KKR Real Estate Finance Trust Q4 2025 KKR Real Estate Finance Trust Inc Earnings Call | AllMind AI Earnings | AllMind AI
Q4 2025 KKR Real Estate Finance Trust Inc Earnings 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 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 Jack swatala. Please go ahead.
Operator: All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by 0. 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 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 Jack Switala. Please go ahead.
Operator: 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 keypad. To withdraw your question, please press star then two. Please note, this event is being recorded. I would now like to turn the conference over to Jack Switala. Please go ahead.
First I wanted to highlight <unk> ability to leverage <unk> significant resources and information.
Great. Thanks operator and welcome to the KKR. Real estate Finance, trust earnings call for the fourth quarter of 2025.
Take care and manages approximately $80 billion of real estate assets globally.
As the operator mentioned, this is Jack fatala.
With approximately 140 professionals.
We have been able to utilize all of our resources across asset management.
Sourcing.
This morning, I'm joined on the call by our CEO Matt Salem our president and CEO Patrick Matson and our CFO Kendra dishes.
Underwriting.
Markets.
Just within real estate credit of KKR, we're active across the United States and Europe.
Jack Switala: Great. Thanks, operator, and welcome to the KKR Real Estate Finance Trust Earnings Call for the Fourth Quarter of 2025. As the operator mentioned, this is Jack Switala. This morning, I'm joined on the call by our CEO, Matt Salem, our president and COO, Patrick Mattson, and our CFO, Kendra Decious. 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 in the supplementary presentation, both of which are available on the investor relations portion of our website. 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 over to Matt, I'll quickly go through our results.
Q4 2025 KKR Real Estate Finance Trust Inc Earnings Call
Jack Switala: Great. Thanks, operator, and welcome to the KKR Real Estate Finance Trust Earnings Call for the Fourth Quarter of 2025. As the operator mentioned, this is Jack Switala. This morning, I'm joined on the call by our CEO, Matt Salem, our president and COO, Patrick Mattson, and our CFO, Kendra Decious. 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 in the supplementary presentation, both of which are available on the investor relations portion of our website.
In both loans and securities.
And we invest across the risk reward spectrum through our bank insurance.
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, for release. And in the supplementary presentation, both of which are available on the investor relations portion of our website.
And transitional pools of capital.
This call will also contain certain forward-looking statements, which do not guarantee future events or performance.
Our dedicated.
Our asset management platform now has over 55 individuals with expertise in asset management special servicing.
please refer to our most recently filed, 10K for cautionary, factors related to the statements
Before I turn the call over to Matt, I'll quickly go through our results.
Underwriting and Oreo.
For the fourth quarter of 2025, we reported a gaap, net loss of -32 million or -49 cents per share.
Jack Switala: 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 over to Matt, I'll quickly go through our results. For the fourth quarter of 2025, we reported a GAAP net loss of -$32 million or -$0.49 per share. Book value as of 31 December is $13.04. We reported distributable earnings of $14 million or $0.22 per share, and we paid a $0.25 cash dividend with respect to the fourth quarter. With that, I'd now like to turn the call over to Matt.
Book value, as of December, 31st is 13.4.
We reported distributable earnings of 14 million or 22 cents per share.
And we paid a 25 cent cash dividend with respect to the fourth quarter.
Jack Switala: For the fourth quarter of 2025, we reported a GAAP net loss of -$32 million or -$0.49 per share. Book value as of 31 December is $13.04. We reported distributable earnings of $14 million or $0.22 per share, and we paid a $0.25 cash dividend with respect to the fourth quarter. With that, I'd now like to turn the call over to Matt.
With that. I'd now like to turn the call over to Matt.
[music].
Thanks Jack. Uh, good morning everyone and thank you for joining us today.
Before reviewing our company results in more detail. I would like to highlight several key achievements for kref in 2025.
First, we made significant progress, strengthening our liquidity position throughout 2025.
In March, we closed a 7-year, 550 million Term Loan B.
Good morning, and welcome to the KKR Real estate Finance Trust incorporated fourth 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.
Matthew Salem: Thanks, Jack. Good morning, everyone, and thank you for joining us today. Before reviewing our company results in more detail, I would like to highlight several key achievements for KREF in 2025. First, we made significant progress strengthening our liquidity position throughout 2025. In March, we closed a 7-year, $550 million term loan B, which we later upsized and repriced in September, increasing the outstanding balance to $650 million and reducing the coupon to SOFR plus 250 basis points. During the year, we also upsized our corporate revolver to $700 million, up from $610 million. Second, we closed on our first loan in Europe for KREF. We have been strategically building our real estate credit platform in the region over the last several years.
Matthew Salem: Thanks, Jack. Good morning, everyone, and thank you for joining us today. Before reviewing our company results in more detail, I would like to highlight several key achievements for KREF in 2025. First, we made significant progress strengthening our liquidity position throughout 2025. In March, we closed a 7-year, $550 million term loan B, which we later upsized and repriced in September, increasing the outstanding balance to $650 million and reducing the coupon to SOFR plus 250 basis points.
Which we later upsized and repriced in September.
Increasing the outstanding, balance to 650 million.
And reducing the coupon to sew for plus 250 basis points.
During the year.
We also upsize our corporate revolver to 700 million up from 610 million.
After todays presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one on your telephone keypad to withdraw your question. Please press Star then two please note. This event is being recorded I would now like to turn the conference over to Jack Switala. Please go ahead.
Second.
We closed on our first Loan in Europe for Krav.
We have been strategically building our real estate credit platform in the region over the last several years.
This transaction.
Along with subsequent European investments in the fourth quarter.
Great. Thanks, operator, and welcome to the KKR Real estate Finance Trust earnings call for the fourth quarter of 2025.
Represents an important milestone in that effort.
Matthew Salem: During the year, we also upsized our corporate revolver to $700 million, up from $610 million. Second, we closed on our first loan in Europe for KREF. We have been strategically building our real estate credit platform in the region over the last several years. This transaction, along with subsequent European investments in the fourth quarter, represents an important milestone in that effort and positions us to capitalize on relative value across the US and Europe. These transactions also serve as a foundation for continued geographic diversification.
And positions us to capitalize on relative value across the US and Europe.
As the operator mentioned this is Jack Switala.
This morning, I'm joined on the call by our CEO, Matt Salem, our President and COO, Patrick Mattson and our CFO Kendra dishes.
These transactions also serve as a foundation for continued Geographic diversification.
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 in the supplementary presentation, both of which are available on the Investor relations portion of.
Matthew Salem: This transaction, along with subsequent European investments in the fourth quarter, represents an important milestone in that effort and positions us to capitalize on relative value across the US and Europe. These transactions also serve as a foundation for continued geographic diversification. During 2025, we continued to experience healthy repayment activity, which totaled $1.5 billion, consistent with 2024 levels. We offset this with $1.1 billion of new originations, and today we are operating at the high end of our leverage ratio and targeted portfolio size. More than 75% of our new originations during the year were concentrated in multifamily and industrial loans, sectors where we continue to see resilient fundamentals and attractive risk-adjusted returns. Multifamily remains our largest property type exposure, and given our significant exposure to Class A product, we continue to observe strong underlying performance across the portfolio.
During 2025, we continue to experience, healthy repayment activity, which Total 1 and a half billion.
Consistent with 2024 levels.
We offset this with 1.1 billion of new originations.
And today we are operating at the high end of our leverage ratio.
And targeted portfolio size.
Matthew Salem: During 2025, we continued to experience healthy repayment activity, which totaled $1.5 billion, consistent with 2024 levels. We offset this with $1.1 billion of new originations, and today we are operating at the high end of our leverage ratio and targeted portfolio size. More than 75% of our new originations during the year were concentrated in multifamily and industrial loans, sectors where we continue to see resilient fundamentals and attractive risk-adjusted returns.
More than 75% of our new originations. During the year, were concentrated in multi-family and Industrial loans,
Sectors where we continue to receive resilient fundamentals?
And attractive risk adjusted returns.
Multifamily remains our largest property, type exposure.
And given our significant exposure to class a product.
We could continue to observe strong, underlying performance across the portfolio.
We remain focused on maintaining and selectively growing. The portfolio within on theme asset classes and top tier in SAS
Matthew Salem: Multifamily remains our largest property type exposure, and given our significant exposure to Class A product, we continue to observe strong underlying performance across the portfolio. We remain focused on maintaining and selectively growing the portfolio within on-theme asset classes and top-tier MSAs.
Looking ahead 2026 will be a year of transition for the company.
Through execution of our business plans. We have positioned much of our REO. Portfolio for liquidity this year.
Before reviewing our company results in more detail I would like to highlight several key achievements for <unk> in 2025.
Additionally.
Matthew Salem: We remain focused on maintaining and selectively growing the portfolio within on-theme asset classes and top-tier MSAs. Looking ahead, 2026 will be a year of transition for the company. Through execution of our business plans, we have positioned much of our REO portfolio for liquidity this year. Additionally, we are going to implement an aggressive resolution strategy for a significant portion of our watchlist assets and select office assets. The overall goal is to compress the discount of our stock price to book value and more quickly unlock approximately $0.13 per share embedded in our REO assets. However, this strategy will also put additional pressure on earnings until we're able to fully execute the plan. As it relates to this approach, we will need to be balanced on a few assets. To that end, I want to touch briefly on our Mountain View asset.
First we made significant progress strengthening our liquidity position throughout 2025.
We are going to implement an aggressive resolution strategy for a significant portion of our watch list assets.
And select office assets.
Matthew Salem: Looking ahead, 2026 will be a year of transition for the company. Through execution of our business plans, we have positioned much of our REO portfolio for liquidity this year. Additionally, we are going to implement an aggressive resolution strategy for a significant portion of our watchlist assets and select office assets.
In March we closed a seven year $550 million term loan b.
Which we later Upsized and repriced in September.
Increasing the outstanding balance of $650 million.
And more quickly unlock approximately 13 cents, per share embedded in our REO assets.
However,
And reducing the coupon to sofa, plus 250 basis points.
this strategy also put additional pressure on earnings.
During the year, we also upsized, our corporate revolver to $700 million up from $610 million.
Until we're able to fully execute the plan.
As it relates to this approach.
We will need to be balanced on a few assets.
Second.
Matthew Salem: The overall goal is to compress the discount of our stock price to book value and more quickly unlock approximately $0.13 per share embedded in our REO assets. However, this strategy will also put additional pressure on earnings until we're able to fully execute the plan. As it relates to this approach, we will need to be balanced on a few assets. To that end, I want to touch briefly on our Mountain View asset.
We closed on our first loan in Europe for Kara.
To that end. I want to touch briefly on our Mountain View asset.
We have been strategically building, our real estate credit platform in the region over the last several years.
The market continues to improve meaning
and we and we remain engaged with tenants.
This transaction along with subsequent European investments in the fourth quarter.
If we are able to sign a lease in the near term, we believe the optimal strategy will be a Moni monetization post 2026.
Give it a number of factors including anticipated, capex.
And 10 improvements work.
Finally, I want to comment on our dividend.
Matthew Salem: The market continues to improve meaningfully, and we remain engaged with tenants. If we are able to sign a lease in the near term, we believe the optimal strategy will be a monetization post-2026, given a number of factors including anticipated CapEx and tenant improvement work. Finally, I want to comment on our dividend. The dividend is something the board is actively evaluating as part of a broader capital allocation discussion, particularly as we work through a transitional year for the portfolio. Our priority is to make disciplined decisions that balance near-term earnings visibility and long-term shareholder value. With that, I'll turn it over to Patrick.
Matthew Salem: The market continues to improve meaningfully, and we remain engaged with tenants. If we are able to sign a lease in the near term, we believe the optimal strategy will be a monetization post-2026, given a number of factors including anticipated CapEx and tenant improvement work. Finally, I want to comment on our dividend.
The dividend is something. The board is actively evaluating as part of a broader Capital allocation discussion.
Particularly as we work through a transitional year for the portfolio.
Our priority is to make disciplined decisions that balance near-term earnings visibility and long-term shareholder value.
With that, I'll turn it over to Patrick.
Thanks Matt. Good morning, everyone.
Matthew Salem: The dividend is something the board is actively evaluating as part of a broader capital allocation discussion, particularly as we work through a transitional year for the portfolio. Our priority is to make disciplined decisions that balance near-term earnings visibility and long-term shareholder value. With that, I'll turn it over to Patrick.
Looking at risk ratings. During the quarter we downgraded the Cambridge life science and San Diego multi family loans, to risk rating 5
Continued to observe strong underlying performance across the portfolio.
As a result of these developments, we recorded total incremental Cecil provisions of 44 million during the quarter.
Subsequent to quarter end.
We remain focused on maintaining and selectively growing the portfolio within on theme asset classes and top tier msas.
We entered into new modification discussions.
Jack Switala: Thanks, Matt. Good morning, everyone. Looking at risk ratings during Q4, we downgraded the Cambridge Life Science and San Diego multifamily loans to risk rating 5. As a result of these developments, we recorded total incremental CECL provisions of $44 million during Q4. Subsequent to quarter end, we entered into new modification discussions on our Boston Life Science loan, which is currently risk rated 3. And while the loan continues to make contractual monthly interest payments, we anticipate a ratings downgrade and CECL increase in Q1. New originations in Q4 totaled $424 million, which surpassed repayments of $380 million. In 2026, we expect full-year repayments of over $1.5 billion, exceeding repayment activity in each of the last two years. We'll continue to originate new loans while maintaining our target leverage range alongside other capital allocation strategies.
Patrick Mattson: Thanks, Matt. Good morning, everyone. Looking at risk ratings during Q4, we downgraded the Cambridge Life Science and San Diego multifamily loans to risk rating 5. As a result of these developments, we recorded total incremental CECL provisions of $44 million during Q4. Subsequent to quarter end, we entered into new modification discussions on our Boston Life Science loan, which is currently risk rated 3.
On our Boston life, science loan.
Which is currently risk rated 3.
Looking ahead 2026 will be a year of transition for the company.
And while the loan continues to make contractual monthly interest payments.
Through execution of our business plans, we have positioned much of our Oreo portfolio for liquidity this year.
We anticipate a ratings, downgrade and Cecil increase in the first quarter.
new originations in the fourth quarter totaled, 424 million
Additionally.
We're going to implement an aggressive resolution strategy for a significant portion of our watch list assets.
Which surpassed repayments of 380 million.
And select office assets.
In 2026, we expect full year repayments of over 1.5 billion.
Patrick Mattson: And while the loan continues to make contractual monthly interest payments, we anticipate a ratings downgrade and CECL increase in Q1. New originations in Q4 totaled $424 million, which surpassed repayments of $380 million. In 2026, we expect full-year repayments of over $1.5 billion, exceeding repayment activity in each of the last two years. We'll continue to originate new loans while maintaining our target leverage range alongside other capital allocation strategies.
The overall goal is to compress the discount of our stock price to book value.
Exceeding repayment activity in each of the last 2 years.
We'll continue to originate new loans.
And more quickly unlock approximately <unk> 13 per share embedded in our Oreo assets.
While maintaining our Target leverage range.
Alongside other Capital, allocation strategies.
However.
Turning to financing and liquidity.
This strategy will also put additional pressure on earnings until we are able to fully execute the plan.
We ended the year with near record levels of liquidity, totaling over 880 million.
As it relates to this approach we will need to be balanced on a few assets.
Including 85 million of cash on hand.
To that end I want to touch briefly on our mountain view asset.
Another 74 million loan repayments held by the serer.
The market continues to improve meaningfully.
As well as 700 million of undrawn capacity on the corporate revolver.
And we remain engaged with tenants.
If we are able to sign a lease in the near term. We believe the optimal strategy will be a monitor monetization post 2026.
Jack Switala: Turning to financing and liquidity, we ended the year with near-record levels of liquidity totaling over $880 million, including $85 million of cash on hand, another $74 million loan repayments held by the servicer, as well as $700 million of undrawn capacity on the corporate revolver. Total financing capacity was $8.2 billion, including $3.5 billion of undrawn capacity. Leveraging our internal KKR Capital Markets team, we added to our non-mark-to-market capacity during the quarter, and 74% of our financing remains non-mark-to-market. We remain well-positioned with no final facility maturities until 2027 and no corporate debt due until 2030. The weighted average risk rating on the portfolio is 3.2. Our debt-to-equity ratio is 2.2 times, and total leverage ratio is 3.9 times, consistent with our target range. Finally, during the quarter, we repurchased over $9 million of common stock at a weighted average share price of $8.24.
Patrick Mattson: Turning to financing and liquidity, we ended the year with near-record levels of liquidity totaling over $880 million, including $85 million of cash on hand, another $74 million loan repayments held by the servicer, as well as $700 million of undrawn capacity on the corporate revolver. Total financing capacity was $8.2 billion, including $3.5 billion of undrawn capacity.
Total financing capacity was 8.2 billion, including 3.5 billion of undrawn capacity.
Leveraging. Our internal Kerr Capital markets team.
Given a number of factors, including anticipated capex.
We added to our non-market to Market capacity during the quarter.
And tenant improvement work.
Finally, I want to comment on our dividend.
And 74% of our financing remains non-market to Market.
The dividend is something the board is actively evaluating as part of our broader capital allocation discussion.
We remained well positioned with no final.
Facility maturities until 2027.
Particularly as we work through a transitional year for the portfolio.
And the corporate debt due until 2030.
Patrick Mattson: Leveraging our internal KKR Capital Markets team, we added to our non-mark-to-market capacity during the quarter, and 74% of our financing remains non-mark-to-market. We remain well-positioned with no final facility maturities until 2027 and no corporate debt due until 2030. The weighted average risk rating on the portfolio is 3.2. Our debt-to-equity ratio is 2.2 times, and total leverage ratio is 3.9 times, consistent with our target range. Finally, during the quarter, we repurchased over $9 million of common stock at a weighted average share price of $8.24.
Our priority is to make disciplined decisions.
The weighted average risk rating on the portfolio is 3.2.
Balance near term earnings visibility and long term shareholder value.
With that I'll turn it over to Patrick.
Our debt to equity ratio is 2.2 times. And total, leverage ratio is 3.9 times consistent with our target range.
Thanks, Matt Good morning, everyone.
Finally, during the quarter.
Looking at risk ratings during the quarter, we downgraded the Cambridge life Science, and San Diego multifamily loans to risk rating five.
We repurchased over 9 million of common stock.
At a weighted average share price of 8.24.
For the full year 2025.
As a result of these developments, we recorded total incremental seasonal provisions of $44 million during the quarter.
We repurchased 43 million of common stock at a weighted average share price of 9.35.
Subsequent to quarter end.
We entered into new modification discussions.
Which resulted in a proximately 32 cents of accretion to book value per share.
Over the course of the year.
On our Boston Life Science loan.
Which is currently risk rated three.
And while the loan continues to make contractual monthly interest payments.
As of the end of the fourth quarter, we have approximately 47 million remaining under our current share buyback, authorization plan.
We anticipate a ratings downgrade and seasonal increase in the first quarter.
Jack Switala: For the full year of 2025, we repurchased $43 million of common stock at a weighted average share price of $9.35, which resulted in approximately $0.32 of accretion to book value per share over the course of the year. As of the end of the fourth quarter, we have approximately $47 million remaining under our current share buyback authorization plan. Our strong liquidity position provides meaningful flexibility in managing the portfolio, allowing us to thoughtfully allocate capital across a range of opportunities, including share repurchases and new originations. Overall, we remain well-capitalized and focused on repositioning the loan portfolio for improved earnings. With that, we're happy to take your questions.
Patrick Mattson: For the full year of 2025, we repurchased $43 million of common stock at a weighted average share price of $9.35, which resulted in approximately $0.32 of accretion to book value per share over the course of the year. As of the end of the fourth quarter, we have approximately $47 million remaining under our current share buyback authorization plan.
Our strong liquidity position.
Yeah.
Provides meaningful flexibility in managing the portfolio.
New originations in the fourth quarter totaled $424 million, which surpassed repayments of $380 million.
Allowing us to thoughtfully allocate Capital across a range of opportunities.
Including share repurchases.
And new originations.
In 2026, we expect full year repayments of over $1 5 billion.
Overall.
Exceeding repayment activity in each of the last two years.
For improved earnings.
With that.
We will continue to originate new loans, while maintaining our target leverage range.
Patrick Mattson: Our strong liquidity position provides meaningful flexibility in managing the portfolio, allowing us to thoughtfully allocate capital across a range of opportunities, including share repurchases and new originations. Overall, we remain well-capitalized and focused on repositioning the loan portfolio for improved earnings. With that, we're happy to take your questions.
We're happy to take your questions.
Alongside other capital allocation strategies.
Turning to financing and liquidity.
We ended the year with near record levels of liquidity totaling over $880 million.
Including $85 million of cash on hand.
Another $74 million loan repayments held by the servicer.
We will now begin the question and answer session to ask a question. You may press star then 1 on your touchtone phone. If you're using a speaker-phone please pick up your handset before pressing the keys to withdraw your question. Please press star. Then 2 at this time we will pause momentarily to assemble our roster.
As well as 700 million of Undrawn capacity on our corporate revolver.
The first question comes from Tom kevinwood with btig. Please go ahead.
Operator: We will now begin the question-and-answer session. To ask a question, you may press star then 1 on your touch-tone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. The first question comes from Tom Catherwood with BTIG. Please go ahead.
Operator: We will now begin the question-and-answer session. To ask a question, you may press star then 1 on your touch-tone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. The first question comes from Tom Catherwood with BTIG. Please go ahead.
Thank you and good morning everybody.
Total financing capacity was $8 2 billion, including $3 5 billion of Undrawn capacity.
Leveraging our internal KKR capital markets team.
Um, Matt, you talked to a period remarks about accelerating resolutions on watch lists and Areo assets. It if kref
We added to our non mark to market capacity during the quarter.
And 74% of our financing remains non mark to market.
We remain well positioned with no final.
Sits on this plan and the stock doesn't materially pulled apart. If there's just a structural discount for monoline commercial mortgage rates are, are you willing to take an approach similar to what arri announced last week and look to revamp your business. Totally
Facility maturities until 2027.
Tom Catherwood: Thank you, and good morning, everybody. Matt, you talked in your prepared remarks about accelerating resolutions on watchlist and REO assets. If KREF executes on this plan and the stock doesn't materially pull to par, if there's just a structural discount for monoline commercial mortgage rates, are you willing to take an approach similar to what ARI announced last week and look to revamp your business totally?
Tom Catherwood: Thank you, and good morning, everybody. Matt, you talked in your prepared remarks about accelerating resolutions on watchlist and REO assets. If KREF executes on this plan and the stock doesn't materially pull to par, if there's just a structural discount for monoline commercial mortgage rates, are you willing to take an approach similar to what ARI announced last week and look to revamp your business totally?
And no corporate debt due until 2030.
Hey Tom, good morning. Appreciate you joining us and uh thank you for the question.
The weighted average risk rating on the portfolio is three two.
Our debt to equity ratio was two two times and total leverage ratio is three nine times consistent with our target range.
Yeah, I guess a couple things there before I kind of addressed the you know, Ari transaction.
Um, I think, first of all, we made a lot of progress on the REO which is kind of why we're at this point today.
um,
Finally during the quarter, we repurchased over $9 million of common stock at.
you know, we feel like um,
At a weighted average share price of $8 24.
Jack Switala: Hey, Tom. Good morning. Appreciate you joining us, and thank you for the question. I guess a couple of things there before I kind of address the ARI transaction. I think, first of all, we've made a lot of progress on the REO, which is kind of why we're at this point today. We feel like we're in a good position on much of that portfolio to be able to liquidate that over the course of this year and then, obviously, start to think about our Mountain View asset, getting a lease done there, and being able to execute that business plan more fully post-2026. So I think we've made the right decisions in terms of just being patient, taking good real estate back, and now we're at the point where we've either advanced the business plan, liquidity has returned, and we can get, obviously, some monetization activity there.
Jack Switala: Hey, Tom. Good morning. Appreciate you joining us, and thank you for the question. I guess a couple of things there before I kind of address the ARI transaction. I think, first of all, we've made a lot of progress on the REO, which is kind of why we're at this point today. We feel like we're in a good position on much of that portfolio to be able to liquidate that over the course of this year and then, obviously, start to think about our Mountain View asset, getting a lease done there, and being able to execute that business plan more fully post-2026.
For the full year of 2025.
We repurchased $43 million of common stock at a weighted average share price of $9 35.
We're in a good position, on much of that portfolio to be able to liquidate that over the course of of the of this year. And then um obviously start to think about our Mountain View asset, getting a lease done there and and being able to execute, you know, that business plan, more fully, you know, post 2026
Which resulted in approximately 32.
Accretion to book value per share over.
Over the course of the year.
As of the end of the fourth quarter, we have approximately $47 million remaining under our current share buyback authorization plan.
So I think we've made the right decisions in terms of just being patient, taking good real estate back. And now we're at the point where we either either Advance, the business plan, liquidity has returned and and we can get um, obviously some monetization activity there.
Our strong liquidity position.
The question you're asking, I think is a good question and it's kind of why I think we're putting a second phase of this plan in effect, which is
Provides meaningful flexibility in managing the portfolio.
Allowing us to thoughtfully allocate capital across a range of opportunities.
Jack Switala: So I think we've made the right decisions in terms of just being patient, taking good real estate back, and now we're at the point where we've either advanced the business plan, liquidity has returned, and we can get, obviously, some monetization activity there. The question you're asking, I think, is a good question, and it's kind of why I think we're putting a second phase of this plan in effect, which is, let's just not deal with only the REO where we've had progress.
Let's just not deal. Uh, with only the REO where we've had progressed. Let's also deal with some of the watch list.
Including share repurchases.
Um, and maybe some other of our select office assets.
And new originations.
Overall, we remain well capitalized and focused on repositioning the loan portfolio for improved earnings.
So that uh, when we are through this, you know, portfolio.
Jack Switala: The question you're asking, I think, is a good question, and it's kind of why I think we're putting a second phase of this plan in effect, which is, let's just not deal with only the REO where we've had progress. Let's also deal with some of the watchlist and maybe some other of our select office assets so that when we are through this portfolio strategy, we can show up with a relatively new origination portfolio. A lot of the REO has been cleaned out, and we don't have some of the exposures that the market is, I think, focused on right now. So that's really the goal here. And my expectation is, if we show up with a clean portfolio, a newer portfolio, that the market will price it.
With that one.
We're happy to take your questions.
We will now begin the question and answer session.
Uh strategy, we can show up with a relatively new origination portfolio. A lot of the REO has been cleaned out and we don't have some of the exposures that the market is I think focused on uh right now.
Ask a question you May press Star then one on your Touchtone phone.
Jack Switala: Let's also deal with some of the watchlist and maybe some other of our select office assets so that when we are through this portfolio strategy, we can show up with a relatively new origination portfolio. A lot of the REO has been cleaned out, and we don't have some of the exposures that the market is, I think, focused on right now. So that's really the goal here. And my expectation is, if we show up with a clean portfolio, a newer portfolio, that the market will price it.
If you are using a speaker phone please pick up your handset before pressing the keys to withdraw your question. Please press Star then two at this time, we will pause momentarily to assemble our roster.
The first question comes from Tom Catherwood with.
<unk>. Please go ahead.
Uh, so that's really the goal here. And my expectation is if we show up with a clean portfolio, a newer portfolio that the market will price it. I think the Market's efficient and um, and It'll recognize the steps that we've taken and the and the new portfolio that we've been able to create at that moment. Um but we'll have to evaluate that obviously when we get to that moment in time and there's, you know, there's a good amount of distance between now and then.
Thank you and good morning, everybody.
Yeah.
Matt you talked to your prepared remarks about accelerating resolutions on the watch list and Oreo assets.
Um, so that's how I would say that I have optimism that, you know, that won't occur that that we will get recognized, uh, for the portfolio. We're going, we're going to, uh, you know, create here.
If keira executes on this plan and the stock doesn't materially pull to par if theres just a structural discount for mono line commercial mortgage Reits are you willing to take an approach similar to what <unk> announced last week and look to revamp your business totally.
Jack Switala: I think the market's efficient, and it'll recognize the steps that we've taken and the new portfolio that we've been able to create at that moment. But we'll have to evaluate that, obviously, when we get to that moment in time, and there's a good amount of distance between now and then. So that's how I would say that. I have optimism that that won't occur, that we will get recognized for the portfolio we're going to create here. As it relates specifically to the ARI transaction, listen, I think it's an interesting transaction for sure. It definitely shows how the private markets value some of these portfolios compared to what the public markets do. But I don't want to draw any direct correlation to KREF. I think we've got our we've got our business plan. We've got our strategy, and we're really focused on implementing that.
Jack Switala: I think the market's efficient, and it'll recognize the steps that we've taken and the new portfolio that we've been able to create at that moment. But we'll have to evaluate that, obviously, when we get to that moment in time, and there's a good amount of distance between now and then. So that's how I would say that. I have optimism that that won't occur, that we will get recognized for the portfolio we're going to create here.
Hey, Tom Good morning, I appreciate you joining us.
For the question.
I guess, a couple of things there before I address the.
As it relates specifically to, you know, the Ari transaction. So I think it's an interesting transaction for sure. It it definitely shows, um, how the private markets value, some of these portfolios compared to what the public markets do. Um, but I don't want to draw any, you know, direct correlation to kref. I think we've got our, you know, we've got our business plan, we've got our strategy and, you know, we're really focused on implementing that.
Jack Switala: As it relates specifically to the ARI transaction, listen, I think it's an interesting transaction for sure. It definitely shows how the private markets value some of these portfolios compared to what the public markets do. But I don't want to draw any direct correlation to KREF. I think we've got our we've got our business plan. We've got our strategy, and we're really focused on implementing that.
Ah transaction.
I think first of all we've made a lot of progress on the Oreo, which is kind of why we're at this point today.
We feel like.
We're in a good position on much of that portfolio to be able to liquidate that over the course of this year and then.
Obviously, you start to think about our mountain view asset getting a lease done there and being able to execute that business plan more fully post 2026.
Tom Catherwood: Appreciate those thoughts, Matt. And maybe sticking with this kind of overhaul of the portfolio, when we get to the end of 2026, what does success look like? I mean, you mentioned Mountain View likely carrying on into 2027. Is it all the REO is, as of right now, resolved? Is it the watchlist is fully resolved? Is it office has been reduced by 50%, some number out there? What does success look like internally? What are those targets by the end of 2026?
Jack Switala: Appreciate those thoughts, Matt. And maybe sticking with this kind of overhaul of the portfolio, when we get to the end of 2026, what does success look like? I mean, you mentioned Mountain View likely carrying on into 2027. Is it all the REO is, as of right now, resolved? Is it the watchlist is fully resolved? Is it office has been reduced by 50%, some number out there? What does success look like internally? What are those targets by the end of 2026?
We've made the right decisions in terms of just being patient and taking good real estate back and now we're at the point, where we've either either advanced the business plan liquidity has returned and we can get.
Appreciate, appreciate those thoughts, Matt. And maybe sticking with that, this kind of overhaul of, of, of the portfolio, when we get to, the end of 26, what does success look like? I mean, you mentioned Mountain View, likely carrying on into 27. Is it all the REO is as of right now is, is is resolved, is it the watch list is fully resolved? Is it office has been reduced by, you know, 50% some number out there. Like what does success look like internally? What are those targets by the end of 26?
I would say some monetization activity there.
The question, you're asking I think it's a good question and it's kind of why I think we're putting a second phase of this plan in effect, which is let's.
Ste 1, I think in our next call, I think we'll be able to really walk, uh, everyone through and articulate. What, you know what the end goal is here. Certainly, when we're looking at it today, um,
This does not deal with only the Oreo, where we've had progress let's also deal with some of the watch list.
And maybe some other of our select office assets.
Jack Switala: Yeah, and I appreciate the question. I would say a couple of things. One, I think in our next call, I think we'll be able to really walk everyone through and articulate what the end goal is here. Certainly, when we're looking at it today, if you think about our watchlist, which we highlight, I think, on page 12 of our supplemental, I think the goal is to get through and monetize or liquidate the vast majority of that watchlist. The reason I don't say all is because I think some of those life science assets, one, we're in the process of modifying, and so we should get to a basis where we're comfortable moving forward on those. Or two, we just have to evaluate the liquidity in that particular sector. But certainly, when we think about the office on our watchlist, we have one multi-deal on there.
Jack Switala: Yeah, and I appreciate the question. I would say a couple of things. One, I think in our next call, I think we'll be able to really walk everyone through and articulate what the end goal is here. Certainly, when we're looking at it today, if you think about our watchlist, which we highlight, I think, on page 12 of our supplemental, I think the goal is to get through and monetize or liquidate the vast majority of that watchlist.
That.
When we are through this portfolio.
Strategy.
We can show up with a relatively new origination portfolio a lot of the Oreo has been cleaned out and we don't have some of the exposures that the market is I think focused on right now.
So that's really the goal here and my expectation is if we show up with clean portfolio of newer portfolio that the market will pricing I think the markets efficient and.
Jack Switala: The reason I don't say all is because I think some of those life science assets, one, we're in the process of modifying, and so we should get to a basis where we're comfortable moving forward on those. Or two, we just have to evaluate the liquidity in that particular sector. But certainly, when we think about the office on our watchlist, we have one multi-deal on there.
And in all recognize the steps that we've taken.
A new portfolio that we've been able to create at that moment.
But we'll have to evaluate that obviously when we get to that moment in time and there is there's a good amount of distance between now and then.
Is because I think some of those life science assets, uh 1 we're in the process of modifying. And so we should get to a basis where, uh, you know, we're we're, we're comfortable, moving forward on those or or to, you know, we just have to evaluate the liquidity um, in that particular sector. But certainly, when we think about the office on our watch list, we have 1 multi deal on there. The multi deal on there like the goal is to move through those and then I think, to your point on office. I think we're going to have to start making a Distinction on office because we are making new office loans that we think are really high quality. Um, but there's really some of our Legacy deals that, you know, we wouldn't put in that same. Um,
So that's how I would say that I have optimism that that won't occur that we will get recognized for the portfolio, we're going we're going to create here.
Jack Switala: The multi-deal on there, the goal is to move through those. And then, I think, to your point on office, I think we're going to have to start making a distinction on office because we are making new office loans that we think are really high quality, but there's certainly some of our legacy deals that we wouldn't put in that same bucket. And so, I think the goal would be to, at the end of this year, be able to articulate, "Hey, we think, from an office portfolio perspective, we've kind of liquidated everything that we see a problem on," or be able to identify any future issues that we may see, so create a lot of clarity there. On the REO, I don't expect much to change there as it relates to what we've talked about on the last couple of earnings calls.
Jack Switala: The multi-deal on there, the goal is to move through those. And then, I think, to your point on office, I think we're going to have to start making a distinction on office because we are making new office loans that we think are really high quality, but there's certainly some of our legacy deals that we wouldn't put in that same bucket.
As it relates specifically to the AHRI transaction.
You know that same bucket. And so the goal would be to uh at the end of this year, be able to articulate. Hey we think um you know from an office Port, portfolio perspective. Uh we've kind of liquidated uh everything that that we see a problem on or be able to identify, you know, any any future issues that that we may see. So create a lot of a lot of clarity there on the REO.
So I think it's an interesting transaction for sure it definitely shows.
How the private markets value some of these portfolios compared to what the public markets too.
Jack Switala: And so, I think the goal would be to, at the end of this year, be able to articulate, "Hey, we think, from an office portfolio perspective, we've kind of liquidated everything that we see a problem on," or be able to identify any future issues that we may see, so create a lot of clarity there. On the REO, I don't expect much to change there as it relates to what we've talked about on the last couple of earnings calls.
But I don't want to draw any direct correlation to <unk> I think we've got our we've got our business plan, we've got our strategy and we're really focused on implementing that.
I appreciate I appreciate those thoughts, Matt and then maybe sticking with that that's kind of overhaul of the portfolio. When we get to the end of 'twenty six what does success look like I mean, you mentioned mountain view likely carrying on into 'twenty seven is it all.
I don't expect much to change there as it relates to what we've talked about on the last, um, couple of earnings calls. When you think about the buckets that we've, we've put our REO in, uh, which is, I think listed on page, 25 of our supplemental. If you want to to follow along. Um, we have um, you know, a number of assets. Excuse me, page 15. Um, we have a number of assets that we put in the short term bucket, the goal for those would be to liquid.
Jack Switala: When you think about the buckets that we've put our REO in, which is, I think, listed on page 25 of our supplemental if you want to kind of follow along, we have a number of assets, excuse me, page 15. We have a number of assets that we put in the short-term bucket. The goal for those would be to liquidate over the course of this year, either partially or fully. Obviously, some of these are selling units or selling lots, so I'm not sure we'll get through 100%, but we'll at least be making good headway there. Those assets are the West Hollywood luxury condo, Portland, Oregon redevelopment, the Raleigh, North Carolina multifamily, and the Philadelphia office. So those are all the short-term, and we'll be able to give progress updates over the course of the year on those.
Jack Switala: When you think about the buckets that we've put our REO in, which is, I think, listed on page 25 of our supplemental if you want to kind of follow along, we have a number of assets, excuse me, page 15. We have a number of assets that we put in the short-term bucket. The goal for those would be to liquidate over the course of this year, either partially or fully.
All the Oreo is as of right. Now is is resolved is it. The watch list is fully resolved is it office has been reduced by 50%. Some number out there what does success look like internally what are those targets by the end of 'twenty six.
Yes.
Appreciate the question I would say a couple of things one I think in our next call I think we will be able to really walk everyone through and articulate what.
Jack Switala: Obviously, some of these are selling units or selling lots, so I'm not sure we'll get through 100%, but we'll at least be making good headway there. Those assets are the West Hollywood luxury condo, Portland, Oregon redevelopment, the Raleigh, North Carolina multifamily, and the Philadelphia office. So those are all the short-term, and we'll be able to give progress updates over the course of the year on those.
<unk> goal is here certainly when we're looking at it today.
<unk>.
If you think about our watch list.
Which we highlighted I think on page 12 of our of our supplemental I think the goal is to get through.
Monetize or liquidate the vast majority of that of that watch list. The reason I don't say all.
8 over the course of this, you know, over the course of this year either partially or fully. Obviously, some of these, are you selling units or selling lots. So I'm not sure. We'll get through 100% but we'll at least be uh, making good Headway there. And those assets are the West Hollywood luxury. Condo Portland, Oregon Redevelopment. The Raleigh North Carolina multi family and the Philadelphia office. So those are all the short-term and we'll be able to give progress updates over the course of the year. On those medium-term, I put more in the Mountain View uh, asset which we've talked about, right? Get a lease done on that. Again, that market is extremely healthy right now and we are engaged with tenants in the market there. Um, and then I put in this last category, the the longer term, um, more of the life science, right? So, we've got the, the Seattle asset and, uh, we'll likely go to title on our, our, uh, Boston, um, moments on the watch list right now and the life science sector. Um,
Jack Switala: Medium-term, I'd put more in the Mountain View asset, which we've talked about, right? Get a lease done on that. Again, that market is extremely healthy right now, and we are engaged with tenants in the market there. And then I'd put in this last category, the longer-term, more the life science, right? So we've got the Seattle asset, and we'll likely go to title on our Boston loan. It's on the watchlist right now in the life science sector. So a little bit of background there, but same buckets, vast majority coming out this year. And then if we can execute on Mountain View in the intermediate term, then we've largely cleaned it up with the exception of a couple of these life science deals, which we'll see, right? We were pretty patient on some of our office, and that's worked out very well, I'd say.
Jack Switala: Medium-term, I'd put more in the Mountain View asset, which we've talked about, right? Get a lease done on that. Again, that market is extremely healthy right now, and we are engaged with tenants in the market there. And then I'd put in this last category, the longer-term, more the life science, right? So we've got the Seattle asset, and we'll likely go to title on our Boston loan.
It's because I think some of those life science assets.
We're in the process of modifying and so we should get to a basis, where we're comfortable moving forward on those.
Or two.
We have one multi deal on their multi deal on there like the goal is to move through those and then I think to your point on office I think we're going to have to start making a distinction on office because we are making new office loans that we think are really high quality.
Jack Switala: It's on the watchlist right now in the life science sector. So a little bit of background there, but same buckets, vast majority coming out this year. And then if we can execute on Mountain View in the intermediate term, then we've largely cleaned it up with the exception of a couple of these life science deals, which we'll see, right? We were pretty patient on some of our office, and that's worked out very well, I'd say.
So a little bit of background there but same buckets like vast majority coming out this year and then if we can execute on me on on on Mountain View and the intermediate term, then we we've largely cleaned it up with the exception of a couple of these life science deals which, you know, we'll see, alright, um, we were pretty patient on some of our office and that's worked out very well. I'd say just the market has come back. It's healthy. What we have in the portfolio from an Aro perspective in the Life Sciences extremely high quality. So to the extent that market comes back, I understand it's it's under pressure today but um, you know, forever is a long time and if
Those markets come back. Uh, you know, certainly we could benefit from that as well.
But there are certainly some of our legacy deals that we wouldn't put in that same.
I appreciate those answers. That's it. For me. Thanks Matt.
That same bucket and so I think goal would be to.
At the end of this year be able to articulate hey, we think.
The next question comes from Rick, Shane with JP Morgan. Please go ahead.
Jack Switala: Just, the market has come back. It's healthy. What we have in the portfolio, from an REO perspective in the life science, is extremely high quality. So, to the extent that market comes back, I understand it's under pressure today, but forever's a long time. And if those markets come back, certainly, we could benefit from that as well.
Jack Switala: Just, the market has come back. It's healthy. What we have in the portfolio, from an REO perspective in the life science, is extremely high quality. So, to the extent that market comes back, I understand it's under pressure today, but forever's a long time. And if those markets come back, certainly, we could benefit from that as well.
From an office park portfolio perspective.
We kind of liquidated everything that we see a problem on or be able to identify any future issues that we may see so create a lot of a lot of clarity there on the Oreo I don't expect much to change there as it relates to what we've talked about on the last.
Tom Catherwood: I appreciate those answers. That's it for me. Thanks, Matt.
Tom Catherwood: I appreciate those answers. That's it for me. Thanks, Matt.
Couple of earnings calls when you think about the buckets that we've we've put our RVO and <unk>.
Operator: The next question comes from Rick Shane with J.P. Morgan. Please go ahead.
Operator: The next question comes from Rick Shane with J.P. Morgan. Please go ahead.
Which is listed on page 25 of our supplemental if you want to follow along.
Rick Shane: Hi, guys. Thanks for taking my questions. When we sort of run back of the envelope, we're looking at over $800 million of loans that are of assets that are either REO or on non-accrual. Well, then there's the development in terms of migration, adding the new loan to the watchlist this quarter. Is that going to be a non-accrual as well, and are we going to be in a situation where, let's call it, 20% of the portfolio is under-earning in 2026 or has a negative carry?
Rich Shane: Hi, guys. Thanks for taking my questions. When we sort of run back of the envelope, we're looking at over $800 million of loans that are of assets that are either REO or on non-accrual. Well, then there's the development in terms of migration, adding the new loan to the watchlist this quarter. Is that going to be a non-accrual as well, and are we going to be in a situation where, let's call it, 20% of the portfolio is under-earning in 2026 or has a negative carry?
We have.
A number of assets excuse me page 15.
A number of assets that we put in the short term bucket. The goal for those would be to liquidate over the course of this over the course of this year, either partially or fully obviously some of these are.
Hi guys, thanks for taking my questions. Um, when we sort of run back of the envelope, we're looking at, um, over 800 million dollars of loans, that are of assets that are are either REO or on non-accrual. Um, we then, you know, there there's the development, uh, in terms of migration adding the new loan to the watch list. This quarter, is that going to be a non-accrual as well, and are we going to be in a situation where, uh, let's call it. 20% of the portfolio is under earning in 2026 or has a has a negative carry
Selling units are selling lots, so not sure we'll get through 100%, but what we see.
Making good headway there.
Assets are the west Hollywood luxury condo, Portland, Oregon redevelopment, the Raleigh, North Carolina multifamily and the Philadelphia office. So those are all the short term and we will be able to give a progress updates over the course of the year on those medium term I'd put more on the mountain view.
Rick. Good morning, it's Patrick. I'll I'll take that question. I think. Um, in terms of like specific numbers, I don't have um you know, sort of that bucket, I I will say this on things like the asset that we indicated will likely downgrade that asset is paying is contractual interest. We expect, uh, in the near term that it will continue to pay um contractual interest. And so, you know, from an earnings
Jack Switala: Rick, good morning. It's Patrick. I'll take that question. I think in terms of specific numbers, I don't have sort of that bucket. I will say this: on things like the asset that we indicated will likely downgrade, that asset is paying its contractual interest. We expect in the near term that it will continue to pay contractual interest. And so from an earnings standpoint, we're not seeing any degradation from that. What's driving it in the near term are some of the REO assets we talked about, and we'll give more color in terms of the timing of the resolution in the subsequent quarter, when we can get some of that back and when we can actually convert that into earnings assets. So clearly, we're being dragged down by some of those assets, but we do think there's a near-term opportunity to pull that forward.
Jack Switala: Rick, good morning. It's Patrick. I'll take that question. I think in terms of specific numbers, I don't have sort of that bucket. I will say this: on things like the asset that we indicated will likely downgrade, that asset is paying its contractual interest. We expect in the near term that it will continue to pay contractual interest.
<unk>, which we've talked about it at least on that again that market is extremely healthy right now and we are engaged with tenants in the market there.
Standpoint. Um, you know we're not seeing any uh degradation you know from that.
And then I put in this last category the longer term.
More of a life science right. So we've got the Seattle asset.
We will likely go to title on our Boston.
Thats on the watch list right now in the life science sector.
Jack Switala: And so from an earnings standpoint, we're not seeing any degradation from that. What's driving it in the near term are some of the REO assets we talked about, and we'll give more color in terms of the timing of the resolution in the subsequent quarter, when we can get some of that back and when we can actually convert that into earnings assets. So clearly, we're being dragged down by some of those assets, but we do think there's a near-term opportunity to pull that forward.
So a little bit of background, there, but same buckets like vast majority coming out this year and then if we can execute on mountain view in the intermediate term and we've largely cleaned it up with the exception of a couple of these life science deals, which we'll see right.
To, you know, earn these assets. So clearly
we're being dragged down by um, some of those assets.
but,
We do think there's a, there's a near-term opportunity to uh, to pull that forward.
We were pretty patient on some of our office and Thats worked out very well I would say just the market has come back its healthy what we have in the portfolio from an audio perspective in life Sciences extremely high quality. So to the extent that market comes back I understand it's under pressure today, but.
On some of these other assets that, you know, on the watch list and we can sort of you can kind of go through, you know, each of these. But in general, we're seeing contractual payments, uh, you know, being being made here. So,
Forever is a long time and if those markets come back.
We could benefit from that as well.
I appreciate those answers that's it for me thanks, Matt.
Jack Switala: On some of these other assets that are on the watchlist, and we can sort of kind of go through each of these, but in general, we're seeing contractual payments being made here. So it's certainly impacting us. We certainly think there's a lot of upside. As we've indicated before, we think there's around $0.13 from getting these REO assets back and converted into performing loan assets. But that's kind of what I would say on that.
Jack Switala: On some of these other assets that are on the watchlist, and we can sort of kind of go through each of these, but in general, we're seeing contractual payments being made here. So it's certainly impacting us. We certainly think there's a lot of upside. As we've indicated before, we think there's around $0.13 from getting these REO assets back and converted into performing loan assets. But that's kind of what I would say on that.
The next question comes from Rick Shane with J P. Morgan. Please go ahead.
Hi, guys. Thanks for taking my questions.
It's certainly impacting us. Um we certainly think there's a lot of upside as we've indicated before. We think there's around 13 cents from getting these Oreo um assets back and converted into uh into performing loan assets. Um but uh that that's kind of what I would say. Um, on that
When we sort of run back of the envelope we're looking at.
Over $800 million of loans that are of assets that are either oreo or on non accrual.
Got it. Okay, uh, and again, I assume look, I I I you guys talked about dividend policy and I
Uh huh.
We then there is the development.
In terms of migration, adding a new loan to the watch list this quarter or is that going to be on non accrual as well on or we could be in a situation where.
Let's call it 20% of the.
Rick Shane: Got it. Okay. And again, I assume, look, you guys talked about dividend policy, and I heard what I would describe as sort of rational financial analysis as opposed to focused on market sentiment and just maintaining a dividend for the sake of that. I'm assuming that that is an indication that as we go through the year, you guys are going to be looking at all of this, and we should be thinking about our dividend very much in the empirical way as opposed to sort of some sort of gauge of sentiment.
Rich Shane: Got it. Okay. And again, I assume, look, you guys talked about dividend policy, and I heard what I would describe as sort of rational financial analysis as opposed to focused on market sentiment and just maintaining a dividend for the sake of that. I'm assuming that that is an indication that as we go through the year, you guys are going to be looking at all of this, and we should be thinking about our dividend very much in the empirical way as opposed to sort of some sort of gauge of sentiment.
Portfolio is under earning in 2026 or has it has a negative carry.
Heard what I would describe as sort of rational financial analysis as opposed to focused on um, Market sentiment and just maintaining a debit dividend for the sake of data. I'm assuming that that is an indication. That as we go through the year, you guys are going to be looking at all of this and
Ric Good morning, it's Patrick I'll take that question I think.
Um, we should be thinking about our dividend very much in the empirical um way as opposed to sort of some sort of gauge of sediment.
In terms of like specific numbers I don't have.
So where that bucket I will say this on things like the asset that we indicated will likely downgrade.
Hey Rick, it's Matt. I think that's a I think that's a fair articulation of you know, how we're thinking about it now which
um,
That asset is pain as contractual interest we expect.
You know, as we kind of look through the the course of the year, like I said, and we try to rebalance this portfolio, um, you know, trying to understand the near near-term impact of of earnings there.
And then your firm that it will continue to pay contractual interest.
So from an earnings standpoint.
We're not seeing any.
The degradation from that what's driving it in the near term.
But I think fair was a good adjectives but clear or straightforward. Probably wasn't a good adjectives to describe my uh my commentary but thank you for, for answering the question.
Jack Switala: Hey, Rick. It's Matt. I think that's a fair articulation of how we're thinking about it now, which, as we kind of look through the course of the year, like I said, and we try to rebalance this portfolio, trying to understand the near-term impact of earnings there.
Jack Switala: Hey, Rick. It's Matt. I think that's a fair articulation of how we're thinking about it now, which, as we kind of look through the course of the year, like I said, and we try to rebalance this portfolio, trying to understand the near-term impact of earnings there.
Thank you.
Some of the Oreo assets, we talked about and we will give more color in terms of the timing of the resolution.
The next question comes from Jade rahmani with KBW. Please go ahead.
In the in the subsequent quarter.
When we can get some of that back in when we can actually convert that.
Rick Shane: Matt, I think fair was a good adjective, but clear or straightforward probably wasn't a good adjective to describe my commentary. But thank you for answering the question.
Rich Shane: Matt, I think fair was a good adjective, but clear or straightforward probably wasn't a good adjective to describe my commentary. But thank you for answering the question.
Into earnings assets, so clearly.
We're being dragged down by some of those assets.
But.
We do think there was a there's a near term opportunity to to pull that forward.
Jack Switala: Thank you.
Jack Switala: Thank you.
Operator: The next question comes from Jade Rahmani with KBW. Please go ahead.
Operator: The next question comes from Jade Rahmani with KBW. Please go ahead.
On some of these other assets that are on the watch list and we can sort of you can kind of go through each of these but in general we're seeing contractual payments.
Jade Rahmani: Thank you. To touch on Tom's question and maybe the underlying issue is that the bid for assets or loans that KREF is originating seems to be stronger in the private credit market than the required yield that mortgage REIT investors require. So there could be an arbitrage there. As a result, perhaps management should pivot its focus to value creation as the top priority, which could include loan sales, share repurchase, unlocking potential gains in the portfolio if there are some, such as Mountain View REO. Perhaps that would buy time to reposition the company rather than go with the strategy you've been undertaking, which might still result in KREF trading at this very sharp discount to book value.
Jade Rahmani: Thank you. To touch on Tom's question and maybe the underlying issue is that the bid for assets or loans that KREF is originating seems to be stronger in the private credit market than the required yield that mortgage REIT investors require. So there could be an arbitrage there.
Thank you. Um, to touch on Tom's question and maybe uh, you know, the underlying issue is that the bid for assets or loans that kref is originating seems to be stronger in the private credit Market than the required yield that mortgage read investors require. So there could be an Arbitrage there as a result perhaps management. Should pivot its focus to Value creation as the top priority which could include loan sales.
<unk> been being made here so.
It's certainly impacting us.
Sherry purchase unlocking potential gains in the portfolio. If there are some stats such as Mountain View Aro,
We certainly think there's a lot of upside as we've indicated before we think there is around 13.
From getting these Oreo.
Assets back and converted into.
Jade Rahmani: As a result, perhaps management should pivot its focus to value creation as the top priority, which could include loan sales, share repurchase, unlocking potential gains in the portfolio if there are some, such as Mountain View REO. Perhaps that would buy time to reposition the company rather than go with the strategy you've been undertaking, which might still result in KREF trading at this very sharp discount to book value.
Into performing loan assets.
But.
Um, and perhaps that would buy time to reposition the company, uh, rather than, uh, go with the strategy, you've been undertaking, which might still result in KF trading at this very sharp discount to Book value.
That's kind of what I would say on that.
Got it okay and again I assume.
Look I you guys talked about dividend policy.
And I.
Heard what I would describe as sort of rational.
Um, otherwise accelerated dispositions could materialize. The book value that the market ultimately is projecting which clearly requires significant losses uh, on the life science in particular but perhaps elsewhere in the portfolio. So just wanted to get your thoughts on that potential pivot and if you see that as something management might undertake,
National analysis as opposed to focused on.
Thank you, Jade. Yeah, it's Matt. Um,
Market sentiment and just maintain a dividend for the sake of that I'm, assuming that that is an indication that as we go through the year you guys are going to be looking at all of this and.
Jade Rahmani: Otherwise, accelerated dispositions could materialize the book value that the market ultimately is projecting, which clearly requires significant losses on the life science in particular, but perhaps elsewhere in the portfolio. So I just wanted to get your thoughts on that potential pivot and if you see that as something management might undertake.
Jade Rahmani: Otherwise, accelerated dispositions could materialize the book value that the market ultimately is projecting, which clearly requires significant losses on the life science in particular, but perhaps elsewhere in the portfolio. So I just wanted to get your thoughts on that potential pivot and if you see that as something management might undertake.
let me unpack that a little bit, like, I guess when I heard you go through the list of things that we could accomplish or, or, or strategies, we could, um,
Hum.
We should be thinking about our dividend very much any empirical.
Follow. I think we are doing most of those. Um, certainly when we think about and I mentioned like,
Watch list.
Way as opposed to sort of some sort of gauge of sentiment.
Jack Switala: Thank you, Jade. Yeah, it's Matt. Let me unpack that a little bit. I guess when I heard you go through the list of things that we could accomplish or strategies we could follow, I think we are doing most of those. Certainly, when we think about and I mentioned watchlist, select office assets, repositioning the portfolio, I think we would part of that will be loan sales, 100%. I think when we think about gains on the REO, unlocking those gains, completely agree. We should try to accelerate those as much as possible, which we're doing, and I think which our plan will incorporate. A lot of it comes back to when's the optimal time to sell, and we don't want to give money away. The market has certain expectations when it buys an asset.
Jack Switala: Thank you, Jade. Yeah, it's Matt. Let me unpack that a little bit. I guess when I heard you go through the list of things that we could accomplish or strategies we could follow, I think we are doing most of those. Certainly, when we think about and I mentioned watchlist, select office assets, repositioning the portfolio, I think we would part of that will be loan sales, 100%.
Hey, Rick It's Matt I think that's I think that's a fair articulation of how we're thinking about it now.
As we kind of look through the course of the year like I said and we tried to rebalance this portfolio.
Select office assets, you know, repositioning the portfolio. I think we would would part of that will be loan sales 100%. Um, I think when we think about gains on the REO, um unlocking those gains completely agree, uh, we should try to accelerate those as much as possible.
Trying to understand the near near term impact of earnings there.
Matt I think fair or was it a good adjective clear or straight forward probably was additive.
uh which we're doing and I think which our plan will incorporate a lot of it comes back to um,
Additive to describe my my commentary, but thank you for answering the question.
Thank you.
Jack Switala: I think when we think about gains on the REO, unlocking those gains, completely agree. We should try to accelerate those as much as possible, which we're doing, and I think which our plan will incorporate. A lot of it comes back to when's the optimal time to sell, and we don't want to give money away. The market has certain expectations when it buys an asset.
The next question comes from Jade Rahmani with K B W. Please go ahead.
Thank you.
To touch on Tom's question and maybe.
The underlying issue is that the bid for assets or loans that K RAF is originating seems to be stronger in the private credit market than the required yield that mortgage REIT investors require so there could be an arbitrage there.
Moments where we're going to create more value and liquidity that we have to be mindful of uh and so we'll do that. Um, the last piece share we purchase we've been
Jack Switala: When I think about something like Mountain View, well, even if we sign a lease, there's certain things that we'll have to do to get that tenant in and occupying, etc., for the lease to go effective. So there's certain moments where we're going to create more value and liquidity that we have to be mindful of. And so we'll do that. The last piece, share repurchase, we've been repurchasing shares. So I think that certainly has been part of our part of our strategy as well. So I do think that we're evaluating everything possible. I think the last point that you might ask as a follow-up question would be, "Well, what about performing loans? Why not go and sell those?" And certainly, we could add that and continue to evaluate a performing loan sale.
Jack Switala: When I think about something like Mountain View, well, even if we sign a lease, there's certain things that we'll have to do to get that tenant in and occupying, etc., for the lease to go effective. So there's certain moments where we're going to create more value and liquidity that we have to be mindful of. And so we'll do that.
We've been repurchasing shares. Um, so I think that certainly has been part of our you know, part of our strategy um as well.
As a result, perhaps management should pivot its focus to value creation as the top priority, which could include loan sales.
Share repurchase.
Unlocking potential gains in the portfolio. If there are some stats such as mountain view Oreo.
Jack Switala: The last piece, share repurchase, we've been repurchasing shares. So I think that certainly has been part of our part of our strategy as well. So I do think that we're evaluating everything possible. I think the last point that you might ask as a follow-up question would be, "Well, what about performing loans? Why not go and sell those?" And certainly, we could add that and continue to evaluate a performing loan sale.
And perhaps that would buy time to reposition the company.
Rather than.
Go with the strategy, you've been undertaking which might still result in <unk> trading at this very sharp discount to book value.
Otherwise accelerated dispositions could materialize as the book value that the market ultimately is projecting which clearly requires significant losses.
On the life science in particular, but perhaps elsewhere in the portfolio. So just wanted to get your thoughts on that potential pivot and if you see that as something management might undertake.
Jack Switala: But right now, where I'd say we're focused on really getting the portfolio in a place where the public markets can trade us in the right way because all these portfolios, whether it's ours or some of our peers, we all have some legacy assets. And that's not to say that they're all going to become watchlists or they all become losses, but perhaps they're just higher loan to value, right, than where we started. Of course, values are down a lot in the real estate space. So maybe that's what the market's telling us. And as we reposition the portfolio and as the percent of newer loans on adjusted bases comes into that portfolio, then these stocks can compress. So I'm not convinced that this is, again, forever. These stocks are always going to trade like this.
Jack Switala: But right now, where I'd say we're focused on really getting the portfolio in a place where the public markets can trade us in the right way because all these portfolios, whether it's ours or some of our peers, we all have some legacy assets. And that's not to say that they're all going to become watchlists or they all become losses, but perhaps they're just higher loan to value, right, than where we started.
So I do think that we're evaluating, you know, everything possible. I think the last uh the last point that you know you might ask as a follow-up question. Well what about performing? You know, performing loans uh why not go and and sell those and um you know, certainly we could uh add that and and and continue to evaluate you know, a performing a performing loan sale. But you know, right now where I'd say, we're focused on on really getting the portfolio in a place where the public markets, you know, can't trade Us in the right way because all these portfolios, whether it's ours or, you know, some of our peers, we all have some leg Legacy assets. Um, and then that's not to say that they're all going to become watch lists, are they all become losses? But you know, perhaps they're just higher loan to value right than where we started. Of course, values are down a lot and and the real estate space, so maybe that's what the Market's telling us. And as we reposition the portfolio and as the percent of newer loans on on, on adjusted basis, uh, comes into that portfolio then stock, these stocks can
Thank you Jay it's Matt.
Let me unpack that a little bit I guess when I heard you go through the list of things that we could accomplish or strategies we could.
Jack Switala: Of course, values are down a lot in the real estate space. So maybe that's what the market's telling us. And as we reposition the portfolio and as the percent of newer loans on adjusted bases comes into that portfolio, then these stocks can compress. So I'm not convinced that this is, again, forever. These stocks are always going to trade like this. We've just gone through probably one of the most challenging real estate environments, certainly of my career. As we get through this, I expect the market will be rational and reprice these portfolios.
Follow I think we are doing most of those.
Press. Um so you know I'm not convinced that this is again forever. Like these stocks are always going to trade like this we've just gone through probably 1 of the most challenging real estate environments. Um certainly my my career um
Certainly when we think about and I mentioned like <unk>.
Watch list.
And um, as we get through this, uh, I expect the market will be rational and and repriced these portfolios.
Select office assets repositioning the portfolio I think we would.
Part of that will be loan sales 100%.
I think when we think about gains on the Oreo.
Thanks very much. Um, you know, the eye of the storm seems to be lifestyle when you listen to Alexandria's earnings call, it's clear. Uh, and they're Best in Class at this.
Jack Switala: We've just gone through probably one of the most challenging real estate environments, certainly of my career. As we get through this, I expect the market will be rational and reprice these portfolios.
Unlocking those gains.
We agree.
We should try to accelerate those as much as possible.
And which we're doing and I think which our plan will incorporate.
They expect a very long uh timeline to turn around this Sector 5 years, plus and AI is also going to rehab it on this sector.
A lot of it comes back to.
When's, the optimal time to sell and we don't want to give money away the market has certain expectations when it buys an asset when I think about it.
Jade Rahmani: Thanks very much. The eye of the storm seems to be life science. When you listen to Alexandria's earnings call, it's clear, and they're best in class at this. They expect a very long timeline to turn around this sector, five years+. And AI is also going to wreak havoc on this sector. So you talk about putting in place modifications to get basis to a point of comfort. The weighted average basis today is $830 a foot. Do you have in mind a range or some benchmark that you could provide at which we should think would be a reasonable basis to take this outsized risk beyond the investor horizon that people are contemplating?
Jade Rahmani: Thanks very much. The eye of the storm seems to be life science. When you listen to Alexandria's earnings call, it's clear, and they're best in class at this. They expect a very long timeline to turn around this sector, five years+. And AI is also going to wreak havoc on this sector. So you talk about putting in place modifications to get basis to a point of comfort.
Something like mountain view, well, even if we sign a lease or certain things that will have to do to get that tenant in an occupying et cetera at least to go effective. So yes. There is.
So, you talk about putting in place modifications, to get basis to a point of comfort. The way that average basis is today is 830 a foot. Do you have in mind the range or some, uh, Benchmark that you could provide at which we should think would be a reasonable basis to take this outside's risk? You know, beyond the investor Horizon that people are contemplating?
Moments, where we're going to create more value in liquidity that we have to be mindful of and so we will do that.
Yeah, I think a couple things on the life science sector. Um,
The last piece share repurchase.
Ben.
Jade Rahmani: The weighted average basis today is $830 a foot. Do you have in mind a range or some benchmark that you could provide at which we should think would be a reasonable basis to take this outsized risk beyond the investor horizon that people are contemplating?
We have been repurchasing shares so I think that certainly has been part of our part of our strategy.
we understand and certainly follow it, you know, closely we understand. It could be a very long
As well.
So I do think that we're evaluating everything possible I think the last.
The last point that you might ask as a follow up question would be well what about performing.
Performing loans why not go and sell those in.
Jack Switala: Yeah, I think a couple of things on the life science sector. We understand and certainly follow it closely. We understand it could be a very long road here. At the same time, I remember when we foreclosed on Mountain View, everybody in the market, including the most sophisticated brokers, told us it was going to be 5 years before we could get anything done there. I'll take the under on that by a few years, and I'll take the over on the value creation that we make there. So things change. And as it relates to technology and life and AI, and in particular as it applies to life science, I'm not convinced that's a negative for the life science sector.
Jade Rahmani: Yeah, I think a couple of things on the life science sector. We understand and certainly follow it closely. We understand it could be a very long road here. At the same time, I remember when we foreclosed on Mountain View, everybody in the market, including the most sophisticated brokers, told us it was going to be 5 years before we could get anything done there.
A long road here. Um, at the same time, I remember when we foreclosed on Mountain View, uh, everybody in the market, uh, including the most sophisticated Brokers told us. It was going to be 5 years before we could do get anything done there. I'll take the under on that by a few years and and I'll take the over on the value creation that we that we make their
Certainly we could.
so things change, um,
Add that and continue to evaluate our performing a performing loan sale, but right now I'd say, we're focused on really getting the portfolio in a place where the public markets.
And, you know, as it relates to technology and lives in in, in Ai and and and in particular in life as it applies to life science.
<unk> in the right way because all of these portfolios, whether it's ours or some of our peers. We all have some legacy assets.
Jade Rahmani: I'll take the under on that by a few years, and I'll take the over on the value creation that we make there. So things change. And as it relates to technology and life and AI, and in particular as it applies to life science, I'm not convinced that's a negative for the life science sector. I think it could be actually quite a positive in terms of the development and need for development of new drugs and need for new lab space. So kind of we'll see how that plays in the system. I think we're eyes wide open, though.
And that's not to say that they're all going they can watch lists are they all become losses, but perhaps or just higher loan to value and where we started of course values are down a lot in the real estate space. So maybe that's what the market is telling us and as we reposition the portfolio and as the percent of newer loans.
I'm not convinced that the negative for for for the life science sector. I think it could be actually quite quite a positive um in terms of the development and need for you know need for development of new drugs and need for new new lab space. So you know kind of we'll see how that um, plays to the system as it relate. I think we're Eyes Wide Open, though. We need to get to a lower basis. And you've seen us doing that. Um,
On an adjusted basis comes into that portfolio than stock stocks compressed.
I think we we apply the same thing to our life science as we do to all the other modifications that we're doing, which is
Jack Switala: I think it could be actually quite a positive in terms of the development and need for development of new drugs and need for new lab space. So kind of we'll see how that plays in the system. I think we're eyes wide open, though. We need to get to a lower basis, and you've seen us doing that. I think we apply the same thing to our life science as we do to all the other modifications that we're doing, which is unless the sponsor's wanting to make a significant capital commitment to delever us to a point where we feel comfortable, then usually, we'll either go to REO and sell it. But in the case of some of the challenges that we're dealing with now and some of these downgrades recently, we do expect our sponsors to commit significant capital to pay us down.
So I'm not convinced that this is again forever like these stocks are always going to trade like this we've just gone through probably one of the most challenging real estate environment.
My career.
Unless the sponsor is wanting to make a significant Capital commitment to de-lever us, um, to a point where we feel comfortable, um, then uh, you know, usually we'll we'll either go to REO and and, and sell it. But in the case of of our, uh,
Jade Rahmani: We need to get to a lower basis, and you've seen us doing that. I think we apply the same thing to our life science as we do to all the other modifications that we're doing, which is unless the sponsor's wanting to make a significant capital commitment to delever us to a point where we feel comfortable, then usually, we'll either go to REO and sell it. But in the case of some of the challenges that we're dealing with now and some of these downgrades recently, we do expect our sponsors to commit significant capital to pay us down.
And as we get through this.
I expect the market will be rational and repriced these portfolios.
Thanks very much.
The eye of the storm seems to be lifestyles. When you listen to Alexandria is earnings call, it's clear and their best in class at this they expect a very long.
Timeline to turnaround this sector five years, plus and AI is also going to wreak havoc on this sector.
Some of the challenges that we're dealing with now. And some of these downgrades recently, we do expect our sponsors to to commit significant Capital to pay us down and in return will likely have to, uh, you know, do some type of hope, not around that. But um, I don't want to talk specifics as we're in the middle of some of these negotiations, right now. Uh, but but in in general, we've been bringing our bases down in a pretty significant way. Again, not just through, uh, Hope notes. But also through, uh, principal pay downs and borrowers, coming out of pocket, and recommitting to the assets.
You talk about putting in place modifications to get basis to a point of comfort.
Thanks very much.
Jack Switala: And in return, we'll likely have to do some type of Hope Note around that. But I don't want to talk specifics as we're in the middle of some of these negotiations right now. But in general, we've been bringing our basis down in a pretty significant way, again, not just through Hope Notes, but also through principal paydowns, and borrowers coming out of pocket and recommitting to the assets.
Jack Switala: And in return, we'll likely have to do some type of Hope Note around that. But I don't want to talk specifics as we're in the middle of some of these negotiations right now. But in general, we've been bringing our basis down in a pretty significant way, again, not just through Hope Notes, but also through principal paydowns, and borrowers coming out of pocket and recommitting to the assets.
The weighted average basis today is $830 a foot do you have in mind the range or some.
The next question comes from, Gabe Paulie with Raymond James, please go ahead.
Benchmark that you can provide at which we should think would be a reasonable basis to take this outsize risk beyond the investor horizon that people are contemplating.
as it pertains to just
Yes, I think a couple of things on the life science sector.
Matthew Salem: Thanks very much.
Matthew Salem: Thanks very much.
<unk>.
We understand and certainly follow it closely we understand it could be a very long.
Operator: The next question comes from Gabe Poggi with Raymond James. Please go ahead.
Operator: The next question comes from Gabe Poggi with Raymond James. Please go ahead.
Rick Shane: Hey, good morning, guys. Thanks for taking the question. I want to kind of piggyback on what's been asked already, but kind of go a different angle and have you guys comment through the KKR lens as it pertains to just broad demand for one, commercial real estate credit, and then commercial real estate in general. Matt, to your points that you just made, right, timing is in the eye of the beholder and can change from five years to a shorter term. But just what's the bigger KKR machine seeing as it pertains to global demand for domestic real estate, both on the credit side and the equity side? Because I think it'll help us kind of get an angle as to the true value here or value creation probability if we take a little bit longer-term tact. Thank you.
Rich Shane: Hey, good morning, guys. Thanks for taking the question. I want to kind of piggyback on what's been asked already, but kind of go a different angle and have you guys comment through the KKR lens as it pertains to just broad demand for one, commercial real estate credit, and then commercial real estate in general. Matt, to your points that you just made, right, timing is in the eye of the beholder and can change from five years to a shorter term. But just what's the bigger KKR machine seeing as it pertains to global demand for domestic real estate, both on the credit side and the equity side? Because I think it'll help us kind of get an angle as to the true value here or value creation probability if we take a little bit longer-term tact. Thank you.
A long road here.
At the same time I remember when we foreclosed on mountain view, everybody in the market, including the most sophisticated brokers told us it was going to be five years before we could get anything done there I'll take the undrawn that by a few years and I will take the over on the value creation that we that we make there.
broad demand for 1 commercial real estate credit and then commercial real estate in general. That to your point is just made. Right timing is in the eye of the beholder and can change from 5 5 years to a shorter term, but just what's the bigger KKR machine seeing as it pertains to Global demand for domestic real estate both on the credit side and the equity side, um, because I think it'll help us kind of get an angle as to the, the True Value here or or value creation probability. If we take a little bit longer term tact, thank you.
Thanks Gabe. Appreciate the question. Um,
So things change.
And as it relates to technology and lives and AI.
So, right, so let's put our kick our hat on for for a minute here. I would say that we are seeing
And in particularly in life as it applies to life science.
I'm not convinced that's a negative for the for the life science sector I think it could be actually quite quite a positive.
In terms of the development and need for need for development of new drugs and need for new lab space.
Increased uh, allocation to both real estate credit uh, as well as real estate Equity. I think the sentiment is clearly shifted from relative value perspective.
a lot of, um, institutional
uh,
Jack Switala: Thanks, Gabe. Appreciate the question. So right, so let's put our KKR hat on for a minute here. I would say that we are seeing increased allocation to both real estate credit as well as real estate equity. I think the sentiment is clearly shifted from a relative value perspective. A lot of institutional allocators of capital, I think, are looking at their overall portfolio and thinking about where those values have gone over the course of the last five years and seeing that real estate's been relatively stagnant. And so you're starting to see a shift back into that sector. Now, I would say it's still predominantly in the opportunistic and value-add parts of the market within equity. So you haven't fully seen some of that core money come back in or that core-plus money, although I could kind of see early signs of it.
Jack Switala: Thanks, Gabe. Appreciate the question. So right, so let's put our KKR hat on for a minute here. I would say that we are seeing increased allocation to both real estate credit as well as real estate equity. I think the sentiment is clearly shifted from a relative value perspective. A lot of institutional allocators of capital, I think, are looking at their overall portfolio and thinking about where those values have gone over the course of the last five years and seeing that real estate's been relatively stagnant. And so you're starting to see a shift back into that sector. Now, I would say it's still predominantly in the opportunistic and value-add parts of the market within equity. So you haven't fully seen some of that core money come back in or that core-plus money, although I could kind of see early signs of it.
We'll see how that plays through the system.
I think we're eyes wide opened now we need to get to a lower basis and you've seen us doing that.
allocators of capital, I think are looking at their overall portfolio and and, and thinking about
Do we apply the same thing to our life science as we do to all of the other modifications that we're doing which is good.
Unless the sponsors wanted to make a significant capital commitment to Delever us.
To a point, where we feel comfortable.
Where those values have gone over the course of The Last 5 Years and and seeing that that real estate's been relatively stagnant. Um and so you're starting to see a shift back into that sector. Now I would say it's still predominantly in the opportunistic and value add parts of the market with inequity. So you haven't fully seen
Then.
Usually we will either go to Oreo and sell it but in the case of our.
<unk>.
Some of the challenges that we're dealing with now in some of these downgrades recently, we do expect our sponsors to commit significant capital to pay us down and in return, we'll likely have to.
Do some type of hope note around that but.
I don't want to talk specifics as we're in the middle of some of these negotiations right now but but.
In general we've been bringing our basis down in a pretty significant way again, not just through hope notes, but also through.
Jack Switala: But I'd say most of it is in that opportunistic value-add sector. So people are allocating. Velocity is starting to come back a little bit in the market. I think we've all seen that, some sales starting to go through. When you think about our pipeline, still predominantly refinance on the lending side. But there's more acquisitions that we're seeing, which means velocity of capital's increasing, funds are returning capital, and that money typically gets recycled back into funds. So that reset, I believe, is beginning to happen. On the real estate credit side, same comment true. We are seeing increased allocations to real estate credit. I think we've been in a little bit more favored piece of the market than equity for a while now as just allocations to private credit overall have been increasing over the course of the last handful of years.
Jack Switala: But I'd say most of it is in that opportunistic value-add sector. So people are allocating. Velocity is starting to come back a little bit in the market. I think we've all seen that, some sales starting to go through. When you think about our pipeline, still predominantly refinance on the lending side. But there's more acquisitions that we're seeing, which means velocity of capital's increasing, funds are returning capital, and that money typically gets recycled back into funds. So that reset, I believe, is beginning to happen. On the real estate credit side, same comment true. We are seeing increased allocations to real estate credit. I think we've been in a little bit more favored piece of the market than equity for a while now as just allocations to private credit overall have been increasing over the course of the last handful of years.
Principal pay downs in borrowers coming out of pocket and Recommitting to the assets.
Uh, you know, some of that core money come back in or if that core Plus money. Although you know, I could kind of see early signs of it but but um I'd say most of it is in that opportunistic value. Add sector. So people are allocating, velocity is starting to come back a little bit in the market. I think we've all seen that some sales starting to go through when we think about our pipeline still predominantly refinance, um, on the lending side. But it's it's there's more Acquisitions that we're seeing which means lots of capitals. Increasing funds are returning capital and that money typically gets recycled back in the fund. So so that reboot reset I believe is is um beginning to happen on the real estate credit side.
Thanks very much.
The next question comes from Gabe Poggi with Raymond James. Please go ahead.
Hey, good morning, guys. Thanks for taking the question I wanted to kind of piggyback on whats been asked already but I'm going to go a different.
Same comment true. Uh we are seeing increased allocations to real estate credit. We've been in a little bit more favored piece of the market than equity for for a while. Now, as just allocations to private credit overall have been increasing over the course of of the last handful of years.
Angle and how did you guys comment through the KKR lens as it pertains to Jennifer.
Broad demand for one commercial real estate credit and then commercial real estate in general Matt to your point that you just made right timing is in the eyes of Beholder and contained from five five years to a shorter term, but just what's the bigger KKR machine.
Seeing as it pertains to global demand for domestic real estate, both on the credit side and the equity side.
Jack Switala: Now, I think there is a very tangible relative value discussion happening around not just real estate credit, but asset-backed as well, and potentially infrastructure also from a sense that how do people maybe fully allocate it to corporate credit? Maybe corporate credit has other potential challenges in those portfolios. So how do I diversify away from that but still be in a credit exposure, still take advantage of the yield and the safety that credit offers in today's market? So we've seen certainly a pivot into real estate credit. The private funds are raising, not just us, but other our peers as well, I think, are raising a significant amount of capital in the space. And my expectation is that will continue going forward here.
Jack Switala: Now, I think there is a very tangible relative value discussion happening around not just real estate credit, but asset-backed as well, and potentially infrastructure also from a sense that how do people maybe fully allocate it to corporate credit? Maybe corporate credit has other potential challenges in those portfolios. So how do I diversify away from that but still be in a credit exposure, still take advantage of the yield and the safety that credit offers in today's market? So we've seen certainly a pivot into real estate credit. The private funds are raising, not just us, but other our peers as well, I think, are raising a significant amount of capital in the space. And my expectation is that will continue going forward here.
I think it'll help us kind of get an.
Angle as to the true value here or value creation probability if we take a little bit longer term tact. Thank you.
Now, I think there is a very tangible relative value discussion happening around. Um, not just real estate credit but asset backed as well. Um, and, and potentially infrastructure also, uh, from a sense that uh, you know, how to people may be fully allocated to corporate credit. Maybe corporate credit has other, you know, potential challenges in those portfolios. So how do I diversify away from that but still be in a credit exposure. Still get take advantage of the yield and the safety that credit offers in today's market. Um so we've seen certainly a pivot uh and a real estate credit. Um the private funds are raising
Thanks, Kevin appreciate the question.
So right so let's put our curricular hat on for a minute here.
You know, not just us but but other our peers as well, I think are raising a significant amount of capital in the space and my expectations that will, you know, continue going forward here.
I would say that we are seeing.
Thanks guys, it's very helpful.
Increased.
The allocation to both real estate credit.
Again, if you have any questions, please press star, then 1.
As well as real estate equity I think the sentiment has clearly shifted from a relative value perspective.
The next question comes from Chris Mueller will citizens, please go ahead.
Lot of.
Institutional.
Allocators of capital I think we're looking at their overall portfolio and in thinking about.
Rick Shane: Thanks, guys. It's very helpful.
Rich Shane: Thanks, guys. It's very helpful.
Where those values have gone over the course of the last five years and seeing that real estate has been relatively stagnant.
Hey guys, thanks for taking the questions. Um, so we have a couple of uh, more rate Cuts behind us now and Futures are suggesting another 2 Cuts this year. Um, I guess the question is have those cuts increased interest in your guys' REO assets at all? And I guess what? I'm really trying to get at is have those cuts narrowed, the gap between buyers and sellers
Jack Switala: Again, if you have a question, please press star, then one. The next question comes from Chris Muller with Citizens. Please go ahead.
Jack Switala: Again, if you have a question, please press star, then one. The next question comes from Chris Muller with Citizens. Please go ahead.
And so you're starting to see a shift back into that sector now I would say, it's still predominantly in the opportunistic and value add parts of the market with an equity. So you haven't fully seen.
Uh, thanks Chris. It's Matt. Um,
Chris Muller: Hey, guys. Thanks for taking the questions. So we have a couple more rate cuts behind us now, and futures are suggesting another two cuts this year. I guess the question is, have those cuts increased interest in your guys' REO assets at all? And I guess what I'm really trying to get at is, have those cuts narrowed the gap between buyers and sellers?
Chris Muller: Hey, guys. Thanks for taking the questions. So we have a couple more rate cuts behind us now, and futures are suggesting another two cuts this year. I guess the question is, have those cuts increased interest in your guys' REO assets at all? And I guess what I'm really trying to get at is, have those cuts narrowed the gap between buyers and sellers?
So that core money come back in or is that core plus money although.
I do think that these rate cuts are helping liquidity in the market, um, you know, I don't know if it, you know, specifically translates to the liquidity, you know, we're seeing. But, uh,
I could kind of see early signs of it but but I'd say most of it is in that opportunistic value add sector. So people are allocating philosophy is starting to come back a little bit in the market I think we've all seen that some sales starting to go through when you think about our pipeline still predominantly refinance on the lending side, but there's more acquisitions.
Jack Switala: Thanks, Chris. It's Matt. I do think that these rate cuts are helping liquidity in the market. I don't know if it specifically translates to the liquidity we're seeing, but it's certainly part of it. But I think just overall, the sentiment for real estate right now is pretty positive. There hasn't really been a lack of buyers in the market. I think there's a lack of sellers, personally, and sellers at a price, right, sellers at an opportunistic price, which is why we're seeing a lot of our activity more in the refinance part of the market than the acquisition part because you have owners of real estate that own a really good property. That property likely is performing fine from an occupancy and cash flow perspective outside of small pockets where you have some oversupply.
Jack Switala: Thanks, Chris. It's Matt. I do think that these rate cuts are helping liquidity in the market. I don't know if it specifically translates to the liquidity we're seeing, but it's certainly part of it. But I think just overall, the sentiment for real estate right now is pretty positive. There hasn't really been a lack of buyers in the market. I think there's a lack of sellers, personally, and sellers at a price, right, sellers at an opportunistic price, which is why we're seeing a lot of our activity more in the refinance part of the market than the acquisition part because you have owners of real estate that own a really good property. That property likely is performing fine from an occupancy and cash flow perspective outside of small pockets where you have some oversupply.
You know, it's certainly part, it's certainly part of it. But, uh, I think it's overall the sentiment for Real Estate right now is, you know, is, is pretty is pretty positive there. Historic, there hasn't really been a lack of buyers in the market. Um, I think there's a lack of sellers
Personally, um, and sellers at a Price Rite sellers, at an opportunistic price.
We're seeing which means lots of capitals, increasing funds returning capital and that money typically gets recycled back into funds. So that reboot reset I believe is beginning to happen on the real estate credit side.
Same comment through we are seeing increased allocations to real estate credit I think we've been a little bit more favored piece of the market than equity for a while now as just allocations to private credit overall have been increasing over the course of the last handful of years now I think there is a very tangible relative value discussion happening around.
Which is why we're seeing a lot of our activity more in the refinance part of the market than the acquisition part. Because you have owners of real estate that owned a really good property that property likely is performing fine. From an occupancy and cash cash flow perspective. Outside of like small Pockets where you have some over Supply
Not just real estate credit, but asset backed as well and potentially infrastructure also from a sense of that.
People may be fully allocated to corporate credit maybe corporate credit has other potential challenges.
Really play that forward, um, refinance by time, where Supply really drops off, um, and they can raise rents and, and grow their Equity value back. Uh, so that's that's the overall market. So, as we think about selling our assets, um, you know, particularly, um,
Jack Switala: You may have a sponsor that owns it at a higher basis than they'd like, given just value declines since rate hikes in 2021. And so we're seeing our sponsors really play that forward, refinance by time where supply really drops off, and they can raise rents and grow their equity value back. So that's the overall market. So as we think about selling our assets, particularly on our REO, I do expect there to be liquidity. And unrelated to maybe the rate cuts, we're seeing more liquidity in the office sector, right? Some of those assets that we've taken back or on the watchlist didn't historically have a lot of liquidity just given the uncertainty. I think the market there has found some stable ground, and you're starting to see real liquidity in that sector. Again, I'm not sure it's directly related to rate cuts.
Jack Switala: You may have a sponsor that owns it at a higher basis than they'd like, given just value declines since rate hikes in 2021. And so we're seeing our sponsors really play that forward, refinance by time where supply really drops off, and they can raise rents and grow their equity value back. So that's the overall market. So as we think about selling our assets, particularly on our REO, I do expect there to be liquidity. And unrelated to maybe the rate cuts, we're seeing more liquidity in the office sector, right? Some of those assets that we've taken back or on the watchlist didn't historically have a lot of liquidity just given the uncertainty. I think the market there has found some stable ground, and you're starting to see real liquidity in that sector. Again, I'm not sure it's directly related to rate cuts.
Portfolio, so how do I diversify away from that but still be in a credit exposure still get take advantage of the yield and the safety of their credit offers in today's market.
On our REO, I do expect there to be, you know, liquidity in in.
You know, unrelated to maybe the rate cuts.
So we've seen certainly a pivot in our real estate credit.
Private funds are raising.
Just us, but other our peers as well I think our raising a significant amount of capital in this space and my expectation is that will continue going forward here.
Thanks, guys, it's very helpful.
Okay.
Again, if you have a question. Please press Star then one.
We're seeing more liquidity in the office sector, right? Some of those assets that uh, that we've taken back or on the watch list, like didn't historically, have a lot of liquidity, just just give me the uncertainty. I think the market there has found some stable ground um and you're starting to see real liquidity in that sector. And again, I'm not sure it's directly related to to rate Cuts. It's I think it's more about just time and and seeing where leasing is shaking out and uh, and and finding some stability and, and the overall occupancy and leasing Market.
Next question comes from Chris smaller with citizens. Please go ahead.
Hey, guys. Thanks for taking the questions.
So we have a couple more rate cuts are behind us now and futures are suggesting another two cuts. This year I guess the question is have those cuts increased interest in your guys' REO assets at all and I guess, what I'm really trying to get at is have those cuts narrowed the gap between buyers and sellers.
Got it. That's very helpful and that's a good segue into my next question on office. Um, and you touch on this a little bit Matt, but we haven't really seen many new office loans in recent years. So can you guys just talk about your view on that sector and what makes an office loan attractive these days?
Jack Switala: I think it's more about just time and seeing where leasing is shaking out and finding some stability in the overall occupancy and leasing market.
Jack Switala: I think it's more about just time and seeing where leasing is shaking out and finding some stability in the overall occupancy and leasing market.
Sure, um, I'd say our bar is still high. We, you know, Jade asked the AI question. Like certainly we think there's
Thanks, Chris its Matt.
Chris Muller: Got it. That's very helpful. And that's a good segue into my next question on office. And you touched on this a little bit, Matt, but we haven't really seen many new office loans in recent years. So can you guys just talk about your view on that sector and what makes an office loan attractive these days?
Chris Muller: Got it. That's very helpful. And that's a good segue into my next question on office. And you touched on this a little bit, Matt, but we haven't really seen many new office loans in recent years. So can you guys just talk about your view on that sector and what makes an office loan attractive these days?
Yes.
I do think that these rate cuts are helping liquidity in the market.
I don't know if it specifically translates to liquidity, we're seeing but.
It's certainly part of it is certainly part of it but.
Jack Switala: Sure. I'd say our bar is still high. Jade asked the AI question. Certainly, we think there's potential volatility ahead as it relates to technology in real estate. So we need to continue to be mindful of that. The opportunity, I think, is if you can lend on newer, high-quality assets, and especially for someone like KREF on stabilized cash flows like leased or mostly leased assets with long-term leases in place, that's really where we're seeing an attractive opportunity today. So you're not really taking a lot of leasing risk or reposition risk. You're going to have this stable cash flow in place. You're in a good market. You can see a lot of leasing demand and velocity within that market, and you're in one of the top buildings within that market. I think that's really where we're focused.
Jack Switala: Sure. I'd say our bar is still high. Jade asked the AI question. Certainly, we think there's potential volatility ahead as it relates to technology in real estate. So we need to continue to be mindful of that. The opportunity, I think, is if you can lend on newer, high-quality assets, and especially for someone like KREF on stabilized cash flows like leased or mostly leased assets with long-term leases in place, that's really where we're seeing an attractive opportunity today. So you're not really taking a lot of leasing risk or reposition risk. You're going to have this stable cash flow in place. You're in a good market. You can see a lot of leasing demand and velocity within that market, and you're in one of the top buildings within that market. I think that's really where we're focused.
I think overall the sentiment for real estate right now.
It's pretty it's pretty positive.
Historically, there hasn't really been a lack of buyers in the market.
I think there is a lack of sellers.
Personally.
And sellers at a price right sellers are an opportunistic price, which is why we're seeing a lot of our activity more in the refinance part of the market than the acquisition part because you have owners of real estate that owner really good property that property likely is performing fine from an occupancy and cash flow cash flow perspective outside of like small pockets.
Where you have some oversupply.
You may have a sponsor that owns it at a higher basis than they'd like given just value declines in rate hikes in 2021.
Potential volatility ahead as it rates as it relates to technology, you know, in real estate. So we need to continue to be mindful of that. Um, the opportunity I think is, is on, if you can lend on newer high-quality assets, um, and especially for for someone like tariff on stabilized cash flows, like least or mostly leased assets with with long-term leases in place. That's really where we're we're seeing an attractive um, opportunity today. So you're not really taking a lot of, you know, leasing risk or reposition risk. Um, you kind of have this stable cash flow in place. You're in a good Market, you can see the, a lot of leasing, uh, demand and, and velocity, um, within that market and you're in 1 of the top buildings within that market. I think that's really where we're, you know, where we're focused. Um, and, uh, there's a substantial amount of data. I think that can prove not only is there, uh, liquidity, uh, for, you know, in the capital markets for for owning real estate like that, but there's also a lot of, um, you know, Leasing
Demand as as well. So it's kind of an interesting opportunity for us where we don't have to take a lot of repositioning risk. We can just lend on really high quality real estate. That's that's already leased.
And so we're seeing our sponsors really play that forward.
Refinance by time, where supply really drops off.
Jack Switala: And there's a substantial amount of data, I think, that can prove not only is there liquidity in the capital markets for owning real estate like that, but there's also a lot of leasing demand as well. So it's kind of an interesting opportunity for us where we don't have to take a lot of repositioning risk. We can just lend on really high-quality real estate that's already leased.
Jack Switala: And there's a substantial amount of data, I think, that can prove not only is there liquidity in the capital markets for owning real estate like that, but there's also a lot of leasing demand as well. So it's kind of an interesting opportunity for us where we don't have to take a lot of repositioning risk. We can just lend on really high-quality real estate that's already leased.
And they can raise rents and grow their equity value back.
Got it very helpful. And if I could just squeeze, 1 more quick 1 in, um, should we expect origination to mostly be in line with repayments as you execute this more aggressive resolution strategy or could we see some net portfolio growth in the coming quarters?
That's the overall market so as we think about selling our assets.
Particularly.
On our Oreo I do expect there to be liquidity.
yeah I I I would think about it as really need to look at it through 2 lens 1 1 is um
Unrelated to maybe the rate cuts.
Chris Muller: Got it. Very helpful. And if I could just squeeze one more quick one in, should we expect originations to mostly be in line with repayments as you execute this more aggressive resolution strategy, or could we see some net portfolio growth in the coming quarters?
Chris Muller: Got it. Very helpful. And if I could just squeeze one more quick one in, should we expect originations to mostly be in line with repayments as you execute this more aggressive resolution strategy, or could we see some net portfolio growth in the coming quarters?
We're seeing more liquidity office sector right. Some of those assets that we've taken back or on the watch list like didn't historically have a lot of liquidity just just given the uncertainty in the market. There has found some stable ground.
Repayments and recycling that capital, I think is the right to answer your question. Yes. We we'll we'll try to re recycle that Capital into new loans.
The second piece is just making sure we're staying within our targeted, uh, leverage ratio. Right? Those are the 2 things that we're that we're balancing.
And youre starting to see real liquidity in that sector again, I'm not sure it's directly related to rate cuts. It's I think it's more about just time and seeing where leasing is shaking out.
Jack Switala: Yeah, I would think about it as really need to look at it through two lenses. One is repayments and recycling that capital, I think, is the right to answer your question. Yes, we'll try to recycle that capital into new loans. The second piece is just making sure we're staying within our targeted leverage ratio, right? Those are the two things that we're balancing.
Jack Switala: Yeah, I would think about it as really need to look at it through two lenses. One is repayments and recycling that capital, I think, is the right to answer your question. Yes, we'll try to recycle that capital into new loans. The second piece is just making sure we're staying within our targeted leverage ratio, right? Those are the two things that we're balancing.
Got it. So REO sales uh may be the missing piece to that puzzle there.
Yeah. And as we liquidate REO, we'll be able to increase portfolio size. Uh, it would be the other piece of that as well. You're right.
And finding some stability in the overall occupancy and leasing market.
Got it. Appreciate you guys taking the questions today.
Got it that's very helpful and Thats a good segue into my next question on office and you touched on this a little bit Matt, but we haven't really seen many new office loans in recent years. So can you guys. Just talk about your view on that sector and what makes an office loan attractive these days.
And we have a follow-up from Jade rahmani with KBW. Please go ahead.
Chris Muller: Got it. So REO sales may be the missing piece to that puzzle there.
Chris Muller: Got it. So REO sales may be the missing piece to that puzzle there.
Thanks very much on Mountain View. Um, could you quantify how much dollars you expect to put in and do you see potential gain their
Sure.
Jack Switala: Yeah. And as we liquidate REO, we'll be able to increase portfolio size. It would be the other piece of that as well, you're right.
Jack Switala: Yeah. And as we liquidate REO, we'll be able to increase portfolio size. It would be the other piece of that as well, you're right.
Say, our bar is still high.
Jade asked the AI question like certainly we think there is potential volatility.
Chris Muller: Got it. Appreciate you guys taking the questions today.
Chris Muller: Got it. Appreciate you guys taking the questions today.
Volatility ahead as it relates as it relates to technology.
Operator: And we have a follow-up from Jade Rahmani with KBW. Please go ahead.
Operator: And we have a follow-up from Jade Rahmani with KBW. Please go ahead.
In real estate, so we need to continue to be mindful of that.
The opportunity I think is on if.
Matthew Salem: Thanks very much. On Mountain View, could you quantify how much dollars you expect to put in? And do you see potential gain there?
Matthew Salem: Thanks very much. On Mountain View, could you quantify how much dollars you expect to put in? And do you see potential gain there?
If you can lend on newer high quality assets.
Hey Jade. It's Matt. I don't think we we don't have a lease yet. Um I don't think we'd want to comment on potential you know. Capex TI Etc until we have a until we have at least um at that point in time when we have the final numbers we can we can certainly go through that.
And especially for for someone like tariff on stabilized cash flows like leased or mostly leased assets with with long term leases in place, that's really where we're seeing an attractive opportunity today, so youre not really taking a lot of leasing risk or reposition risk.
the answer to your second part is, um,
Everything we're seeing today.
Jack Switala: Hi, Jade. It's Matt. I don't think we don't have a lease yet. I don't think we'd want to comment on potential CapEx, TI, etc., until we have a lease. At that point in time, when we have the final numbers, we can certainly go through that. The answer to your second part is everything we're seeing today. I'll comment again. We don't have a lease done. But everything we're seeing today would suggest that I think we've got significant value in that asset above where we're carrying it today.
Jack Switala: Hi, Jade. It's Matt. I don't think we don't have a lease yet. I don't think we'd want to comment on potential CapEx, TI, etc., until we have a lease. At that point in time, when we have the final numbers, we can certainly go through that. The answer to your second part is everything we're seeing today. I'll comment again. We don't have a lease done. But everything we're seeing today would suggest that I think we've got significant value in that asset above where we're carrying it today.
Oh, comment again, we don't have a lease done, but everything we're seeing today would suggest that I think we've got, you know, significant value in that asset above where we're carrying it today.
Youre going to have this stable cash flow in place you are in a good market you can see a lot of leasing demand and velocity.
Okay, that's good to know. Um, and then office there's a couple of, uh,
Within that market and Youre in one of the top buildings within that market I think that's really where we're where we're focused.
And Theres a substantial amount of data I think that can prove not only is there a liquidity.
2021 and early 2022, vintage risk, 3 loans, not sure if that's what you were referring to in your office comments, including, uh, Washington, DC, Plano, and Dallas. So just if you comment on that,
For the.
The capital markets for owning real estate like that but there's also a lot of.
Matthew Salem: Okay. That's good to know. And then office, there's a couple of 2021 and early 2022 vintage risk three loans. Not sure if that's what you were referring to in your office comments, including Washington, D.C., Plano, and Dallas. So just if you can comment on that.
Matthew Salem: Okay. That's good to know. And then office, there's a couple of 2021 and early 2022 vintage risk three loans. Not sure if that's what you were referring to in your office comments, including Washington, D.C., Plano, and Dallas. So just if you can comment on that.
Um, yeah, and I think we can take everybody through this again in more detail. Next next quarter, um,
Leasing demand as well so it's kind of an interesting opportunity for us where we don't have to take a lot of repositioning risks. We can just lend on really high quality real estate, that's that's already leased.
Got it very helpful and if I could just squeeze one more quick one in so.
So we expect originations to mostly be in line with repayments as you execute this more aggressive resolution strategy or can we see some net portfolio growth in the coming quarters.
We're not worried about, you know, kind of like all of our office 3 rated loans to be to be clear. Um, like you called out some of the Dallas assets like I'd expect.
Those assets are are are perfectly fine and, you know, we have DC assets that are totally fine. So um,
Jack Switala: Yeah. And I think we can take everybody through this again in more detail next quarter. I guess a couple of things. One, we're not worried about kind of all of our office 3-rated loans, to be clear. Like, you called out some of the Dallas assets. I'd expect those assets are perfectly fine. And we have DC assets that are totally fine. So I expect we're going to get a fair amount of repayments in our office portfolio from that seasoned piece from the 2021 or earlier. So I wouldn't look at it as though we're looking at each particular asset. I think most of them are going to get repaid.
Jack Switala: Yeah. And I think we can take everybody through this again in more detail next quarter. I guess a couple of things. One, we're not worried about kind of all of our office 3-rated loans, to be clear. Like, you called out some of the Dallas assets. I'd expect those assets are perfectly fine. And we have DC assets that are totally fine. So I expect we're going to get a fair amount of repayments in our office portfolio from that seasoned piece from the 2021 or earlier. So I wouldn't look at it as though we're looking at each particular asset. I think most of them are going to get repaid.
Yeah, I would think about it as really need to look at it through two lenses one is.
Repayments and recycling that capital I think is the right to answer your question, Yes, we will.
I expect to get, we're going to get a fair amount of repayments in our office portfolio, this year, that from That season piece, um, you know, from the 2021 or, or or earlier. Um,
Try to recycle that capital into new loans.
That piece is just making sure we're staying within our targeted leverage.
Leverage ratio alright, those are the two things that we're that we're balancing.
Got it so Oreo sales, maybe the missing piece to that puzzle there yes.
And as we liquidate Oreo will be able to increase portfolio size.
So I wouldn't look at it as, as though. Um, we're looking at each particular asset. I think a bunch. Most of them are going to get repaid to the extent. We're not going to get repaid. We may just choose to, you know, note sell those or wreck cut a deal with the borrower Etc. Um, you know, to make sure that, um, you know, we can get on a call and and have that portfolio that part piece of the portfolio reduced.
It would be the other piece of that as well right.
Thanks very much.
Got it appreciate you guys taking the questions.
And we have a follow up from Jade Rahmani with <unk>. Please go ahead.
This concludes our question and answer session, I would like to turn the conference back over to Jax with tala for any closing remarks.
Thanks, very much on mountain view.
Jack Switala: To the extent we're not going to get repaid, we may just choose to note sale those or recut a deal with the borrower, etc., to make sure that we can get on a call and have that piece of the portfolio reduced.
Jack Switala: To the extent we're not going to get repaid, we may just choose to note sale those or recut a deal with the borrower, etc., to make sure that we can get on a call and have that piece of the portfolio reduced.
Could you quantify how much dollars you expect to put in and do you see central game there.
Well, great, thanks, operator. And thanks everyone for joining us this morning. Uh, you can reach out to me or the team here with any questions. Take care.
Hi, Jay It's Matt I don't think we don't have a lease yet.
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Chris Muller: Thanks very much.
Chris Muller: Thanks very much.
I don't think we'd want to comment on potential Capex Ti et cetera until we have until we have at least.
Operator: This concludes our question and answer session. I would like to turn the conference back over to Jack Switala for any closing remarks.
Operator: This concludes our question and answer session. I would like to turn the conference back over to Jack Switala for any closing remarks.
At that point in time, when we have the final numbers. We can we can certainly go through that.
Jack Switala: Well, great. Thanks, operator. And thanks, everyone, for joining us this morning. You can reach out to me or the team here with any questions. Take care.
Jack Switala: Well, great. Thanks, operator. And thanks, everyone, for joining us this morning. You can reach out to me or the team here with any questions. Take care.
The answer to your second part is.
Everything we're seeing today.
I'll comment again, we don't have at least done but everything we're seeing today would suggest that I think we've got significant value in that asset above where we're carrying it today.
Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Okay. That's good to know.
And then office there is a couple of.
2021 in early 2022 vintage risks three loans not sure if that's what you're referring to in your office comments, including our Washington D. C. Plano in Dallas So just.
Comment on that.
Yeah, and I think we can take everybody through this in more detail next next quarter.
I guess, a couple of things one not all of our we're not worried about kind of like all of our office three rated mountains to be to be clear.
You called out some of the Dallas assets like I would expect.
Those assets are.
Perfectly fine and FTC assets that are totally fine so.
I expect to get we're going to get a fair amount of repayments in our office portfolio. This year that from that season piece.
From the 2021 or earlier.
So I wouldn't look at it as though we're looking at each particular asset I think most of them are going to get repaid to the extent, we're not going to get repaid. We may just choose a note sale those or are we kind of deal with the borrower et cetera.
You have to make sure that we can get on a call and have that portfolio that part piece of the portfolio reduced.
Thanks very much.
This concludes our question and answer session I would like to turn the conference back over to Jack with Taylor for any closing remarks, great. Thanks, operator, and thanks, everyone for joining US. This morning, you can reach out to me or the team here with any questions take care.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
