KKR Real Estate Finance Trust Inc. (NYSE:KREF) Q2 2020 Earnings Conference Call - Final Transcript

Aug 04, 2020 • 11:00 am ET

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KKR Real Estate Finance Trust Inc. (NYSE:KREF) Q2 2020 Earnings Conference Call - Final Transcript

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Presentation
Operator
Operator

Good morning, and welcome to the KKR Real Estate Finance Trust Inc. Second Quarter 2020 Financial Result Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Michael Shapiro. Please go ahead.

Executive
Michael Shapiro

Thank you, operator. Welcome to the KKR Real Estate Finance Trust earnings call for the second quarter of 2020. We hope that all of you and your families are continuing to stay safe and healthy. Today, I am joined on the phone by our CEO, Matt Salem, our President and COO, Patrick Mattson, our CFO, Mostafa Nagaty. I would 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 will provide a brief recap of our results. As a reminder we provided a preliminary set of results on form 8-K on July 13. For the second quarter 2020 we had a GAAP net income of $28.6 million or $0.52 per share which included a $1.4 million or $0.02 per share benefit from a slower CECL provision, core earnings were $25 million or $0.45 per share the high end of our preliminary estimated range.

Core earnings included a $4.7 million or $0.08 per share write off on our small $5.5 million Mezzanine loan. Booked value per share as of June 30, 2020 increased to $18.57 which included the impact of $1.16 per share from CECL as compared to 18.45 as of March 31. Finally, I would note that in mid-July we paid a cash dividend of $0.43 per share with respect to the second quarter.With that I would now like to turn the call over to Matt.

Executive
Matt Salem

Thank you Michael. Good morning and thank you for joining us today. We hope you are all healthy and safe. We are now five months into the pandemic and the company is continuing to show its strength. Our conservative posture over the last few years for both our lending strategy and liability management has differentiated us during this volatile time while still generating earnings power from our LIBOR floors.KREF has a best in class investment portfolio that was purpose-built for the latter stages of an economic cycle. Our $5.3 billion almost exclusive senior loan portfolio focuses on institutional real estate and sponsorship and is secured predominantly by class A lighter transitional, multi-family and office properties located in the most liquid real estate markets. Today our average loan size is 134 million and approximately 80% of our loans are located in the top 10 markets in the US. Our investment portfolio is 99% first mortgage, senior loans with no direct