Good morning and welcome to the KKR Real Estate Finance Trust First Quarter 2025 Financial Results Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then 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. Great. Thanks, Operator. Welcome to the KKR Real Estate Finance Trust Earnings Call for the first 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-Q for cautionary factors related to these statements. Before I turn the call over to Matt, I'll go through our results. For the first quarter of 2025, we reported a GAAP net loss of $10.6 million, or $0.15 per share. Book value as of March 31st is $14.44 per share. Distributed earnings this quarter was $17 million, or $0.25 per share, which is in line with our $0.25 per share dividend. With that, I'd now like to turn the call over to Matt. Thank you, Jack. Good morning, and thanks for joining our call today. Since our last earnings call and tariff implementations, market volatility and recession expectations have increased significantly, creating uncertainty for both businesses and households. The early recovery of real estate has likely been put on hold until we have more clarity on the scale and impact of the tariff regime. That said, we do believe real estate is better positioned for this environment compared to past cycles and other asset classes, given the reset in values over the last three years. In times like this, the first thing we think about is defense. It is a get your house in order mentality. To that end, we are in a very good position. We have no corporate maturities until 2030, having just upsized and extended our corporate revolver for a new five-year term and refinanced our Term Loan B with a new seven-year facility. We have ample liquidity with over $700 million today. Given this secure position, we will remain on offense, actively looking to reinvest repayments into new originations. In terms of what we are seeing in the real estate credit market, it is still functioning, and all market participants remain active, including the banking sector. Warehouse financing and senior loan spreads are approximately 10-15 basis points wider, while the transitional loan sector spreads are approximately 15-20 basis points wider. CMBS spreads have been more volatile and are currently 50-75 basis points wider. Many owners are now coming to us for a balance sheet solution to avoid the capital markets volatility. From an opportunity perspective, it's significant. Our pipeline is the largest it's ever been, totaling over $30 billion, and it's very high quality. I expect this market will lead our sponsors to seek out more short-term bridge loans instead of testing the investment sales market. Interestingly, our repayment expectations have increased since our last call. As we articulated last quarter, repayments are expected to exceed $1 billion this year, and we are tracking well above that. We had an active quarter and closed four loans for a total of $376 million, 80% of which were secured by Class A multifamily properties. It had a weighted average LTV of 69% and a coupon of SOFR plus 277 basis points. Repayments in the quarter were $184 million, and along with future funding from existing loans, our net fundings totaled $222 million. We are actively looking at opportunities to diversify our portfolio and add duration. To that end, we are focused on the European lending market. We have built a strong team over the last few years. We are also looking at new issue CMBS conduit B- pieces, where we can leverage our position as one of the largest market participants, as well as K-Star, which is our rated special servicer. Turning next to risk ratings, we downgraded two loans this quarter. First, a Raleigh, North Carolina multifamily loan from a four-rated loan to a five-rated loan. We are still evaluating numerous scenarios for this loan and are engaged in work-out discussions, which could lead to an ownership position. Second, Boston Life Science from a three-rated to a four-rated loan due to current occupancy trends. With the two downgrades in the quarter and therefore increased CECL provisions, book value per share is $14.44, down approximately 2% compared to the prior quarter. We will continue to be transparent and proactive in managing the KKR Real Estate Finance Trust portfolio, and we'll provide updates on those two loans in the coming quarters. Before turning it over to Patrick, I will touch on our life science exposure. This is a sector that we believe has long-term positive fundamentals, but faces cyclical headwinds, which could be exacerbated by an economic downturn or NIH funding cuts. As a reminder, 12% of our loan portfolio is life science, and we have one REO property. We thought it'd be helpful to provide additional details in our supplemental, which is on page 10 of the presentation. At a high level, 100% of our loan exposure is located in the top two life science markets, Boston and South San Francisco. We provided construction financing for over half of our exposure, so these are very high quality and purpose-built for life science. We've seen some green shoots as well. In March, we executed a 32,000 sq ft lease in our Seattle Life Science REO property to the Institute for Protein Design at the University of Washington. The tenant has created AI technologies and computationally designed protein medicines, and is led by a recent Nobel Prize winner for chemistry. With that, I'll turn it over to Patrick. Thanks, Matt. Good morning, everyone. This quarter, we work closely with our KKR Capital Markets team to maintain our best-in-class financing. In March, we closed on a new $550 million Term Loan B, upsizing from the prior loan of $340 million and resetting the term for seven years. Proceeds were used to repay indebtedness, including our existing Term Loan B, and for general corporate purposes. The new Term Loan B priced at 99.875% and bears interest at SOFR plus 325 basis points. This loan further bolsters our liquidity position and enables us to continue to focus on offense. In the quarter, we also upsized our corporate revolver to $660 million and extended the maturity for a new five-year term to March 2030, eliminating corporate liability maturities over the next several years. Additionally, we added a new non-market-to-market secured loan facility this quarter, with an initial funded size of $122 million and the ability to grow as new loans are included, further diversifying our financing capacity. Our financing availability now sits at $8.3 billion, including $3.1 billion of undrawn capacity. At quarter end, we had $720 million of liquidity available, including $106 million of cash on hand and $570 million of undrawn corporate revolver capacity. 78% of our financing is non-market-to-market, and KKR Real Estate Finance Trust has no final facility maturities until 2026 and no corporate debt due until 2030. In addition to originations this quarter, we also invested capital in share repurchases. In the first quarter, we repurchased $10 million of KKR Real Estate Finance Trust stock, representing a weighted average price of $11.03. This raises our total shares repurchased in the past two quarters to $20 million at a weighted average price of $11.33. Our CECL reserve increased to $144 million, with two rating downgrades Matt mentioned. Our loan portfolio remains relatively stable, with 90% of the portfolio risk-rated three or better. As an update on our West Hollywood multifamily loan, risk-rated five as of quarter end, we took title to the asset earlier this month and are proceeding on our condo execution strategy, with unit closings anticipated for late summer. As a result of the assignment in lieu of foreclosure, we expect to realize a loss tied to this investment of approximately $21 million to distributed earnings in 2Q, which is consistent with our CECL reserve as of 1Q. As a reminder, our REO assets could generate an additional $0.12 per share per quarter on our distributed earnings as we effectuate our business plans, repatriate capital, and reinvest into performing loans. As of the first quarter, KKR Real Estate Finance Trust's debt-to-equity ratio is 1.9 x, and our leverage ratio is 3.9 x. Following two repayments totaling $283 million early in the second quarter, on a spot basis, the current leverage ratio is 3.7 x, which is the midpoint of our target range. In closing, we're positioned well for this market environment, given steps that we've taken over the years to manage our liabilities, including our most recent activity in the first quarter to increase and extend our corporate facilities. We're continuing to make progress on our REO assets and are supported by a deep and experienced credit team of over 110 associates and who, together with K-Star, manage $37 billion of CRE loans and are named special servicer on over $46 billion of CMBS. Origination activity is picking up speed, and we're expanding our investment opportunity into the European loan market and the U.S. CMBS market. Finally, the portfolio grew 4% quarter over quarter, and we expect to recycle capital into new opportunities throughout the balance of this year. Thank you for joining us, and now we're happy to take your questions. We will now begin the question and answer session. To ask a question, you may press star, then one on your touch-tone phone. If you are using a speakerphone, 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 Rick Shane with JPMorgan. Please go ahead. Good morning. Thanks for taking my question today. I think there are two things that are going on here. You're working through some of the portfolio issues that you've identified previously. You've raised concerns related to the macro environment. Two things. One, when you think about the macro issues, are you looking at this from a big-picture perspective and just saying, "Hey, risk and uncertainty is increasing," or are there specific properties within the portfolio that you identify as, for whatever reason, being at greater risk? The second part of the question is, given the return on capital that it appears that you're going to generate in 2025, how do you think about the dividend policy as we move through the year? Good morning, Rick. It's Matt. Thank you for the question and for joining us. I think I could start off and take both those pieces. As it relates to the economic environment, I'd say we're probably thinking about both sides of it from a macro perspective. Just trying to think through what is the impact to, really, jobs, right? How much is it going to slow the economy, and then what's the flow-through into the job market? Will it be significant? Will there be a significant impact there? Obviously, if so, that could be felt through the broader economy and have a little bit bigger impact on the real estate sector. That's probably our base case. Certainly, here at KKR, we're not calling for a recession. We think growth will slow down to somewhere between 0%-1% from a GDP perspective. We are kind of watching the broader macro and unemployment pretty carefully. I do not expect that to have a very big impact on real estate because values have obviously declined a lot already. From a supply perspective, we are getting through the big supply wave. We all know construction starts are down across every property type, somewhere between 60% and 70%. I think that is why in our opening remarks, we make the comment about real estate's a little bit different position than other asset classes. Certainly, if we are going to enter a recession and we see that unemployment rate go up, you are going to have impacts kind of broadly. Again, I think we are pretty well positioned for that. I am more concerned about what you are talking about and how it will impact individual properties. The two things that come to mind are some of the port markets for industrial, especially on the West Coast, obviously, if you think about the slowdown in trade from China. We are clearly watching that sector more. I do I do not think there is any one asset in our portfolio that we are particularly concerned about, but we have heightened just awareness of the potential market impact there. The second is just around decision-making. In this kind of uncertain market, I think you can see decision-making slow down, which can impact CapEx. It could impact leasing decisions. Some of our assets are still in lease-up mode and are looking for larger tenants and just a little bit concerned that there is going to be kind of a pause in that decision-making around some of these leasing. Those are really the two things I would say we are focused on. Got it. I really appreciate that answer. It's very thoughtful, and I realize there's no easy answer to that. Do you mind circling back on the dividend policy? I do want to acknowledge having asked the question about buying back stock for probably every quarter for ages that you guys were in the market this quarter, and I think that's constructive for shareholders. Can you talk a little bit about dividend policy in light of the ROE characteristics right now? Yeah. Happy to. I think on the dividend, when we initially cut it, we had a number of different scenarios in mind, and a big part of that clearly was thinking through the REO and giving us time to just effectuate those business plans. There's been a lot of change since we initially set that dividend, but I think when we kind of net-net it all together, we still feel pretty comfortable where we set it. Of course, it's a board decision, and we'll evaluate it every quarter. I don't think we feel a lot of pressure right now to do anything different. From where we sit, we have all that upside in the REO as well, and we know at some point in time, we're going to sell those assets, repatriate that capital. Patrick mentioned in his section that if we did all that, we could reinvest that into new loans and have it drive earnings by $0.12 a share per quarter. Even though our current earnings rate is right around that dividend level, we know there's this embedded earnings power within the company that we'll unlock at some point in time. Keep in mind that we calculate those numbers on our existing cost basis, and we think we're going to do better than that as we implement these business plans. That's a little bit how we're thinking about the dividend now. You ask about the share buybacks, similar to last quarter, I think we need to be balanced. The stock, where it trades right now, is very attractive. You saw us buying it back, and we've got a long track record of buying back stock when we thought it was trading at attractive prices. It's very accretive to our book value per share. I think we'll have to continue to evaluate that as an option for capital, especially kind of given where it is today. At the same time, and similar to what you saw us in the first quarter, we need to invest in our portfolio as well we need to make loans. We need to continue to diversify the portfolio from a vintage perspective. We talked about potentially adding Europe and CMBS to the portfolio. I think it's important for the market to see us front-footed and active, and we think the market's pretty attractive from an investing perspective. I think we need to continue to be kind of balanced as we think about allocation of capital across investing and share repurchases. Makes sense. Matt, thank you very much. We have our next question from Tom Catherwood with BTIG. Please go ahead. Thank you. Good morning, everybody. Matt or Patrick, you both mentioned Europe in your remarks, and I know this has been a target market for quite some time. What has to be done to start originating there, and do you expect to be active broadly across Europe, or would it be more targeted to start? Thanks, Tom. It's Matt. Yeah, I can take that. We've been actively originating there for a couple of years now, and I'd expect to close deals in the next quarter or two. I mean, we're quoting stuff. It's just a timing game at this point. Our focus there is really Western Europe and the U.K. I think that's really where we've been targeting opportunities. I think in the near term, we expect to add to the portfolio in Europe. Yeah. Appreciate that, Matt. Obviously, it was an active quarter in 1 Q for originations, and you mentioned the pipeline being strong as ever. With debt now up to 3.9 x, do you see originations primarily being tied to repayments? You mentioned, obviously, repayment activity tracking ahead of expectations. How much more do you think you can push that leverage level with originations? Good morning, Tom. I'll take that question. It's Patrick. Yes, we were 3.9 x into the quarter. As I said, we had pretty sizable repayments early in April. On a spot basis, we're actually at 3.7. We're at the midpoint. Part of that is trying to get a little bit ahead of some of these repayments. As Matt mentioned, deals like we're tracking ahead of schedule. Some of the repayments that we got in this quarter were deals that we were really forecasting to get repaid in 2026, and we saw an acceleration of those repayments. We'll be within the range. At some times, we're going to be toward the high end as we anticipate some of those repayments, but our target is still the same. Knowing that we've got a pretty good pipeline of repayments, we're going to be focused on the origination side and making sure that we're staying deployed and that we're maximizing earnings. Got it. Just to follow up, Patrick, on those repayments, has your expectation or the pace of those been impacted at all by the tariffs, or is it just too early to tell whether there's any link between kind of market dislocation and repayment activity? I think it's a little early to tell. That said, there are a number of deals that we're aware of that are in the market seeking refinancing. As you recall, a lot of these loans, when we initially originated them, there was typically some lease-up strategy involved. Many of those assets have now effectively stabilized. Despite the fact that you've seen this volatility in the broader market, in the CRE market, we see a lot of liquidity. While spreads may have backed up 10-20 basis points, if you think about what those spreads were when we initially had those loans as a lease-up, they're still down, and sponsors still have an opportunity to improve their cost of capital in this environment. We very much see kind of a functioning market here. is early to tell whether a deal or two gets sort of pushed off because of this. As of right now, at least in our near-term projections, we're not seeing a lot of impact. Appreciate the answers. Thanks, everyone. The next question is from Jade Rahmani with KBW. Please go ahead. Hi. Thank you. This is actually Jason Sabshon on for Jade. Thanks for taking my questions today. First, it would be helpful to discuss what about the Raleigh multifamily that drove the downgrade. Is it a matter of basis, lease-up, operating costs, location, or all these factors? It would just be helpful to get some more follow-up. Thanks. Hey, Jason. It's Matt. I can jump in. I think the downgrade, it's been on our watchlist for a while, and now we're coming up on a maturity date. That was really, I think, the reason for the downgrade from the four to the five. The reason it's been on the watchlist for a while is because we just haven't seen the ability to drive rents in this particular sub-market. This is a loan we made kind of at the peak of the market, right? This is, I think, a late first quarter, early second quarter 2022 loan. There have obviously been big value declines. In most of our portfolio on the multifamily side, we've given these numbers in the past. We just saw a tremendous amount of rental growth. In this particular pocket, we just have not seen the same amount of that in terms of just being able to drive, excuse me, being able to drive NOI higher. It is really a function of that. I mean, it is a good property. It is performing well. It just has not had that same push in the rental rate as we have seen in most other markets. We have a near-term maturity here. We will have to figure out exactly the go-forward from here. As we mentioned on the call, it could be a modification. We could go to title and kind of run the property ourselves, but we will have to negotiate that with our borrower. Great. Thank you. Just on life science, over what time period do you think the capital is patient to wait, patient enough to wait for a pickup in leasing? Due to softness in the sector, would you be able to discuss the outlook for the risk-frees? Yeah. This is why we tried to give a little bit more information, both in our prepared remarks as well as added some detail in our presentation. Most of our—excuse me—most of our exposure is kind of in these newer-built, purpose-built assets that are really targeting larger tenants or big pharma, which we do not think is as susceptible as some of the cyclical issues that the sector is facing. It is certainly a part of it, but maybe not as susceptible as some of the smaller kind of earlier-stage companies. We would expect that to come back earlier. I think it is anybody's guess in terms of just at what point you really start to see a pickup in overall life science leasing. A lot of that, I think, will depend on what happens with the tariff regime and what happens, therefore, to the overall economic environment. That'll certainly weigh on the overall sectors as well. Yeah, I think that's generally speaking how we're kind of thinking about it. In terms of the three-rated loans that you asked, we've modified a couple of those already. Kind of have dealt with our sponsors and getting them to a better spot. As I just mentioned, about half of the three-rated loans, we have three assets that were construction loans. We still feel pretty good about those. Those are built now and are mostly built in just the lease-up period. Just given that they were new, the quality there is very high. We think it's just a matter of time before it attracts the right tenants. Great. Thank you. The next question is from Steve Delaney with Citizens Capital Markets. Please go ahead. Thank you. Good morning, everyone. Look, applaud the buyback activity, of course. It would seem it's even better today after the 15% or so decline after tariffs. What I'm really intrigued by is we're going to be on a lot of these calls in the next two weeks, and I don't think we're going to hear a lot of commercial mortgage rates talking enthusiastically about new lending opportunities. It feels like we're still in more of a defensive mode, just in a broad sense. I'm just curious, Matt, as you guys look at sort of the menu of new opportunities, I guess first question is, what is different in either the quality or the pricing, the return profile? If you look at today's opportunity set versus what you've maybe seen on average over the last couple of years, I'd love you to compare and contrast that, if you would, in terms of the new opportunities on the lending side. Thanks. Thanks, Steve. Thank you for the question. I think you have to start with basis. I think the biggest change right now is just the opportunity to lend at these much lower valuations. You still have real estate values somewhere around or below replacement cost. When we're lending at some discount to that, it just feels like this vintage should be very safe from just an overall basis perspective. Of course, that translates into cash flow and debt service coverage and other things. The first thing I think about this vintage is really basis, and that'll translate into this vintage and the safety of it should be quite strong. That's probably the first thing. The second thing we're seeing is there's more opportunity in less transitional assets. Let me explain that. I think I mentioned this on maybe our last earnings call. If you think about what we were doing in 2021 and 2022, a lot of it was lending on brand new assets that had just been delivered in their initial lease-up period. A lot of that was multifamily. We would be lending at a 10% occupancy or 20% occupancy and providing that bridge to occupancy stabilization and burning off of concessions. Fast forward to today, we are lending on what I call we went from kind of a transitional lender to an almost stabilized lender. We are lending on assets that are 90% leased, and maybe there is a little bit of concession in there. The vast majority of the cash flows are in place today. All we are doing is providing our sponsors a bridge to a better capital markets environment and maybe a little bit lower interest rate environment. As we all know, just with values down so much, I think many institutional owners, they do not want to sell right now. They hold out another year or two or three. They are going to get into this supply dynamic where they are back in the market raising rents pretty substantially, and they can kind of dig themselves out of a basis in 2021 that is just not very favorable today. That is probably part of a big change in terms of the business plan that we are lending on. Locally here, and I do not know how long this will last, there is a big opportunity in sizable transactions. As we mentioned in the prepared remarks, with the CMBS market having widened much more than the loan market, we're seeing a lot of sponsors coming to us and say, "You have a $500 million loan, a billion-dollar loan," which should have been SASB or should be SASB issuance coming to us and saying, "Can you guys help with this? Because we don't want to—we don't know what's going to happen tomorrow, and the market's volatile in the CMBS market." That is kind of a local opportunity that we're focused on right now. Again, I think that that market will heal and be more effective as we kind of progress through the year. Lastly, I would just comment that one of the big changes in my mind from pre-rate hike inflation pressures to today will be how the banks participate in the market. They've always been kind of loan-on-loan providers, but it is much more pronounced now in terms of just their willingness and their focus on putting some of their capital into these loan-on-loan facilities, just given how much more capital-efficient it is for them, how much safer it is for them to lend to other lenders than it is to make a direct mortgage loan. I don't want to make it sound like they're not going to continue to lend on properties, but we are seeing that allocation shift more towards loan-on-loan facilities. I think that'll be another, on the financing side, I think that'll be another kind of, we are seeing that as a kind of a meaningful shift from what we saw before. That's really helpful color. Are you seeing—obviously, you have development-type borrowers who are out there, new projects, developing new projects, and you make them—there's either construction loans, and maybe then you flip it into a bridge. Are you seeing new equity coming in from institutional buyers where they're seeing projects where the potential value is much greater than where the rents are today and where the basis is? I'm just curious how much of your new financing is going in side by side with new equity into a project rather than you just refinancing the original developer? Yes. Our pipeline and our activity is still heavily weighted towards refinance. I guess right now, if you look at our pipeline, it's around 70% refinance, like 30% acquisitions. That'll slow down a little bit just given the market volatility here since the tariff increases. Historically, that may have been 50% acquisitions and 40% refinance. It's a little bit turned upside down there. As it relates to the construction side, and I know you didn't ask this question directly, but it's probably somewhat relevant here. There's debt capital available. You can go get a construction loan. We're making one right now. In the fourth quarter, we did a big data center loan. You can get it. You can definitely access the financing markets for construction. The challenge is the equity. I just don't think it pencils out very well right now. You have a scenario where costs are increasing with tariffs. It is going to get even more difficult. I think when you talk about the 60%-70% decline in some of this construction, maybe early on, it was driven by debt and lack of availability. Now it is just the equity math does not work from a yield-on-cost perspective. Got it. Okay. Just the final thing for me, obviously, the tariffs kind of discussions kind of do a wrinkle into the stock market broadly. Certainly, that hurt mortgage rates in the month of April, for sure. Given that the stock at last night's close, $9.28, down about 15% as a result, I think, largely of tariffs, I mean, should we assume that if the buyback was attractive in first quarter, it's even more attractive to you and your board as you sit looking at the stock with a nine-handle or so? Yeah. I mean, similar to the question I asked earlier, I do not think our view has really changed that much. The stock has come down a little bit. It is certainly more attractive from a buyback perspective. We need to be balanced. As we approach the market, we need to invest capital. We need to diversify the portfolio. We certainly feel like we have ample liquidity right now. We will take a balanced approach to that, excuse me, a balanced approach to allocating that capital across the buybacks and the new originations. Got it. Really appreciate your comments, Matt. Thank you. Thank you. Again, if you have a question, please press star, then one. Our next question comes from Don Fandetti with Wells Fargo. Please go ahead. Yeah. With repayments coming in a little bit higher, how are you feeling about net portfolio growth? I know you're sort of more on offense now. Do you think that you're in a situation where every quarter through 2025, you're seeing a little bit of portfolio growth? Don, this is Patrick. I can take that. I think that as we think about the rest of the year, there's probably some incremental growth that we can have. But we're getting pretty close to, I think, what's our target size when you factor in our leverage targets, the capital that we have here. I think just what you'll see, though, is us looking to, as we've said, kind of match those repayments. If those repayments start to kick up even more, we'll accelerate on the origination front. I don't think there's a lot more incremental size because we're kind of approaching our upper limit of our target leverage. Got it. On some of the originations, the multifamily this quarter looked like the spreads were in the 230 basis points range. Are those sort of—what are the leverage returns on those loans? Are those examples of that more stabilized type lending you are seeing? Yeah, Don, it's Matt. I can jump in. I think our weighted average spread was a little bit more than that, like 277. The market got as tight as probably that number you were mentioning, like 230-240 area, again, on those mostly stabilized leased multifamily assets. At that level, our back leverage had declined. Spreads had declined there as well pre-tariffs. We were on the tightest end, probably like 11%-12% type of IRRs there on a gross basis. Most of the stuff we're doing is kind of north of there. There's always a range, right, as you kind of portfolio construct and deal with different risk profiles in the market. I'd say most of what we're getting right now is centered around that 12%-13% IRR when you start to think about embedding the fees and things like that. Got it. I just wanted to go back on life science a bit. Appreciate the disclosure. I guess, is this a situation where you could see a significant amount of these loans migrate from three to four? How do you think about values on these assets? They're probably a little more unique than a multifamily or industrial. I mean, do you expect—is it harder to kind of triangulate value on these types of assets? Yeah. I mean, just given the lease profile isn't as granular, right, on the multifamily side, certainly, there's more of a timing element to thinking about value. It's not our expectation right now that these would migrate from three to a four because either one, it's already been kind of modified and kind of adjusted. Or like I said, just the quality of the assets out there, for the most part, our sponsorship is very strong. If you look at these locations, we're kind of like Main and Main in terms of where you want to be in some of these markets. We're in Cambridge. We're in Seaport and South San Francisco. It's certainly not our expectation right now that we go from a three to a four or put this on the watch list. They still need to get leased up. There is risk there. And there is some level of uncertainty, especially when you kind of sprinkle in this type of economic environment that we are in. Got it. Thank you. Thank you. This concludes our question-and-answer session. I would like to turn the conference back over to Jack Switala for closing remarks. Great. Thanks, operator. Thanks, everyone, for joining today. Please reach out to me or the team here if you have any questions. Take care. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.