[Management View]
KKR Real Estate emphasized active management of its REO portfolio, aiming to realize embedded earnings as assets are liquidated or repositioned. The company confirmed $400 million in scheduled loan originations for Q4 2025 and highlighted its first real estate credit loan in Europe, marking a significant step in its European expansion.

[Outlook]
The company expects over $1.5 billion in repayments in 2026 and plans to match these with new originations. Management is focused on sustaining dividends despite near-term distributable losses and sees significant opportunities in the commercial real estate lending market.

[Financial Performance]
For Q3 2025, KKR Real Estate reported a GAAP net income of $8 million or $0.12 per share. The book value per share decreased by 0.4% quarter over quarter to $13.78. Distributable earnings were negative $0.03 per share, or $0.18 per share excluding losses, compared to a dividend of $0.25 per share.

[Q&A Highlights]
Question 1: Is the lower leverage and higher liquidity a defensive positioning or a timing issue?
Answer: It's primarily a timing issue related to the timing of repayments and originations. A large repayment occurred, and European originations take longer to close. The strategy remains unchanged, and the company expects to continue investing in line with repayments.

Question 2: Could the lag in capital redeployment affect earnings?
Answer: The company does not expect a prolonged lag. While there is natural ebb and flow, they aim to match repayments with originations without significant delays.

Question 3: Are you seeing a rebound in demand from life science tenants?
Answer: There are early signs of recovery, particularly from larger pharma companies. The company remains positive on the sector's long-term prospects.

Question 4: What drove the downgrade of the Cambridge Life Science loan?
Answer: The downgrade was due to ongoing modification negotiations with the sponsor. Other life science loans are proceeding normally.

Question 5: Have you considered selling underperforming assets to reinvest in current opportunities?
Answer: The company evaluates this regularly, focusing on maximizing value from quality assets. They believe patience will yield better outcomes, especially in recovering markets like Silicon Valley.

Question 6: How should we view the $1 billion in repayments and reinvestment?
Answer: The goal is to match repayments with originations, minimizing timing mismatches. The company has ample liquidity to support this strategy.

Question 7: How long will it take to double ROE to support the dividend?
Answer: The company expects to recover about half of the REO value in the near term (12-18 months) and the rest over a medium to long-term horizon.

Question 8: Can you contrast EU loans with U.S. loans?
Answer: EU loans are similar in quality but tend to be larger and more portfolio-based. The market is heavily banked, offering different opportunities compared to the U.S.

Question 9: Is there interest in CMBS conduit business or M&A for scale?
Answer: While the company has the expertise, there are no current plans for a CMBS originations business. They are open to M&A opportunities that align with strategic goals.

[Sentiment Analysis]
The tone of the management was optimistic about future opportunities, particularly in Europe and the life sciences sector. Analysts were focused on understanding the timing of capital redeployment and the company's strategic positioning.

[Quarterly Comparison]
| Metric | Q3 2025 | Q2 2025 |
|-------------------------------|---------|---------|
| GAAP Net Income | $8M | N/A |
| Book Value per Share | $13.78 | N/A |
| Distributable Earnings | -$0.03 | N/A |
| Dividend per Share | $0.25 | N/A |
| Total Portfolio | $5.9B | N/A |

[Risks and Concerns]
The downgrade of the Cambridge Life Science loan to a higher risk rating and the associated increase in CECL provisions are notable concerns. The company is also navigating the timing challenges of capital redeployment.

[Final Takeaway]
KKR Real Estate is strategically managing its portfolio to unlock embedded earnings and expand its European presence. While facing near-term challenges in capital redeployment and asset stabilization, the company remains focused on long-term growth and maintaining its dividend. The management's proactive approach in managing risks and leveraging global opportunities positions KKR Real Estate for future success.