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KKR Real Estate Finance Trust NYSE: KREF reported a fourth-quarter 2025 GAAP net loss of $32 million, or $0.49 per share, as management highlighted elevated credit provisioning and continued focus on liquidity, portfolio repositioning, and asset resolutions heading into what it described as a “transition” year in 2026.
On the call, the company said book value as of Dec. 31 was $13.04 per share. It also reported distributable earnings of $14 million, or $0.22 per share, and paid a $0.25 cash dividend for the fourth quarter.
Liquidity actions and financing profile
Chief Executive Officer Matt Salem said the company “made significant progress strengthening our liquidity position throughout 2025,” pointing to multiple capital markets actions. In March, KREF closed a 7-year, $550 million Term Loan B, which was later upsized and repriced in September to $650 million outstanding with a reduced coupon of SOFR plus 250 basis points. The company also increased its corporate revolver to $700 million from $610 million.
President and COO Patrick Mattson said KREF ended the year with “near-record levels of liquidity totaling over $880 million,” including:
- $85 million of cash on hand
- $74 million of loan repayments held by the servicer
- $700 million of undrawn capacity on the corporate revolver
Mattson added that total financing capacity was $8.2 billion, including $3.5 billion of undrawn capacity, and said 74% of the company’s financing remains non-mark-to-market. He also said KREF has no final facility maturities until 2027 and no corporate debt due until 2030.
Credit migration and fourth-quarter CECL provisions
Credit performance was a central focus of the quarter. Mattson said KREF downgraded the Cambridge life science and San Diego multifamily loans to risk rating 5 during the quarter. As a result, the company recorded “total incremental CECL provisions of $44 million” in the fourth quarter.
He also said that after quarter-end, the company entered new modification discussions on its Boston life science loan, which is currently risk rated 3. While that loan continues to make contractual monthly interest payments, Mattson said the company anticipates a ratings downgrade and a CECL increase in the first quarter of 2026.
Mattson reported the weighted average risk rating on the portfolio was 3.2 at year-end. He also said the company’s debt-to-equity ratio was 2.2x and its total leverage ratio was 3.9x, which he described as consistent with the target range.
Originations, repayments, and geographic diversification
Management discussed portfolio activity and sector positioning. Salem said 2025 repayments totaled $1.5 billion, consistent with 2024, and were partially offset by $1.1 billion of new originations. He said more than 75% of new originations during the year were concentrated in multifamily and industrial loans, which he characterized as sectors with “resilient fundamentals and attractive risk-adjusted returns.” Salem also noted that multifamily remains the company’s largest property type exposure, and said KREF’s significant exposure to Class A product has supported “strong underlying performance across the portfolio.”
In the fourth quarter specifically, Mattson said new originations totaled $424 million, exceeding repayments of $380 million. Looking ahead, he said the company expects full-year 2026 repayments of “over $1.5 billion,” which would exceed repayment activity in each of the last two years.
Salem also highlighted geographic expansion, noting KREF closed its first loan in Europe and made subsequent European investments in the fourth quarter, describing the move as a milestone that could support relative-value opportunities across the U.S. and Europe and provide a “foundation for continued geographic diversification.”
2026 transition plan: REO liquidity and watchlist resolutions
Salem said 2026 will be a year of transition as KREF pursues a plan to position much of its real estate owned (REO) portfolio for liquidity and implement what he called an “aggressive resolution strategy” for a significant portion of its watchlist assets and select office assets.
He said the goal is to compress the discount of the stock price to book value and “more quickly unlock approximately $0.13 per share embedded in our REO assets,” but cautioned that the approach is expected to put additional pressure on earnings until the plan is executed.
During Q&A, Salem said management expects to provide more detail on what success looks like in future communications, but described a focus on monetizing or liquidating the vast majority of the watchlist. He also said the company intends to distinguish between newer, high-quality office loans and certain legacy deals it would not place “in that same bucket.”
He also discussed REO by category, referencing a short-term bucket of assets the company aims to liquidate over the course of 2026, at least partially in some cases. Salem named the West Hollywood luxury condo, Portland, Oregon redevelopment, Raleigh, North Carolina multifamily, and Philadelphia office as assets in that near-term category. He described Mountain View as more of an intermediate-term effort, and suggested life science REO assets may be longer-term.
On Mountain View specifically, Salem said the company remains engaged with tenants and that the market is improving. He indicated that if a lease is signed in the near term, the company believes the “optimal strategy” could be monetization post-2026 due to anticipated capital expenditures and tenant improvement work. When asked about value, Salem said that while no lease has been completed, “everything we’re seeing today would suggest that I think we’ve got significant value in that asset above where we’re carrying it today.”
Dividend review and share repurchases
Salem said the dividend is “something the board is actively evaluating” as part of broader capital allocation discussions, particularly in light of the transitional year and efforts to rebalance the portfolio. In response to an analyst question, he agreed that the company is evaluating the dividend through the lens of near-term earnings visibility and long-term shareholder value.
Meanwhile, Mattson said KREF repurchased more than $9 million of common stock in the fourth quarter at a weighted average share price of $8.24. For the full year 2025, the company repurchased $43 million at a weighted average share price of $9.35, which he said resulted in approximately $0.32 of accretion to book value per share. As of year-end, he said about $47 million remained under the current share buyback authorization.
Management also said it expects to continue originating new loans in 2026 while maintaining its target leverage range alongside other capital allocation strategies, with Salem noting that the ability to recycle capital and remain within leverage targets will be key factors as the company executes its resolution plan.
About KKR Real Estate Finance Trust NYSE: KREF
KKR Real Estate Finance Trust, Inc NYSE: KREF is a mortgage real estate investment trust sponsored by KKR & Co Inc The company focuses on originating, acquiring, financing and managing a diversified portfolio of commercial real estate debt and real estate-related assets across the United States and select European markets.
The trust’s investment strategy is centered on lending to high-quality office, industrial, retail, multifamily and hotel properties. Its portfolio primarily consists of senior mortgage loans, mezzanine loans, floating-rate debt securities and preferred equity positions.
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