KKR Real Estate Finance Trust is exploring a potential sale, the company announced as part of its reporting of weak second-quarter results Wednesday.

The New York-based real estate lender reported a $121.8M loss on its $4.5B loan portfolio in the second quarter, during which it also repurchased 5.7 million shares for a combined $38M.

As part of the earnings release, CEO Matt Salem announced that the board of directors was starting a review of strategic alternatives, Wall Street parlance for a potential sale or disposition of assets.

“As the Board undertakes its review of strategic alternatives, management remains focused on executing the action plan that we established at the beginning of the year,” Salem said in a statement released with the results. “We have made substantial progress repositioning the portfolio and generating liquidity through repayments and asset resolutions.”

KREF’s stock fell by more than 4% on the opening bell after posting the loss but has since recovered some of the slide.

The real estate finance firm ended the quarter with $721.6M in liquidity and more than $2B in expected repayments through the end of the year, which Chief Operating Officer Patrick Mattson said provided meaningful flexibility to KREF’s operations.

All but 2% of its loan portfolio is floating-rate debt, with 60% of it backing multifamily or industrial assets. The weighted average loan-to-value at origination of its total portfolio sits at 66%.

KREF’s debt portfolio covers $4.5B across 48 senior loans — down from $5.1B at the end of the first quarter — $648M in owned real estate assets, $91M in CMBS debt and $15M in other investments.

It resolved two watchlisted loans in the second quarter, taking title to a life sciences asset in Boston and securing repayment on a property in Georgetown, Texas. It now has six watchlisted properties, including two offices and one life sciences asset.

There was no timetable for the completion of the strategic review and no guarantee that it would lead to any action on KREF’s loan book, the lender said. It comes after KREF slashed its dividend at the end of the first quarter, and after Salem declared 2026 would be a “year of transition” for the firm.

Underwriting real estate debt has become increasingly competitive in recent months as banks return to the sector after a couple of years of restrictive lending and find that private credit filled the void in their absence. Banks are squeezing back in by underwriting their own real estate debt and by lending capital to the private credit space to do it for them.

Fears that a wave of underperforming properties would default on loans and drag down lenders haven’t materialized, and banks are cutting their loss reserves on a more optimistic outlook.