Q4 2022 KKR Real Estate Finance Trust Inc Earnings Call
Speaker 2: The pro.
Speaker 3: Good morning and welcome to the KKR Real Estate Finance Trust Inc.
Speaker 4: 4th quarter, 2022 Financial Results Conference call.
Speaker 5: All participants will be in listen-only mode.
Speaker 6: Should you need assistance please signify a conference specialist by pressing the star key followed by zero.
Speaker 7: After today's presentation, there will be an opportunity to ask questions.
Speaker 8: To ask a question, you may press star then 1 on your telephone keypad.
Speaker 9: Do withdraw your question, please press star then two.
Speaker 10: Please note this event is being recorded.
Speaker 11: I would not like to turn the conference over to Jack's Fautala. Please go ahead.
Speaker 12: Great, thanks operator and welcome to the KKR Real Estate Finance Trust earnings call for the fourth quarter of 2022. As the operator mentioned, this is Jack Sotala. Today I'm joined on the call by our CEO Matt Salem, our president and COO Patrick Mathson.
Speaker 13: and our CFO , Kendra Decius. I would 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 in the supplementary presentation, both of which are available on the investor relations portion of our website.
Speaker 14: This call will also contain certain forward-looking statements which do not guarantee future events or performance.
Speaker 15: Please refer to our most recently filed 10-K for cautionary factors related to these statements.
Speaker 16: Before I turn the call over to Matt, I'll provide a brief recap of our results.
Speaker 17: For the fourth quarter of 2022, we reported gap net income of $14.6 million, or $0.21 per diluted share, including a CECL provision of $21.2 million, or $0.31 per diluted share.
Speaker 18: Distributable earnings this quarter were $12.4 million or $18 cents per share.
Speaker 19: including a write-off of $25 million or 36 cents per share.
Speaker 20: Distributable earnings prior to realized losses were $0.54 per share relative to our Q4 $0.43 per share dividend, driven largely by the higher rate environment.
Speaker 21: Book value per share as of December 31st, 2022 was $18, a decline of 1.5% quarter over quarter.
Speaker 22: our Cecil allowance decreased,
Speaker 23: to $1.61 per share from $1.66 per share last quarter.
Speaker 24: Finally, in early December , we paid a cash dividend of 43 cents per common share with respect to the fourth quarter.
Speaker 25: Based on yesterday's closing price, the dividend reflects an annualized yield of 10.9%.
Speaker 26: With that, I would now like to turn the call over to Matt.
Speaker 27: Good morning and thank you for joining us today.
Speaker 28: Before turning to the current market and company results, I'd like to reflect on K-RES achievements during 2022.
Speaker 29: Despite a very challenging environment, we made significant progress enhancing our liquidity and diversifying our already best-in-class non-marked-to-market liabilities.
Speaker 30: In 2022, we optimized and diversified our financing sources and as a result sit on record levels of liquidity.
Speaker 31: Last year, we had a 2.5 billion of non-marked market liabilities.
Speaker 32: Notably, we increased the borrowing capacity on KRS corporate revolver by $275 million to $610 million and extended the maturity date through March 2027.
This revolver is a key contributor to our nearly $1 billion in liquidity as of your end.
77% of our secured financing as of year end was completely nonmarked to market.
and their remaining 23% is only marked to credit.
is only marked a credit. In addition,
We have 1.9 billion of Cereceo-Lovate Viabilities.
that are priced at attractive spread.
and still in their reinvestment periods.
In 2022, we grew our permanent equity base by 15% to $1.6 billion.
We raised approximately $150 million of preferred equity at a 6.5% fixed for life coupon.
We completed two public offerings of common stock.
resulting in net primary proceeds of $188 million.
Take your hour, reach its target, long-term hold position of 10 million shares.
representing 14% of our shares outstanding.
resulting in market leading alignment between KKR and KREF.
equally as important.
with our disciplined approach to buying back shares.
When K ref traded below book value
2022
We repurchase 2.1 million shares for nearly $36 million.
Since our May 2017 IPO,
KF has repurchased nearly $100 million of stock.
I cannot overstate the impact of our partnership with our manager, KKR.
and the strength of our real estate platform.
Pecor's integrated real estate business.
provides us with a robust view of the current operating environment.
which has become more dynamic over the past few quarters.
as the Federal Reserve has embarked on a virtually unprecedented pace.
of interest rate increases.
This broader real estate platform collectively manages over $64 billion of AUM.
and is grown by approximately 60% since the end of 2021.
For example,
TKR's real estate private equity team owns or manages over 90 million square feet of industrial assets and over 30,000 multi-family units globally.
We were able to draw on real-time data and market intelligence.
from this property portfolio which informs our investment decisions as a lender.
The kick-air realistic credit business is substantial in its own right.
with 30 billion of assets and management and a dedicated team of 66 at year-end, 1022.
with nine senior investors.
responsible for over 10 billion.
and originations.
As a reminder,
Care up his K-CAR's flagship senior transitional CREL ending strategy and hold the first priority position within the allocation waterfall.
This team originated 2.7 billion on behalf of KRAF in 2022.
across 25 loans.
Concentrated our efforts in the growth property types.
with nearly 70% secured by a multi-family and industrial properties and another 22% secured by life science properties.
Our focus on lending to institutional sponsors.
on high quality real estate and growth sectors and markets.
has positioned us well to navigate the current environment.
Our largest property type is multifamily, which represents approximately 45% of the overall portfolio.
We continue to see strong performance across that segment.
with median same store rental rates up 12%.
in the portfolio for fourth quarter of 2021 to the fourth quarter of 2022.
That said.
And as we discussed last quarter.
the office sector remains challenged with little liquidity across both debt and equity.
Our underweighting office will benefit K-Ref on a relative basis.
We are diligently working through our watch list office loans.
Our first preference is to work with our existing sponsors.
However, many properties will require additional capital.
and sponsors will need to demonstrate commitment to the asset with additional equity.
We are not in the free option business.
And our mine set is to deal with any issues now.
and not to kick the can down the road with a sponsor who is not economically incentivized to lease at current market rates.
Fortunately
We have many tools at our disposal to optimize these outcomes.
including taking title and operating assets.
until the liquidity returns.
We are also in a position to be proactive with our borrowers.
and work towards faster resolutions.
because we have high levels of liquidity at the corporate level.
Turning to earnings.
The high interest rate environment continues to be a tailwind for our distributable earnings.
In 2023, we expect the portfolio to turn over modestly.
and we will continue to match originations with repayments.
We expect repayments for $2,023 to be approximately $1 billion weighted to the back half of the year.
As we navigate this new year, we are very well positioned with a strong portfolio.
Best in class liabilities.
and record levels of liquidity.
levels of liquidity. Lastly,
I want to take a moment to thank Todd Fisher.
who resigned from the K-Rep board of directors earlier this month.
to accept a position with the United States Department of Commerce.
This official has been an integral part of our team since K Refinception.
And we thank him for his thoughtful guidance in steering the company.
We wish him well in his future endeavors.
With that, I'll turn the call over to Patrick.
Thank you, Matt. Good morning, everyone.
I'll focus today on our efforts on the capital and liquidity front.
and provide an update around our Cecil Reserve and Watchlist loans.
In 2022, with the continued help of our partners in KKR Capital Markets,
We added $2.5 billion in non-mark-to-market financing.
In the public capital markets, we closed a $1 billion managed multifamily CLO earlier in the year, providing KREP with $848 million of non-marked to market and non-recourse financing.
in a two year reinvestment period.
In the private markets, we close on a term lending agreement, totaling 350 million.
with an option to increase the facility to 500 million.
and entered into three new asset specific financing facilities.
totaling nearly 500 million.
We also increase the borrowing capacity of an existing $500 million term lending agreement to $1 billion.
Finally, we increased our corporate revolver by 275 million to 610 million.
and extended the maturity date through March 20, 20, 27.
Of the 2.5 billion total capacity added this year, two-thirds is truly bespoke by abilities.
The resiliency of our financing structure.
Coupled with our independence from the public capital markets is a true differentiator.
and buffers KREF on the liability side during times of capital markets volatility.
KREF is well capitalized today and continuing to preserve flexibility in today's market
Our debt to equity ratio was two times.
and our total leverage ratio was 3.8 times as of quarter end.
Our approach to managing the balance sheet allows us to start 2023 with a record level of liquidity in excess of $950 million.
including our $610 million undrawn corporate revolver.
and $240 million of cash.
Additionally, at quarter end, K-Ref had $180 million in unencumbered senior loans on the balance sheet.
We are maintaining our defensive posture with a focus on managing liquidity.
This quarter, we recorded a $4 million net decrease in our Cecil Reserve of $115 million to $111 million.
or 147 basis points based on the funded loan portfolio.
Similar to our commentary in Q3.
Nearly half of our total seasonal reserve remains held within our five rated loans.
Additionally, as we know that last quarter,
the fetal reserve is unrealized in non-cash.
We would recognize a loss through our cash metric of the shrewd over earnings if such amounts are deemed non-recoverable as we did this quarter.
Turning to the watch list.
In December , we finalized the plan to modify a $161 million senior office loan previously risk-graded before located in Philadelphia.
As part of the modification, K-REP agreed to subordinate 25 million of our senior loan.
in the form of a junior mezzanine loan.
In return, for a $25 million principal repayment from the sponsor.
The principal repayment is structured as a new senior mezzanine loan.
and reduces KREF's mortgage exposure to $111 million.
At year end, the loan was risk rated a 5.
However, following the execution of the modification in January , the new senior loan was upgraded to a risk rating of 3.
In addition to the $25 million paydown,
The sponsor committed to fund an additional 16.5 million per future capital expenditures and leasing cost.
which would bring the total senior Mezzanine loan balance to 41.5 million fully funded.
The subordinated hope note is structured as a junior mezzanine loan.
and does have priority of cash flow once a senior mortgage and senior mezzanine loans are fully repaid with interest.
K-ref wrote off $25 million of the loan balance in Q4.
Regarding our other two risk rated five loans.
There are sponsor-led sale processes in progress.
And we are maintaining an active dialogue with these sponsors.
For the Minneapolis Lone, we execute a short-term extension to facilitate the sale process.
And for the other Philadelphia loan, we have an initial maturity date in May of this year.
We have an initial maturity date in May of this year.
With regard to the broader portfolio, 88% of our loan portfolio remains risk-rated.
and we collected 100% of scheduled interest payments across the portfolio in Q4 and through the first payment date in 2023.
A few final comments.
K-REF finished 20-22 strong.
With a $7.9 billion total fund at portfolio representing a 17% year-over-year increase.
We originated three senior loans in Q4 for a total of $370 million and sourced and closed $125 million asset-specific financing.
Finally, we repurchased approximately 500,000 shares of common stock in Q4 at a weighted average price per share of 1641.
for a total of over 7.4 million.
Over the last three quarters, we have been opportunistic in utilizing our share repurchase program.
With 2.1 million shares repurchased in 2022 for a total of 36 million.
Additionally, this month, the Board reauthorized a $100 million buyback program.
Thank you for joining us today.
And now we're happy to take your questions.
Our first question will come from Dawn, San Daddy of Wells Fargo. Please go ahead.
Hi. Good morning. You know, obviously office continues to be a pressure point. Can you talk a little bit on how your borrowers are handling the higher rate environment? Are you making modifications?
and um
you know, just talk a little bit about your expectations. I would assume that there'll be more reserve building on your office portfolio as we go forward through 23. Right.
Sure, Donnett's Matt.
Thank you for the question today. I appreciate you joining the call. I'd say specifically, we'll start at the interest rate environment right now. Certainly putting a lot of pressure on the overall system. However, our borrowers do have interest rate caps in place.
they're not fully exposed to current SOFR or current LIBOR if we haven't converted it over yet.
and then clearly as those.
Interest rate caps.
expire typically at the initial maturity date of the loan. They are required to
typically at the initial maturity date of the loan. They are required to...
re-up those interest rate caps and buy a new one. And that's really when the conversations take place around potential modifications on the loan. It's another opportunity for us to take a look at the credit and understand where we are and add any other structural features that we want. And we've been working with our sponsors in terms of giving them some flexibility on.
for future interest rate cap purchases, et cetera. So we want to work with them and help alleviate, definitely pressure points as it relates to that, but it's typically in return for some type of other consideration within the loan document.
As it relates to further buildup on office in terms of our reserves,
We go to the portfolio every quarter and
where we stand now, we feel comfortable with the reserves. It is a very robust process. I think we're eyes wide open. You've seen us, it'll be very transparent and pretty front-footed as it relates to not only increasing reserves, but as you saw this quarter, but also for modifying loans and trying to get to the other side and create the right basis for us and for sponsors so that they can...
The next question comes from Rick Shane of JP Morgan. Please go ahead.
Thanks everybody and I appreciate you taking my question this morning. One of the few places where gap and tax diverge is related to realized losses.
So, to the extent you did realize a gap loss of $25 million, I'm curious if you believe
that it's met the threshold from an IRS or tax perspective as well. And then if you could talk specifically about because it occurred in the fourth quarter, but perhaps the tax loss might be realized in 2023, how we should think about the timing and how that falls.
Sure, thank you Rick, appreciate you joining and appreciate the question. You asked about the write-off that we incurred in Q4 and that $25 million write-off will
be a taxable event in the year the modification closed, which was 2023.
Maybe pulling the thread on this a little bit, you know, the sum of our quarterly dividends paid in 2022, plus borrowing part of the dividend that was paid in January 2023, and the throwback dividend concept is a practice that's allowed under
The REIT rules that we've used in the past means that we are fully distributed for 2022 and so there is no special dividend that would be required.
Got it, no excise tax or anything that we need to think about in that regard. That's right. We met all of those thresholds. That's correct.
Terrific. Thank you very much.
Thank you. Thank you.
The next question comes from Stephen Laws of Raymond James. Please go ahead.
Hi, good morning. Patrick, I guess I'll start with, I'll point this to you since you mentioned it in your comments, but um,
I think half the reserves are related to the five-rated loans. As we think about that and kind of pair it with Matt's comments, we're going to focus on resolutions quickly and not kick the can down the road. How do we think about those moving from specific losses and to realized losses and running through distributed earnings over the course of this year?
Steven, thanks for the question. So if you look at our reserves, as we said, about half of the five rated loans or about half the reserves are attributed to the five rated loans, if you look at the asset where we had the right down in the fourth quarter.
We realized the right amount of about 16% against that balance. And coincidentally, the reserve that's held against those five rate loans is pretty close to that number. We're obviously working through each of these loans individually. All of the...
fours and fives that are on there, you know, are going to have potentially different levels of loss content. Not every four-rated loan is a loan where we think there's, you know, a high degree of loss. Some of the four-rated loans are on there as a reflection of the fact that we think there's a near-term catalyst or a near-term event that...
You know, may lead to a modification.
may lead to a modification. So hopefully that addresses what you were asking.
Yeah, I guess kind of, you know, to take half of the one where we won 111. So you know, if you're looking at 55 million, you know, we see all of that run through a loss assuming your reserve where you at the appropriate level for the assets, you know, resolve to monetize like just trying to think about the timing of when that's going to hit. Is that a
This year event, is it early next year? How do we think about the timing of those monetizations or realizations?
Yes, sure. I think the timing is difficult to forecast here. And clearly with those, you know, five rated loans that we talked about, there's processes in place to get to some form of liquidation of bend. So not unreasonable to think that.
we could see some realization over the course of this year. I think the bigger question probably is just related to the quantum there. We feel good about where we are reserved, but clearly in this market the realized amounts could come in greater or less.
than what we've set aside. Yep, thanks Patrick. And moving to the financing side on these loans, can you talk about how the watch list loans are financed, you know, and if that is financing exposed to credit marks, how those discussions are going with with counter parties as as you work through these watch list loans.
Sure. There's a little bit of a disconnect between necessarily what's on a watch list and whether the loan is performing. As we've indicated, we collected 100% of our interest payments through last year and the first payment date of this year.
So, you know, the real driver, especially on these non-marked market facilities, is the loan current and, in fact, all of these loans are current. So, there isn't really much concern in the immediate term as it relates to those loans. Obviously, as we get to maturity dates or we need further modification.
a write-off in the fourth quarter. That was not on a financing facility, that was unlevered. But post now the modification of that loan, that loan is a loan that we can finance on any number of facilities. But I would say that the conversations have been constructive and we have an opportunity to work through and...
get runway where needed.
get runway where needed. Great, appreciate the comments this morning Patrick.
Thank you, Steven.
The next question comes from Jade Romani of KBW. Please go ahead.
Thank you very much. Wanted to ask, in terms of your quarterly interest income, do you know what percentage of that is funded out of interest reserves that are structured up front as part of the loans?
Hey, J. It's Matt. I can jump in there. I don't have that number right in front of me right now. It's not abnormal obviously for us to have.
reserves or recourse obligations to guarantees to fund interest payments just given nature of the business plan and lease up, etc. but don't have the exact number in front of me.
Okay. But is that an issue in terms of any shortfall in performance and pressure from elevated interest rates the exhausting of those reserves in coming quarters?
I mean, let's, it comes back down to value at the end of the day.
You know, you look at most of our portfolio is in, you know, these growth sectors.
And value there has held up well and the fundamentals are really strong. So I kind of put this in the same bucket as interest rate cap discussions as those expire. There's a lot of value behind these loans and the sponsors re up and come out of pocket and buy the next interest rate cap.
to re-up on the reserve.
Thank you very much. On the multi-family credit outlook, it was somewhat surprising to see the downgrade on the West Hollywood asset.
I was wondering if you could talk to your overall expectations for that sector. It's definitely been a resilient sector in past cycles. However, the early 90s did see credit issues and CNBS throughout time has always had credit issues in multi-family. This time around we do have a record.
level of units under construction, disproportionately concentrated in the growth market, and then a lot of deals done at very low cap rates, which would have pressure from valuation, as well as interest rate caps. So what would be your outlook in terms of multifamily credit performance?
Yeah, I think we're still, I think, very favorable outlook on multi-family credit performance.
Clearly values have come down a little bit to encapsulates, have increased just to accommodate the higher cost of capital in the current interest rate environment.
on the on the occupancy side, the properties or the markets still operating it at basically all time highs. And we're still seeing pretty favorable rent growth, although it's come down a fair amount as we reported just on this call. We've got about in just an art art.
K-Refportfolio rents were up on a same-store sales base as 12% year-over-year from fourth quarter of 22 to 21, or from 21 to 22, excuse me. So, and I expect that to continue to come down and my guess is across a broader set of assets that's probably in the high single digits today.
by the way which I still think is very very healthy and and it's kind of the fact that activity is obviously
you're having some impact on that, which is probably a net positive for the whole market. In terms of supply, I agree, there is a wave coming out right now, and I think that will impact some of these local growth markets, but at the end of the day, all these markets are underhoused.
And so it really is just a short term phenomenon in terms of the market digesting those new units and keep in mind there's very little behind that. There hasn't been a lot of new construction financing available in the market over the course of the last six months or so and certainly not readily available today either.
So you're going to have a little bit of a blip probably as the market goes through that and then it should be a pretty favorable setup after that with your new supply really tapering off. So I would say overall, still very constructive on that market and haven't really seen any material signs of deterioration there.
Thank you very much.
Hey, thanks. Good morning. I'm curious how you think your appetite for risk may be changed as a result of raising your reserve. Like should one expect the parameters for your target assets to necessarily change? And is there a threshold for the reserve where it does begin to change your risk parameters more meaningfully? In Eric, you're speaking about this new loans that we're making in terms of how we're evaluating the current market, etc.
Yeah, exactly. Well, yeah, let's just start there. Number one, it's a very lender friendly market right now. You've got large participants completely on the sidelines.
Commercial banks are still not actively lending in the market.
loan of values have come down a fair amount. Obviously the V in that equation is down with the current interest rate market. So we like the market right now. We think it's very attractive.
come down a fair amount. Obviously the V in that equation is down with the current interest rate market. So we like the market right now. We think it's very attractive.
You know, you could see what we did last year. The vast majority of our lending activity was in multifamily industrial sectors, which we still believe in the fundamental backdrop there as I just described with Jade.
We could see what we did last year. The vast majority of our lending activity was in multi-family industrial sectors, which we still believe in the fundamental backdrop there as I just described with Jade. So I don't think that...
you know, really like what we're looking at like reserves or things like that are really impacting how we're thinking about making a new loan or what we would focus on.
Some of it does come back to liquidity and we are
As you've saw in our report at pretty high levels of liquidity right now, and I think that's more of a function of just the market uncertainty and
the volatility that we're seeing in the market and just making sure that we've got plenty of excess liquidity to deal with any issues that may come up. And I think it's a little bit less about reserves, but one of the reasons why we've been so front-footed and trying to work out some of these loans and you saw the modification.
than five rated loans and once we get through that I think that will really kind of change some of our posture in the market as it relates to taking advantage of the current market
Yep, yep, that's really helpful. Maybe you can share some of the things that you're seeing from your seat at KKR more broadly about the flows of capital into commercial real estate, how much capital you see getting allocated to the sector this year, maybe even who you see being the incremental buyer.
in the market with there being this layer of uncertainty that we're all talking about. Thanks.
Sure, so stepping away from KREF for a second and just talking about what we're seeing broadly in capital flows, I would say that starting the real estate credit side, there is a pretty consensus view, a strong view, really globally that...
Credit is very attractive today and within that segment real estate credit is very attractive and so Well a lot of allocators
In the market are experiencing a denominator effect just given where the equity market is. So the overall pie might be shrinking. You want to think about the component of that pie being real estate credit is growing. So we're taking market share if you will.
And we're certainly seeing that on the fundraising side with more allocators, the favoring real estate credit. So that feels like a good opportunity. And on the real estate equity side, I think the market is very much looking at values and trying to understand, okay, where values day thinking about...
The fundamental setup in many of these property types and markets is still pretty good. So I think you'll continue to see capital being raised on the opportunistic side of the market as well and on the equity side.
So it's overall everyone's dealing again with a little bit of headwinds from you know from the denominator effect, but still seeing very good flows across the real estate spectrum.
Let's really help them.
The next question is a follow-up from Jade Romani of KVW. Please go ahead.
Thank you very much. You mentioned a billion dollars of repayments this year.
Do you know the dollar amount of loans scheduled for initial maturity that will have to meet some kind of extension test?
And I know you talked about you're not giving away anything for free, so it sounds like you're going to be pretty strict in those discussions.
Yeah, Jade, I can talk about it and I'll turn it over to Patrick to give you the exact number.
A lot of the portfolio.
you know, was originated post COVID. And so it is a smaller dollar amount, but, you know, we can give you the initial maturity here. And agree, I mean, we wanna work with our sponsors, we wanna be reasonable. And however, all those initial maturities, or most of those initial maturities have some.
So that's how we approach it. And with that I'll turn it over to Patrick. He can add whatever, any other comments he wants and talk about the numbers.
I'm happy to elaborate here. So in the supplement, we show kind of our fully extended
terms and you can see that this year about 6% of the portfolios is scheduled to have a final maturity day.
In terms of like initial maturity date, inclusive of those numbers, that grows to about 21% of the total portfolio. So about a billion seven in total.
Thanks very much. The West Hollywood multi-family deal.
Sorry, I didn't hear before, but did you provide any color on that deal? And if not, could you talk to just some overall statistics or give some sense of what characterizes it? I see that the average unit value is something like 2 million per unit and if you make some caprate assumptions, you're talking rents north of 15,000 a month.
Any color you can give there and why that deal was downgraded to risk rating for.
Yeah sure I can give a little bit of color there. You're right in the sense that it's a very high-end luxury.
The little D family property is actually it was built for condo so it is basically top of the market and Great location in West LA as you highlighted there and you know the reason we downgraded that was really around Modification discussions that we were having around interest rate caps and
and just try to get to make sure we got to a good place as those discussions were ongoing. And this again comes back, a little bit back down to come back to value. And so I think we feel pretty good about our basis and your overall value of that.
about asset, but we just downgraded it as we went through modification discussions on interest rate caps.
Thanks. I have one more. Are there any other questions in the queue? Because I just wanted to ask you that I've got some investor questions on this.
Sure, go ahead, Jason.
Just on the CMBS exposure, which is a joint venture, what's the risk of any write down there? And I believe those positions are B pieces, so there would be special servicing rights. Is that really just a mark to model kind of calculation? What would drive any value degradation there that we could see?
Got it. Yeah, so that's an investment in a fund that owns...
2017-18 Vintage Conduit B-Paces. The marking process on that is...
Same as pretty much everything we do at KKR, that's a third party service provider that marks that. We don't mark that internally on a model or anything like that. That's a purely outsourced marking service.
And obviously the two main things that could impact that market are number one, just risk premium increasing in the market and number two, fundamental, fundamentals and defaults. You know, what we've seen in our overall CMS, portfolio, I would say, again, keep in mind it's a tiny, tiny part of what's within KRAP, so I'm speaking.
typically over two and a half to three times coverage on those lower interest rates and they'll enjoy that interest rate for quite some time. So another called seven years or so in some cases. So I think that you know we continuously strong performance across that.
across that portfolio with really diminimous delinquencies. Thanks very much.
This concludes our question and answer session. I would like to turn the conference back over to Jack Switalow for any closing remarks.
Great, thanks operator. Thanks everyone for joining today and please follow up with me or the team here if you have any questions.
Take care.
The conference is now concluded. Thank you for attending today's presentation and you may now disconnect.
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