Earnings call transcript: KKR Real Estate misses Q3 2025 EPS and revenue forecasts

KKR Real Estate Finance Trust Inc. (KREF) reported its Q3 2025 earnings, revealing a notable shortfall in both earnings per share (EPS) and revenue compared to analysts’ expectations. The company posted a GAAP net income of $8 million, translating to $0.12 per share, while the EPS forecast was set at $0.07. However, the adjusted EPS showed a loss of $0.03, missing the forecast by 142.86%. Revenue came in at $31.41 million, falling short of the projected $34.15 million, marking an 8.02% surprise. Following the announcement, KREF shares experienced a slight premarket uptick, rising 4.49% to $9.07. The company maintains an attractive dividend yield of 11.59% and according to InvestingPro analysis, the stock appears undervalued based on its Fair Value assessment.

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Key Takeaways

• KKR Real Estate’s Q3 2025 adjusted EPS missed expectations by 142.86%.
• Revenue underperformed forecasts by 8.02%, totaling $31.41 million.
• The company paid a $0.25 cash dividend despite reporting a distributable loss.
• Stock price increased by 4.49% in premarket trading following the earnings release.
• KREF continues to expand its European real estate credit platform.

Company Performance

KKR Real Estate’s performance in Q3 2025 was marked by a GAAP net income of $8 million, or $0.12 per share, despite an adjusted EPS loss. The company faced challenges in meeting earnings expectations, yet it maintained a stable book value of $13.78 per share, experiencing only a slight 0.4% decrease from the previous quarter. Year-to-date, the company recorded $1.1 billion in repayments and $719 million in originations, reflecting its active participation in the real estate finance market.

Financial Highlights

• Revenue: $31.41 million, down from the forecast of $34.15 million.
• Adjusted EPS: -$0.03, missing the forecast of $0.07.
• GAAP net income: $8 million, or $0.12 per share.
• Book value: $13.78 per share, a 0.4% quarter-over-quarter decrease.

Earnings vs. Forecast

KKR Real Estate’s adjusted EPS of -$0.03 fell significantly short of the $0.07 forecast, marking a 142.86% negative surprise. Revenue also missed expectations, with actual figures at $31.41 million compared to the $34.15 million forecast, an 8.02% shortfall. This earnings miss contrasts with the company’s previous quarters, where it generally met or exceeded projections.

Market Reaction

Despite the disappointing earnings report, KKR Real Estate’s stock saw a 4.49% increase in premarket trading, reaching $9.07. This movement suggests that investors may have been encouraged by other aspects of the company’s performance or its strategic initiatives. The stock’s current price is positioned between its 52-week high of $12.33 and low of $8.28.

Outlook & Guidance

Looking ahead, KKR Real Estate anticipates more than $1.5 billion in repayments for 2026 and aims to match these with new originations. The company is also focused on expanding its European market presence and optimizing its real estate-owned (REO) portfolio. No significant facility maturities are expected until 2027, providing a stable financial outlook.

Executive Commentary

CEO Matt Salem highlighted the robustness of real estate opportunities, stating, "The number of real estate opportunities remains robust." President and COO Patrick Mattson addressed operational efficiency, noting, "Our goal is to minimize some of that drag," reflecting the company’s focus on optimizing its portfolio.

Risks and Challenges

• Market Volatility: Fluctuations in real estate markets could impact earnings.
• Interest Rate Changes: Rising rates may affect borrowing costs and investment returns.
• Economic Uncertainty: Macroeconomic pressures could hinder growth.
• Regulatory Risks: Changes in real estate finance regulations could pose challenges.
• Competitive Landscape: Intense competition in real estate finance may pressure margins.

Q&A

During the earnings call, analysts questioned the timing of Q3 originations and the company’s strategies in the life science sector. KREF’s management provided insights into potential REO asset sales within the next 12 to 36 months and compared the dynamics of U.S. and European lending markets.

Full transcript - KKR Real Estate Finance Trust Inc (KREF) Q3 2025:

Conference Operator: Good day, and welcome to the KKR Real Estate Finance Trust Inc. Third Quarter 2025 Financial Results Conference Call. All participants will be in a 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 the touch-tone phone. To withdraw your question, please press star, then two. Please note that this event is being recorded. I would now like to hand the conference over to Mr. Jack Switala. Please go ahead.

Jack Switala, Investor Relations, KKR Real Estate Finance Trust Inc.: Great, thanks operator, and welcome to the KKR Real Estate Finance Trust Earnings Call for the third 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 will go through our results.

For the third quarter of 2025, we reported GAAP net income of $8 million or $0.12 per share. Book value, as of September 30, 2025, is $13.78 per share. We reported a distributable loss of $2 million, due primarily to taking ownership of our Raleigh Multifamily property. Prior to net realized losses, DE was $12 million or $0.18 per share. We paid a $0.25 cash dividend with respect to the third quarter. With that, I’d now like to turn the call over to Matt.

Matt Salem, CEO, KKR Real Estate Finance Trust Inc.: Thank you, Jack, and thank you everyone for joining us today. I’ll begin with a brief update on the commercial real estate lending market. The number of real estate opportunities remains robust as we enter the $1.5 trillion wall of maturities over the next 18 months. The debt markets are liquid, with banks returning to the market while increasing their back leverage lending. Despite a tightening of whole loan spreads since the beginning of the year, with lower liability costs, we are still able to generate strong returns, and we believe that real estate credit offers attractive relative value. As lenders, we think about safety first, and the ability to lend on reset values well below replacement cost, combined with decreasing new supply, creates a unique credit environment with strong downside protection. Overall, sentiment for real estate is turning positive as investors recognize the lagging values and strengthening fundamentals.

We’ve been actively lending into this opportunity. In the fourth quarter, we expect over $400 million in originations and have already closed $110 million across the U.S. and Europe. In October, we closed our first real estate credit loan in Europe for KKR Real Estate Finance Trust Inc., secured by a 92.5% occupied portfolio of 12 light industrial assets across Paris and Lyon, France. This transaction highlights the breadth of our platform and our ability to draw on KKR’s global resources. Although this is KKR Real Estate Finance Trust Inc.’s first European loan, over the last couple of years, we have been strategically building our European real estate credit platform, establishing a dedicated team, and originating over $2.5 billion to date. Through our European real estate equity business, we have strong connectivity across markets, giving us unique insight and access to opportunities that align with our disciplined approach.

Within our broader real estate credit platform, we have been actively investing across the risk-reward spectrum. Our platform lends on behalf of bank insurance and transitional capital, targeting institutional sponsors and high-quality real estate. Our CMBS team is one of the larger investors in investment grade and B pieces. Across our global team, we will invest approximately $10 billion in 2025. To support our investing activity, we built a dedicated asset management platform called K-Star, which now has over 70 professionals across loan asset management, underwriting, special servicing, and REO. K-Star manages a portfolio of over $37 billion in loans and is named special servicer on $45 billion of CMBS. Moving next to our third quarter results, we reported distributable earnings of negative $0.03 per share, or distributable earnings excluding losses of $0.18 per share, compared to our $0.25 per share dividend.

We set our dividend at a level in which we believe we can cover distributable earnings prior to realized losses over the long term. We continue to see upside in our REO portfolio, where we are making progress. As we stabilize and sell those assets, we can repatriate that capital and reinvest into higher earning assets. Therefore, there’s embedded earnings power of $0.13 per share per quarter that we will be able to unlock over time. Looking at risk rating, we downgraded Cambridge Life Science Loan from risk rated 3 to 4, with increased CECL provisions due to the downgrade. Book value per share remained mostly unchanged at $13.78, a decrease of 0.4% quarter over quarter. We are proactively managing our current portfolio of $5.9 billion. We received repayments of $480 million this quarter.

Year to date, we have received $1.1 billion in repayments and have originated $719 million, with $400 million of origination circled in the fourth quarter. The underlying activity level remains strong, and we continue to see robust market activity. In 2026, we expect greater than $1.5 billion of repayments and expect to continue to match repayments with originations. With that, I’ll turn it over to Patrick.

Jack Switala, Investor Relations, KKR Real Estate Finance Trust Inc.: Thanks, Matt. Good morning, everyone. Thanks to strong investor demand and close coordination with the KKR Capital Markets team, we successfully upsized our Term Loan B by $100 million to $650 million, which now has approximately six and a half years remaining until its 2032 maturity. The loan repriced 75 basis points tighter, reducing the coupon to SOFR plus 250 basis points, and locked in more efficient funding. During the quarter, we also upsized our corporate revolver to $700 million, up from $610 million at the beginning of the year. With continued momentum for repayments and the Term Loan B upsize, we ended the quarter with near record liquidity levels of $933 million, including over $200 million of cash plus our $700 million underwriting corporate revolver. Our overall financing availability sits at $7.7 billion, including $3.1 billion of underwriting capacity.

Importantly, 77% of our financing is non-mark-to-market, and KKR Real Estate Finance Trust Inc. has no final facility maturities until 2027 and no corporate debt due until 2030. In the quarter, we continued our share repurchases totaling $4 million, representing a weighted average price of $9.41. Year to date, we have repurchased $34 million for a weighted average price of $9.70, and since inception, we have repurchased over $140 million of common stock. We remain committed to deploying capital through buybacks as well as new investments. Overall, our liquidity position gives us meaningful flexibility to manage the portfolio, stay on offense, and take advantage of new opportunities. We’re encouraged by the market backdrop and momentum we’re seeing. Turning to our watch list, our current portfolio has a weighted average risk rating of 3.1 on a 5-point scale.

Our total CECL reserve at quarter end is $160 million, representing around 3% of the loan portfolio. Over 85% of the loan portfolio is risk rated 3 or better, and as of the third quarter, our debt-to-equity ratio is 1.8 times, and total leverage ratio is 3.6 times, consistent with our target range. Now turning to our REO portfolio, we took title to the Raleigh multifamily loan, which is already appropriately reserved for, and therefore no additional impact on book value. Our business plan is to invest additional capital into the property to enhance the amenity base, improve operations, and reposition the asset for sale. On our Mountain View, California office, the market continues to heal, with leasing demand picking up. As mentioned last call, we’re actively responding to tenant requests for proposals.

Given our asset offers the tenants the ability to have a full campus setting and control their amenities and security perimeter, we believe positioning for a single user is the optimal strategy. On our West Hollywood asset, we launched condo sales process last week and are focused on executing our sales strategy. Finally, on our Portland, Oregon redevelopment, our entitlement process is progressing, with final entitlements expected in the first half of 2026, giving us the ability to unlock value and return capital through parcel sales. In summary, we see significant opportunity ahead. Our origination pipeline continues to build. We remain focused on optimizing our REO portfolio, working through the watch list, and redeploying capital efficiently as we position the business for its next phase of growth. Thank you for joining us today. Now, we’re happy to take your questions.

Conference Operator: Thank you. 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 speaker phone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then two. At this time, we will pause momentarily to assemble our roster. Your first question today will come from Tom Catherwood with BTIG. Please go ahead.

Thank you, and good morning, everybody. Maybe Matt or Patrick, help us triangulate something here. There are kind of two ways to view the lower leverage and higher liquidity that you had going into the end of the third quarter. One is like a defensive positioning to bolster the company against headwinds, or the second one is really a timing issue where if a couple of originations had closed a week or so earlier, it might look very different from the level of the distance between repayments and originations, and it might be a very different story. Which is the case here? Is this just timing, or could we see further deleveraging and further liquidity building as we get through the rest of this year?

Jack Switala, Investor Relations, KKR Real Estate Finance Trust Inc.: Hey, Tom, it’s Jack. Give us just a minute here. We’re just having some technical difficulties. We’ll be right back to you. Okay, just give us about two minutes here. We’re redialing in, and folks should join shortly. Thank you.

Conference Operator: Pardon me, ladies and gentlemen, please stand by as we reconnect. Thank you for your patience. Pardon me, this is the conference operator. I’ve reconnected the speaker lines. Please proceed.

Matt Salem, CEO, KKR Real Estate Finance Trust Inc.: Okay, thank you. Tom, can you hear me now? It’s Matt.

Tom Catherwood, Analyst, BTIG: Yes, I can.

Matt Salem, CEO, KKR Real Estate Finance Trust Inc.: Okay, thanks. Sorry about that, everyone. We are down in our Dallas office and had a new system here and just had some technical difficulties, but I think we’re working now. We’ll jump back in and appreciate everyone joining. Tom, thank you for the question. You know, it’s really the latter, I’d say. It’s just a timing issue, and it’s really related to two things. I’d say the first one, just when you think about repayments, one of our repayments this quarter just happened to be a larger repayment. It was actually the largest loan in our portfolio repaid. It was a multifamily property just outside of Washington, D.C., that got taken out by the agencies on a refinance. That is a relatively large, just single repayment.

Secondly, when you think about our originations this quarter, and I think we mentioned this in the prepared remarks, a bunch of our originations just happened to be in Europe, and those take a little bit longer to close. The closing timelines are somewhat elongated in Europe versus the U.S., and that’s why you see the bigger pipeline, I think, in the fourth quarter and a little bit of the slower originations and closings, I’d say, in the third quarter. It’s just timing. We haven’t really changed our strategy at all and certainly expect to continue to invest and originate in line with our repayments. Right now we’re at the lower end of our leverage ratio, so we’ve got the ability to kind of take that up and grow the portfolio back to where we were before.

Tom Catherwood, Analyst, BTIG: That’s perfect. Maybe just following up on that and thinking of the cadence of earnings, you talk about the lag between receiving repayments and putting that capital back to work. You also mentioned, I think it was greater than $1.5 billion of repayments that you’re expecting in 2026. Could that lag take us lower from an earnings front for a longer period of time just while you put that capital back to work, or are there some other levers you can pull to boost distributable earnings as you’re repatriating and redeploying capital?

Matt Salem, CEO, KKR Real Estate Finance Trust Inc.: No, I wouldn’t look at it like we’re always behind. I think some quarter, like this quarter, obviously we got a little behind, just kind of due to the timing of those closings. I think other quarters will be ahead. You can see us getting ahead of it a little bit. You can’t time the repayments, right? You can’t necessarily time the closing dates of your originations. There’s just a little bit of ebb and flow that happens naturally in the business. I wouldn’t necessarily model anything like we’re always waiting for a repayment to come in before we originate, and so we’re 45 days behind. I think there’s just a little bit of give and take in the overall investing profile.

Tom Catherwood, Analyst, BTIG: Understood. Last one for me, we’ve had a number of lab space owners this past quarter that have noted kind of an early stage rebound in demand from smaller life science tenants looking for space, kind of following an upturn in VC funding over the past 12 months. In terms of the four assets in your life science loan portfolio that remain three-rated, how are they proceeding on their business plans? Are you starting to see that at least early stage recovery in tenant demand?

Matt Salem, CEO, KKR Real Estate Finance Trust Inc.: Yeah, I think we’re starting to see green shoots from the sponsors, right, and some of the commentary about leasing. I’d say we’ve got honestly a little bit of a mix. Most of our assets that we’ve lent on are more, you know, the tenants are going to be larger pharma companies and not necessarily some of the smaller VC-funded ventures. We are starting to see a little bit of pickup in that sector. Again, we’re long-term, like we’re pretty positive on that sector. I certainly understand it can be cyclical both from a capital perspective and certainly some of the things you see going on at the NIH and things like that. I’d say over the medium to long term, we’re still pretty positive on the overall sector.

Tom Catherwood, Analyst, BTIG: Got it. Appreciate all the answers. Thanks, everyone.

Matt Salem, CEO, KKR Real Estate Finance Trust Inc.: Thank you.

Conference Operator: Your next question today will come from Jade Rahmani with KBW. Please go ahead.

Jade Rahmani, Analyst, KBW: Thank you very much. I wanted to follow up on Tom’s question. Can you give an update as to the state of dialogue with the sponsors across the life science fields? On Cambridge, if you could touch on what drove the downgrade?

Matt Salem, CEO, KKR Real Estate Finance Trust Inc.: Yeah, I’d say really, let’s go starting with the last question. What drove the downgrade was we’ve entered negotiations and modification negotiations with that sponsor. It was really as it related to those discussions. I think on the other, the three-way rated loans, Jade, there’s no other really discussions happening outside just the normal course. We’re getting leasing updates and any property level financial updates, but really no other kind of detailed conversations happening at this point in time.

Jade Rahmani, Analyst, KBW: Thank you. Broadly speaking, have you done an NPV analysis comparing the cost and benefit of waiting on these deals, as well as any other sub-performing deals versus selling down the exposure, taking that capital, and reinvesting in the current uptick in deal flow that we’re seeing? That would drive stronger distributable earnings and eventually dividend growth more near term than perhaps the market expects. How do you view the trade-offs versus waiting, since I think that the life science recovery is quite nascent at this point? For at least that sector, it’s probably going to be a while before these buildings get to stabilized occupancy.

Matt Salem, CEO, KKR Real Estate Finance Trust Inc.: Yeah, it’s a great question. It’s something that I’d say we look at every quarter. It’s something that we certainly discuss with the board in terms of portfolio positioning and, specifically, as it relates to the REO, which is directly impacting our earnings. As we look to liquidate that, we can redeploy that capital and increase our earnings, which we talked about on the last few calls. It’s something we’re consistently looking at. When you look at where we’ve decided to hold things, and I’m talking more about the REO because that’s really the biggest impact right now, it’s really around quality. We feel like we’ve got quality real estate, and our job as fiduciaries is to maximize the outcome there. If we’ve got a great asset, we think it’s going to lease over time, and we’ll be able to optimize the value.

We definitely look at NPVs, and we look at what’s that IRR, and is it better to sell today and redeploy capital now versus holding out? I’d say we’ve been right to be patient. Certainly, when you think about things like our office in Silicon Valley, that market’s come back significantly, and we’re seeing real leasing demand in that market. To be patient, wait, quality asset, let’s get a tenant, and then we can evaluate liquidity options. I think that strategy will work out over time. We have to continuously evaluate this because I know that we can’t, we don’t have forever, we need to execute, and we need to repatriate some of this capital.

Jade Rahmani, Analyst, KBW: Thanks very much.

Matt Salem, CEO, KKR Real Estate Finance Trust Inc.: Thank you, Jane.

Conference Operator: Your next question today will come from Rick Shane with JPMorgan. Please go ahead.

Rick Shane, Analyst, JPMorgan: Hey guys, thanks for taking my question. Looking back last quarter, there was commentary about $1 billion of repayments in the second half. It seems like you’re on track with that. I think the implication, at least the way we interpreted it, was that capital would be redeployed and suggested sort of, again, not we didn’t fully assume this, but targeting towards that $1 billion in reinvestment. Should the way we think about this be there’s a one-quarter lag? You get the repayment in quarter one, you’re able to redeploy it in quarter two, you get repayments in quarter two that are redeployed in quarter three. Should we see this as sort of the $1 billion of repayments in the second half of this year manifesting into Q4 and Q1 originations of close to $1 billion?

Jack Switala, Investor Relations, KKR Real Estate Finance Trust Inc.: Hey Rick, it’s Patrick. Good morning. Thanks for that question. I think as Matt was referencing a little bit earlier, the goal is to sort of match up the repayments, minimize some of the timing that happens between repayment and origination. That always, when we snap the line at quarter end, won’t sort of match up. We think over time, there’s going to be some quarters where we get a little bit ahead of that. If you think about our liquidity position today, we certainly have ample capital to be able to do that. There are going to be some quarters where we’re ahead of it. Maybe there’s some quarters that we’re behind it. On balance, we should think about as we’re getting those repayments, they’re going to be matched.

Our goal effectively is to minimize some of that drag because ultimately we want to optimize what we can return to shareholders in terms of earnings.

Rick Shane, Analyst, JPMorgan: Got it. I think the thing that confuses me about it is I understand that the difference between a deal closing on September 30th and October 1st, from your perspective, it’s a day. From an accounting perspective, it’s very different. You’ve talked about $400 million of originations this quarter. I think what surprises me is given the lag in Q3 originations, again, not a big deal, but that Q4 pipeline doesn’t look bigger, given that sort of timing issue. I think that’s what’s confusing people a little bit here today.

Jack Switala, Investor Relations, KKR Real Estate Finance Trust Inc.: Understood. Thanks. Yeah, I think, look, as we think about the fourth quarter, a lot of that will be front-ended in the quarter in terms of the originations. The year is not out. The pipelines are still very active. I think we’ve been focused on being disciplined around deployment, focused on diversity. When you look at these asset sizes, they’ll reflect that. Obviously, Matt mentioned some of the activity that we have in Europe. As I said, our goal is to continue to deploy capital. I suspect that if things continue to proceed as they are, going into year-end and into the first quarter, we’re going to continue to see build for that origination pipeline. We know what we have a good idea of what we expect to come forth in the next two quarters. I think we’re preparing to match that up and to close some of that gap.

Rick Shane, Analyst, JPMorgan: Got it. Okay. Thank you. The other question is this, and, you know, Jaret’s touched on this, but if we look at the current ROE, it’s about half of what you need to support the dividend as it exists today. Obviously, moving, resolving challenged properties and challenged loans is the key to that. Realistically, how long do you think it takes for you to be able to double that ROE to put yourself in a position where, and again, there are all these different earnings metrics, but at the end of the day, this really is an NII issue. How long do you think it really takes to get there?

Matt Salem, CEO, KKR Real Estate Finance Trust Inc.: Yeah, I can jump in there, Rick. It’s a good question and certainly something we think about a lot. In my mind, we kind of bucket the REO into three timelines. One is near term, 12 to 18 months, medium term, maybe that’s 24 or so months, 24 to 36 months, and then longer term. I’d say about half of that we think we can get back in the near term, and that’s concentrated on things like our Portland, Oregon asset, which we should be fully entitled to then the market with next year on an individual parcel basis. The West Hollywood condo, which Patrick mentioned, we’re in the market now live selling or offering units there. The Raleigh, North Carolina multifamily deal, which is largely stabilized, and we’re doing a little bit of value add there, but can kind of execute on that in a short amount of time.

The Philadelphia office, there’s one or two leases outstanding that we’re working on and then can effectively sell that as well. If you group those together, that’s really the short term, and again, it’s about half of that number. We can get that back more quickly. I’d say in that medium term bucket is the Mountain View asset. As I mentioned to Jade, we’re making good progress. The market is really coming back there, and we’re actively engaged there with tenants. I put that more in the medium term, although we could have something happen there shorter than that, but then there’d be a business plan to execute if we were able to sign a lease there in terms of just tenant improvements and CapEx, etc. Lastly, I put the Seattle, Washington life science, and just given where life science is, we’ll see. That market could come back quickly.

Just given what we’re seeing there, we did execute a pretty important lease on that asset, so we’re pretty happy about that. It could take longer to fully stabilize that asset.

Rick Shane, Analyst, JPMorgan: Hey, Matt, Patrick, I really always appreciate your willingness to try to dimensionalize the answers to these tough questions, and I appreciate it a great deal. Thank you, guys.

Matt Salem, CEO, KKR Real Estate Finance Trust Inc.: Sure, thank you.

Conference Operator: Your next question today will come from Chris Miller with Citizens JMP. Please go ahead.

Chris Miller, Analyst, Citizens JMP: Hey guys, thanks for taking the questions. It’s nice to see you guys branching out into Europe. Can you contrast some of the EU loans versus U.S. loans? I guess what I’m looking for is, are terms similar, returns similar? Any color here would be very helpful.

Matt Salem, CEO, KKR Real Estate Finance Trust Inc.: Sure, yeah, thank you for the question. Let’s start with kind of how they’re similar, and then we can think about how they’re different. I’d say from a quality of real estate perspective, from a sponsorship perspective, it’s the same program we’re running in the U.S. This is institutional quality real estate and sponsorship. In fact, a lot of the clients we lend to in Europe are the exact same clients we’re lending to in the U.S., and it’s nice to have that global connectivity there. I’d say the opportunity set there is a little bit different than what we’re seeing in the U.S. The loan sizes tend to be a little bit bigger. There tend to be more portfolios where we’re... I would say multi-jurisdictional is an opportunity as well.

It’s a heavily banked market, so contrast, think about Europe as like 80% of that market is banks, whereas in the U.S. it’s around 40%. The back leverage there, structurally, I think is a little bit more advanced in our favor than what we’re seeing in the U.S. From a whole loan perspective, spread-wise, now you’re talking about different base rates, obviously, between the UK and EU, but I’d say overall, spreads on whole loan and then the ability to back leverage and generate ROE are largely in line with the U.S. From a relative value perspective, I think it’s pretty balanced right now, although we’ve been lending there for a few years now. It has not always been like that. I’d say two years ago, we probably saw a lot more opportunities and relative value in Europe versus the U.S. Now, as the U.S.

activity has picked up materially, it’s probably a little bit more balanced. Ultimately, I think the ROEs are really about the same between the U.S. and Europe right now, and that’s on a U.S., on a hedge U.S. dollar basis.

Chris Miller, Analyst, Citizens JMP: That’s all very helpful. I guess on the Long Island multifamily loan you guys originated this quarter, is this ground-up construction, and then are you guys looking at heavier transitional projects now, or was this more of a one-off type loan?

Matt Salem, CEO, KKR Real Estate Finance Trust Inc.: It is ground-up, yes. It’s ground-up construction to a repeat sponsor who we’ve lent to a couple of times now on construction projects. We know them well, and we think they do a great job and build a really high-end product. It’s great to be able to sign that one up with a repeat sponsor there. I don’t think we’ve really changed the DNA of what we want to do. We’ve always had a small percentage of construction in the portfolio, and we’ll continue to do that. We think there’s some relative value in that sector. The bulk of the opportunity of what we’re seeing right now is what I still refer to as almost stabilized versus transitional lending. I still think that the market is really, the opportunity around the market is really around stretched seniors where it’s like a 70% LTV, mostly leased assets.

That’s where we’ve been participating. We think that’s where there’s the most relative value. We’ll look at projects that have a larger business plan. Just from a relative value perspective, again, it seems like the kind of almost stabilized lending just offers a better investment right now.

Chris Miller, Analyst, Citizens JMP: Got it. That’s all very helpful. Thanks for taking the questions.

Conference Operator: Your next question today is a follow-up from Jade Rahmani of KBW. Please go ahead.

Jade Rahmani, Analyst, KBW: I wanted to ask about the platform overall. I know you mentioned you’re in Dallas with K-Star, and you all have a servicing operation, quite substantial. You buy B pieces. A nice complement to that could be the CMBS conduit business, which is capital light. I think the securitization outlook seems quite healthy given that the regional banks still continue to pull back. Any interest in that? Another follow-up would just be on the special situation side, if you see any opportunities to combine with another either public or privately held mortgage REIT. I think scale is a huge differentiator across the real estate landscape. We see huge premiums between market cap ranges in all real estate sectors. I think it’s clear that having gone through this cycle, there’s also a big differentiator in the commercial mortgage REIT space.

You could combine stock for stock or NAV for NAV transaction, gain scale, and that probably would help with consistency of dividends. Could you just respond to those two items? Thanks very much.

Matt Salem, CEO, KKR Real Estate Finance Trust Inc.: Sure, Jade. Thank you again for the question. First, on the CMBS side, it’s something we’ve looked at. We have the expertise, I think, in-house to do that, whether it’s from the credit or the origination side, or some of us have backgrounds in that business and capital markets. I’d say right now, no real plans to begin a CMBS originations business. I think the one thing that is a real consideration for us is it doesn’t really overlap with our client base for the most part. I think about, we’re lending in major markets to institutional sponsors, and that tends to be a more diverse set of borrowers and markets. We’d have to probably change a little bit of the way we’re oriented, and I’m just not sure that’s in our kind of credit DNA to do that. We’ll continue to evaluate it as the market evolves.

On the M&A question, I would say we continue to look at opportunities as they arise. I think there’ll be consolidation in the industry over time. We’d like to grow, not for the sake of scale for scale’s sake, but to have a more liquid stock, as you mentioned, I think would be able to attract more shareholders and create a better cost of capital. As we’ve discussed, we want to try to do things that also give us the ability to diversify our portfolio and move again to Europe is one of those things, but also potentially adding duration to the portfolio. We’re going to continue to evaluate opportunities that are on the table, but there’s nothing we’re looking at currently.

Jade Rahmani, Analyst, KBW: Thanks very much.

Matt Salem, CEO, KKR Real Estate Finance Trust Inc.: Thank you, Jane.

Conference Operator: Concludes our question and answer session. I would like to turn the conference back over to Jack Switala for any closing remarks.

Jack Switala, Investor Relations, KKR Real Estate Finance Trust Inc.: Great. Thanks, operator. Thanks, everyone, for joining today. Please reach out to me or the team here if you have any questions. Take care.

Conference Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.

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