report
Total other income decreased by $3.7 million during the three months ended March 31, 2025, as compared to the prior year period. This decrease was due primarily to a $2.1 million decrease in revenue from REO operations and a $1.0 million operating loss related to our real estate asset equity method investment.
Current report
During the three months ended March 31, 2025, our cash flows from financing activities were primarily driven by borrowing proceeds of $603.4 million under our secured financing agreements and proceeds of $209.8 million issued under our secured term loan, partially offset by repayments of $377.0 million on our secured financing agreements and repayments of $185.1 million on our collateralized loan obligations.
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 are evaluating the impact of ASU 2024-03.
Removed paragraphs (21)
Previous report
(B) Includes (i) a $1.8 million write-off on a senior loan repaid during the three months ended September 30, 2024; and (ii) 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.
Previous report
(C) Includes a $615 thousand loss on the sale of certain real estate owned assets during the three months ended June 30, 2024.
Previous report
(B) Includes a $1.8 million write-off on a senior loan repaid during the three months ended September 30, 2024. Includes 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.
Previous report
(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 report
(B) In certain instances, we finance our loans through the non-recourse sale of a senior interest that is not included in the condensed 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 report
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 September 30, 2024.
Previous report
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 September 30, 2024.
Previous report
In 2018, we entered into a loan financing facility with BMO Harris Bank ("BMO Facility”) with a current borrowing capacity of $300.0 million. The facility provides financing on a non-mark-to-market basis with match-term up to five years with partial recourse to us.
Previous report
In 2019, we entered into a Master Repurchase and Securities Contract Agreement ("KREF Lending V Facility") with Morgan Stanley Mortgage Capital Holdings LLC ("Administrative Agent"), as administrative agent on behalf of Morgan Stanley Bank, N.A. ("Initial Buyer"), which provides non-mark-to-market financing. The facility has a current maturity of June 2025, subject to an additional one-year extension option. The Initial Buyer subsequently syndicated a portion of the facility to multiple financial institutions and held 22.7% of the total commitment as of September 30, 2024.
Previous report
In 2021, we entered into a Master Repurchase and Securities Contract Agreement with a financial institution (“KREF Lending IX Facility”) with a current borrowing capacity of $568.1 million. The facility, which provides financing on a non-mark-to-market basis with partial recourse to us, has a three-year draw period and match-term to the underlying loans. In May 2024, the lender assigned its rights and obligations under the KREF Lending IX Facility to another financial institution.
Previous report
In 2022, we entered into a $350.0 million Master Repurchase Agreement and Securities Contract with a financial institution (“KREF Lending XII Facility”). The facility, which provides financing on a non-mark-to-market basis with partial recourse to KREF, has a two-year draw period and match-term to the underlying loans. In addition, we have the option to increase the facility amount to $500.0 million.
Previous report
In 2022, we entered into a $100.0 million loan financing facility with a financial institution ("KREF Lending XI Facility"), a $265.6 million loan financing facility with a financial institution ("KREF Lending XIII Facility") and a $125.0 million loan financing facility with a financial institution ("KREF Lending XIV Facility"). The facilities provide non-recourse match-term asset-based financing on a non-mark-to-market basis.
Previous report
The following table outlines the CLO collateral assets and respective borrowing (dollars in thousands):
Previous report
(A) The term of the CLO notes represents the rated final distribution date. Repayments of CLO notes are dependent on timing of underlying collateral loan asset repayments post the reinvestment period.
Previous report
(B) Including deferred financing costs and applicable index in effect as of September 30, 2024. Average weighted by the outstanding principal of the facility.
Previous report
In 2020, we entered into a $300.0 million secured term loan at a price of 97.5%. The secured term loan is partially amortizing, with an amount equal to 1.0% per annum of the principal balance due in quarterly installments. In 2021, we completed a $52.2 million add-on, which was issued at par, for an aggregate principal amount of $350.0 million. The secured term loan bears coupon interest at Adjusted Term SOFR, as defined in the secured term loan agreements, plus a 3.50% margin, and is subject to a 0.50% SOFR floor.
Previous report
Total other income increased by $2.8 million during the three months ended September 30, 2024, as compared to the preceding period. This increase was primarily due to a $2.8 million increase in revenue from REO operations, resulting from $5.3 million of insurance proceeds received in July 2024, partially offset by a decrease in rental income after a property sale in June 2024.
Previous report
The banking sector and financial market recently witnessed significant volatility resulting from multiple bank failures. While we maintained no accounts at these failed banks, substantially all of our cash currently on deposit with other major financial institutions exceeds insured limits. We limit exposure relating to our short-term financial instruments by diversifying these financial instruments among various counterparties. Generally, deposits may be redeemed upon demand and are maintained with financial institutions with reputable credit and therefore we believe bear minimal credit risk.
Previous report
(A) Loan principal repayments held by a servicer at quarter-end were received in October 2024.
Previous report
During the nine months ended September 30, 2023, our cash flows from financing activities were primarily driven by (i) repayments of $588.5 million under our financing agreements, (ii) payment of $143.8 million to redeem convertible notes, and (iii) payments of $105.1 million in dividends, partially offset by proceeds from borrowings under our financing agreements of $656.6 million.
Previous report
In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires a public entity to disclose significant segment expenses and other segment items on an annual and interim basis and to provide in interim periods all disclosures about a reportable segment’s profit or loss and assets that are currently required annually. Public entities with a single reportable segment are required to provide the new disclosures and all the disclosures required under ASC 280. The guidance is effective for our 2024 annual reporting. The guidance is applied retrospectively to all periods presented in the financial statements, unless it is impracticable. We have not early adopted ASU 2023-07 and do not expect the adoption to have a material impact on our condensed consolidated financial statements.
Reworded paragraphs (52)
Previous wording
The last several quarters have been marked by significant volatility in global markets, driven by inflation, elevated interest rates, slowing economic growth, trade tensions, geopolitical conditions, and political and regulatory uncertainty. These conditions have adversely impacted, and may continue to adversely impact, the U.S. and global economies, the real estate industry and our borrowers, and the performance of the properties securing our loans. Collectively, these market dynamics pose challenges to commercial real estate values and transaction activity, which have resulted in lower demand for office space and elevated levels of vacancy and default rates.
Current wording
The last several quarters have been marked by significant volatility in global markets, driven by inflation, elevated interest rates, slowing economic growth, increased tariffs, trade tensions, geopolitical conditions, and political and regulatory uncertainty. These conditions have adversely impacted, and may continue to adversely impact, the U.S. and global economies, the real estate industry and our borrowers, and the performance of the properties securing our loans. Collectively, these market dynamics pose challenges to commercial real estate values and transaction activity, which have resulted in lower demand for office space and elevated levels of vacancy and default rates.
Previous wording
Although the Federal Reserve lowered interest rates by 50 basis points on September 18, 2024, interest rates remain elevated and the timing, direction and extent of any future interest rate changes remain uncertain. Although higher interest rates will generally correlate to increases in our net income, increases in interest rates may adversely affect our existing borrowers and the cost of financing their properties and lead to nonperformance. Higher interest rates may also adversely impact real estate asset values and increase our interest expense, which expense may not be fully offset by any resulting increase in interest income.
Current wording
Although the Federal Reserve lowered interest rates by 50 basis points in September 2024, by 25 basis points in November 2024 and by 25 basis points in December 2024, interest rates remain elevated and the timing, direction and extent of any future interest rate changes remain uncertain. Although higher interest rates will generally correlate to increases in our net income, increases in interest rates may adversely affect our existing borrowers and the cost of financing their properties and lead to nonperformance. Higher interest rates may also adversely impact real estate asset values and increase our interest expense, which expense may not be fully offset by any resulting increase in interest income.
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 September 30, 2024 included the impact of an estimated CECL credit loss allowance of $150.9 million, or ($2.17) per share. See Note 2 — Summary of Significant Accounting Policies, to our condensed consolidated financial statements included in this Form 10-Q for detailed discussion of allowance for credit losses.
Current wording
Book value as of March 31, 2025 included the impact of an estimated CECL credit loss allowance of $144.4 million, or ($2.12) per share. See Note 2 — Summary of Significant Accounting Policies, to our condensed consolidated financial statements included in this Form 10-Q for detailed discussion of allowance for credit losses.
Previous wording
We have established a $6,710.7 million portfolio of diversified investments, consisting primarily of senior commercial real estate loans as of September 30, 2024.
Current wording
We have established a $6,495.5 million portfolio of diversified investments, consisting primarily of senior commercial real estate loans as of March 31, 2025.
Previous wording
During the three months ended September 30, 2024, we collected 100.0% of interest payments due on our loan portfolio. As of September 30, 2024, the average risk rating of our loan portfolio was 3.2, weighted by total loan exposure. As of September 30, 2024, the average loan commitment in our portfolio was $120.2 million and multifamily and industrial loans comprised 60% of our loan portfolio.
Current wording
During the three months ended March 31, 2025, we collected 100% of interest payments due on our loan portfolio. As of March 31, 2025, the average risk rating of our loan portfolio was 3.1, weighted by loan outstanding principal. As of March 31, 2025, the average loan commitment in our portfolio was $121.1 million and multifamily and industrial loans comprised 61% of our loan portfolio.
Previous wording
In addition, we owned Real Estate Assets with an investment amount of $335.6 million, comprised of the acquired properties and capitalized redevelopment costs, as of September 30, 2024. These properties are reflected on our Condensed Consolidated Balance Sheets.
Current wording
In addition, we owned Real Estate Assets with an investment amount of $337.1 million, comprised of the acquired properties (directly or indirectly) and capitalized redevelopment costs, as of March 31, 2025. These properties are reflected on our Condensed Consolidated Balance Sheets.
Previous 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 September 30, 2024, 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 September 30, 2024, 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 March 31, 2025, substantially all of our loans by outstanding principal 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. As of March 31, 2025, all of our investments were located in the United States.
Previous wording
The following charts illustrate the diversification and composition of our loan portfolio, based on type of investment, interest rate, underlying property type, geographic location, vintage and LTV as of September 30, 2024:
Current wording
The following charts illustrate the diversification and composition of our loan portfolio as of March 31, 2025, based on type of investment, interest rate, underlying property type, geographic location, vintage and LTV:
Previous wording
The charts above are based on total loan exposure of our commercial real estate loans.
Current wording
The charts above are based on outstanding principal of our commercial real estate loans.
Previous 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.
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.
Previous wording
(A) Represents mezzanine loans with commitments of $79.4 million and $8.7 million, respectively, accompanying two senior loans. $82.4 million of loan principal was funded, of which $74.4 million was placed on nonaccrual status, as of September 30, 2024. The remaining $8.0 million funded principal earned a fixed interest rate of 10.0% as of September 30, 2024. Refer to Note 3 to our condensed 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. $84.6 million of loan principal was funded and placed on nonaccrual status, as of March 31, 2025. Refer to Note 3 to our condensed consolidated financial statements for additional information.
Previous wording
(D)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
(C)In addition to cash coupon, all-in yield includes the amortization of deferred origination fees, loan origination costs and purchase discounts. Weighted average cash coupon and all-in yield excludes loans on nonaccrual status.
Previous 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 September 30, 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.
Current wording
For Senior Loan 7, 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 March 31, 2025, 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 26, the total whole loan is $110.7 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 $7.2 million funded as of September 30, 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.
Current wording
For Senior Loan 24, 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 $9.5 million funded as of March 31, 2025, 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
(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.
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. Weighted average LTV excludes risk-rated 5 loans and weighted average coupon excludes loans on nonaccrual status.
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, 5, 16, 20, 22, 56, and 57, 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, 15 and 20, Loan Per SF / Unit / Key is calculated as the total commitment amount of the loan divided by the proposed SF / Unit / Key.
Previous wording
For Senior Loans 2, 3, 5, 16, 20, 22, 56, and 57, 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 18 (64%); Senior Loan 19 (78%); Senior Loan 23 (64%); Senior Loan 27 (57%); Senior Loan 28 (75%); Senior Loan 31 (83%); Senior Loan 33 (70%), Senior Loan 38 (63%); Senior Loan 42 (81%); and Senior Loan 57 (61%).
Current wording
For Senior Loans 2, 3, 5, 15 and 20, 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 16 (77%); Senior Loan 17 (64%); Senior Loan 19 (78%); Senior Loan 22 (64%); Senior Loan 25 (57%); Senior Loan 26 (75%); Senior Loan 30 (83%); Senior Loan 31 (70%); Senior Loan 34 (81%); Senior Loan 35 (63%); and Senior Loan 43 (81%).
Previous wording
(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
Current wording
(J) 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.
Previous wording
As of September 30, 2024, the average risk rating of our portfolio was 3.2, weig hted by total loan exposure, consistent with that as of December 31, 2023.
Current wording
As of March 31, 2025, the average risk rating of our portfolio was 3.1, weig hted by outstanding loan principal, consistent with that as of December 31, 2024.
Previous wording
In September 2023, we modified a risk-rated 4 senior office loan located in Chicago, IL, with an outstanding principal balance of $118.4 million. The terms of the modification included, among others, a $15.0 million principal repayment, a $15.0 million reduction in unfunded loan commitment, and a restructure of the $103.4 million senior loan (after the $15.0 million repayment) into (i) a $105.0 million committed senior mortgage loan (with $16.6 million in unfunded commitment) and (ii) a $15.0 million subordinated note which is subordinate to a new $18.5 million sponsor interest. The restructured senior loan earns a coupon rate of S+2.25% and has a new term of five years. The $15.0 million subordinated note was deemed uncollectible and written off. The loan modification was accounted for as a new loan for GAAP purposes. The restructured senior loan with an outstanding principal balance of $90.1 million was risk-rated 3 as of September 30, 2024.
Current wording
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 $57.0 million was risk-rated 3 as of March 31, 2025.
Previous wording
Our Non-Mark-to-Market Financing Sources, which accounted for 79% of our total financing as of September 30, 2024, are not subject to credit or capital markets mark-to-market provisions. The remaining 21% of our total financing, which is comprised of three master repurchase agreements, are only subject to credit marks.
Current wording
Our Non-Mark-to-Market Financing Sources, which accounted for 78% of our total financing as of March 31, 2025, are not subject to credit or capital markets mark-to-market provisions. The remaining 22% of our total financing, which is comprised of three master repurchase agreements, are only subject to credit marks.
Previous wording
Each of our existing master repurchase facilities includes "credit mark-to-market" features. "Credit mark-to-market" provisions in repurchase facilities are designed to keep the lenders' credit exposure generally constant as a percentage of the underlying collateral value of the assets pledged as security to them. If the credit underlying collateral value decreases, the gross amount of leverage available to us will be reduced as our assets are marked-to-market, which would reduce our liquidity. The lender under the applicable repurchase facility sets the valuation and any revaluation of the collateral assets in its sole, good faith discretion. As a contractual matter, the lender has the right to reset the value of the assets at any time based on then-current market conditions, but the market convention is to reassess valuations on a monthly, quarterly and annual basis using the financial information delivered pursuant to the facility documentation regarding the real property, borrower and guarantor under such underlying loans. Generally, if the lender determines (subject to certain conditions) that the market value of the collateral in a repurchase transaction has decreased by more than a defined minimum amount, the lender may require us to provide additional collateral or lead to margin calls that may require us to repay all or a portion of the funds advanced. We closely monitor our liquidity and intend to maintain sufficient liquidity on our balance sheet in order to meet any margin calls in the event of any significant decreases in asset values. As of September 30, 2024, the weighted average haircut under our repurchase agreements was 32.5% (or 30.1%, if we had borrowed the maximum amount approved by its repurchase agreement counterparties as of such dates). In addition, our existing master repurchase facilities are not entirely term-matched financings and may mature before our CRE debt investments that represent underlying collateral to those financings. As we negotiate renewals and extensions of these liabilities, we may experience lower advance rates and higher pricing under the renewed or extended agreements.
Current wording
Each of our existing master repurchase facilities includes "credit mark-to-market" features. "Credit mark-to-market" provisions in repurchase facilities are designed to keep the lenders' credit exposure generally constant as a percentage of the underlying collateral value of the assets pledged as security to them. If the credit underlying collateral value decreases, the gross amount of leverage available to us will be reduced as our assets are marked-to-market, which would reduce our liquidity. The lender under the applicable repurchase facility sets the valuation and any revaluation of the collateral assets in its sole, good faith discretion. As a contractual matter, the lender has the right to reset the value of the assets at any time based on then-current market conditions, but the market convention is to reassess valuations on a monthly, quarterly and annual basis using the financial information delivered pursuant to the facility documentation regarding the real property, borrower and guarantor under such underlying loans. Generally, if the lender determines (subject to certain conditions) that the market value of the collateral in a repurchase transaction has decreased by more than a defined minimum amount, the lender may require us to provide additional collateral or lead to margin calls that may require us to repay all or a portion of the funds advanced. We closely monitor our liquidity and intend to maintain sufficient liquidity on our balance sheet in order to meet any margin calls in the event of any significant decreases in asset values. As of March 31, 2025, the weighted average haircut under our repurchase agreements was 32.8% (or 30.5%, if we had borrowed the maximum amount approved by its repurchase agreement counterparties as of such dates). In addition, our existing master repurchase facilities are not entirely term-matched financings and may mature before our CRE debt investments that represent underlying collateral to those financings. As we negotiate renewals and extensions of these liabilities, we may experience lower advance rates and higher pricing under the renewed or extended agreements.
Previous wording
In 2018, we entered into a term loan financing agreement with third party lenders with a current borrowing capacity of $1.0 billion (“Term Loan Facility”). The facility provides us with asset-based financing on a non-mark-to-market basis with match-term up to five years, with additional two-year extension available, and is non-recourse to us.
Current wording
Our term loan facility provides us with asset-based financing on a non-mark-to-market basis, is match-term up to five years, with an additional two-year extension available, and is non-recourse.
Previous wording
In 2020, we entered into a $500.0 million Loan and Security Agreement with HSBC Bank USA, National Association (“HSBC Facility”) with a current facility maturity date of March 2026. The facility provides warehouse financing on a non-mark-to-market basis with partial recourse to us.
Current wording
Our warehouse facility provides us with asset-based financing on a non-mark-to-market basis, has a current facility maturity of March 2026, and is partial recourse.
Previous wording
In 2022, we upsized our corporate revolving credit agreement (“Revolver”), administered by Morgan Stanley Senior Funding, Inc., to $610.0 million and extended the maturity date to March 2027. We may use our Revolver as a source of financing, which is designed to provide short-term liquidity to originate or de-lever loans, pay operating expenses and borrow amounts for general corporate purposes. Our Revolver is secured by corporate level guarantees and includes net equity interests in the investment portfolio.
Current wording
In March 2025, we upsized our corporate revolving credit agreement (“Revolver”), administered by Morgan Stanley Senior Funding, Inc., to $660.0 million and extended the maturity date to March 2030. We may use our Revolver as a source of financing, which is designed to provide short-term liquidity to originate or de-lever loans, pay operating expenses and borrow amounts for general corporate purposes. Our Revolver is secured by corporate level guarantees and includes net equity interests in the investment portfolio.
Previous wording
The secured term loan matures on September 1, 2027 and contains restrictions relating to liens, asset sales, indebtedness, investments and transactions with affiliates. Our secured term loan is secured by corporate level guarantees and does not include asset-based collateral. Refer to Notes 2 and 7 to our condensed consolidated financial statements for additional discussion of our secured term loan.
Current wording
In March 2025, we refinanced our existing term loan of $339.5 million with a new $550.0 million secured term loan due March 2032. The secured term loan is partially amortizing, with an amount equal to 1.0% per annum of the principal balance due in quarterly installments starting June 30, 2025. The secured term loan contains restrictions relating to liens, asset sales, indebtedness, investments and transactions with affiliates, and is secured by corporate level guarantees and does not include asset-based collateral.
Previous wording
•a consolidated tangible net worth covenant (75.0% of the aggregate net cash proceeds of any equity issuances made and any capital contributions received by us and KKR Real Estate Finance Holdings L.P. (our "Operating Partnership") or up to approximately $1,307.7 million, depending on the agreement;
Current wording
•a consolidated tangible net worth covenant (75.0% of the aggregate net cash proceeds of any equity issuances made and any capital contributions received by us and KKR Real Estate Finance Holdings L.P. (our "Operating Partnership") or up to approximately $1.3 billion, depending on the agreement;
Previous wording
Portland Retail /Redevelopment—In 2015, we originated a $177.0 million senior loan secured by a retail property in Portland, OR. In December 2021, we took title to the retail property and 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 on the Condensed Consolidated Balance Sheets as real estate owned ("REO") with a carrying value of $78.6 million, which included the estimated fair value of the property. We contributed a portion of the REO asset with a carrying value of $68.9 million to a joint venture (the "REO JV") with a third party local developer (“JV Partner”), whereby we had a 90% interest and the JV Partner had a 10% interest. The JV Partner's interest in the property was presented within "Noncontrolling interests in equity of consolidated joint ventures" on the Condensed Consolidated Balance Sheets. As of September 30, 2024, we have a priority of distributions up to $78.4 million before the JV Partner can participate in the economics of the REO JV.
Current wording
Portland, OR Retail /Redevelopment—In December 2021, we took title a Portland retail property and accounted for the property on a consolidated basis. The transaction was accounted for as an asset acquisition under Accounting Standards Codification ("ASC") 805. Accordingly, we recorded the property and its net assets on the Condensed Consolidated Balance Sheets based on the estimated fair value of acquired assets and assumed liabilities. We contributed a portion of the REO asset to a joint venture (the "REO JV") with a third party local developer (“JV Partner”), whereby we had a 90% interest and the JV Partner had a 10% interest. The JV Partner's interest in the property was presented within "Noncontrolling interests in equity of consolidated joint ventures" on the Condensed Consolidated Balance Sheets. As of March 31, 2025, we have a priority of distributions up to $80.9 million before the JV Partner can participate in the economics of the REO JV.
Previous wording
Philadelphia Office / Garage —In 2019, we originated a $182.6 million senior loan secured by an office portfolio in Philadelphia, PA. In December 2023, we received a $6.0 million partial repayment and then took title to the office property through a deed-in-lieu of foreclosure ("DIL"). The transaction was accounted for as an asset acquisition under ASC 805. Accordingly, we recorded the portfolio and its net assets on the Condensed Consolidated Balance Sheets with an estimated fair value of $86.4 million, which included $1.3 million of cash received and $76.5 million, $24.6 million and $15.9 million allocated to REO held for sale, lease intangible and other assets, and leasing and other liabilities, respectively. As a result, we recognized a $58.7 million loan write-off for the difference between the amortized cost of the foreclosed loan and the fair value of the REO’s net assets.
Current wording
Philadelphia, PA Office / Garage —In December 2023, we took title to a Philadelphia office portfolio through a deed-in-lieu of foreclosure ("DIL"). The transaction was accounted for as an asset acquisition under ASC 805. Accordingly, we recorded the portfolio and its net assets on the Condensed Consolidated Balance Sheets based on the estimated fair value of acquired assets and assumed liabilities.
Previous wording
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 Condensed Consolidated Balance Sheets.
Current wording
In June 2024, we sold a portion of the portfolio and provided financing to the buyer through a senior loan. The senior loan had an outstanding principal balance of $24.4 million ($77.7 million total commitment) as of March 31, 2025 and earned a coupon rate of S+4.0% with a maximum maturity of July 2029, assuming all extension options are exercised. The senior loan is presented within “Commercial real estate loans, held-for-investment, net” on the Condensed Consolidated Balance Sheets.
Previous wording
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 Condensed 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 Condensed Consolidated Balance Sheets.
Current wording
Mountain View, CA Office —In June 2024, we and the KKR affiliate took title to a Mountain View office property through a DIL and we accounted for the property on a consolidated basis. Ours and the KKR affiliate's interest in the property were 68.9% and 31.1%, respectively. The transaction was accounted for as an asset acquisition under ASC 805. Accordingly, we recorded the property and its net assets on the Condensed Consolidated Balance Sheets based on the estimated fair value of acquired assets and assumed liabilities. The KKR affiliate's interest in the property was presented within "Noncontrolling interests in equity of consolidated joint ventures" on the Condensed Consolidated Balance Sheets.
Previous wording
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 Condensed 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 wording
Seattle, WA Life Science (Equity Method Investment) — In June 2024, we and the KKR affiliates took title to a Seattle 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 equity method investment based on our share of the estimated fair value of the property's net assets.
Previous wording
Net interest income decreased by $3.4 million during the three months ended September 30, 2024, as compared to the preceding three-month period. This decrease was primarily due to a reduced loan portfolio size as a result of repayments and the impact of two additional loans placed on nonaccrual status in September 2024. We recorded $3.9 million of deferred loan fees and origination discounts accreted into interest income during the three months ended September 30, 2024, as compared to $4.8 million during the preceding period. In addition, we recorded $3.8 million of deferred financing costs amortization into interest expense during the three months ended September 30, 2024, as compared to $4.3 million for the preceding period.
Current wording
Net interest income decreased by $3.8 million during the three months ended March 31, 2025, as compared to the preceding three-month period. This decrease was due primarily to a decrease in index rates and fewer calendar days compared to the preceding three month period. We recorded $3.4 million of deferred loan fees and origination discounts accreted into interest income during the three months ended March 31, 2025, as compared to $3.7 million during the preceding period. In addition, we recorded $3.1 million of deferred financing costs amortization into interest expense during the three months ended March 31, 2025, as compared to $1.3 million for the preceding period.
Previous wording
Total other income increased by $7.8 million during the nine months ended September 30, 2024, as compared to the prior year period. This increase was primarily due to a $13.3 million increase in revenue from REO operations, partially offset by a decrease in interest income earned on our cash balance.
Current wording
Total other income decreased by $0.8 million during the three months ended March 31, 2025, as compared to the preceding period. This decrease was due primarily to a $0.7 million decrease in revenue from REO operations.
Previous wording
Total operating expenses increased by $32.2 million during the three months ended September 30, 2024, as compared to the preceding period. This increase was primarily due to a $33.7 million change in the provision for credit losses. The provision for credit losses during the three months ended September 30, 2024 was due primarily to additional reserves for risk-rated 5 loans, primarily in the life science sector.
Current wording
Total operating expenses increased by $20.8 million during the three months ended March 31, 2025, as compared to the preceding period. This increase was primarily due to a $20.3 million change in the provision for credit losses. The provision for credit losses during the three months ended March 31, 2025 was due primarily to additional reserves for risk-rated 5 and risk-rated 4 loans in the multifamily and life science sectors.
Previous wording
Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023
Current wording
Three Months Ended March 31, 2025 Compared to Three Months Ended March 31, 2024
Previous wording
The following table summarizes the changes in our results of operations for the nine months ended September 30, 2024 and 2023 (dollars in thousands, except per share data):
Current wording
The following table summarizes the changes in our results of operations for the three months ended March 31, 2025 and 2024 (dollars in thousands, except per share data):
Previous wording
Net interest income decreased by $18.5 million during the nine months ended September 30, 2024, as compared to the corresponding period in the prior year. This decrease was primarily due to a reduced loan portfolio size as a result of repayments or other resolutions and the impact of certain loans on nonaccrual status accounted for under the cost recovery method. We recorded $13.5 million of deferred loan fees and origination discounts accreted into interest income during the nine months ended September 30, 2024, as compared to $17.8 million during the prior year period. In addition, we recorded $13.1 million of deferred financing costs amortization into interest expense during the nine months ended September 30, 2024, as compared to $20.4 million during the prior year period.
Current wording
Net interest income decreased by $7.8 million during the three months ended March 31, 2025, as compared to the corresponding period in the prior year. This decrease was due primarily to a reduced loan portfolio size as a result of repayments or other resolutions and lower index rates. We recorded $3.4 million of deferred loan fees and origination discounts accreted into interest income during the three months ended March 31, 2025, as compared to $4.7 million during the prior year period. In addition, we recorded $3.1 million of deferred financing costs amortization into interest expense during the three months ended March 31, 2025, as compared to $5.0 million during the prior year period.
Previous wording
Total operating expenses decreased by $43.7 million during the nine months ended September 30, 2024, as compared to the prior year period. This decrease was primarily due to a $49.6 million change in the provision for credit losses. The provision for credit losses during the nine months ended September 30, 2024 was due primarily to additional reserves for risk-rated 5 loans, primarily in the office and life science sectors.
Current wording
Total operating expenses decreased by $9.2 million during the three months ended March 31, 2025, as compared to the prior year period. This decrease was due primarily to a $8.4 million change in the provision for credit losses. This change was due primarily to a higher provision for credit losses of $33.3 million on risk-rated 5 loans in the office sector during the prior year period compared to the provision for credit losses of $24.9 million on risk-rated 5 and risk-rated 4 loans in the multifamily and life science sectors during the three months ended March 31, 2025 .
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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
Refer to Notes 2 and 7 to our condensed consolidated financial statements for additional discussion of our secured term loan.
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Previous report — wording carried elsewhere
with the KKR affiliate under the TIC agreement.