8-K
KKR Real Estate Finance Trust Inc. (KREF)
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 16, 2021
KKR Real Estate Finance Trust Inc.
(Exact name of registrant as specified in its charter)
| Maryland | 001-38082 | 47-2009094 |
|---|---|---|
| (State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
| 30 Hudson Yards, | Suite 7500 | |
| --- | --- | --- |
| New York, | New York | 10001 |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (212) 750-8300
| 9 West 57th Street, | Suite 4200 | |
|---|---|---|
| New York, | New York | 10019 |
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
| Securities registered pursuant to Section 12(b) of the Act: | ||
|---|---|---|
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
| Common stock, par value $0.01 per share | KREF | New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒
Item 2.02 Results of Operations and Financial Condition.
On February 16, 2021, KKR Real Estate Finance Trust Inc. (the “Company”) issued an earnings release and supplemental financial information announcing its financial results for the quarter and year ended December 31, 2020. The earnings release and supplemental financial information are furnished as Exhibit 99.1 and Exhibit 99.2, respectively, hereto and are incorporated herein by reference.
The information in Item 2.02 of this Current Report, including Exhibits 99.1 and 99.2, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section. The information in this Current Report shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, as amended (the “Securities Act”), unless it is specifically incorporated by reference therein.
Forward-Looking statements
This Report contains forward-looking statements within the meaning of the “safe harbor” provisions of Section 27A of the Securities Act and Section 21E of the Exchange Act. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. The forward-looking statements are based on the Company’s beliefs, assumptions and expectations of its future performance, taking into account all information currently available to it. These beliefs, assumptions and expectations can change as a result of many possible events or factors, not all of which are known to the Company or are within its control. The forward-looking statements speak only as of the date of this Report or as of the date they are made, and the Company does not undertake any obligation to update any forward-looking statements except as required by law. Information about factors affecting the Company and the forward-looking statements is available in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020, as such factors may be updated from time to time in the Company’s periodic filings with the Securities and Exchange Commission, which are available at www.sec.gov.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
| Exhibit No. | Description |
|---|---|
| 99.1 | Earnings Release dated February16, 2021 |
| 99.2 | Supplemental Financial Information for the year ended December 31, 2020 |
| 104 | Cover Page Interactive Data File, formatted in Inline XBRL (embedded within the Inline XBRL document) |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| KKR Real Estate Finance Trust Inc. | |
|---|---|
| By: | /s/ Vincent J. Napolitano |
| Name: Vincent J. Napolitano | |
| Title: Secretary |
Date: February 16, 2021
Document
KKR REAL ESTATE FINANCE TRUST INC. REPORTS
FOURTH QUARTER AND FULL YEAR 2020 FINANCIAL RESULTS
New York, NY, February 16, 2021 - KKR Real Estate Finance Trust Inc. (the “Company” or “KREF”) (NYSE: KREF) today reported its financial results for the quarter and full year ended December 31, 2020.
Reported net income attributable to common stockholders of $28.8 million and $53.6 million, or $0.52 and $0.96 per diluted share of common stock, for the three and twelve months ended December 31, 2020, respectively.
Reported Distributable Earnings(1) of $26.5 million and $109.3 million, or $0.48 and $1.95 per diluted share of common stock, respectively, for the three and twelve months ended December 31, 2020, respectively.
Fourth Quarter 2020 Highlights
•Originated six senior loans and one corporate loan to a multifamily operator, together totaling $565.4 million. The six senior loans have a weighted average appraised LTV and coupon of 68% and L+3.9%, respectively.
•$481.8 million liquidity position(2), including $110.8 million of cash and $335.0 million of undrawn capacity on the corporate revolving credit facility (“Revolver”).
•Received loan repayments of $534.6 million.
•Current portfolio:
•$5.0 billion funded portfolio is 97.7% performing with a weighted average risk rating of 3.1.
•99.2% floating-rate with a weighted average loan-to-value ratio (“LTV”)(3) of 67%.
•Multifamily and office loans comprise 81% of the portfolio, while hospitality and retail loans comprise 9%.
•Earnings benefited from low LIBOR given in-place rate floors, as approximately 85% of the portfolio is subject to a LIBOR floor of at least 1.0% with a weighted average floor of 1.64%.
•Net repaid $271.4 million on financing facilities.
2020 Highlights
•Originated 10 floating-rate loans totaling $917.9 million.
•Executed a $300.0 million secured term loan and entered into a $500.0 million warehouse financing facility.
•Increased the borrowing capacity on the Revolver to $335.0 million.
•83% of the secured financing was completely non-mark-to-market, and the remaining balance is only subject to mark-to-credit, as of December 31, 2020.
•Repurchased 2,037,637 shares of common stock at an average price per share of $12.27, for a total of $25.0 million.
•Book value was $1,043.6 million or $18.76 per share as of December 31, 2020, inclusive of CECL allowance of $60.7 million or ($1.09) per common share.
Matt Salem, Chief Executive Officer of KREF, said: “KREF achieved record distributable earnings for the year bolstered by another strong performance in the fourth quarter. The fourth quarter also marked our return to offense with $565 million of new originations and a continued focus on institutional real estate owned by high quality sponsors. KREF remains well positioned for the year ahead supported by a conservative portfolio and robust pipeline.”
Patrick Mattson, President and Chief Operating Officer of KREF, added: “The volatility at the onset of COVID-19 showcased KREF’s best in class liabilities. Over the course of the year we made our inaugural debut in the corporate credit market, expanded our corporate revolver, and increased our fully non-mark-to-market financing to an industry leading 83%.”
(1)Commencing with the Company’s fourth quarter 2020 earnings release and Annual Report on Form 10-K for the fiscal year ended December 31, 2020 and for subsequent reporting periods, the Company has elected to present Distributable Earnings, a measure that is not prepared in accordance with GAAP, as a supplement to KREF’s GAAP net income reporting. Refer to page 6 for the definition of Distributable Earnings.
(2)Excludes $274.7 million of unencumbered senior loans that can be pledged to financing facilities subject to lender approval, as of December 31, 2020.
(3)LTV is generally based on the initial loan amount divided by the as-is appraised value as of the date the loan was originated or by the current principal amount as of the date of the most recent as-is appraised value.
Portfolio Performance
Collected 99.4% and 97.1% of interest payments due on loan portfolio for the year ended December 31, 2020 and for the month ended January 31, 2021, respectively. As of December 31, 2020, the average risk rating of the Company's portfolio was 3.1 (Average Risk), weighted by outstanding principal amount, as compared to 3.1 as of September 30, 2020.
Fourth Quarter 2020 Investment Activity
Loan Originations
The Company committed capital and funded to the following floating-rate loans ($ in thousands):
| Description/ Location | Property Type | Month Originated | Committed Principal Amount | Initial Principal Funded | Interest Rate (A) | Maturity Date(B) | LTV | ||
|---|---|---|---|---|---|---|---|---|---|
| Senior Loan, Arlington VA(C) | Multifamily | October 2020 | $ | 70,895 | $ | 68,000 | L + 3.8% | October 2025 | 73% |
| Senior Loan, Denver CO(D) | Multifamily | October 2020 | 40,000 | 38,500 | L + 3.6 | November 2024 | 49 | ||
| Senior Loan, Oakland CA(E) | Office | October 2020 | 159,690 | 94,720 | L + 4.3 | November 2025 | 65 | ||
| Senior Loan, Austin, TX | Multifamily | December 2020 | 80,000 | 78,000 | L + 3.7 | December 2024 | 77 | ||
| Senior Loan, Washington D.C. | Multifamily | December 2020 | 69,000 | 64,954 | L + 3.5 | December 2025 | 63 | ||
| Senior Loan, Denver, CO | Industrial | December 2020 | 95,766 | 18,430 | L + 3.8 | January 2026 | 76 | ||
| Real Estate Corporate Loan(F) | Multifamily | December 2020 | 50,000 | 50,000 | L + 12.0 | December 2025 | n/a | ||
| Total/ Weighted Average | $ | 565,351 | $ | 412,604 | L + 4.6% | 68% |
(A) Floating rate based on one-month USD LIBOR. The weighted average interest rate floor for the six senior loans is 4.5%.
(B) Maturity date assumes all extension options are exercised, if applicable.
(C) The total whole loan is $141.8 million, co-originated and co-funded by the Company and a KKR affiliate on a pari passu basis. The Company's interest is 50% of the loan.
(D) The total whole loan is $80.0 million, co-originated and co-funded by the Company and a KKR affiliate on a pari passu basis. The Company's interest is 50% of the loan.
(E) The total whole loan is $509.9 million, co-originated and co-funded by the Company and a KKR affiliate. The Company's interest was 31% of the loan or $159.7 million, of which $134.7 million in senior notes were syndicated to third party lenders. Post syndication, the Company retained a mezzanine loan with a commitment of $25.0 million, of which $14.8 million was funded as of December 31, 2020, at an interest rate of L+12.9%.
(F) The total loan amount is $125.0 million, co-originated and co-funded fully by the Company and KKR affiliates. The Company’s interest is 40% of the loan. The borrower is a full service, vertically-integrated multifamily real estate acquisition, development, and operating company. The loan is partially secured by equity interests in the borrower’s underlying real estate portfolio.
Quarter End Portfolio Summary
The following table sets forth certain information regarding the Company’s portfolio at December 31, 2020 ($ in millions):
| Investment | Committed Principal Amount(A) | Outstanding Principal Amount(A) | Amortized Cost(B) | Carrying Value(C) | Max Remaining Term (Years)(D)(E) | Weighted Average LTV(D) | ||||
|---|---|---|---|---|---|---|---|---|---|---|
| Senior Loans | $ | 5,416.2 | $ | 4,886.6 | $ | 4,867.1 | $ | 4,808.7 | 3.3 | 67% |
| Non-Senior Loans(G) | 75.5 | 75.5 | 69.9 | 68.5 | 4.6 | 67 | ||||
| CMBS B-Pieces(F) | 40.0 | 35.7 | 35.7 | 35.7 | 8.5 | 58 | ||||
| Total/Weighted Average | $ | 5,531.7 | $ | 4,997.8 | $ | 4,972.7 | $ | 4,912.9 | 3.4 | 67% |
(A) Senior loans include senior mortgages and similar credit quality investments, including junior participations in the Company's originated senior loans for which it has syndicated the senior participations and retained the junior participations for its portfolio and excludes vertical loan syndications.
(B) Amortized cost represents the outstanding face amount of loan, net of applicable unamortized discounts, loan origination fees and a $4.7 million write-off on one $5.5 million impaired mezzanine loan.
(C) Carrying value represents the amortized cost of loan, net of applicable allowance for credit losses.
(D) Weighted by current principal amount for the Company's senior, mezzanine and real estate corporate loans and by net equity for its CMBS B-Piece investments through an aggregator vehicle. Weighted Average LTV does not include one fully funded corporate loan to a multifamily operator with an outstanding principal amount of $50.0 million.
(E) Max remaining term (years) assumes all extension options are exercised, if applicable.
(F) Represents a $35.7 million investment in an aggregator vehicle that invests in CMBS B-Pieces with a net equity balance on a fair market value basis of $33.3 million.
(G) Includes two fully funded mezzanine loans with an aggregate outstanding principal amount of $25.5 million and one fully funded corporate loan to a multifamily operator with an outstanding principal amount of $50.0 million at December 31, 2020.
Non-GAAP Financial Measures
Reconciliation of Distributable Earnings to Net Income Attributable to Common Stockholders
The table below reconciles Distributable Earnings and related diluted per share amounts to net income attributable to common stockholders and related diluted per share amounts, respectively, for the three months ended December 31, 2020, September 30, 2020 and December 31, 2019 and the years ended December 31, 2020 and 2019, respectively ($ in thousands, except per share data):
| Three Months Ended | Per Diluted Share | Three Months Ended | Per Diluted Share | Three Months Ended | Per Diluted Share | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| December 31, 2020 | September 30, 2020 | December 31, 2019 | ||||||||||||
| Net Income (Loss) Attributable to Common Stockholders | $ | 28,776 | $ | 0.52 | $ | 31,351 | $ | 0.56 | $ | 24,789 | $ | 0.43 | ||
| Adjustments | ||||||||||||||
| Non-cash equity compensation expense | 1,305 | 0.02 | 1,390 | 0.02 | 1,017 | 0.02 | ||||||||
| Unrealized (gains) or losses(A) | (203) | — | (178) | — | (407) | (0.01) | ||||||||
| Provision for (Reversal of) credit losses, net | (3,438) | (0.06) | (126) | — | — | — | ||||||||
| Non-cash convertible notes discount amortization | 91 | — | 91 | — | 91 | — | ||||||||
| Distributable Earnings | $ | 26,531 | $ | 0.48 | $ | 32,528 | $ | 0.58 | $ | 25,490 | $ | 0.44 | ||
| Weighted average number of shares of common stock outstanding, diluted | 55,669,230 | 55,632,170 | 57,595,424 |
(A) Includes ($0.1) million, ($0.3) million and ($0.4) million non-cash redemption value adjustment of the Special Non-Voting Preferred Stock and ($0.1) million, $0.1 million and $0.0 million of unrealized mark-to-market adjustment to the Company's underlying CMBS investments for the three months ended December 31, 2020, September 30, 2020 and December 31, 2019, respectively.
| Year Ended | Per Diluted Share | Year Ended | Per Diluted Share | ||||||
|---|---|---|---|---|---|---|---|---|---|
| December 31, 2020 | December 31, 2019 | ||||||||
| Net Income (Loss) Attributable to Common Stockholders | $ | 53,553 | $ | 0.96 | $ | 90,492 | $ | 1.57 | |
| Adjustments | |||||||||
| Non-cash equity compensation expense | 5,676 | 0.10 | 4,091 | 0.07 | |||||
| Unrealized (gains) or losses(A) | 4,036 | 0.06 | 1,179 | 0.02 | |||||
| Provision for credit losses, net | 50,344 | 0.90 | — | — | |||||
| Loan write-off | (4,650) | (0.08) | — | — | |||||
| Non-cash convertible notes discount amortization | 362 | 0.01 | 360 | 0.01 | |||||
| Reversal of previously unrealized loss now realized | — | — | 191 | — | |||||
| Distributable Earnings | $ | 109,321 | $ | 1.95 | $ | 96,313 | $ | 1.67 | |
| Weighted average number of shares of common stock outstanding, diluted | 56,057,237 | 57,532,490 |
(A) Includes $0.2 million and ($1.2) million non-cash redemption value adjustment of the Special Non-Voting Preferred Stock and $3.9 million and $0.0 million of unrealized mark-to-market adjustment to the Company's underlying CMBS investments for the years ended December 31, 2020 and 2019, respectively.
Book Value
The Company’s book value per share of common stock was $18.76 at December 31, 2020, as compared to book value per share of common stock of $18.73 and $19.52 at September 30, 2020 and December 31, 2019, respectively.
Book value per share as of December 31, 2020 includes the impact of CECL credit loss allowance of $60.7 million, or ($1.09) per common share. See Note 2 — Summary of Significant Accounting Policies, to the Company's consolidated financial statements included in the Form 10-K for the fiscal year ended December 31, 2020 for detailed discussion of allowance for credit losses.
In addition, book value per share includes the impact of a ($0.2) million, or $0.00 per common share, non-cash redemption value adjustment to the redeemable Special Non-Voting Preferred Stock (“SNVPS”) for the year ended December 31, 2020, resulting in a cumulative (since issuance of the SNVPS) decrease of $1.9 million, or ($0.03) per common share to the book value (“SNVPS Cumulative Impact”) as of December 31, 2020. Upon redemption of the SNVPS, the Company's book value will increase as a result of a one-time gain, thus substantially eliminating the SNVPS Cumulative Impact on the book value. See Note 10 — Equity, to the Company's consolidated financial statements included in this Form 10-K, for detailed discussion of the SNVPS.
Subsequent Events
The following events occurred subsequent to December 31, 2020:
Investing Activities
The Company originated the following senior loans:
| Description/ Location | Property Type | Month Originated | Committed Principal Amount | Initial Principal Funded | Interest Rate (A) | Maturity Date(B) | LTV | ||
|---|---|---|---|---|---|---|---|---|---|
| Senior Loan, Dallas, TX | Office | January 2021 | $ | 87,000 | $ | 87,000 | L + 3.3% | February 2026 | 65% |
| Senior Loan, Boston, MA(C) | Office | February 2021 | 187,500 | 187,500 | L + 3.3 | February 2026 | 71 | ||
| Total/ Weighted Average | $ | 274,500 | $ | 274,500 | L + 3.3% | 69% |
(A) Floating rate based on one-month USD LIBOR.
(B) Maturity date assumes all extension options are exercised, if applicable.
(C) The total whole loan is $375.0 million, co-originated and co-funded by the Company and a KKR affiliate on a pari passu basis. The Company's interest is 50% of the loan.
Funding of Previously Closed Loans
The Company funded approximately $19.3 million for previously closed loans.
Loan Repayments
The Company received approximately $24.3 million from loan repayments.
Financing Activities
The Company net borrowed approximately $259.0 million under its financing agreements.
Corporate Activities
Dividends
In January 2021, the Company paid $23.9 million in dividends on its common stock, or $0.43 per share, with respect to the fourth quarter of 2020, to stockholders of record on December 31, 2020.
Teleconference Details:
The Company will host a conference call to discuss its financial results on Wednesday, February 17, 2021 at 10:00 a.m. Eastern Time. Members of the public who are interested in participating in the Company’s fourth quarter and full year 2020 earnings teleconference call should dial from the U.S., (844) 784-1730, or from outside the U.S., +1 (412) 380-7410, shortly before 10:00 a.m. and reference the KKR Real Estate Finance Trust Inc. Teleconference Call; a pass code is not required. Please note the teleconference call will be available for replay beginning approximately two hours after the broadcast. To access the replay, callers from the U.S. should dial (877) 344-7529 and callers from outside the U.S. should dial +1 (412) 317-0088, and enter conference identification number 10150772.
Webcast:
The conference call will also be available on the Company’s website at www.kkrreit.com. To listen to a live broadcast, please go to the site at least 15 minutes prior to the scheduled start time in order to register, download and install any necessary audio software. A replay of the webcast will also be available for 30 days on the Company’s website.
Supplemental Information
The slide presentation accompanying this release and containing supplemental information about the Company’s financial results for the fiscal quarter ended December 31, 2020 may also be accessed through the investor relations section of the Company’s website at www.kkrreit.com.
About KKR Real Estate Finance Trust Inc.
KKR Real Estate Finance Trust Inc. (NYSE: KREF) is a real estate investment trust that primarily originates or acquires transitional senior loans collateralized by institutional-quality commercial real estate assets that are owned and operated by experienced and well-capitalized sponsors and located in liquid markets with strong underlying fundamentals. The Company's target assets also include mezzanine loans, preferred equity and other debt-oriented instruments with these characteristics. The Company is externally managed and advised by KKR Real Estate Finance Manager LLC, a registered investment adviser and an indirect subsidiary of KKR & Co. Inc., a leading global alternative investment firm with over 40-year history of leadership, innovation and investment excellence and $251.7 billion of assets under management as of December 31, 2020.
Additional information can be found on the Company’s website at www.kkrreit.com.
Forward-Looking Statements
This release contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which reflect the Company’s current views with respect to, among other things, its future operations and financial performance. You can identify these forward looking statements by the use of words such as “outlook,” “believe,” “expect,” “potential,” “continue,” “may,” “should,” “seek,” “approximately,” “predict,” “intend,” “will,” “plan,” “estimate,” “anticipate,” the negative version of these words, other comparable words or other statements that do not relate strictly to historical or factual matters. By their nature, forward-looking statements speak only as of the date they are made, are not statements of historical fact or guarantees of future performance and are subject to risks, uncertainties, assumptions or changes in circumstances that are difficult to predict or quantify, in particular due to the uncertainties created by the COVID-19 pandemic, including the projected impact of COVID-19 on the Company's business, financial performance and operating results. The forward-looking statements are based on the Company’s beliefs, assumptions and expectations, taking into account all information currently available to it. These beliefs, assumptions and expectations can change as a result of many possible events or factors, not all of which are known to the Company or are within its control. Such forward-looking statements are subject to various risks and uncertainties, including, among other things: the severity and duration of the COVID-19 pandemic; potential risks and uncertainties relating to the ultimate geographic spread of COVID-19; actions that may be taken by governmental authorities to contain the COVID-19 outbreak or to treat its impact; the potential negative impacts of COVID-19 on the global economy and the impacts of COVID-19 on the Company’s financial condition and business operations; adverse developments in the availability of desirable investment opportunities whether they are due to competition, regulation or otherwise; the general political, economic and competitive conditions in the United States and in any foreign jurisdictions in which the Company invests; the level and volatility of prevailing interest rates and credit spreads; adverse changes in the real estate and real estate capital markets; difficulty or delays in redeploying the proceeds from repayments of existing investments; general volatility of the securities markets in which the Company participates; changes in the Company’s business, investment strategies or target assets; deterioration in the performance of the properties securing the Company’s investments that may cause deterioration in the performance of the Company’s investments and, potentially, principal losses to the Company; acts of God such as hurricanes, earthquakes and other natural disasters, pandemics such as COVID-19, acts of war and/or terrorism and other events that may cause unanticipated and uninsured performance declines and/or losses to the Company or the owners and operators of the real estate securing the Company’s investments; the adequacy
of collateral securing the Company’s investments and declines in the fair value of the Company’s investments; difficulty in obtaining financing or raising capital; difficulty in successfully managing the Company’s growth, including integrating new assets into the Company’s existing systems; reductions in the yield on the Company’s investments and increases in the cost of the Company’s financing; defaults by borrowers in paying debt service on outstanding indebtedness; the availability of qualified personnel and the Company’s relationship with its manager, KKR Real Estate Finance Manager LLC; subsidiaries of KKR & Co. Inc. control the Company and KKR's interests may conflict with those of the Company’s stockholders in the future; the cost of operating the Company’s platform, including, but not limited to, the cost of operating a real estate investment platform; adverse legislative or regulatory developments; the Company’s qualification as a real estate investment trust ("REIT") for U.S. federal income tax purposes and its exclusion from registration under the Investment Company Act of 1940, as amended (the "Investment Company Act"); and authoritative accounting principles generally accepted in the United States of America ("GAAP") or policy changes from such standard-setting bodies such as the Financial Accounting Standards Board (the "FASB"), the Securities and Exchange Commission (the "SEC"), the Internal Revenue Service, the New York Stock Exchange and other authorities that the Company is subject to, as well as their counterparts in any foreign jurisdictions where the Company might do business; and other risks and uncertainties, including those described under Part I-Item 1A. “Risk Factors” of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020, as such factors may be updated from time to time in the Company’s periodic filings with the SEC, which are accessible on the SEC’s website at www.sec.gov. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in this release. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements and information included in this release and in the Company’s filings with the SEC. All forward-looking statements in this release speak only as of the date of this release. The Company undertakes no obligation to publicly update or review any forward-looking statements, whether as a result of new information, future developments or otherwise, except as required by law.
CONTACT INFORMATION
Investor Relations:
KKR Real Estate Finance Trust Inc.
Anna Thomas
Tel: +1-888-806-7781 (U.S.) / +1-212-763-9048 (Outside U.S.)
KREF-IR@kkr.com
Media:
Kohlberg Kravis Roberts & Co. L.P.
Cara Major or Miles Radcliffe-Trenner
Tel: +1-212-750-8300
media@kkr.com
Definitions:
“Loan-to-value ratio”: 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 the CMBS B-Pieces, LTV is based on the weighted average LTV of the underlying loan pool.
“Distributable Earnings”: Commencing with the Company's fourth quarter 2020 earnings release and Annual Report on Form 10-K for the fiscal year then ended and for subsequent reporting periods, the Company has elected to present Distributable Earnings, a measure that is not prepared in accordance with GAAP, as a supplement to the Company's net income reporting. The Company believes this metric will be a useful indicator for investors in evaluating the Company’s operating performance and its ability to pay dividends. Distributable Earnings replaces the Company’s prior presentation of Core Earnings, and Core Earnings presentations from prior reporting periods have been recast as Distributable Earnings.
The Company defines Distributable Earnings as net income (loss) attributable to stockholders or, without duplication, owners of the Company's subsidiaries, computed in accordance with GAAP, including realized losses not otherwise included in GAAP net income (loss) and excluding (i) non-cash equity compensation expense, (ii) depreciation and amortization, (iii) any unrealized gains or losses or other similar non-cash items that are included in net income for the applicable reporting period, regardless of whether such items are included in other comprehensive income or loss, or in net income, and (iv) one-time events pursuant to changes in GAAP and certain material non-cash income or expense items agreed upon after discussions between the Company’s Manager and board of directors and after approval by a majority of the independent directors. The exclusion of depreciation and amortization from the calculation of Distributable Earnings only applies to debt investments related to real estate to the extent the Company forecloses upon the property or properties underlying such debt investments.
While Distributable Earnings excludes the impact of the unrealized current provision for credit losses, any loan losses are charged off and realized through Distributable Earnings when deemed non-recoverable. Non-recoverability is determined (i) upon the resolution of a loan (i.e. when the loan is repaid, fully or partially, or in the case of foreclosure, when the underlying asset is sold), or (ii) with respect to any amount due under any loan, when such amount is determined to be non-collectible.
Distributable Earnings should not be considered as a substitute for GAAP net income. The Company cautions readers that its methodology for calculating Distributable Earnings may differ from the methodologies employed by other REITs to calculate the same or similar supplemental performance measures, and as a result, the Company’s reported Distributable Earnings may not be comparable to similar measures presented by other REITs.
KKR Real Estate Finance Trust Inc. and Subsidiaries
Consolidated Balance Sheets
(Amounts in thousands, except share and per share data)
| December 31, 2020 | December 31, 2019 | |||
|---|---|---|---|---|
| Assets | ||||
| Cash and cash equivalents | $ | 110,832 | $ | 67,619 |
| Commercial mortgage loans, held-for-investment | 4,844,534 | 4,931,042 | ||
| Less: Allowance for credit losses | (59,801) | — | ||
| Commercial mortgage loans, held-for-investment, net | 4,784,733 | 4,931,042 | ||
| Equity method investments | 33,651 | 37,469 | ||
| Accrued interest receivable | 15,412 | 16,305 | ||
| Other assets(A) | 20,984 | 4,583 | ||
| Total Assets | $ | 4,965,612 | $ | 5,057,018 |
| Liabilities and Equity | ||||
| Liabilities | ||||
| Secured financing agreements, net | $ | 2,574,747 | $ | 2,884,887 |
| Collateralized loan obligation, net | 810,000 | 803,376 | ||
| Secured term loan, net | 288,028 | — | ||
| Convertible notes, net | 140,465 | 139,075 | ||
| Loan participations sold, net | 66,232 | 64,966 | ||
| Dividends payable | 24,287 | 25,036 | ||
| Accrued interest payable | 5,381 | 6,686 | ||
| Accounts payable, accrued expenses and other liabilities(B) | 4,823 | 3,363 | ||
| Due to affiliates | 6,243 | 5,917 | ||
| Total Liabilities | 3,920,206 | 3,933,306 | ||
| Commitments and Contingencies | — | — | ||
| Temporary Equity | ||||
| Redeemable preferred stock | 1,852 | 1,694 | ||
| Permanent Equity | ||||
| Preferred stock, 50,000,000 authorized 1 share with par value of $0.01 issued and outstanding as of December 31, 2020 and 2019, respectively) | — | — | ||
| Common stock, 300,000,000 authorized (55,619,428 and 57,486,583 shares with par value of $0.01 issued and outstanding as of December 31, 2020 and 2019, respectively) | 556 | 575 | ||
| Additional paid-in capital | 1,169,695 | 1,165,995 | ||
| Accumulated deficit | (65,698) | (8,594) | ||
| Repurchased stock, 3,900,326 and 1,862,689 shares repurchased as of December 31, 2020 and 2019, respectively | (60,999) | (35,958) | ||
| Total KKR Real Estate Finance Trust Inc. stockholders’ equity | 1,043,554 | 1,122,018 | ||
| Total Permanent Equity | 1,043,554 | 1,122,018 | ||
| Total Liabilities and Equity | $ | 4,965,612 | $ | 5,057,018 |
(A) Includes $15.9 million and $0.0 million of loan repayment proceeds held by the servicer and receivable by KREF as of December 31, 2020 and 2019, respectively.
(B) Includes $0.9 million and $0.0 million of expected loss reserve for unfunded loan commitments as of December 31, 2020 and 2019, respectively.
KKR Real Estate Finance Trust Inc. and Subsidiaries
Consolidated Statements of Income
(Amounts in thousands, except share and per share data)
| Three Months Ended | Year Ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| December 31, 2020 | September 30, 2020 | December 31, 2019 | December 31, 2020 | December 31, 2019 | ||||||
| Net Interest Income | ||||||||||
| Interest income | $ | 63,201 | $ | 67,689 | $ | 72,417 | $ | 269,188 | $ | 274,335 |
| Interest expense | 28,835 | 28,832 | 41,333 | 127,312 | 158,860 | |||||
| Total net interest income | 34,366 | 38,857 | 31,084 | 141,876 | 115,475 | |||||
| Other Income | ||||||||||
| (Loss) gain on sale of investments | — | — | 71 | — | (2,688) | |||||
| Income (loss) from equity method investments | 1,168 | 973 | 1,254 | 537 | 4,568 | |||||
| Change in net assets related to CMBS consolidated variable interest entities | — | — | — | — | 1,665 | |||||
| Other income | 86 | 102 | 447 | 744 | 2,453 | |||||
| Total other income (loss) | 1,254 | 1,075 | 1,772 | 1,281 | 5,998 | |||||
| Operating Expenses | ||||||||||
| General and administrative | 2,862 | 3,563 | 2,676 | 14,238 | 10,522 | |||||
| Provision for (Reversal of) credit losses, net | (3,438) | (126) | — | 50,344 | — | |||||
| Management fees to affiliate | 4,252 | 4,223 | 4,280 | 16,992 | 17,135 | |||||
| Incentive compensation to affiliate | 2,929 | 990 | 1,174 | 6,774 | 3,272 | |||||
| Total operating expenses | 6,605 | 8,650 | 8,130 | 88,348 | 30,929 | |||||
| Income (Loss) Before Income Taxes, Preferred Dividends and Redemption Value Adjustment | 29,015 | 31,282 | 24,726 | 54,809 | 90,544 | |||||
| Income tax expense | 157 | 96 | 213 | 412 | 579 | |||||
| Net Income (Loss) | 28,858 | 31,186 | 24,513 | 54,397 | 89,965 | |||||
| Preferred Stock Dividends and Redemption Value Adjustment | 82 | (165) | (276) | 844 | (527) | |||||
| Net Income (Loss) Attributable to Common Stockholders | $ | 28,776 | $ | 31,351 | $ | 24,789 | $ | 53,553 | $ | 90,492 |
| Net Income (Loss) Per Share of Common Stock | ||||||||||
| Basic | $ | 0.52 | $ | 0.56 | $ | 0.43 | $ | 0.96 | $ | 1.58 |
| Diluted | $ | 0.52 | $ | 0.56 | $ | 0.43 | $ | 0.96 | $ | 1.57 |
| Weighted Average Number of Shares of Common Stock Outstanding | ||||||||||
| Basic | 55,619,428 | 55,491,405 | 57,486,583 | 55,985,014 | 57,426,912 | |||||
| Diluted | 55,669,230 | 55,632,170 | 57,595,424 | 56,057,237 | 57,532,490 | |||||
| Dividends Declared per Share of Common Stock | $ | 0.43 | $ | 0.43 | $ | 0.43 | $ | 1.72 | $ | 1.72 |
9
krefq420supplemental_vf
KKR Real Estate Finance Trust Inc. Fourth Quarter and Full Year 2020 Supplemental Information February 16, 2021
Legal Disclosures 2 This presentation has been prepared for KKR Real Estate Finance Trust Inc. (NYSE: KREF) for the benefit of its stockholders. This presentation is solely for informational purposes in connection with evaluating the business, operations and financial results of KKR Real Estate Finance Trust Inc. and its subsidiaries (collectively, "KREF“ or the “Company”). This presentation is not and shall not be construed as an offer to purchase or sell, or the solicitation of an offer to purchase or sell, any securities, any investment advice or any other service by KREF. Nothing in this presentation constitutes the provision of any tax, accounting, financial, investment, regulatory, legal or other advice by KREF or its advisors. This presentation may not be referenced, quoted or linked by website by any third party, in whole or in part, except as agreed to in writing by KREF. This presentation contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which reflect the Company’s current views with respect to, among other things, its future operations and financial performance. You can identify these forward looking statements by the use of words such as “outlook,” “believe,” “expect,” “potential,” “continue,” “may,” “should,” “seek,” “approximately,” “predict,” “intend,” “will,” “plan,” “estimate,” “anticipate,” the negative version of these words, other comparable words or other statements that do not relate strictly to historical or factual matters. By their nature, forward-looking statements speak only as of the date they are made, are not statements of historical fact or guarantees of future performance and are subject to risks, uncertainties, assumptions or changes in circumstances that are difficult to predict or quantify, in particular due to the uncertainties created by the COVID-19 pandemic, including the projected impact of COVID-19 on our business, financial performance and operating results. The forward-looking statements are based on the Company’s beliefs, assumptions and expectations, taking into account all information currently available to it. These beliefs, assumptions and expectations can change as a result of many possible events or factors, not all of which are known to the Company or are within its control. Such forward-looking statements are subject to various risks and uncertainties, including, among other things: the severity and duration of the COVID-19 pandemic; potential risks and uncertainties relating to the ultimate geographic spread of COVID-19; actions that may be taken by governmental authorities to contain the COVID-19 outbreak or to treat its impact; the potential negative impacts of COVID-19 on the global economy and the impacts of COVID-19 on the Company’s financial condition and business operations; deterioration in the performance of the properties securing our investments that may cause deterioration in the performance of our investments and, potentially, principal losses to us; difficulty or delays in redeploying the proceeds from repayments of our existing investments; the general political, economic and competitive conditions in the United States and in any foreign jurisdictions in which the Company invests; the level and volatility of prevailing interest rates and credit spreads; adverse changes in the real estate and real estate capital markets; general volatility of the securities markets in which the Company participates; changes in the Company’s business, investment strategies or target assets; difficulty in obtaining financing or raising capital; adverse legislative or regulatory developments; reductions in the yield on the Company’s investments and increases in the cost of the Company’s financing; acts of God such as hurricanes, earthquakes and other natural disasters, pandemics such as COVID-19, acts of war and/or terrorism and other events that may cause unanticipated and uninsured performance declines and/ or losses to the Company or the owners and operators of the real estate securing the Company’s investments; deterioration in the performance of properties securing the Company’s investments that may cause deterioration in the performance of the Company’s investments and, potentially, principal losses to the Company; defaults by borrowers in paying debt service on outstanding indebtedness; the adequacy of collateral securing the Company’s investments and declines in the fair value of the Company’s investments; adverse developments in the availability of desirable investment opportunities whether they are due to competition, regulation or otherwise; difficulty in successfully managing the Company’s growth, including integrating new assets into the Company’s existing systems; the cost of operating the Company’s platform, including, but not limited to, the cost of operating a real estate investment platform and the cost of operating as a publicly traded company; the availability of qualified personnel and the Company’s relationship with our Manager; KKR controls the Company and its interests may conflict with those of the Company’s stockholders in the future; the Company’s qualification as a REIT for U.S. federal income tax purposes and the Company’s exclusion from registration under the Investment Company Act of 1940; authoritative GAAP or policy changes from such standard-setting bodies such as the Financial Accounting Standards Board, the Securities and Exchange Commission (the “SEC”), the Internal Revenue Service, the New York Stock Exchange and other authorities that the Company is subject to, as well as their counterparts in any foreign jurisdictions where the Company might do business; and other risks and uncertainties, including those described under Part I—Item 1A. “Risk Factors” of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020, as such factors may be updated from time to time in the Company’s periodic filings with the SEC, which are accessible on the SEC’s website at www.sec.gov. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in this presentation. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements and information included in this presentation and in the Company’s filings with the SEC. All forward looking statements in this presentation speak only as of February 16, 2021. KREF undertakes no obligation to publicly update or review any forward-looking statements, whether as a result of new information, future developments or otherwise, except as required by law. All financial information in this presentation is as of December 31, 2020 unless otherwise indicated. This presentation also includes non-GAAP financial measures, including Distributable Earnings and Distributable Earnings per Diluted Share. Such non-GAAP financial measures should be considered only as supplemental to, and not as superior to, financial measures prepared in accordance with U.S. GAAP. Please refer to the Appendix of this presentation for a reconciliation of the non-GAAP financial measures included in this presentation to the most directly comparable financial measures prepared in accordance with U.S. GAAP.
3 KKR Real Estate Finance Trust Inc. Overview Best In Class Portfolio Conservative Balance Sheet Fully Integrated with KKR $5.0 Billion Investment Portfolio 98.5% Senior Loans 81% Multifamily & Office $118 Million Average Loan Size 8.6% Unfunded Purpose built portfolio of senior loans secured primarily by lighter transitional, institutional multifamily and office properties owned by high quality sponsors. $6.1 Billion Financing Capacity 83% Fully Non-Mark-to-Market(1) Conservative liability management focused on diversified non-mark-to-market financing capacity 36% KKR Ownership in KREF $482 Million Current Liquidity(2) $252 Billion Global AUM $20 Billion Balance Sheet $15 Billion Real Estate AUM(3) 90 Real Estate Professionals One firm culture that rewards investment discipline, creativity, determination and patience and emphasizes the sharing of information, resources, expertise and best practices (1) Based on outstanding face amount of secured financing, including non-consolidated senior interests, and excludes convertible notes and the corporate revolving credit facility. 100% of financings are non-mark-to-capital markets marks. (2) Includes $110.8 million in cash and $335.0 million undrawn corporate revolver capacity. (3) Figures represent AUM across all KKR real estate transactions.
Fourth Quarter and Full Year 2020 Highlights 4 • 4Q Net income(1) of $0.52 per diluted share and Distributable Earnings(2) of $0.48 per diluted share ($0.96 and $1.95, respectively, for full year 2020); 113% dividend coverage in 2020 • Book value(3) of $18.76 per share, compared to $18.73 per share in 3Q’20 • Earnings benefited from low LIBOR given in-place rate floors; approximately 85% of the loan portfolio is subject to LIBOR floor of at least 1.0% with a weighted average floor of 1.64%, resulting in book value accretion • Book value(3) per share inclusive of ($1.09) per share CECL allowance • $5.0 billion predominantly senior loan portfolio • Multifamily and office assets represent 81% of loan portfolio; only 9% of portfolio is comprised of hospitality and retail assets • Weighted average risk rating of 3.1 • Received $534.6 million in loan repayments and collected 97.9% and 97.1% of interest payments due on loan portfolio in 4Q'20 and January 2021, respectively • Originated six floating-rate senior loans totaling $515.4 million and one floating-rate real estate corporate loan for $50.0 million, and funded $83.4 million on previously originated loans in 4Q • Subsequent to year-end, originated two floating-rate senior loans totaling $274.5 million Note: Net income attributable to common stockholders per share and Distributable Earnings per share are based on diluted weighted average shares outstanding for the quarter ended December 31, 2020; book value per share is based on shares outstanding as of December 31, 2020. (1) Represents Net Income attributable to common stockholders. (2) Commencing for all periods ending on or after December, 31, 2020, we have elected to present Distributable Earnings, a measure that is not prepared in accordance with GAAP, as a supplemental method of evaluating our operating performance. Such measure replaces our prior presentation of Core Earnings. See Appendix for definition and reconciliation to financial results prepared in accordance with GAAP. (3) Book value per share includes the year-to-date (“YTD”) impact of a ($0.2) million, or $0.00 per common share, non-cash redemption value adjustment to our redeemable Special Non-Voting Preferred Stock (‘SNVPS’), resulting in a cumulative (since issuance of the SNVPS) decrease of $1.9 million to our book value as of December 31, 2020. Financials Portfolio Originations Liquidity & Capitalization • $481.8 million of available liquidity, including $110.8 million of cash and $335.0 million undrawn on the corporate revolver • 83% of financing is fully non-mark-to-market and the remaining balance is only mark-to-credit • 4Q Net repayments of $271.4 million on financing facilities
4Q'20 Financial Summary 5 (1) See Appendix for definition and reconciliation to financial results prepared in accordance with GAAP. (2) Represents (i) total debt less cash to (ii) total permanent equity. The debt-to-equity ratio, adjusted for the impact of CECL allowance for credit losses, is 1.8x at 4Q'20. (3) Represents (i) total leverage less cash to (ii) total permanent equity. The total leverage ratio, adjusted for the impact of CECL allowance for credit losses, is 3.4x at 4Q'20. (4) Book value per share includes (i) CECL credit loss allowance of ($60.7) million or ($1.09) per common share, (ii) write-off of ($4.7) million or ($0.08) per common share on the Company’s $5.5 million mezzanine loan, and (iii) the YTD impact of ($0.2) million, or $0.00 per common share, non-cash redemption value adjustment to our redeemable SNVPS, resulting in a cumulative (since issuance of the SNVPS) decrease of $1.9 million to our book value as of December 31, 2020. Income Statement Balance Sheet ($ in Millions) ($ in Millions)4Q20 Net Interest Income $34.4 Other Income 1.3 Operating Expenses and Other (10.3) Benefit From Credit Loss Provision 3.4 Net Income Attributable to Common Stockholders $28.8 Weighted Average Shares Outstanding, Diluted 55,669,230 Net Income per Share, Diluted $0.52 Distributable Earnings(1) $26.5 Distributable Earnings per Share, Diluted(1) $0.48 Dividend per Share $0.43 4Q20 Total Portfolio $4,905.4 Term Credit Facilities 673.1 Term Lending Agreement 900.0 Asset Specific Financing 60.0 Secured Term Loan 300.0 Convertible Notes 143.8 Total Debt $2,076.9 Term Loan Facility 948.2 Collateralized Loan Obligation 810.0 Total Leverage $3,835.1 Cash 110.8 Total Permanent Equity 1,043.6 Debt-to-Equity Ratio(2) 1.9x Total Leverage Ratio(3) 3.6x Shares Outstanding 55,619,428 Book Value per Share(4) $18.76
$18.45 $18.57 $18.73 $18.76 $1.22 $1.16 $1.16 $1.09 1Q'20 2Q'20 3Q'20 4Q'20 BVPS Post-CECL CECL Impact $19.73$19.67 Recent Operating Performance 6 (1) Represents Net Income attributable to common stockholders. (2) See Appendix for definition and reconciliation to financial results prepared in accordance with GAAP. Net Income(1) and Distributable Earnings(2) ($0.61) $0.52 $0.56 $0.52 $0.44 $0.45 $0.58 $0.48 1Q'20 2Q'20 3Q'20 4Q'20 Net Income per Diluted Share Distributable Earnings per Diluted Share Dividends and Book Value Per Share Dividend per share: Dividend yield on book value per share: Net income: Distributable earnings: $19.85 $19.89 ($ in Millions) 1Q'20 ($35.2) $25.3 4Q'20 $28.8 $26.5 3Q'20 $31.4 $32.5 2Q'20 $28.6 $25.0 1Q'20 $0.43 9.3% 2Q'20 $0.43 9.3% 3Q'20 $0.43 9.2% 4Q'20 $0.43 9.2% $0.43
67% 97% 98% 6% 27% 0% 20% 40% 60% 80% 100% At IPO 4Q'18 4Q'20 Senior Loan Mezz/Other Loan Securities <2%<3% Conservative Portfolio Construction 7 $50 $100 $118 $0 $50 $100 $150 At IPO 4Q'18 4Q'20 Average Funded Loan Size 62% 86% 81% 31% 7% 9% 0% 20% 40% 60% 80% 100% At IPO 4Q'18 4Q'20 Multifamily and Office Hospitality and Retail 23% 10% 9% 0% 5% 10% 15% 20% 25% At IPO 4Q'18 4Q'20 Investment Portfolio Evolution Property Type Evolution Future Funding as a Percentage of Total Commitments ($ in Millions) Note: The charts above are based on total assets. Total assets reflect the principal amount of our senior and mezzanine/other loans.
$5,075 $5,233 $5,257 $5,035 $4,998 $621 $338 $593 $78 $512 $52 $462 $498 $472 $180 $54 $274 $535 4Q'19 Portfolio 1Q'20 Fundings 1Q'20 Repayments 1Q'20 Portfolio 2Q'20 Fundings 2Q'20 Repayments 2Q'20 Portfolio 3Q'20 Fundings 3Q'20 Repayments 3Q'20 Portfolio 4Q'20 Fundings 4Q'20 Repayments 4Q'20 Portfolio Last Twelve Months Loan Activity 8 (1) Includes capital committed to our investment in an aggregator vehicle that invests in CMBS. (2) Future funding obligations are generally contingent upon certain events and may not result in investment by us. (3) Includes $1.9 million, $1.4 million and $1.0 million PIK interest for 4Q’20, 3Q’20 and 2Q’20, respectively. (4) Includes $1.2 million vertical loan syndications for 3Q’20. (5) Gross of write-off of $4.7 million on a $5.5 million mezzanine loan. Portfolio Funding Activity – Outstanding Principal(1) $5,826 Future Funding Obligations(2) $5,696 (3) $5,769 ($ in Millions) $5,497 (5)(3) (3) $5,470 (5)(4)(5)
4Q’20 Loan Originations – Select Case Studies 9 Investment Denver Multifamily Arlington Multifamily Oakland Office Loan Type Floating-Rate Senior Loan Floating-Rate Senior Loan Floating-Rate Senior Loan Loan Size $40.0 million(1) $70.9 million(2) $159.7 million(3) Location Denver, CO Arlington, VA Oakland, CA Collateral 168-unit Class-A Multifamily 360-unit Class-A Multifamily Class-A Office Portfolio totaling 1.0 mm SF Loan Purpose Refinance Refinance Acquisition LTV(4) 49% 73% 65% Investment Date October 2020 October 2020 October 2020 Asset Photos (1) The total whole loan is $80.0 million, co-originated and co-funded by KREF and a KKR affiliate on a pari passu basis. KREF’s interest is 50% of the loan. (2) The total whole loan is $141.8 million, co-originated and co-funded by KREF and a KKR affiliate on a pari passu basis. KREF’s interest is 50% of the loan. (3) The total whole loan is $509.9 million, co-originated and co-funded by KREF and a KKR affiliate. KREF’s interest was 31% of the loan, of which $134.7 million in senior notes were syndicated to third party lenders. Post syndication, KREF retained a mezzanine loan with a total commitment of $25.0 million, of which $14.8 million was funded as of December 31, 2020, at an interest rate of L + 12.9%. (4) LTV based on initial loan amount divided by the as-is appraised value as of the date the loan was originated.
4Q’20 Loan Originations – Select Case Studies 10 Investment Denver Industrial Austin Multifamily Washington D.C. Multifamily Loan Type Floating-Rate Senior Loan Floating-Rate Senior Loan Floating-Rate Senior Loan Loan Size $95.8 million $80.0 million $69.0 million Location Denver, CO Austin, TX Washington, D.C. Collateral Three Class–A Buildings totaling 1.5 mm RSF 390-unit Class-A Multifamily 250-unit Class-A Multifamily Loan Purpose Construction Refinance Refinance LTV(1) 76% 77% 63% Investment Date December 2020 December 2020 December 2020 Asset Photos (1) LTV based on initial loan amount divided by the as-is appraised value as of the date the loan was originated.
Multifamily 50% Office 31% Condo (Residential) 6% Retail 5% Hospitality 4% Industrial 2% Student Housing 1% Floating 99.9% Fixed 0.1% Senior Loans 98.5% Mezz/Other 1.5% Class-A 88% Class-B 12% Multifamily Class-A 76% Class-B 24% Office KREF Loan Portfolio by the Numbers 11 Geography(2) Investment Type(3) Note: The charts above are based on total assets. Total assets reflect the principal amount of our senior and mezzanine loans. (1) As of February 12, 2021. (2) Map excludes $5.5 million Midwest Mezzanine portfolio and $50.0 million real estate corporate loan. (3) Senior loans include senior mortgages and similar credit quality loans, including related contiguous junior participations in senior loans where KREF has financed a loan with structural leverage through the non-recourse sale of a corresponding first mortgage and excludes vertical loan syndications. Property Type Interest Rate Type $2,083 $4,134 $5,075 $4,998 4Q'17 4Q'18 4Q'19 4Q'20 Total Portfolio Growth Current Portfolio: $5.3 billion(1) Including net funding and repayment activity subsequent to quarter-end 14% 10% 13% 9% 6% 6% 7% 9% 8% Other <5%, 18% ($ in Millions)
0% 7% 77% 14% 1 2 3 4 5 0% 5% 79% 14% 2% 1 2 3 4 5 Portfolio Credit Quality Remains Strong • Loan portfolio is 97.7% performing 12 Loan-to-Value(1,2) Risk Rating Distribution(2) Weighted Average Risk Rating(3): 3.1 Weighted Average LTV(3): 66% (1) 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. (2) Includes non-consolidated senior interests and excludes vertical loan syndications and real estate corporate loan. (3) Weighted average is weighted by current principal amount. (% of total portfolio) (% of portfolio) 4Q'20 Loan Count 0 22 632 Loan Count 0 22 627 3Q'20 4Q'20 3Q'20 Weighted Average LTV(3): 67% Weighted Average Risk Rating(3): 3.1 13% 31% 14% 30% 12% 0% - 60% 60% - 65% 65% - 70% 70% - 75% 75% - 80% 17% 29% 18% 27% 9% 0% - 60% 60% - 65% 65% - 70% 70% - 75% 75% - 80% 2%
Case Studies: Watch List Loans(1) (Risk Rating 4 & 5) 13 Investment Portland Retail(2) New York Condo Ft. Lauderdale Hotel San Diego Multifamily New York Condo Brooklyn Hotel Queens Industrial Loan Type Floating-Rate Senior Loan Floating-Rate Senior Loan Floating-Rate Senior Loan Floating-Rate Senior Loan Floating-Rate Senior Loan Floating-Rate Senior Loan Floating-Rate Senior Loan Investment Date October 2015 December 2018 November 2018 February 2020 August 2017 January 2019 July 2017 Collateral 1.1M Square Foot Retail Center 126-Unit Class-A Residential Condominium 346-Key Full-Service Hotel 231-Unit Class-A Multifamily 14 Luxury Residential Condominiums 196-Key Hotel Two Class–B Buildings Totaling 595k RSF Loan Purpose Refinance Acquisition Refinance Acquisition Refinance Refinance Acquisition Location Portland, OR New York, NY Ft. Lauderdale, FL San Diego, CA New York, NY Brooklyn, NY Queens, NY Committed Amount $110 million $235 million $152 million $102 million $99 million $77 million $70 million Current Principal Amount $110 million $200 million $142 million $102 million $99 million $77 million $67 million Loan Basis $101 / SF $1,250 / SF $409k / key $443k / unit $1,712 / SF $392k / key $111 / SF Spread L + 5.5% L + 3.6% L + 2.9% L + 3.3% L + 4.7% L + 2.9% L + 3.0% LTV(3) 61% 71% 62% 71% 73% 69% 77% Max Remaining Term (Yrs.) 0.3 3.0 2.9 4.1 0.8 3.1 1.6 Loan Risk Rating 5 4 4 4 4 4 4 (1) Excludes $5.5 million mezzanine loan risk-rated 5. (2) Loan was placed on non-accrual status in October 2020. (3) LTV is 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.
Term Loan Facility 25% Term Lending Agreement 23% Collateralized Loan Obligation 21% Secured Term Loan 8% Senior Loan Interests 4% Asset Specific Financing 2% Term Credit Facilities 17% 1.8x 3.4x 0.1x 0.2x Debt-to-Equity Ratio Total Leverage Ratio CECL Impact Pre-CECL Financing Overview: 83% Non-Mark-To-Market • Diversified financing sources totaling $6.1 billion with $2.3 billion of undrawn capacity 14 (1) Term credit facilities are marked to credit only and not subject to capital markets mark-to-market provisions. (2) Represents (i) total outstanding debt agreements (excluding non-recourse term loan facility), secured term loan and convertible notes, less cash to (ii) total permanent equity, in each case, at period end. (3) Represents (i) total outstanding debt agreements, secured term loan, convertible notes, and collateralized loan obligation, less cash to (ii) total permanent equity, in each case, at period end. (4) Based on outstanding face amount of secured financing, including non-consolidated senior interests, which result from non-recourse sales of senior loan interest in loans KREF originated, and excludes convertible notes and the corporate revolving credit facility. Maximum Capacity Outstanding Face Amount Weighted Avg. Coupon Advance Rate Non- MTM Term Credit Facilities $1,840 $673 L+1.6% 63.3% - (1) Term Lending Agreement $900 $900 L+1.9% 80.3% Warehouse Facility $500 $0 n/a n/a Asset Specific Financing $300 $60 L+1.7% 78.9% Secured Term Loan $300 $300 L+4.8% - Convertible Notes $144 $144 6.1% - Corporate Revolving Credit Facility $335 $0 L+2.0% - Total Corporate Obligations $4,319 $2,077 Term Loan Facility $1,000 $948 L+1.6% 82.1% Collateralized Loan Obligation $810 $810 L+1.4% 81.0% Total Leverage $6,129 $3,835 ($ in Millions) Summary of Outstanding Financing Leverage Ratios Outstanding Secured Financing(4) Non-Mark- to-Market 83% (2) (3) 1.9x 3.6x
Financing Overview: Term Credit Facilities 15 Counterparty Total / Weighted Average Drawn $446 $150 $77 $673 Capacity $1,000 $600 $240 $1,840 Collateral: Loans / Principal Balance 5 Loans / $684 3 Loans / $221 2 Loans / $158 10 Loans / $1,063 Final Stated Maturity(1) November 2023 December 2022 October 2023 - Weighted Average Pricing L + 1.4% L + 1.8% L + 1.9% L + 1.6% Weighted Average Advance 65.3% 67.8% 48.7% 63.3% Mark-to-market Credit Only Credit Only Credit Only - Property Type(2): ($ in Millions) Multi- family 50% Retail 19% Office 16% Student Housing 8% Condo 5% Industrial 2% (1) Based on extended maturity date. (2) Based on principal balance of financing.
Liquidity Overview $110.8 $335.0 $20.1 $15.9 $481.8 $0.0 $100.0 $200.0 $300.0 $400.0 $500.0 $600.0 Cash Undrawn Corporate Revolver Approved and Undrawn Credit Capacity Loan Repayment Receivable Total Available Liquidity(2) 16 ($ in Millions) (1) Represents under-levered amounts under financing facilities. While these amounts were previously contractually approved and/or drawn, in certain cases, the lender’s consent is required for us to (re)borrow these amounts. (2) Represents proceeds from loan repayment held by the servicer as of December 31, 2020. (1) Sources of Available Liquidity • In addition to the available sources of liquidity noted below, KREF had $274.7 million of unencumbered senior loans that can be pledged to financing facilities subject to lender approval, as of December 31, 2020.
Portfolio Benefits from Attractive in the Money LIBOR Floors 17 • 99.9% of the loan portfolio is indexed to one-month USD LIBOR • Portfolio benefits from current low rate environment given in-place LIBOR floors 85% of the portfolio is subject to a LIBOR floor of at least 1.0% Portfolio weighted average LIBOR floor of 1.64% 10% of total outstanding financing including the Secured Term Loan is subject to a LIBOR floor greater than 0.0% Net Interest Income Per Share Sensitivity to LIBOR(1) (1) Portfolio as of December 31, 2020. 0.25% LIBOR as of 12/31/2020 ($ Impact Per Share / Q) 0.50% 0.75% 1.00%0.14% $0.00 LIBOR LIBOR = 0.00%
Appendix 18
Investment Location Property Type Investment Date Total Whole Loan (2) Committed Principal Amount (2) Current Principal Amount Net Equity (3) Future Funding (4) Coupon (5)(6) Max Remaining Term (Yrs) (5)(7) Loan Per SF / Unit / Key LTV (5)(8) Risk Rating Senior Loans (1) 1 Senior Loan Chicago, IL Multifamily 6/28/2019 340.0 340.0 334.6 73.6 5.4 L + 2.8% 5.5 $ 418,289 / unit 75% 3 2 Senior Loan Arlington, VA Multifamily 6/28/2019 345.0 278.8 271.1 71.6 7.7 L + 2.6% 3.5 $ 244,215 / unit 70% 3 3 Senior Loan New York, NY Condo (Resi) 12/20/2018 234.5 234.5 200.1 43.2 34.4 L + 3.6% 3.0 $ 1,250 / SF 71% 4 4 Senior Loan Boston, MA Office 5/23/2018 227.3 227.3 208.6 38.6 18.7 L + 2.4% 2.4 $ 444 / SF 53% 3 5 Senior Loan Various Multifamily 5/31/2019 216.5 216.5 210.6 37.6 5.9 L + 3.5% 3.4 $ 196,862 / unit 74% 3 6 Senior Loan Minneapolis, MN Office 11/13/2017 194.4 194.4 194.1 37.1 0.3 L + 3.8% 1.9 $ 178 / SF 63% 2 7 Senior Loan Chicago, IL Multifamily 6/6/2019 186.0 186.0 179.5 100.3 3.6 L + 3.6% 3.4 $ 364,837 / unit 72% 3 8 Senior Loan Denver, CO Multifamily 8/13/2019 185.0 185.0 171.6 50.4 13.4 L + 2.8% 3.7 $ 288,834 / unit 64% 3 9 Senior Loan Irvine, CA Office 11/15/2019 183.3 183.3 162.3 46.0 21.0 L + 2.9% 3.9 $ 255 / SF 66% 3 10 Senior Loan Philadelphia, PA Office 4/11/2019 182.6 182.6 155.0 25.6 27.6 L + 2.6% 3.4 $ 220 / SF 65% 3 11 Senior Loan Washington, D.C. Office 12/20/2019 175.5 175.5 72.9 32.0 102.6 L + 3.4% 4.0 $ 357 / SF 58% 3 12 Senior Loan Seattle, WA Office 9/13/2018 172.0 172.0 172.0 33.7 - L + 3.9% 2.8 $ 502 / SF 62% 3 13 Senior Loan Chicago, IL Office 7/15/2019 170.0 170.0 131.8 22.7 38.2 L + 3.3% 3.6 $ 127 / SF 59% 3 14 Senior Loan Philadelphia, PA Office 6/19/2018 165.0 165.0 164.9 37.2 0.1 L + 2.5% 2.5 $ 169 / SF 71% 3 15 Senior Loan New York, NY Multifamily 12/5/2018 163.0 163.0 148.0 23.4 15.0 L + 2.6% 2.9 $ 556,391 / unit 67% 3 16 Senior Loan Oakland, CA Office 10/23/2020 509.9 159.7 94.7 15.0 10.2 L + 4.3% 4.9 $ 291 / SF 65% 3 17 Senior Loan Plano, TX Office 2/6/2020 153.7 153.7 112.8 18.3 40.9 L + 2.7% 4.1 $ 157 / SF 64% 3 18 Senior Loan Fort Lauderdale, FL Hospitality 11/9/2018 151.6 151.6 141.6 29.0 10.0 L + 2.9% 2.9 $ 409,275 / key 62% 4 19 Senior Loan Boston, MA Multifamily 3/29/2019 138.0 138.0 137.0 22.3 1.0 L + 2.7% 3.3 $ 351,282 / unit 63% 3 20 Senior Loan West Palm Beach, FL Multifamily 11/7/2018 135.0 135.0 132.1 21.5 2.9 L + 2.9% 2.9 $ 162,669 / unit 73% 3 21 Senior Loan Various Retail 12/19/2019 128.9 128.9 128.9 19.9 - L + 2.6% 4.6 $ 95 / SF 55% 2 22 Senior Loan (9) Portland, OR Retail 10/26/2015 109.6 109.6 109.6 89.6 - L + 5.5% 0.3 $ 101 / SF 61% 5 23 Senior Loan San Diego, CA Multifamily 2/3/2020 102.3 102.3 102.3 20.9 - L + 3.3% 4.1 $ 442,965 / unit 71% 4 24 Senior Loan New York, NY Condo (Resi) 8/4/2017 99.1 99.1 99.1 66.2 - L + 4.7% 0.8 $ 1,712 / SF 73% 4 25 Senior Loan Denver, CO Industrial 12/11/2020 95.8 95.8 18.4 4.8 77.4 L + 3.8% 5.0 $ 12 / SF 76% 3 26 Senior Loan State College, PA Student Housing 10/15/2019 93.4 93.4 71.2 18.8 22.2 L + 2.7% 3.9 $ 59,603 / bed 64% 3 27 Senior Loan Seattle, WA Multifamily 9/7/2018 92.3 92.3 92.3 16.8 - L + 2.6% 2.7 $ 515,571 / unit 76% 3 28 Senior Loan Los Angeles, CA Multifamily 12/11/2019 91.0 91.0 91.0 19.1 - L + 2.8% 2.0 $ 421,296 / unit 72% 3 29 Senior Loan New York, NY Multifamily 3/29/2018 86.0 86.0 86.0 14.5 - L + 2.6% 2.3 $ 462,366 / unit 48% 3 30 Senior Loan Seattle, WA Office 3/20/2018 80.7 80.7 80.7 14.7 - L + 3.6% 2.3 $ 466 / SF 61% 3 31 Senior Loan Austin, TX Multifamily 12/4/2020 80.0 80.0 78.0 47.4 2.0 L + 3.7% 3.9 $ 200,000 / unit 77% 3 32 Senior Loan Philadelphia, PA Multifamily 10/30/2018 77.0 77.0 77.0 13.0 - L + 2.7% 2.9 $ 150,391 / unit 73% 3 33 Senior Loan Brooklyn, NY Hospitality 1/18/2019 76.9 76.9 76.9 16.7 - L + 2.9% 3.1 $ 392,450 / key 69% 4 34 Senior Loan Herndon, VA Multifamily 12/23/2019 73.9 73.9 73.1 12.1 0.8 L + 2.5% 4.0 $ 248,787 / unit 72% 3 35 Senior Loan Arlington, VA Multifamily 10/23/2020 141.8 70.9 68.5 12.8 2.4 L + 3.8% 4.8 $ 380,726 / unit 73% 3 36 Senior Loan Queens, NY Industrial 7/21/2017 70.1 70.1 66.9 66.8 3.2 L + 3.0% 1.6 $ 111 / SF 77% 4 37 Senior Loan Washington, D.C. Multifamily 12/4/2020 69.0 69.0 65.0 64.4 4.0 L + 3.5% 4.9 $ 259,815 / unit 63% 3 38 Senior Loan Austin, TX Multifamily 9/12/2019 67.5 67.5 67.5 12.4 - L + 2.5% 3.7 $ 191,218 / unit 75% 3 39 Senior Loan Denver, CO Multifamily 10/14/2020 80.0 40.0 38.7 7.1 1.3 L + 3.6% 3.9 $ 460,566 / unit 49% 3 Total / Weighted Average $5,943.6 $5,416.3 $4,886.4 $1,317.1 $472.2 L + 3.1% 3.3 67% 3.1 Non-Senior Loans 1 Floating Rate Mezzanine Westbury, NY Multifamily 1/27/2020 20.0 20.0 20.0 19.9 - L + 9.0% 3.6 $ 464,135 / unit 66% 3 2 Fixed Rate Mezzanine (11) Various Retail 6/19/2015 5.5 5.5 5.5 0.9 - 11.0% 4.5 $ 45 / SF 71% 5 3 Real Estate Corporate Loan (12) n/a Multifamily 12/11/2020 125.0 50.0 50.0 49.1 - L + 12.0% 5.0 n/a n/a 3 Total / Weighted Average $150.5 $75.5 $75.5 $69.9 $0.0 12.3% 4.6 67% 3.1 CMBS Total / Weighted Average $40.0 $35.7 $35.7 $4.3 4.7% 8.5 58% Portfolio Total / Weighted Average $5,531.8 $4,997.6 $1,422.7 $476.5 4.8% 3.4 67% 3.1 4Q20 Outstanding Portfolio (13) $4,997.6 Portfolio Details 19 *See footnotes on subsequent page (10)
Portfolio Details (1) Senior loans include senior mortgages and similar credit quality investments, including junior participations in our originated senior loans for which we have syndicated the senior participations and retained the junior participations for our portfolio and excludes vertical loan syndications. • For Senior Loan 7, the total whole loan is $186.0 million, of which an $81.6 million senior note was syndicated to a third party lender. Post syndication, KREF retained the mezzanine loan and a 45% interest in the senior loan which both totaled $104.4 million commitment, of which $100.7 million was funded as of December 31, 2020, at a blended interest rate of L + 4.7%. • For Senior Loan 16, the total whole loan is $509.9 million, co-originated and co-funded by KREF and a KKR affiliate. KREF’s interest was 31% of the loan or $159.7 million, of which $134.7 million in senior notes were syndicated to third party lenders. Post syndication, KREF retained a mezzanine loan with a total commitment of $25.0 million, of which $14.8 million was funded as of December 31, 2020, at an interest rate of L + 12.9%. (2) 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. (3) Net equity reflects (i) the amortized cost basis of our loans, net of borrowings and (ii) the cost basis of our investment in RECOP I. (4) Represents Committed Principal Amount less Current Principal Amount on Senior Loans and $4.3 million of unfunded commitment to RECOP I. (5) Weighted averages are weighted by current principal amount for senior loans and non-senior loans and by net equity for our RECOP I CMBS B-Piece investment. Non-Senior Loan 3 is excluded from the weighted average LTV. (6) L = one-month USD LIBOR rate; greater of (i) spot one-month USD LIBOR rate of 0.14% and (ii) LIBOR floor, where applicable, included in portfolio-wide averages represented as fixed rates. (7) Max remaining term (years) assumes all extension options are exercised, if applicable. (8) For senior loans, loan-to-value ratio ("LTV") LTV is 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 Senior Loan 3, LTV is based on the initial loan amount divided by the appraised bulk sale value assuming a condo-conversion and no renovation; for Senior Loan 24, LTV is based on the current principal amount divided by the adjusted appraised gross sellout value net of sales cost; for mezzanine loans, LTV is based on the current balance of the whole loan dividend 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. (9) Senior Loan 22 was placed on non-accrual status in October 2020. (10) For Senior Loan 24, Loan per SF of $1,712 is based on the allocated loan amount of the residential units. Excluding the value of the retail and parking components of the collateral, the Loan per SF is $2,035 based on allocating the full amount of the loan to only the residential units. (11) For Non-Senior Loan 1, Current Principal Amount is gross of $4.7 million written-off (of amortized cost). (12) Non-Senior Loan 3 is a real estate corporate loan to a multifamily operator. (13) Represents Current Principal Amount of Senior Loans and Non-Senior Loans and Net Equity for our RECOP I CMBS B-Piece investment. 20
Fully Extended Loan Maturities 21 Fully Extended Loan Maturities(1) ($ in Millions) (1) Excludes RECOP I CMBS B-Piece investment. • Fully extended weighted average loan maturity of 3.3 years(1) $208.7 $261.0 $1,394.2 $1,971.3 $773.8 $353.1 $0 $500 $1,000 $1,500 $2,000 $2,500 2021 2022 2023 2024 2025 2026
22 Consolidated Balance Sheets (1) Includes $15.9 million and $0.0 million of loan repayment proceeds held by the servicer and receivable by KREF as of December 31, 2020 and December 31, 2019, respectively. (2) Includes $0.9 million and $0.0 million of reserve for unfunded loan commitments as of December 31, 2020 and December 31, 2019, respectively. (in thousands - except share and per share data) December 31, 2020 December 31, 2019 Assets Cash and cash equivalents $ 110,832 $ 67,619 Commercial mortgage loans, held-for-investment 4,844,534 4,931,042 Less: Allowance for credit losses (59,801) - Commercial mortgage loans, held-for-investment, net 4,784,733 4,931,042 Equity method investments 33,651 37,469 Accrued interest receivable 15,412 16,305 Other assets (1) 20,984 4,583 Total Assets $ 4,965,612 $ 5,057,018 Liabilities and Equity Liabilities Secured financing agreements, net $ 2,574,747 $ 2,884,887 Collateralized loan obligation, net 810,000 803,376 Secured term loan, net 288,028 - Convertible notes, net 140,465 139,075 Loan participations sold, net 66,232 64,966 Dividends payable 24,287 25,036 Accrued interest payable 5,381 6,686 Accounts payable, accrued expenses and other liabilities (2) 4,823 3,363 Due to affiliates 6,243 5,917 Total Liabilities 3,920,206 3,933,306 Commitments and Contingencies Temporary Equity Redeemable preferred stock 1,852 1,694 Permanent Equity Preferred stock, 50,000,000 authorized (1 share with par value of $0.01 issued and outstanding as of December 31, 2020 and December 31, 2019) - - Common stock, 300,000,000 authorized (55,619,428 and 57,486,583 shares with par value of $0.01 issued and outstanding as of December 31, 2020 and December 31, 2019, respectively) 556 575 Additional paid-in capital 1,169,695 1,165,995 Accumulated deficit (65,698) (8,594) Repurchased stock, 3,900,326 and 1,862,689 shares repurchased as of December 31, 2020 and December 31, 2019, respectively (60,999) (35,958) Total KKR Real Estate Finance Trust Inc. stockholders’ equity 1,043,554 1,122,018 Total Permanent Equity 1,043,554 1,122,018 Total Liabilities and Equity $ 4,965,612 $ 5,057,018
23 Consolidated Statements of Income (in thousands - except share and per share data) December 31, 2020 September 30, 2020 December 31, 2019 December 31, 2020 December 31, 2019 December 31, 2018 Net Interest Income Interest income $ 63,201 $ 67,689 $ 72,417 $ 269,188 $ 274,335 $ 183,575 Interest expense 28,835 28,832 41,333 127,312 158,860 85,017 Total net interest income 34,366 38,857 31,084 141,876 115,475 98,558 Other Income Gain (loss) on sale of investments - - 71 - (2,688) 13,000 Income (loss) from equity method investments 1,168 973 1,254 537 4,568 3,065 Change in net assets related to CMBS consolidated variable interest entities - - - - 1,665 2,588 Other income 86 102 447 744 2,453 1,440 Total other income (loss) 1,254 1,075 1,772 1,281 5,998 20,093 Operating Expenses General and administrative 2,862 3,563 2,676 14,238 10,522 7,812 Provision for (Reversal of) credit losses, net (3,438) (126) - 50,344 - - Management fees to affiliate 4,252 4,223 4,280 16,992 17,135 16,346 Incentive compensation to affiliate 2,929 990 1,174 6,774 3,272 4,756 Total operating expenses 6,605 8,650 8,130 88,348 30,929 28,914 Income (Loss) Before Income Taxes, Preferred Dividends and Redemption Value Adjustment 29,015 31,282 24,726 54,809 90,544 89,737 Income tax expense (benefit) 157 96 213 412 579 (70) Net Income (Loss) 28,858 31,186 24,513 54,397 89,965 89,807 Redeemable Noncontrolling Interests in Income (Loss) of Consolidated Joint Venture - - - - - 63 Net Income (Loss) Attributable to KKR Real Estate Finance Trust Inc. and Subsidiaries 28,858 31,186 24,513 54,397 89,965 89,744 Preferred Stock Dividends and Redemption Value Adjustment 82 (165) (276) 844 (527) 2,451 Net Income (Loss) Attributable to Common Stockholders $ 28,776 $ 31,351 $ 24,789 $ 53,553 $ 90,492 $ 87,293 Net Income (Loss) Per Share of Common Stock, Basic $ 0.52 $ 0.56 $ 0.43 $ 0.96 $ 1.58 $ 1.58 Net Income (Loss) Per Share of Common Stock, Diluted $ 0.52 $ 0.56 $ 0.43 $ 0.96 $ 1.57 $ 1.58 Weighted Average Number of Shares of Common Stock Outstanding, Basic 55,619,428 55,491,405 57,486,583 55,985,014 57,426,912 55,136,548 Weighted Average Number of Shares of Common Stock Outstanding, Diluted 55,669,230 55,632,170 57,595,424 56,057,237 57,532,490 55,171,061 Dividends Declared per Share of Common Stock $ 0.43 $ 0.43 $ 0.43 $ 1.72 $ 1.72 $ 1.69 Three Months Ended Year Ended
Reconciliation of GAAP Net Income to Distributable Earnings 24 (1) Includes ($0.1) million, ($0.3) million, $0.2 million, and $0.4 million non-cash redemption value adjustment of our SNVPS during 4Q'20, 3Q'20, 2Q'20 and 1Q'20, respectively. (2) Includes ($0.1) million, $0.1 million, $0.8 million, and $3.0 million of unrealized loss (gain) on RECOP I, an equity method investment, during 4Q'20, 3Q'20, 2Q'20 and 1Q'20, respectively. • Commencing for all periods ending on or after December 31, 2020, we have elected to present Distributable Earnings, a measure that is not prepared in accordance with GAAP, as a supplemental method of evaluating our operating performance. Such measure replaces our prior presentation of Core Earnings. See Appendix for definition. (in thousands - except share and per share data) Year Ended December 31, 2020 December 31, 2020 September 30, 2020 June 30, 2020 March 31, 2020 Net Income (Loss) Attributable to Common Stockholders 53,553$ 28,776$ 31,351$ 28,590$ (35,164)$ Adjustments Non-cash equity compensation expense 5,676 1,305 1,390 1,374 1,607 Unrealized (gains) or losses (1)(2) 4,036 (203) (178) 973 3,444 Provision for (Reversal of) credit losses, net 50,344 (3,438) (126) (1,366) 55,274 Non-cash convertible notes discount amortization 362 91 91 90 90 Loan write-off (4,650) - - (4,650) - Distributable Earnings 109,321$ 26,531$ 32,528$ 25,011$ 25,251$ Weighted Average Shares Outstanding Basic 55,985,014 55,619,428 55,491,405 55,491,937 57,346,726 Diluted 56,057,237 55,669,230 55,632,170 55,504,077 57,432,611 Distributable Earnings per Weighted Average Share, Basic 1.95$ 0.48$ 0.59$ 0.45$ 0.44$ Distributable Earnings per Weighted Average Share, Diluted 1.95$ 0.48$ 0.58$ 0.45$ 0.44$ Three Months Ended
Reconciliation of GAAP Net Income to Distributable Earnings 25 (1) Includes $0.2 million, ($1.2) million and $1.6 million non-cash redemption value adjustment of our SNVPS during the years ended December 31, 2020, 2019 and 2018, respectively. (2) Includes $3.9 million of unrealized loss on RECOP I, an equity method investment, during year ended December 31, 2020. (3) Includes $5.5 million and $6.4 million of unrealized gains related to the first quarter of 2018 and to prior periods, respectively, that were realized during the year ended December 31, 2018. (in thousands - except share and per share data) December 31, 2020 December 31, 2019 December 31, 2018 Net Income (Loss) Attributable to Common Stockholders 53,553$ 90,492$ 87,293$ Adjustments Non-cash equity compensation expense 5,676 4,091 1,973 Unrealized (gains) or losses (1)(2) 4,036 1,179 (1,370) Provision for credit losses, net 50,344 - - Non-cash convertible notes discount amortization 362 360 224 Loan write-off (4,650) - - Reversal of previously unrealized loss now realized (3) - 191 11,900 Distributable Earnings 109,321$ 96,313$ 100,020$ Weighted Average Shares Outstanding Basic 55,985,014 57,426,912 55,136,548 Diluted 56,057,237 57,532,490 55,171,061 Distributable Earnings per Weighted Average Share, Basic 1.95$ 1.68$ 1.81$ Distributable Earnings per Weighted Average Share, Diluted 1.95$ 1.67$ 1.81$ Year Ended
Key Definitions 26 “Distributable Earnings": Commencing for all periods ending on or after December 31, 2020, the Company has elected to present Distributable Earnings, a measure that is not prepared in accordance with GAAP, as a supplemental basis to KREF’s net income as determined in accordance with GAAP as the Company believes it would be useful to investors in evaluating the Company’s operating performance and its ability to pay its dividends. Distributable Earnings replaces the Company’s prior presentation of Core Earnings, and Core Earnings presentations from prior reporting periods have been recast as Distributable Earnings. The Company defines Distributable Earnings as net income (loss) attributable to stockholders or, without duplication, owners of the Company's subsidiaries, computed in accordance with GAAP, including realized losses not otherwise included in GAAP net income (loss) and excluding (i) non-cash equity compensation expense, (ii) depreciation and amortization, (iii) any unrealized gains or losses or other similar non-cash items that are included in net income for the applicable reporting period, regardless of whether such items are included in other comprehensive income or loss, or in net income, and (iv) one-time events pursuant to changes in GAAP and certain material non-cash income or expense items agreed upon after discussions between the Company’s Manager and board of directors and after approval by a majority of the independent directors. The exclusion of depreciation and amortization from the calculation of Distributable Earnings only applies to debt investments related to real estate to the extent the Company forecloses upon the property or properties underlying such debt investments. While Distributable Earnings excludes the impact of the unrealized current provision for credit losses, any loan losses are charged off and realized through Distributable Earnings when deemed non-recoverable. Non-recoverability is determined (i) upon the resolution of a loan (i.e. when the loan is repaid, fully or partially, or in the case of foreclosure, when the underlying asset is sold), or (ii) with respect to any amounts due under any loan, when such amount is determined to be non-collectible. Distributable Earnings should not be considered as a substitute for GAAP net income. The Company cautions readers that its methodology for calculating Distributable Earnings may differ from the methodologies employed by other REITs to calculate the same or similar supplemental performance measures, and as a result, the Company’s reported Distributable Earnings may not be comparable to similar measures presented by other REITs.