Reit Magazine - March/April 2021 - 69

undergoing a capital expenditure improvement plan. "
Therefore, even though the
buildings may not be fully
leased, they are benefiting from
recent renovation activity. The
geography and property type
mix, as well as the duration of
their loans, all stand to benefit
KREF, Rahmani says.

PURPOSE-BUILT
PORTFOLIO
KREF's portfolio has performed
well through the pandemic
as it continues to focus on
the institutional sector of the
lending market, and continuously re-evaluates the
real estate landscape and the
impacts of COVID-19 both to
protect its capital and to find
opportunities.
" Historically, we have been
very conservative from a property-type perspective with over
half our portfolio secured by
multifamily properties, " Salem
says. " While I expect multifamily
to continue to be our largest
exposure, I'm hopeful we will see
opportunities to lend on more
cyclical property types-such as
hotels-at a reset basis as the year
progresses. "
An advantage of KREF's current investment portfolio is that
it was purpose-built for the latter
stages of an economic cycle.
" As of the fourth quarter, our
$5 billion portfolio, which is
comprised almost exclusively
of senior loans, focused on
institutional real estate and
sponsorship and is secured predominantly by class-A lighter
transitional, multifamily, and
office properties located in liquid real estate markets, " Salem
says. " Our average loan size is
$118 million and nearly 90% of

our loans are located in the top
20 markets in the U.S. "
When evaluating a new loan,
sponsorship is a key focus for
the mREIT, with Salem explaining that it looks to ensure it is
lending to the highest quality
owners and operators that have
the experience and financial
wherewithal to implement their
business plan regardless of the
economic cycle.
As of the fourth quarter,
KREF's investment portfolio
was 98.5% first mortgage senior
loans with no direct holdings of
securities, Salem says. " Our two
largest property type exposures
are multifamily and office,
which together account for 81%
of the portfolio. Importantly we
have very little exposure to more
volatile property types like hotel
and retail, which combined represent only 9% of the portfolio. "

WE MATCH OUR LOAN PORTFOLIO WITH ONE OF
THE MOST CONSERVATIVE AND DIVERSE SET OF
LIABILITIES, WHICH AGAIN HAS ALLOWED US TO
DIFFERENTIATE OURSELVES DURING THIS
VOLATILE MARKET.
- Matt Salem, CEO of KREF

OPPORTUNITIES
AHEAD
Looking ahead, KREF is working on a couple of industrial
construction and life science
financings, which will increase
its exposure to asset types with
strong secular tailwinds.
" In many cases, KREF's
sponsors use our financing to
build, upgrade, reposition, and
lease properties to meet today's
demands, " Salem says. " I expect
there will be demand for capital
which can facilitate the creation
of new space either through
repositioning or construction
into sought after sectors such as
industrial or life sciences. "
In addition, COVID-19 has
negatively impacted many properties, Salem adds, " so sponsors
need more time to implement
their business plan and we can
provide that bridge. "

Senior loan, multifamily property in Arlington, Virginia.

Salem says KREF is continuing to build momentum
with its " solutions-oriented
approach, " which has led to
increasing business with repeat
borrowers. " Through our team's
relationships and KKR's culture
of 'like and trust,' we have built

a franchise with the highest
quality institutional owners and
operators. "
" KREF remains well
positioned for the year ahead
supported by a conservative
portfolio and robust pipeline, "
he says.
Nareit: Real estate working for you |

69



Reit Magazine - March/April 2021

Table of Contents for the Digital Edition of Reit Magazine - March/April 2021

Contents
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Reit Magazine - March/April 2021 - Contents
Reit Magazine - March/April 2021 - 1
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