Q2 2025 KKR Real Estate Finance Trust Inc Earnings Call
Good morning and welcome to the KKR. Real estate Finance, trust Incorporated, second quarter 2025 Financial results conference call. All participants will be in listen-only mode. Should you need assistance? Please signal a conference specialist by pressing the star key followed by zero. After today's presentation there will be an opportunity to ask questions to ask a question. You may press star then 1 on your telephone,
Speaker Change: Phone keypad to withdraw your question. Please press star then 2. Please note. This event is being recorded. I would now like to turn the conference over to Jax futala. Please go ahead.
Jax Futala: Great thanks operator and welcome to the KKR. Real estate Finance, trust earnings call for the second quarter of 2025.
Jax Futala: As the operator mentioned, this is Jax futala.
Jax Futala: This morning, I'm joined on the call by our CEO, Matt Salem our president and CEO Patrick Matteson and our CFO Kendra dishes.
Jax Futala: I'd like to remind everyone that we will refer to certain non-gaap Financial measures on the call which are reconciled to Gap figures in our earnings release. And in the supplementary presentation, both of which are available on the investor relations portion of our website,
Jax Futala: This call will also contain certain forward-looking statements, which do not guarantee future events or performance.
Jax Futala: please refer to our most recently filed 10q for cautionary factors related to the statements
Unidentified: Before I turn the call over to Matt, I'll go through our results.
Unidentified: for the second quarter of 2025, we reported a gap, net loss, of 35 million, or negative 53 cents per share
Unidentified: Book value per share as of June 30th, 2025 is $13.84.
We reported as a distributable loss of million dollars due primarily to taking ownership of our West Hollywood property.
Unidentified: Prior to realize losses, distributable earnings was 16 million or 24 cents per share.
Unidentified: We paid a 25 cent cash dividend with respect to the second quarter.
Matt: With that. I'd now like to turn the call over to Matt.
Matt: Thank you, Jack. Good morning, everyone. And thanks for joining our call today.
Let's begin with an update on the real estate credit Market.
Matt: Transaction. Activity and Loan. Demand has recovered from the volatility of the initial ter tariff announcement.
Matt: Record levels.
Matt: Competition is returned and most lenders are active in the market.
Matt: Despite the competitive environment We Believe The Lending opportunity remains highly attractive offering both absolute and relative value.
Matt: Most of that is driven by the ability to lend on reset values. Well, below replacement cost,
Fundamentals. Remain healthy across most property types.
And construction starts have decreased meaningfully.
Matt: Likely leading to Stronger. Stronger rectal growth.
Matt: Over the next few years.
Speaker Change: Commercial banks are increasing their participation while shifting some of their lending to loan on loan or other back leverage facilities.
Speaker Change: Allowing kreeft to borrow at attractive rates on a non-market to Market and match term basis.
Speaker Change: Now, turning to second quarter results, originations in the quarter total of 211 million, comprised of 2, loans secured by industrial and multi-family properties.
We had 2 full repayments.
Speaker Change: And 6 partial repayments.
Speaker Change: Which total of 450 million.
Speaker Change: We will continue to reinvest repayments.
Speaker Change: And are projecting nearly 1 billion of incremental repayments.
Speaker Change: Over the second half of the year.
Speaker Change: Now that we have turned the investment Pipeline on, we are focused on 2 new areas.
Speaker Change: First diversifying our portfolio geographically into Europe.
And second, creating some more duration through cmbs Investments.
Speaker Change: We have an active pipeline in the European loan market and its and anticipate. New originations in the region by the end of this year.
Speaker Change: In addition.
Speaker Change: This quarter, we closed out a BP of investment where it returns a very attractive.
Speaker Change: The pool consists of 34 low leverage fixed rate, first mortgage loans, Diversified across property types and geographies.
Speaker Change: We have a best-in-class team and a long track record of cmvs investing.
Including the ability to leverage our case our platform, which is a rated special serer.
Speaker Change: Turning the risk ratings. We downgraded a Boston life science asset from a 4 rated loan to a 5 rated loan and expect expect to extend the loan through February of 2026.
Speaker Change: We also downgraded our Chicago office loan from a 3 rated loan to a 4 rated loan due to continued Market deterioration.
As a reminder, this phone has already been modified twice with a reduction of loan balance by approximately 35%.
Speaker Change: Through 35 million of equity repayments and a 15 million. Hope note.
Speaker Change: Turning to our life science exposure.
Speaker Change: Our lifestyle sector is 12%. As of the second quarter, comprised of 6 assets, located in the top 2, life science msas of Boston and South San Francisco.
Speaker Change: 60% is comprised of newly constructed and purpose-built properties that are targeting larger pharmaceutical tenants.
Which are less susceptible to some of the cyclical issues. The sector is experiencing
Speaker Change: as a reminder, we've added additional detail in our supplemental, which can be found on page 10,
Patrick: With that, I'll turn it over to Patrick.
Thanks, Matt. Good morning, everyone. Let me begin with an update on our watch list, as well. As progress on the REO assets.
Patrick: As we reported last quarter, we took title to the West Hollywood multi family Loan in April and recorded a loss to distribute our earnings of 20 million.
Patrick: Which was a slight improvement over our Cecil Reserve.
Patrick: Or progressing on our execution plan for a condo sellout.
Patrick: And expect sales to commence in the third quarter.
On the 5 rated Raleigh multi family.
We are proceeding on an assignment in Louisville, foreclosure, and expect to complete the process in the third quarter.
Patrick: at which point we will convert our approximately 15 million Cecil Reserve to a realized loss,
Patrick: As of June 30th, this asset is 96% occupied.
Patrick: And we will Implement a small value. Add program to enhance the value and reposition the property as Market fundamentals. Continue to improve
3 updates on the REO side.
Patrick: First.
Patrick: Mountain View, California office.
Patrick: The market here is improved materially from our initial ownership from both the capital markets and tenant demand perspective.
Patrick: And we are actively responding to tenant requests for proposals.
Patrick: Given our asset offers tenants, the ability to have a full campus setting.
Patrick: Continue to position leasing toward a single.
Patrick: Next in Portland, Oregon.
Patrick: During the quarter, we closed on the sale of a parcel which will be developed as a multi-genre concert space.
Patrick: Providing an entertainment venue to the site.
Patrick: Additionally, we're working toward the completion of the entitlement.
Patrick: 4 plus million square feet.
Patrick: Of mixed use space creating a path to opportunistically. Sell additional development parcels and repatriate capital.
Patrick: Finally, in Philadelphia.
Patrick: we completed the sale of the garage, in 2q to a private parking operator at a level slightly above our carry basis,
Patrick: the garage was a 13-story 469 parking space facility amongst the larger Philadelphia Oreo portfolio,
Patrick: At the office property, we're continuing to focus on retaining tenants and increasing occupancy.
Patrick: And remain open to selling the property and appropriate basis.
Patrick: As a reminder, at just our basis. In the REO assets, we could generate over 12 cents per share per quarter.
Patrick: On distributor earnings. As we effectuate, our business plans repatriate capital and reinvest into performing loans.
Our Oreo portfolio represents approximately 352 million of proforma equity.
Patrick: For 4 or 5.34%.
Patrick: Moving to share repurchases.
Patrick: We repurchased 20 million of kref stock in the second quarter for a weighted average price of 9.21.
Patrick: Over the last 3 quarters. We have repurchased almost 40 million of common stock.
Patrick: Representing approximately 25 cents a book value per share accretion.
Patrick: Since Inception of our buyback plan.
Patrick: We have bought back 137 million of kref common stock.
Patrick: We'll continue to evaluate the allocation of capital across both share BuyBacks and loan origination
Patrick: liquidity remains robust.
And a quarter end, we had 757 million of liquidity available.
Patrick: Including 108 million of cash on hand.
Patrick: And 620 million of undrawn corporate revolver capacity.
With the assistance of the KKR Capital markets team.
Patrick: 78% of our financing remains fully non-market Market.
Patrick: Overall, we are well positioned for the opportunity in front of us in 2025 and Beyond.
Patrick: We've been making progress on our watch list in REO.
Patrick: As well as actively making new Investments.
Patrick: We'll continue to be transparent and proactive and managing the portfolio to maximize shareholder value.
Patrick: Thank you for joining us today.
Patrick: With that, we are happy to take your questions.
Patrick: We will now begin the question and answer session.
Patrick: to ask a question, you may press star then 1 on your touchtone phone,
Patrick: If you're using a speaker-phone, please pick up your handset before pressing the keys.
Patrick: To withdraw your question. Please. Press star. Then 2
At this time, we will pause momentarily to assemble our roster.
Speaker Change: The first question comes from Jade rochlani with KBW. Please go ahead.
Jade rochlani: Thank you very much. Um, can you talk about the level of Roe's that you're able to achieve in the market uh and give some color around? You know loan, spreads all in yields.
Jade rochlani: Uh, that would be helpful, considering the uptick in uh, competition that we've seen this year.
Jade rochlani: Hey, Jade. It's Matt. Um, thanks for joining this morning and thank you for the question. Um,
Yeah. So just in terms of what we're seeing in the market, which we made some comments on the on the call today pipelines as big as it's ever been. And we've set kind of 2 records in in our own pipeline this year. Just in terms of the market opportunity, we're generally running
Jade rochlani: Over 30 billion dollars a week. Um, of what? You know, just within our actionable.
Jade rochlani: Within our actual pipeline. That's us and Europe. And that's across all of our pools of capital, we have Bank Capital, Insurance, capital and and um, you know, more transitional Bridge type of capital that, uh, we Lynn for kref
Jade rochlani: Competitive side, definitely competitive. I think all the pools of capital are turned on. Um, but um,
Jade rochlani: You know it's led to spreads compressing back to where we were pre tariff announcement. Um I would characterize the market for
Jade rochlani: called transitional Lending.
Jade rochlani: Stuff we're focused on in any way and in in the institutional segment of the market and the call it mid 200s. Um I'd say most of the stuff we're looking at is around the 265 or so area. So, kind of basically back to where we were, um, pre- tariff, you'll see this quarter. Um, we did close 2 deals that are on the tighter end of of probably the tightest in honestly of of where we see the transitional loan market right now. So we closed 2 deals this quarter and like the 240 area that's about as tight as you can go. Now this goes back to, I think some of the comments we made on previous calls where we're seeing a lot of opportunities to lend on.
Jade rochlani: What I think of, as like, mostly stabilized assets, uh, these are, they're ones that industrial portfolio that was scheduled to or, or slated to go for the single asset, single borrower Market. Um, then the Tariff announcement hit. We have a pull that out and provide bullet, uh, balance sheet financing. So pretty much stabilized. Um, well occupied industrial portfolio and then the the second 1 was a
Jade rochlani: Again, a mostly stabilized, very well-located, institutional sponsor, multi family property. Uh, so there's no real business plans here. And so when you start to get into these things that aren't even light transitional, it's in that 240, 250 area. We've always tried to play in the kind of higher quality, uh, section of the part of the market, um, and we're able to finance those really effectively as well. So, when you think about these spreads, We're translating, um, these into the similar Roes in that. Call it on the tight end. We're probably in the middle 11s, um, and that ranges all the way out to into into the 13s. So Roe is pretty similar to what we have seen, really through most of our uh through most of our lending. Um I think these 2 deals we close in the quarter are both in like the 12s. Uh so certainly what we're targeting. Um but I'd say the the fact patterns are
Jade rochlani: Um, more stabilized. Um, you know, a little bit more, uh, you know, more well occupied assets.
Jade rochlani: Thank you. Um, you mentioned, the 1 billion in repayments you expect in the second half, can you talk about what kind of originations you expect in the second half and also any loans with upcoming maturities that, um, you know, could create some conversations on how those ultimately get paid off or if the plan is to extend.
Jade rochlani: Yeah. Um, I guess
A couple comments.
Jade rochlani: We're still.
Jade rochlani: We're still, um, trying to match.
The repayments with.
Jade rochlani: Um, with new originations.
Jade rochlani: So if we got that billion dollars of repayments which we think is we I think we say nearly a billion. Um, if we got that, I think you would see us pretty actively originating to, to try to, to try to replace, you know, the vast majority of that. The the only thing,
Jade rochlani: We're just mindful of is obviously watching the our, our leverage ratio, we're right in line with where we want to be right now, and these slight maybe at the slight with the higher end. But but certainly within the range within a reasonable range
um, and I don't think we have
Jade rochlani: You know, as we think about maturities, um there's nothing currently you know on the on the radar we have 1 industrial property in in New York that we're you know that we're watching. But outside of that there's there's really nothing else uh coming down that, you know, we're particularly you know watching closely
Thank you very much.
Jade rochlani: Sure.
Rick Shane: The next question comes from Rick, Shane with JP Morgan. Please go ahead.
Rick Shane: Um, can you sort of give us a sense of maybe, even sort of the pie chart of that 2 billion? Hey, we think we're going to 50% are going to pay off.
Rick Shane: 40% are going to extend in 10% are going to be problematic. Can you give us some sense of how to think about uh, that 2026 maturity wall?
Speaker Change: Yeah, Rick unfortunately I don't think I'll uh I'm not sure I could be as precise as as you're asking and predicting the future. Um
Speaker Change: A couple a couple comments, I'd make 1 um, a lot of that's getting pulled forward. So when you think about like the billion that's coming down, this our, our expectation around a billion coming down for the second half of the year.
Speaker Change: That's all coming in before.
Speaker Change: Before a maturity date. Um,
Speaker Change: The market.
Speaker Change: I think these business plans are getting, um,
executed, um, completed, if you will
In many cases, people are pulling forward refinancing, um, or or beginning to sell assets.
Speaker Change: So when we think about the maturity wall, I I think it's going to look a lot different at the end of this year. And and then when you start to think about the 27 maturity wall, I think a lot of that will get pulled forward into 20 into 26. People are just the markets are active, there's financing availability and, um, and people are taking taking advantage of that. Um, I would say when you, when you look at our
Speaker Change: Pipeline. Our pipeline is for new Investments. It's a lot of it is
Speaker Change: a lot of its refinance. Uh, and so it is it's it's sponsors buying more time.
Speaker Change: and,
Speaker Change: Uh creating more Runway because if you think about it, if you own a multi family property or industrial, um you're watching these Supply Pipelines.
Speaker Change: Uh, get absorbed, uh, you're watching this Supply, uh, starts drop dramatically and which they have done over the last. Um,
Speaker Change: Over the last handful of quarters as well as um, you know, the impact on some of these tariffs on on new starts.
Speaker Change: And I think people are becoming very optimistic about what that can mean for, um, you know, for rental increases uh and and and therefore, you know, enhance property values. It's a it's a lot of our pipeline right now is sponsors just again trying to buy the time so they can hold the assets for another 2 3 years. Um and and get into a window where uh the fundamentals are are are really in the landlord's favor. So um, I I expect to see our within our portfolio, to translate that to, you know, our borrowers. I think a lot of people are pulling this financing forward buying that time now. Um, and uh, and they're going to hold these assets and and waited out
Speaker Change: as it relates to, um,
You know, credit issues. I think we're going to see less and less credit issues around maturities. You know, I think we we've already identified. I think most of of the issues not to say there won't be more but the maturity
Speaker Change: You know, it used to be like a, a rate reset, um, you know, interest rate, caps of things would cause some of the issues or maybe you had a, um, an initial maturity date that caused issues, just given where we are now, uh, in the cycle. Uh, I think it's a lot of the problems have reared their heads at this point in time. So it's kind of less about a date, um, and more about what's going on in the particular property, type or you know, that specific asset. Um, so I wouldn't expect
Speaker Change: That to be a big Catalyst for, you know, for defaults. Um, you know, at a maturity date. I I think they could kind of come earlier, or to do to something else happening, like a tenant leaving, or or something.
No, look, it, it it's really interesting point about rate resets. Um, you know, we think about this all the time in terms of Consumer Finance at a certain point consumers demonstrate an ability to absorb over time have demonstrated an ability to absorb certain changes given how long rates have been higher. And the fact that basically everybody has been reset already 1. The business models have proven, the ones that survived to prove an
Speaker Change: Understand.
Speaker Change: The different criteria between a refinance versus an extension because it is Outsiders. I I think we probably look at them the same way, but I think internally you probably have very different criteria and it's perhaps a different signal.
Speaker Change: Yeah, uh, that's a good question.
Speaker Change: Um,
Speaker Change: I'd say.
Speaker Change: The vast majority.
Financing that we're seeing are are they would be new credits for us?
Speaker Change: Um, you know, new assets, uh, for us. So, um,
Speaker Change: We do very little of like, kind of refinancing our our own portfolio, obviously, to your point, like we do modifications, we do extensions. Um, you know, there are
Speaker Change: Isolated cases where we'll where we kind of provide a new what we think of as in a new loan because it's it's new terms, um, you have a new 5 year term. We have like, Refresh on all the reserves and structure, Etc, so that that has happened in the past. But it's
Speaker Change: It's very isolated. Um I mean it's it's these are really just new opportunities coming in to the, you know, into our pipeline.
Okay, perfect. Thank thank you for clarifying and and I apologize for taking so much time. Thank you, guys.
Speaker Change: thanks for
Steve DeLaney: The next question comes from Steve Delaney with citizens. JMP Securities, please go ahead.
Steve DeLaney: Thanks, good morning, everyone first. Uh, let me applaud the buyback. Um, I think it's a great allocation of capital, even though it is, uh, obviously you'd like to pay offense more than defense. But, but as a, uh, as a representative of the shareholders, I say thank you. Uh, assuming it will probably continue if the stock stays down here under 70% a book. Um,
Speaker Change: Matt, just looking and Patrick looking at the portfolio, you know, you're now
Speaker Change: 5.8 million billion about 20% off the uh, the recent high of, I guess a year and a half ago a little over 7 billion. You when you look at the capital Base today, you look at the opportunity as we're updating models and we're thinking out to the end of 2026 or so. Is it realistic to think that the loan portfolio could could grow back to something close to that 7 billion dollar figure or given given the BuyBacks and given the other allocations is, is that unrealistic? I guess I'm just asking, if you guys have a, a Target level, for where your loan portfolio, could stabilize in the current environment. Thank you.
Speaker Change: Good morning, Steve. Uh, it's Patrick. It's a good question. Um, I guess a couple of things I'd I'd comment. Um, uh, on there, I think 1. Um, we don't think about it in terms of a Target that way we we think about it.
Speaker Change: in terms of allocating capital,
Speaker Change: Um, and thinking about it uh in terms of our leverage levels. And so if you look at you know, what's happened since we've been at that peak level, a couple of things here 1, I think the mix um
Speaker Change: Will change slightly, um, over the course of, uh, you know, the next couple of quarters, we mentioned, um, the cmbs investment we made, obviously, that's capital that you could sort of gross up what the loan equivalent would be. Um, but we allocate Capital towards cmbs, then the loan portfolio is not going to be at a, at, a peak level, you mentioned the BuyBacks. Um, clearly as, um, we removed Equity, uh, you know, from the company that's, you know, not available to to, uh, you know, grow the loan portfolio. Um, so we, we will see some um, shrinkage, uh, you know, from that.
Speaker Change: The other area though, on the flip side, we do have Equity that is in effect trapped in some of our Oro assets. And as we work through those business plans, as we return that Capital back, then there's an opportunity for us to, you know, redeploy that into into new loans. And so, um, you could see some, you know, growth there but it will, you know, all of that will just be constrained by what our total Equity is. And you know what our Target leverage level is
Speaker Change: I would just lastly, comment that.
Speaker Change: You know, if you look at it on a spot moment, uh, you know, Matt alluded to that we're we're right in our Target, leverage level.
Speaker Change: you know, for the year
Speaker Change: We're probably um just off from a um redeployment of repayments. We're about 50 million less of uh originations relative to the repayments that we've received.
Speaker Change: Um so we've got uh, quite a bit that's enclosing now and so as we look toward the back half of the year, you know, we would certainly expect that we're going to close that Gap. Uh and probably see uh, you know, a slightly higher level uh from where we are today. Hopefully that addresses what you were asking. Yeah, that that's very helpful. Thanks and and totally get the uh, from your view, it's an allocation of capital. It's not a particular dollar level of a portfolio given given other places you're allocating Capital. Um, just curious on this, the B pieces. Um, do you do that as somewhat opportunistic given some Market disruption or do you see that as a core piece of the pie? You know, the investment pie going forward for 4K ref
Matt: Yeah. Thanks Steve. I can jump in there. It's Matt. Um yeah. Hey Matt.
Matt: I think we'd like it to be to grow it and it it, you know, need to be a, a more consistent piece of our of our investing. We've got
Matt: We've got a pretty um, strong position in that in that market, you know, we've been, we've been very large participants in that space really going back to when risk retention started, um, in in cmbs in 2017. In fact, you know, we were the first investor ever to acquire a conduit BP, that was subject to risk, retention. So negotiated all the precedent documents with the banks to kind of set that program up and since
Matt: And we've been the, the largest investor in Risk retention across our our various pools of capital. So we've got a really strong position there. Um, and so I think we'd like to continue to to be active in the market that market tends to be a little bit more consistent from an opportunity set as well. Um, in terms of, okay, just given the risk retention. It's it's not
It's not as volatile from a, uh, return perspective as what we've seen in other markets. So we're hoping that continues and and we can continue to kind of participate, of course,
Matt: every every investment we make, we're making relative value decisions. So, for that to change, we we'd obviously react to that, um, but we're hoping that, um, just given the way that market operates that, uh, it'll be, uh, uh, we can be consistent there.
Speaker Change: Okay. And would you?
Speaker Change: Do you see the return the Roe on that cnbs deep Piece book? Um do you look at that as being incremental to shareholders versus if you had a 100% Bridge Loan, uh portfolio. So in other words is that a on a, on a dollar of capital invested? Do you see is that has an incrementally higher Roe? Contributing to what a kref shareholder receives than if you weren't in that business.
Speaker Change: Um, yeah, it kind of depends on on what your comp, what kind of loans, you're comparing it against it tends to be slightly higher than, than what we're doing on on the loan side, uh, from a, from a total return or irr perspective. Um, yes. So there is a slightly more return I would say, that's
Nice. Not necessarily why we're doing it. I think we're doing it more for the fact that we we do think there's good risk reward in the sector.
Speaker Change: Number 2, it's a diversifier for us.
Speaker Change: And yes, number 3, I think the duration component is important, um, and and you see this in our peers as well. I think the industry is evolving a little bit. Um, in terms of trying to, you know, create a little bit more duration, um, which I think there's a number of things, but just from a risk management perspective,
Speaker Change: You know, it just helps us. Um, you know, if you think about these loan, our loan portfolio, as being kind of a shorter duration, 3 issue, or loans,
Speaker Change: um, you know, we're not
Speaker Change: We're not having to recycle the the entire portfolio, every you know, every 3 years and um we kind of subject to some of the cyclical cyclicality of markets, Etc. So I think it kind of takes a little bit more of that vintage risk out of the portfolio. So that that's another reason and I'd say, 1 of the primary reasons why we decided to, um, enter that space.
Speaker Change: Thank you both for the comments this morning.
Thank you.
The next question comes from John, Nicodemus with btig, please go ahead.
Speaker Change: Those stand and their ability to stay off the watch list in the coming quarters. Thanks.
Thanks Sean. Um, appreciate the question. Thanks again for joining the call. Um, I would say on the Boston asset, I don't think we have the answer there yet. Um, we're still working through a number of different options and in discussions, you know, with the borrower which is kind of leading to this to this extension. So I let us come back on on that 1 and and you know, the next earnings call, we hope to kind of give everybody an update on, how that may, how that made proceed, it's it's obviously kind of live live discussions happening. Um, right now.
Speaker Change: Um, you know, on the rest of the, of the, of the life science.
um, a couple things uh,
Speaker Change: 1 would obviously modified and 1 of them. And and, and as you as you kind of, as you mentioned and then
Speaker Change: A few of those, which I I mean the remarks on on the call as well, 3 of them have been in particular are really new. Um,
New assets, purpose built, they were originally construction loans. Um, and those are largely, um, effectively largely delivered at this point in time. Um, and
Speaker Change: And so I think we still feel, we still feel good about those they're they're in great locations. They are very strong real estate. Um and we've got um you know, for the most part some pretty good sponsors um, within that. So
Speaker Change: I think if, if obviously it's a very challenging Market, although
Speaker Change: We're starting to see a little bit of green shoots. It's early still. Um, but we are starting to see a little bit of the tenants returning to returning to the market. It's picking up, um, in some of these sectors, you know, some of these sub markets. Um, and so obviously, we want that to continue. Um, but for right now, I think we're rated appropriately and we'll just have to kind of see what happens as uh, you know, as time progresses here, in terms of our, our sponsors. Um, you know, plans with those with those particular.
With those particular assets but we're in it's it's very good real estate, very well-located. Um, and again, um for the most part, pretty strong, pretty strong sponsors. Um, there
Speaker Change: you know 1 thing that people haven't asked yet but you know perhaps there's a coral area here certainly we're hoping so um on the office side
We're seeing a lot more liquidity in that sector. Now, there's still a bifurcation in terms of quality. Um, you know, all the liquidity is coming back to the higher quality assets, first and tenants are returning to the market. Um, you know, there's real leases getting done and Patrick alluded or, or mentioned this, and, and his remarks in terms of like some of the stuff we're seeing in in Mountain.
Speaker Change: view, which is
Speaker Change: You know completely changed from, you know, when we took title to that asset. So these markets can change um, and you know, tenants can come back Supply is dropping off. Um and so we feel like if we're in really high quality real estate that over time, um, you know these asset values can recover
Speaker Change: Um, so that's that's a little bit of how we're thinking about. Yeah, just the overall, um, you know, portfolio specifically on the REO and and some of these 5 science assets as well.
Speaker Change: Great, thanks so much, Matt and appreciate the added detail on the office sector. That's great to hear.
Speaker Change: And then other 1 for me, uh, 1 of the notable developments this year, has been the move by some of your peers into the owned net lease space. I know you've mentioned diversifying into more European loans. Obviously the cnbs B pieces, just curious to hear your team's thoughts on, you know, more commercial mortgage rates, owning at least real estate, and if that's something that you would ever consider in the kref vehicle, thanks.
Speaker Change: Sure, John. Well I I think it's a positive that the markets evolving and so I like to see the peers, you know, adding new Investments um new types of Investments to their portfolio and
Speaker Change: And and you know, we obviously made remarks already around, you know, how that helps the the duration these assets can fund differently as well. So I I just think it's going to create at the end of the day, a more robust um industry and um and and maybe more um, you know, shareholders attracted to the market. So I think it's I think it's a real positive.
Speaker Change: Um, you know for us on the net lease, we've done it.
Speaker Change: Um, in other parts of our real estate business, um, so it's it's certainly a sector. We have we have a couple teams that do it today. It's a sector that um, you know, we're very familiar with I'd say we're still evaluating whether we think it, it makes sense for for kref um,
Speaker Change: Of expanding our, um, you know, our our portfolio. Um, so I think we'll continue to look at it but but certainly nothing. Um, in in the near-term horizon.
Speaker Change: Great. Thanks so much. Matt, appreciate the answers.
Speaker Change: Thank you.
Speaker Change: again, if you have a question, please press star then 1
Speaker Change: and we have a follow-up from Rick chain with JP Morgan. Please go ahead.
Rick Shane: Hey guys, excuse me. Hey guys, thanks for taking my second question. Um, very quick. Uh, on the 400 million dollar REO portfolio. Uh, we got a question, what sort of the timeline to repatriating that Capital back into uh loans?
Rick Shane: Yeah, maybe um maybe. Maybe I could just go 1 by 1 um if that's helpful and if if you have the supplemental open, it's on, on page 14. Um, but it just gives some context, so Mount Mountain View.
Rick Shane: Again, not to campus office building or property and their uh, we want to be patient. Um, and
Rick Shane: We really are targeting a single user, the, the real estate's somewhat its high quality. Real estate, there's other competitors in the market. There's obviously vacancy in the market, that, that we're competing against there, but I say we're on the short list of, um, you know, of tenant for tenants that that want high quality, um, in Mountain View, we've seen that leasing pick up substantially as we've mentioned, um, and
Rick Shane: Um, you know, because we're a campus offering, you know, to kind of gives, uh, there's a little bit of uniqueness to that, um, where obviously the, the amenity package, the security Etc. Um, could be very attractive. Um, you know, for a tenant most of our competitors are are multi-tenant buildings, so we, we stand out a little bit in that regard. Um, in terms of timing,
Rick Shane: Again, we need to be patient here in the market is coming back. There's there's real activity. So, um, you know, we're actively working on, um, you know, rfps for tenants, but I think we're we're willing to wait um, to get the right deal with the right tenant. Um, so that 1's a little bit of a, a unknown on, on the West Hollywood. We will be in Market selling, um, shortly within within, uh, the third quarter. Uh, and so that will be and, and that's condo sales. So that will start going
Rick Shane: Coming out over the course of the next year or so. Um, you know, we'll start whittling down at that as we sell condo units.
Rick Shane: On Portland. Um, again similar, um, a little bit similar story from Hollywood where we've been working in the background on this, um, Redevelopment and entitlement, um, for, for some time now and we're getting to the stage where we should be able to sell. Um, you know, sell lots for for development, predominantly multi family development, we're very excited about that project. But over the course of next year we are hoping that we can, you know, begin to kind of sell lots and repatriate some of that Capital but again it won't be a likely will not be a wholesale.
Rick Shane: you know, 1 Sale will likely be individual um,
Rick Shane: Parcels that we that we sell to developers there, um, on Seattle, I would probably put this a little bit more in the, in the Mountain View camp where, uh, you know, we've if you recall we've signed, um, kind of an anchor tenant there in the life science space, um, which we think is going to really help Drive future leasing, um, but this is a multi-tenant asset and I'd say, the, the leasing here is not as robust as we're seeing in in, um, in Mountain View. So, uh, this will take a little bit more time, but again, still probably TBD on on, on this 1 to see how the market recovers. Uh, but all of these assets that that's probably the 1 that's that's has the longest
Rick Shane: Tail. Um and then the Philadelphia asset. Um it's mostly stabilized, the office office building, you know, there's a couple of of uh
Rick Shane: Of um leases that were working on there um and if we could hit hit a couple of those we could that would be more of a short-term you know sale over the course of the next year. Or so we'll we'll see kind of what the market um, is doing and then finally um,
Rick Shane: 12 or 18 month, hold, it won't be a long. It won't be long-term, hold, but I think we'd like to get a little bit further down the road and put a little money into it. And and then uh, and then try to exit exit that. So
you know, kind of when you when you think through all this stuff
Rick Shane: You're getting a, a few of these back in relatively short order, like a couple of within, you know, a few of them within the next year to year to 18 months. Um, and then, um, in my mind, it kind of comes down to Mountain View and you know, what's the success? We have there, it's a big asset. Um, and, uh, you know, can we execute there in a, in a short amount of time, and
Rick Shane: Um, certainly like what we're seeing in that market right now?
Speaker Change: It's an incredibly helpful answer. Thank you so much.
Thanks for the question.
Speaker Change: This concludes our question and answer session. I would like to turn the conference back over to jack swatala for any closing remarks.
Speaker Change: Great. Thanks operator. And thanks everyone for joining us today. Uh, you can reach out to me or the team here if you have any questions. Take care.
Speaker Change: The conference has now concluded, thank you for attending today's presentation. You may now disconnect