KREF has no corporate debt or final facility maturities for two years. 76% of our secured financing as of year-end was completely non mark-to-market. And the remaining 24% is only mark-to-credit. We received $767 million of repayments, with office loans representing approximately 25% of total repayments. Our unfunded commitments as a percentage of the portfolio are 10% at year-end 2023, down from 16% at year-end 2022. More than half of our portfolio is supported by multifamily and industrial properties. Multifamily remains our largest property type representing approximately 41% of the portfolio. And we continue to see stable underlying performance across that segment with weighted average rent increases of 3.9% year-over-year in our portfolio.

Office represents our second largest property type, and since the beginning of last year has decreased as a percent of the portfolio, from 26% to 22% today, including a full payoff last month of a $173 million previously risk-rated 4 loan secured by a Washington, D.C. property. Access to KKR's broader real estate platform with approximately 150 dedicated professionals and over $68 billion of assets under management has been instrumental in the management of KREF's portfolio. Our capabilities have been further bolstered by our affiliated rated special servicer K-Star, with a team of more than 45 professionals and over $45 billion of special servicing rights, providing us with extensive expertise and access to sizable, real-time market information.

We have been actively using many tools at our disposal to execute on a variety of workout options, including modifications, restructurings, as well as taking title and managing real estate. Since our last fall, the Federal Reserve has indicated an end to their interest rate hikes, with potential rate cuts beginning in the first-half of the year. Market sentiment has improved dramatically as some of the tail-risks driven by inflation and higher interest rates have subsided. The broader rally in equities and fixed income is impacting the commercial real estate equity of debt markets as well, with significant heightening in CMBS and loan spreads over the past few months. The fear/greed factor has clearly shifted, and capital is flowing into the markets.

We expect acquisition and refinance activity to increase this year, and we are seeing that in our own lending pipeline across our different capital sources. However, despite the strong momentum, challenging remain given the value declines from the post-COVID interest rate environment. Today's higher interest rates and carrying costs combined with interest rate cap costs and near-term maturity dates continue to stress real estate capital structures. And now, I'll discuss KREF's earnings power and dividend philosophy as we get into 2024. Last year, KREF's earnings potential benefited from the higher interest rate environment, with average run rate distributable earnings before losses of $0.48 per quarter throughout 2023. We stated last quarter that as we determine the run rate earnings potential of the business into 2024, the main drivers will be interest rates, portfolio performance and the ability to unlock equity held in our risk rated five assets.

We have been proactive and transparent as we work through this market. And we have implemented a variety of strategies to optimize the outcome of our watch list loans. Today, we have a few assets where the best path forward to maximize value will be to take title, operate the real estate and stabilize cash flows before selling. Each has different circumstances, but this is high quality real estate that we have full confidence will lease and stabilize over time. To put it simply, we have great real estate, we have ample liquidity and we have the resources and expertise to create value. Once stabilized, we believe we can sell the real estate at a higher value than our current mark. We cycle that capital into cash flowing assets and return to a more normal level of operating earnings.

However, getting to stabilization will require time and impact earnings in the interim. To that end, the Board of Directors declared a dividend of $0.25 per share for the first quarter. The dividend is set at a level where we can cover with distributable earnings ex-losses with our performing loan portfolio under a number of different scenarios, including lower interest rates and the potential migration of loans to cost recovery and REO. To be clear, in the near-term, we expect DE ex-losses to be significantly higher than our dividend. Similar to how we've operated in the past, we are taking a proactive approach and making this adjustment now as opposed to waiting for a typical March declaration date in order to provide transparency. Importantly, as we sell our REO portfolio, we can reinvest the capital into new loan assets to unlock additional earnings potential.

To put some context around this, we believe we can generate an additional $0.12 per share and distributable earnings per quarter and this is just on our existing basis. Of course, the goal is to gain more than that over time. The assets driving this impact include our Portland Retail and Redevelopment Property, our Philadelphia REO, Mountain View projected REO and potentially the Seattle Life Science Loans which combined represent approximately $150 million of equity. Continuing with our transparent reporting, we've added a new page in our earnings presentation highlighting these assets. With that, I'll turn the call over to Patrick.

Patrick Mattson: Thank you, Matt. Good morning, everyone. I'll begin with updates to our CECL allowance and watch list. We finished the quarter with $213 million in CECL reserves, over two-thirds of which is held against the three, 5 rated loans. Reserves decreased by $9 million quarter-over-quarter primarily as a result of a few changes in Q4. First, upon taking title to the five-rated Philadelphia office asset we realized a $59 million loss, which is lower than the $69 million asset specific CECL reserve in the prior quarter. The CECL amount was reversed and realized loss flowed through our distributable earnings in Q4. Looking ahead, we are in discussions to sell two of the four properties in the near-term and do not expect any impact to DE as a result of the sale.

Second, we increased reserves on our loans secured by the Class A office campus in Mountain View, California, reflecting a lower valuation given the continued slow leasing environment in Silicon Valley and the lower levels of liquidity. We expect to take title to the asset in the second quarter. Third we downgraded the risk rating and increased reserves on a loan backed via Class A Seattle Life Sciences property. This property was built in 2021 and our sponsors purchased and converted the asset to life science lab use for spec lease up. As Matt mentioned, our multifamily portfolio has generally been stable, with low single-digit rental increases supporting NOI growth. Most sponsors have renewed interest rate caps and maturities. However, we downgraded two multifamily loans to risk ratings of 4 in the quarter given ongoing discussions regarding interest rate caps.

Both properties are over 90% occupied, and the loans are current on interest payments. As we continue to work through our watchlist portfolio we saw positive outcomes on two of our watches in D.C. office loans that had been on the watchlist last quarter. First, in January, the $173 million Washington, D.C. office loan paid off in full as the sponsor completed a refinance with a new lender. This recently renovated and well-located Class A office asset had leased up to nearly 90% following the completion of the sponsor's CapEx plan. Our other watchlist Washington, D.C. office loan is now risk rated 3 following a modification finalized in the fourth quarter which included a $20 million principal paydown. The Class A property is 92% leased after positive momentum throughout last year.

With these positive outcomes, we have only one remaining risk rated 4 office loan. With current asset exposure in the form of a $37.5 million mezzanine loan secured by a Class A property located in Boston. Post quarter-end, we entered into discussions with the sponsor and have begun modification negotiations which may result in increased CECL reserves. We expect to provide a further update on the status of the modification next quarter. In the past 13 months, KREF has received over $1 billion of repayments, including two full repayments totaling approximately $325 million we received in January. Both loans were previously risk rated 4, including the D.C. office loan previously mentioned, and the New York City condo loan. The weighted average risk rating on the portfolio remain 3.2, and 87% of our portfolio is risk rated 3 or better.

KREF has built a diversified liability structure with $8.9 billion of financing capacity, and $2.8 billion of undrawn capacity. Our non-mark-to-market capacity remained substantial at 76%, and is diversified across two CER CLOs and a number of matched term lending agreements and asset-specific financing structures, as well as our corporate revolver. Excluding matched term secured financing, there were no corporate debt or final facility maturities until 2026. KREF is well-capitalized, with $136 million of cash, and $450 million of corporate revolver capacity available as of year-end, our best-in-class non-mark-to-market, and high levels of liquidity coupled with our deep relationships with both our financing partners and borrowers positions KREF strongly for this dynamic credit and interest rate environment.

Thank you for joining us today. Now, we're happy to take your questions.

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