KKR Real Estate Finance Trust (KREF) 23 Jul 242024 Q2 Earnings call transcript

Good morning, and welcome to the KKR Real Estate Finance Trust Incorporated Second Quarter 2024 Financial Results Conference Call. [Operator Instructions] 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 second quarter of 2024.

this Switala. mentioned, operator the is Jack As that Today, Matt Patrick Salem; on the financial which are to are remind of Mattson; the non-GAAP to our CEO, Relations in call call, available GAAP the supplementary our which and by everyone to portion earnings our on release like our Kendra I'm in will CFO, the refer website. certain joined presentation, measures and figures Decious. I'd we on President and reconciled our both of Investor COO, This do call or statements, will also contain certain performance. not forward-looking which events guarantee future Please refer factors recently XX-Q related for to cautionary our most statements. to these filed

the brief over results. our I Matt, I'll call recap turn of provide a Before to

prior of quarter or earnings to share, increase For of million, share. XXXX, share. $X.XX Distributable negative $XX.X quarter-over-quarter. per share as were including per $XXX or $XX.XX, were the negative June quarter net Distributable $X.XX million, realized earnings XXXX, second Book per $X.XX $X.XX $X.XX to this of million, dividend. an we representing $XXX.X or reported QX of share our was realized per losses value losses $X.XX income relative GAAP of XX, share per per

to Matt. decreased Our CECL call like now share realized $X.XX from losses. With I'd to quarter, per per allowance $X.XX primarily share last that, by the driven to over turn

thank for us joining you and today. everyone, morning, Good Jack. you, Thank

begin with these came equity market out largely slowly Within is volume with investor is is dormant. increasing inflation since levels. value-add equity types commercial Before most turning reacted in albeit income appear real signaling property level brief to lowest core quarter Transaction core for Fixed pools estate, capital and to KREF's lower more the of XXXX, opportunistic a present, second have demand and and subsiding. to bottomed from values at In like positively. at mid-July, I'd update. results, U.S. markets CPI that most

starts may over lead years. lower new next increases few largely have construction the imbalances to rental While subsided, supply-demand

flow per well costs. benefit On side, originations lending basis debt, the of new replacement unit LTVs, cash and more a from lower below

these Given lending real expectation very will that of vintage this strong factors, estate credit. be our a is

We continue the transaction remains attractive the represented and market, XX% as bank volumes muted. normalize will while think today, accelerate that Banks activity come opportunity, their to expect and market materially. down historically to of participation we

dynamic that the from direct will is guess facilities. to an occur months of few XX opportunity with shift turn to KREF to we best banks opportunity and to in over next step demonstrating Our resume This lending U.S. the over of look the originating will bulk to origination offense XX a next preference the present months. as are loan-on-loan mortgage quarters. Notably,

senior market. for financing readily our available the to So return as investments we is

real as our $XX KKR's real different we estate special KREF of securities servicing K-Star sits and first As that of investing, origination of and capital and across both platform. debt manages billion broader credit, pockets management within across have number mortgage over well a reminder, capital business estate asset equity as globally. Within a

our from strong investing and relationships. us private active client funds market allows actively debt bank which the is individuals our stay service XXX SMAs, over in of and insurance team Our and to

alone, investment over activity. are converting estate quarter over billion, we $X.X pipeline And robust, the over pipeline year's In credit $XX which to real our credit we complex. second up real own is last billion Our average. across invested totaling is compared weekly the estate XX% into

to of prior Now, KREF's results. distributable our losses comfortably turning dividend. our realized $X.XX $X.XX covered share quarter to per earnings second

In which prior under the number believe cover loan different we be while to losses we with of of portfolio at higher realized REO, continue As year, for and we was significantly a watch to losses, our the set us earnings X completed can our stated DE distributable performing transition loans with we important ex-losses dividend dividend. This we reserved. earlier as realized list than scenarios. level to quarter to we we this an our near we term, expect appropriately were a

in transparency with led and have KREF has We remained reserves. CECL adjusting disciplined

Importantly, we quarter. second value grew did end list Book $XX.XX $X.XX per any not have watch share of migrations negative the by the to quarter-over-quarter quarter. this at

delever the we to leverage last one the declined target reduction loan with fundings current the loans have strong repayments X% of allowed of portfolio. received four repayments X our quarters. of the have fundamentals. with including of to also balance business, we X are in current us four repayments hospitality, quarter, line million with in property This was our $XXX across Future approximately have credit in industrial, a X.Xx across classes million. Repayments real funded multifamily $XXX funding sheet X-rated asset previously $XXX loan on with leverage. Within exceeded funded pipeline, favored for now loan. a million estate types, full Repayments net with obligations of focused -- which and We in principal

resilient long-term with multifamily Our rent increases average weighted tailwinds. and is performed note, X.X% of has our portfolio current KREF property with types portfolio To year-over-year. well industrial, XX% multifamily

Science robust the of our other of comprised we with $XXX given in the million and up is In Boston science loan terms Francisco, in there loan of availability, deepest trophy from and exposure tenant technology located decreased is sequentially demand has around while remain types, in the estate. KREF this of new half of Life innovations currently sector, our property portfolio in liquidity quarter. and San with the real prior sector markets positive

Capital With termed No diversified billion completely capacity. debt out secured is and or the only. total $X.X XX% well. final of our we've the XXXX. with and KREF mark-to-credit balance totaling structure financing sources Markets, $X.X remaining maturities billion -- its has financing structure with of corporate undrawn of as non-mark-to-market, facility is built a debt KKR assistance until

the modifications, over induced long shareholder the have order any funding We've anticipated, liquidity us is transparently. give and to how Fed watch loans, by hiking ample work-from-home to full a target reduce value range. the long-term significant issues list portfolio leverage with and foreclosures, DPOs, repayments REO create step been to may Leveraging able cycle. to we've optimizing We've With our the approaches including our to in the of noise our back value exceeding the reduced as in the within breadth despite discuss mindset dividend always dynamic We've it near-term positioned. and stress our portfolio. throughout. Now, platform, the maintained working to of cause. We company the time taken in we KKR come want approached proactively various our ratio out I the through take a and way

edge can't of to woods woods of looks see we're say like I and at a proverbial half we're discuss year. offense in the While the think of what starting light. do to to that the the return I the second out To end, begun yet, we're we've the

value over the are to We market. With thinking management experience access of our evaluating KREF the all Real call our KKR across turn to Patrick. of platform, our return tools over Estate today's team and to broader and our years maximize navigate challenges XX to that, I'll to the collective relative options shareholders. With continue leadership has the through for and asset

quarter, in begin There reserves driven to decreased primarily no Matt. quarter. losses $XXX watch you, our by everyone. or the CECL X.X additions with and the allowance million, I'll now last stable risk loans list. X.X the morning, the updates $XXX of on portfolio average realized to by is the to to in remained The portfolio list better. risk Good compared rating watch X XX% million Thank is were CECL and our ratings and rated the remaining weighted portfolio. risk on over

list have and discussions sponsor to we'll on the the Life continue Science those with We update loans manage X-rated remaining proactively the loan, as everyone begun proceed. and watch

selling XXXX, our For became within in X portfolio. late REO we asset quarter, of X the that this properties in the Philadelphia succeeded

have stated we parking previously, assets well. comfortable sell property those and holding As garage X are discussions as the remaining but office to in longer-term, we're

a call, Class office Science A deeds-in-lieu Seattle last in and and title took in Life June, Mountain in property California, a of projected A mezzanine a office off loss As loan less we the View, recorded campus CECL for This than wrote million. combined these was to previously in had foreclosure, in Class X loans. $XXX we Boston resulting realized million reserve that loss was deemed amount a $XXX approximately through actual uncollectible, of

With of assets we're these View properties transfer complete, for long-term Seattle full breadth the Mountain the to the work KKR and beginning platform. position using of the success to

upon to portfolio in to We on equity $X.XX or shareholder Page will on quarter. Details we believe monetization $XXX in distributable supplemental. approximately assets, remaining maximize the capital $X.XX our REO share, aggregate are of per reflected can portfolio, of net and the per our share reinvest additional earnings generate million which those REO future an our currently per XX value represents of manage

to portfolio the On financing continues be the over fully side, XX% of non-mark-to-market.

outstanding CRE continue of full year. X with leverage KREF loan no capital. perform are delinquencies Our CLOs with for tracking well, the Repayments cost $X accretive attractive and providing billion above to

has future obligations negative by throughout Repayments able quarter. million an during share liquidity million. With substantial no increased of in this the in funding to $XXX was incremental the of total position a $XXX increased quarter future the KREF to In addition and value our received $XX.XX. the paydowns and summary, $XXX reduced over are X.Xx X.Xx, migrations book financing remainder ratio this obligations, reducing outpace ratio the to debt-to-equity credit XXXX. In $XXX to had second We've the have leverage repayments KREF quarter, million. and respectively, over $X.XX quarter, in to $XXX to per received funding during to that projected million repay million July, we year-to-date quarter, bringing

we well the year. Thank the us the the we KREF back for real going feel we constructive have within today. half are positioned made portfolio confident lending of seeing that Given is progress backdrop credit, you estate into on the and joining

to we're questions. your happy take Now,

Stephen question is Raymond [Operator Instructions] The Laws James. with from first

looks a like the on it second print done you Congratulations in and got a quarter. nice lot

the about talking like think, discussion. outlook about Patrick, I leverage. Matt, that new for repays originations. to outpacing new shifting offense commented to I kind followed with first, I'd think, having and of up investments you start you

it have think more or should being competitive off lift type type size eligible then loans you a opportunistic to their are the the How maybe do coming And see collateral? at kind you troughing in higher strong moving you looking leverage think financing and of CLO we that stuff, in do just bid have look So, Or pretty about offense, at that that the next more returns? assets given -- more growing construction we portfolio year-end heavier at for as about quarters? year?

the that. for question. It's Stephen, Thanks, can Matt, take I

years, of leverage Xs which is going same perspective, really a our we're been over has last maintain think to the leverage from I target handful high through that range, leverage. the which

So, redeploy. have and, of we there, I increase think the kind additional we're to overall obviously, going of start look equity but we to we'll can as to don't portfolio, repayments leverage the get

In we've what looking of to we're terms done to we're that similar past. in the things at, stick going

activity well industrial, of right property team as focuses an increase a -- up center couple the equity team fully as real our student. footprint favorite seeing us types, over our us last for of in Europe that So, in Europe. stood lot We've the in on integrated that's with We're opportunity to data Western There's a London predominantly estate years. multifamily, well. space opportunity now

certainly, the well. on expansion is geographic table So, as a

the really about the tends think think to an most When to a pulled the capital bank I board construction more they've across focused, as relates even there's dramatically. but lending, and banks less market back more in do construction, which from more they it be opportunity the As it's of kind it's bit you that for and retrenchment, acute of efficient part capital there. little become

be a to portfolio that going the dollars Obviously, area our So, to with of future lot some in comes certainly of immediately. But, it's that to little balance funding to and allocated a opportunity. could that you we'll an at. ground that look continue think, get percent have don't bit. We're I

of kind X Great. watch And When versus at do across of reserve, the portfolio? the one. look list you that Patrick, percentage the roughly the you of what loans allocate, other or parts a quick CECL

might continues the That's true you to Yes. true today. thanks watch as list and loans the of up that tend for We it, majority over the last be Stephen, the question. been about several quarters CECL. to think make the expect

And then look think you Great. pass? watch I one sneak in And REO at which When if then which lastly, resolutions in. longer-term can the assume list assets, year? the the X be I them, X may those half have this resolution the of more remainder second do of of loans, you would

X-rated the mind, you list loans, loans. one first think I that think to -- yes, Science watch is existing our I comes the if at look Life

Patrick As entering mentioned, sponsor that. a with on discussions we're

we'll the hard get It's to conclusion So, the my X. time that always or over over some quarter these. guess is back next --

on You of office exactly long unclear it's X those never the course, time. going expect -- again, asset, this at loans we those sell our how list -- on for Philadelphia of year-end in by likely independent watch and know remaining take. And at then, our properties remaining the we timing to point to

the But it certainly the And X Some really in transitioning lot continue can question last down material property is by loss The category. is loans from vast majority discussed And real if could in of XXXX. quarterly sector? of certainly that you pretty we recall while loans there X. The liquidity there break is, a there, go continues seeing, to on be little or noise be solid. those to the of are again, X type can what multifamily. what in we're content and bit the from be to there remaining there I multifamily to performance into call, a

any so in material in we're not real losses type point this property multifamily the anticipating And at time.

next with from Rick The JPMorgan. question is Shane

well same this you if in property along curious concentration you I'm way geographic the really I curious, in your costs shift would -- would expect to some with same look, when guessing. vein. -- to regions, if look California, on to the I'm concentration you Steve a ownership I'm aggressively because we as at the to see with property queue of lesser extent, the in evolving as before Florida. Texas, it's of type as distribution in to on way sort geographic And shift move keep associated side some opposed little side? describe continue clearly the need at exposure, Laws as those that point, I offense But

Yes. been of question. in shift how you about geographic bit do there's how invest distribution the for the portfolio of Thank forward. we Matt. of going and It's think would I little a we think the terms

just highlight, things think would is around which X I one I the that of you especially costs, insurance. mentioned

states So, we in have material insurance like a costs seen increase pretty Florida, there.

little So bit more that's making market us that carefully. certainly a evaluate

of supply, is have levels that second these highest a We've demand thing multifamily The supply seen there's seen. markets in. we've coming number that watching for of the of we're and sunbelt ever a lot really

markets. demand. a We are cautious So a we're lot there's of do the that is that time, being reiterate met are cities at certainly loan major bit more an to lender. lender, just want a we on But that with But same institutional we focus I little strong today. on some the large

where populous Within the be there's So continue the have kind that we're to transparency. really we'll XX it'll Within a lender. market -- and areas kind of is XX top of most in top liquidity winning preferences, our lender. but that, focus some most

sort which your during resonated something with original Got comments. And interesting, you brought of had it. up me

to in slowdown you we sort demand to trends that that of seems be the constructive talked sort supply-demand is When see do the really the shift crest, fact yours. apologize. reaching word, to That's of favorably. coming can my given fact you to new about and strong, on those just equilibrium. you new still is the multifamily supply that so you And the You not of a expect continue supply I very think But also online. -- construction? alluded sort start

market dependent, some not Yes, are dependent it's it's market well. submarket what it's dependent, as but think very people and only I missing,

But a number look a be your by question do there's to market And at low -- to to at answer be the have look extremely months, months next over measures, delivered level concentrated at ways hard new But will market. the but lot most that you X into coming new I get levels. start a where can of Phoenix, is we're like submarkets. starts. supply it of think historical high in very X can most in, it's in it the to certain of

time And supply as see client market, so, seeing our will real from People investing and even X-month that investing supply-demand digest our looks market the and that But most tighten X-month side. up, come a levels equity XX, through in intermediate the that are our about and we're out own base, to in. what thinking it XX past take and very absorb to looking to that equity months investors period continues across we business, the current the market opportunity. on it in will good in the the of supply recognizing should markets now be like estate will

Fandetti from Fargo. question next The with is Don Wells

picture Yes. If how coming begin of hang expect out you willingness the on can you think on that or an the paint in, borrower Fed a this capital properties edge? you impact terms play are cutting, sort of does marginal to will of to Do spreads, there? in series

and Don, can with start, it's Matt. I anything here. Patrick miss I jump maybe in

belief Fed it's transaction change as prints, different lead cut. prints think much sentiment volumes. is been do As higher my when actually statements, there's through to And to inflation or a it start telegraphed they will I economic

set much little as start coming get legs people their and to going there of to market. the sentiment driven a how by in are improves, get to transaction going will going be just bit down really capital opportunity mind, -- my You're And in is sea cost more bit. is little volume a clearly the

more for employment think I cutting issues GDP cutting inflation environment because just and not we're and So under a where when issues. control about we're is Fed or

not it that think as increase, volumes impact will dramatically. transaction spreads I

the widen have unchanged, start volumes a not of more being largely the a feel we think normal full the being absence because environment, you lending down spreads don't can there's be of -- to given banks to I'm if we even yet. percent, knows felt get will in you to they banks there's where the credit transaction they the just widen absence going where believer as you value transaction the space. of like. just set. Even and in real a into of that firm one XX% don't are opportunity lot you a world scenario banks estate I and XX-plus very could enough not our no spreads looks And be if the a spreads think to exactly those how meet of presence what certainly capital the of relative because imagine widen, large banks imagine market, going But are I that

there we of pretty to get so as couple a a be investing should over levels. of little And years market good normal bit next the back

So thinking how bit that's little about the a here. opportunity we're market

few Got provision that X and need lower to X lowest about you [ was it. where How to years. of And at that's I last I probability. that in you then, ]? a are the you're guess, the this feeling be the feeling comfortable you're point, the migration guess,

initial it come But or through the many cases, bulk we're economic issues feel we're next happens As will in. environment not of in of like I A kind comments, handful out said quarters. been been that what's the hard to the been the liquidated. by over REO of now, reserved identified, yet. in what the they've they've be for, have the driven of to living predict lot woods It's does

there challenges that it it. we'll here I loss particularly relatively a not through I from there'll we'll around, issues content, are here be feel and and we've perspective, say focused it's things that think just but so be loss there's our expectation And But come there I don't pops want is nothing contained but majority ahead to concern from a and there. of Obviously, us. that to on there's like it. And it have we'll in of sure again and so, to don't vast up any have those I'm multifamily still there us, react big out, pure think does

Jade The with next from question Rahmani KBW. is

you exceed will ex-losses DE proceed expecting are the you dividend, about the loans? upcoming comment the losses list through watch as In

could negotiations still mean, number of some, we have a Well, obviously we're Jade. I in on these.

happens So, I individual to get and these how those. see negotiations kind the what don't we think to of of -- end with have we

Science list that And watch is certainly realized or So in I there is component result the increased it our reserves of but a on asset, portfolio. losses could again, think, most portfolio. on of Life the focus

of to Life standpoint On the to the the assets terms you side, expect REO from on contribute of for is any for expenses? Science, those those will attracting to in carrying amount can the an capital be -- just talk outlook losses you tenants? Seattle generating what parameters if earnings assets, And specifically the around some

Jade, I'll it's Patrick. take that.

at specific this nothing So, moment.

outlay the plans, the through of We through several over what be are going business that quarters. a lot might next working capital

quarters I guidance specific would we'll anticipate but at the nothing that further around in that So, have coming the moment.

at I deal, I think, really and we've Seattle, starting to Mountain guess, challenges some that have moment. sort real don't definitive estate, that view good the with of of high-quality those a got a we're leasing on markets. active real we're timing the lease-up with is but View to But we so regard estate the similar experiencing in market in

updates markets sort the real report our broader look and management we'll asset sort coming further coordinating but in to And these our obviously to of estate with nothing across have of are teams now. right specific quarters Our team. in equity

of slowed CECL terms rate and reserves has In of of of the beyond as watch just the the slowed loan assets, rate modification rate has listed well? down modifications,

Yes, certainly.

lenders? Are I acquisitions the How characterize $X would you if existing lastly, deal flow? color, you refis of billion-plus could credit the KKR provide other they was wondering some far. deals opportunistic? deals so new of on Are just from Matt, these then, And

Sure. Jade. to, Happy

terms fund it across reward everything. as billion. really profile, really mentioned, of does at our stretch lending in behalf on across And $XX look mind, I risk it's and we're so now, debt you capital, capital, keep in If right bank -- capital, of our business, it pipeline insurance

investing our have steadily also, at this the course but translates the of seen months. through pipeline, call it activity increase requests refinance, the heavily is and weighted of the you some we acquisition still of If over of to last, towards it the X context look amount

Historically, it's I of is XX% Now our just around that pipeline have under would running, overall been think, half. acquisitions.

out digits low like so it just double gives I last the at some direction of year, bottomed you think it of context the travel.

other about again pipeline and excuse seeing that a most little our it's half We're insurance that's for in than that's of in more for over is thing increasing half floating pipeline last capital. X portfolio steadily request our The half is the rate been of we're biggest bit a request. pool fixed, request our rate me, months months, now to of or -- floating fixed capital, our versus active our X

in of activity also more obviously But KREF lot opportunistic the that would done insurance a of business. a So deals in number that as we've is participate well.

question next Steve is with Delaney from JMP. Citizens The

attention morning. actual the positive also the you reaction, equity you've dollars back, want congratulations that management. progress Patrick, on this made and quarter the looking at KKR in made some and you some you side, have under Matt, you market I people's about the comments property Matt from got on take to

really from in opportunistic materially that characterize we you terms you real REO of the some to in is buyers I as of would of core and values really the the properties improve kind in what what need more think, there? estate we as you're forward? core not property and to see coming And change heard potential that cap I -- to that money, equity that -- you're What rates has move about you say the come investors. flow the talking money seeing your

is we've are mean, sidelines, have associated replaced of there's clearly lenders, the the market debt broadly when that. by seen largely like KREF the think from Thanks cost whether a side. Yes. a cost the or higher of the capital. being questions. for what on I Yes, I that's lowest with cost in capital, lenders Obviously, alternative other banks if that's the they

not a plus a as a discussed Yes, remarks, are value-add are, side, the the cost market, or of in question some equity on On just on the slightly REITs capital unreasonable. In you've being properties my Odyssey the low Xs. sellers the And all really but sidelines drawdown buyers lot the have said, core available mind a it's then handles opening cap we at the or almost the of bit you funds of who who seen little funds. still seen some multifamily opportunistic is capital, have right of now. That buyers of trading today's the very are? X in higher We've cases. rates non-traded

those values we versus mind, my compression can in so, in unreasonable market there not the of this of And some the But complex, get start fair treasury increased core amount capital are a returns. certainly be to and if online. back

to but portfolios time lot to due look And of back time to what's markets of real on making That is negative issues little other sentiment think, capital and in find of relative heals value. Real people losses pull where rate you estate in clearly, some a is office these a in that estate and with is largely are the there right opportunities, the the its and to from world. of versus through now. some take creating and will attractive market. negative at and very it's going get And you it portfolios out money equity environment. world the that way value. think I bit debt sentiment at sentiment is relative a in -- what changes trading, efficient, And, look with credit And of I and start going living are alternatives. that real corporate looking going estate some to very is the

you this really but they on, real for bridge on terms That's improving you're loan Is banks helpful. referring the is not transitional real And that estate you I'll somewhat? that will Is portfolio, market. it -- got loans possible of can back. XX% And bridge think broadly, of also mentioned it on that certainly ROE be like your lending assume have pulled I reasons to on as banks transitional were or before financing, broadly your do the going bank is could and or That's play estate equity it your as out If possible, come think whether are the pricing, my as final possible get it it ask question. well, you say there. ROE, then you first me whatever. improve that's thing, to it it going as ask of a on or you your the -- forward can you good let environment we your your market, possible we've it's regulatory levered was I

you. it's say very slightly the in returns of environment, I around historically about to about we're many and This do -- -- And in lower that, at at to replacement valued to costs. replacement talking lending lending set, if apples-to-apples of we're a what hard opportunity vintage basis lending of so cases magnitude cost, we're think XX% credit higher about be safe would XX% When then done we've replacement all or we're real the going at part of a apple most should today. because loans. seeing is low again, the cost. comparison the by be Thank portfolio a estates basis trading you're XX% than in below I now, the right first like volume is

So, my first is just safety.

than today an it basis it to points incremental we is, in 'XX. terms yield and doing better basis in what points return, In were call the call ROE XXX seeing we're of basis, XXX market on

value lot do it's the I relative a think in of So market.

that getting think, I return base rate be rate a the ample kind market into and has replicate that environment. lower As opportunity stabilizes, market in cuts market of the despite to there'll a

BTIG. Catherwood Tom from is question with next The

the taking from else get maybe to response the flip before, looks if we do KREF transaction what and could dam And break rate to offense? you transactions in Matt, activity Don's don't question to before pickup to cuts, side your bring the on go this on table? need sellers

Okay.

up is as So, right mentioned, activity. last our what good that that's opportunities think a transaction There's from Working enough ample pickup we I in we XX% for really question. are lend a don't to now us year. that attractive levels. on pipeline backwards, going need And there's

have timelines a little So pressure, to where to got property time we're the we there's kind they say, more to now. seeing would in I going do. If moment we're healthy -- the sustained types, brokers And put a decreased multifamily of I get to of that and limp bit. It on to capital out has we are push inflation a does economy, like that to cost try continued more -- market not cuts, like have cap into think, across that going rate where does flow real going there good we broadly and just like to people rate just are higher there. instance, sales, environment cash continue estate increasing, are even limp rates. delay for you try slowly pressure there though were along they're along And causing low to everything

that a So you the market. of could a there. little create seen But There's lot lot looking in bit that we've liquidity of buyers access noise component of to a more again, portfolio.

could view to my loans change don't think loss content, transition it list would certainly I you in environment. more that see materially watch but So, on

then me. Appreciate those thoughts. last maybe And for

committed and origination, for expected million that's is the $XX so plan new what or sponsor's what timing the Philadelphia office sale the loan? is new On remaining assets? funding, the under of the the And

Good the it's I morning, the appreciate call. Patrick. to question. Tom, Welcome

our -- on million funding. that's the So, Philadelphia, initial what $XX reflected is

asset. we've to going The is mixed said, sponsor be this to future here. got It's going funding take you a use development. As

couple and property sort So, future, in a it presently, of of will of types. it's XXX% office, be mix the different a

not be a forward. use majority going the will office So, of

In funding from it is maybe XX% the is of about what because timing, that thing because our wasn't I to initial we're course XX that on we happen terms would funding And note, struck receive redevelopment, proceeds one months projecting. cost. the over this of we and then just loan at clear to asset, loan a expect this it's back that

a [Operator Instructions] from follow-up with The KBW. next Jade Rahmani question is

of to then number size? financing transitional months and two think banks Just that's you because opportunity for do quick for to two, to One, KREF clearly any permanent on as you implications the its M&A, over loans. grow short-term be the have would as XX just just that XX pulling months? that ones. scale able see Or are opportunity if takeout best do see back, And a that you if thoughts

too talking of a size And of They're now. come think well the guess, come But, out do, brush don't United a could KREF. trillion I that Yes, they you a in little like to to that I fraction commercial going but a see we broad to out, online zero. mortgages Jade. banks on are we're they're banking I of trillion $X.X you system dive know Thanks, say the banks market deeper than take more right and $X.X think, I XX% XX% X,XXX are to there's bit could that, about as dynamic. better is the into alternative If today and think, you think extreme. of back banking XX% States we XX% going think come lenders I that see do all they're and down they're than

are efficient keep comments the plausible. At survey losses that they're content all more do those and they're the de we to in what sheet. that safer. much folks in loan-on-loan loss know more to very same they efficient It's direct direct not do. and on margin versus, manage to more again, made, on that's and last capital lending a an CECL model, more mind, on the like they're that XXX%, the They origination of time, facilities. capital has origination we on books model think opening to It's I moving from in focused. but balance years becoming a us for from few shifting the the they're taking basis. been It's reserves taking ongoing Their minimis

shift good So profile. that to like, going why there's a of, lot really reasons they're

distress cost to a it's will market. do whether I debt coming a So, bigger out capacity more, additional complexes, or think take able KREF the to increase lot And don't that's that in have fund on mentioned. of think that's to capital be funds, going the I alternative get these to we create little like bit of the banks.

I On liquidity perspective, There's sources. It's certainly think from a at. consolidation always the answer and to think, that benefits of this be we through -- access same number it's it's of side, a to look we'll I something larger M&A different period time, give. capital the being there'll

the certainly market evolves. that So, something it's continue evaluate we'll as to

turn like for conference concludes would to our any Switala Jack question-and-answer closing This session. remarks. back the to I over

Well, team or great. Thanks, operator, and thanks, to everyone, you care. for any the have joining if out Take here questions. today. Please me reach

The concluded. attending today's conference for is presentation. Thank now you

now disconnect. You may