NEW YORK, Feb 7 (Reuters) - Shares of KKR Real Estate Finance Trust plunged by as much as 20% to a nearly four-year low on Wednesday after the real estate investment trust (REIT) slashed its dividend amid souring loans.

KREF, which invests in commercial mortgages and is backed by private equity giant KKR & Co Inc, cut its dividend by 42% to 25 cents-per-share for the first quarter after booking a roughly $59-million loss tied to a Philadelphia office loan, the company announced late on Tuesday.

That loan loss provision drove KREF to a distributable loss of about $26 million, or a loss of 37 cents-per-share, in the fourth quarter. Wall Street analysts on average had expected a profit of 11 cents-per-share, according to LSEG data.

KREF shares fell as low as $9.42, their lowest level since March 2020, on Wednesday. The stock pared those losses and was down 14.5% to $10.07.

"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 (real estate owned)," KREF Chief Executive Matt Salem said during an analyst earnings call on Wednesday.

KREF has downgraded the risk rating and increased reserves owing to a Seattle life sciences property loan, company executives announced.

Commercial real estate (CRE) exposure is under renewed scrutiny as New York Community Bancorp's shares have tanked after the mid-sized bank slashed its dividend and set aside huge provisions for loans to deal with tough regulation.

Other commercial mortgage REITs were also trading lower on Wednesday: Blackstone Mortgage was down 2.7%, Starwood Property Trust lost 1.3%, Ares Commercial Real Estate fell 4.4%, Annaly Capital declined 1.3%, TPG RE Finance dropped 6%.

(Reporting by Chibuike Oguh in New York; Editing by Lance Tupper and Nick Zieminski)