Good morning and welcome to the KKR Real Estate Finance Trust Incorporated Q4 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 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. Great. Thanks, operator, and welcome to the KKR Real Estate Finance Trust earnings call for the Q4 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. For the Q4 of 2025, we reported a GAAP net loss of -$32 million or -0.49 per share. Book value as of December 31st 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 Q4. With that, I'd now like to turn the call over to Matt. 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. This transaction, along with subsequent European investments in the Q4, represents an important milestone in that effort and positions us to capitalize on relative value across the U.S. 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. 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. 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. Looking at risk ratings during the quarter, 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 the quarter. 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 the Q1. New originations in the 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. 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. For the full year 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 Q4, 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. We will now begin the Q&A 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. 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 REITs, are you willing to take an approach similar to what ARI announced last week and look to revamp your business totally? Hey, Tom. Good morning. Appreciate you joining us, and thank you for the question. I guess a couple of things there before I address the ARI transaction. I think, first of all, we've made a lot of progress on the REO, which is 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. The question you're asking, I think, is a good question, and it's 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. 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 business plan. We've got our strategy, and we're really focused on implementing that. Appreciate those thoughts, Matt. Maybe sticking with this 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? 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 multifamily deal on there. 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 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. 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 follow along, we have a number of assets. Excuse me, page 15. We have a number of assets that we put in this 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. 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 of the life science, right? So we've got the Seattle asset, and we'll likely go to title on our Boston loan that'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. 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. Appreciate those answers. That's it for me. Thanks, Matt. The next question comes from Rick Shane with JPMorgan. Please go ahead. Hi, guys. Thanks for taking my questions. When we 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. 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? Rick, good morning. It's Patrick. I'll take that question. I think in terms of specific numbers, I don't have 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. On some of these other assets that are on the watchlist, and you can 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 what I would say on that. Got it. Okay. And again, I assume, look, you guys talked about dividend policy, and I heard what I would describe as 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 some gauge of sentiment. Rick. It's Matt. I think that's a fair articulation of how we're thinking about it now, which, as we l ook 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. 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. Thank you. The next question comes from Jade Rahmani with KBW. 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 KREF is originating seems to be stronger in the private credit market than the required yield that mortgage reinvestors 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. 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 KREF trading at this very sharp discount to book value. 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 just wanted to get your thoughts on that potential pivot and if you see that as something management might undertake. Thank you, Jade. I t'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 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. When I think about something like Mountain View, 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, "W hat about performing loans? Why not go and sell those?" And certainly, we could add that and continue to evaluate a performing loan sale. 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. 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. 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, 5+ 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? 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 five 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 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 we'll see how that plays to 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. And in return, we'll likely have to do some type of hope note around that. I don't want to talk specifics as we're in the middle of some of these negotiations right now. 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. 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 want to piggyback on what's been asked already, but 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 g et an angle as to the true value here or value creation probability if we take a little bit longer-term tack. Thank you. Thanks, Gabe. Appreciate the question. S o 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 see early signs of it. 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 we 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. 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 our peers as well, I think, are 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. Thanks, Gabe. Again, if you have a question, please press star, then one. The next question comes from Chris Muller with Citizens. Please go ahead. 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? 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 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. And again, I'm not sure it's directly related to rate cuts. 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. Got it. That's very helpful. That's a good segue into my next question on office. You touched on this a little bit, Matt, but we haven't really seen many new office loans in recent years. Can you guys just talk about your view on that sector and what makes an office loan attractive these days? 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 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. 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 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. 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? 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 answer to 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 may be the missing piece to that puzzle there? A s we liquidate REO, we'll be able to increase portfolio size. It would be the other piece of that as well, you're right. Got it. Appreciate you guys taking the questions today. We have a follow-up from Jade Rahmani with KBW. Please go ahead. Thanks very much. On Mountain View, could you quantify how much dollars you expect to put in? And do you see potential gain there? Hey, 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. 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. Just if you can comment on that. 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 three-rated loans, to be clear. You called out some of the Dallas assets. I'd expect those assets are perfectly fine. And we have D.C. 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 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 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. Thanks very much. This concludes our Q&A session. I would like to turn the conference back over to Jack Switala for any closing remarks. G reat. Thanks, operator. 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.