The real estate investment trust lowered its dividend to 25 cents a share, down by 42%, after the company realized a nearly $59 million loss on a Philadelphia office loan. It also added two multifamily assets — one in Raleigh, North Carolina, and one in San Diego — and a Seattle life sciences property to its watchlist, signaling that commercial real estate woes extend beyond offices. 

Shares plunged the most since March 2020, falling nearly 15% to $10.01 at 10:07 a.m. in New York Wednesday.

Commercial-property loans have come into sharp focus, after New York Community Bancorp slashed its dividend last week and set aside more reserves for troubled loans to office and apartment landlords. Moody's Investors Service cut the bank's credit rating to junk late Tuesday.

The problem, which dates back to the sharp increase in interest rates that started in 2022, is that properties will have to be refinanced at higher costs when existing loans come due. There are more than $1 trillion in commercial mortgages maturing over the next two years, according to Trepp, spread across banks, insurance companies and REITs such as KREF.

KREF Chief Executive Officer Matt Salem said that the decision to cut the dividend was made, in part, to give his firm time to monetize assets taken back from borrowers. The company said on a call with analysts Wednesday that the firm is in discussions to sell two of the four properties tied to the Philadelphia loan.

"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," he said on the call. "This is high-quality real estate that we have full confidence will lease and stabilize over time."