Q2 2020 KKR Real Estate Finance Trust Inc Earnings Call
Good morning, and welcome to the cake, our real estate Finance Trust Inc. second quarter 2020 financial results Conference call all participants will be in listen only mode.
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I would now like turn the conference over to Michael Shapiro. Please go ahead.
Thank you operator, welcome to the KKR Real estate Finance Trust earnings call second quarter of 2020.
I hope that all of you in your families are continuing to stay safe and healthy.
Today I'm joined on the phone by our CEO, Matt They love, our President and COO, Patrick Mattson and our CFO ms. stopping the gotti.
I'd like to remind everyone that we will refer to certain non-GAAP financial measures on the call, which are reconciled to GAAP figures in our earnings release, and then the supplementary presentation, both of which are available on the Investor relations portion of our websites.
This call will also contain certain forward looking statements, which do not guarantee future events or performance.
Please refer to our most recently filed 10-K for cautionary factors related to these statements.
Before I turn the call a burden that I will provide a brief recap of our results.
As a reminder, we provided a preliminary set of results on form 8-K on July 13th.
For the second quarter 2020, we had a GAAP net income of 28.6 million or 52 cents per share, which included a 1.4 million or two cents per share benefit from a lower diesel provision.
Core earnings were 25 million for 45 cents per share.
The high end of our preliminary estimated range.
Earnings included a 4.7 billion or eight cents per share right. All our small 5.5 million dollar mezzanine loan.
Book value per share as of June Thirtyth 220, 20 increased to 18 57, which included the impact of $1.16 per share from cease all as compared to 18 45 as of March surface.
Finally, I would note that in mid July we paid a cash dividend of 43 cents per share with respect to the second quarter.
With that I'd now like to turn the call over to Matt.
Thank you Michael.
Good morning, and thank you for joining us today.
We hope you were all healthy and safe.
We're now five months ended a pandemic.
The company is continuing to show its strength.
Our conservative posture over the last few years.
For both our lending strategy.
And liability management.
Differentiated us during this volatile time.
While still generating earnings power.
From our LIBOR floors.
Okay. We're up has a best in class investment portfolio.
That was purpose built for the latter stages of an economic cycle.
Our 5.3 billion almost exclusive senior loan portfolio.
Focuses on institutional real estate and sponsorship.
And the secured predominantly by class say.
Lighter transitional multifamily and office properties.
Located in the most liquid real estate markets.
Today, our average loan size, it's 134 million.
And approximately 80% of our loans.
Located in the top 10 markets.
In the U.S.
Our investment portfolio was 99% first mortgage.
And your loans.
No direct holdings of Securities.
Our two largest property type exposures are multifamily and office.
Which represent 81% of the portfolio.
In addition.
87% of our multifamily loans.
And 75% of our office loans.
Our secured by class a properties.
Importantly.
More volatile property types like hotel and retail.
Represent only 8% of the portfolio.
And as I mentioned.
We believe our focus on light transitional properties.
The safer.
Shorter duration alone.
Our future funding.
As a percent of our total commitments.
So effectively how much more value add dollars are going into a property.
It's currently 9%.
Which is among the lowest in the industry.
We match our loan portfolio with one of the most conservative and diverse set of liabilities.
Our team.
It would be invaluable assistance of picky, our capital markets.
That's been focused on growing and diversifying our non mark to market financing capacity.
As of quarter end, 73% of our liabilities across eight different financing facilities.
We're completely non mark to market.
Meaning both capital markets and credit marks.
This is an important distinction.
Historically, but market did not focused on closely.
Patrick will discuss this further in his remarks.
Finally.
The company benefits from a from its affiliation and integration with KKR.
As a reminder, picky ours congrats largest shareholder.
In addition, our integration would kick areas growing real estate platform.
Wow, that's to see around the corner.
Identify investable and non investable trend.
First pick your real estate has one leadership team.
And we are fully integrated across our real estate equity and debt businesses.
Our extensive portfolio across real estate equity and credit.
Gives us a differentiated view a real estate fundamentals.
Trend and values.
Across a broad range of markets and business plans.
In addition.
We benefit from one from culture.
That rewards information sharing.
Well one team approach has also led cage picky Archie as all of its relationships.
And wallet share.
We encourage our financing relationships.
To support our growing real estate business.
Okay Rep specifically.
Our ability to access all of the khaki our brain is really driven by that culture of collaboration.
Since our last quarterly call.
Our weekly pipeline discussions.
I have reverted back to market opportunity.
In originations.
What many lenders on the sidelines, we're seeing favorable more favorable market dynamics.
Well spread unlike transitional loans, increasing by approximately 200 basis points.
We recently launched a term loan b.
Well I wants to take advantage of the market opportunity we see today.
With a focus on the same high quality real estate, we have been underwriting since our IPO.
Well, we well we will be measured and selective.
New investment opportunities we.
We are actively quoting transactions.
And believe we're well positioned to take advantage.
Well the attractive lending environment.
As we had indicated in our pre released last month.
99.8% of our borrowers made their interest payments and the second quarter.
In July.
Through our robust quarterly asset review process.
We reevaluate every loan in the portfolio to sign an updated risk rating.
Our portfolio, which totaled 5.3 billion at the ended the quarter.
As a weighted average risk rating of 3.1.
On a five point scale.
One small mezzanine loan that was substantially written off.
Moved from a four rating to five.
And one loan moved from a three rating to four rating.
Given the recent change in the sponsors underlying business plan.
84% of the portfolio, what's the risk weighted three or better.
And we feel good about the performance on those properties.
Today, only two loans are two hospitality loans.
Which we discussed in detail during our last quarterly call.
How about any payment related modifications.
In an effort to continue to increase the level of transparency for our investors.
We provided a detailed breakout of our four rated loans this quarter on page 14 of our supplemental.
As a reminder.
We had no four or five rated loans prior to cobot.
The 16% in this category.
Predominantly secured.
More cobot sensitive property types.
Like hospitality.
Retail.
Enforce they'll condo housing.
We feel very good about a relative position and many of these properties.
And we're seeing improving trends in a number of the business plan.
Our Portland retail property is most negatively exposed.
And we maintained frequent dialogue with the sponsor.
Given the properties plant sale.
Near term loan maturity.
And the underlying business plan, which incorporates both retail.
And entertainment providers, such as live nation.
Given the limited portfolio activity in the second quarter.
I thought I would spend some time diving deeper into our multifamily in office portfolios.
This quarter.
Well, we believe are overweight positions and these property types is a differentiator.
There is also important understand our level of conservatism within the asset class.
Especially in today's environment.
So let me spend a few minutes, providing some incremental background.
On page 10 of our earnings supplemental.
We provided some disclosure for multifamily and office portfolios.
Starting on the multifamily side.
Our average loan size and weighted average LTV was 146 million and 67% respectively.
Notably.
Less than 1% of our multifamily portfolio well for construction.
And the weighted average occupancy.
Was 74%.
Let me spend a minute highlighting the typical fact pattern that we would lend on and the multifamily segment.
Typically we provide construction takeout financing.
I think our sponsors a better cost of capital and time to at least the property and burn off the initial lease up concessions.
Having just been built.
Properties or class a with many having the best amenities in the market.
We'd like lending on the stock pattern, because we usually have a number of leases in place.
The property is already built.
And there are no moving pieces as it relates to construction.
We can look at the individual leases that have been side.
And extrapolate that into a stabilized cash flow.
Which we think creates a straightforward underwriting.
And as simple business plan.
Underlying collection or multifamily properties.
We continue to show a strong trend.
And the 90% area.
On the office side.
We have a similar average deal size.
<unk> lower weighted average LTV at 64%.
We have no exposure so some of the larger co working tenant markets like New York, San Francisco for Los Angeles.
And less than 1% of our space is occupied by co working tests.
We typically went on wider transitional or value add fraud projects.
And we value in place tenancy.
And cash flow.
For the stability it provides.
Our going in average occupancy.
On our office portfolio.
It was 72%.
But there's no heroic underwriting assumptions.
Or lease up.
We will provide capital for renovations.
The upgrade things like the lobby elevator cabs.
We're at amenities to the building.
Our underlying office occupancy remains.
In the high Seventys.
With a weighted average remaining lease term of over six years.
And a weighted average.
That service coverage ratio in excess of 1.4 times.
Our underlying collections have shown relative stability, there are only slightly lower their multifamily portfolio.
We believe these overweights represent our differentiated investment strategy.
And conservative portfolio.
Which will continue to position K rough well and the current environment.
Now, let me turn the call over to Patrick.
Thank you, Matt and good morning, everyone.
As a quarter and 73% of our in place secured financing was completely non mark to market.
I will stop.
And the 27% remaining balance was only subject to credit marks.
We continue to invest a considerable amount of time and resources to differentiate and diversify our financing sources.
And are excited to be in the market with our inaugural term loan b issuance.
Our focus on non mark to market financing has allowed us to lower the risk of our liabilities.
Well at the same time maintain target leverage levels. Despite the recent volatility.
On page 15 of the supplemental we provided incremental details on our financing facilities.
In addition to the running cost of funds. We've included advance rates, we have borrowed against our underlying loans.
Notably we have targeted a lower advance rate across our mark to credit only repo facilities.
While pursuing slightly higher advance rates when borrowing against non mark to market facilities.
Our repo financing represents 27% or outstanding secured financing.
And we have not received any margin calls when any of these marked a credit facilities.
The facilities are diversified across three banks.
And individually represent smaller exposures for K rough.
And our bank lenders.
The facilities have term maturities.
Which we have successfully extended a number of times.
Including a recent extension with Goldman Sachs.
In aggregate the repo facilities finance 11 loans.
Which almost 75%.
Class, a multifamily and office assets.
Our financing facilities and partners or continuing to work in ways consistent to the pre cobot time.
And during the second quarter.
We funded 78 million against loans previously closed.
Consistent with our projected at 25 million per month.
And we borrowed 68 million across our various financing facilities.
Hey reps liquidity position remained strong.
With 431 million of availability.
Including cash of 127 million as of two Q.
And access to an additional 285 million or corporate revolver.
Additionally, we would anticipate loan repayments to supplement our liquidity position in the coming quarters.
As a number of properties have reached stabilization.
Finally.
Almost the entirety of the portfolio remains invested in LIBOR based floating rate loans.
As a reminder, if some of the details.
98% of the loan portfolio has a LIBOR floor of at least 95 basis points.
Well only 5% of our liabilities have a floor above zero.
So with spot LIBOR rate around 16 basis points.
And the weighted average LIBOR floor on our assets of approximately 180 basis points.
Hey, rough continues to benefit from increased net interest margin.
And this declining rate environment.
In summary.
Our best in class investment portfolio is providing strong earnings power through significant in the money right floors.
We generated our second best core earnings quarter in the company's history.
We're continuing to diversify or financing sources, including growing our market, leading 73% non mark to market secured liabilities.
We have a strong liquidity position.
And are beginning to see interesting opportunities to lend at attractive levels on credit consistent with our historic underwriting.
Thank you again for joining us today.
And now we're happy to take your questions.
Thank you.
Well now begin the question and answer session to ask a question you May Press Star then one and your telephone keypad, if you're using a speakerphone. Please pick up your handset we're pressing the keys.
Withdraw your question. Please press Star then too.
At this time, we will pause momentarily to assemble our roster.
And the first question will be from Jade Rahmani with KBW. Please go ahead.
Starting next door Ajay taking the.
Yes can you hear me.
We can now thank you okay. Thanks very much.
I was wondering if you are looking at the disclosure to you.
You can provide some color as to how occupancy in the multifamily in office portfolios compared to say quarter over quarter I've gotten a couple of questions on that.
Hi, James good to hear from whence Matt.
Yeah, I would say the occupancy is pretty consistent you know quarter over quarter, we haven't seen large changes in either of those.
Hi, there those segments.
Okay. That's good to hear and in terms of the outlook for repayments. It sounds like you are expecting a pickup in refinancing even in the current environment has a number of properties I assume in the multifamily and reach stabilization that accurate.
Yes, it's Matt again, that's accurate it's still difficult.
To protect the exact timing, but when we look across the portfolio.
We've got a few multifamily properties that are close to stabilization then [noise].
In discussion with borrowers, they're starting to think about refinancing us or potentially selling the asset and then.
It's not just multifamily, though we have yes, there's some office assets as well where the alert they're largely <unk>.
Finished with their business plan on lease up so we're watching a number of a number of the loans the C.
Over the next year I'm kinda back after the Europe, we can get we payments.
Okay, and just lastly on the outlook for credit you have any expectation for a near term increase in the amount of loan loss provisioning based on the loans you disclosed omni watch list.
No I mean I think we.
Yeah, I think that that number we have four.
Yeah for our reserves there you know what we can see in the portfolio no today based on the model, but that's being run.
Thanks, Josh.
Thanks for it.
Next question will come from Dawn and Daddy with Wells Fargo. Please go ahead.
Hi, I'm couple of questions first.
Can you talk a little bit about liquidity in the real estate market. I mean are you seeing more capital willing to step in are you seeing sellers willing to sell or things starting to Bruce moved a little bit more.
John Thank you, it's Matt I think that's right.
The market is starting to thaw.
Out from March April.
And activity.
And we expect this fall and going into the winter to be you're very active.
There's a lot of capital on the sidelines, but at the same time, there's clearly some distress and portfolios and so.
We do think about will create a transaction activity and.
There's pent up demand on the refinance side as well as the market shut down for a couple of months there people will come back to market and.
And try to refinance or existing their existing loan so.
From what we see I think both the equity side of our business on the credit side of our business really gearing up for a pretty active or fall and winter.
Oh, I guess I'm.
Looking at some of the stress properties the Portland asset based on I think you had said the property is marketed for sale based on you know kind of what you're seeing do you have enough reserve and the balance sheet to cover that scenario or would you expect a book value a hit from the sale of data so.
Got it well I don't think it's not certainly in distressed when they're in their in sale and the planets, that's a big redevelopment plan.
And I guess too early to tell.
Where that.
Say ultimately where the price ultimately shakes out so I wouldn't want to speculate on on where it is but the way our our Cecil model works is.
Incorporates lots of things in terms of LTV and de Fcr and.
Also incorporates our risk ratings I'm so.
Losses tend to be you know more weighted towards obviously, the riskier loans in our portfolio.
Okay, but I think it's I think it's a little bit early to tell exactly what happens on that asset.
Got it and then lastly in terms of a new originations you did mention spreads are pretty wide I assume you want to balance that with sort of a defensive position how much would you be willing to allocate to new originations. If you saw fantastic spreads like can you.
Give us a sense on what you'd be willing to do.
As a 100 million 200 million.
Yeah, I don't think we have an exact number right now, but I think we feel like we have enough liquidity.
To to begin Wendy.
And so in <unk> and we'll judge the market as we as we proceed and.
Just to be clear I think.
We're not de emphasizing.
Liquidity, we're not de emphasizing being defensive.
But if you look at.
Where we are from a liquidity position, whether its cash on the balance sheet. The revolver potential issuance of a have a term loan b, there's going to be lots of liquidity available to us and tried to prepare to start.
Pick some of that the working.
But the market environment looks like and what our prepayments CLYC.
Yeah, I don't really judge the amount of capital we put into the market Opex.
Number two.
Okay. Thank you.
Our next question is from Stephen laws with Raymond James. Please go ahead.
Hi, good morning.
Wanted to follow up a little bit on on your comments over the last few minutes on originations and in spreads widening you know thinking about the existing portfolio with LIBOR floors. So you know well above market. Today. You know can you can you maybe make it apples to apples that alone extends through you model.
By it and you are able to keep it above market LIBOR floor in place.
You know what is the trade off how much just spreads need to widen to to make a new origination more attractive today than than having to benefit above LIBOR floor. It at one and a half for either higher or some of the laws.
Yeah, I guess, we don't without thinking about it versus the existing portfolio the existing portfolio is clearly.
<unk>.
Generating a lot of earnings power right now to those like workforce that that you're mentioning.
So I would not say that were encouraging.
You are clients are borrowers to pay us off so we can go make a new loan at <unk>.
In the current environment, but I do think if you look at it probably.
[laughter] coded versus post Kobe, just in terms of the man and the or are we can create.
Before I was who the decrease in our library and monthly LIBOR.
The NIM has increased and are the or are we we can generate isn't the same context are higher than where we were pretty cold, but so we still like the market, obviously from a credit perspective or.
Yeah, the loans are more conservative today, both from structure and leverage.
It's more of a lenders market right now.
So that's that's your we're seeing good credit we're seeing attractive returns, but clearly those why more floors on existing portfolio or are very powerful.
Yeah, and and on the financing side, you know, 73% non mark to market you guys have been one of the highest in the group for a while it in the low Seventys you know is that where you'd like this number to be can it can it go higher I would think there's you know at some point.
Maybe is there some benefit to having some that's that's.
You know maybe cheaper with some mark to market, but can you comment on where you'd like to see that non mark to market mix kind of on a go forward basis or maybe the next 12 to 18 months.
Hey, good morning, Stephen It's it's Patrick I'll address that one so I think it right at 73%, we feel really comfortable where weve. What we've achieved here over the last couple of years I think there's room for us to do more.
I think we need to be out of state where were 100% Nonmortgage market. We do think there there was a place and we obviously have a very good repo counterparties.
And so we think that's that's part of our mix going forward, but our biggest focus was really being on diversified and getting to a you know sort of a higher number and I would and I would quantify a 73%.
Being sort of a higher number so this feels like a good mix or a good level for us to be at and but there is opportunity for us to marginally improved that overtime.
Right, Thanks, Patrick and they're not met kind of higher level, you know all new investments and just more for the market you know given.
You know expect you know strong underwriting and good performance of the the upcoming vintages posts post this crisis [noise].
You know how do you think about opportunities maybe doing mezz loans with no balance sheet leverage versus continuing to do the you know senior mortgages with with a couple of turns of a balance sheet leverage.
Or are we at a point in the cycle or been edge, where maybe those mezz investments are more attractive or how do you think about the opportunities between senior and Mezz loans are.
New originations.
[noise] well, yeah, a lot of its just driven by.
Client demand and what the market dynamics are the pre co bid.
There was a lot of liquidity.
And.
Obviously, what are the capture as much economics as possible and most of our competitive set putting us can quote unquote the whole loan it had pretty attractive financing.
To be able to create the elaborate or are we.
And then the question is your where are we today and I think there is a little bit of shifted the market I think that there's more ability to create the whole loan and felony note. So overtime could I see a small shift towards more.
A higher percentage of mezzanine loans in the portfolio versus today I think you could my guess is at the end today, it's a bars that we deal with our very institutional nature.
They value.
Certainty of execution, they value the ability to kind of come to one counterparty one stop shopping and do the loan.
So I still think the primary business will be quoting the whole loan and and providing that.
To our clients, but I could see the mix shifting a little bit in favor of meds.
Great. Thanks for that that a color and just in closing I appreciate the additional disclosure the the new supplements extremely helpful. Thank you.
Thanks, Thank you.
And the next question will be from Steve Delaney with JMP Securities.
Thank you and good morning, everyone I'm first for Patrick the 512 million of future fundings at June Thirtyth, Patrick did I hear you clearly that we should think somewhere about 25 million a quarter is to take down rate on on that 500 million.
That's correct, Steve we we modeled that pretty detailed you know over the next couple of quarters and we've been consistently running at that rate. So that's a good number to assume.
Oh, sorry, just to clarify 20 to 20 to 25 million a month, just what make sure pardon me yeah. Okay. That's why I thought 25, its could be a pretty <unk> take a long time to pay down 512. So so 25 of them on 75 per quarter, Okay, well. Thank you Sir.
And Matt for you I'm very positive just the a the fact that you're looking at new investment opportunities and I guess I don't put words in emailed I think I heard you say, you're actually quoting terms could we see an origination as soon as Bobby you ended the third quarter or should we.
I think more like four quarter in terms of win win any actual closings might occur.
Got to predict it obviously, we're coming into August so.
We're on a normal environment, but normal environment, you'd expect to kind of a little bit to slow down in transaction that Germany in late August here.
But I think it's a round that timeframe you know whether we hit the subject before September 30 at third Orbitz <unk> slightly thereafter, I think it's in that context and.
Part of it just depends on.
Yeah, what we see that we like and.
Able to.
Sign up a deal or two but that's that's certainly work we're active today, which would imply that we can.
Have a closing within that timeframe.
Great. That's that's helpful. Thank you and just last one more quick thing for me could you.
Yes, Matt or are either of you just give us a high level kind of profile of the tenant mix. It your your large Minneapolis or office buildings I'm. Just curious you know what the credit profile of the tenants are given what's going on in that market. These days.
Thanks.
Well I think the.
The most important thing on that particular asset is that it's it's basically stabilize.
So the occupancy on that and then.
In the nineties.
And <unk> and it's pretty long lease term on how the exact would average remaining lease term on that property, but it is that's been leasing up.
And for the <unk> the weighted average remaining lease term is pretty strong I'm I'm not one and this was actually alone that we had marked.
Our potential repayment.
Actually as early as the first quarter.
Given where it is from a business plan perspective, and so this isn't one where particularly youre concerned about from a from a volatility perspective.
Yeah, it sounds like with that with that occupancy you you know him and.
The fact that it's it's I think you've had the alone since 2017, it looks like you'd be a candidate for CMBS deal you know at some point.
This has always been a strong performer I think with sponsors have done a really excellent job on on executing on their business plan, which was originally had a renovation.
And we came in post renovation and and they've really outperformed all of our assumptions in terms of rents as well as the velocity of lease up.
Great. Thank you for that color congratulations on the quarter.
Thanks again it if you have a question. Please press Star then one.
The next question will come from Rick Shane with Jay I'm, Sorry, JP Morgan. Please go ahead.
Thanks, guys for taking my question and I think you pretty additional disclosure. It really is helpful wanted to talk about two things one.
When we look at the right side of your balance sheet you guys have.
Done a really good job and created a lot of opportunity and when we think about that in the context of the significant contribution from floor income I am curious if you guys are thinking about ways to potentially lock in some of that floor.
Rick Good morning, its Patrick I'll I'll take that one so we've spent some time I'm looking at that obviously, that's that's a potential sort of path for us its not something that we you know execute on obviously it at this point, but we can tell.
You to explore that and and think about that and then from as you can see from this quarter. You know, we're continuing to you'll get the benefit of of the cash flow went up quarter by quarter basis.
Got it okay. Thank you second question and you'd answered some questions about Cecil and I in my mind, you sort of described it and I think this is probably true for the commercial mortgage Reits in the context of a bottoms up analysis.
We often think about c., so and again this may be informed by our experience with a broad set of companies from a top down perspective in terms of a number of macro factors, we have seen and our coverage universe change is sick downgrades.
Or reduce outlook in terms of macro drivers for C.. So if you could just talk a little bit about how you guys are looking at things off from that perspective as well.
Oh, Hi Tech listening to stop I'll take that one so you're absolutely right, though our overseas. So is model is a loan level and the factors and underlying property performance sitting down with loans as well as an equity economic scenario. So this quarter.
You will see 'em, we would get a benefit of two cents as a result of.
As a 1.4 million lower seasonal reserve quarter over quarter, and this was mainly driven by.
A slightly improved economic outlook assumption, a this quarter compared to the best and this quarter. So less water, we use off the shelf subscription service for a wide modeling for Michael economic scenarios and we use the April macroeconomic scenario.
And from others have you was that the down.
ER March economic scenarios. So we have you that they put an economic started up you have used was pretty CB or economic scenario.
And wouldn't be a macroeconomic data came out a need June or would that you unemployment numbers or was it was a better than expected and Steve. So that when you open the that bad nightly economic scenarios assumptions in cool slightly quarter over quarter, that's you'd get a driver for you a one point.
For many in <unk> dollar benefit that you won't see we think in this quarter.
But other than that the Dan that analysis is pretty pretty consistent quarter over quarter.
That's great is that the answer I wasn't sure I understood. The answer and so you said Youre using April previously versus March because so many other companies use March so that doesn't make sense from a macro perspective. Thank you guys for taking my question.
[music].
Your next question as a follow up from Jade Rahmani with KBW. Please go ahead [laughter].
Yes. Thank you we've seen a number of rescue financings that have taken place in the mortgage REIT space and I was wondering if that's something given the liquidity position than the asset quality that K RASK might participate in you know some of the returns are in the L plus 12% range.
Unlevered. So wondering if you could have pine on that.
[laughter] Jed its Matt.
We look at it.
We're trying to look at everything that comes to the market, whether that's no loans or corporate financing and.
I will tell you we haven't spent a lot of time on those.
The corporate financing side.
Mostly from just a credit perspective and.
Trying to keep the portfolio.
Comprised of this incident institutional quality real estate borrowers and that's high quality to Canada market like this so.
I think we still prefer to originate loans directly at this point.
And I think that a new mark just put out notes about five minutes ago, where they're expecting a low loan sale activity, but then a and meaningful pickup post labor day, They said something effective three and a half billion of named assignments on strategic advisory, including a billion of loan sales.
That's something that you're watching and expect to see an uptick in.
It is and we've added it to our pipeline, we've expanded our coverage or in that segment the market loan sale advisor.
I would say similar.
He says credit thesis is in the loan sale market, it's like what what's coming through that channel doesn't really fit.
Our DNA doesn't look like whats in our existing portfolio from a quality perspective into sponsorship perspective, and so that's.
The first lens, we we go we look at and and a lot of times that lenses kind of eliminates a lot of those opportunities I don't want to rule anything out we would look across both the corporate side as well as.
No the loan sale market, but that.
We bring the same kind of credit thesis with us as we look at those segments and often times. The credit you see in those markets is different than what we've been focused on.
And lastly, whats KKR as overall thesis with respect to real estate values. At this point is becoming company, taking a wait and see a approach endearing commercial real estate as a slow sector to recover is there any estimation of impact to values.
That KKR has the consensus around How's the company overall, the parent company viewing real estate.
Well I think we've got a couple of different ways, we're definitely front footed.
We are definitely gearing up for investing.
At the market activity picks back up.
The same time real estate values lag and we all know that Kobin pad.
A specific impact on different markets and different property types, it's impacted real estate in a different way than than other parts of the economy.
And so I think.
We're looking at.
That I'm trying to evaluate.
As other real estate investors are like what's the real impact.
And there are these secular changes as it relates office usage et cetera urban versus suburban.
We're studying all these things very closely however, we do expect there to be lots of opportunity to invest as people reposition their portfolios.
And we certainly have dry powder that.
We'd like to the you'll be able to a put to work in this market.
Thanks for taking the questions.
Ladies and gentlemen, this concludes our question and answer session I would like to turn the conference back over to Michael Shapiro for any closing remarks.
Thanks, Chad and thanks, everybody for joining us today, we appreciate the time and hope you continue to stay well unhealthy Ah Theres any follow up please don't hesitate to reach out to US I know, we'll be talking to many of you but enjoy the rest of your summer.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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