KKR Real Estate Finance Trust Inc. (NYSE:KREF) Q3 2023 Results Conference Call October 24, 2023 10:00 AM ET

Company Participants

Jack Switala - IR

Matt Salem - CEO

Patrick Mattson - President and COO

Kendra Decious - CFO

Conference Call Participants

Sarah Barcomb - BTIG

Stephen Laws - Raymond James

Don Fandetti - Wells Fargo

Jade Rahmani - KBW

Rick Shane - JP Morgan

Steve Delaney - JMP Securities

Operator

Good morning, and welcome to the KKR Real Estate Finance Trust Incorporated Third Quarter 2023 Financial Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note, this event is being recorded.

I would now like to turn the conference over to Jack Switala. Please go ahead.

Jack Switala

Great. Thanks, operator. And welcome to the KKR Real Estate Finance Trust earnings call for the third quarter of 2023. As the operator mentioned, this is Jack Switala. Today, 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 provide a brief recap of our results. For the third quarter of 2023, we reported GAAP net income of $21.4 million or $0.31 per diluted share. Distributable earnings this quarter were $17.4 million or $0.25 per share, including a write-off of $15 million or $0.22 per share. Distributable earnings prior to realized losses were $0.47 per share relative to our Q3 $0.43 per share dividend. Book value per share as of September 30, 2023 was $16.29, a decline of less than 1% quarter-over-quarter. Our CECL allowance decreased to $3.21 per share from $3.30 per share last quarter. Finally, in mid-October, we paid a cash dividend of $0.43 per common share with respect to the third quarter.

With that, I’d now like to turn the call over to Matt.

Matt Salem

Thanks, Jack. Good morning and thank you for joining us today. The portfolio continues to benefit from the higher interest rate environment. KREF averaged run rate distributable earnings of $0.48 per quarter throughout 2023, excluding realized losses. KREF benefits from KKR’s large real estate team with access to real-time market data across our $64 billion equity and credit portfolio. In addition, KKR has a dedicated rated special servicer and asset management platform called K-Star. Started in 2022, K-Star has over 45 people and $40 billion of special servicing rights, which enhances our market connectivity, gives us real-time performance information and enhances our ability to offer differentiated high-quality service to our borrowers and to drive asset management outcomes.