KKR Real Estate Finance posts $8 million net income, forecasts over $400 million in Q4 originations amid positive market sentiment.

OPERATOR - (00:00:00)

Good day and welcome to the KKR Real Estate Finance Trust Inc. Third Quarter 2025 Financial Results Conference call. All participants will be in a listen only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation there will be an opportunity to ask questions. To ask a question, you may press star then one on the touchtone phone. To withdraw your question, please press Star then two. Please note that this event is being recorded. I would now like to hand the conference over to Mr. Jack Swatala. Please go ahead.

UNKNOWN - (00:03:02)

Great.

Jack Swetala - (00:03:02)

Thanks operator and welcome to the KKR Real Estate Finance Trust earnings call for the third quarter of 2025. As the operator mentioned, this is Jack Swatala. 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 10Q for cautionary factors related to these statements. Before I turn the call over to Matt, I will go through our Results. For the third quarter of 2025 we reported GAAP net income of $8 million or $0.12 per share. Book value as of September 30, 2025 is $13.78 per share. We reported a distributable loss of $2 million due primarily to taking ownership of our rally multifamily property and prior to net realized losses, distributable earnings were $12 million or $0.18 per share. We paid a $0.25 cash dividend with respect to the third quarter. With that I'd now like to turn the call over to Matt.

Matt Salem - Chief Executive Officer - (00:04:36)

Thank you Jack and thank you everyone for joining us today. I'll begin with a brief update on the commercial real estate lending market. The number of real estate opportunities remains robust as we enter the 1.5 trillion wall of maturities over the next 18 months. The debt markets are liquid with banks returning to the market while increasing their back leverage. Lending Despite a tightening of whole loan spreads since the beginning of the year. With lower liability costs we are still able to generate strong returns and we believe that real estate credit offers attractive relative value. As lenders we think about safety first and the ability to lend on reset values well below replacement cost. Combined with decreasing new supply creates a unique credit environment with strong downside protection. Overall, sentiment for real estate is turning positive as investors recognize the lagging values and strengthening fundamentals. We've been actively lending into this opportunity. In the fourth quarter we expect over 400 million in originations and have already closed 110 million across the United States and Europe. In October, we closed our first real estate credit loan in Europe for kref, secured by 92.5% occupied portfolio of 12 light industrial assets across Paris and Lyon, France. This transaction highlights the breadth of our platform and our ability to draw on KKR's global resources. Although this is KRAF's first European loan, over the last couple of years we have been strategically building our European real estate credit platform, establishing a dedicated team and originating over $2.5 billion to date. Through our European real estate equity business. We have strong connectivity across markets giving us unique insight and access to opportunities that align with our disciplined approach. Within our broader real estate credit platform, we have been actively investing across the risk reward spectrum. Our platform lends on behalf of bank, insurance and transitional capital, targeting institutional sponsors and high quality real estate. Our Commercial Mortgage-Backed Securities team is one of the larger investors in investment grade and B pieces across our global team. We we will invest approximately $10 billion in 2025. To support our investing activity, we built a dedicated asset management platform called K-Star which now has over 70 professionals across loan asset management, underwriting, special servicing and REO. K-Star manages a portfolio of over $37 billion in loans and and is named special servicer on 45 billion of Commercial Mortgage-Backed Securities. Moving next to our third quarter results, we reported distributable earnings of negative $0.03 per share or distributed earnings excluding losses of $0.18 per share compared to our $0.25 per share dividend. We set our dividend to a level in which we believe we can cover distributable earnings prior to realized losses. Over the long term, we continue to see upside in our REO portfolio where we are making progress and as we stabilize and sell those assets we can repatriate that capital and reinvest into higher earning assets. Therefore, there's embedded Earnings power of $0.13 per share per quarter that we will be able to unlock over time. Looking at risk rating, we downgraded Cambridge Life Science loan From risk rated 3 to 4 with increased CECL provisions due to the downgrade. Book value per share remained mostly unchanged at $13.78, a decrease of 0.4% quarter over quarter. We are proactively managing our current portfolio of 5.9 billion, we received repayments of $480 million this quarter year. To date we have received 1.1 billion in repayments and have originated 719 million with 400 million of originations circled in the fourth quarter. Underlying activity level remains strong and we continue to see robust market activity. In 2026, we expect greater than 1.5 billion of repayments and expect to continue to match repayments with originations. With that, I'll turn it over to Patrick.

Patrick Mattson - President and Chief Operating Officer - (00:09:27)

Thanks Matt Good morning everyone. Thanks to strong investor demand and close coordination with the KKR Capital Markets team, we successfully upsized our term loan B by $100 million to $650 million, which now has approximately six and a half years remaining until its 2032 maturity. The loan repriced 75 basis points tighter, reducing the coupon to SOFR plus 250 basis points and locked in more efficient funding during the quarter. We also upsized our corporate revolver to 700 million, up from 610 million at the beginning of the year. With continued momentum for repayments and the term loan B upsized, we ended the quarter with near record liquidity levels of $933 million, including over $200 million of cash plus our $700 million undrawn corporate revolver. Our overall financing availability sits at $7.7 billion including $3.1 billion of undrawn capacity. Importantly, 77% of our financing is non mark to market and KREF has no final facility maturities until 2027 and the corporate debt due until 2030. In the quarter we continued our share repurchases totaling 4 million, representing a weighted average price of $9.41. Year to date we have repurchased $34,000,000 for a weighted average price of$9.70 and since inception we have repurchased over $140,000,000 of common stock. We remain committed to deploying capital through buybacks as well as new investments. Overall, our liquidity position gives us meaningful flexibility to manage the portfolio, stay on offense and take advantage of new opportunities. We're encouraged by the market backdrop and momentum we're seeing. Turning to our watch list, our current portfolio has a weighted average risk rating of 3.1 on a 5 point scale. Our total CECL reserve at quarter end is 160 million, representing around 3% of the loan portfolio. Over 85% of loan portfolio is risk rated 3 or better and as of the third quarter our debt-to-equity ratio is 1.8 times and total leverage ratio is 3.6 times consistent with our target range. Now turning to our REO portfolio, we took title to the Raleigh Multifamily Loan, which is already appropriately reserved for and therefore no additional impact on book value. Our business plan is to invest additional capital into the property to enhance the amenity base, improve operations and reposition the asset for sale. On our Mountain View, California office, the market continues to heal with leasing demand picking up and as mentioned last call, we're actively responding to tenant requests for proposals given. Our asset offers the tenants the ability to have a full campus setting and control their amenities and security perimeter. We believe positioning for a single user is the optimal strategy. On our West Hollywood asset, we launched condo sales. We launched a condo sale process last week and are focused on executing our sales strategy. Finally, on our Portland, Oregon redevelopment, our entitlement process is progressing with final entitlements expected in the first half of 2026, giving us the ability to unlock value and return capital through parcel sales. In summary, we we see significant opportunity ahead. Origination pipeline continues to build. We remain focused on optimizing our REO portfolio, working through the watch list and redeploying capital efficiently as we position the business for its next phase of growth. Thank you for joining us today. Now we're happy to take your questions.

OPERATOR - (00:14:16)

Thank you. We will now begin the question and answer session. To ask a question, you may press star then 1. On your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster and your first question today will come from Tom Catherwood with btig. Please go ahead.

Tom Catherwood - Equity Analyst - (00:14:55)

Thank you and good morning, everybody. Maybe Matt or Patrick, help us clarify something here. So there's kind of two ways to view the lower leverage and higher liquidity that you had going into the end of the third quarter. One is a defensive positioning to kind of bolster the company against headwinds, or the second one is really a timing issue where if a couple of originations had closed a week or so earlier, it might look very different from the level of the distance between repayments and originations and it might be a very different story, which is the case here. Is this just timing or could we see further deleveraging and further liquidity building as we get through the rest of this year?

Jack Swetala - (00:15:53)

Hey Tom, it's Jack. Give us just a minute here. We're just Having some technical difficulties. We'll be right back to you. Okay, so just give us about two minutes here. We're redialing in and folks should join shortly. Thank you.

OPERATOR - (00:16:56)

IT Pardon me, ladies and gentlemen. Please stand by as we reconnect. Thank you for your patience. IT Pardon me. This is the conference operator. I've reconnected the speaker lines. Please proceed.

UNKNOWN - (00:19:59)

Okay, thank you.

Matt Salem - Chief Executive Officer - (00:20:00)

Tom, can you hear me now? It's Matt.

Tom Catherwood - Equity Analyst - (00:20:02)

Yes, I can.

Matt Salem - Chief Executive Officer - (00:20:04)

Okay, thanks. Sorry about that, everyone. We are down in our Dallas office and had a new system here and just had some technical difficulties. But I think we're working now, so we'll jump back in and appreciate everyone joining. Tom, thank you for the question. You know, it's really the latter, I'd say. It's just a timing issue and it's really related to two things, I'd say. The first one, just when you think about repayments, one of our repayments this quarter just happened to be a larger repayment. It was actually the largest loan in our portfolio repaid. It was multifamily property just outside of Washington, D.C. that got taken out by the agencies on a refinance. And so that is a relatively large single repayment. And then secondly, when you think about our originations this quarter, I think we mentioned this in the prepared remarks, a bunch of our originations just happened to be in Europe, and those take a little bit longer to close. Just the closing timelines are somewhat elongated in Europe versus the US and so that's why you see the bigger pipeline, I think, in the fourth quarter and a little bit of the slower originations and closings, I'd say, in the third quarter. So just timing, we haven't really changed our strategy at all and certainly expect to continue to invest and originate in line with our repayments. And right now we're at the lower end of our leverage ratio. So we've got the ability to kind of take that up and grow the portfolio back to where we were before.

UNKNOWN - (00:21:38)

That's perfect.

Tom Catherwood - Equity Analyst - (00:21:39)

And maybe just following up on that and thinking of the cadence of earnings and you talk about the lag between receiving repayments and putting that capital back to work. And also you mentioned, I think it was greater than, you know, 1.5 billion of repayments that you're, that you're expecting in 2026. Could that lag take us lower from an earnings front for a longer period of time just while you put that capital back to work? Or are there some other levers you can pull to boost distributable Earnings as you're repatriating and redeploying capital?

Matt Salem - Chief Executive Officer - (00:22:15)

No, I wouldn't look at it like we're always behind. I think some quarter like this quarter, obviously we got a little behind and again, just kind of do the timing of those closing dates. But I think other quarters will be ahead. You know, you can see us getting ahead of it a little bit. So it, you can't time the repayments right and you can't necessarily time the closing dates of your origination. So there's just a little bit of ebb and flow that happens naturally in the business.

UNKNOWN - (00:22:42)

So.

Matt Salem - Chief Executive Officer - (00:22:42)

But I wouldn't necessarily like model anything like we're always waiting for a repayment to come in before we originate, so we're 45 days behind. I think there's, there's just a little bit of give-and-take in the overall investing profile.

UNKNOWN - (00:22:55)

Understood.

Tom Catherwood - Equity Analyst - (00:22:57)

And then last one for me, we've had a number of lab space owners this past quarter that have noted an early stage rebound in demand from smaller Life Science tenants looking for space following an upturn in VC funding over the past 12 months. In terms of the four assets in your life science loan portfolio that remain 3 rated, how are they proceeding on their business plans and are you starting to see that at least early stage recovery in tenant demand?

Matt Salem - Chief Executive Officer - (00:23:33)

I think we're starting to see green shoots. Shoots from the sponsors and some of the commentary about leasing. And you know, I'd say we've got honestly a little bit of a mix. Most of our assets that we've lent.

UNKNOWN - (00:23:50)

On are more.

Matt Salem - Chief Executive Officer - (00:23:54)

You know, the tenants are going to be larger pharma companies and not necessarily, you know, some of the smaller, you know, VC funded ventures. But we are starting to see a little bit pick up in that sector. And again, we're long term, we're pretty positive on that sector. Certainly understand it can be cyclical both from a capital perspective and certainly some of the things you see going on at the NIH and things like that. But I'd say over the medium to long term, I'd say we're still pretty positive on the overall sector.

UNKNOWN - (00:24:33)

Got it. Appreciate all the answers. Thanks, everyone. Thank you.

OPERATOR - (00:24:38)

And your next question today will come from Jade Rahmani with kbw. Please go ahead.

Jade Rahmani - Equity Analyst - (00:24:44)

Thank you very much. Wanted to follow up on Tom's question. Can you give an update as to the state of dialogue with the sponsors across the Life Science deals and then on Cambridge, if you could touch on what drove the downgrade?

Matt Salem - Chief Executive Officer - (00:25:04)

Yeah, I'd say.

UNKNOWN - (00:25:07)

Really the. Let's go.

Matt Salem - Chief Executive Officer - (00:25:09)

Starting with the last question, what drove. The downgrade was we've entered negotiations and modification negotiations with that, you know, with that sponsor. And so, you know, it was really as it related to those discussions and.

UNKNOWN - (00:25:23)

Then, you know, I think on the.

Matt Salem - Chief Executive Officer - (00:25:26)

Other, you know, the three rated loans, Jade, there's no other really discussions happening, you know, outside. Just a normal, you know, just a normal course we're getting leasing updates and you know, any, you know, any property level financial updates, but you know, really no other kind of detailed conversations happening at this point in time.

Jade Rahmani - Equity Analyst - (00:25:49)

Thank you. And then broadly speaking, have you done an NPV analysis comparing the cost and benefit of waiting on these deals as well as any other underperforming deals versus selling down the exposure, taking that capital and reinvesting in the current uptick in deal flow that we're seeing, which that would drive stronger distributable earnings and eventually dividend growth more near term than perhaps the market expects. You know, how do you view the trade offs versus waiting since I think that the life science recovery is quite nascent at this point. So for at least that sector, it's probably going to be a while before, you know, these buildings get to stabilized occupancy.

Matt Salem - Chief Executive Officer - (00:26:42)

Yeah, it's a great question and it's something that I'd say we look at every quarter, something that we certainly discuss with the board in terms of portfolio positioning and specifically, Jade, as it relates obviously to the reo, which is directly impacting our earnings. And as we liquidate that, obviously we can redeploy that capital and increase our earnings, which we talked about on the last few calls. And so it's something we're consistently looking at, you know, when you look at where we've decided to hold things, and I'm talking more about the REO, because that's really the biggest impact right now. It's really around quality and we feel like we've got quality real estate and our job as fiduciaries is to maximize the outcome there. And if we've got a great asset, we think it's going to lease over time and you know, we'll be able to optimize the value. But we definitely look at NPVs and we look at, you know, what's that IRR and is it better to sell today versus you know, and redeploy capital now versus holding out. But so far I'd say we're pretty. I think we've been right to kind of be patient. And certainly when you think about things like our office in Silicon Valley, you know, that Market's come back significantly and we're seeing real leasing demand in that market. So to be patient, wait, quality asset, let's get a tenant and then we can, you know, we can evaluate liquidity options. I think that strategy has, will work out over time. But we have to continuously, you know, evaluate this because, you know, I know that, you know, we can't, we don't have forever that, you know, we need to execute and we need to repatriate.

UNKNOWN - (00:28:42)

Some of this capital. Thanks very much. Thank you, Jade.

OPERATOR - (00:28:50)

And your next question today will come from Rick Shane with JPMorgan. Please go ahead.

Rick Shane - Equity Analyst - (00:28:55)

Hey guys, thanks for taking my question. Looking back last quarter there was commentary about a billion dollars repayments in the second half. It seems like you're on track with that. And I think the implication, at least the way we interpreted it, was that that capital would be redeployed and suggested sort of again, not we didn't fully assume this, but targeting towards that billion dollars in reinvestment. Should the way we think about this be there's a one quarter lag. You get the repayment in quarter one, you're able to redeploy it in quarter two, you get repayments in quarter two that are redeployed in quarter three. Should we see this as sort of the billion dollars of in the second half of this year manifesting into Q4 and Q1 originations close to a billion dollars?

Patrick Mattson - President and Chief Operating Officer - (00:29:53)

Hey, Rick, it's Patrick. Good morning. Yeah, thanks for that question. I think as Matt was sort of. Referencing a little bit earlier, I think the goal is to sort of match up the repayments, minimize some of the timing that happens between repayment and origination. That always, when we snap the line at quarter end, that always won't sort of match up. But we think over time there's going to be some quarters where we get.

UNKNOWN - (00:30:21)

A little bit ahead of that.

Patrick Mattson - President and Chief Operating Officer - (00:30:23)

And if you think about our liquidity position today,, we certainly have ample capital to be able to do that.

UNKNOWN - (00:30:30)

And so there are going to be.

Patrick Mattson - President and Chief Operating Officer - (00:30:31)

Some quarters where we're ahead of it. Maybe there's some quarters that were behind it. But on balance we should think about as we're getting those repayments, they're going to be matched. And our goal effectively is to minimize some of that drag because ultimately we want to optimize what we can return to shareholders in terms of earnings.

Rick Shane - Equity Analyst - (00:30:53)

Got it? Yeah. I mean, I think the thing that confuses me about it is I understand that the difference between a deal closing on September 30th and October 1st from your perspective, it's a day. From an accounting perspective, it's very different. You talked about 400 million of originations this quarter. I think what surprises me is given the lag in 3Q originations, again, not a big deal, but that, that Q4 pipeline doesn't look bigger given that sort of timing issue. I think that's what's confusing people a little bit here today.

Patrick Mattson - President and Chief Operating Officer - (00:31:37)

Understood, thanks. Yeah, I think, look, as we think about the fourth quarter, obviously a lot of that will be front ended in the quarter in terms of the originations. The year is not out. The pipelines are still very active. I think we've been focused on being disciplined around deployment, focused on diversity. So when you look at these asset sizes, they'll reflect that. Obviously Matt mentioned some of the activity that we have in Europe, but as I said, our goal is to continue to deploy capital. I suspect that if things continue to proceed as they are going into year end and into first quarter, we continue to see build for that origination pipeline. And we know what, we have a good idea of what we expect to come forth in the next two quarters. And I think we're preparing to match that up and to close some of that gap.

Rick Shane - Equity Analyst - (00:32:44)

Got it. Okay, thank you. And then the other question is this, and Jade's touched on this in. But if we look at the current roe, it's about half of what you need to support the dividend as it exists today. Obviously moving resolving challenged properties and challenged loans is the key to that. Realistically, how long do you think it takes for you to be able to do double that roe, to put yourself in a position where. And again, there are all these different earnings metrics. But at the end of the day, this really is an NII issue. How long do you think it really takes to get there?

Matt Salem - Chief Executive Officer - (00:33:33)

Yeah, I can jump in there, Rick. It's a good question and certainly something we think about a lot. In my mind, we kind of bucket the REO into in three timelines. One is like near term, 12 to 18 months, medium term, maybe that's 24 or so months, 24 to 36 months in the longer term. And I'd say about half of that we think we can get back in the near term. And that's concentrated on things like our Portland, Oregon asset, which we should be fully entitled to. Then the market with, you know, next year on a individual parcel basis. The West Hollywood condo which Patrick mentioned, we're in the market now live selling, you know, selling or offering, you know, units there. The Raleigh, North Carolina multifamily deal, which is, you know, largely stabilized, and, you know, we're doing a little bit of value add there, but can execute on that in a short amount of time. And then the Philadelphia office, which there's kind of one or two leases outstanding that we're working on, and then effectively sell that as well.

UNKNOWN - (00:34:42)

So if you group those together, that's.

Matt Salem - Chief Executive Officer - (00:34:44)

Really the short term. And again, it's about half of that number, so we can get that back more quickly. I'd say in that medium term bucket is the Mountain View asset. As I mentioned to Jade, we're making good progress. The market is really coming back there and we're kind of actively engaged there with, you know, with tenants. So I put that more in the. In the medium term, although, you know, we could have, you know, something happen there shorter than that, but then there'd be a business plan to execute, you know, if we were able to sign a lease there in terms of just tenant tenant improvements and capex, et cetera. And then lastly, you know, I kind.

UNKNOWN - (00:35:24)

Of put the.

Matt Salem - Chief Executive Officer - (00:35:27)

Seattle, Washington Life Science, and just given where Life Science is, we'll see that market could come back quickly. But just given where we're seeing there, we did execute a pretty important lease on that asset. So we're pretty happy about that. But it could take longer to fully stabilize that asset.

Rick Shane - Equity Analyst - (00:35:44)

Hey, Matt, Patrick, really always appreciate your willingness to try to dimensionalize the answers to these tough questions, and I appreciate.

UNKNOWN - (00:35:52)

It a great deal.

Rick Shane - Equity Analyst - (00:35:53)

Thank you, guys.

UNKNOWN - (00:35:54)

Sure. Thank you.

OPERATOR - (00:35:57)

And your next question today will come from Chris Muller with Citizens. Please go ahead.

Chris Muller - Equity Analyst - (00:36:02)

Hey, guys, thanks for taking the questions.

UNKNOWN - (00:36:05)

So it's nice to see you guys.

Chris Muller - Equity Analyst - (00:36:06)

Branching out into Europe. Can you contrast some of the EU loans versus US loans? I guess what I'm looking for is are terms similar, return similar? Any color here would be very helpful.

Matt Salem - Chief Executive Officer - (00:36:18)

Sure, yeah. Thank you for the question. Let's start with kind of how they're. Similar, and then we can think about how they're different. I'd say from a quality of real estate perspective, from a sponsorship perspective, it's the same program we're running, you know, in the United States. This is institutional quality real estate and sponsor and sponsorship. And in fact, a lot of the clients we lend to in Europe are the exact same clients we're lending to in the US and so it's nice to have that, you know, global connect connectivity there. I'd say the opportunity set there is. A little bit different than what we're seeing in the U.S. the loan sizes tend to be a little Bit bigger. There tend to be more portfolios where we're. And then also I would say multi jurisdictional is an opportunity as well. It's a heavily banked market. So contrast. Think about Europe as like 80% of that market is, is banks, whereas in the US it's around 40% and the back leverage there structurally I think is a little bit more advanced in our favor than what we're seeing in the US From a whole loan perspective spread wise. Now you're talking about different base rates obviously between the UK and eu. But I'd say overall spreads on whole loan and, and then the ability to back leverage and generate roe are largely in line with the US.

UNKNOWN - (00:37:54)

From a.

Matt Salem - Chief Executive Officer - (00:37:54)

Relative value perspective, I think it's pretty balanced right now. Although we've been living there for a few years now, it has not always been like that. I'd say two years ago we probably saw a lot more opportunities and relative value in Europe versus the US but now as the US activity has picked up materially, it's probably a little bit, a little bit more balanced. But ultimately I think the ROEs are really about the same between the US and Europe right now. And that's on a US on a hedge US dollar basis.

Chris Muller - Equity Analyst - (00:38:31)

Got it. It's all very helpful and I guess on the Long island multifamily loan you guys originated this quarter, is this ground up construction and then are you guys looking at heavier transitional projects now or was this more of a one off type loan?

Matt Salem - Chief Executive Officer - (00:38:46)

It is ground up, yes, it's ground up construction to a repeat sponsor who we've went to a couple times now on construction projects. So we know them well and we think they do a great job and build a really high end product. So it's great to be able to sign that one up with a repeat sponsor there. I don't think we've really changed the DNA of what we want to do. We've always had a small percentage of construction in the portfolio and we'll continue to do that. We think there's some relative value in that sector.

UNKNOWN - (00:39:26)

The bulk of the opportunity of what.

Matt Salem - Chief Executive Officer - (00:39:27)

We'Re seeing right now is what I still refer to as almost stabilized versus transitional lending. I still think that there's stretch the market is really the opportunity around. The market is really around stretch seniors where it's like a 70% LTV, mostly leased assets. And so that's where we've been participating. We think that's where there's the most relative value.

UNKNOWN - (00:39:53)

We'll look at projects that have, you.

Matt Salem - Chief Executive Officer - (00:39:56)

Know, that have a Larger business plan, but just from a relative value perspective, again, like it seems like, you know, the kind of almost stabilized lending is just offers a better investment right now.

UNKNOWN - (00:40:14)

Got it. That's all very helpful. Thanks for taking the questions.

OPERATOR - (00:40:20)

And your next question today is a follow up from Jade Rahmani of kbw. Please go ahead.

Jade Rahmani - Equity Analyst - (00:40:27)

Wanted to ask about the platform overall. I know you mentioned you're in Dallas with kstar and you all have a servicing operation quite substantial. You buy B pieces. So a nice complement to that could be the CMBS conduit business, which is capital light. And you know, I think the securitization outlook seems quite healthy given that the regional banks still continue to pull back any interest in that. And then another follow up would just be on the special situation side. If you see any opportunities to combine with another either public or privately held mortgage reit. I think scale is a huge differentiator across the real estate landscape. We see huge premiums between market cap ranges in all real estate sectors. And I think it's clear that having gone through this cycle, there's also a big differentiator in the commercial mortgage REIT space. So, you know, you could combine stock for stock or nav for nav, transaction gain scale and that probably would help, you know, with consistency of dividend. So could you just respond to those two items? Thanks very much.

UNKNOWN - (00:41:52)

Sure.

Matt Salem - Chief Executive Officer - (00:41:52)

Jay, thank you again for the question. First, on the CMBS side, you know, it's something we've looked at. We have the expertise, I think in. House to do that. Whether it's from the credit or the origination side or some of us have backgrounds in that business and capital markets. I think right now, no real plans to begin a CMBS originations business. I think one thing that.

UNKNOWN - (00:42:22)

Is a.

Matt Salem - Chief Executive Officer - (00:42:22)

Real consideration for us is it doesn't really overlap with our client base for the, for the most part, you know, think about, you know, we're lending in major markets to institutional sponsors and that tends to be a more diverse set of borrowers and markets. So we'd have to probably change a little bit of the way we're oriented and that's not sure that's in our, you know, that's in our kind of credit DNA to do that. But we'll continue to evaluate it as I think as the market evolves on the M and a question, I would say we continue to look at opportunities as they arise. I think there'll be consolidation in the industry over time. We'd like to grow not for the sake of, you know, of scale, for scale sake but to have a more liquid stock as you know, as you mentioned I think would be able to attract more, more shareholders and and create a better, a better cost of capital. And as we've discussed, you know, we want to try to do things that also give us the ability to diversify our portfolio and moving into Europe is one of those things but also you know, potentially adding duration to the portfolio. So we're going to continue to evaluate, you know, opportunities that are on the table but you know, there's nothing you know, we're looking at currently.

UNKNOWN - (00:43:52)

Thanks very much. Thank you. Jay.

OPERATOR - (00:43:57)

Concludes our question and answer session. I would like to turn the conference back over to Jack Zwittala for any closing remarks. Well, great.

Jack Swetala - (00:44:04)

Thanks operator. Thanks everyone for joining today. Please reach out to me or the team here if you have any questions. Take care.

OPERATOR - (00:44:14)

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.