Chris Miller

Chris Miller inquired about the Long Island multifamily loan originated this quarter, asking if it was ground-up construction and if KKR Real Estate Finance Trust was now focusing on heavier transitional projects or if this was a one-off loan.

Answer

CEO Matthew Salem confirmed it was ground-up construction with a repeat sponsor. He clarified that while construction loans remain a small percentage of the portfolio, the bulk of current opportunities and relative value are in 'almost stabilized' versus heavier transitional lending, focusing on stretched seniors with high LTVs and mostly leased assets.

Chris Miller asked for a comparison between KKR Real Estate Finance Trust's European and U.S. loans, specifically regarding terms, returns, and structural differences. He also inquired about the nature of the Long Island multifamily loan originated this quarter, asking if it was ground-up construction and if the company was shifting towards heavier transitional projects.

Answer

Matthew Salem, CEO, explained that European and U.S. loans share similar institutional quality real estate and sponsorship. He noted European opportunities often involve larger loan sizes and portfolios, with a more bank-dominated market and advanced back leverage structures. While spreads and ROEs are currently balanced between regions, Europe offered more relative value two years prior. Regarding the Long Island loan, Mr. Salem confirmed it was ground-up construction with a repeat sponsor, reiterating that construction remains a small portfolio percentage. He emphasized that the bulk of current opportunities are in 'almost stabilized' versus heavier transitional lending, offering better relative value.