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What changed in KKR Real Estate Finance Trust Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of KKR Real Estate Finance Trust Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+342 added−357 removedSource: 10-K (2025-02-03) vs 10-K (2024-02-06)

Top changes in KKR Real Estate Finance Trust Inc.'s 2024 10-K

342 paragraphs added · 357 removed · 283 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

26 edited+2 added−9 removed59 unchanged
Biggest changeOur retained interest when utilizing structural leverage is subordinate to the lien of the third-party lender that owns the senior interest. 5 Table of Contents During the year ended and as of December 31, 2023, we: • Extended a $600.0 million master repurchase agreement and a $500.0 million warehouse facility maturity date to March 2026 • Upsized a $240.0 million master repurchase agreement to $400.0 million and extended the final maturity date to December 2027 • Repaid $143.8 million convertible notes in cash • Had no corporate debt or final facility maturities due until the first quarter of 2026 As a result, our Non-Mark-to-Market financing was $4.8 billion as of December 31, 2023, representing 76% of our secured financing.
Biggest changeOur retained interest when utilizing structural leverage is subordinate to the lien of the third-party lender that owns the senior interest. 5 Table of Contents During the year ended and as of December 31, 2024, we: • Extended the final maturity of a $1.0 billion term credit facility to September 2029 • Had no final facility maturities until 2026 and no corporate debt due until 2027 As a result, our Non-Mark-to-Market financing was $3.9 billion as of December 31, 2024, representing 79% of our secured financing.
The map below illustrates the geographic distribution of the properties securing our loan portfolio as of December 31, 2023: 4 Table of Contents The following charts illustrate the diversification of our loan portfolio (A) , based on type of investment, interest rate, underlying property type, geographic location, vintage and loan to value ("LTV") as of December 31, 2023: The charts above are based on total loan exposure of our commercial real estate loans.
The map below illustrates the geographic distribution of the properties securing our loan portfolio as of December 31, 2024: 4 Table of Contents The following charts illustrate the diversification of our loan portfolio (A) as of December 31, 2024, based on type of investment, interest rate, underlying property type, geographic location, vintage and loan to value ("LTV"): The charts above are based on total loan exposure of our commercial real estate loans.
The remaining 24% of our secured borrowings, which is primarily comprised of three master repurchase agreements, are only subject to credit marks. In addition, we may use structural leverage by syndicating senior mortgage interests in our originated senior loans to other investors and create a subordinated interest that we retain for our portfolio.
The remaining 21% of our secured borrowings, which is primarily comprised of three master repurchase agreements, are only subject to credit marks. In addition, we may use structural leverage by syndicating senior mortgage interests in our originated senior loans to other investors and create a subordinated interest that we retain for our portfolio.
The below-investment grade securities that comprise each CMBS B-Piece have generally in the past been acquired in aggregate. Due to their first loss position, these investments are typically offered at a discount to par. These investments typically carry a 10-year weighted average life due to prepayment restrictions on the underlying loans.
The below-investment grade securities that comprise each CMBS B-Piece have generally in the past been acquired in aggregate. Due to their first loss position, these investments are typically offered at a discount to par. These investments typically carry a 5 to 10-year average life due to prepayment restrictions on the underlying loans.
Financial and other material information regarding our company is routinely posted and accessible on our website. In addition, you may automatically receive e-mail alerts and other information about our company by enrolling your e-mail address by visiting the “E-mail Alerts” section of the “Investor Relations” page on our website. 10 Table of Contents
Financial and other material information regarding our company is routinely posted and accessible on our website. In addition, you may automatically receive e-mail alerts and other information about our company by enrolling your e-mail address by visiting the “E-mail Alerts” section of the “Investor Relations” page on our website. 9 Table of Contents
For additional information regarding our portfolio as of December 31, 2023, see Part II, Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations." Our Financing Strategy We raise capital through offerings of our equity and debt securities to fund future investments.
For additional information regarding our portfolio as of December 31, 2024, see Part II, Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations." Our Financing Strategy We raise capital through offerings of our equity and debt securities to fund future investments.
Salem, our Chief Executive Officer, and W. Patrick Mattson, our President and Chief Operating Officer, who each has over 25 years of CRE experience. Our Manager's senior leadership team is supported by 56 other investment professionals with significant expertise in executing our investment strategy.
Salem, our Chief Executive Officer, and W. Patrick Mattson, our President and Chief Operating Officer, who each has over 25 years of CRE experience. Our Manager's senior leadership team is supported by over 50 other investment professionals with significant expertise in executing our investment strategy.
Our Manager's investment committee, which is comprised of Ralph Rosenberg, KKR’s Global Head of Real Estate and Chairman of our board of directors, Chris Lee, Co-President of KKR Real Estate and Vice Chairman of our board of directors, Matt Salem, Head of KKR’s Real Estate Credit and Chief Executive Officer of KREF, Patrick Mattson, Chief Operating Officer of KKR’s Real Estate Credit and President and Chief Operating Officer of KREF, Joel Traut, Partner & Head of Originations, Jenny Box, Co-Head of KKR’s Special Situations, Billy Butcher, Co-President of KKR Real Estate, Roger Morales, Head of KKR's Real Estate Acquisitions Americas and Justin Pattner, Head of KKR's Real Estate Equity Americas, advises and consults with our Manager and its investment professionals with respect to our investment strategy, portfolio construction, financing and investment guidelines and risk management and approves all of our investments.
Our Manager's investment committee, which is comprised of Ralph Rosenberg, KKR's Chairman of Real Assets and Chairman of our board of directors, Chris Lee, President of KKR Real Estate and Vice Chairman of our board of directors, Matt Salem, Head of KKR’s Real Estate Credit and Chief Executive Officer of KREF, Patrick Mattson, Chief Operating Officer of KKR’s Real Estate Credit and President and Chief Operating Officer of KREF, Joel Traut, Partner and Head of Originations, Jenny Box, Co-Head of KKR’s Special Situations, Roger Morales, Head of KKR's Real Estate Acquisitions Americas and Justin Pattner, Head of KKR's Real Estate Equity Americas, advises and consults with our Manager and its investment professionals with respect to our investment strategy, portfolio construction, financing and investment guidelines and risk management and approves all of our investments.
Rosenberg, who has over 35 years of real estate equity and debt transactions experience, is supported at KKR Real Estate by a team of approximately 150 dedicated investment and asset/portfolio management professionals across 16 offices globally.
Rosenberg, who has over 35 years of real estate equity and debt transactions experience, is supported at KKR Real Estate by a team of approximately 140 dedicated investment and asset/portfolio management professionals across 16 offices globally.
Several other REITs have raised, or are expected to raise, significant amounts of capital, and may have investment objectives that overlap with ours, which may create additional competition for lending and investment opportunities. Some competitors may have a lower cost of funds and access to funding sources that are not available to us.
Several other REITs have raised, or are expected to raise, significant amounts of capital, and may have investment objectives that overlap with ours, which may create additional competition for lending and investment opportunities. Some competitors may have a lower cost of funds and access to funding sources that are 8 Table of Contents not available to us.
In order to comply with REIT requirements, we may need to forego otherwise attractive opportunities and limit our expansion opportunities and limit the manner in which we conduct our operations. See Part I, Item 1A. "Risk Factors—Risks Related to our REIT Status and Certain Other Tax Considerations." 9 Table of Contents Competition We are engaged in a competitive business.
In order to comply with REIT requirements, we may need to forego otherwise attractive opportunities and limit our expansion opportunities and limit the manner in which we conduct our operations. See Part I, Item 1A. "Risk Factors—Risks Related to our REIT Status and Certain Other Tax Considerations." Competition We are engaged in a competitive business.
Term lending arrangements, asset based financing and collateralized loan obligations provide us with Non-Mark-to-Market financing sources, which reduces our exposure to market fluctuations. These Non-Mark-to-Market financing sources, which represented 76% of our secured financing as of December 31, 2023, are not subject to credit or capital markets mark-to-market provisions.
Term lending arrangements, asset based financing and collateralized loan obligations provide us with Non-Mark-to-Market financing sources, which reduces our exposure to market fluctuations. These Non-Mark-to-Market financing sources, which represented 79% of our secured financing as of December 31, 2024, are not subject to credit or capital markets mark-to-market provisions.
Our senior loans a s of December 31, 2023 had a weighted average LTV of 66%, and we have focused our portfolio on senior positions in the capital structure where the sponsor has meaningful cash or imputed equity subordinated to our position to provide what we believe is downside protection in the event of credit impairment at the asset level.
Our senior loans as of December 31, 2024 had a weighted average LTV of 65%, and we have focused our portfolio on senior positions in the capital structure where the sponsor has meaningful cash or imputed equity subordinated to our position to provide what we believe is downside protection in the event of credit impairment at the asset level.
As of December 31, 2023, all of our investments were located in the United States. 3 Table of Contents The following charts illustrate the size of our portfolio and related compound annual growth rate ("CAGR") and common book value, over the years ended December 31, 2023 and the preceding four years (dollars in millions): (A) Common book value as of December 31, 2023 includes the impact of a CECL allowance of $212.5 million.
As of December 31, 2024, all of our investments were located in the United States. 3 Table of Contents The following charts illustrate the size of our portfolio and related compound annual growth rate ("CAGR") and common book value, over the years ended December 31, 2024 and the preceding four years (dollars in millions): (A) Common book value as of December 31, 2024 includes the impact of a CECL allowance of $119.6 million.
Impact of Interest Rate Environment Generally, our business model is such that rising interest rates will result in an increase to our net income, while declining interest rates will decrease our net income. As of December 31, 2023, 99.0% of our loans by total loan exposure earned a floating rate of interest indexed to Term SOFR.
Impact of Interest Rate Environment Generally, our business model is such that rising interest rates will result in an increase to our net income, while declining interest rates will decrease our net income. As of December 31, 2024, substantially all of our loans by total loan exposure earned a floating rate of interest indexed to Term SOFR.
We plan to maintain leverage levels appropriate to our specific portfolio. As of December 31, 2023, our total leverage ratio was 4.2-to-1. We will endeavor to match the terms and indices of our assets and liabilities and will also seek to minimize the risks associated with mark-to-market and recourse borrowing.
We plan to maintain leverage levels appropriate to our specific portfolio. As of December 31, 2024, our total leverage ratio was 3.6-to-1. We will endeavor to match the terms and indices of our assets and liabilities and will also seek to minimize the risks associated with mark-to-market and recourse borrowing.
Our aggregate investment portfolio totaled $7.8 billion as of December 31, 2023, which is primarily comprised of $7.6 billion of total outstanding principal of senior and mezzanine CRE loans, $158.6 million net investment in real estate owned assets (“REO”), and a $35.7 million investment in CMBS B-Pieces (indirectly-owned through RECOP I).
Our aggregate investment portfolio totaled $6.3 billion as of December 31, 2024, which is primarily comprised of $5.9 billion of total outstanding principal of senior and mezzanine CRE loans, $335.8 million net investment directly or indirectly in real estate owned assets (“REO”), and a $35.6 million investment in CMBS B-Pieces (indirectly-owned through RECOP I).
KKR sponsors investment funds that invest in private equity, credit and real assets, and as strategic partners that manage hedge funds. KKR is listed on the NYSE (NYSE: KKR) and reported $552.8 billion of assets under management ("AUM") as of December 31, 2023.
KKR sponsors investment funds that invest in private equity, credit and real assets, and as strategic partners that manage hedge funds. KKR is listed on the NYSE (NYSE: KKR) and reported $624.4 billion of assets under management ("AUM") as of September 30, 2024.
We had a common book value of $1,077.0 million as of December 31, 2023 and established a diversified investment portfolio which totaled $7,752.3 million, consisting primarily of performing senior and mezzanine commercial real estate loans.
We had a common book value of $1,017.3 million as of December 31, 2024 and established a diversified investment portfolio which totaled $6,271.6 million, consisting primarily of performing senior commercial real estate loans.
We expect the majority of our future investment activity to focus on originating floating-rate senior loans that we finance with our repurchase facilities and non-mark-to-market financing including term lending arrangements, asset based financing and collateralized loan obligations. In addition, we originate floating-rate loans for which we syndicate a senior position and retain a subordinated interest for our portfolio.
We expect the majority of our future investment activity to focus on originating floating-rate senior loans, which may include both domestic and international, that we finance with our repurchase facilities and non-mark-to-market financing including term lending arrangements, asset based financing and collateralized loan obligations.
As of December 31, 2023, our floating-rate loan portfolio and financing arrangements were all indexed to Term SOFR. 8 Table of Contents Taxation of the Company We elected to be treated as a REIT for U.S. federal income tax purposes commencing with our taxable year ended December 31, 2014 and expect to continue to operate so as to qualify as a REIT.
Taxation of the Company We elected to be treated as a REIT for U.S. federal income tax purposes commencing with our taxable year ended December 31, 2014 and expect to continue to operate so as to qualify as a REIT.
(E) LTV is generally based on the initial loan amount divided by the as-is appraised value as of the date the loan was originated or by the current principal amount as of the date of the most recent as-is appraised value. Weighted average LTV includes non-consolidated senior interests and excludes risk-rated 5 loans.
(D) LTV is based on the initial loan amount divided by the as-is appraised value as of the date the loan was originated. Weighted average LTV excludes risk-rated 5 loans.
(C) We classify a loan as life science if more than 50% of the gross leasable area is leased to, or will be converted to, life science-related space. (D) Other property type includes Condo (Residential) (2%), Self-Storage (2%), Student Housing (1%) and Single Family Rental (1%).
(A) Excludes: (i) Real Estate Assets, (ii) CMBS B-Pieces and (iii) fully written off loans. (B) We classify a loan as life science if more than 50% of the gross leasable area is leased to, or will be converted to, life science-related space. (C) Other property type includes Self-Storage (2%), Student Housing (2%) and Mixed Use (1%).
The following table details our outstanding financing arrangements as of December 31, 2023 (amounts in thousands): Portfolio Financing Outstanding Principal Balance Maximum Capacity Master repurchase agreements $ 1,477,227 $ 2,000,000 Collateralized loan obligation 1,942,750 1,942,750 Term lending agreements 1,329,390 1,977,399 Term loan facility 561,377 1,000,000 Asset specific financing 266,072 490,625 Warehouse facility — 500,000 Secured term loan 343,000 343,000 Revolving credit agreement 160,000 610,000 Non-consolidated senior interests 188,611 188,611 Total portfolio financing $ 6,268,427 $ 9,052,385 The following chart illustrates our progress in diversifying our financing sources and expanding our non-mark-to-market financing sources to reduce our exposure to market volatility: (1) Based on outstanding principal amount of secured financing, including non-consolidated senior interests, that resulted from non-recourse sales of senior loan interest in loans we originated 6 Table of Contents Financing Risk Management The amount of leverage employed on our assets will depend on our Manager's assessment of the credit, liquidity, price volatility and other risks of those assets and the financing counterparties and availability of particular types of financing at any given time.
The following table details our outstanding financing arrangements as of December 31, 2024 (amounts in thousands): Portfolio Financing Outstanding Principal Balance Maximum Capacity Master repurchase agreements $ 1,038,066 $ 2,000,000 Collateralized loan obligations 1,766,231 1,766,231 Term lending agreements 789,647 1,288,371 Term loan facility 553,966 1,000,000 Asset specific financing 343,216 490,625 Warehouse facility — 500,000 Secured term loan 339,500 339,500 Revolving credit agreement 80,000 610,000 Total portfolio financing $ 4,910,626 $ 7,994,727 The following chart illustrates our progress in diversifying our financing sources and expanding our non-mark-to-market financing sources to reduce our exposure to market volatility: Outstanding Financing (1) (1) Based on outstanding principal amount of secured financing. 6 Table of Contents Financing Risk Management The amount of leverage employed on our assets will depend on our Manager's assessment of the credit, liquidity, price volatility and other risks of those assets and the financing counterparties and availability of particular types of financing at any given time.
The following chart illustrates the sensitivity of our net interest income to changes in Term SOFR on a per weighted average diluted common share basis: (1) Assumes loans are drawn up to maximum approved advance rate based on current principal amount outstanding as of December 31, 2023. For a further discussion, see Part II, Item 7.
The following chart illustrates the sensitivity of our net interest income to changes in Term SOFR on a per weighted average diluted common share basis: Quarterly Net Interest Income Per Share Sensitivity to Change in Market Rates Term SOFR = 4.33% ($ Impact Per Share) As of December 31, 2024 For a further discussion, see Part II, Item 7.
Rosenberg, Global Head of KKR Real Estate and Chairman of our board of directors, KKR Real Estate had over $68 billion of AUM as of December 31, 2023. Mr.
Rosenberg, KKR's Chairman of Real Assets and Chairman of our board of directors, KKR Real Estate had $79.6 billion of AUM as of September 30, 2024. Mr.
Removed
(A) Excludes: (i) REO with net carrying value of $158.6 million , (ii) CMBS B-Piece investments held through an equity method investment and (iii ) fully written off risk-rated 5 loans with a combined outstanding principal balance of $45.5 million.
Added
In addition, we originate floating-rate loans for which we syndicate a senior position and retain a subordinated interest for our portfolio.
Removed
(B) Senior loans include senior mortgages and similar credit quality loans, including related contiguous junior participations in senior loans where we have financed a loan with structural leverage through the non-recourse sale of a corresponding first mortgage.
Added
"Management's Discussion and Analysis of Financial Condition and Results of Operations—Quantitative and Qualitative Disclosures About Market Risk—Interest Rate Risk." As of December 31, 2024, our floating-rate loan portfolio and financing arrangements were all indexed to Term SOFR.
Removed
"Management's Discussion and Analysis of Financial Condition and Results of Operations—Quantitative and Qualitative Disclosures About Market Risk—Interest Rate Risk." On March 5, 2021, the Financial Conduct Authority of the U.K. (the “FCA”), which regulates LIBOR, announced (the “FCA Announcement”) that all relevant LIBOR tenors would cease to be published or would no longer be representative after June 30, 2023.
Removed
The FCA Announcement coincided with the March 5, 2021 announcement of LIBOR’s administrator, the ICE Benchmark Administration Limited (the “IBA”), indicating that, as a result of not having access to input data necessary to calculate relevant LIBOR tenors on a representative basis after June 30, 2023, the IBA would have to cease publication of such LIBOR tenors immediately after the last publication on June 30, 2023.
Removed
Further, on March 15, 2022, the Consolidated Appropriations Act of 2022, which includes the Adjustable Interest Rate (LIBOR) Act, was signed into law in the United States. This legislation established a uniform benchmark replacement process for financial contracts maturing after June 30, 2023 that do not contain clearly defined or practicable fallback provisions.
Removed
The legislation also created a safe harbor that shields lenders from litigation if they choose to utilize a replacement rate recommended by the Board of Governors of the Federal Reserve.
Removed
The Federal Reserve, in conjunction with the Alternative Reference Rate Committee, a committee convened by the Federal Reserve that includes major market participants, identified the Secured Overnight Financing Rate, or SOFR, an index calculated by short-term repurchase agreements, backed by Treasury securities, as its preferred alternative rate for LIBOR.
Removed
There are significant differences between LIBOR and SOFR, such as LIBOR being an unsecured lending rate while SOFR is a secured lending rate, and SOFR is an overnight rate while LIBOR reflects term rates at different maturities.
Removed
The differences between LIBOR and SOFR, could result in higher interest costs for us, which could have a material adverse effect on our operating results.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

117 edited+18 added−4 removed609 unchanged
Biggest changeIf it were established that we were an unregistered investment company, there would be a risk that we would be subject to monetary penalties and injunctive relief in an action brought by the SEC, that we would be unable to enforce contracts with third parties, that third parties could seek to obtain rescission of transactions undertaken during the period it was established that we were an unregistered investment company. 38 Table of Contents If we were required to register as an investment company under the Investment Company Act, we would become subject to substantial regulation with respect to our capital structure (including our ability to use borrowings or corporate leverage, which would have an adverse impact on our investment returns), management, operations, transactions with affiliated persons (as defined in the Investment Company Act) and portfolio composition, including disclosure requirements and restrictions with respect to diversification and industry concentration and other matters.
Biggest changeIf we were required to register as an investment company under the Investment Company Act, we would become subject to substantial regulation with respect to our capital structure (including our ability to use borrowings or corporate leverage, which would have an adverse impact on our investment returns), management, operations, transactions with affiliated persons (as defined in the Investment Company Act) and portfolio composition, including disclosure requirements and restrictions with respect to diversification and industry concentration and other matters.
For example, under certain circumstances, a lender who has inappropriately exercised control over the management and policies of a debtor may have its claims subordinated or disallowed or may be found liable for damages suffered by parties as a result of such actions.
For example, under certain circumstances, a lender who has inappropriately exercised control over the management and policies of a debtor may have its claims subordinated or disallowed or may be found liable for damages suffered by parties as a result of such actions.
In a period of declining interest rates, our interest income on floating-rate investments would generally decrease, while any decrease in the interest we are charged on our floating-rate debt may be subject to floors and may not compensate for such decrease in interest income.
In a period of declining interest rates, our interest income on floating-rate investments would generally decrease, while any decrease in the interest we are charged on our floating-rate debt may be subject to floors and may not compensate for such decrease in interest income.
There may be no guidance from the SEC staff that applies directly to our factual situations and as a result we may have to apply SEC staff guidance that relates to other factual situations by analogy. No assurance can be given that the SEC or its staff will concur with our classification of our assets.
There may be no guidance from the SEC staff that applies directly to our factual situations and as a result we may have to apply SEC staff guidance that relates to other factual situations by analogy. No assurance can be given that the SEC or its staff will concur with our classification of our assets.
There is no guarantee that we will be able to adjust our assets in the manner required to maintain an exclusion from registration under the Investment Company Act and any adjustment in our strategy or assets could have a material adverse effect on us.
There is no guarantee that we will be able to adjust our assets in the manner required to maintain an exclusion from registration under the Investment Company Act and any adjustment in our strategy or assets could have a material adverse effect on us.
Interest rate and currency hedging may fail to protect or could adversely affect us because, among other things: 28 Table of Contents • interest rate, currency and/or credit hedging can be expensive and may result in us generating less net income; • available interest rate or currency hedges may not correspond directly with the interest rate or currency risk for which protection is sought; • due to a credit loss, prepayment or asset sale, the duration of the hedge may not match the duration of the related asset or liability; • the amount of income that a REIT may earn from hedging transactions (other than hedging transactions that satisfy certain requirements of the Internal Revenue Code of 1986, as amended (the “Code”) or that are done through a taxable REIT subsidiary) to offset interest rate losses is limited by U.S. federal income tax provisions governing REITs; • the hedging counterparty owing money in the hedging transaction may default on its obligation to pay; • the credit quality of the hedging counterparty owing money on the hedge may be downgraded to such an extent that it impairs our ability to sell or assign our side of the hedging transaction; • we may fail to recalculate, readjust and execute hedges in an efficient manner; and • legal, tax and regulatory changes could occur and may adversely affect our ability to pursue hedging strategies and/or increase the costs of implementing such strategies.
Interest rate and currency hedging may fail to protect or could adversely affect us because, among other things: • interest rate, currency and/or credit hedging can be expensive and may result in us generating less net income; • available interest rate or currency hedges may not correspond directly with the interest rate or currency risk for which protection is sought; • due to a credit loss, prepayment or asset sale, the duration of the hedge may not match the duration of the related asset or liability; • the amount of income that a REIT may earn from hedging transactions (other than hedging transactions that satisfy certain requirements of the Internal Revenue Code of 1986, as amended (the “Code”) or that are done through a taxable REIT subsidiary) to offset interest rate losses is limited by U.S. federal income tax provisions governing REITs; • the hedging counterparty owing money in the hedging transaction may default on its obligation to pay; • the credit quality of the hedging counterparty owing money on the hedge may be downgraded to such an extent that it impairs our ability to sell or assign our side of the hedging transaction; • we may fail to recalculate, readjust and execute hedges in an efficient manner; and • legal, tax and regulatory changes could occur and may adversely affect our ability to pursue hedging strategies and/or increase the costs of implementing such strategies.
To the extent that we invest in non-U.S. real estate-related assets, we may be subject to certain risks associated with international investments generally, including, among others: • currency exchange matters, including fluctuations in currency exchange rates and costs associated with conversion of investment principal and income from one currency to another; • less developed or efficient financial markets than in the United States, which may lead to potential price volatility and relative illiquidity; • the burdens of complying with international regulatory requirements and prohibitions that differ between jurisdictions; • changes in laws or clarifications to existing laws that could impact our tax treaty positions, which could adversely impact the returns on our investments; • a less developed legal or regulatory environment, differences in the legal and regulatory environment or enhanced legal and regulatory compliance; • political hostility to investments by foreign investors; • higher inflation rates; • higher transaction costs; • difficulty enforcing contractual obligations; • fewer investor protections; • war or other hostilities; • potentially adverse tax consequences; or • other economic and political risks, including potential exchange control regulations and restrictions on our non-U.S. investments and repatriation of profits from investments or of capital invested, the risks of political, economic or social instability, the possibility of expropriation or confiscatory taxation and adverse economic or political developments.
To the extent that we invest in non-U.S. real estate-related assets, we may be subject to certain risks associated with international investments generally, including, among others: • currency exchange matters, including fluctuations in currency exchange rates and costs associated with conversion of investment principal and income from one currency to another; • less developed or efficient financial markets than in the United States, which may lead to potential price volatility and relative illiquidity; • the burdens of complying with international regulatory requirements and prohibitions that differ between jurisdictions; • changes in laws or clarifications to existing laws that could impact our tax treaty positions, which could adversely impact the returns on our investments; • a less developed legal or regulatory environment, differences in the legal and regulatory environment or enhanced legal and regulatory compliance; • political hostility to investments by foreign investors; • higher inflation rates; • higher transaction costs; • difficulty enforcing contractual obligations; • fewer investor protections; • war or other hostilities; • potentially adverse tax consequences; or • other economic and political risks, including potential exchange control regulations and restrictions on our non-U.S. investments and repatriation of profits from investments or of capital invested, the risks of political, 22 Table of Contents economic or social instability, the possibility of expropriation or confiscatory taxation and adverse economic or political developments.
For example, we may acquire assets, including debt securities requiring us to accrue original issue discount or recognize market discount income, that generate taxable income in excess of economic income or in advance of the corresponding cash flow from the assets referred to as “phantom income.” In addition, if a borrower with respect to a particular debt instrument encounters financial difficulty rendering it unable to pay 44 Table of Contents stated interest as due, we may nonetheless be required to continue to recognize the unpaid interest as taxable income with the effect that we will recognize income but will not have a corresponding amount of cash available for distribution to our stockholders.
For example, we may acquire assets, including debt securities requiring us to accrue original issue discount or recognize market discount income, that generate taxable income in excess of economic income or in advance of the corresponding cash flow from the assets referred to as “phantom income.” In addition, if a borrower with respect to a particular debt instrument encounters financial difficulty rendering it unable to pay 43 Table of Contents stated interest as due, we may nonetheless be required to continue to recognize the unpaid interest as taxable income with the effect that we will recognize income but will not have a corresponding amount of cash available for distribution to our stockholders.
By virtue of KKR’s stock ownership and voting power, KKR has the power to significantly influence our business and affairs and is able to influence the outcome of matters required to be submitted to stockholders for approval, including the election of our directors, amendments to our charter, mergers or sales of assets.
By virtue of KKR’s stock ownership and voting power, KKR has the power to influence our business and affairs and is able to influence the outcome of matters required to be submitted to stockholders for approval, including the election of our directors, amendments to our charter, mergers or sales of assets.
By virtue of KKR’s stock ownership, KKR has the power to significantly influence our business and affairs and is able to influence the outcome of matters required to be submitted to stockholders for approval, including the election of our directors, amendments to our charter, mergers or sales of assets.
By virtue of KKR’s stock ownership, KKR has the power to influence our business and affairs and is able to influence the outcome of matters required to be submitted to stockholders for approval, including the election of our directors, amendments to our charter, mergers or sales of assets.
In addition, since such loans generally entail greater risk than mortgage loans collateralized by income-producing property, we may need to increase our allowance for loan losses in the future to account for the likely increase in probable incurred credit losses associated with such loans.
In addition, since such loans generally entail greater risk than mortgage loans collateralized by income-producing property, we may increase our allowance for loan losses in the future to account for the likely increase in probable incurred credit losses associated with such loans.
If the stockholder is a foreign person, it would be subject to U.S. federal income tax at the maximum tax rate and withholding will be required on this income without reduction or exemption pursuant to any otherwise applicable income tax treaty. 46 Table of Contents Our qualification as a REIT may be dependent on the accuracy of legal opinions or advice rendered or given or statements by the issuers of assets that we acquire, and the inaccuracy of any such opinions, advice or statements may adversely affect our REIT qualification and result in significant corporate-level tax.
If the stockholder is a foreign person, it would be subject to U.S. federal income tax at the maximum tax rate and withholding will be required on this income without reduction or exemption pursuant to any otherwise applicable income tax treaty. 45 Table of Contents Our qualification as a REIT may be dependent on the accuracy of legal opinions or advice rendered or given or statements by the issuers of assets that we acquire, and the inaccuracy of any such opinions, advice or statements may adversely affect our REIT qualification and result in significant corporate-level tax.
Such changes and have included and/or may in the future include economic and/or market fluctuations, increases in remote working arrangements, changes in environmental, zoning and other laws, casualty or condemnation losses, regulatory limitations on rents, decreases in property values, changes in the appeal of properties to tenants, changes in supply and demand of real estate products, fluctuations in real estate fundamentals (including average occupancy and room rates for hotel properties), energy and supply shortages, various uninsured or uninsurable risks, natural 11 Table of Contents disasters, terrorism, acts of war, outbreaks of pandemic or contagious diseases such as COVID-19, changes in government regulations (such as rent control), political and legislative uncertainty, changes in monetary policy, changes in real property tax rates and operating expenses, changes in interest rates, changes in the availability of debt financing and/or mortgage funds which may render the sale or refinancing of properties difficult or impracticable, increased mortgage defaults, increases in borrowing rates, escalating global trade tensions, the conflict between Russia and Ukraine, deteriorating geopolitical conditions in the Middle East, the adoption or expansion of economic sanctions or trade restrictions, negative developments in the economy that depress travel activity, adverse changes in demand and/or real estate values generally and other factors that are beyond our control.
Such changes and have included and/or may in the future include economic and/or market fluctuations, increases in remote working arrangements, changes in environmental, zoning and other laws, casualty or condemnation losses, regulatory limitations on rents, decreases in property values, changes in the appeal of properties to tenants, changes in supply and demand of real estate products, fluctuations in real estate fundamentals (including average occupancy and room rates for hotel properties), energy and supply shortages, various uninsured or uninsurable risks, natural 10 Table of Contents disasters, terrorism, acts of war, outbreaks of pandemic or contagious diseases, changes in government regulations (such as rent control), political and legislative uncertainty, changes in monetary policy, changes in real property tax rates and operating expenses, changes in interest rates, changes in the availability of debt financing and/or mortgage funds which may render the sale or refinancing of properties difficult or impracticable, increased mortgage defaults, increases in borrowing rates, escalating global trade tensions, the conflict between Russia and Ukraine, conflict and deteriorating geopolitical conditions in the Middle East, the adoption or expansion of economic sanctions or trade restrictions, negative developments in the economy that depress travel activity, adverse changes in demand and/or real estate values generally and other factors that are beyond our control.
We refer to these subsidiaries as our “CLO subsidiaries.” Rule 3a-7 under the Investment Company Act is available to certain structured financing vehicles that are engaged in the business of holding financial assets that, by their terms, convert into cash within a finite time period and that issue fixed income securities entitling holders to receive payments that depend primarily on the cash flows from these assets, provided that, among other things, the structured finance vehicle does not engage in certain portfolio management practices resembling those employed by management investment companies (e.g., mutual funds).
We refer to these subsidiaries as our “CLO subsidiaries.” Rule 3a-7 under the Investment Company Act is available to certain structured financing vehicles that are engaged in the business of holding financial assets that, by their terms, convert into cash within a finite time period and that issue fixed income securities entitling holders to receive payments 36 Table of Contents that depend primarily on the cash flows from these assets, provided that, among other things, the structured finance vehicle does not engage in certain portfolio management practices resembling those employed by management investment companies (e.g., mutual funds).
Under the terms of the management agreement, our Manager and its affiliates and their respective directors, officers, employees, managers, trustees, control persons, partners, equityholders and stockholders are not liable to us, our directors, stockholders or any subsidiary of ours, or their directors, officers, employees or stockholders for any acts or omissions performed in accordance with and pursuant to the management agreement, whether by or through attempted piercing of the corporate veil, by or through a claim, by the enforcement of any judgment or assessment or by any legal or equitable proceeding, or by virtue of any statute, regulation or other applicable law, or otherwise, except by reason of acts or omissions constituting bad faith, willful misconduct, gross negligence, or reckless disregard of their duties under the management agreement.
Under the terms of the management agreement, our Manager and its affiliates and their respective directors, officers, employees, managers, trustees, control persons, partners, equityholders and stockholders are not liable to us, our directors, stockholders or any subsidiary of ours, or their directors, officers, employees or stockholders for any acts or omissions performed in accordance with and pursuant to the management agreement, whether by or through attempted piercing of the corporate veil, by or through a claim, 30 Table of Contents by the enforcement of any judgment or assessment or by any legal or equitable proceeding, or by virtue of any statute, regulation or other applicable law, or otherwise, except by reason of acts or omissions constituting bad faith, willful misconduct, gross negligence, or reckless disregard of their duties under the management agreement.
However, since January 2022, in light of increasing inflation, the U.S. Federal Reserve has increased interest rates eleven times. In a period of rising interest rates, our interest expense on floating-rate debt would increase, while any additional interest income we earn on our floating-rate investments may be subject to caps and may not compensate for such increase in interest expense.
However, since January 2022, in light of increasing inflation, the U.S. Federal Reserve has increased interest rates eleven times. In a period of rising interest rates, our interest expense on floating-rate debt would increase, while any additional interest income we earn on our floating-rate investments may be subject to caps and may not compensate for such increase in interest expense.
Changes in interest rates and credit spreads will affect our net income from loans and other investments, which is the difference between the interest and related income earned on interest-earning investments and the interest and related expense incurred in financing these investments. As of December 31, 2023, our floating-rate loan portfolio and financing arrangements were all indexed to Term SOFR.
Changes in interest rates and credit spreads will affect our net income from loans and other investments, which is the difference between the interest and related income earned on interest-earning investments and the interest and related expense incurred in financing these investments. As of December 31, 2024, our floating-rate loan portfolio and financing arrangements were all indexed to Term SOFR.
The materiality of ESG risks and impacts on an individual potential investment or portfolio as a whole are dependent on many factors, including the relevant industry, country, asset class and investment style. Our Manager’s loss estimates based on its due diligence process may not prove accurate, as actual results may vary from estimates.
The materiality of sustainability risks and impacts on an individual potential investment or portfolio as a whole are dependent on many factors, including the relevant industry, country, asset class and investment style. Our Manager’s loss estimates based on its due diligence process may not prove accurate, as actual results may vary from estimates.
Even after the lapse of the five-year prohibition period, any business combination with an interested stockholder must be recommended by our board of directors and approved by the affirmative vote of at least: • 80% of the votes entitled to be cast by stockholders; and 50 Table of Contents • two-thirds of the votes entitled to be cast by stockholders other than the interested stockholder and affiliates and associates thereof.
Even after the lapse of the five-year prohibition period, any business combination with an interested stockholder must be recommended by our board of directors and approved by the affirmative vote of at least: 49 Table of Contents • 80% of the votes entitled to be cast by stockholders; and • two-thirds of the votes entitled to be cast by stockholders other than the interested stockholder and affiliates and associates thereof.
We seek to invest primarily in debt investments in or relating to real estate assets. Deterioration of real estate fundamentals generally, and in the United States in particular, has increased the default risk applicable to borrowers, and made it relatively more difficult for us to generate attractive risk-adjusted returns and comtinue to negatively impact our performance.
We seek to invest primarily in debt investments in or relating to real estate assets. Deterioration of real estate fundamentals generally, and in the United States in particular, has increased the default risk applicable to borrowers, and made it relatively more difficult for us to generate attractive risk-adjusted returns and continue to negatively impact our performance.
There can be no assurance that we will continue to utilize rate floors. In recent years, interest rates had remained at relatively low levels on a historical basis. However, since January 2022, in light of increasing inflation, the U.S. Federal Reserve increased interest rates eleven times.
There can be no assurance that we will continue to utilize rate floors. In recent years, interest rates had remained at relatively low levels on a historical basis. However, since January 2022, in light of increasing inflation, the U.S. Federal Reserve increased interest rates eleven times.
Changes in the level of interest rates and credit spreads may also affect our ability to make loans or investments and the value of our loans and investments. 12 Table of Contents Furthermore, increases in interest rates and/or credit spreads may negatively affect demand for loans and could result in higher borrower default rates, while decreases in interest rates and/or credit spreads may decrease our interest income on floating-rate investments and may lead to higher prepayment rates on our loans.
Changes in the level of interest rates and credit spreads may also affect our ability to make loans or investments and the value of our loans and investments. 11 Table of Contents Furthermore, increases in interest rates and/or credit spreads may negatively affect demand for loans and could result in higher borrower default rates, while decreases in interest rates and/or credit spreads may decrease our interest income on floating-rate investments and may lead to higher prepayment rates on our loans.
Owning and operating real property involves risks that are different (and in many ways more significant) than the risks faced in owning a loan secured by that property. The costs associated with operating and redeveloping the property, including any operating shortfalls and significant capital expenditures, could materially and adversely affect our results of operations, financial condition and liquidity.
Owning and operating real property involves risks that are different (and in many ways more significant) than the risks faced in owning a loan secured by that property. Once owned, the costs associated with operating and redeveloping the property, including any operating shortfalls and significant capital expenditures, could materially and adversely affect our results of operations, financial condition and liquidity.
The imperfect correlation between the value of a derivative and the underlying assets may result in losses on the derivative transaction that are greater than the gain in the value of the underlying assets in our portfolio. • Valuation Risk : The derivative instruments used by us may be difficult to value or involve the risk of mispricing or improper valuation, especially where the markets for such derivatives instruments are illiquid and/or such derivatives involve complex structures, or where there is imperfect correlation between the value of the derivative instrument and the underlying asset, reference rate or index. • Counterparty Risk : Derivative instruments also involve exposure to counterparty risk, since contract performance depends in part on the financial condition of the counterparty.
The imperfect correlation between the value of a derivative and the underlying assets may result in losses on the derivative transaction that are greater than the gain in the value of the underlying assets in our portfolio. • Valuation Risk : The derivative instruments used by us may be difficult to value or involve the risk of mispricing or improper valuation, especially where the markets for such derivatives instruments are illiquid and/or such derivatives involve complex structures, or where there is imperfect correlation between the value of the derivative instrument and the underlying asset, reference rate or index. 21 Table of Contents • Counterparty Risk : Derivative instruments also involve exposure to counterparty risk, since contract performance depends in part on the financial condition of the counterparty.
The SEC recently proposed amendments to its rules related to cybersecurity risk management, strategy, governance, and incident reporting, and many jurisdictions in which we and KKR operate have, or are considering adopting, laws and regulations relating to data privacy, cybersecurity and protection of personal information, including the General Data Protection Regulation in the European Union that went into effect in May 2018 and the California Consumer Privacy Act that became effective on January 1, 2020 and is being amended by the California Privacy Rights Act, which became effective on January 1, 2023.
The SEC recently proposed amendments to its rules related to cybersecurity risk management, strategy, governance, and incident reporting, and many jurisdictions in which we and KKR operate have, or are considering adopting, laws and regulations relating to data privacy, cybersecurity and protection of personal information, including the General Data Protection Regulation in the European Union that went into effect in May 2018 and the California Consumer Privacy Act that became effective on January 1, 2020 and was amended by the California Privacy Rights Act, which became effective on January 1, 2023.
State licensing statutes vary from state to state and prescribe or impose various recordkeeping requirements; restrictions on loan origination and servicing practices, including limits on finance charges and the type, amount and manner of charging fees; disclosure requirements; requirements that licensees submit to periodic examination; surety bond and minimum specified net worth requirements; periodic financial reporting requirements; notification requirements for changes in principal officers, stock ownership or corporate control; restrictions on advertising; and requirements that loan forms be submitted for review.
State licensing statutes vary from state to state and prescribe or impose various recordkeeping requirements; restrictions on loan origination and servicing practices, including limits on finance charges and the type, amount and manner of charging fees; disclosure requirements; requirements that licensees submit to periodic examination; surety bond and minimum specified net worth requirements; periodic financial reporting requirements; notification requirements for changes in principal officers, stock 35 Table of Contents ownership or corporate control; restrictions on advertising; and requirements that loan forms be submitted for review.
If we identify material weaknesses in our internal controls over financial reporting, if we are unable to comply with the requirements of Section 404 of the Sarbanes-Oxley Act in a timely manner or to assert that our internal controls over financial reporting is effective or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal controls over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could be negatively affected.
If we identify material weaknesses in our internal controls over financial reporting, if we are unable to comply with the requirements of Section 404 of the Sarbanes-Oxley Act in a timely manner or to assert that our internal controls over financial reporting is effective or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal controls over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could 40 Table of Contents be negatively affected.
Although we intend to make regular quarterly distributions to holders of our common stock and we currently expect to distribute at least 90% of our net taxable income to our stockholders on an annual basis, we have not established a minimum distribution payment level and our ability to pay distributions may be adversely affected by a number of factors, including the risk factors described in this Annual Report on Form 10-K.
Although we intend to make regular quarterly distributions to holders of our common stock and we currently expect to distribute at least 90% of our net taxable income to our stockholders on an annual basis, we have not established a minimum distribution payment level and our ability to pay distributions may be adversely affected by a number of 51 Table of Contents factors, including the risk factors described in this Annual Report on Form 10-K.
Insurance on loans and real estate securities collateral may not cover all losses. There are certain types of losses, generally of a catastrophic nature, such as earthquakes, floods, hurricanes, terrorism or acts of war, which may be uninsurable or not economically insurable.
Insurance on underlying collateral of loans and real estate securities may not cover all losses. There are certain types of losses, generally of a catastrophic nature, such as earthquakes, floods, fires, hurricanes, terrorism or acts of war, which may be uninsurable or not economically insurable.
However, in circumstances where KKR’s global conflicts and compliance committee approves a transaction of this type, approval by our board of directors is generally not 34 Table of Contents required, and our interests and those of KKR or such KKR investment vehicle may not always be aligned, which may give rise to actual or potential conflicts of interest and actions taken for us may be adverse to KKR or such KKR investment vehicle, or vice versa. • Competing interests; allocation of resources.
However, in circumstances where KKR’s global conflicts and compliance committee approves a transaction of this type, approval by our board of directors is generally not required, and our interests and those of KKR or such KKR investment vehicle may not always be aligned, which may give rise to actual or potential conflicts of interest and actions taken for us may be adverse to KKR or such KKR investment vehicle, or vice versa. • Competing interests; allocation of resources.
We cannot predict when or if any new U.S. federal income tax law, regulation or administrative interpretation, 47 Table of Contents or any amendment to any existing U.S. federal income tax law, regulation or administrative interpretation, will be adopted, promulgated or become effective and any such law, regulation or interpretation may take effect retroactively.
We cannot predict when or if any new U.S. federal income tax law, regulation or administrative interpretation, 46 Table of Contents or any amendment to any existing U.S. federal income tax law, regulation or administrative interpretation, will be adopted, promulgated or become effective and any such law, regulation or interpretation may take effect retroactively.
If a borrower fails to complete the construction of a project or experiences cost overruns, there could be adverse consequences associated with the loan, including a decline in the value of the property securing the loan, a borrower claim against us for failure to perform under the loan documents if we choose to stop funding, increased costs to the borrower that the borrower is unable to pay, a bankruptcy filing by the borrower, and abandonment by the borrower of the collateral for the loan.
If a borrower fails to complete the construction of a project or experiences cost overruns, there could be adverse consequences associated with the loan, including a decline in the value of the property securing the loan, a borrower claim against us for 24 Table of Contents failure to perform under the loan documents if we choose to stop funding, increased costs to the borrower that the borrower is unable to pay, a bankruptcy filing by the borrower, and abandonment by the borrower of the collateral for the loan.
In an extreme eventuality, it is possible that such regulations could render the continued operation of our company unviable. 39 Table of Contents In the United States, the process established by the Dodd-Frank Act for designation of systemically important nonbank firms has provided a means for ensuring that the perimeter of prudential regulation can be extended as appropriate to cover large shadow banking institutions.
In an extreme eventuality, it is possible that such regulations could render the continued operation of our company unviable. In the United States, the process established by the Dodd-Frank Act for designation of systemically important nonbank firms has provided a means for ensuring that the perimeter of prudential regulation can be extended as appropriate to cover large shadow banking institutions.
The current term of the management agreement extends to December 31, 2024 and will be automatically renewed for additional one-year terms thereafter; provided, however, that our Manager may terminate the management agreement annually upon 180 days’ prior notice.
The current term of the management agreement extends to December 31, 2025 and will be automatically renewed for additional one-year terms thereafter; provided, however, that our Manager may terminate the management agreement annually upon 180 days’ prior notice.
If unauthorized parties gain access to such information and technology systems, they may be able to steal, publish, delete or modify private and sensitive information, including nonpublic personal information related to shareholders (and their beneficial 48 Table of Contents owners) and material nonpublic information.
If unauthorized parties gain access to such information and technology systems, they may be able to steal, publish, delete or modify private and sensitive information, including nonpublic personal information related to shareholders (and their beneficial 47 Table of Contents owners) and material nonpublic information.
As a result, with respect to our investments in CMBS B-Pieces, mezzanine loans and other subordinated debt, we would potentially receive 16 Table of Contents payments or interest distributions after, and must bear the effects of losses or defaults on the senior debt (including underlying senior loans, senior mezzanine loans, B-Notes, preferred equity or senior CMBS bonds, as applicable) before, the holders of other more senior tranches of debt instruments with respect to such issuer.
As a result, with respect to our investments in CMBS B-Pieces, mezzanine loans and other subordinated debt, we would potentially receive payments or interest distributions after, and must bear the effects of losses or defaults on the senior debt (including underlying senior loans, senior mezzanine loans, B-Notes, preferred equity or senior CMBS bonds, as applicable) before, the holders of other more senior tranches of debt instruments with respect to such issuer.
As a result of any high levels of concentration, any adverse economic, political, climate-related or other conditions that disproportionately affects those geographic areas or asset classes could have a magnified adverse effect on our results of operations and financial condition, and the value of our stockholders’ investments could vary more widely than if we invested in a more diverse portfolio of loans.
As a result of any high levels of concentration, any adverse economic, political, climate-related or other conditions that disproportionately affects those geographic areas or asset classes could have a magnified adverse effect on 16 Table of Contents our results of operations and financial condition, and the value of our stockholders’ investments could vary more widely than if we invested in a more diverse portfolio of loans.
A decline in the value of our assets may require us to recognize an “other-than-temporary” impairment or write-offs against such assets under GAAP if we were to determine that, with respect to any assets in unrealized loss positions, we do not have the ability and intent to hold such assets to maturity or for a period of time sufficient to allow for recovery to the original acquisition cost of such assets.
A decline in the value of our assets may require us to recognize an impairment or write-offs against such assets under GAAP if we were to determine that, with respect to any assets in unrealized loss positions, we do not have the ability and intent to hold such assets to maturity or for a period of time sufficient to allow for recovery to the original acquisition cost of such assets.
Therefore, we cannot assure you that our Manager will have knowledge of all information that may adversely affect such investment. CMBS B-Pieces, mezzanine loans, preferred equity and other investments that are subordinated or otherwise junior in an issuer’s capital structure and that involve privately negotiated structures expose us to greater risk of loss.
Therefore, we cannot assure you that our Manager will have knowledge of all information that may adversely affect such investment. 15 Table of Contents CMBS B-Pieces, mezzanine loans, preferred equity and other investments that are subordinated or otherwise junior in an issuer’s capital structure and that involve privately negotiated structures expose us to greater risk of loss.
Although our Manager will seek to resolve any conflicts of interest in a fair and equitable manner in accordance with the allocation policy and its prevailing policies and procedures with respect to conflicts resolution among KKR funds generally, only those transactions set forth in this paragraph will be required to be presented for approval by the independent directors. • Management agreement.
Although our Manager will seek to resolve any conflicts of interest in a fair and equitable manner in accordance 34 Table of Contents with the allocation policy and its prevailing policies and procedures with respect to conflicts resolution among KKR funds generally, only those transactions set forth in this paragraph will be required to be presented for approval by the independent directors. • Management agreement.
These provisions could have the effect of limiting or precluding a third party from making an unsolicited acquisition proposal for our company or of delaying, deferring or preventing a change in control under circumstances that otherwise could provide the holders of shares of our common stock with the opportunity to realize a premium over the then current market price.
These provisions could have the effect of limiting or precluding a third party from making an unsolicited acquisition proposal for our company or of delaying, deferring or preventing a change in control under circumstances that otherwise could provide 50 Table of Contents the holders of shares of our common stock with the opportunity to realize a premium over the then current market price.
See “Risks Related to Our REIT Status and Certain Other Tax Considerations.” 22 Table of Contents Loans or investments involving international real estate-related assets are subject to special risks that we may not manage effectively, which could have a material adverse effect on our results of operations and our ability to make distributions to our stockholders.
See “Risks Related to Our REIT Status and Certain Other Tax Considerations.” Loans or investments involving international real estate-related assets are subject to special risks that we may not manage effectively, which could have a material adverse effect on our results of operations and our ability to make distributions to our stockholders.
If we are unable to adequately address such ESG matters or we or our borrowers fail or are perceived to fail to comply with all laws, regulations, policies and related interpretations, it could negatively impact our reputation and our business results.
If we are unable to adequately address such sustainability-related matters or we or our borrowers fail or are perceived to fail to comply with all laws, regulations, policies and related interpretations, it could negatively impact our reputation and our business results.
Selecting and evaluating material ESG factors is subjective by nature, and there is no guarantee that the criteria utilized or judgment exercised by our Manager or a third-party ESG specialist (if any) will reflect the beliefs, values, internal policies or preferred practices of any particular investor or align with the beliefs or values or preferred practices of other asset managers or with market trends.
Selecting and evaluating sustainability factors is subjective by nature, and there is no guarantee that the criteria utilized or judgment exercised by our Manager or a third-party sustainability specialist (if any) will reflect the beliefs, values, internal policies or preferred practices of any particular investor or align with the beliefs or values or preferred practices of other asset managers or with market trends.
Accordingly, we may be unable to obtain the consent of a lender to finance an investment and alternate sources of financing for such asset may not exist. 26 Table of Contents Our master repurchase agreements impose, and additional lending facilities may impose, restrictive covenants, which would restrict our flexibility to determine our operating policies and investment strategy and to conduct our business.
Accordingly, we may be unable to obtain the consent of a lender to finance an investment and alternate sources of financing for such asset may not exist. Our master repurchase agreements impose, and additional lending facilities may impose, restrictive covenants, which would restrict our flexibility to determine our operating policies and investment strategy and to conduct our business.
Although members of the KKR Real Estate team intend to devote such time as may be necessary to conduct our business affairs in an appropriate manner, our Manager and KKR will continue to devote the resources necessary to manage the investment activities of KKR, KKR investment vehicles, other entities affiliated with 33 Table of Contents KKR and the executives of KKR and, therefore, conflicts may arise in the allocation of time, services and resources.
Although members of the KKR Real Estate team intend to devote such time as may be necessary to conduct our business affairs in an appropriate manner, our Manager and KKR will continue to devote the resources necessary to manage the investment activities of KKR, KKR investment vehicles, other entities affiliated with KKR and the executives of KKR and, therefore, conflicts may arise in the allocation of time, services and resources.
Thus, compliance with REIT requirements may hinder our ability to operate solely on the basis of maximizing profits. 42 Table of Contents Complying with REIT requirements may force us to liquidate or restructure otherwise attractive investments.
Thus, compliance with REIT requirements may hinder our ability to operate solely on the basis of maximizing profits. 41 Table of Contents Complying with REIT requirements may force us to liquidate or restructure otherwise attractive investments.
If such renovation is not completed in a timely manner, or if it costs more than expected, the borrower may experience a prolonged reduction of net operating income and may not be able to make payments on our investment on a timely basis or at all, which could result in significant losses.
If such renovation is not completed in a timely manner, or if it costs more than expected, the borrower 13 Table of Contents may experience a prolonged reduction of net operating income and may not be able to make payments on our investment on a timely basis or at all, which could result in significant losses.
Our access to sources of financing will depend upon a number of factors, over which we have little or no control, including: • general economic or market conditions; • the market’s view of the quality of our assets; • the market’s perception of our growth potential; • our current and potential future earnings and cash distributions; and • the market price of the shares of our common stock.
Our access to sources of financing will depend upon a number of factors, over which we have little or no control, including: • general economic or market conditions; • the market’s view of the quality of our assets; 26 Table of Contents • the market’s perception of our growth potential; • our current and potential future earnings and cash distributions; and • the market price of the shares of our common stock.
Any interruption or deterioration in the performance of these third parties or failures of their information systems and technology could impair the quality of our operations and could affect our reputation and hence adversely affect our business. 49 Table of Contents KKR has significant influence over us and its interests may conflict with ours or those of our stockholders in the future.
Any interruption or deterioration in the performance of these third parties or failures of their information systems and technology could impair the quality of our operations and could affect our reputation and hence adversely affect our business. 48 Table of Contents KKR has influence over us and its interests may conflict with ours or those of our stockholders in the future.
The nature and scope of our Manager’s ESG diligence, if any, will vary based on the investment opportunity, but may include a review of, among other things: energy management, air and water pollution, land contamination, diversity, human rights, employee health and safety, accounting standards and bribery and corruption.
The nature and scope of our Manager’s sustainability-related diligence, if any, will vary based on the investment opportunity, but may include a review of, among other things: energy management, air and water pollution, land contamination, diversity, human rights, employee health and safety, accounting standards and bribery and corruption.
As a result, we could experience poor performance or losses for which our Manager would not be liable. 31 Table of Contents The historical returns generated by funds managed by affiliates of our Manager should not be considered indicative of our future results or of any returns expected on an investment in shares of our common stock.
As a result, we could experience poor performance or losses for which our Manager would not be liable. The historical returns generated by funds managed by affiliates of our Manager should not be considered indicative of our future results or of any returns expected on an investment in shares of our common stock.
The management agreement may be terminated upon the affirmative vote of at least two-thirds of our independent directors, based upon our determination that (1) our Manager's performance is unsatisfactory and is materially detrimental to us and our subsidiaries taken as a whole or (2) the management fee and incentive fee payable to our Manager are not fair, subject to our Manager’s right to prevent any termination due to unfair fees by accepting a reduction of management and/or incentive fees agreed to by at least two-thirds of our independent directors.
The management agreement may be terminated upon the affirmative vote of at least two-thirds of our independent directors, based upon our determination that (i) our Manager's performance is unsatisfactory and is materially detrimental to us and our subsidiaries taken as a whole or (ii) the management fee and incentive fee payable to our Manager are not fair, subject to our Manager’s right to prevent any termination due to unfair fees by accepting a reduction of management and/or incentive fees agreed to by at least two-thirds of our independent directors.
If that partnership or limited liability company owned nonqualifying assets or earned nonqualifying income, we may not be able to satisfy all of the REIT income or 45 Table of Contents asset tests.
If that partnership or limited liability company owned nonqualifying assets or earned nonqualifying income, we may not be able to satisfy all of the REIT income or 44 Table of Contents asset tests.
“Management’s Discussion and Analysis of Financial Condition and Results of Operations—Our Portfolio.” Any credit ratings assigned to our investments or to us will be subject to ongoing evaluations and revisions and we cannot assure you that those ratings will not be downgraded. Some of our investments may be rated by rating agencies.
“Management’s Discussion and Analysis of Financial Condition and Results of Operations—Our Portfolio.” 17 Table of Contents Any credit ratings assigned to our investments or to us will be subject to ongoing evaluations and revisions and we cannot assure you that those ratings will not be downgraded. Some of our investments may be rated by rating agencies.
No assurance can be given that such claims will not arise or that we will not be subject to significant liability if a claim of this type did arise. 19 Table of Contents Any distressed loans or investments we make, or loans and investments that later become distressed, may subject us to losses and other risks relating to bankruptcy proceedings.
No assurance can be given that such claims will not arise or that we will not be subject to significant liability if a claim of this type did arise. Any distressed loans or investments we make, or loans and investments that later become distressed, may subject us to losses and other risks relating to bankruptcy proceedings.
Any distributions we make to our 52 Table of Contents stockholders will be at the discretion of our board of directors and will depend on our earnings, financial condition, liquidity, debt covenants, maintenance of our REIT qualification, applicable law and such other factors as our board of directors may deem relevant from time to time.
Any distributions we make to our stockholders will be at the discretion of our board of directors and will depend on our earnings, financial condition, liquidity, debt covenants, maintenance of our REIT qualification, applicable law and such other factors as our board of directors may deem relevant from time to time.
As of December 31, 2023, 13,160,000 shares of preferred stock are classified as 6.50% Series A Cumulative Redeemable Preferred Stock and one share of preferred stock is classified as special non-voting preferred stock.
As of December 31, 2024, 13,160,000 shares of preferred stock are classified as 6.50% Series A Cumulative Redeemable Preferred Stock and one share of preferred stock is classified as special non-voting preferred stock.
To the extent we suffer such losses with respect to these transitional loans, it could adversely affect our results of operations and financial condition. 14 Table of Contents Prepayment rates may adversely affect the value of our portfolio of assets. Generally, our borrowers may repay their loans prior to their stated final maturities.
To the extent we suffer such losses with respect to these transitional loans, it could adversely affect our results of operations and financial condition. Prepayment rates may adversely affect the value of our portfolio of assets. Generally, our borrowers may repay their loans prior to their stated final maturities.
CRE debt instruments (e.g., mortgages, mezzanine loans and preferred equity) that are secured by commercial property are subject to risks of delinquency and foreclosure and risks of loss that are greater than similar risks associated with loans made on the security of single-family residential property.
CRE debt instruments (e.g., mortgages, mezzanine loans and preferred equity) that are secured, directly or indirectly, by commercial property are subject to risks of delinquency and foreclosure and risks of loss that are greater than similar risks associated with loans made on the security of single-family residential property.
If rules or regulations were to extend to us or our affiliates the regulatory and supervisory requirements, such as capital and liquidity standards, currently applicable to banks, then the regulatory and operating costs associated therewith could adversely impact the implementation of our investment strategy and our returns.
If rules or regulations were to extend to us or our affiliates the regulatory and supervisory requirements, such as capital and liquidity standards, currently applicable to banks, then the regulatory and operating costs associated therewith could 38 Table of Contents adversely impact the implementation of our investment strategy and our returns.
In addition, our investment portfolio will always be exposed to certain risks that cannot be fully or effectively hedged, such as credit risk relating both to particular securities and counterparties. Hedging against interest rate or currency exposure may adversely affect our earnings, which could reduce our cash available for distribution to stockholders.
In addition, our investment portfolio will 27 Table of Contents always be exposed to certain risks that cannot be fully or effectively hedged, such as credit risk relating both to particular securities and counterparties. Hedging against interest rate or currency exposure may adversely affect our earnings, which could reduce our cash available for distribution to stockholders.
Furthermore, when KKR proprietary entities or KKR investment vehicles have interests or requirements that do not align with our interests, including differing liquidity needs or desired investment horizons, conflicts may arise in the manner in which any voting or control rights are exercised with respect to the relevant investment, potentially resulting in an adverse impact on us.
Furthermore, when KKR proprietary entities or KKR investment vehicles have interests or requirements that do not align with our interests, including differing liquidity needs or desired investment horizons, conflicts may arise in the manner in which any voting or control 33 Table of Contents rights are exercised with respect to the relevant investment, potentially resulting in an adverse impact on us.
In any reorganization or liquidation proceeding relating to our investments, we may lose our entire investment, may be required to accept cash or securities with a value less than our original investment and/or may be required to accept payment over an extended period of time.
In any reorganization or liquidation proceeding relating to our investments, we may lose our entire investment, may be required to accept cash or securities with a value less than our original investment and/ 19 Table of Contents or may be required to accept payment over an extended period of time.
If such a determination were to be made, we would recognize unrealized losses through earnings and write-offs the amortized cost of such assets to a new cost basis, based on the value of such assets on the date they are considered to be other-than-temporarily impaired.
If such a determination were to be made, we would recognize unrealized losses through earnings and write-offs the amortized cost of such assets to a new cost basis, based on the value of such assets on the date they are considered to be impaired.
Our 51 Table of Contents charter contains a provision whereby we have elected to be subject to the provisions of MUTA relating to the filling of vacancies on our board of directors. In addition, our charter includes certain limitations on the ownership and transfer of our common stock.
Our charter contains a provision whereby we have elected to be subject to the provisions of MUTA relating to the filling of vacancies on our board of directors. In addition, our charter includes certain limitations on the ownership and transfer of our common stock.
Construction lending generally is considered to involve a higher degree of risk of non-payment and loss than other types of lending due to a variety of factors, including the difficulties in estimating construction costs and anticipating construction delays (or governmental shut-downs of construction activity) and, generally, the dependency on timely, successful completion and the lease-up and commencement of operations post-completion.
Construction lending involves a higher degree of risk of non-payment and loss than other types of lending due to a variety of factors, including the difficulties in estimating construction costs and anticipating construction delays (or governmental shut-downs of construction activity) and, generally, the dependency on timely, successful completion and the lease-up and commencement of operations post-completion.
The exemptions to 43 Table of Contents the ownership limit granted to date may limit our board of directors’ power to increase the ownership limit or grant further exemptions in the future.
The exemptions to 42 Table of Contents the ownership limit granted to date may limit our board of directors’ power to increase the ownership limit or grant further exemptions in the future.
Market disruptions in a single country could cause a worsening of conditions on a regional and even global level, and economic problems in a single country are increasingly affecting other markets and economies. A continuation of this trend could result in problems in one country 20 Table of Contents adversely affecting regional and even global economic conditions and markets.
Market disruptions in a single country could cause a worsening of conditions on a regional and even global level, and economic problems in a single country are increasingly affecting other markets and economies. A continuation of this trend could result in problems in one country adversely affecting regional and even global economic conditions and markets.
In addition, any dislocation or weakness 27 Table of Contents in the capital and credit markets could adversely affect our lenders and could cause one or more of our lenders to be unwilling or unable to provide us with financing or to increase the costs of that financing.
In addition, any dislocation or weakness in the capital and credit markets could adversely affect our lenders and could cause one or more of our lenders to be unwilling or unable to provide us with financing or to increase the costs of that financing.
These increases have increased our borrowers interest payments, and adversely affected commercial real estate property values, and could result in higher borrower default rates. Notwithstanding the current period of relatively high interest rates, the U.S. Federal Reserve has indicated that it may decrease interest rates in 2024.
These increases have increased our borrowers interest payments, and adversely affected commercial real estate property values, and could result in higher borrower default rates. Notwithstanding the current period of relatively high interest rates, the U.S. Federal Reserve began decreasing rates in 2024 and has indicated that it may further decrease interest rates in 2025.
Accordingly, each of these CLO subsidiaries is subject to an indenture (or similar transaction documents) that contains specific guidelines and restrictions limiting the discretion of the CLO subsidiary and its collateral manager, if 37 Table of Contents applicable.
Accordingly, each of these CLO subsidiaries is subject to an indenture (or similar transaction documents) that contains specific guidelines and restrictions limiting the discretion of the CLO subsidiary and its collateral manager, if applicable.
Net operating income of an income-producing property can be affected by, among other things: • tenant mix and tenant bankruptcies; • success of tenant businesses; • property management decisions, including with respect to capital improvements, particularly in older building structures; • property location and condition; • competition from other properties offering the same or similar services; • changes in laws that increase operating expenses or limit rents that may be charged; • any liabilities relating to environmental matters at the property; • changes in global, national, regional or local economic conditions and/or specific industry segments; 13 Table of Contents • increases in remote working arrangements and the subsequent effect on demand for CRE; • global trade disruption, supply chain issues, significant introduction of trade barriers and bilateral trade frictions; • labor shortages and increasing wages; • higher inflation rates; • declines in global, national, regional or local real estate values; • declines in global, national, regional or local rental or occupancy rates; • changes in interest rates and in the state of the credit and securitization markets and the debt and equity capital markets, including diminished availability or lack of debt financing for CRE; • changes in real estate tax rates and other operating expenses; • changes in governmental rules, regulations and fiscal policies, including environmental legislation, income tax regulations and other tax legislation; • outbreaks of contagious or pandemic diseases, including COVID-19; • acts of God, natural disasters, climate change related risks, terrorism, social unrest and civil disturbances, which may decrease the availability of or increase the cost of insurance or result in uninsured losses; and • adverse changes in zoning laws.
Net operating income of an income-producing property can be affected by, among other things: • tenant mix and tenant bankruptcies; • success of tenant businesses; • property management decisions, including with respect to capital improvements, particularly in older building structures; • renovations or repositionings during which operations may be limited or halted completely; • property location and condition, including without limitation, any need to address climate-related risks; • competition from other properties offering the same or similar services; • changes in laws that increase operating expenses or limit rents that may be charged; • any liabilities relating to environmental matters at the property; 12 Table of Contents • changes in global, national, regional or local economic conditions and/or specific industry segments; • increases in remote working arrangements and the subsequent effect on demand for CRE; • global trade disruption, supply chain issues, significant introduction of trade barriers and bilateral trade frictions; • labor shortages and increasing wages; • higher inflation rates; • declines in global, national, regional or local real estate values; • declines in global, national, regional or local rental or occupancy rates; • changes in interest rates and in the state of the credit and securitization markets and the debt and equity capital markets, including diminished availability or lack of debt financing for CRE; • changes in real estate tax rates and other operating expenses; • changes in governmental rules, regulations and fiscal policies, including environmental legislation, income tax regulations and other tax legislation; • outbreaks of contagious or pandemic diseases; • acts of God, natural disasters, climate change related risks, terrorism, social unrest and civil disturbances, which may decrease the availability of or increase the cost of insurance or result in uninsured losses; and • adverse changes in zoning laws.
Obtaining and maintaining licenses will cause us to incur expenses and failure to be properly licensed under state law or otherwise may have a material adverse effect on us and our operations. 36 Table of Contents Maintaining an exclusion from registration under the Investment Company Act imposes significant limits on our operations.
Obtaining and maintaining licenses will cause us to incur expenses and failure to be properly licensed under state law or otherwise may have a material adverse effect on us and our operations. Maintaining an exclusion from registration under the Investment Company Act imposes significant limits on our operations.
Significant restrictions exist, and additional restrictions may be added in the future, regarding who may hold risk retention interests, the structure of the entities that hold risk retention interests and when and how such risk retention interests may be transferred. Therefore such risk retention interests will generally be illiquid.
Significant restrictions exist, and additional restrictions may be added in the future, regarding who may hold risk retention interests, the structure of the entities that hold risk retention interests and when 23 Table of Contents and how such risk retention interests may be transferred. Therefore such risk retention interests will generally be illiquid.
In addition, we may choose not to enforce, or to enforce less vigorously, our rights under the management agreement because of our desire to maintain an ongoing relationship with our Manager. 35 Table of Contents • Service providers.
In addition, we may choose not to enforce, or to enforce less vigorously, our rights under the management agreement because of our desire to maintain an ongoing relationship with our Manager. • Service providers.
Furthermore, amounts paid by us as premiums and cash or other assets held in margin 21 Table of Contents accounts with respect to our derivative instruments would not be available to us for other investment purposes, which may result in lost opportunities for gain.
Furthermore, amounts paid by us as premiums and cash or other assets held in margin accounts with respect to our derivative instruments would not be available to us for other investment purposes, which may result in lost opportunities for gain.
A change in our investment strategy may 17 Table of Contents also increase our exposure to interest rate and real estate market fluctuations and could adversely affect our results of operations and financial condition.
A change in our investment strategy may also increase our exposure to interest rate and real estate market fluctuations and could adversely affect our results of operations and financial condition.
Our inability to timely prepare our consolidated financial statements in the future would likely have a significant adverse effect on our stock price. 24 Table of Contents Provisions for credit losses are difficult to estimate. Our provision for credit losses is evaluated on a quarterly basis.
Our inability to timely prepare our consolidated financial statements in the future would likely have a significant adverse effect on our stock price. Provisions for credit losses are difficult to estimate. Our provision for credit losses is evaluated on a quarterly basis.
Additionally, the investment programs employed by KKR for KKR investment vehicles or proprietary entities of KKR could conflict with the transactions and strategies employed by our Manager in managing our company.
Additionally, the investment programs employed by KKR for KKR investment vehicles or proprietary entities of KKR could 32 Table of Contents conflict with the transactions and strategies employed by our Manager in managing our company.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

1 edited+0 added−0 removed19 unchanged
Biggest changeThe technology and information security risk committee is responsible for overseeing the cybersecurity risk environment for KKR’s asset management business, which includes identifying and monitoring KKR’s technology risks, including those related to 53 Table of Contents information security, business disruption, fraud and privacy related risks, and also promoting cybersecurity awareness at the firm.
Biggest changeThe technology and information security risk committee is responsible for overseeing the cybersecurity risk environment for KKR’s 52 Table of Contents asset management business, which includes identifying and monitoring KKR’s technology risks, including those related to information security, business disruption, fraud and privacy related risks, and also promoting cybersecurity awareness at the firm.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+0 added−0 removed0 unchanged
Biggest changeITEM 3. LEGAL PROCEEDINGS The section entitled “Litigation” appearing in Note 13 of our consolidated financial statements included in this Form 10-K is incorporated herein by reference. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 54 Table of Contents PART II.
Biggest changeITEM 3. LEGAL PROCEEDINGS The section entitled “Litigation” appearing in Note 13 of our consolidated financial statements included in this Form 10-K is incorporated herein by reference. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 53 Table of Contents PART II.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

1 edited+0 added−0 removed0 unchanged
Biggest changeITEM 4. MINE SAFETY DISCLOSURES 54 PART II. 55 ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES 55 ITEM 6. RESERVED 57 ITEM 7. MANAGEMENT ' S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 58 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 82 ITEM 8.
Biggest changeITEM 4. MINE SAFETY DISCLOSURES 53 PART II. 54 ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES 54 ITEM 6. RESERVED 56 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 57 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 81 ITEM 8.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

8 edited+1 added−1 removed7 unchanged
Biggest changeThe following table sets forth the dividends declared on our common stock during each calendar quarter for 2023 and 2022: Declaration Date Record Date Payment Date Per Share 2023 March 17, 2023 March 31, 2023 April 14, 2023 $ 0.43 June 15, 2023 June 30, 2023 July 14, 2023 0.43 September 15, 2023 September 29, 2023 October 13, 2023 0.43 December 15, 2023 December 29, 2023 January 12, 2024 0.43 2022 March 15, 2022 March 31, 2022 April 15, 2022 $ 0.43 June 15, 2022 June 30, 2022 July 15, 2022 0.43 September 13, 2022 September 30, 2022 October 14, 2022 0.43 December 13, 2022 December 30, 2022 January 13, 2023 0.43 55 Table of Contents Stockholder Return Performance The following graph is a comparison of the cumulative total stockholder return on shares of our common stock, the Russell 2000 Index (the “Russell 2000”), and the Bloomberg REIT Mortgage Index, a published industry index, from December 31, 2018 to December 31, 2023.
Biggest changeThe following table sets forth the dividends declared on our common stock during each calendar quarter for 2024 and 2023: Declaration Date Record Date Payment Date Per Share 2024 February 1, 2024 March 28, 2024 April 15, 2024 $ 0.25 June 13, 2024 June 28, 2024 July 15, 2024 0.25 September 13, 2024 September 30, 2024 October 15, 2024 0.25 December 12, 2024 December 31, 2024 January 15, 2025 0.25 2023 March 17, 2023 March 31, 2023 April 14, 2023 $ 0.43 June 15, 2023 June 30, 2023 July 14, 2023 0.43 September 15, 2023 September 29, 2023 October 13, 2023 0.43 December 15, 2023 December 29, 2023 January 12, 2024 0.43 54 Table of Contents Stockholder Return Performance The following graph is a comparison of the cumulative total stockholder return on shares of our common stock, the Russell 2000 Index (the “Russell 2000”), and the FTSE NAREIT All Mortgage Capped Index, a published industry index, from December 31, 2019 to December 31, 2024.
The timing, manner, price and amount of any common stock repurchases will be determined by the Company in its discretion and will depend on a variety of factors, including legal requirements, price, liquidity and economic considerations, and market conditions. The program does not require the Company to repurchase any specific number of shares of common stock.
The timing, manner, price and amount of any common stock repurchases will be determined by us in our discretion and will depend on a variety of factors, including legal requirements, price and economic considerations, and market conditions. The program does not require us to repurchase any specific number of shares of common stock.
The graph assumes that $100 was invested on December 31, 2018 in our common stock, the Russell 2000 and the Bloomberg REIT Mortgage Index and that all dividends were reinvested without the payment of any commissions.
The graph assumes that $100 was invested on December 31, 2019 in our common stock, the Russell 2000 and the FTSE NAREIT All Mortgage Capped Index and that all dividends were reinvested without the payment of any commissions.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES On May 5, 2017, our common stock began trading on the NYSE under the symbol “K REF.” A s of February 2, 2024, the re were 20 holders of record of our common stock.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES On May 5, 2017, our common stock began trading on the NYSE under the symbol “K REF.” A s of January 30, 2025, the re were 20 ho lders of record of our common stock.
(2) Restricted stock units are not exercisable for consideration. 56 Table of Contents Issuer Purchases of Equity Securities Under the Company’s current share repurchase program, which was announced on June 15, 2020 and has no expiration date, the Company may repurchase up to $100.0 million of its common stock beginning July 1, 2020, of which up to $50.0 million may be repurchased under a pre-set trading plan meeting the requirements of Rule 10b5-1 under the Exchange Act that provides for repurchases of common stock when the market price per share is below book value per share (calculated in accordance with GAAP as of the end of the most recent quarterly period for which financial statements are available), and the remaining $50.0 million may be used for repurchases in the open market, pursuant to pre-set trading plans meeting the requirements of Rule 10b5-1 under the Exchange Act, in privately negotiated transactions or otherwise.
(2) Restricted stock units are not exercisable for consideration. 55 Table of Contents Issuer Purchases of Equity Securities Under the Company's current share repurchase program, which was originally announced on May 9, 2018, and subsequently extended and/or increased on June 17, 2019, June 15, 2020 and February 3, 2023, we may repurchase up to an aggregate of $100.0 million of our common stock effective as of February 3, 2023, of which up to $50.0 million may be repurchased under a pre-set trading plan meeting the requirements of Rule 10b5-1 under the Exchange Act, and provide for repurchases of common stock when the market price per share is below book value per share (calculated in accordance with GAAP as of end of the most recent quarterly period for which financial statements are available), and the remaining $50.0 million may be used for repurchases in the open market, pursuant to pre-set trading plans meeting the requirements of Rule 10b5-1 under the Exchange Act, in privately negotiated transactions or otherwise.
Total Return Performance Period Ended 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 KKR Real Estate Finance Trust, Inc. $ 100.0 $ 116.1 $ 113.1 $ 142.8 $ 106.0 $ 115.6 Russell 2000 100.0 125.5 150.5 172.7 137.4 160.6 Bloomberg REIT Mortgage Index 100.0 123.6 96.2 113.1 85.5 97.9 Equity Compensation Plan Information The following table summarizes information, as of December 31, 2023, relating to our equity compensation plans pursuant to which shares of our common stock or other equity securities may be granted from time to time: Plan Category Number of securities to be issued upon exercise of outstanding options, warrants, and rights (1) Weighted-average exercise price of outstanding options, warrants and rights (2) Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column 1) Equity compensation plans approved by security holders 1,220,635 $ — 1,852,009 Equity compensation plans not approved by security holders — — — Total 1,220,635 $ — 1,852,009 (1) Reflects the aggregate number of equity-based awards granted under our Amended and Restated KKR Real Estate Finance Trust Inc. 2016 Omnibus Incentive Plan that remained outstanding as of December 31, 2023.
Total Return Performance Period Ended 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 12/31/2024 KKR Real Estate Finance Trust, Inc. $ 100.0 $ 97.4 $ 123.0 $ 91.3 $ 99.5 $ 83.7 Russell 2000 100.0 120.3 138.0 109.8 128.3 143.1 FTSE NAREIT All Mortgage Capped Index 100.0 80.4 93.9 68.6 79.0 78.7 Equity Compensation Plan Information The following table summarizes information, as of December 31, 2024, relating to our equity compensation plans pursuant to which shares of our common stock or other equity securities may be granted from time to time: Plan Category Number of securities to be issued upon exercise of outstanding options, warrants, and rights (1) Weighted-average exercise price of outstanding options, warrants and rights (2) Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column 1) Equity compensation plans approved by security holders 1,454,925 $ — 1,358,928 Equity compensation plans not approved by security holders — — — Total 1,454,925 $ — 1,358,928 (1) Reflects the aggregate number of equity-based awards granted under our Amended and Restated KKR Real Estate Finance Trust Inc. 2016 Omnibus Incentive Plan that remained outstanding as of December 31, 2024.
The program does not have an expiration date and may be suspended, modified or discontinued at any time. We did not repurchase any shares of our common stock during the year ended December 31, 2023.
The program does not have an expiration date and may be suspended, modified or discontinued at any time. As of December 31, 2024, we had $90.0 million of remaining capacity to repurchase shares under the program.
Our earnings, financial condition and liquidity will be affected by various factors, including the net interest and other income from our portfolio, our operating expenses and any other expenditures. Based on current market conditions, macroeconomic factors, and the status of our loan portfolio, we reduced our common stock dividend for the first quarter of 2024 to $0.25 per share.
Our earnings, financial condition and liquidity will be affected by various factors, including the net interest and other income from our portfolio, our operating expenses and any other expenditures.
Removed
This level should support coverage of the dividend with operating earnings from our performing loan portfolio, while simultaneously managing our REO assets, as well as expectations for future interest rate reductions.
Added
The following table sets forth information regarding purchases of shares of our common stock by us or on our behalf during the three months ended December 31, 2024 (amounts in thousands, except share and per share data) : Period Beginning Period Ending Total number of shares purchased Average price paid per share Amounts paid for shares purchased as part of publicly announced program Total number of shares purchased as part of publicly announced program Approximate dollar value of shares that may yet be purchased under the program October 1, 2024 October 31, 2024 150,000 $ 11.75 $ 1,762 150,000 $ 98,238 November 1, 2024 November 30, 2024 571,553 11.64 6,651 721,553 91,587 December 1, 2024 December 31, 2024 137,502 11.54 1,587 859,055 90,000 Total/Average 859,055 $ 11.64 $ 10,000

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

119 edited+37 added−53 removed73 unchanged
Biggest changeOffice 1/13/2022 228.5 100.0 65.8 13.1 + 3.3 4.1 $241 / SF 55 3 37 Senior Loan Phoenix, AZ Industrial 1/13/2022 195.3 100.0 58.1 14.1 + 4.0 3.1 $57 / SF 57 3 63 Table of Contents Investment (A) Location Property Type Investment Date Total Whole Loan (B) Committed Principal Amount (B) Current Principal Amount Net Equity (C) Coupon (D)(E) Max Remaining Term (Years) (D)(F) Loan Per SF / Unit / Key (G) LTV (D)(H) Risk Rating 38 Senior Loan Cary, NC Multifamily 11/21/2022 100.0 100.0 95.0 18.2 + 3.4 3.9 $243,656 / unit 63 3 39 Senior Loan Orlando, FL Multifamily 12/14/2021 97.4 97.4 89.3 23.3 + 3.1 3.0 $235,601 / unit 74 3 40 Senior Loan Brisbane, CA Life Science 7/22/2021 95.0 95.0 90.8 18.0 + 3.1 2.6 $784 / SF 71 3 41 Senior Loan Brandon, FL Multifamily 1/13/2022 90.3 90.3 67.4 10.1 + 3.1 3.1 $193,586 / unit 75 3 42 Senior Loan Dallas, TX Multifamily 12/23/2021 90.0 90.0 80.1 17.2 + 2.9 3.0 $246,511 / unit 67 3 43 Senior Loan Miami, FL Multifamily 10/14/2021 89.5 89.5 89.5 17.4 + 2.9 2.9 $304,422 / unit 76 3 44 Senior Loan Dallas, TX Office 1/22/2021 87.0 87.0 87.0 14.6 + 3.4 2.1 $294 / SF 63 3 45 Senior Loan San Antonio, TX Multifamily 6/1/2022 246.5 86.3 80.3 19.8 + 2.8 3.4 $103,007 / unit 68 3 46 Senior Loan Scottsdale, AZ Multifamily 5/9/2022 169.0 84.5 84.5 13.0 + 2.9 3.4 $457,995 / unit 64 3 47 Senior Loan Raleigh, NC Multifamily 4/27/2022 82.9 82.9 80.1 16.7 + 3.0 3.4 $250,170 / unit 68 4 48 Senior Loan Hollywood, FL Multifamily 12/20/2021 81.0 81.0 81.0 15.1 + 3.1 3.0 $327,935 / unit 74 3 49 Senior Loan Charlotte, NC Multifamily 12/14/2021 79.3 79.3 75.5 12.0 + 3.1 3.0 $205,055 / unit 74 3 50 Senior Loan (M) Various Industrial 6/30/2021 153.0 76.5 63.7 27.1 + 5.5 2.5 $74 / SF 59 3 51 Senior Loan Phoenix, AZ Single Family Rental 4/22/2021 72.1 72.1 67.7 17.7 + 4.9 2.4 $157,092 / unit 50 3 52 Senior Loan Denver, CO Multifamily 9/14/2021 70.3 70.3 70.3 10.7 + 2.8 2.8 $290,496 / unit 78 3 53 Senior Loan Washington, D.C.
Biggest changeOffice 1/13/2022 228.5 100.0 94.9 14.2 + 3.3 3.1 $347 / SF 55 3 28 Senior Loan Orlando, FL Multifamily 12/14/2021 97.4 97.4 95.9 24.4 + 3.1 2.0 $253,077 / unit 74 3 29 Senior Loan Boston, MA Industrial 6/28/2022 273.2 95.7 95.0 19.9 + 3.0 2.5 $195 / SF 52 3 30 Senior Loan Brisbane, CA Life Science 7/22/2021 94.3 94.3 86.8 25.6 + 3.4 3.6 $750 / SF 71 3 31 Senior Loan Raleigh, NC Multifamily 4/27/2022 91.6 91.6 84.5 44.4 + 3.2 2.3 $263,954 / unit 68 4 32 Senior Loan Brandon, FL Multifamily 1/13/2022 90.3 90.3 69.7 18.7 + 3.1 2.1 $194,258 / unit 75 3 33 Senior Loan San Carlos, CA Life Science 2/1/2022 139.7 89.1 55.1 16.5 + 1.0 2.9 $376 / SF 68 3 34 Senior Loan Dallas, TX Office 1/22/2021 87.0 87.0 87.0 15.5 + 3.4 1.1 $294 / SF 65 3 35 Senior Loan Dallas, TX Multifamily 12/23/2021 85.0 85.0 78.2 16.3 + 2.9 2.0 $240,717 / unit 67 3 36 Senior Loan Miami, FL Multifamily 10/14/2021 84.5 84.5 84.5 17.8 + 2.9 1.9 $287,415 / unit 76 3 37 Senior Loan Philadelphia, PA Mixed Use 6/28/2024 83.7 83.7 30.1 14.4 + 4.1 4.5 $59 / SF 66 3 62 Table of Contents Investment (A) Location Property Type Investment Date Total Whole Loan (B) Committed Principal/Investment Amount Outstanding Principal/ Investment Amount Net Equity (C) Coupon (D)(E) Max Remaining Term (Years) (D)(F) Loan/Investment Per SF / Unit / Key (G) Origination LTV (D)(H) Risk Rating 38 Senior Loan Charlotte, NC Multifamily 12/14/2021 79.3 79.3 77.0 12.0 + 3.1 2.0 $209,168 / unit 74 3 39 Senior Loan Hollywood, FL Multifamily 12/20/2021 71.0 71.0 71.0 13.5 + 2.8 2.0 $287,449 / unit 74 3 40 Senior Loan Denver, CO Multifamily 9/14/2021 70.3 70.3 70.3 10.7 + 2.8 1.8 $290,496 / unit 78 3 41 Senior Loan Nashville, TN Hospitality 12/9/2021 66.0 66.0 64.8 11.9 + 3.7 2.0 $281,672 / key 68 3 42 Senior Loan Plano, TX Multifamily 3/31/2022 63.3 63.3 63.3 23.3 + 0.9 2.6 $238,000 / unit 75 3 43 Senior Loan Dallas, TX Multifamily 8/18/2021 63.1 63.1 63.1 12.1 + 3.9 1.7 $175,278 / unit 70 3 44 Senior Loan Durham, NC Multifamily 12/15/2021 59.5 59.5 57.0 17.5 + 2.8 3.0 $165,120 / unit 67 3 45 Senior Loan San Antonio, TX Multifamily 4/20/2022 57.6 57.6 56.4 14.9 + 2.7 2.3 $164,950 / unit 79 3 46 Senior Loan Atlanta, GA Multifamily 12/10/2021 53.0 53.0 51.4 13.0 + 3.0 2.0 $170,197 / unit 67 3 47 Senior Loan Sharon, MA Multifamily 12/1/2021 51.9 51.9 51.9 7.9 + 2.9 1.9 $270,443 / unit 70 3 48 Senior Loan Reno, NV Industrial 4/28/2022 140.4 50.5 50.5 11.5 + 2.7 2.4 $117 / SF 74 3 49 Senior Loan Dallas, TX Multifamily 4/1/2022 43.9 43.9 42.6 11.7 + 2.9 2.3 $119,706 / unit 73 3 50 Senior Loan Carrollton, TX Multifamily 4/1/2022 43.7 43.7 43.7 13.5 + 0.9 2.6 $136,478 / unit 74 3 51 Senior Loan Georgetown, TX Multifamily 12/16/2021 35.2 35.2 35.2 8.8 + 3.4 2.0 $167,381 / unit 68 3 Total/Weighted Average Senior Loans Unlevered $ 8,696.9 $ 6,354.4 $ 5,900.2 $ 1,438.5 + 3.2% 2.0 65 % 3.1 Real Estate Assets 1 Real Estate Owned Mountain View, CA Office 6/28/2024 n.a. $ 120.8 120.8 120.8 n.a. n.a. $393 / SF n.a. n.a. 2 Real Estate Owned Portland, OR Retail / Redevelopment 12/16/2021 n.a. 88.2 88.2 88.2 n.a. n.a. n.a. n.a. n.a. 3 Equity Method Investment (I) Seattle, WA Life Science 6/28/2024 n.a. 81.7 81.7 40.7 n.a. n.a. $521 / SF n.a. n.a. 4 Real Estate Owned Philadelphia, PA Office / Garage 12/22/2023 n.a. $ 45.1 45.1 45.1 n.a. n.a. $112 / SF n.a. n.a.
At each meeting, our Manager is provided with a due diligence submission for each loan underlying our CMBS B-Piece investments, which includes both property- and loan-level information.
At each meeting, our Manager is provided with a due diligence submission for each loan underlying our CMBS B-Piece investments, which includes both property-level and loan-level information.
Guarantees —In connection with our financing arrangements including; master repurchase agreements, our term lending agreements, and our asset specific financing, our Operating Partnership has entered into a limited guarantee in favor of each lender, under which our Operating Partnership guarantees the obligations of the borrower under the respective financing agreement (i) in the case of certain defaults, up to a maximum liability of 25.0% of the then-outstanding repurchase price of the eligible loans, participations or securities, as applicable, or (ii) up to a maximum liability of 100.0% in the case of certain "bad boy" defaults.
Guarantees — In connection with our financing arrangements, including master repurchase agreements, term lending agreements, and asset specific financing, our Operating Partnership has entered into a limited guarantee in favor of each lender, under which our Operating Partnership guarantees the obligations of the borrower under the respective financing agreement (i) in the case of certain defaults, up to a maximum liability of 25.0% of the then-outstanding repurchase price of the eligible loans, participations or securities, as applicable, or (ii) up to a maximum liability of 100.0% in the case of certain "bad boy" defaults.
For its services to KREF, our Manager is entitled to a quarterly management fee equal to the greater of $62,500 or 0.375% of weighted average adjusted equity and quarterly incentive compensation equal to 20.0% of the excess of (a) the trailing 12-month Distributable Earnings (before incentive compensation payable to our Manager) over (b) 7.0% of the trailing 12-month weighted average adjusted equity (1) (“Hurdle Rate”), less incentive compensation KREF already paid to the Manager with respect to the first three calendar quarters of such trailing 12-month period.
For its services to KREF, our Manager is entitled to a quarterly management fee equal to the greater of $62,500 or 0.375% of weighted average adjusted equity and quarterly incentive compensation equal to 20.0% of the excess of (a) the trailing 12-month Distributable Earnings (before incentive compensation payable to our Manager) over (b) 7.0% of the trailing 12-month weighted average adjusted equity (“Hurdle Rate”), less incentive compensation KREF already paid to the Manager with respect to the first three calendar quarters of such trailing 12-month period.
In June 2022, we entered into a $350.0 million Master Repurchase Agreement and Securities Contract with a financial institution (“KREF Lending XII Facility”). The facility, which provides financing on a non-mark-to-market basis with partial recourse to KREF, has a two-year draw period and match-term to the underlying loans.
In 2022, we entered into a $350.0 million Master Repurchase Agreement and Securities Contract with a financial institution (“KREF Lending XII Facility”). The facility, which provides financing on a non-mark-to-market basis with partial recourse to KREF, has a two-year draw period and match-term to the underlying loans.
The lender under the applicable repurchase facility sets the valuation and any revaluation of the collateral assets in its sole, good faith discretion. 68 Table of Contents As a contractual matter, the lender has the right to reset the value of the assets at any time based on then-current market conditions, but the market convention is to reassess valuations on a monthly, quarterly and annual basis using the financial information delivered pursuant to the facility documentation regarding the real property, borrower and guarantor under such underlying loans.
The lender under the applicable repurchase facility sets the valuation and any revaluation of the collateral assets in its sole, good faith discretion. 67 Table of Contents As a contractual matter, the lender has the right to reset the value of the assets at any time based on then-current market conditions, but the market convention is to reassess valuations on a monthly, quarterly and annual basis using the financial information delivered pursuant to the facility documentation regarding the real property, borrower and guarantor under such underlying loans.
(B) Includes $4.7 million of cost recovery interest applied as a reduction to loan principal during the three months ended December 31, 2023.
Includes $4.7 million of cost recovery interest applied as a reduction to loan principal during the three months ended December 31, 2023.
Committed principal represents our total commitment to the aggregator vehicle whereas current principal represents the current funded amount. 65 Table of Contents Portfolio Surveillance and Credit Quality Our Manager actively manages our portfolio and assesses the risk of any deterioration in credit quality by quarterly evaluating the performance of the underlying property, the valuation of comparable assets as well as the financial wherewithal of the associated borrower.
Committed principal represents our total commitment to the aggregator vehicle whereas current principal represents the current funded amount. 64 Table of Contents Portfolio Surveillance and Credit Quality Our Manager actively manages our portfolio and assesses the risk of any deterioration in credit quality by quarterly evaluating the performance of the underlying property, the valuation of comparable assets as well as the financial wherewithal of the associated borrower.
This is only an estimate as actual amounts borrowed, the timing of repayments and interest rates may vary over time. The Revolver matures in March 2027. (C) The amounts are estimated by assuming the amounts outstanding under these facilities and the interest rates in effect as of December 31, 2023 will remain constant into the future.
This is only an estimate as actual amounts borrowed, the timing of repayments and interest rates may vary over time. The Revolver matures in March 2027. (C) The amounts are estimated by assuming the amounts outstanding under these facilities and the interest rates in effect as of December 31, 2024 will remain constant into the future.
Sales of our common stock made pursuant to the ATM may be made in negotiated transactions or transactions that are deemed to be “at the market” offerings as defined in Rule 415 under the Securities Act. During the year ended December 31, 2023, we did not sell any shares of common stock under the ATM.
Sales of our common stock made pursuant to the ATM may be made in negotiated transactions or transactions that are deemed to be “at the market” offerings as defined in Rule 415 under the Securities Act. During the year ended December 31, 2024, we did not sell any shares of common stock under the ATM.
If conditions change from those expected, it is possible that the judgments and estimates described below could change, which may result in a change in our allowance for credit losses, future write-offs of our investments, and valuation of our investment 79 Table of Contents portfolio, among other effects.
If conditions change from those expected, it is possible that the judgments and estimates described below could change, which may result in a change in our allowance for credit losses, future write-offs of our investments, and valuation of our investment 78 Table of Contents portfolio, among other effects.
Amounts borrowed are subject to a maximum 25.0% recourse limit. (B) Any amounts borrowed are full recourse to certain subsidiaries of KREF. Amounts are estimated based on the amount outstanding under the Revolver and the interest rate in effect as of December 31, 2023.
Amounts borrowed are subject to a maximum 25.0% recourse limit. (B) Any amounts borrowed are full recourse to certain subsidiaries of KREF. Amounts are estimated based on the amount outstanding under the Revolver and the interest rate in effect as of December 31, 2024.
Collateralized Loan Obligations In August 2021, we financed a pool of loan participations from our existing loan portfolio through a managed collateralized loan obligation ("CLO" or "KREF 2021-FL2") and, in February 2022, we financed a pool of loan participations from our existing multifamily loan portfolio through a managed CLO ("KREF 2022-FL3").
Collateralized Loan Obligations In 2021, we financed a pool of loan participations from our existing loan portfolio through a managed collateralized loan obligation ("CLO" or "KREF 2021-FL2") and, in 2022, we financed a pool of loan participations from our existing multifamily loan portfolio through a managed CLO ("KREF 2022-FL3").
A loan is determined to be collateral dependent if (i) 80 Table of Contents a borrower or sponsor is experiencing financial difficulty, and (ii) the loan is expected to be substantially repaid through the sale of the underlying collateral; such determination requires the use of significant judgment and can be based on several factors subject to uncertainty.
A loan is determined to be collateral dependent if (i) a borrower or sponsor is experiencing financial difficulty, and (ii) the loan is expected to be substantially repaid through the sale of the underlying collateral; such determination requires the use of significant judgment and can be based on several factors subject to uncertainty.
In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures , which requires a public entity to disclose significant segment expenses and other segment items on an annual and interim basis and to provide in interim periods all disclosures about a reportable segment’s profit or loss and assets that are currently required annually.
Recently Adopted Accounting Standards In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures , which requires a public entity to disclose significant segment expenses and other segment items on an annual and interim basis and to provide in interim periods all disclosures about a reportable segment’s profit or loss and assets that are currently required annually.
Our maximum risk of loss associated with our interests in these VIEs is limited to the carrying value of our investment in the entity and any unfunded capital commitments.
Our maximum risk of loss associated with our interests in these VIEs is limited to the carrying value of our investment in the entities and any unfunded capital commitments.
The following charts illustrate the diversification and composition of our loan portfolio (A) , based on type of investment, interest rate, underlying property type, geographic location, vintage and LTV as of December 31, 2023: The charts above are based on total loan exposure of our commercial real estate loans.
The following charts illustrate the diversification and composition of our loan portfolio as of December 31, 2024, based on type of investment, interest rate, underlying property type, geographic location, vintage and LTV: The charts above are based on total loan exposure of our commercial real estate loans.
Accordingly, we recorded the property with its net assets on the Consolidated Balance Sheet with an estimated fair value of $86.4 million, which included $1.3 million of cash received and $76.5 million, $24.6 million and $15.9 million allocated to REO held for sale, lease intangible and other assets, and leasing and other liabilities, respectively.
Accordingly, we recorded the portfolio and its net assets on the Consolidated Balance Sheets with an estimated fair value of $86.4 million, which included $1.3 million of cash received and $76.5 million, $24.6 million and $15.9 million allocated to REO held for sale, lease intangible and other assets, and leasing and other liabilities, respectively.
For Senior Loan 9, the total whole loan is $199.4 million, including (i) a fully funded senior mortgage loan of $120.0 million, at an interest rate of S+2.25% and (ii) a mezzanine note with a commitment of $79.4 million, of which $74.4 million was funded as of December 31, 2023, at a fixed interest rate of 4.5%.
For Senior Loan 8, the total whole loan is $199.4 million, including (i) a fully funded senior mortgage loan of $120.0 million, at an interest rate of S+2.25% and (ii) a mezzanine note with a commitment of $79.4 million, of which $74.4 million was funded as of December 31, 2024 , at a fixed interest rate of 4.5%.
We continue to expand and diversify our financing sources, especially those sources that provide non-mark-to-marke t financing, reducing our exposure to market volatility.
We plan to expand and diversify our financing sources, especially those sources that provide non-mark-to-marke t financing, reducing our exposure to market volatility.
The facility provides us with asset-based financing on a non-mark-to-market basis with match-term up to five years, with additional two-year extension available, and is non-recourse to us. Warehouse Facility In March 2020, we entered into a $500.0 million Loan and Security Agreement with HSBC Bank USA, National Association (“HSBC Facility”).
The facility provides us with asset-based financing on a non-mark-to-market basis with match-term up to five years, with additional two-year extension available, and is non-recourse to us. Warehouse Facility In 2020, we entered into a $500.0 million Loan and Security Agreement with HSBC Bank USA, National Association (“HSBC Facility”) with a current facility maturity date of March 2026.
Such financial covenants include a minimum consolidated tangible net worth of $650.0 million and a maximum total debt to total assets ratio of 83.3% (the “Leverage Covenant”). As of December 31, 2023, we were in compliance with the covenants of our financing facilities.
Such financial covenants include a minimum consolidated tangible net worth of $650.0 million and a maximum total debt to total assets ratio of 83.3%. As of December 31, 2024, we were in compliance with the covenants of our financing facilities.
(B) Represents the principal balance of the collateral assets. (C) Available borrowings represents the undrawn amount we could draw under the terms of each credit facility, based on collateral already approved and pledged. Master Repurchase Agreements We utilize master repurchase facilities to finance the origination of senior loans.
(B) Available borrowings represents the undrawn amount we could draw under the terms of each credit facility, based on collateral already approved and pledged. Master Repurchase Agreements We utilize master repurchase facilities to finance the origination of senior loans.
For Senior Loan 31, the total whole loan is $107.0 million, including (i) a fully funded senior mortgage loan of $102.0 million, at an interest rate of S+3.06%, (ii) a senior mezzanine note with $2.3 million funded as of December 31, 2023, at a fixed interest rate of 10.0% and (iii) a fully funded junior mezzanine note of $0.8 million, at a fixed interest rate 10.0% with certain profit share provisions, as defined in the loan agreement.
For Senior Loan 23, the total whole loan is $112.2 million, including (i) a fully funded senior mortgage loan of $102.0 million, at an interest rate of S+3.06%, (ii) a senior mezzanine note with $8.6 million funded as of December 31, 2024 , at a fixed interest rate of 10.0% and (iii) a fully funded junior mezzanine note of $0.8 million, at a fixed interest rate of 10.0% with certain profit share provisions, as defined in the loan agreement.
(B) Represents (i) total outstanding debt agreements, secured term loan, convertible notes, and collateralized loan obligations, less cash to (ii) total permanent equity, in each case, at period end. Sources of Liquidity Our primary sources of liquidity include cash and cash equivalents and available borrowings under our secured financing agreements, inclusive of our Revolver.
(B) Represents (i) total outstanding debt agreements, secured term loan, and collateralized loan obligations, less cash to (ii) KREF's stockholders' equity, in each case, at period end. Sources of Liquidity Our primary sources of liquidity include cash and cash equivalents and available borrowings under our secured financing agreements, inclusive of our Revolver.
As of December 31, 2023, $93.2 million remained available for issuance under the ATM.
As of December 31, 2024, $93.2 million remained available for issuance under the ATM.
As of December 31, 2023, all of our investments were located in the United States.
As of December 31, 2024, all of our investments were located in the United States.
Covenants —Each of our repurchase facilities, term lending agreements, warehouse facility and our Revolver contain customary terms and conditions, including, but not limited to, negative covenants relating to restrictions on our operations with respect to our status as a REIT, and financial covenants, such as: • a trailing four quarter interest income to interest expense ratio covenant (1.4 to 1.0); • a consolidated tangible net worth covenant (75.0% of the aggregate net cash proceeds of any equity issuances made and any capital contributions received by us and KKR Real Estate Finance Holdings L.P.
Covenants —Each of our repurchase facilities, term lending agreements, warehouse facility and our Revolver contain customary terms and conditions, including, but not limited to, negative covenants relating to restrictions on our operations with respect to our status as a REIT, and financial covenants, such as: • a trailing four quarter interest income to interest expense ratio covenant (1.3 to 1.0 beginning September 30, 2024 through June 30, 2025, then 1.4 to 1.0 thereafter); 69 Table of Contents • a consolidated tangible net worth covenant (75.0% of the aggregate net cash proceeds of any equity issuances made and any capital contributions received by us and KKR Real Estate Finance Holdings L.P.
Our Non-Mark-to-Market Financing Sources, which accounted for 76% of our total financing as of December 31, 2023, are not subject to credit or capital markets mark-to-market provisions. The remaining 24% of our total financing, which are comprised of three master repurchase agreements, are only subject to credit marks.
Our Non-Mark-to-Market Financing Sources, which accounted for 79% of our total financing as of December 31, 2024, are not subject to credit or capital markets mark-to-market provisions. The remaining 21% of our total financing, which are comprised of three master repurchase agreements, are only subject to credit marks.
Term Lending Agreements In August 2018, we entered into a $200.0 million loan financing facility with BMO Harris Bank (the "BMO Facility”). In May 2019, we increased the borrowing capacity to $300.0 million. The facility provides financing on a non-mark-to-market basis with match-term up to five years with partial recourse to us.
Term Lending Agreements In 2018, we entered into a loan financing facility with BMO Harris Bank ("BMO Facility”) with a current borrowing capacity of $300.0 million. The facility provides financing on a non-mark-to-market basis with match-term up to five years with partial recourse to us.
See Note 2 — Summary of Significant Accounting Policies, to our consolidated financial statements included in this Form 10-K for detailed discussion of allowance for credit losses. 60 Table of Contents Our Portfolio We have established a $7,752.3 million portfolio of diversified investments, consisting primarily of senior commercial real estate loans as of December 31, 2023.
See Note 2 — Summary of Significant Accounting Policies, to our consolidated financial statements included in this Form 10-K for detailed discussion of allowance for credit losses. 59 Table of Contents Our Portfolio We have established a $6,271.6 million portfolio of diversified investments, consisting primarily of senior commercial real estate loans as of December 31, 2024.
Our Non-Mark-to-Market Financing Sources, which accounte d for 76% of our total financing as of December 31, 2023, are not subject to credit or capital markets mark-to-market provisions. The remaining 24% of our total financing, which is primarily comprised of three master repurchase agreements, are only subject to credit marks.
Our Non-Mark-to-Market Financing Sources, which accounte d for 79% of our total financing as of December 31, 2024, are not subject to credit or capital markets mark-to-market provisions. The remaining 21% of our total financing, which is comprised of three master repurchase agreements, are only subject to credit marks.
Total loan exposure includes the entire loan KREF originated and financed, including $188.6 million and $263.1 million of such non-c onsolidated interests as of December 31, 2023 and 2022, respectively. 66 Table of Contents In January 2023, we completed the modification of a risk-rated 5 senior office loan located in Philadelphia, PA, with an outstanding principal balance of $161.0 million.
Total loan exposure includes the entire loan we originated and financed, including $188.6 million of such non-c onsolidated interests as of December 31, 2023. 65 Table of Contents In January 2023, we modified a risk-rated 5 senior office loan located in Philadelphia, PA, with an outstanding principal balance of $161.0 million.
(H) For senior loans, LTV is generally based on the initial loan amount divided by the as-is appraised value as of the date the loan was originated or by the current principal amount as of the date of the most recent as-is appraised value; f or mezzanine loans, LTV is based on the current balance of the whole loan divided by the as-is appraised value as of the date the loan was originated; for RECOP I CMBS B-Pieces, LTV is based on the weighted average LTV of the underlying loan pool at issuance.
(H) For senior loans, LTV is generally based on the initial loan amount divided by the as-is appraised value as of the date the loan was originated; for mezzanine loans, LTV is based on the initial balance of the whole loan divided by the as-is appraised value as of the date the loan was originated; for CMBS B-Pieces, LTV is based on the weighted average LTV of the underlying loan pool at issuance.
The terms of the modification included, among others, a $15.0 million principal repayment, a $15.0 million reduction in unfunded loan commitment, and a restructure of the $103.4 million senior loan (after the $15.0 million repayment) into (i) a $105.0 million committed senior mortgage loan (with $16.6 million in unfunded commitment) and (ii) a $15.0 million subordinated note.
The terms of the modification included, among others, a $15.0 million principal repayment, a $15.0 million reduction in unfunded loan commitment, and a restructure of the $103.4 million senior loan (after the $15.0 million repayment) into (i) a $105.0 million committed senior mortgage loan (with $16.6 million in unfunded commitment) and (ii) a $15.0 million subordinated note which is subordinate to a new $18.5 million sponsor interest.
During the year ended December 31, 2023, we collected 97.6% of interest payments due on our loan portfolio. As of December 31, 2023, the average risk rating of our loan portfolio was 3.2, weighted by total loan exposure.
During the year ended December 31, 2024, we collected 98% of interest payments due on our loan portfolio. As of December 31, 2024, the average risk rating of our loan portfolio was 3.1, weighted by total loan exposure.
Public entities with a single reportable segment are required to provide the new disclosures and all the disclosures required under ASC 280. The guidance is effective for our 2024 annual reporting. The guidance is applied retrospectively to all periods presented in the financial statements, unless it is impracticable. We are evaluating the impact of ASU 2023-07. 81 Table of Contents
Public entities with a single reportable segment are required to provide the new disclosures and all the disclosures required under ASC 280. The guidance is effective for our 2024 annual reporting. The guidance is applied retrospectively to all periods presented in the financial statements, unless it is impracticable.
As of December 31, 2023, the weighted average haircut under our repurchase agreement s w as 33.8% (or 32.2%, if we had borrowed the maximum amount approved by its repurchase agreement counterparties as of such dates).
As of December 31, 2024, the weighted average haircut under our repurchase agreement s w as 34.9% (or 32.1%, if we had borrowed the maximum amount approved by its repurchase agreement counterparties as of such dates).
The facility pro vides non-recourse m atch-term asset-based financing on a non-mark-to-market basis. Revolving Credit Agreement In March 2022, we upsized our corporate revolving credit agreement (“Revolver”), administered by Morgan Stanley Senior Funding, Inc., to $520.0 million and extended the maturity date to March 2027. In April 2022, we further upsized our Revolver to $610.0 million.
The facilities pro vide non-recourse m atch-term asset-based financing on a non-mark-to-market basis. 68 Table of Contents Revolving Credit Agreement In 2022, we upsized our corporate revolving credit agreement (“Revolver”), administered by Morgan Stanley Senior Funding, Inc., to $610.0 million and extended the maturity date to March 2027.
Earnings (Loss) Per Share and Dividends Declared The following table sets forth the calculation of basic and diluted net income (loss) per share and dividends declared per share (amounts in thousands, except share and per share data): Three Months Ended December 31, Year Ended December 31, 2023 2023 2022 Net income (loss) attributable to common stockholders $ (18,738) $ (53,919) $ 15,371 Weighted-average number of shares of common stock outstanding, basic and diluted 69,384,309 69,180,039 67,553,578 Net income (loss) per share, basic and diluted $ (0.27) $ (0.78) $ 0.23 Dividends declared per share $ 0.43 $ 1.72 $ 1.72 Distributable Earnings Distributable Earnings, a measure that is not prepared in accordance with GAAP, is a key indicator of our ability to generate sufficient income to pay our quarterly dividends and in determining the amount of such dividends, which is the primary focus of yield/income investors who comprise a significant portion of our investor base.
Earnings (Loss) Per Share and Dividends Declared The following table sets forth the calculation of basic and diluted net income (loss) per share and dividends declared per share (amounts in thousands, except share and per share data): Three Months Ended Year Ended December 31, December 31, 2024 2024 2023 Net income (loss) attributable to common stockholders $ 14,578 $ 13,071 $ (53,919) Weighted-average number of shares of common stock outstanding, basic and diluted 69,342,983 69,396,890 69,180,039 Net income (loss) per share, basic and diluted $ 0.21 $ 0.19 $ (0.78) Dividends declared per share $ 0.25 $ 1.00 $ 1.72 Distributable Earnings Distributable Earnings, a measure that is not prepared in accordance with GAAP, is a key indicator of our ability to generate sufficient income to pay our quarterly dividends and in determining the amount of such dividends, which is the primary focus of yield/income investors who comprise a significant portion of our investor base.
In June 2019, we entered into a Master Repurchase and Securities Contract Agreement ("KREF Lending V Facility") with Morgan Stanley Mortgage Capital Holdings LLC ("Administrative Agent"), as administrative agent on behalf of Morgan Stanley Bank, N.A. ("Initial Buyer"), which provides non-mark-to-market financing .
In 2019, we entered into a Master Repurchase and Securities Contract Agreement ("KREF Lending V Facility") with Morgan Stanley Mortgage Capital Holdings LLC ("Administrative Agent"), as administrative agent on behalf of Morgan Stanley Bank, N.A. ("Initial Buyer"), which provides non-mark-to-market financing . The facility has a current maturity of June 2025, subject to an additional one-year extension option.
(our "Operating Partnership") or up to approximately $1,307.7 million, depending on the agreement; • a cash liquidity covenant (the greater of $10.0 million or 5.0% of our recourse indebtedness); • a total indebtedness covenant (83.3% of our Total Assets, as defined in the applicable financing agreements); With respect to our secured term loan, we are required to comply with customary loan covenants and event of default provisions that include, but are not limited to, negative covenants relating to restrictions on operations with respect to our status as a REIT, and financial covenants.
(our "Operating Partnership") or up to approximately $1,300.2 million, depending on the agreement; • a total indebtedness covenant (83.3% of our Total Assets, as defined in the applicable financing agreements); and • a cash liquidity covenant (the greater of (i) $10.0 million or (ii) 5.0% of KREF's recourse indebtedness; from September 30, 2024 and through June 30, 2025 the Revolver has a minimum cash liquidity covenant of $75.0 million) With respect to our secured term loan, we are required to comply with customary loan covenants and event of default provisions that include, but are not limited to, negative covenants relating to restrictions on operations with respect to our status as a REIT, and financial covenants.
In addition, we have the option to increase the facility amount to $500.0 million. Term Loan Facility In April 2018, we entered into a term loan financing agreement with third party lenders for an initial borrowing capacity of $200.0 million that was increased to $1.0 billion in October 2018 (“Term Loan Facility”).
In addition, we have the option to increase the facility amount to $500.0 million. Term Loan Facility In 2018, we entered into a term loan financing agreement with third party lenders with a current borrowing capacity of $1.0 billion (“Term Loan Facility”).
These non-consolidated senior interests provide structural leverage on a non-mark-to-market, match-term basis for our net investments, which are typically reflected in the form of mezzanine loans or other subordinate interests on our consolidated balance sheet and in our consolidated statement of income.
These non-consolidated senior interests provide structural leverage on a non-mark-to-market, match-term basis for our net investments, which are typically reflected in the form of mezzanine loans or other subordinate interests on our consolidated balance sheets and in our consolidated statement of income. We had no outstanding financing through non-consolidated senior interests as of December 31, 2024.
As of December 31, 2023, 99% of our loans by total loan exposure earned a floating rate of interest.
As of December 31, 2024, substantially all of our loans by total loan exposure earned a floating rate of interest.
Post modification, the whole loan’s maximum maturity is July 2025, assuming all extension options are exercised. The restructured whole loan with an outstanding principal balance of $194.4 million was risk-rated 5 as of December 31, 2023.
Post modification, the whole loan’s maximum maturity is July 2025, assuming all extension options are exercised. The restructured whole loan with an outstanding principal balance of $194.4 million was risk-rated 5 as of December 31, 2024. In September 2023, we modified a risk-rated 4 senior office loan located in Chicago, IL, with an outstanding principal balance of $118.4 million.
January 2026 Interests retained 44,667 S + 8.8% January 2026 70 Table of Contents Secured Term Loan In September 2020, we entered into a $300.0 million secured term loan at a price of 97.5%. The secured term loan is partially amortizing, with an amount equal to 1.0% per annum of the principal balance due in quarterly installments.
Secured Term Loan In 2020, we entered into a $300.0 million secured term loan at a price of 97.5%. The secured term loan is partially amortizing, with an amount equal to 1.0% per annum of the principal balance due in quarterly installments.
Cash Flows The following table sets forth changes in cash and cash equivalents for the years ended December 31, 2023, 2022 and 2021 (dollars in thousands): Year Ended December 31, 2023 2022 2021 Cash Flows From Operating Activities $ 155,715 $ 141,125 $ 124,793 Cash Flows From Investing Activities 13,487 (1,177,133) (1,540,836) Cash Flows From Financing Activities (271,510) 1,012,859 1,578,981 Net Increase (Decrease) in Cash, Cash Equivalents, and Restricted Cash $ (102,308) $ (23,149) $ 162,938 77 Table of Contents Cash Flows from Operating Activities Our cash flows from operating activities were primarily driven by our net interest income, which is driven by the income generated by our investments less financing costs.
Cash Flows The following table sets forth changes in cash and cash equivalents for the years ended December 31, 2024, 2023 and 2022 (dollars in thousands): Year Ended December 31, 2024 2023 2022 Cash Flows From Operating Activities $ 132,563 $ 155,715 $ 141,125 Cash Flows From Investing Activities 1,116,237 13,487 (1,177,133) Cash Flows From Financing Activities (1,290,566) (271,510) 1,012,859 Net Increase (Decrease) in Cash, Cash Equivalents, and Restricted Cash $ (41,766) $ (102,308) $ (23,149) 76 Table of Contents Cash Flows from Operating Activities Our cash flows from operating activities were primarily driven by our net interest income, which is a result of the income generated by our investments less financing costs.
In June 2023, we completed the modification of a risk-rated 5 senior office loan located in Minneapolis, MN, with an outstanding principal balance of $194.4 million as of March 31, 2023.
The restructured senior loan with an outstanding principal balance of $114.3 million was risk-rated 3 as of December 31, 2024. In June 2023, we modified a risk-rated 5 senior office loan located in Minneapolis, MN, with an outstanding principal balance of $194.4 million.
Weighted average LTV includes non-consolidated senior interests and excludes risk-rated 5 loans. 62 Table of Contents The table below sets forth additional information relating to our portfolio as of December 31, 2023 (dollars in millions): Investment (A) Location Property Type Investment Date Total Whole Loan (B) Committed Principal Amount (B) Current Principal Amount Net Equity (C) Coupon (D)(E) Max Remaining Term (Years) (D)(F) Loan Per SF / Unit / Key (G) LTV (D)(H) Risk Rating Senior Loans (I) 1 Senior Loan Arlington, VA Multifamily 9/30/2021 $ 381.0 $ 381.0 $ 369.0 $ 74.1 + 3.3 2.8 $332,439 / unit 69 % 3 2 Senior Loan Boston, MA Life Science 8/3/2022 312.5 312.5 195.4 27.3 + 4.2 3.6 $747 / SF 56 3 3 Senior Loan Bellevue, WA Office 9/13/2021 520.8 260.4 182.5 47.7 + 3.7 3.3 $855 / SF 63 3 4 Senior Loan Various Industrial 4/28/2022 504.5 252.3 252.3 50.6 + 2.7 3.4 $98 / SF 64 3 5 Senior Loan Mountain View, CA Office 7/14/2021 362.8 250.0 200.9 118.5 + 3.4 2.6 $654 / SF n.a. 5 6 Senior Loan Bronx, NY Industrial 8/27/2021 381.2 228.7 198.9 43.0 + 4.2 2.7 $277 / SF 52 3 7 Senior Loan Los Angeles, CA Multifamily 2/19/2021 220.0 220.0 220.0 33.9 + 2.9 2.2 $410,430 / unit 68 3 8 Senior Loan Various Multifamily 5/31/2019 206.5 206.5 206.5 41.9 + 4.0 1.4 $192,991 / unit 74 3 9 Senior Loan Minneapolis, MN Office 11/13/2017 199.4 199.4 194.4 89.0 + 2.3 1.5 $182 / SF n.a. 5 10 Senior Loan Various Industrial 6/15/2022 375.5 187.8 173.3 37.7 + 2.9 3.5 $125 / SF 50 3 11 Senior Loan Boston, MA Office 2/4/2021 375.0 187.5 187.5 37.5 + 3.4 2.1 $506 / SF 71 4 12 Senior Loan The Woodlands, TX Hospitality 9/15/2021 183.3 183.3 180.9 33.0 + 4.3 2.8 $199,015 / key 64 3 13 Senior Loan Washington, D.C.
Weighted average LTV excludes risk-rated 5 loans. 61 Table of Contents The table below sets forth additional information relating to our portfolio as of December 31, 2024 (dollars in millions): Investment (A) Location Property Type Investment Date Total Whole Loan (B) Committed Principal/Investment Amount Outstanding Principal/ Investment Amount Net Equity (C) Coupon (D)(E) Max Remaining Term (Years) (D)(F) Loan/Investment Per SF / Unit / Key (G) Origination LTV (D)(H) Risk Rating Senior Loans 1 Senior Loan Arlington, VA Multifamily 9/30/2021 $ 381.0 $ 381.0 $ 375.5 $ 84.6 + 3.3% 1.8 $338,320 / unit 69 % 3 2 Senior Loan Boston, MA Life Science 8/3/2022 312.5 312.5 229.0 33.1 + 4.2 2.6 $747 / SF 56 3 3 Senior Loan Bellevue, WA Office 9/13/2021 520.8 260.4 224.5 55.9 + 3.7 2.3 $851 / SF 63 3 4 Senior Loan Various Industrial 4/28/2022 504.5 252.3 252.3 62.4 + 2.7 2.4 $98 / SF 64 3 5 Senior Loan Bronx, NY Industrial 8/27/2021 381.2 228.7 217.2 47.5 + 4.2 1.7 $277 / SF 52 3 6 Senior Loan Los Angeles, CA Multifamily 2/19/2021 220.0 220.0 220.0 36.7 + 2.9 1.2 $410,430 / unit 68 3 7 Senior Loan Various Multifamily 5/31/2019 206.5 206.5 206.5 81.2 + 4.0 0.4 $192,991 / unit 74 3 8 Senior Loan Minneapolis, MN Office 11/13/2017 199.4 199.4 194.4 91.8 + 2.3 0.5 $182 / SF n.a. 5 9 Senior Loan Various Industrial 6/15/2022 375.5 187.8 173.5 42.4 + 2.9 2.5 $135 / SF 50 3 10 Senior Loan The Woodlands, TX Hospitality 9/15/2021 181.4 181.4 181.4 35.4 + 4.3 1.8 $199,513 / key 64 3 11 Senior Loan Washington, D.C.
(E) LTV is generally based on the initial loan amount divided by the as-is appraised value as of the date the loan was originated or by the current principal amount as of the date of the most recent as-is appraised value.
(D) LTV is generally based on the initial loan amount divided by the as-is appraised value as of the date the loan was originated.
The following table calculates our book value per share (amounts in thousands, except share and per share data): Year Ended December 31, 2023 2022 KKR Real Estate Finance Trust Inc. stockholders' equity $ 1,404,767 $ 1,571,538 Series A preferred stock (liquidation preference of $25.00 per share) (327,750) (327,750) Common stockholders' equity $ 1,077,017 $ 1,243,788 Shares of common stock issued and outstanding at period end 69,313,860 69,095,011 Add: Deferred stock units 72,708 — Total shares outstanding at period end 69,386,568 69,095,011 Book value per share $ 15.52 $ 18.00 Book value as of December 31, 2023 included the impact of an estimated CECL credit loss allowance of $212.5 million, or ($3.06) per share.
The following table calculates our book value per share (amounts in thousands, except share and per share data): December 31, 2024 December 31, 2023 KKR Real Estate Finance Trust Inc. stockholders' equity $ 1,345,030 $ 1,404,767 Series A preferred stock (liquidation preference of $25.00 per share) (327,750) (327,750) Common stockholders' equity $ 1,017,280 $ 1,077,017 Shares of common stock issued and outstanding at period end 68,713,596 69,313,860 Add: Deferred stock units 206,112 72,708 Total shares outstanding at period end 68,919,708 69,386,568 Book value per share $ 14.76 $ 15.52 Book value as of December 31, 2024 included the impact of an estimated CECL credit loss allowance of $119.6 million, or ($1.74) per share.
On December 22, 2023, we received a $6.0 million partial repayment and then took title to the office property through a deed-in-lieu of foreclosure. The transaction was accounted for as an asset acquisition under ASC 805.
Philadelphia Office / Garage — In 2019, we originated a $182.6 million senior loan secured by an office portfolio in Philadelphia, PA. In December 2023, we received a $6.0 million partial repayment and then took title to the office property through a deed-in-lieu of foreclosure ("DIL"). The transaction was accounted for as an asset acquisition under ASC 805.
During the year ended December 31, 2023, we funded $677.3 million of CRE loans and received $691.3 million from repayments of CRE loans. During the year ended December 31, 2022, we funded $2,419.7 million of CRE loans and received $1,244.3 million from the repayments of CRE loans.
During the year ended December 31, 2024, we funded $298.2 million of CRE loans and received $1,426.4 million from the repayments and sale of CRE loans. During the year ended December 31, 2023, we funded $677.3 million of CRE loans and received $691.3 million from the repayments of CRE loans.
Since our IPO, we have continued to execute on our primary investment strategy of originating floating-rate transitional senior loans and, as we continue to scale our loan portfolio, we expect that our originations will continue to be heavily weighted toward floating-rate loans.
These properties are reflected on our Consolidated Balance Sheets. We have executed on our primary investment strategy of originating floating-rate transitional senior loans and, as we continue to scale our loan portfolio, we expect that our originations will be heavily weighted toward floating-rate loans.
The following table sets forth interest received from, and paid for, our investments for the years ended December 31, 2023, 2022 and 2021 (dollars in thousands): Year Ended December 31, 2023 2022 2021 Interest Received: Commercial real estate loans $ 612,046 $ 362,178 $ 249,564 612,046 362,178 249,564 Interest Paid: Interest expense 430,275 201,007 95,256 Net interest collections $ 181,771 $ 161,171 $ 154,308 Our net interest collections were partially offset by cash used to pay management and incentive fees, as follows (dollars in thousands): Year Ended December 31, 2023 2022 2021 Management Fees to affiliate $ 26,225 $ 24,391 $ 18,341 Incentive Fees to affiliate 2,491 634 10,273 Total management and incentive fee payments $ 28,716 $ 25,025 $ 28,614 Cash Flows from Investing Activities Our cash flows from investing activities consisted of cash outflows to fund new loan originations and our commitments under existing loan investments, partially offset by cash inflows from the principal repayments and sale/syndication of our loan investments.
The following table sets forth interest received from, and paid for, our investments (dollars in thousands): Year Ended December 31, 2024 2023 2022 Interest received $ 558,478 $ 612,046 $ 362,178 Interest paid 398,805 430,275 201,007 Net interest collections $ 159,673 $ 181,771 $ 161,171 Our net interest collections were partially offset by cash used to pay management and incentive fees, as follows (dollars in thousands): Year Ended December 31, 2024 2023 2022 Management Fees to affiliate $ 25,137 $ 26,225 $ 24,391 Incentive Fees to affiliate — 2,491 634 Total management and incentive fee payments $ 25,137 $ 28,716 $ 25,025 Cash Flows from Investing Activities Our cash flows from investing activities primarily consisted of cash inflows from loan repayments and cash outflows to fund commitments under existing loan investments.
CMBS B-Piece Investments Our current CMBS exposure is through RECOP I, an equity method investment. Our Manager has processes and procedures in place to monitor and assess the credit quality of our CMBS B-Piece investments and promote the regular and active management of these investments.
Our Manager has processes and procedures in place to monitor and assess the credit quality of our CMBS B-Piece investments and promote the regular and active management of these investments.
(C) Includes a $58.7 million write-off on a defaulted senior loan upon deed-in-lieu of foreclosure during the three months ended December 31, 2023, and a $15.0 million write-off of a subordinated loan during the three months ended September 30, 2023. Includes a $25.0 million partial write-off of a defaulted senior loan during the year ended December 31, 2022.
Includes a $58.7 million write-off on a senior loan during the three months ended December 31, 2023, and a $15.0 million write-off of a subordinated loan during the three months ended September 30, 2023.
Real Estate Owned and Joint Venture In 2015, we originated a $177.0 million senior loan secured by a retail property in Portland, Oregon. In December 2021, we took title to the retail property; such acquisition was accounted for as an asset acquisition under ASC 805.
Real Estate Assets Portland Retail / Redevelopment — In 2015, we originated a $177.0 million senior loan secured by a retail property in Portland, OR. In December 2021, we took title to the retail property and accounted for the property on a consolidated basis. The transaction was accounted for as an asset acquisition under Accounting Standards Codification ("ASC") 805.
In certain instances, we consider relevant loan-specific qualitative factors to certain loans to estimate its CECL allowance. For collateral dependent loans that we determine foreclosure of the collateral is probable, we measure the expected losses based on the difference between the fair value of the collateral and the amortized cost basis of the loan as of the measurement date.
For collateral dependent loans that we determine foreclosure of the collateral is probable, we measure the expected losses based on the difference between the fair value of the collateral and the amortized cost basis of the loan as of the measurement date.
We recognized $25.1 million of deferred loan fees and origination discounts accreted into interest income during the year ended December 31, 2022, as compared to $23.2 million for the year ended December 31, 2021.
We recorded $17.2 million of deferred loan fees and origination discounts accreted into interest income during the year ended December 31, 2024, as compared to $23.6 million during the prior year.
(B) In certain instances, KREF finances its loans through the non-recourse sale of a senior interest that is not included in the consolidated financial statements.
(A) Excludes fully written off loans. (B) In certain instances, we finance our loans through the non-recourse sale of a senior interest that is not included in the consolidated financial statements.
CECL amends the previous credit loss model to reflect our current estimate of all expected credit losses, not only based on historical experience and current conditions, but also by including reasonable and supportable forecasts incorporating forward-looking information.
We recognize and measure the allowance for credit losses under the Current Expected Credit Loss ("CECL") model, which requires us to estimate expected credit losses, not only based on historical experience and current conditions, but also by including reasonable and supportable forecasts incorporating forward-looking information.
We might use other acceptable alternative approaches in the future depending on, among other factors, the type of loan, underlying collateral, and availability of relevant historical market loan loss data. We estimate our CECL allowance for our loan portfolio, including unfunded loan commitments, at the individual loan level.
In certain instances, we might use other acceptable alternative approaches in the future depending on, among other factors, the type of loan, underlying collateral and availability of relevant historical market loan loss data.
This increase was primarily due to a net increase of $116.4 million in the provision for credit losses, and a $11.1 million increase in REO operating expenses. 75 Table of Contents Liquidity and Capital Resources Overview We have capitalized our business to date primarily through the issuance and sale of our common stock and preferred stock, borrowings from our Non-Mark-to-Market Financing Sources (1) , and borrowings from three master repurchase agreements.
This increase was primarily due to a net increase of $62.7 million in the provision for credit losses. 74 Table of Contents Liquidity and Capital Resources Overview We have capitalized our business to date primarily through the issuance and sale of our common stock and preferred stock, borrowings from three master repurchase agreements, and borrowings from our Non-Mark-to-Market Financing Sources, which were comprised of collateralized loan obligations, term lending agreements, term loan facility, secured term loan, asset specific financing, warehouse facility, and corporate revolver.
Our secured term loan is secured by corporate level guarantees and does not include asset-based collateral. Refer to Notes 2 and 7 to our consolidated financial statements for additional discussion of our secured term loan.
The secured term loan matures on September 1, 2027 and contains restrictions relating to liens, asset sales, indebtedness, investments and transactions with affiliates. Our secured term loan is secured by corporate level guarantees and does not include asset-based collateral. Refer to Notes 2 and 7 to our consolidated financial statements for additional discussion of our secured term loan.
(C) We classify a loan as life science if more than 50% of the gross leasable area is leased to, or will be converted to, life science-relat ed space. (D) "Other" property type includes Condo (Residential) (2%), Self-Storage (2%), Student Housing (1%) and Single Family Rental (1%).
(A) Excludes: (i) Real Estate Assets, (ii) CMBS B-Pieces and (iii) fully written off loans. (B) We classify a loan as life science if more than 50% of the gross leasable area is leased to, or will be converted to, life science-relat ed space. (C) "Other" property type includes Self-Storage (2%), Student Housing (2%) and Mixed Use (1%).
Concurrently with taking the title to the REO asset, we contributed a portion of the REO asset to a joint venture (the "REO JV") with a third party local development operator (“JV Partner”), whereby we have a 90% interest and the JV Partner has a 10% interest.
We contributed a portion of the REO asset with a carrying value of $68.9 million to a joint venture (the "REO JV") with a third party local developer (“JV Partner”), whereby we had a 90% interest and the JV Partner had a 10% interest.
Includes a $25.0 million partial write-off of a defaulted senior loan during the year ended December 31, 2022. Book Value per Share We believe that book value per share is helpful to stockholders in evaluating the growth of our company as we have scaled our equity capital base and continue to invest in our target assets.
Book Value per Share We believe that book value per share is helpful to stockholders in evaluating the growth of our company as we have scaled our equity capital base and continue to invest in our target assets.
To facilitate future offerings of equity, debt and other securities, we have in place an effective shelf registration statement (the “Shelf”) with the SEC. The amount of securities to be issued pursuant to this Shelf was not specified when it was filed and there is no specific dollar limit on the amount of securities we may issue.
The amount of securities to be issued pursuant to this Shelf was not specified when it was filed and there is no specific dollar limit on the amount of securities we may issue.
As such, depreciation on the building and building improvements was suspended. 72 Table of Contents Results of Operations The following table summarizes the changes in our results of operations for years ended December 31, 2023, 2022, and 2021 (dollars in thousands, except per share data): For the Year Ended December 31, Increase (Decrease) For the Year Ended December 31, Increase (Decrease) 2023 2022 Dollars Percentage 2022 2021 Dollars Percentage Net Interest Income Interest income $ 640,412 $ 421,968 $ 218,444 52 % $ 421,968 $ 279,950 $ 142,018 51 % Interest expense 458,802 236,095 222,707 94 236,095 114,439 121,656 106 Total net interest income 181,610 185,873 (4,263) (2) 185,873 165,511 20,362 12 Other Income Revenue from real estate owned operations 8,545 8,971 (426) (5) 8,971 — 8,971 100 Income (loss) from equity method investments 1,417 4,655 (3,238) (70) 4,655 6,371 (1,716) (27) Other income 11,237 5,568 5,669 102 5,568 686 4,882 712 Gain on sale of investments — — — — — 5,126 (5,126) (100) Total other income 21,199 19,194 2,005 10 19,194 12,183 7,011 58 Operating Expenses General and administrative 18,788 17,616 1,172 7 17,616 14,235 3,381 24 Provision for (reversal of ) credit losses, net 175,116 112,373 62,743 56 112,373 (4,059) 116,432 2,868 Management fee to affiliate 26,171 25,680 491 2 25,680 19,378 6,302 33 Incentive compensation to affiliate 2,491 634 1,857 293 634 10,273 (9,639) (94) Expenses from real estate owned operations 11,190 11,113 77 1 11,113 — 11,113 100 Total operating expenses 233,756 167,416 66,340 40 167,416 39,827 127,589 320 Income (Loss) Before Income Taxes, Noncontrolling Interests, Preferred Dividends, Redemption Value Adjustment and Participating Securities' Share in Earnings (30,947) 37,651 (68,598) (182) 37,651 137,867 (100,216) (73) Income tax expense 710 58 652 1,124 58 684 (626) (92) Net Income (Loss) (31,657) 37,593 (69,250) (184) 37,593 137,183 (99,590) (73) Net income (loss) attributable to noncontrolling interests (806) (510) (296) 58 (510) — (510) 100 Net Income (Loss) Attributable to KKR Real Estate Finance Trust Inc. and Subsidiaries (30,851) 38,103 (68,954) (181) 38,103 137,183 (99,080) (72) Preferred stock dividends and redemption value adjustment 21,304 21,304 — — 21,304 11,369 9,935 87 Participating securities' share in earnings 1,764 1,428 336 24 1,428 179 1,249 698 Net Income (Loss) Attributable to Common Stockholders $ (53,919) $ 15,371 $ (69,290) (451) $ 15,371 $ 125,635 $ (110,264) (88) Net Income (Loss) Per Share of Common Stock Basic $ (0.78) $ 0.23 $ (1.01) (439) $ 0.23 $ 2.22 $ (1.99) (90) Diluted $ (0.78) $ 0.23 $ (1.01) (439) $ 0.23 $ 2.21 $ (1.98) (90) Weighted Average Number of Shares of Common Stock Outstanding Basic 69,180,039 67,553,578 1,626,461 2 67,553,578 56,571,200 10,982,378 19 Diluted 69,180,039 67,553,578 1,626,461 2 67,553,578 56,783,388 10,770,190 19 Dividends Declared per Share of Common Stock $ 1.72 $ 1.72 $ — — $ 1.72 $ 1.72 $ — — 73 Table of Contents Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 Net Interest Income Net interest income decreased by $4.3 million, during the year ended December 31, 2023, as compared to the prior year.
As a result, we recognized a $18.6 million loan write-off for the difference between the amortized cost of the foreclosed loan and our share of the fair value of the property’s net assets and closing costs. 71 Table of Contents Results of Operations The following table summarizes the changes in our results of operations for years ended December 31, 2024, 2023, and 2022 (dollars in thousands, except per share data): Year Ended December 31, Increase (Decrease) Year Ended December 31, Increase (Decrease) 2024 2023 Dollars Percentage 2023 2022 Dollars Percentage Net Interest Income Interest income $ 564,629 $ 640,412 $ (75,783) (12) % $ 640,412 $ 421,968 $ 218,444 52 % Interest expense 412,913 458,802 (45,889) (10) 458,802 236,095 222,707 94 Total net interest income 151,716 181,610 (29,894) (16) 181,610 185,873 (4,263) (2) Other Income Income (loss) from equity method investments 1,518 1,417 101 7 1,417 4,655 (3,238) (70) Other miscellaneous income 5,738 11,237 (5,499) (49) 11,237 5,568 5,669 102 Revenue from real estate owned operations 22,866 8,545 14,321 168 8,545 8,971 (426) (5) Gain on sale of investments (615) — (615) 100 — — — — Total other income 29,507 21,199 8,308 39 21,199 19,194 2,005 10 Operating Expenses Provision for (reversal of ) credit losses, net 80,605 175,116 (94,511) (54) 175,116 112,373 62,743 56 Management fee to affiliate 24,533 26,171 (1,638) (6) 26,171 25,680 491 2 Incentive compensation to affiliate — 2,491 (2,491) (100) 2,491 634 1,857 293 General and administrative 18,410 18,788 (378) (2) 18,788 17,616 1,172 7 Expenses from real estate owned operations 23,100 11,190 11,910 106 11,190 11,113 77 1 Total operating expenses 146,648 233,756 (87,108) (37) 233,756 167,416 66,340 40 Income (Loss) Before Income Taxes 34,575 (30,947) 65,522 212 (30,947) 37,651 (68,598) (182) Income tax expense 248 710 (462) (65) 710 58 652 1,124 Net Income (Loss) 34,327 (31,657) 65,984 208 (31,657) 37,593 (69,250) (184) Net income (loss) attributable to noncontrolling interests (1,264) (806) (458) 57 (806) (510) (296) 58 Net Income (Loss) Attributable to KKR Real Estate Finance Trust Inc. and Subsidiaries 35,591 (30,851) 66,442 215 (30,851) 38,103 (68,954) (181) Preferred stock dividends 21,304 21,304 — — 21,304 21,304 — — Participating securities' share in earnings 1,216 1,764 (548) (31) 1,764 1,428 336 24 Net Income (Loss) Attributable to Common Stockholders $ 13,071 $ (53,919) $ 66,990 124 $ (53,919) $ 15,371 $ (69,290) (451) Net Income (Loss) Per Share of Common Stock Basic and Diluted $ 0.19 $ (0.78) $ 0.97 124 $ (0.78) $ 0.23 $ (1.01) (439) Weighted Average Number of Shares of Common Stock Outstanding Basic and Diluted 69,396,890 69,180,039 216,851 — 69,180,039 67,553,578 1,626,461 2 Dividends Declared per Share of Common Stock $ 1.00 $ 1.72 $ (0.72) (42) $ 1.72 $ 1.72 $ — — 72 Table of Contents Year Ended December 31, 2024 Compared to Year Ended December 31, 2023 Net Interest Income Net interest income decreased by $29.9 million, during the year ended December 31, 2024, as compared to the prior year.
As of December 31, 2023, the average risk rating of our loan portfolio was 3.2, weighted by total loan exposure, consistent with that as of December 31, 2022.
As of December 31, 2024, the average risk rating of our portfolio was 3.1 , weig hted by total loan exposure, as compared to 3.2 as of December 31, 2023.
We may seek additional sources of liquidity from syndicated financing, other borrowings (including borrowings not related to a specific investment) and future offerings of equity and debt securities.
Our corporate Revolver and secured term loan are secured by corporate level guarantees and include net equity interests in the investment portfolio. We may seek additional sources of liquidity from syndicated financing, other borrowings (including borrowings not related to a specific investment) and future offerings of equity and debt securities.
Risk-rated 5 loans are excluded from the weighted average LTV. (E) Coupon expressed as spread over Term SOFR. (F) Max remaining term (years) assumes all extension options are exercised, if applicable. (G) Loan Per SF / Unit / Key is based on the current principal amount divided by the current SF / Unit / Key.
(D) Weighted average is weighted by the current principal amount for our senior and mezzanine loans and by the investment amount of CMBS B-Pieces. Risk-rated 5 loans are excluded from the weighted average LTV. (E) Coupon expressed as spread over Term SOFR. (F) Maximum remaining term (years) assumes all extension options are exercised, if applicable.
For Senior Loans 2, 3, 6, 20, 25, 28, 37, 50, 51, and 69, LTV is calculated as the total commitment amount of the loan divided by the as-stabilized value as of the date the loan was originated.
Weighted Average LTV excludes risk-rated 5 loans. For Senior Loans 2, 3, 5, 16 and 19, LTV is calculated as the total commitment amount of the loan divided by the as-stabilized value as of the date the loan was originated.
Debt-to-Equity Ratio and Total Leverage Ratio The following table presents our debt-to-equity ratio and total leverage ratio: December 31, 2023 December 31, 2022 Debt-to-equity ratio (A) 2.3x 2.0x Total leverage ratio (B) 4.2x 3.8x (A) Represents (i) total outstanding debt agreements (excluding non-recourse facilities), secured term loan and convertible notes, less cash to (ii) total permanent equity, in each case, at period end.
See Notes 5, 6, 7 and 10 to our consolidated financial statements for additional details regarding our secured financing agreements, collateralized loan obligations, secured term loan and stock activity. 75 Table of Contents Debt-to-Equity Ratio and Total Leverage Ratio The following table presents our debt-to-equity ratio and total leverage ratio: December 31, 2024 December 31, 2023 Debt-to-equity ratio (A) 1.6x 2.3x Total leverage ratio (B) 3.6x 4.2x (A) Represents (i) total outstanding debt agreements (excluding non-recourse facilities) and secured term loan, less cash to (ii) KREF's stockholders' equity, in each case, at period end.
We have not received any margin calls on our master repurchase agreements to date. Our primary sources of liquidity include $135.9 million of cash on our Consolidated Balance Sheet, $450.0 million of available capacity on our corporate Revolver, $44.0 million of available borrowings under our financing arrangements based on existing collateral, and cash flows from operations.
Our primary sources of liquidity include $104.9 million of cash on our Consolidated Balance Sheets, $530.0 million of available capacity on our corporate Revolver, $49.9 million of available borrowings under our financing arrangements based on existing collateral, and cash flows from operations.
We recorded $23.9 million of deferred financing costs amortization into interest expense during the year ended December 31, 2022, as compared to $15.7 million during the prior year. Other Income Total other income increased by $7.0 million during the year ended December 31, 2022, as compared to the year ended December 31, 2021.
In addition, we recorded $14.4 million of deferred financing costs amortized into interest expense during the year ended December 31, 2024, as compared to $26.2 million during the prior year. Other Income Total other income increased by $8.3 million during the year ended December 31, 2024, as compared to the prior year.
The restructured senior loan earns a coupon rate of S+2.75% and has a new term of up to four years, assuming all extension options are exercised. The $25.0 million junior mezzanine note is subordinate to a new $41.5 million committed senior mezzanine note held by the sponsor (with $16.5 million in unfunded commitment).
The restructured senior loan earns a coupon rate of S+2.75% and has a new term of up to four years, assuming all extension options are exercised.
Cash Flows from Financing Activities Our cash flows from financing activities were primarily driven by proceeds from borrowings under our financing agreements of $811.1 million during year ended December 31, 2023, partially offset by (i) repayments of $791.3 million on borrowings under our financing agreements, (ii) repayment of $143.75 million convertible notes, and (iii) payment of $140.2 million in dividends.
Cash Flows from Financing Activities During the year ended December 31, 2024, our cash flows from financing activities were primarily driven by (i) repayments of $1,594.5 million under our financing agreements and (ii) payment of $103.1 million in dividends, partially offset by borrowing proceeds of $601.9 million under our financing agreements.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeThere can be no assurance of how our net income may be affected in future quarters, which will depend on, among other things, the interest rate environment and our then-current portfolio. In light of increasing inflation in recent years, the U.S. Federal Reserve has raised interest rates eleven times since January 2022.
Biggest changeThere can be no assurance of how our net income may be affected in future quarters, which will depend on, among other things, the interest rate environment and our then-current portfolio.
Inflation, rising interest rates and increasing costs may dampen consumer spending and slow corporate profit growth, which may negatively impact the value of underlying real estate collateral relating to KREF’s investments and impair KREF's borrowers’ ability to execute on their business plans and potentially their ability to perform under the terms of their loan obligations.
Inflation, rising interest rates and increasing costs may dampen consumer spending and slow corporate profit growth, which may negatively impact the value of underlying real estate collateral relating to our investments and impair our borrowers’ ability to execute on their business plans and potentially their ability to perform under the terms of their loan obligations.
Prepayment Risk Prepayment risk is the risk that principal will be repaid at an earlier date than anticipated, potentially causing the return on certain investments to be less than expected. As we receive prepayments of principal on our assets, any premiums paid on such assets are amortized against interest income.
Prepayment Risk Prepayment risk is the risk that principal will be repaid at an earlier date than anticipated, potentially causing the return on certain investments to be less than expected. As we receive prepayments of principal on our assets, any premiums paid on such 81 Table of Contents assets are amortized against interest income.
In 83 Table of Contents addition, decreases in property values reduce the value of the collateral and the potential proceeds available to a borrower to repay the underlying loans, which could also cause us to suffer losses. 84 Table of Contents
In addition, decreases in property values reduce the value of the collateral and the potential proceeds available to a borrower to repay the underlying loans, which could also cause us to suffer losses. 82 Table of Contents
However, rate floors relating to our loan portfolio may offset some of the impact from declining rates. In addition, interest we are charged on our fixed-rate debt would not change. As of December 31, 2023, our accruing loan portfolio and related portfolio financing by principal amount earned or paid a floating rate of interest indexed to Term SOFR.
However, rate floors relating to our loan portfolio may offs et some of the impact from declining rates. In addition, interest we are charged on our fixed-rate debt would not change. As of December 31, 2024, our accruing loan portfolio and related portfolio financing by principal amount earned or paid a floating rate of interest indexed to Term SOFR.
As of December 31, 2023, a 50 basis point and a 100 basis point decrease in the index rates would decrease our expected cash flows by appro ximately $1.1 million and $2.2 million, or ($0.02) and ($0.03) p er common share, respectively, for the following three-month period.
As of December 31, 2024, a 50 basis point and a 100 basis point decrease in the index rates would decrease our expected cash flows by appro ximately $1.1 million and $2.1 million, or ($0.02) and ($0.03) per common share, respectively, for the following three-month period.
In the case of a significant increase in interest rates, the cash flows of the collateral real estate assets may not be sufficient to pay debt service due under our loans, which may contribute to non-performance or, in severe cases, default. Notwithstanding the current period of relatively high interest rates, the U.S.
In the case of a significant increase in interest rates, the cash flows of the collateral real estate assets may not be sufficient to pay debt service due under our loans, which may contribute to non-performance or, in severe cases, default.
Federal Reserve has indicated that it may decrease in interest rates in 2024. In a period of declining interest rates, our interest income on floating-rate investments would generally decrease, while any decrease in the interest we are charged on our floating-rate debt may be subject to floors and may not compensate for such decrease in interest income.
In a period of declining interest rates, our interest income on floating-rate investments would generally decrease, while any decrease in the interest we are charged on our floating-rate debt may be subject to floors and may not compensate for such decrease in interest income.
To monitor this risk, our Manager reviews our investment portfolio and is in regular contact with the sponsors, monitoring performance of the collateral and enforcing our rights as necessary.
To monitor this risk, we review our investment portfolio and are in regular contact with the sponsors, monitoring performance of the collateral and enforcing our rights as necessary.
Conversely, a 50 basis point and a 100 basis point increase in the index rates would increase our expected cash flows by approximately $1.1 million and $2.2 million, or $0.02 and $0.03 per common share, respectively, for the same period. 82 Table of Contents LIBOR Transition On March 5, 2021, the Financial Conduct Authority of the U.K.
Conversely, a 50 basis point and a 100 basis point increase in the index rates would increase our expected cash flows by approximately $1.1 million and $2.1 million, or $0.02 and $0.03 per common share, respectively, for the same period.
Removed
(the “FCA”), which regulates LIBOR, announced (the “FCA Announcement”) that all relevant LIBOR tenors would cease to be published or would no longer be representative after June 30, 2023.
Added
Although the Federal Reserve lowered interest rates three times during 2024, interest rates remain elevated and the timing, direction and extent of any future interest rate changes remain uncertain.
Removed
The FCA Announcement coincided with the March 5, 2021 announcement of LIBOR’s administrator, the ICE Benchmark Administration Limited (the “IBA”), indicating that, as a result of not having access to input data necessary to calculate relevant LIBOR tenors on a representative basis after June 30, 2023, the IBA would have to cease publication of such LIBOR tenors immediately after the last publication on June 30, 2023.
Removed
Further, on March 15, 2022, the Consolidated Appropriations Act of 2022, which includes the Adjustable Interest Rate (LIBOR) Act, was signed into law in the United States. This legislation established a uniform benchmark replacement process for financial contracts maturing after June 30, 2023 that do not contain clearly defined or practicable fallback provisions.
Removed
The legislation also created a safe harbor that shields lenders from litigation if they choose to utilize a replacement rate recommended by the Board of Governors of the Federal Reserve.
Removed
The Federal Reserve, in conjunction with the Alternative Reference Rate Committee, a committee convened by the Federal Reserve that includes major market participants, identified the Secured Overnight Financing Rate, or SOFR, an index calculated by short-term repurchase agreements, backed by Treasury securities, as its preferred alternative rate for LIBOR.
Removed
There are significant differences between LIBOR and SOFR, such as LIBOR being an unsecured lending rate while SOFR is a secured lending rate, and SOFR is an overnight rate while LIBOR reflects term rates at different maturities.
Removed
The differences between LIBOR and SOFR, could result in higher interest costs for us, which could have a material adverse effect on our operating results. As of December 31, 2023, our floating-rate loan portfolio and financing arrangements were all indexed to Term SOFR.

Other KREF 10-K year-over-year comparisons