KKR Real Estate Finance Trust Inc. (NYSE:KREF) Q1 2025 Earnings Call Transcript

KKR Real Estate Finance Trust Inc. (NYSE:KREF) Q1 2025 Earnings Call Transcript April 24, 2025

Operator: Good morning and welcome to the KKR Real Estate Finance Trust Inc, First Quarter 2025 Financial Results Conference Call. [Operator Instructions]. I would now like to turn the conference over to Jack Switala. Please go ahead.

Jack Switala : Great thanks, operator, and welcome to the KKR Real Estate Finance Trust earnings call for the first quarter of 2025 as the operator mentioned, this is Jack Switala. This morning, I’m joined on the call by our CEO, Matt Salem, our President and COO, Patrick Mattson and our CFO, Kendra Decius, I’d like to remind everyone that we will refer to certain non GAAP financial measures on the call, which are reconciled to GAAP figures in our earnings release and in the supplementary presentation, both of which are available on the investor relations portion of our website. This call will also contain certain forward looking statements which do not guarantee future events or performance. Please refer to our most recently filed 10 Q for cautionary factors related to these statements.

Before I turn the call over to Matt, I’ll go through our results for the first quarter of 2025 we reported a gap net loss of $10.6 million or 15 cents per share. Book value as of March 31 is $14.44 per share. Distributable earnings this quarter was $17 million or 25 cents per share, which is in line with our 25 cent per share dividend. With that, I’d now like to turn the call over to Matt.

Matt Salem : Thank you, Jack. Good morning, and thanks for joining our call today. Since our last earnings call and tariff implementations, market volatility and recession expectations have increased significantly, creating uncertainty for both businesses and households, the early recovery of real estate has likely been put on hold until we have more clarity on the scale and impact of the tariff regime. That said, we do believe real estate is better positioned for this environment compared to past cycles and other asset classes, given the reset and values over the last three years in times like this, the first thing we think about is defense. It’s a get your house in order mentality. And to that end, we are in a very good position.

We have no corporate maturities until 2030 having just upsized and extended our corporate revolver for new five year term and refinanced our Term Loan B, with a new seven year facility, we have ample liquidity with over 700 million today. Given this secure position, we will remain on offense, actively looking to reinvest repayments into new originations. In terms of what we are seeing in the real estate credit market, it is still functioning, and all market participants remain active, including the banking sector, warehouse financing and senior loan spreads are approximately 10 to 15 basis points wider, while the transitional loan sector spreads are approximately 15 to 20 basis points wider. BMBF spreads have been more volatile and are currently 50 to 75 basis points wider.

Many owners are now coming to us for a balance sheet solution to avoid the capital markets volatility. From an opportunity perspective, it’s significant. Our pipeline is the largest it’s ever been, totaling over 30 billion, and it’s very high quality. I expect this market will lead our sponsors to seek out more short term bridge loans instead of testing the investment sales market, interestingly, our repayment expectations have increased since our last call. As we articulated last quarter, repayments are expected to exceed $1 billion this year, and we are tracking well above that. We had an active quarter and closed four loans for a total of 376,000,080% 80% of which were secured by Class A, multi-family properties. It had a weighted average LTV of 69% and a coupon of SOFR plus 277 basis points repayments in the.

Quarter, we’re 180, 4 million, and along with future funding from existing loans, our net fundings totaled 220, 2 million. We are actively looking at opportunities to diversify our portfolio and add duration. To that end, we are focused on the European lending market. We have built a strong team over the last few years, we are also looking at new issue, CMBS, conduit V pieces, where we can leverage our position as one of the largest market participants, as well as k star, which is our rated special servicer. Turning next to risk ratings, we downgraded two loans this quarter. First, a Raleigh, North Carolina multifamily loan, from a four rated loan to a five rated loan. We are still evaluating numerous scenarios for this loan, and are engaged in workout discussions which could lead to an ownership position.

Second, Boston life science, from a three rated to a four rated loan due to current occupancy trends with the two downgrades in the quarter and therefore increased CECL provisions book value per share is $14.44 down approximately 2% compared to the prior quarter. We will continue to be transparent and proactive in managing the KREF portfolio, and will provide updates on those two loans in the coming quarters, before turning it over to Patrick. I will touch on our life science exposure. This is a sector that we believe has long term positive fundamentals, but faces cyclical headwinds, which could be exacerbated by an economic downturn or NIH funding costs, funding cuts. As a reminder, 12% of our loan portfolio is Life Science, and we have one REO property.

We thought it’d be helpful to provide additional details in our supplemental which is on page 10 of the presentation. At a high level, 100% of our loan exposure is located in the top two Life Science markets, Boston and South San Francisco, and we provided construction financing for over half of our exposure. So these are very high quality and purpose built for Life Science. We’ve seen some green shoots as well. In March, we executed a 32,000 square foot lease in our Seattle Life Science REO property to the Institute for protein Design at the University of Washington. The tenant has created AI technologies and computationally designed protein medicines, and is led by a recent Nobel Prize winner for chemistry. With that, I’ll turn it over to Patrick.

Patrick Mattson : Thanks, Matt. Good morning. Everyone. This quarter, we work closely with our KKR Capital Markets team to maintain our best in class financing. In March, we closed on a new $550 million term loan B, upsizing from the prior loan of 340 million and resetting the term for seven years. Proceeds were used to repay indebtedness, including our existing term loan B, and for general corporate purposes, the new term loan B priced at 99 spot 870 5% and bears interest at SOFR plus 325 basis points. This loan further bolsters our liquidity position and enables us to continue to focus on offense in the quarter, we also upsized our corporate revolver to 660 million and extended the maturity for a new five year term to March 2030 eliminating corporate liability maturities Over the next several years.

Additionally, we added a new non mark to market secured loan facility this quarter, with an initial funded size of 122 million and the ability to grow as new loans are included. Further diversifying our financing capacity, our financing availability now sits at 8.3 billion, including 3.1 billion of undrawn capacity. At quarter end, we had 720 million of liquidity available, including 106 million of cash on hand and 570 million of undrawn corporate revolver capacity, 78% of our four financing is non mark to market, and KREF has no final facility maturities until 2026 and no corporate debt due until 2030 In addition to originations, this quarter, we also invested capital and share. Purchases. In the first quarter, we repurchased 10 million of KREF stock, representing a weighted average price of $11.03 this raises our total shares repurchased in the past two quarters to 20 million at a weighted average price of $11.33 our Cecil reserve increased to 144 million with two rating downgrades.

Matt mentioned our loan portfolio remains relatively stable, with 90% of the portfolio risk rated three or better. As an update on our West Hollywood multifamily loan risk rate at five as of quarter end, we took title to the asset earlier this month and are proceeding on our condo execution strategy with unit closings anticipated for late summer as a result of the assignment. In lieu of foreclosure, we expect to realize the loss tied to this investment of approximately 21 million to distribute our earnings in 2q which is consistent with our CECL reserve as of 1q As a reminder, our REO assets could generate an additional 12 cents per share per quarter on our distributor earnings as we effectuate our business plans, repatriate capital and reinvest into performing loans as of the first quarter.

K ref debt to equity ratio is 1.9 times, and our leverage ratio is 3.9 times, following two repayments totaling 283 million early in the second quarter on a spot basis, the current leverage ratio is 3.7 times, which is The midpoint of our target range. In closing, we’re positioned well for this market environment, given steps that we’ve taken over the years to manage our liabilities, including our most recent activity, in the first quarter, to increase and extend our corporate facilities, we’re continuing to make progress on our REO assets, and are supported by a deep, inexperienced credit team of over 110 Associates, and who, together with k star, manage 37 billion of CRE loans and are named special servicer on over 46 billion of CMBS. Origination activity is picking up speed, and we’re expanding our investment opportunity into the into the European loan market and the US CMBS market.

Finally, the portfolio grew 4% quarter over quarter, and we expect to recycle capital into new opportunities throughout the balance of this year, thank you for joining us, and now we’re happy to take your questions.

Operator: [Operator Instructions]. The first question comes from Rick Shane with JP Morgan. Please go ahead.

Q&A Session

Rick Shane: Good morning. Thanks for taking my question today. Look, you know, I think there are two things that are going on here. You’re working through some of the portfolio issues that you’ve identified previously. You’ve raised concerns related to the macro environment. Two things. One, when you think about the macro issues, are you looking at this from a big picture perspective and just saying, hey, risk and uncertainty is increasing, or are there specific properties within the portfolio that you identify is, for whatever reason, being at greater risk. And then the second part of the question is, given the return on capital that you’re it appears that you’re going to generate in ’25. How do you think about the dividend policy as we move through the year.

Matt Salem: Well, good morning, Rick. It’s Matt. Thank you for the question and for joining us. I think I could start off and take both those pieces as it relates to the economic environment, I’d say it. Probably think about both sides of it from a macro perspective, just trying to think through, what are, what is the impact to really jobs, right? How much is it going to slow the economy, and then what’s the flow through into the job market? And, you know, will it be significant? Will there be a significant impact there? And obviously, if so, that could be felt through the broader through the broader economy, and have a little bit bigger impact on the real estate sector. That’s probably not our base case. Certainly here at KKR, we’re not calling for a recession.

We think growth will slow down to go somewhere between zero and 1% from a GP perspective. So we are kind of watching the broader macro and unemployment pretty, pretty carefully. I don’t expect that to have a very big impact on real estate, because values have obviously declined a lot already. And it from a supply perspective, we’re getting through the big supply wave. We all know construction starts are down across every property type, somewhere between 60 and 70% I think that’s why in our opening remarks, we make the comment about real estate’s a little bit different position than other than other asset classes. But if we certainly, if we’re going to enter a recession and we see that unemployment rate go up, you’re going to have impacts, you know, kind of broadly.

But again, we’re pretty well positioned for that, but more concerned about what you’re talking about and how will impact individual properties, the two things that that come to mind are some of the port markets for industrial especially on the West Coast, obviously, if you think about the slowdown in trade from China. So we’re clearly watching that sector more. I don’t think there’s any one asset in our portfolio that we’re like particularly concerned about, but we have heightened just awareness of the potential market impact there. The second is just around decision making. In this kind of uncertain market, I think you could see decision making slowdown, which could impact capex. It could impact leasing decisions, and so some of our assets are still in lease up mode, and you’re looking for larger, larger tenants, and just a little bit concerned that there’s going to be a kind of a pause in that decision making around some of these leasing so those are the, really the two things I would say, we’re focused on.

Rick Shane: Got it, and I really appreciate That answer there. It’s very thoughtful. And I realize it’s, there’s, there’s no easy answer to that. Do you mind circling back on the dividend policy? And I do want to acknowledge having asked the question about buying back stock for probably every quarter, for ages that you guys were in the market this quarter. And I think that’s constructive for shareholders. But can you talk a little bit about dividend policy in light of the roe characteristics right now?

Matt Salem: Yeah, happy to so I think on the dividend, when we initially cut it, we had a number of different scenarios in mind, and a big part of that, clearly, was thinking through the REO and giving us time to just effectuate those business plans. There’s been a lot of change since we initially, you know, set that dividend. But I think when we kind of net, net it all together, we still feel pretty comfortable where, you know where we you know where we set it. Of course, it’s a board decision, and we’ll evaluate it every quarter. But I don’t think we feel a lot of pressure right now to do anything, anything different. And from where we sit, we have all that upside in the REO as well, and we know at some point in time we’re going to sell those assets, repatriate that capital.

And Patrick mentioned in his section that if we did all that, we could reinvest that into new loans and have a drive earnings by 12 cents a share per quarter. So even though our current earnings rate is right around that dividend level, we know there’s like this embedded earnings power within the within the company that will unlock at some point in time. And keep in mind that we calculate those numbers on our existing cost basis, and we think we’re going to do better than that as we implement these business plans. So that’s a little bit how we’re thinking about the dividend. Now you ask about the share buybacks, similar to last quarter, we’re back. I think we need to be balanced. The stock where it trades right now, it’s very attractive. So you saw us buying it back, and we’ve got a long track record of buying back stock when, you know, when we thought it was trading at attractive prices.

It’s very accretive to our book for per share. So I think we’ll have to continue to evaluate that as an option for capital, especially kind of given, given where it is today, but the same time, and similar to like you saw us in the first quarter, we need to, we need to invest in our portfolio as well. We need to make loans. We need, we need to continue to diversify the portfolio. You know, from a vintage perspective, he’s talked, we talked about, you know, potentially adding Europe and CMBS the portfolio. And I think it’s important for the market to see us front footed and active. And we think the market’s pretty attractive from an investing perspective. So I think we need to continue to be kind of balanced as we think about allocation of capital across investing and share repurchases,

Operator: We have our next question from Tom Catherwood with BTIG.

Tom Catherwood: Matt, or Patrick, you both mentioned Europe in your paired remarks, and I know this has been the target market for quite some time. What has to be done to start originating there, and do you expect to be active broadly across Europe, or would it be more targeted to start?

Matt Salem: Yeah, I can take that. It’s, we’re we’ve been actively originating there for a couple years now, and so I’d expect to close deals in the next quarter to, I mean, we’re quoting stuff. It’s just a it’s just a timing it’s just a timing game at this point. But our focus there is really Western, Western Europe and the UK. So I think that’s really where we’re kind of, we’ve been targeting opportunity. So again, the near term, we would expect to add to the portfolio in Europe.

Tom Catherwood: Got appreciate that Matt, and then, obviously, it was an active quarter in in one queue for originations. And you mentioned the pipeline being strong as ever, but with debt now up to 3.9 times. Do you see originations primarily being tied to repayments? And you mentioned, obviously repayment activity tracking ahead of expectations, or how much kind of more do you think you can push that leverage level with originations?

Patrick Mattson: Good morning. Tom, I’ll take that question. It’s Patrick, yes, we were three times, 3.9 times into the quarter. But as I said, we had, you know, pretty sizable repayments early in April. So on a spot basis, we’re actually at 3.7 so we’re at the midpoint, and part of that is trying to get a little bit ahead of some of these repayments, as Matt mentioned, feels like we’re tracking ahead of schedule. Some of the repayments that we got in this quarter were deals that we were really forecasting to get repaid in 2026 and we saw an acceleration of those of those repayments, so we’ll be within the range, and sometimes we’ll get it. We’re going to be toward the high end, as we anticipate some of those repayments. But our target is still, is still the same, but knowing that we’ve got a pretty good pipeline of repayments, we’re going to be focused on, you know, the origination side, and making sure that we’re staying deployed and that we’re maximizing earnings.

Tom Catherwood: Got it and just to follow up Patrick on those repayments, has your expectation or the pace of those been impacted at all by the tariffs, or is it just too early to tell whether there’s any link between kind of market dislocation and repayment activity?

Patrick Mattson: I think it’s a little early to tell

Matt Salem: That said, you know, there are a number of deals that you know, we’re aware of that are in the market, you know, seeking refinancing. As you recall, you know, a lot of these loans when we initially originated them, there was typically some lease up strategy involved. Many of those assets have now effectively, you know, stabilized. And so despite the fact that you’ve seen this volatility in the broader market, in the CRE market, we see a lot of liquidity. And so while spreads may have backed up 1020 basis points, if you think about what those spreads were when we initially had those loans as a lease up, they’re still down, and sponsors still have an opportunity to improve their cost of capital in this environment. So we very much see kind of a functioning market here. And early to tell whether a deal or two gets sort of pushed off because of this. But as of right now, at least in our near term projections, we. We’re not seeing a lot of impact.

Operator: The next question is from Jade Rahmani with KBW.

Jason Sabshon: This is actually Jason Sabshon on for Jade. Thanks for taking my questions today. So first, it would be helpful to discuss, what about the Raleigh multifamily that drove the downgrade? Is it a matter of basis, Lisa, operating cost, location, or all these factors? It would just be helpful to get some more trouble. Thanks.

Matt Salem: I can jump in. I think the downgrade, you know, it’s been on our watch list for a while, and now we’re coming up on a maturity date. So that was really the, I think the reason for the downgrade from the four to the five, and the reason it’s been on the watch list for a while, is because we just haven’t seen the ability to drive rents in this particular stock market. And you know, this is a loan we made sort of at the peak, peak of the market, right? This is a, I think, a late first quarter, early second quarter, 22 loan. So there’s been, obviously big value declines, but in most of our portfolio on the multifamily side, when we’ve given these numbers in the past, we just saw a tremendous amount of rental growth, and in this particular pocket, we just haven’t seen the same, the same amount of that in terms of just being able to drive, excuse me, to be able to drive NOI higher.

So it’s really a function of that. I mean, it’s a good property. It’s performing well. It’s just hasn’t had that same, you know, push in the rental rate, as we’ve seen in most in most other markets, and then we’ve got a near term maturity here, so we’ll have to figure out exactly the go forward from here. And as we mentioned on the call, could be a modification. We could go to title and, you know, kind of run the property ourselves. But we’ll have to, you know, we’ll have to negotiate that with our borrower.

Jason Sabshon: Great. Thank you. And just on life science, you know, over what time period Do you think the capital was patient to wait, patient enough to wait for a pickup and leasing and you know, due to softness in the sector, would you be able to discuss the outlook for the risk series.

Matt Salem: Yeah, and we, you know, this is why we tried to give a little bit more information, both in our prepared remarks and as well, as, you know, added some detail in our in our presentation. You know, most of our, excuse me, most of our exposure is kind of in these newer built, purpose built assets that are really targeting larger tenants, or Big Pharma, which we don’t think is as susceptible as some of the cyclical issues that the sector is facing, certainly a part of it, but, but maybe not as acceptable some of the, you know, the smaller kind of earlier stage, stage companies. So we’d expect that to come back earlier. I think it’s anybody’s guess in terms of just, you know, at what point you really start to see a pickup in in overall life science leasing, and a lot of that, I think, will depend on, you know, what happens with the tariff regime, and what happens, therefore, to the, you know, the overall economic environment that that’ll certainly weigh on, on the overall all sectors as well.

And, yeah, that’s generally speaking how we’re kind of thinking about it, you know, in terms of the three rated loans that you asked. You know, we’ve, we’ve modified a couple of those already, and so kind of, I’ve dealt with our sponsors and getting them to a better spot. And then, as I, as I just mentioned, about half of the three rating loans, we have three assets that were construction loans. And so we still feel pretty good about those. Are built now, and are mostly built, and then, you know, just in the lease up period, but just given that they were new, quality there is very high. And so we think it’s just a matter of time before, you know, it attracts the right tenants. Great. Thank you.

Operator: The next question is from Steve Delaney with Citizens JMP

Steve Delaney: So look, applaud the buyback activity, of course, and it would seem it’s even better today, after the 15% or so decline, you know, after tariffs. But what I’m really intrigued by is, if we’re going to be on a lot of these calls the next two weeks, and I don’t think we’re going to hear a lot of commercial mortgage treats, talking enthusiastically about new lending opportunities, it feels like we’re still in more of a defensive mode. Just in a broad sense, I’m just. Curious, Matt, as you guys look at sort of the menu of new opportunities, I guess first question is, you know what is different in the either the quality or the pricing, the return profile, if you look at today’s opportunity set, versus what you’ve maybe seen on average over the last couple years. I’d love you to compare and contrast that you know, if you would, in terms of the new opportunities on the lending side. Thanks.

Matt Salem: I think you have to start with basis. I think the biggest change right now is just the opportunity to lend at these much lower valuations, and you still have real estate values somewhere around or below replacement cost. And when we’re lending at some discount to that, it just feels like this vintage should be very, very safe from just an overall basis perspective. Of course, that translates into cash flow and debt service coverage and other things. But the first thing I think about this vintage is really basis, and that’ll translate into this vintage, and the safety of it could be quite strong. So that’s probably the first thing. The second thing we’re seeing is there’s less there’s more opportunity in less transitional assets.

And let me explain that. I think I mentioned this on maybe our last earnings call. If you think about what we were doing in 2122 a lot of it was like lending on brand new assets that had just been delivered and when their initial in, their initial lease up period, and a lot of that was multi family, and we’d be lending at a 10% occupancy or 20% occupancy, and providing that bridge To, you know, occupancy stabilization and burning off of concessions. Fast forward to today, and we’re lending on what I call we went from kind of a transitional lender to like an almost stabilized lender. We’re lending on assets that are 90% leased, and maybe there’s a little bit of concession in there, but the vast majority of the cash flows are in place today, and all we’re doing is providing our sponsors a bridge to a better capital markets environment and maybe a little bit lower interest rate environment.

And as we all know, just with values down so much, I think many institutional owners just they don’t want to sell right now. They just, they hold out another year or two or three, they’re going to get into this supply dynamic where they’re back in the market, raising rents pretty substantially, and they can kind of dig themselves out of, you know, a basis and 21 that is just not very favorable today. So that’s, that’s probably part of the big change in terms of the business plan that we’re lending on locally here. And I don’t know how long this will last, there’s a big opportunity in sizable transactions, as we mentioned in the prepared remarks. With the CMDs market having widened much more than the loan market, we’re seeing a lot of sponsors coming to us and, you know, $500 million loan, a billion dollar loan, which should have been SASB, or should be SASB issuance, coming to us and saying, Can, can you guys, you know, help with this?

Because we don’t want to, you know, we don’t know what’s going to happen tomorrow, and the market’s volatile, and in the CMBS market, so that’s kind of a local opportunity that we’re focused on right now, but I don’t again. I think that that market will heal and be more effective as we kind of progress through the year. And then lastly, I would just comment that one of the big changes in my mind from like pre rate hike inflation pressures to today will be how the banks participate in the market. They’ve always been kind of loan on loan providers, but it is much more pronounced now in terms of just their willingness and their focus on putting some of their capital into these loan on loan facilities, just given how much more capital efficient is for them, how much safer it is for them to lend to other lenders than it is to make a direct mortgage loan, and I don’t want to make it sound like they’re not going to continue to lend on properties, but we are seeing that allocation shift more towards loan on loan facilities, So I think that’ll be another on the financing side.

I think that’ll be another we are seeing that as a kind of a meaningful shift from what we saw before.

Steve Delaney: That’s really helpful. Color and Are you, are you seeing? You know, obviously you have development type borrowers who are out there getting. Projects, developing new projects, and you make them, you know, initial there’s either construction loans and maybe then you flip it into a bridge. But are you seeing new equity coming in from institutional buyers, where they’re seeing projects, where they, you know, are the potential values much greater than where the rents are today and where the basis is. So I’m just curious how much of your new financing is going in side by side with new equity into a project, rather than you just refinancing the original developer.

Matt Salem: Yes, our pipeline, and our activity is still heavily weighted towards refinance. It gets right now it’s around, if you look at our pipeline, it’s around 70% refinance, like 30-ish percent acquisitions, and it’ll slow down a little bit, just given the market volatility here, you know, since the since the tariff increases, but historically, that may have been 50% acquisitions and 40% refinance. So it’s a little bit turned, you know, upside down there, as it relates, like the construction side. And I know you didn’t ask this question directly, but it’s probably somewhat relevant here. There’s debt capital available. You can go get a construction loan, but we were making one, you know, right now, and in the fourth quarter, we did a big data center loan like you can get it, you can you can definitely access the financing markets for construction.

And the challenge is the equity, I just don’t think it pencils out very well right now. And now you’ve got a scenario where costs are increasing with tariffs that’s going to be even more, you know, difficult. So anything when you talk about, like the 60, 70% decline, and in some of this construction, maybe early on, it was driven by debt and lack of availability, but now it’s just the equity math, you know, doesn’t work from a yield on cost perspective.

Steve Delaney: Got it. Okay. And just the final thing for me, you know, obviously the tariff kind of discussions kind of through a wrinkle, wrinkle into stock market broadly, and certainly that hurt mortgage treats, you know, in the last in the month of April, for sure. You know, given that the stock at last night’s closed 928, down about 15% you know, as a result, I think largely of tariffs. I mean, should we assume that if the buyback was attractive in first quarter, it’s even more attractive to you and your board as you sit, you know, looking at as a stock with, you know, with this, with a non-handle or so,

Matt Salem: Yeah, I mean, similar to the question asked earlier, I don’t think our view has, has really changed that much. The stocks come down a little bit, so it’s, it’s certainly more attractive from a from a buyback perspective, but we need to be balanced. And as we approach the market, we need to invest capital. We need diversify the portfolio. But we certainly feel like we have ample liquidity right now, and so we’ll take a balanced approach to that balance, excuse me, balanced approach to allocating that capital across the buybacks and the no originations got

Operator: [Operator Instructions]. Our next question comes from Don Fandetti with Wells Fargo.

Don Fandetti: Yeah, with repayments coming in a little bit higher, how are you feeling about net portfolio growth? I know you’re sort of more on offense. Now, do you think that you’re in a situation where every quarter through ’25 you’re seeing a little bit of portfolio growth?

Patrick Mattson: Don, it’s Patrick. I can take that. I think that, you know, as we think about the rest of the year, there’s probably some incremental growth that that we can have, but we’re getting pretty close to, I think, what’s our target size, when you factor in our leverage targets the capital that that we have here. I think just what you’ll see, though, is us looking to, as we’ve said, kind of match those repayments. So if those repayments start to kick up even more, you know, we’ll accelerate on the origination front. But I don’t think there’s a lot of a lot more incremental sizes. We’re kind of approaching our, you know, upper limit of our target leverage.

Don Fandetti: Got it and then on some of the originations the multi-family this quarter look like the spreads were in this 230 basis range. Are those sort of, you know, what are the leverage returns on those loans? And are those examples of that? That more stabilized type lending you’re seeing,

Matt Salem: Yeah, it’s Matt. I can jump in. I think our weighted average spread is a little bit more than that. Like 277 the market got as tight as that, probably that number you’re mentioning, like 232 40 area again, on those mostly stabilized leased multifamily assets and those at that level, the back, our back leverage had declined. Spreads have declined there as well. You know, pre tariffs, but we were on the tightest in probably like 11 to 12% type of IRS there on a gross basis, most of the stuff we’re doing is kind of north of there, but you’re always, is always a range right as you kind of portfolio construct and to deal with different risk profiles in the market, but I’d say most of what we’re getting right now is centered around that 12 to kind of 13% IRR, when you start to think about embedding the fees and things like that,

Don Fandetti: Got it. And then I just wanted to go back on life science a bit, you know, appreciate the disclosure. I guess is this a situation where you could see, like a significant amount of these loans migrate from three to four. And how do you think about values on these assets? They’re probably a little more unique than a multi-family or industrial I mean, do you expect is it harder to kind of triangulate value on these types of assets?

Matt Salem: Yeah. I mean, just given the lease profile, isn’t as granular, right on the multifamily side, you know, certainly there’s, there’s more of a timing element to, you know, thinking about thinking about value. And you know, it’s not our expectation right now that these would migrate from three to a four, because either one is already been kind of modified and kind of adjusted, or, like I said, like the just the quality of the assets are there. The most part our sponsorship is, is very strong. And if you look at these locations, you know, we’re, we’re kind of like Maine and Maine in terms of where do you want to be in some of these markets, and we’re in Cambridge, we’re in seaport and South San Francisco. So, you know, it’s not, certainly not our expectation right now that we, we go from a three to four or put this on the watch list, but you know, they still need to get leased up.

So there’s, there’s risk there, and there’s, you know, some a level of uncertainty, especially when you kind of sprinkle in this type of economic environment that we’re in.

Operator: Thank you. This concludes our question and answer session, I would like to turn the conference back over to Jack Switala for closing remarks.

Jack Switala : Great thanks, operator, and thanks everyone for joining today. Please reach out to me or the team here if you have any questions. Take care.

Operator: The conference has now concluded. Thank you for attending today’s presentation you may now disconnect you.