KKR Real Estate Finance Trust reported a sharp narrowing in its third-quarter net loss, alongside a much larger loss on its distributable measure. The commercial real estate lender also reported $1.2 billion of loan repayments during the quarter, new loan activity and a $3.2 billion portfolio that remains predominantly floating-rate.
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Net loss narrowed: KREF reported a $6.4 million net loss attributable to common stockholders, or 11 cents per diluted share, for the quarter ended Sept. 30. That compares with a $121.8 million loss, or $1.95 per share, in the second quarter.
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Distributable loss moved in the opposite direction: The company reported a $152.0 million distributable loss, or $2.64 per diluted share, versus a $36.4 million loss, or 58 cents per share, in the prior quarter. The reported figures therefore show a substantial improvement in net loss but a larger loss on the distributable measure.
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Liquidity totaled $853.5 million at quarter-end: That figure included $165.9 million in cash, $53.4 million of loan principal repayments held by a servicer and $600 million of unused capacity under KREF’s corporate revolving credit agreement. The unused borrowing capacity is part of the total, not cash on hand.
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New lending and repayments: KREF originated two floating-rate senior loans totaling $157.0 million and funded $137.5 million of them during the quarter. The loans had a weighted-average appraised loan-to-value ratio of 63% and a coupon 2.6 percentage points above the applicable benchmark. The company also funded $20.4 million of principal for existing loans.
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Repayments reduced the portfolio: KREF received $1.2 billion in loan repayments during the quarter, bringing repayments for the year to $2.4 billion.
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Portfolio profile: The current loan portfolio stood at $3.2 billion. As of Sept. 30, 98% of it was floating-rate, with a weighted-average unlevered all-in yield of 7.0%. Multifamily and industrial assets made up 57% of the portfolio, and the weighted-average loan-to-value ratio at origination was 65%.
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Credit indicators: The portfolio’s average risk rating was 3.2, weighted by outstanding principal. KREF also said it resolved three watch-list loans, including a risk-rated 5 life-sciences loan.
The results show two distinct quarterly trends: the net loss narrowed considerably, while the reported distributable loss widened. KREF’s loan book remains largely floating-rate, and its quarter included sizeable repayments as well as new lending.