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DATE
- Wednesday, July 23, 2025, at 2 p.m. ET
CALL PARTICIPANTS
- Chief Executive Officer — Matthew A. Salem
- President and Chief Operating Officer — W. Patrick Mattson
- Chief Financial Officer — Kendra Decious
- Managing Director — Jack Switala
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RISKS
- GAAP Net Loss— Reported a GAAP net loss of $35 million, or negative $0.53 per share (GAAP).
- Asset Downgrades— Downgraded a Boston Life Science asset from a four- to a five-rated loan and a Chicago office loan from a three- to a four-rated loan due to continued market deterioration.
- Distributable Loss— Reported a distributable loss of $3 million, driven by taking ownership of the West Hollywood property.
- Realized Losses Expected— Management expects to realize a $15 million loss on the Raleigh multifamily asset upon completion of an assignment in lieu of foreclosure, anticipated in Q3 2025.
TAKEAWAYS
- Book Value Per Share-- Book value per share stood at $13.84 at quarter-end.
- Originations-- Originated $211 million in new loans secured by industrial and multifamily properties.
- Repayments-- Received two full and six partial loan repayments totaling $450 million.
- Projected Future Repayments-- Management projects nearly $1 billion in incremental repayments over the second half of the year.
- Dividend-- Paid a $0.25 cash dividend.
- Pipeline Scale-- Salem stated, “Pipelines as big as it's ever been,” with actionable opportunities topping “over $30 billion a week” across the U.S. and Europe, as discussed on the earnings call.
- Loan Spreads and ROE-- New originations for transitional loans closed in the $2.40 area, with stated return on equity “in the mid elevens” to “end of the thirteens” percent this quarter.
- Portfolio Diversification-- Management indicated active efforts to diversify geographically into Europe and to allocate more capital toward CMBS investments for duration.
- Share Repurchases-- Repurchased $20 million of common stock at an average price of $9.21, adding approximately $0.25 of book value per share accretion over the last three quarters.
- Liquidity Position-- Ended the quarter with $757 million of liquidity, including $108 million in cash and $620 million in undrawn revolver capacity.
- OREO Equity-- OREO (Owned Real Estate) portfolio accounts for $352 million of pro forma equity, or $5.34 per share, as per management’s disclosure.
- Financing Structure-- 78% of financing remains fully non-mark-to-market, supported by corporate revolver and capital markets access.
- Life Science Exposure-- Life science loan portfolio is 12% of assets with 60% in newly constructed, purpose-built properties targeting large pharma tenants.
SUMMARY
KKR Real Estate Finance Trust(KREF) reported a GAAP net loss of $35 million and a distributable loss of $3 million, citing the impact of taking ownership of a multifamily property in West Hollywood. Management highlighted $211 million of new loan originations alongside $450 million of repayments, with nearly $1 billion in additional repayments projected for the second half of 2025. The company is actively reallocating capital by buying back shares, pursuing geographic expansion into Europe, and increasing exposure to longer-duration CMBS investments.
- Salem said new transitional loan originations are yielding spreads near pre-tariff levels, with closed loans “in a $2.40 area.” ROE remains consistent with what management has seen through most of their lending.
- Mattson stated that OREO assets could generate “over $0.12 per share per quarter on distributable earnings (non-GAAP)” if business plans are executed and capital redeployed.
- Salem described an active loan pipeline generally running over $30 billion per week, with heightened competition as “most lenders are active in the market.”
- Management confirmed $20 million in share repurchases, and referenced $137 million in cumulative buybacks since inception.
- Decisions on target portfolio size hinge on capital allocation, leverage, buybacks, and the potential to redeploy equity currently held in OREO assets.
- Three OREO assets (Mountain View, Portland, Seattle) present variable timelines for repatriating capital, with West Hollywood and Raleigh holds expected to be shorter term, per Salem’s asset-by-asset commentary.
INDUSTRY GLOSSARY
- CMBS (Commercial Mortgage-Backed Securities): Fixed-income securities backed by pools of commercial real estate loans, often used for portfolio duration and diversification by mortgage REITs.
- OREO (Other Real Estate Owned): REO assets represent properties owned by the lender, usually acquired through foreclosure or deed-in-lieu and held pending business plan execution or sale.
- CECL Reserve (Current Expected Credit Loss Reserve): A loan loss accounting standard requiring forward-looking estimates of expected losses over the life of a financial asset.
- B Piece Investment: The subordinated, highest-risk tranche in a CMBS securitization, intended to absorb first losses and typically purchased by specialist investors.
- Non-Mark-to-Market Financing: Borrowing structures that do not require collateral revaluation or margin calls because the value of underlying assets fluctuates.
Full Conference Call Transcript
Jack Switala: Great. Thanks, operator, and welcome to the KKR Real Estate Finance Trust earnings call for the second quarter of 2025. As the operator mentioned, this is Jack Switala. This morning, I'm joined on the call by our CEO, Matthew A. Salem, our President and COO, W. Patrick Mattson, and our CFO, Kendra Decious. 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 second quarter of 2025, we reported a GAAP net loss of $35 million or negative $0.53 per share. Book value per share as of June 30, 2025, is $13.84. We reported a distributable loss of $3 million due primarily to taking ownership of our West Hollywood property. Prior to realized losses, distributable earnings were $16 million or $0.24 per share. We paid a $0.25 cash dividend with respect to the second quarter. With that, I'd now like to turn the call over to Matt.
Matthew A. Salem: Thank you, Jack. Good morning, everyone, and thanks for joining our call today. Let's begin with an update on the real estate credit market. Transaction activity and loan demand have recovered from the volatility of the initial tariff announcement. We are seeing significant opportunities within our loan pipeline which continue to run near record levels. Competition has returned and most lenders are active in the market. Despite the competitive environment, we believe the lending opportunity remains highly attractive, offering both absolute and relative value. Most of that is driven by the ability to lend on reset values, well below replacement costs.
Fundamentals remain healthy across most property types; construction starts have decreased meaningfully, likely leading to stronger rental growth over the next few years. Commercial banks are increasing their participation while shifting some of their lending to loan-on-loan or other back-leverage facilities, allowing KREF to borrow at attractive rates on a non-mark-to-market and match-term basis. Now turning to second quarter results. Originations in the quarter totaled $211 million, comprised of two loans secured by industrial and multifamily properties. We had two full repayments and six partial repayments which totaled $450 million. We will continue to reinvest repayments and are projecting nearly $1 billion of incremental repayments over the second half of the year.
Now that we have turned the investment pipeline on, we are focused on two newer areas: first, diversifying our portfolio geographically into Europe, and second, creating some more duration through CMBS investments. We have an active pipeline in the European loan market and anticipate new originations in the region by the end of this year. In addition, this quarter, we closed on a B Piece investment where returns are very attractive. The pool consists of 34 low-leverage fixed-rate first mortgage loans diversified across property types and geographies. We have a best-in-class team and a long track record of CMBS investing, including the ability to leverage our K-SAAR platform, which is a rated special servicer. Turning to risk ratings.
We downgraded a Boston Life Science asset from a four-rated loan to a five-rated loan and expect to extend the loan through February. We also downgraded our Chicago office loan from a three-rated loan to a four-rated loan due to continued market deterioration. As a reminder, this loan has already been modified twice with a reduction in loan balance by approximately 35% through $35 million of equity repayments and a $15 million hope note. Turning to our Life Science exposure. Our Life Science sector is 12% as of the second quarter, comprised of six assets located in the top two life science MSAs of Boston and South San Francisco.
60% is comprised of newly constructed and purpose-built properties targeting larger pharmaceutical tenants which are less susceptible to some of the cyclical issues the sector is experiencing. As a reminder, we've added additional detail in our supplemental, which can be found on Page 10. With that, I'll turn it over to Patrick.
W. Patrick Mattson: Thanks, Matt. Good morning, everyone. Let me begin with an update on our watch list as well as progress on the REO assets. As we reported last quarter, we took title to the West Hollywood multifamily loan in April and recorded a loss to distributable earnings of $20 million, which was a slight improvement over our CECL reserve. We're progressing on our execution plan for a condo sellout and expect sales to commence in the third quarter. On the five-rated Raleigh multifamily, we are proceeding on an assignment in lieu of foreclosure and expect to complete the process in the third quarter, at which point we will convert our $15 million CECL reserve to a realized loss.
As of June 30, this asset is 96% occupied, and we will implement a smaller value-add program to enhance the value and reposition the property as market fundamentals continue to improve. Three updates on the REO side. First, Mountain View, California office. The market here has improved materially from our initial ownership from both the capital markets and tenant demand perspective, and we are actively responding to tenant requests for proposals. Given our asset offers tenants the ability to have a full campus setting, we continue to position leasing toward a single user.
Next, in Portland, Oregon, during the quarter, we closed on the sale of a parcel which will be developed as a multi-genre concert space, providing an entertainment venue to the site. Additionally, we're working toward the completion of the entitlement of four-plus million square feet of mixed-use space, creating a path to opportunistically sell additional development parcels and repatriate capital. Finally, in Philadelphia, we completed the sale of the garage in 2Q to a private parking operator at a level slightly above our carry basis. The garage was a 13-story, 469-parking-space facility amongst the larger Philadelphia REO portfolio.
At the office property, we're continuing to focus on retaining tenants and increasing occupancy and remain open to selling the property at an appropriate basis. As a reminder, adjust our basis in the REO assets, we could generate over $0.12 per share per quarter on distributable earnings as we effectuate our business plans, repatriate capital, and reinvest into performing loans. Our OREO portfolio represents approximately $352 million of pro forma equity or $5.34 per share, which was reflected on Page 14 of our supplemental. Moving to share repurchases. We repurchased $20 million of KREF stock in the second quarter for a weighted average price of $9.21.
Over the last three quarters, we have repurchased almost $40 million of common stock, representing approximately $0.25 of book value per share accretion. Since inception of our buyback plan, we have bought back $137 million of KREF common stock. We'll continue to evaluate the allocation of capital across both share buybacks and loan origination. Liquidity remains robust, and at quarter end, had $757 million of liquidity available, including $108 million of cash on hand and $620 million of undrawn corporate revolver capacity. With the assistance of the KKR Capital Markets team, 78% of our financing remains fully non-mark-to-market. Overall, we are well-positioned for the opportunity in front of us in 2025 and beyond.
We've been making progress on our watch list in REO, as well as actively making new investments. We'll continue to be transparent and proactive in managing the portfolio to maximize shareholder value. Thank you for joining us today. With that, we are happy to take your questions.
Operator: We will now begin the question and answer session. If you're using a speakerphone, please pick up your handset before pressing the keys. The first question comes from Jade Rahmani with KBW. Please go ahead.
Jade Joseph Rahmani: Thank you very much. Can you talk about the level of ROEs that you're able to achieve in the market and give some color around loan spreads, all-in yields, that would be helpful considering the uptick in competition that we've seen this year.
Matthew A. Salem: Hey, Jade. It's Matt. Thanks for joining this morning and thank you for the question. Yes, so just in terms of what we're seeing in the market, which we made some comments on the call today. Pipelines as big as it's ever been, and we've set kind of two records in our own pipeline this year just in terms of the market opportunity. We're generally running over $30 billion a week. Of you know, just within our actionable our actual pipeline. That's US and Europe, and that's across all of our pools of capital. We have bank capital, insurance capital, and, you know, more transitional bridge type of capital that we win for KREF. So pretty robust opportunity set.
Lots to look at. I'd say on the competitive side, definitely competitive. I think all the pools of capital are turned on. But you know, it's led to spreads compressing back to where we were pre-tariff announcement. I would characterize the market for call it, transitional lending stuff we're focused on anyway in the institutional segment of the market. In the call it mid two hundreds. I'd say most of the stuff we're looking at is around the $2.65 or so area. Kind of basically back to where we were. Pre-tariff.
You'll see this quarter we did close two deals that are on the tighter end of or probably the tightest end, honestly, of where we see the transitional loan market right now. So we closed two deals this quarter in a $2.40 area. That's about as tight as you can go. Now this goes back to, I think, some of the comments we made on previous calls where seeing a lot of opportunities to lend on what I think of as, like, mostly stabilized assets. These are one's an industrial portfolio that was scheduled to or slated to go for single asset, single borrower market. Then the tariff announcement hit.
We are able to pull that out and provide bullet balance sheet financing. So pretty much stabilized well-occupied industrial portfolio. And then the second one was, again, a mostly stabilized, very well-located institutional sponsor multifamily property. So there's no real business plans here. And so when you start to get into these things that aren't even white transitional, it's in that two forty, two fifty area. We've always tried to play in the kind of higher quality section of the part of the market, and we're able to finance those really effectively as well.
So when you think about these spreads, we're translating these into the similar ROEs in that call it on the tight end, we're probably in the mid elevens. And that ranges all the way out to end of end of the thirteens. So ROE is pretty similar to what we have seen really through most of our through most of our lending through I think these two deals we closed in the quarter are both like the twelves. So certainly, what we're targeting, but I'd say the fact patterns are more stabilized, you know, a little bit more, you know, more well-occupied assets.
Jade Joseph Rahmani: Thank you. You mentioned the $1 billion in repayments you expect in the second half. Can you talk about what kind of originations you expect in the second half? And also, any loans with upcoming maturities that, you know, could create some conversations on how those ultimately get paid off or, you know, the plan is to extend.
Matthew A. Salem: Yeah. I guess, a couple comments. We're still trying to match the repayments with new originations. So if we got that billion dollars of repayments which we think is we I think we say nearly a billion. If we got that then you would see us pretty actively originating to try to replace you know, the vast majority of that. The only thing we're we're just mindful of is, obviously, watching the leverage ratio. We're right in line with where we want to be right now. Any slight maybe at the slight with the higher end, but certainly within the within a reasonable range.
And I don't think we have as we think about near term maturities, there's nothing currently, you know, on the on the radar. We have one industrial property in New York that we're that we're watching. But outside of that, there's there's really nothing else coming down that you know, we're particularly watching closely.
Jade Joseph Rahmani: Thank you very much. Sure.
Operator: The next question comes from Richard Barry Shane with JPMorgan. Please go ahead.
Richard Barry Shane: Hey, guys. Thanks for taking my questions. And always tough to be after Jade because he asks great questions and covered a lot of what I was interested in. The thing I'd like to talk about is and it sort of dovetails with the last topic you guys were on. 2026, you have $2 billion 2 plus billion dollars of maturities. $272,700,000,000.0. Obviously, those are pretty big walls. I think the conversation we just had was about near term maturities. But as you really look into the heavy lift next year, can you sort of give us a sense of maybe even sort of the pie chart of that 2 billion Hey.
We think we're gonna 50% are gonna pay off. 40% are gonna extend, and 10% are gonna be problematic. Can you give us some sense of how to think about, that 2020 maturity wall?
Matthew A. Salem: Yeah, Rick. Unfortunately, I think I'll make sure I could be as precise as you're asking and predicting the future. A couple of comments I'd make. One, a lot of that's getting pulled forward. So when you think about, like, the billion that's that's coming down this our expectation around a billion coming down in the second half of the year. That's all coming in before a maturity date. The market I think these business plans are getting executed, completed, if you will. In many cases, people are pulling forward refinancing or beginning to sell assets. So when we think about the maturity wall, I think it's going to look a lot different at the end of this year.
And then we start to think about the '27 maturity wall. I think a lot of that will get pulled forward into '20 into '26. People are just the markets are active. There's financing availability. And people are taking advantage of that. I would say when you look at our pipeline, our pipeline is for new investments. It's a lot of it is a lot of it is refinance. And so it is it sponsors buying more time and creating more runway. Because if you think about it, if you own a multifamily property or industrial you're watching these supply pipelines get absorbed.
You're watching the supply starts drop dramatically and which they have done over the last the last handful of quarters. As well as the impact on some of these tariffs on new starts. And I think people are becoming very optimistic about what that can mean for you know, for rental increases and therefore enhanced property values. So I'd say a lot of our pipeline right now is sponsors just, again, trying to buy the time so they can hold the assets for another two, three years. And get into a window where the fundamentals are really in the landlord's favor. So I expect to see our within our portfolio to translate that to our borrowers.
I think a lot of people are pulling this financing forward, buying that time now. And they're gonna hold these assets and wait it out. As it relates to your credit issues, think we're going to see less and less credit issues around maturities. We've already identified, I think, most of the issues. I'd say there won't be more, but the maturity it used to be like a rate reset, interest rate caps or things would cause some of the issues or maybe you had an initial maturity date that caused issues. Just given where we are now, in the cycle, I think it's a lot of the problems have reared their heads. At this point in time.
So it's kind of less about a date and more about what's going on in particular property type or, you know, that specific asset. So I wouldn't expect that to be a big catalyst for you know, for defaults. You know, at a maturity date. I think they could kinda come earlier or it's due to something else happening like a tenant leaving or something like that. No. Look, it's a really interesting point about rate resets.
Richard Barry Shane: We think about this all the time in terms of consumer finance. At a certain point, consumers demonstrate an ability to absorb over time have demonstrated an ability to absorb certain changes. Given how long rates had been higher and the fact that basically everybody has been reset. Already. One, the business models have proven the ones that survived have proven out, and also, incrementally, it's probably not any more costly. I am curious You talk about refinance. Is that refinance for sponsors who are borrowing outside of your portfolio? Or is that refinance of existing loans?
And to the extent it's refinance of existing loans that you've made can you help us just sort of understand the different criteria between a refinance versus an extension because it is outsiders I think we probably look at them the same way, but I think internally, you probably have very different criteria, and it's perhaps a different signal.
Matthew A. Salem: Yeah. That's a good question. I'd say the vast majority of the refinancings that we're seeing are they would be new credits for us. New assets for us. So we do very little of, like, kind of refinancing our own portfolio. Obviously, to your point, like we do modifications, we do extensions. There are isolated cases where we kind of provide a new what we think of as a new loan because it's it's new terms. We have a new five-year term. We have, like, refresh on all the reserves and structure, etcetera. So that has happened in the past, but it's it's very isolated. I mean, these are really just new opportunities coming into the into our pipeline.
Richard Barry Shane: Okay, perfect. Thank you for clarifying and I apologize for taking so much time. Thank you, guys.
Matthew A. Salem: Thanks, Rick.
Operator: The next question comes from Steven Cole Delaney with Citizens JMP Securities. Please go ahead.
Steven Cole Delaney: Thanks. Good morning, everyone. First, let me applaud the buyback. I think it's a great allocation of capital even though it is obviously, you'd like to pay offense more than defense, but as a as a representative of the shareholders, I say thank you, for assume it will probably continue if the stock stays down here under 70% of book. Matt, just looking and Patrick, looking at the portfolio, you know, you're now $5.8 billion about 20% off the recent high of, I guess, a year and a half ago, a little over $7 billion.
When you look at the capital base today, you look at the opportunity, as we're updating models and we're thinking out to the 2026 or so, is it realistic to think that the loan portfolio could grow back to something close to that $7 billion figure or given the buybacks and given the other allocations is that unrealistic? I guess I'm just asking if you guys have a target level for where your loan portfolio could stabilize in the current environment? Thank you.
W. Patrick Mattson: Good morning, Steve. It's Patrick. It's a good question. I guess a couple of things I'd comment. On there. I think one, we don't think about it in terms of a target that way. We think about it in terms of allocating capital and thinking about it in terms of our leverage levels. And so if you look at what's happened since we been at that peak level, a couple of things here. One, I think the mix will change slightly over the course of the next couple of quarters. We mentioned CMBS investment we made. Obviously, that's capital that you could sort of gross up what the loan equivalent would be. But we allocate capital towards CMBS.
Then the loan portfolio is not going to be at a peak level. You mentioned the buybacks. Clearly, as we remove equity, you know, from the company that's, you know, not available to, you know, grow the loan portfolio. So we'll see some shrinkage, you know, from that. The other area, though, on the flip side, we do have equity that is in effect trapped in some of our REL assets. And as we work through those business plans, as we return that capital back, then there's an opportunity for us to redeploy that into new loans. And so you could see some growth there.
But you'll you know, all of that will just be constrained by what our total equity is and what our target leverage level is. I would just lastly comment that as you look at it on a spot moment, Matt alluded to that we're right in our target leverage level. For the year, we're probably just off from a redeployment of repayments. We're about $50 million less of originations relative to the repayments that we received. That's just quarter to quarter. There's going to be some fluctuations. The pipeline, as Matt mentioned, is pretty active. So we've got quite a bit that's in closing now.
So as we look toward the back half of the year, we would certainly expect that we're to close that gap and probably see a slightly higher level. From where we are today. Hopefully, addresses what you were asking. Yeah.
Steven Cole Delaney: That's very helpful. Thanks. And totally get the from your view, it's an allocation of capital. It's not a particular dollar level of a portfolio given other places you're allocating capital. Just curious on the B pieces. Do you view that as somewhat opportunistic given some market disruption Or do you see that as a core piece of the pie, you know, the investment? Pie going forward for four KREF.
Matthew A. Salem: Thanks, Steve. I can jump in there. It's Matt. Yeah. Hey, Matt. I think we'd like it to be to grow it and that you know, and it to be a more consistent piece of our of our investing. We've got we've got a pretty, strong position in that in that market. You know, we've been We've been very large participants in that space. Really going back to when risk retention started in CMBS in 2017. In fact, we were the first investor ever to acquire a conduit BPs that was subject to risk retention. So negotiated all the precedent documents with the banks to kind of set that program up.
Since then, we've been the largest investor in risk retention across our various pools capital. So we've got a really strong position there. And so I think we'd like to continue to be active in the market. That market tends to be a little bit more consistent from an opportunity set as well in terms of Okay. Just given the risk retention, it's it's not it's not as volatile from a return perspective as what we've seen in other markets. We're hoping that continues and we can continue to kind of participate. Of course, every investment we make, we're making relative value decisions. So for that to change, we obviously react to that.
But hoping that just given the way that market operates that it'll be we can be consistent there.
Steven Cole Delaney: Okay. And would you do you see the return the ROE on that CMBS fee piece book? Do you look at that as being incremental to shareholders versus if you had a 100% bridge loan portfolio? So in other words, is that a on a on a dollar of capital invested, do you see as that has an incrementally higher ROE contributing to what a KRAS shareholder receives than if you weren't in that business?
Matthew A. Salem: Yeah. It kind of depends on what you're which kind of loans you're comparing it against. It tends to be slightly higher than what we're doing on the loan side from a from a total return or IRR perspective. Yes. So there is a slightly more return I would say that's nice, not necessarily why we're doing it. I think we're doing it more for the fact that we do think there's good risk reward in the sector. Number two, it's a diversifier for us. And Yes. Number three, I think the duration component is important. And do you see this in our peers as well?
I think the industry is evolving a little bit in terms of trying to create a little bit more duration, which I think does a number of things, but just from a risk management perspective, it just helps us if you think about these loan, our loan portfolio is being kind shorter duration three ish year loans, We're not we're not having to recycle the entire portfolio every three years. And kind of subject to some of the cyclicality of markets, etcetera. So I think it takes a little bit more of that vintage risk out of the portfolio. So that's another reason. I think one of the primary reasons why we decided to enter that space.
Steven Cole Delaney: Thank you both for the comments this morning.
W. Patrick Mattson: Thanks, Steve.
Operator: The next question comes from John Ryan Nickodemus with BTIG. Please go ahead.
John Ryan Nickodemus: Hi, good morning everyone. I wanted to start with a two-part question on your life science loans. First, obviously, Boston loans downgraded for the second straight quarter here. I was curious what a potential plan for resolution could look like there. Know, Matt, you mentioned the extension. I was just curious if it could be something like what we saw at the San Carlos modification a few quarters ago. Then second, of your other five life science loans, though they're all three-rated, how do you feel about where those stand and their ability to stay off the watch list in the coming quarters? Thanks.
Matthew A. Salem: Thanks, John. Appreciate the question. Thanks again for joining the call. I would say on the Boston asset, I don't think we have the answer there yet. We're still working through a number of different options and in discussions with the borrower, is kind of leading to this extension. So let us come back on that one. And next earnings call, hope kinda give everybody an update on how that may how that may proceed. It's obviously kind of live discussions happening right now. On the rest of the of the of the life science a couple things One, we've obviously modified one of them and as you as you kind of as you mentioned.
And then a few of those, which I made the remarks on the call as well, three of them in particular are really new assets purpose built. They're originally construction loans. And those are largely effectively largely delivered at this point in time. And so I think we still feel still feel good about those. In great locations. They are very strong real estate. We've got, you know, for the most part, some pretty good sponsors, within that. So I think if obviously, it's a very challenging market. Although, we're starting to see a little bit of green shoots. It's early still. But we are starting to see a little bit of the tenants returning to the market.
Picking up in some of these sectors some of these submarkets. And so we obviously want that to continue. But for right now, think we're rated appropriately. And we'll just have to kinda see what happens as time progresses here terms of our sponsors plans with those particular those particular assets. But we're in it's it's very good real estate, very well located. And again, for the most part, pretty strong pretty strong sponsors, there. One thing that people haven't asked yet, but perhaps there's a corollary here, certainly we're hoping so, On the office side, we're seeing a lot more liquidity in that sector.
Now there's still a bifurcation in terms of quality, You know, all the liquidity is coming back to the higher quality assets first. And tenants are returning to the market, there's real leases getting done and Patrick alluded or mentioned this in his remarks, in terms of, like, some of the stuff we're seeing in Mountain View, which is you know, completely changed from, you know, when we took title to that asset. So these markets can change and tenants can come back. Supply is dropping off, And so we feel like if we're in really high quality real estate, that over time, you know, these asset values can recover.
So that's that's a little bit of how we're thinking about, yeah, just the overall, you know, portfolio specifically on the REO and some of these life science assets. As well.
John Ryan Nickodemus: Great. Thanks so much, Matt, and appreciate the added detail on the office sector. That's great to hear. And then other one for me, one of the notable developments this year has been the move by some of your peers into the owned at lease space. I know you've mentioned diversifying into more European loans. Obviously, the CMBS B pieces. Just curious to hear your team's thoughts on you know, more commercial mortgage REITs owning net lease real estate if that's something that you would ever consider in the KREF vehicle. Thanks.
Matthew A. Salem: Sure, John. Well, I think it's a positive that the market is evolving. And so I'd like to see the peers adding new investments, new types of investments to their portfolio and we obviously made remarks already around how that helps the duration. These assets can fund differently as well. So I just think it's going to create the end of the day a more robust industry and maybe more shareholders attracted to the market. So I think it's real positive. For us on the net lease, we've done it other parts of our real estate business. So it's certainly a sector we have a couple of teams that do it today. It's a sector that we're very familiar with.
I'd say we're still evaluating whether we think it makes sense for KRAS. And so, you know, we'll kinda keep everyone posted on that. There's nothing, I would say, imminent there, but it's certainly on a list of things when we talk to our board about possibilities of expanding our portfolio. So I think we'll continue to look at it, but certainly nothing in the near term horizon.
John Ryan Nickodemus: Great. Thanks so much, Matt. Appreciate the answers.
Matthew A. Salem: Thank you.
Operator: And we have a follow-up from Richard Barry Shane with JPMorgan. Please go ahead.
Richard Barry Shane: Hey, guys. Excuse me. Hey, guys. Thanks for taking my second question. Very quick. On the $400 million REO portfolio, we got a question What's sort of the timeline to repatriating that capital back into loans.
Matthew A. Salem: Yeah. Maybe, maybe I could just go one by one. If that's helpful. And if you have the supplemental open, it's on Page 14. But it just gives some context. So Mountain View again, that's a campus office building or property. And there, we wanna be patient. And we really are targeting a single user. The real estate's somewhat it's high quality real estate. There's other competitors in the market. There's obviously vacancy in the market that we're competing against there. But I'd say we're on the short list of tenant for tenants that want high quality in Mountain View. We've seen that leasing pickup substantially as we've mentioned.
And because we're a campus offering, it kind of gives there's a little bit of uniqueness to that. Where, obviously, the amenity package, the security, etcetera, could be very attractive for a tenant. Most of our competitors are multi-tenant buildings. So we stand out a little bit in that regard. In terms of timing, again, we need to be patient here. The market is coming back. There's real activity. So we're actively working on RFPs for tenants, but I think we're we're willing to wait, to get the right deal with the right tenant. So that one's a little bit of an unknown. On West Hollywood, we will be in market selling shortly. Within the third quarter.
And so that will be and that's condo sales, so that will start going coming out over the course of the next year or so. We'll start whittling down at that as we sell condo units. On Portland, again, a little bit similar story from Hollywood where we've been working in the background on this redevelopment and entitlement for some time now. And we're getting to the stage we should be able to sell you know, sell lots for development, predominantly multifamily development. We're very excited about that project. But over the course of next year, we are hoping that we can, you know, begin to kind of sell lots and repatriate of that capital.
But again, it won't be a likely will not be a wholesale one sale will likely be individual parcels that we that we sell to developers there. On Seattle, I'd probably put this a little bit more in the in the Mountain View Camp where if you recall, we signed kind of an anchor tenant there. The life science space. Which we think is going to really help drive future leasing. But it is a multi-tenant asset and I'd say the leasing here is not as robust as we're seeing in Mountain View. So this will take a little bit more time. But again, so probably TBD on this one. See how the market recovers.
But of all these assets, that's probably the one that's that's has the longest tail. And then Philadelphia asset, it's mostly stabilized office building. There's a couple of leases that we're working on there. And if we could hit a couple of those, we could that would be more of a short term, you know, sale over the course of next year or so. We'll we'll see kind of what the market is doing. And then finally, the Raleigh multifamily property that will likely be a short term hold. This is well it's well occupied. As we mentioned, we'll probably do a slight value add business plan. Supply is coming down in that market as well.
So we kind of like the setup there. So think about that as a I don't know, as the twelve or eighteen month hold. It be a term hold, but I think we'd like to get a little bit further down the road and put a little money into it and then and then try to exit. Exit that. So, you know, kinda when you when you think through all this stuff, you're getting a few of these back in relatively short order, like a couple of within a few of them within the next year to eighteen months. And then in my mind, kind of comes down to Mountain View and what's the success we have there.
It's a big asset. And can we execute there in a short amount of time? And like what we're seeing in that market right now.
Richard Barry Shane: It's an incredibly helpful answer. Thank you so much.
Matthew A. Salem: Thanks for the question.
Operator: This concludes our question and answer session. I would like to turn the conference back over to Jack Switala for any closing remarks.
Jack Switala: Great. Thanks, operator, and thanks, everyone, for joining us today. You could 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.