Is KKR Real Estate Finance Trust a Buy?

KKR Real Estate Finance Trust (NYSE: KREF) is a real estate investment trust (REIT) that specializes in acquiring and issuing senior loans driven by well-capitalized commercial real estate (CRE) in liquid markets with solid fundamentals are secured.

In addition to these types of property, the REIT employs mezzanine loans, preferred capital, and other debt-oriented instruments to provide what is known as an attractive risk-adjusted return and capital preservation for investors in this property stock.

The New York-based REIT manages approximately $ 16 billion (AUM) in assets and is managed as part of the global real estate group of KKR & Co. (NYSE: KKR), a global investment giant with an AUM of more than $ 252 billion -Dollars.

Public since 2017, with an aggressive growth strategy

KREF has only been public since mid-2017 and has just ended a good year. “KREF achieved record results for the year, supported by another strong performance in the fourth quarter,” said CEO Matt Salem on the company’s fourth quarter 2020 and year-end report.

Salem added, “The fourth quarter was also our return to the offensive, with $ 565 million in new origins and an ongoing focus on institutional real estate owned by high quality sponsors. KREF remains well positioned for the year ahead, supported by a conservative portfolio and robust pipeline. “

KREF also plans to continue its acquisition path, announcing on April 9th ​​that it will use the net proceeds of $ 150 million to sell 6 million shares of a new issue of 6.50% redeemable preferred stock to “raise its target assets Consistent manner with its investment strategies and guidelines as well as for general corporate purposes. “

The vast majority of the KREF portfolio – 98.5% in full – consists of senior loans and the remainder of mezzanine loans. Half of the portfolio consists of multi-family loans, with 31% being office space. The remainder is spread across housing, retail, hospitality, industrial, and student housing loans. Nine states make up 82% of the portfolio, from New York with 14% to Florida and Texas with 6% each.

The bottom line of Millionacres

KREF stock closed at $ 19 per share on April 9, just 2.26% below the 52-week high of $ 19.44 hit on March 17. This was good for a return of 9.05% on an annual dividend payout of $ 1.72 per share, including $ 0.43 per share share declared on March 15th.

That payout was the 12th in a row at this level, dating back to June 2018 when it was the REIT’s fourth quarterly payout since it went public. That payout also comes from a portfolio that accumulated 99.4% of its interest payments for the year in the fourth quarter. A high yielding, diverse portfolio managed by an affiliate as one of the world’s best known wealth managers makes KREF a compelling consideration to buy, especially if you are more interested in income than growth.