On Tuesday, BTIG reiterated a Buy rating on KKR Real Estate Financial Trust (NYSE:KREF) with a stable price target of $11.50. KKR Real Estate Financial Trust reported a Distributable Earnings per Share (EPS) of ($1.57), which was more favorable than the estimated ($1.72). This figure, however, included net realized losses of $136 million, or ($1.97) per share.
Adjusting for these losses, the second quarter Distributable EPS is approximately $0.39 per share, consistent with the first quarter and $0.06 above BTIG's estimate, sufficiently covering the $0.25 per share quarterly dividend by 156%.
The company's GAAP EPS stood at $0.29 per share, factoring in a $5 million, or ($0.07) per share, Current Expected Credit Loss (CECL) provision. The Book Value per share increased slightly to $15.24 from $15.18 in the first quarter, after accounting for a total CECL of $115 million, or ($1.65) per share.
This represents a significant reduction from the first quarter's CECL allowance of $246 million, or ($3.54) per share.
During the second quarter, KREF took ownership of two properties, including an office property in Mountain View, California, and a life science property in Seattle.
Additionally, the company wrote off a mezzanine office loan in Boston. These actions contributed to the quarter's $136 million realized loss. KREF also completed the sale of a portion of its Philadelphia Real Estate Owned (REO) property and initiated an $83.7 million loan to the purchaser.
Further financial activities for KREF in the second quarter included funding $121 million of prior agreements and receiving $384 million in repayments. The quarter ended with a loan portfolio having an unpaid principal balance (UPB) of $6.56 billion, with a 96% interest payment collection rate, a slight decrease from 97% in the first quarter.
The company's leverage ratio decreased by 0.3x sequentially to 3.9x, and liquidity increased by $24 million from the first quarter to $644 million. BTIG plans to update its estimates following the company's earnings call scheduled for the day after the announcement.
In other recent news, KKR Real Estate Finance Trust reported mixed financial results for the first quarter of 2024, with a GAAP net loss of $8.7 million offset by distributable earnings of $26.7 million.
Despite the loss, the company remains optimistic about future lending activities, particularly in the life science and multifamily sectors. In addition, the company announced a robust pipeline of over $20 billion and anticipates resuming lending in the upcoming quarters.
Analysts from BTIG have initiated coverage on KKR Real Estate Finance Trust, assigning a Buy rating and setting a price target of $11.50. They highlighted the company's strategy in addressing portfolio challenges and its potential for a 25.6% one-year forward total return.
KKR Real Estate Finance Trust's recent dividend reduction from $0.43 per share to $0.25 per share was also noted as a proactive stance in managing its non-performing loans.
In other company developments, KKR Real Estate Finance Trust's debt-to-equity ratio stands at 2.1, and it has liquidity of over $600 million.
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