KKR REAL ESTATE FINANCE TRUST INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

April 26, 2022 Beth McCandry

The following discussion should be read in conjunction with the unaudited
condensed consolidated financial statements and notes thereto appearing
elsewhere in this Form 10-Q. The historical consolidated financial data below
reflects the historical results and financial position of KREF. In addition,
this discussion and analysis contains forward-looking statements and involves
numerous risks and uncertainties, including those described under Part I, Item
1A. “Risk Factors” in the Form 10-K and under “Cautionary Note Regarding
Forward-Looking Statements.” Actual results may differ materially from those
contained in any forward-looking statements.

Overview

Our Company and Our Investment Strategy

We are a real estate finance company that focuses primarily on originating and
acquiring transitional senior loans secured by commercial real estate (“CRE”)
assets. We are a Maryland corporation that was formed and commenced operations
on October 2, 2014, and we have elected to qualify as a REIT for U.S. federal
income tax purposes. Our investment strategy is to originate or acquire
transitional senior loans collateralized by institutional-quality CRE assets
that are owned and operated by experienced and well-capitalized sponsors and
located in liquid markets with strong underlying fundamentals. The assets in
which we invest include senior loans, mezzanine loans, preferred equity and
commercial mortgage-backed securities (“CMBS”) and other real estate-related
securities. Our investment allocation strategy is influenced by prevailing
market conditions at the time we invest, including interest rate, economic and
credit market conditions. In addition, we may invest in assets other than our
target assets in the future, in each case subject to maintaining our
qualification as a REIT for U.S. federal income tax purposes and our exclusion
from registration under the Investment Company Act. Our investment objective is
capital preservation and generating attractive risk-adjusted returns for our
stockholders over the long term, primarily through dividends.

Our Manager

We are externally managed by our Manager, KKR Real Estate Finance Manager LLC,
an indirect subsidiary of KKR & Co. Inc. KKR is a leading global investment firm
with an over 45-year history of leadership, innovation, and investment
excellence. KKR manages multiple alternative asset classes, including private
equity, real estate, energy, infrastructure and credit, with strategic manager
partnerships that manage hedge funds. Our Manager manages our investments and
our day-to-day business and affairs in conformity with our investment guidelines
and other policies that are approved and monitored by our board of directors.
Our Manager is responsible for, among other matters, (i) the selection,
origination or purchase and sale of our portfolio investments, (ii) our
financing activities and (iii) providing us with investment advisory services.
Our Manager is also responsible for our day-to-day operations and performs (or
causes to be performed) such services and activities relating to our investments
and business and affairs as may be appropriate. Our investment decisions are
approved by an investment committee of our Manager that is comprised of senior
investment professionals of KKR, including senior investment professionals of
KKR’s global real estate group. For a summary of certain terms of the management
agreement, see Note 15 to our condensed consolidated financial statements
included in this Form 10-Q.
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Key Financial Measures and Indicators

As a real estate finance company, we believe the key financial measures and
indicators for our business are earnings per share, dividends declared,
Distributable Earnings and book value per share.

Earnings (Loss) Per Share and Dividends Declared

The following table sets forth the calculation of basic and diluted net income
(loss) per share and dividends declared per share (amounts in thousands, except
share and per share data):
Three Months Ended,
March 31, 2022 December 31, 2021
Net income attributable to common stockholders $ 29,796 $ 35,198
Weighted-average number of shares of common stock
outstanding
Basic 63,086,452 59,364,672
Diluted 69,402,626 59,453,264
Net income per share, basic $ 0.47 $ 0.59
Net income per share, diluted $ 0.46 $ 0.59
Dividends declared per share $ 0.43 $ 0.43

Distributable Earnings

Distributable Earnings, a measure that is not prepared in accordance with GAAP,
is a key indicator of our ability to generate sufficient income to pay our
quarterly dividends and in determining the amount of such dividends, which is
the primary focus of yield/income investors who comprise a significant portion
of our investor base. Accordingly, we believe providing Distributable Earnings
on a supplemental basis to our net income as determined in accordance with GAAP
is helpful to our stockholders in assessing the overall performance of our
business.

We define Distributable Earnings as net income (loss) attributable to our
stockholders or, without duplication, owners of our subsidiaries, computed in
accordance with GAAP, including realized losses not otherwise included in GAAP
net income (loss) and excluding (i) non-cash equity compensation expense,
(ii) depreciation and amortization, (iii) any unrealized gains or losses or
other similar non-cash items that are included in net income for the applicable
reporting period, regardless of whether such items are included in other
comprehensive income or loss, or in net income, and (iv) one-time events
pursuant to changes in GAAP and certain material non-cash income or expense
items agreed upon after discussions between our Manager and our board of
directors and after approval by a majority of our independent directors. The
exclusion of depreciation and amortization from the calculation of Distributable
Earnings only applies to debt investments related to real estate to the extent
we foreclose upon the property or properties underlying such debt investments.

While Distributable Earnings excludes the impact of our unrealized current
provision for (reversal of) credit losses, any loan losses are charged off and
realized through Distributable Earnings when deemed non-recoverable.
Non-recoverability is determined (i) upon the resolution of a loan (i.e. when
the loan is repaid, fully or partially, or in the case of foreclosure, when the
underlying asset is sold), or (ii) with respect to any amount due under any
loan, when such amount is determined to be non-collectible.

Distributable Earnings should not be considered as a substitute for GAAP net
income. We caution readers that our methodology for calculating Distributable
Earnings may differ from the methodologies employed by other REITs to calculate
the same or similar supplemental performance measures, and as a result, our
reported Distributable Earnings may not be comparable to similar measures
presented by other REITs.

Historically, when calculating our share count for purposes of GAAP earnings per
diluted share and Distributable Earnings per diluted share, we have excluded the
number of shares that may be issued upon the conversion of the Convertible
Notes. As a result of updated accounting guidance, beginning with the first
quarter of 2022, we are now required to include such shares in our diluted
shares outstanding under GAAP notwithstanding that we currently have the intent
and ability to settle the Convertible Notes in cash. Accordingly, beginning with
the first quarter of 2022, for purposes of calculating Distributable Earnings
per diluted weighted average share, the weighted average diluted shares
outstanding has been adjusted from the weighted average diluted shares
outstanding under GAAP to exclude potential shares that may be issued upon the
conversion of the Convertible Notes. Consistent with the treatment of other
unrealized adjustments to Distributable Earnings, these potentially
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issuable shares are excluded until a conversion occurs, which we believe is a
useful presentation for investors. We believe that excluding shares issued in
connection with a potential conversion of the Convertible Notes from our
computation of Distributable Earnings per diluted weighted average share is
useful to investors for various reasons, including: (i) conversion of
Convertible Notes to shares would require the holder of a note to elect to
convert the Convertible Note and for us to elect to settle the conversion in the
form of shares, and we currently intend to settle the Convertible Notes in cash;
(ii) future conversion decisions by note holders will be based on our stock
price in the future, which is presently not determinable; and (iii) we believe
that when evaluating our operating performance, investors and potential
investors consider our Distributable Earnings relative to our actual
distributions, which are based on shares outstanding and not shares that might
be issued in the future.

The table below reconciles the weighted average diluted shares under GAAP to the
weighted average diluted shares used for Distributable Earnings:

Three Months Ended,
March 31, 2022 December 31, 2021
Diluted weighted average common shares outstanding, 69,402,626 59,453,264

GAAP

Less: Dilutive shares under assumed conversion of the (6,316,174) –
Convertible Notes (ASU 2020-06)
Less: Anti-dilutive restricted stock units – (88,592)
Diluted weighted average common shares outstanding, 63,086,452 59,364,672
Distributable Earnings

We also use Distributable Earnings (before incentive compensation payable to our
Manager) to determine the management and incentive compensation we pay our
Manager. For its services to KREF, our Manager is entitled to a quarterly
management fee equal to the greater of $62,500 or 0.375% of a weighted average
adjusted equity and quarterly incentive compensation equal to 20.0% of the
excess of (a) the trailing 12-month Distributable Earnings (before incentive
compensation payable to our Manager) over (b) 7.0% of the trailing 12-month
weighted average adjusted equity(1) (“Hurdle Rate”), less incentive compensation
KREF already paid to the Manager with respect to the first three calendar
quarters of such trailing 12-month period. The quarterly incentive compensation
is calculated and paid in arrears with a three-month lag.

(1) For purposes of calculating incentive compensation under our Management
Agreement, adjusted equity excludes: (i) the effects of equity issued that
provides for fixed distributions or other debt characteristics and (ii)
unrealized provision for (reversal of) credit losses.

The following table provides a reconciliation of GAAP net income attributable to
common stockholders to Distributable Earnings (amounts in thousands, except
share and per share data):

Three Months Ended,
March 31, 2022 December 31, 2021
Net Income (Loss) Attributable to Common Stockholders $ 29,796 $ 35,198

Adjustments

Non-cash equity compensation expense 2,126 1,413
Unrealized (gains) or losses(A) (1,032) 1,463
Provision for (reversal of) credit losses, net (1,218) (3,077)
Non-cash convertible notes discount amortization 89 91

Loan write-offs(B) – (32,905)
Gain on redemption of non-voting manager units – (5,126)
Distributable Earnings $ 29,761 $ (2,943)
Weighted average number of shares of common stock
outstanding
Basic 63,086,452 59,364,672
Adjusted Diluted Shares Outstanding(C) 63,086,452 59,364,672
Distributable Earnings per Diluted Weighted Average $ 0.47 $ (0.05)
Share(C)

(A) Includes ($1.0) million and ($1.1) million of unrealized mark-to-market
adjustment to our RECOP I’s underlying CMBS investments for the three months
ended March 31, 2022 and December 31, 2021, respectively. Includes $2.5 million
non-cash redemption value adjustment of our Special Non-Voting Preferred Stock
for the three months ended December 31, 2021.

(B) Includes $32.1 million write-off on a defaulted senior retail loan which we
took title of the underlying property and $0.9 million write-off of the
remaining balance on an impaired mezzanine retail loan during the three months
ended December 31, 2021.

(C) See the reconciliation from weighted average diluted shares under GAAP to
the adjusted weighted average diluted shares used for Distributable
Earnings above.

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Book Value per Share

We believe that book value per share is helpful to stockholders in evaluating
the growth of our company as we have scaled our equity capital base and continue
to invest in our target assets. The following table calculates our book value
per share of common stock (amounts in thousands, except share and per share
data):
March 31, 2022December 31, 2021

KKR Real Estate Finance Trust Inc. stockholders’ equity $ 1,649,535$ 1,361,434
Series A preferred stock (liquidation preference of
$25.00 per share)

(327,750) (172,500)
Common stockholders’ equity $

1,321,785 $ 1,188,934
Shares of common stock issued and outstanding at period
end

67,933,704 61,370,732
Book value per share of common stock $ 19.46 $ 19.37

Book value as of March 31, 2022 included the impact of an estimated CECL credit
loss allowance of $22.5 million, or ($0.33) per common share. See Note 2 –
Summary of Significant Accounting Policies, to our condensed consolidated
financial statements included in this Form 10-Q for detailed discussion of
allowance for credit losses.

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Our Portfolio

We have established a $7,253.9 million portfolio of diversified investments,
consisting primarily of performing senior and mezzanine commercial real estate
loans as of March 31, 2022.

Our loan portfolio is 100.0% performing as of March 31, 2022. During the three
months ended March 31, 2022, we collected 100.0% of interest payments due on our
loan portfolio. As of March 31, 2022, the average risk rating of our loan
portfolio was 2.9 (Average Risk), weighted by total loan exposure. As of
March 31, 2022, 95.0% of our loans, based on total loan exposure, was risk-rated
3 or better. As of March 31, 2022, the average loan commitment in our portfolio
was $128.8 million and multifamily and office loans comprised 75% of our loan
portfolio, while hospitality loans comprised 5% of the portfolio.

In addition to our loan portfolio, as of March 31, 2022, as a result of taking
title to the collateral of one defaulted senior retail loan, we owned one REO
asset with a net carrying value of $78.6 million, comprised of the fair value of
the acquired retail property and the capitalized transaction costs, as of
March 31, 2022. This property is held for investment and reflected on our
consolidated balance sheets at its estimated fair value at the time of
acquisition plus related acquisition costs.

Since our IPO, we have continued to execute on our primary investment strategy
of originating floating-rate transitional senior loans and, as we continue to
scale our loan portfolio, we expect that our originations will continue to be
heavily weighted toward floating-rate loans. As of March 31, 2022, 100.0% of our
loans by total loan exposure earned a floating rate of interest. We expect the
majority of our future investment activity to focus on originating floating-rate
senior loans that we finance with our repurchase and other financing facilities,
with a secondary focus on originating floating-rate loans for which we syndicate
a senior position and retain a subordinated interest for our portfolio. As of
March 31, 2022, all of our investments were located in the United States.

The following charts illustrate the diversification and composition of our loan
portfolio(A), based on type of investment, interest rate, underlying property
type, geographic location, vintage and LTV as of March 31, 2022:
[[Image Removed: kref-20220331_g2.jpg]]

The charts above are based on total outstanding principal amount of our
commercial real estate loans.

(A) Excludes: (i) one REO retail asset on a defaulted loan with net carrying
value of $78.6 million as of March 31, 2022, (ii) CMBS B-Piece investments held
through RECOP I, an equity method investment and (iii) one impaired mezzanine
loan with an outstanding principal of $5.5 million that was fully written off.
(B) Senior loans include senior mortgages and similar credit quality loans,
including related contiguous junior participations in senior loans where we have
financed a loan with structural leverage through the non-recourse sale of a
corresponding first mortgage.
(C) We classify a loan as life science if more than 50% of the gross leasable
area is leased to, or will be converted to, life science-related space.
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(D) Excludes one real estate corporate loan to a multifamily operator with an
outstanding principal amount of $41.5 million, representing 0.6% of our
commercial real estate loans as of March 31, 2022.
(E) LTV is generally based on the initial loan amount divided by the as-is
appraised value as of the date the loan was originated or by the current
principal amount as of the date of the most recent as-is appraised value.

The following table details our quarterly loan activity (dollars in thousands):

Three Months Ended
December 31, September 30,
March 31, 2022 2021 2021 June 30, 2021
Loan originations $ 843,624$ 1,804,897$ 1,536,993$ 967,108
Loan fundings(A) $ 744,192

$ 1,680,890$ 1,142,969$ 558,387
Loan repayments/syndications

(282,282) (679,749) (934,899) (270,980)
Net fundings 461,910 1,001,141 208,070 287,407
PIK interest 464 418 373 458
Write-off – (32,905) – –
Transfer to REO – (77,516) – –
Total activity $ 462,374$ 891,138$ 208,443$ 287,865

(A) Includes initial funding of new loans and additional fundings made under
existing loans.

The following table details overall statistics for our loan portfolio as of
March 31, 2022 (dollars in thousands):

Total Loan Exposure(A)
Balance Sheet Total Loan Floating Rate
Portfolio Portfolio Loans Fixed Rate Loans
Number of loans 68 67 67 –
Principal balance $ 6,821,576$ 7,139,613$ 7,139,613 $ –
Amortized cost $ 6,772,884$ 7,096,421$ 7,096,421 $ –
Unfunded loan commitments(B) $ 1,449,105$ 1,449,105$ 1,449,105 $ –
Weighted-average cash coupon(C) 4.1 % + 3.30 % + 3.30 % n.a.
Weighted-average all-in yield(C) 4.4 % + 3.60 % + 3.60 % n.a.
Weighted-average maximum maturity 3.5 3.5 3.5 n.a.
(years)(D)
LTV(E) 67 % 67 % 67 % n.a.

(A) In certain instances, we finance our loans through the non-recourse sale
of a senior interest that is not included in our condensed consolidated
financial statements. Total loan exposure includes the entire loan we originated
and financed and excludes one impaired mezzanine loan with an outstanding
principal of $5.5 million that was fully written off.

(B) Unfunded commitments will primarily be funded to finance property
improvements and renovations or lease-related expenditures by the borrowers.
These future commitments will be funded over the term of each loan, subject in
certain cases to an expiration date.

(C) As of March 31, 2022, 87.1% and 12.9% of floating rate loans by loan
exposure were indexed to one-month USD LIBOR and Term SOFR, respectively. In
addition to cash coupon, all-in yield includes the amortization of deferred
origination fees, loan origination costs and purchase discounts.

(D) Maximum maturity assumes all extension options are exercised by the
borrower; however, our loans may be repaid prior to such date. As of March 31,
2022, based on total loan exposure, 66.8% of our loans were subject to yield
maintenance or other prepayment restrictions and 33.2% were open to repayment by
the borrower without penalty.

(E) LTV is generally based on the initial loan amount divided by the as-is
appraised value as of the date the loan was originated or by the current
principal amount as of the date of the most recent as-is appraised value.
Weighted average LTV excludes one real estate corporate loan to a multifamily
operator with an outstanding principal of $41.5 million as of March 31, 2022.

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The table below sets forth additional information relating to our portfolio as
of March 31, 2022 (dollars in millions):

Investment(A) Senior Loans(J)
1 Senior Loan 2 Senior Loan 3 Senior Loan 4 Senior Loan 5 Senior Loan 6 Senior Loan 7 Senior Loan 8 Senior Loan 9 Senior Loan(K) 10 Senior Loan 11 Senior Loan 12 Senior Loan 13 Senior Loan 14 Senior Loan 15 Senior Loan 16 Senior Loan 17 Senior Loan 18 Senior Loan 19 Senior Loan 20 Senior Loan 21 Senior Loan 22 Senior Loan 23 Senior Loan 24 Senior Loan 25 Senior Loan 26 Senior Loan 27 Senior Loan 28 Senior Loan 29 Senior Loan 30 Senior Loan 31 Senior Loan 32 Senior Loan 33 Senior Loan 34 Senior Loan 35 Senior Loan 36 Senior Loan 37 Senior Loan Committed Current
Total Whole Principal Principal Max Remaining Term Loan Per SF /
Location Property Type Investment Date Loan(B) Amount(B) Amount Net Equity(C) Coupon(D)(E) (Years)(D)(F) Unit / Key(G) LTV(D)(H) Risk Rating
Arlington, VA Multifamily 9/30/2021$ 381.0$ 381.0$ 352.9 $ 70.2 + 3.2% 4.5 $ 317,965 / unit 69 % 3
Bellevue, WA Office 9/13/2021 520.8 260.4 68.2 16.3 + 3.6 5.0 $ 855 / SF 63 3
Los Angeles, CA Multifamily 2/19/2021 260.0 260.0 250.0 38.0 + 3.6 3.9 $ 466,400 / unit 68 3
Boston, MA Life Science 5/24/2018 250.5 250.5 249.0 60.7 + 3.2 1.8 $ 533 / SF 53 1
Mountain View, CA Office 7/14/2021 362.8 250.0 186.7 44.8 + 3.3 4.4 $ 607 / SF 73 3
New York, NY Condo (Residential) 12/20/2018 234.5 234.5 214.8 59.2 + 3.6 1.8 $ 1,341 / SF 71 3
Bronx, NY Industrial 8/27/2021 381.2 228.7 111.3 109.8 + 4.1 4.4 $ 277 / SF 52 3
Various Multifamily 5/31/2019 216.5 216.5 216.3 38.9 + 4.0 2.2 $ 202,104 / unit 74 3
Various Industrial 6/30/2021 425.0 212.5 26.5 24.0 + 5.4 4.3 $ 210 / SF 68 3
Minneapolis, MN Office 11/13/2017 194.4 194.4 194.4 33.0 + 3.8 0.7 $ 179 / SF 65 2
Washington, D.C. Office 11/9/2021 187.7 187.7 125.9 31.6 + 3.3 4.7 $ 362 / SF 55 3
Boston, MA Office 2/4/2021 375.0 187.5 187.5 37.4 + 3.3 3.9 $ 506 / SF 71 3
Chicago, IL Multifamily 6/6/2019 186.0 186.0 179.5 32.4 + 3.6 2.2 $ 364,837 / unit 72 3
The Woodlands, TX Hospitality 9/15/2021 183.3 183.3 168.9 30.5 + 4.2 4.5 $ 185,810 / key 64 3
Philadelphia, PA Office 4/11/2019 182.6 182.6 157.0 24.9 + 2.6 2.1 $ 220 / SF 68 4
Washington, D.C. Office 12/20/2019 175.5 175.5 127.1 43.9 + 3.4 2.8 $ 622 / SF 58 3
West Palm Beach, FL Multifamily 12/29/2021 171.5 171.5 169.6 25.2 + 2.7 4.8 $ 208,857 / unit 73 3
Chicago, IL Office 7/15/2019 170.0 170.0 137.6 27.1 + 3.3 2.4 $ 132 / SF 59 3
Boston, MA Life Science 4/27/2021 332.3 166.2 124.3 20.8 + 3.6 4.1 $ 516 / SF 66 3
Philadelphia, PA Office 6/19/2018 165.0 165.0 165.0 92.2 + 2.5 1.3 $ 169 / SF 71 4
New York, NY Multifamily 12/5/2018 163.0 163.0 148.0 22.3 + 4.0 1.7 $ 556,391 / unit 77 3
Oakland, CA Office 10/23/2020 509.9 159.7 112.3 17.7 + 4.3 3.6 $ 306 / SF 65 3
Plano, TX Office 2/6/2020 153.7 153.7 135.7 21.2 + 2.7 2.9 $ 188 / SF 63 2
Seattle, WA Life Science 10/1/2021 188.0 140.3 90.0 23.9 + 3.1 4.5 $ 575 / SF 69 3
Boston, MA Multifamily 3/29/2019 138.0 138.0 137.0 21.3 + 2.7 2.0 $ 351,282 / unit 59 3
Dallas, TX Office 12/10/2021 138.0 138.0 135.8 25.0 + 3.6 4.7 $ 432 / SF 68 3
Arlington, VA Multifamily 1/20/2022 135.3 135.3 130.9 31.5 + 2.9 4.9 $ 436,300 / unit 65 3
Fort Lauderdale, FL Hospitality 11/9/2018 130.0 130.0 130.0 24.2 + 3.4 1.7 $ 375,723 / key 66 3
San Carlos, CA Life Science 2/1/2022 195.9 125.0 80.8 19.7 + 3.6 4.9 $ 551 / SF 68 3
Fontana, CA Industrial 5/11/2021 119.9 119.9 48.7 19.5 + 4.6 4.2 $ 102 / SF 64 3
Irving, TX Multifamily 4/22/2021 117.6 117.6 110.5 17.6 + 3.3 4.1 $ 121,745 / unit 70 3
Cambridge, MA Life Science 12/22/2021 401.3 115.7 53.4 14.3 + 3.9 4.8 $ 1072 / SF 51 3
Pittsburgh, PAStudent Housing6/8/2021 112.5 112.5 112.5 16.9 + 2.9 4.2 $ 155,602 / bed 74 3
Las Vegas, NV Multifamily 12/28/2021 106.3 106.3 102.0 19.7 + 2.7 4.8 $ 193,182 / unit 61 3
Doral, FL Multifamily 12/10/2021 212.0 106.0 106.0 20.8 + 2.8 4.7 $ 335,975 / unit 77 3
San Diego, CA Multifamily 10/20/2021 103.5 103.5 103.5 18.3 + 2.8 4.6 $ 448,052 / unit 71 3
Orlando, FL Multifamily 12/14/2021 102.4 102.4 88.9 21.3 + 3.0 4.8 $ 234,565 / unit 74 3

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Committed Current
Total Whole Principal Principal Max Remaining Term Loan Per SF /

Investment(A) Location

Property Type Investment Date Loan(B) Amount(B) Amount Net Equity(C) Coupon(D)(E) (Years)(D)(F) Unit / Key(G) LTV(D)(H) Risk Rating
38 Senior Loan West Hollywood, CA Multifamily 1/26/2022 102.0 102.0 102.0 15.1 + 3.0 4.9 $ 2,756,757 / 65 3
unit
39 Senior Loan Washington, D.C. Office 1/13/2022 228.5 100.0 57.4 8.9 + 3.2 5.9 $ 210 / SF 55 3
40 Senior Loan Phoenix, AZ Industrial 1/13/2022 195.3 100.0 5.6 3.2 + 4.0 4.9 $ 57 / SF 57 3
41 Senior Loan Brisbane, CA Life Science 7/22/2021 95.0 95.0 85.6 17.0 + 3.0 4.4 $ 739 / SF 71 3
42 Senior Loan State College, PAStudent Housing10/15/2019 93.4 93.4 87.8 21.7 + 2.7 2.6 $ 73,507 / bed 64 3
43 Senior Loan Brandon, FL Multifamily 1/13/2022 90.3 90.3 61.9 8.4 + 3.1 4.9 $ 189,939 / unit 75 3
44 Senior Loan Dallas, TX Multifamily 12/23/2021 90.0 90.0 77.5 14.9 + 2.8 4.8 $ 238,488 / unit 67 3
45 Senior Loan Miami, FL Multifamily 10/14/2021 89.5 89.5 89.5 17.0 + 2.8 4.6 $ 304,422 / unit 76 3
46 Senior Loan Denver, CO Multifamily 6/24/2021 88.5 88.5 88.5 15.4 + 3.0 4.3 $ 295,000 / unit 77 3
47 Senior Loan Dallas, TX Office 1/22/2021 87.0 87.0 87.0 21.1 + 3.3 3.9 $ 288 / SF 65 3
48 Senior Loan Charlotte, NC Multifamily 12/14/2021 86.8 86.8 76.0 10.8 + 3.0 4.8 $ 206,522 / unit 74 3
49 Senior Loan New York, NY Multifamily 3/29/2018 86.0 86.0 86.0 13.2 + 4.0 1.0 $ 462,366 / unit 63 2
50 Senior Loan Hollywood, FL Multifamily 12/20/2021 81.0 81.0 81.0 14.6 + 3.0 4.8 $ 327,935 / unit 74 3
51 Senior Loan Seattle, WA Office 3/20/2018 80.7 80.7 80.7 13.2 + 4.1 1.0 $ 468 / SF 56 3
52 Senior Loan Phoenix, AZ Single Family Rental 4/22/2021 72.1 72.1 18.8 11.2 + 4.8 4.1 $ 157,092 / unit 50 3
53 Senior Loan Arlington, VA Multifamily 10/23/2020 141.8 70.9 70.9 11.5 + 3.8 3.5 $ 393,858 / unit 73 3
54 Senior Loan Denver, CO Multifamily 9/14/2021 70.3 70.3 69.3 11.0 + 2.7 4.5 $ 286,157 / unit 78 3
55 Senior Loan Washington, D.C. Multifamily 12/4/2020 69.0 69.0 66.3 10.3 + 3.5 3.7 $ 265,132 / unit 63 3
56 Senior Loan Dallas, TX Multifamily 8/18/2021 68.2 68.2 68.2 9.8 + 3.8 4.4 $ 189,444 / unit 70 3
57 Senior Loan Manassas Park, VA Multifamily 2/25/2022 68.0 68.0 68.0 67.5 + 2.7 4.9 $ 223,684 / unit 73 3
58 Senior Loan Plano, TX Multifamily 3/31/2022 67.8 67.8 64.2 63.5 + 2.8 5.0 $ 241,165 / unit 75 3
59 Senior Loan Nashville, TN Hospitality 12/9/2021 66.0 66.0 64.3 9.8 + 3.6 4.8 $ 279,498 / key 68 3
60 Senior Loan Atlanta, GA Multifamily 12/10/2021 61.5 61.5 55.8 13.7 + 2.9 4.8 $ 184,763 / unit 67 3
61 Senior Loan Durham, NC Multifamily 12/15/2021 60.0 60.0 50.3 8.4 + 2.9 4.8 $ 145,740 / unit 67 3
62 Senior Loan Sharon, MA Multifamily 12/1/2021 56.9 56.9 56.9 8.3 + 2.8 4.7 $ 296,484 / unit 70 3
63 Senior Loan Queens, NY Industrial 2/22/2022 55.3 55.3 52.0 51.7 + 4.0 1.9 $ 84 / SF 68 3
64 Senior Loan Georgetown, TX Multifamily 12/16/2021 41.8 41.8 41.8 10.1 + 3.3 4.8 $ 199,048 / unit 68 3
65 Senior Loan(L) New York, NY Condo (Residential) 8/4/2017 32.6 32.6 32.6 32.6 + 4.2 – $ 1,244 / SF 73 4
66 Senior Loan Denver, CO Industrial 12/11/2020 28.8 28.8 13.7 13.3 + 3.8 3.8 $ 58 / SF 61 3
Total/Weighted Average $ 10,837.1$ 8,590.0$ 7,098.1$ 1,743.3 + 3.3% 3.5 67 % 2.9
Senior Loans Unlevered
Non-Senior Loans
1 Corporate n.a. Multifamily 12/11/2020 103.8 41.5 41.5 41.0 + 12.0 3.7 n.a. n.a. 3
Total/Weighted Average $ 103.8$ 41.5$ 41.5 $ 41.0 + 12.0% 3.7 n.a. 3.0

Non-Senior Loans Unlevered

CMBS B-Pieces
1 RECOP I(I) Various Various 2/13/2017 n.a. 40.0 35.7 35.7 4.6 7.2 n.a. 58 n.a.
Total/Weighted Average $ 40.0$ 35.7 $ 35.7 4.6% 7.2 58 %
CMBS B-Pieces Unlevered
Real Estate Owned
1 Real Estate Asset Portland, OR Retail 12/16/2021 n.a. n.a. 78.6 78.4 n.a. n.a. n.a. n.a. n.a.

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Table of Contents

Committed Current
Principal Principal Max Remaining Term Loan Per SF /
Investment(A) Location Property Type Investment Date Total Whole Loan(B) Amount(B) Amount Net Equity(C) Coupon(D)(E) (Years)(D)(F) Unit / Key(G) LTV(D)(H) Risk Rating
Total/Weighted Average $ 78.6 $ 78.4
Real Estate Owned
Grand Total / Weighted Average $ 8,671.5$ 7,253.9$ 1,898.4 4.1% 3.6 67 % 2.9

* Numbers presented may not foot due to rounding.
(A) Our total portfolio represents the current principal amount on senior,
mezzanine and corporate loans, net equity in RECOP I, which holds CMBS B-Piece
investments, and net carrying value of our sole REO investment. Excludes one
impaired mezzanine loan with an outstanding principal of $5.5 million that was
fully written off.

For Senior Loan 12, the total whole loan is $375.0 million, co-originated and
co-funded by us and a KKR affiliate. Our interest was 50% of the loan or
$187.5 million, of which $150.0 million in senior notes were syndicated to a
third party. Post syndication, we retained a mezzanine loan with a commitment of
$37.5 million, fully funded as of March 31, 2022, at an interest rate of L+7.9%.

For Senior Loan 13, the total whole loan is $186.0 million, of which an
$81.6 million senior note was syndicated to a third party lender. Post
syndication, we retained the mezzanine loan and a 45% interest in the senior
loan with a total commitment of $104.4 million, of which $100.7 million was
funded as of March 31, 2022, at a blended interest rate of L+4.7%.

For Senior Loan 22, the total whole loan is $509.9 million, co-originated and
co-funded by us and a KKR affiliate. Our interest was 31% of the loan or $159.7
million, of which $134.7 million in senior notes were syndicated to third party
lenders. Post syndication, we retained a mezzanine loan with a commitment of
$25.0 million, of which $17.6 million was funded as of March 31, 2022, at an
interest rate of L+12.9%.

(B) Total Whole Loan represents total commitment of the entire whole loan
originated. Committed Principal Amount includes participations by KKR affiliated
entities and third parties that are syndicated/sold.

(C) Net equity reflects (i) the amortized cost basis of our loans, net of
borrowings; and (ii) the cost basis of our investments in RECOP I and REO.

(D) Weighted average is weighted by the current principal amount for our
senior, mezzanine and corporate loans and by net equity for our RECOP I CMBS
B-Pieces.
(E) Coupon expressed as spread over the relevant floating benchmark rates,
which include one-month LIBOR and Term SOFR, as applicable to each loan. As of
March 31, 2022, 87.1% and 12.9% of floating rate loans by principal amount were
indexed to one-month LIBOR and Term SOFR, respectively.

(F) Max remaining term (years) assumes all extension options are exercised, if
applicable.

(G) Loan Per SF / Unit / Key is based on the current principal amount divided
by the current SF / Unit / Key. For Senior Loans 2, 7, 9, 30, 32, 40, 52, and
66, Loan Per SF / Unit / Key is calculated as the total commitment amount of the
loan divided by the proposed SF / Unit / Key.

(H) For senior loans, LTV is generally based on the initial loan amount divided
by the as-is appraised value as of the date the loan was originated or by the
current principal amount as of the date of the most recent as-is appraised
value; for mezzanine loans, LTV is based on the current balance of the whole
loan divided by the as-is appraised value as of the date the loan was
originated; for RECOP I CMBS B-Pieces, LTV is based on the weighted average LTV
of the underlying loan pool at issuance. Weighted Average LTV excludes one fully
funded corporate loan to a multifamily operator with an outstanding principal
amount of $41.5 million.

For Senior Loan 6, LTV is based on the initial loan amount divided by the
appraised bulk sale value assuming a condo-conversion and no renovation.

For Senior Loan 65, LTV is based on the current principal amount divided by the
adjusted appraised gross sellout value net of sales cost.

For Senior Loans 2, 7, 9, 30, 32, 40, 52 and 66, LTV is calculated as the total
commitment amount of the loan divided by the as-stabilized value as of the date
the loan was originated.

(I) Represents our investment in an aggregator vehicle alongside RECOP I that
invests in CMBS B-Pieces. Committed principal represents our total commitment to
the aggregator vehicle whereas current principal represents the current funded
amount.

(J) Senior loans include senior mortgages and similar credit quality
investments, including junior participations in our originated senior loans for
which we have syndicated the senior participations and retained the junior
participations for our portfolio and excludes vertical loan participations.

(K) For Senior Loan 9, the total whole loan facility is $425.0 million,
co-originated and co-funded by us and a KKR affiliate. Our interest was 50% of
the facility or $212.5 million. The facility is comprised of individual
cross-collateralized whole loans. As of March 31, 2022, there were six
underlying senior loans in the facility with a commitment of $65.9 million and
outstanding principal of $26.5 million.

(L) For Senior Loan 65, Loan per SF of $1,244 is based on the allocated loan
amount of the residential units. Excluding the value of the retail and parking
components of the collateral, the Loan per SF is $1,928 based on allocating the
full amount of the loan to only the residential units.
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Portfolio Surveillance and Credit Quality

Our Manager actively manages our portfolio and assesses the risk of any
deterioration in credit quality by quarterly evaluating the performance of the
underlying property, the valuation of comparable assets as well as the financial
wherewithal of the associated borrower. Our loan documents generally give us the
right to receive regular property, borrower and guarantor financial statements;
approve annual budgets and tenant leases; and enforce loan covenants and
remedies. In addition, our Manager evaluates the macroeconomic environment,
prevailing real estate fundamentals and micro-market dynamics where the
underlying property is located. Through site inspections, local market experts
and various data sources, as part of its risk assessment, our Manager monitors
criteria such as new supply and tenant demand, market occupancy and rental rate
trends, and capitalization rates and valuation trends.

We maintain a robust asset management relationship with our borrowers and have
utilized these relationships to proactively address the potential impacts of the
COVID-19 pandemic on our loans secured by properties experiencing cash flow
pressure, most significantly hospitality and retail assets. Some of our
borrowers have indicated that due to the impact of the COVID-19 pandemic, they
will be unable to timely execute their business plans, have had to temporarily
close their businesses, or have experienced other negative business consequences
and have requested temporary interest deferral or forbearance, or other
modifications of their loans. Accordingly, discussions we have had with our
borrowers have addressed potential near-term defensive loan modifications, which
could include repurposing of reserves, temporary deferrals of interest, or
performance test or covenant waivers on loans collateralized by assets directly
impacted by the COVID-19 pandemic, and which would generally be coupled with an
additional equity commitment and/or guaranty from sponsors.

We believe our loan sponsors are generally committed to supporting assets
collateralizing our loans through additional equity investments, and that we
will benefit from our long-standing core business model of originating senior
loans collateralized by large assets in major markets with experienced,
well-capitalized institutional sponsors. While we believe the principal amounts
of our loans are generally adequately protected by underlying collateral value,
there is a risk that we will not realize the entire principal value of certain
investments.

In addition to ongoing asset management, our Manager performs a quarterly review
of our portfolio whereby each loan is assigned a risk rating of 1 through 5,
from lowest risk to highest risk. Our Manager is responsible for reviewing,
assigning and updating the risk ratings for each loan on a quarterly basis. The
risk ratings are based on many factors, including, but not limited to,
underlying real estate performance and asset value, values of comparable
properties, durability and quality of property cash flows, sponsor experience
and financial wherewithal, and the existence of a risk-mitigating loan
structure. Additional key considerations include LTVs, debt service coverage
ratios, real estate and credit market dynamics, and risk of default or principal
loss. Based on a five-point scale, our loans are rated “1” through “5,” from
less risk to greater risk, which ratings are defined as follows:

1-Very Low Risk-The underlying property performance has surpassed underwritten
expectations, and the sponsor’s business plan is generally complete. The
property demonstrates stabilized occupancy and/or rental rates resulting in
strong current cash flow and/or a very low LTV (<65%). At the level of performance, it is very likely that the underlying loan can be refinanced easily in the period's prevailing capital market conditions. 2-Low Risk-The underlying property performance has matched or exceeded underwritten expectations, and the sponsor's business plan may be ahead of schedule or has achieved some or many of the major milestones from a risk mitigation perspective. The property has achieved improving occupancy at market rents, resulting in sufficient current cash flow and/or a low LTV (65%-70%). Operating trends are favorable, and the underlying loan can be refinanced in today's prevailing capital market conditions. The sponsor/manager is well capitalized or has demonstrated a history of success in owning or operating similar real estate. 3-Average Risk-The underlying property performance is in-line with underwritten expectations, or the sponsor may be in the early stages of executing its business plan. Current cash flow supports debt service payments, or there is an ample interest reserve or loan structure in place to provide the sponsor time to execute the value-improvement plan. The property exhibits a moderate LTV (<75%). Loan structure appropriately mitigates additional risks. The sponsor/manager has a stable credit history and experience owning or operating similar real estate. 60 -------------------------------------------------------------------------------- Table of Contents 4-High Risk/Potential for Loss-A loan that has a risk of realizing a principal loss. The underlying property performance is behind underwritten expectations, or the sponsor is behind schedule in executing its business plan. The underlying market fundamentals may have deteriorated, comparable property valuations may be declining or property occupancy has been volatile, resulting in current cash flow that may not support debt service payments. The loan exhibits a high LTV (>80%), and the loan covenants are unlikely to fully mitigate some risks.
Interest payments may come from an interest reserve or sponsor equity.

5-Impaired/Loss Likely-A loan that has a very high risk of realizing a principal
loss or has otherwise incurred a principal loss. The underlying property
performance is significantly behind underwritten expectations, the sponsor has
failed to execute its business plan and/or the sponsor has missed interest
payments. The market fundamentals have deteriorated, or property performance has
unexpectedly declined or valuations for comparable properties have declined
meaningfully since loan origination. Current cash flow does not support debt
service payments. With the current capital structure, the sponsor might not be
incentivized to protect its equity without a restructuring of the loan. The loan
exhibits a very high LTV (>90%), and default may be imminent.

As of March 31, 2022, the average risk rating of our loan portfolio was 2.9
(Average Risk), weighted by total loan exposure, consistent with that as of
December 31, 2021.

March 31, 2022 December 31, 2021
Total Loan Total Loan Total Loan Total Loan
Risk Rating Number of Loans Carrying Value Exposure(A) Exposure % Number of Loans Carrying Value Exposure(A) Exposure %
1 1 $ 248,860$ 249,010 3.5 % 1 $ 243,549$ 243,552 3.6 %
2 3 415,329 416,147 5.8 3 410,293 411,424 6.2
3 60 5,753,587 6,119,804 85.7 54 5,268,590 5,627,927 84.3
4 3 355,108 354,652 5.0 4 394,301 394,336 5.9
5 1 – – – 1 – – –
Total loan receivable 68 $ 6,772,884$ 7,139,613 100.0 % 63 $ 6,316,733$ 6,677,239 100.0 %
Allowance for credit losses (20,676) (22,244)
Loan receivable, net $ 6,752,208$ 6,294,489

(A) In certain instances, we finance our loans through the non-recourse sale of
a senior interest that is not included in our condensed consolidated financial
statements under GAAP. Total loan exposure includes the entire loan we
originated and financed, including $323.5 million and $318.6 million of such
non-consolidated senior interests as of March 31, 2022 and December 31, 2021,
respectively.

CMBS B-Piece Investments

Our current CMBS exposure is through RECOP I, an equity method investment. Our
Manager has processes and procedures in place to monitor and assess the credit
quality of our CMBS B-Piece investments and promote the regular and active
management of these investments. This includes reviewing the performance of the
real estate assets underlying the loans that collateralize the investments and
determining the impact of such performance on the credit and return profile of
the investments. Our Manager holds monthly surveillance calls with the special
servicer of our CMBS B-Piece investments to monitor the performance of our
portfolio and discuss issues associated with the loans underlying our CMBS
B-Piece investments. At each meeting, our Manager is provided with a due
diligence submission for each loan underlying our CMBS B-Piece investments,
which includes both property- and loan-level information. These meetings assist
our Manager in monitoring our portfolio, identifying any potential loan issues,
determining if a re-underwriting of any loan is warranted and examining the
timing and severity of any potential losses or impairments.

Valuations for our CMBS B-Piece investments are prepared using inputs from an
independent valuation firm and confirmed by our Manager via quotes from two or
more broker-dealers that actively make markets in CMBS. As part of the quarterly
valuation process, our Manager also reviews pricing indications for comparable
CMBS and monitors the credit metrics of the loans that collateralize our CMBS
B-Piece investments.

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Portfolio Financing

Our portfolio financing arrangements include term loan financing, term lending
agreements, collateralized loan obligations, secured term loan, warehouse
facility, asset specific financing, non-consolidated senior interest
(collectively “Non-Mark-to-Market Financing Sources”) and master repurchase
agreements.

Our Non-Mark-to-Market Financing Sources, which accounted for 79% of our total
secured financing (excluding our corporate revolver) as of March 31, 2022, are
not subject to credit or capital markets mark-to-market provisions. The
remaining 21% of our secured borrowings, which is primarily comprised of three
master repurchase agreements, are only subject to credit marks.

We continue to expand and diversify our financing sources, especially those
sources that provide non-mark-to-market financing, reducing our exposure to
market volatility.

The following table summarizes our portfolio financing (dollars in thousands):

Portfolio Financing Outstanding Principal
Balance
Non-/Mark-to-Market March 31, 2022 December 31, 2021
Master repurchase agreements Mark-to-Credit $ 1,204,289$ 1,554,808
Collateralized loan obligations Non-Mark-to-Market 1,942,750 1,095,250
Term lending agreements Non-Mark-to-Market 942,580 1,117,627
Term loan financing Non-Mark-to-Market 898,959 870,458
Secured term loan Non-Mark-to-Market 349,125 350,000
Asset specific financing Non-Mark-to-Market – 60,000
Warehouse facility Non-Mark-to-Market – –
Non-consolidated senior interests Non-Mark-to-Market 323,537 318,634
Total portfolio financing $ 5,661,240$ 5,366,777

Financing Agreements

The following table details our financing agreements (dollars in thousands):

March 31, 2022
Maximum Collateral Borrowings
Facility Size(A) Assets(B) Potential(C) Outstanding Available
Master Repurchase
Agreements
Wells Fargo $ 1,000,000$ 894,440$ 670,830$ 665,620$ 5,210
Morgan Stanley 600,000 612,504 458,695 433,368 25,327
Goldman Sachs 240,000 189,087 135,899 105,301 30,598
Term Loan Facility 1,000,000 1,141,803 898,959 898,959 –
Term Lending Agreements
KREF Lending V 633,388 761,770 606,474 602,113 4,361
KREF Lending IX 750,000 422,826 341,057 340,467 590
Warehouse Facility
HSBC 500,000 – – – –
Asset Specific Financing
BMO Facility 300,000 – – – –
Revolver 520,000 – 520,000 – 520,000
$ 5,543,388$ 4,022,430$ 3,631,914$ 3,045,828$ 586,086

(A) Maximum facility size represents the largest amount of borrowings
available under a given facility once sufficient collateral assets have been
approved by the lender and pledged by us.

(B) Represents the principal balance of the collateral assets.

(C) Potential borrowings represents the total amount we could draw under each
facility based on collateral already approved and pledged. When undrawn, these
amounts are available to us under the terms of each credit facility.

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Master Repurchase Agreements

We utilize master repurchase facilities to finance the origination of senior
loans. After a mortgage asset is identified by us, the lender agrees to advance
a certain percentage of the principal of the mortgage to us in exchange for a
secured interest in the mortgage. We have not received any margin calls on any
of our master repurchase facilities to date.

Repurchase agreements effectively allow us to borrow against loans and
participations that we own in an amount generally equal to (i) the market value
of such loans and/or participations multiplied by (ii) the applicable advance
rate. Under these agreements, we sell our loans and participations to a
counterparty and agree to repurchase the same loans and participations from the
counterparty at a price equal to the original sales price plus an interest
factor. The transaction is treated as a secured loan from the financial
institution for GAAP purposes. During the term of a repurchase agreement, we
receive the principal and interest on the related loans and participations and
pay interest to the lender under the master repurchase agreement. At any point
in time, the amounts and the cost of our repurchase borrowings will be based
upon the assets being financed-higher risk assets will result in lower advance
rates (i.e., levels of leverage) at higher borrowing costs and vice versa. In
addition, these facilities include various financial covenants and limited
recourse guarantees, including those described below.

Each of our existing master repurchase facilities includes “credit
mark-to-market” features. “Credit mark-to-market” provisions in repurchase
facilities are designed to keep the lenders’ credit exposure generally constant
as a percentage of the underlying collateral value of the assets pledged as
security to them. If the credit underlying collateral value decreases, the gross
amount of leverage available to us will be reduced as our assets are
marked-to-market, which would reduce our liquidity. The lender under the
applicable repurchase facility sets the valuation and any revaluation of the
collateral assets in its sole, good faith discretion. As a contractual matter,
the lender has the right to reset the value of the assets at any time based on
then-current market conditions, but the market convention is to reassess
valuations on a monthly, quarterly and annual basis using the financial
information delivered pursuant to the facility documentation regarding the real
property, borrower and guarantor under such underlying loans. Generally, if the
lender determines (subject to certain conditions) that the market value of the
collateral in a repurchase transaction has decreased by more than a defined
minimum amount, the lender may require us to provide additional collateral or
lead to margin calls that may require us to repay all or a portion of the funds
advanced. We closely monitor our liquidity and intend to maintain sufficient
liquidity on our balance sheet in order to meet any margin calls in the event of
any significant decreases in asset values. As of March 31, 2022 and December 31,
2021, the weighted average haircut under our repurchase agreements was 29.0% and
30.3%, respectively (or 25.4% and 25.9%, respectively, if we had borrowed the
maximum amount approved by its repurchase agreement counterparties as of such
dates). In addition, our existing master repurchase facilities are not entirely
term-matched financings and may mature before our CRE debt investments that
represent underlying collateral to those financings. As we negotiate renewals
and extensions of these liabilities, we may experience lower advance rates and
higher pricing under the renewed or extended agreements.

Term Loan Financing

In connection with our efforts to diversify our financing sources, further
expand our non-mark-to-market borrowing base and reduce our exposure to market
volatility, we entered into a term loan financing agreement in April 2018 with
third party lenders for an initial borrowing capacity of $200.0 million that was
increased to $1.0 billion in October 2018 (“Term Loan Facility”). The facility
provides us with asset-based financing on a non-mark-to-market basis with
matched term up to five years and is non-recourse to us. Borrowings under the
facility are collateralized by senior loans, held-for-investment, and bear
interest equal to one-month LIBOR plus a margin.

The following table summarizes our borrowings under the Term Loan Facility
(dollars in thousands):

March 31, 2022
Outstanding
Term Loan Facility Count Principal Amortized Cost Carrying Value Wtd. Avg. Yield/Cost(A) Guarantee(B) Wtd. Avg. Term(C)
Collateral assets 13 $ 1,141,803$ 1,139,773$ 1,132,639 + 3.3% n.a. October 2024
Financing provided n.a. 898,959 898,959 898,959 L + 1.6% n.a. October 2024

(A) Collateral loan assets are indexed to one-month LIBOR and/or Term SOFR. In
addition to cash coupon, yield/cost includes the amortization of deferred
origination/financing costs.

(B) Financing under the Term Loan Facility is non-recourse to us.

(C) The weighted-average term is weighted by outstanding principal, using the
maximum maturity date of the underlying loans assuming all extension options are
exercised by the borrower.

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Term Lending Agreements

In June 2019, we entered into a Master Repurchase and Securities Contract
Agreement (“KREF Lending V Facility”) with Morgan Stanley Mortgage Capital
Holdings LLC (“Administrative Agent”), as administrative agent on behalf of
Morgan Stanley Bank, N.A. (“Initial Buyer”), which provides non-mark-to-market
financing. In March 2021, the current stated maturity was extended to June 2022,
subject to four additional one-year extension options, which may be exercised by
us upon the satisfaction of certain customary conditions and thresholds. The
Initial Buyer subsequently syndicated a portion of the facility to multiple
financial institutions. As of March 31, 2022, the Initial Buyer held 24.2% of
the total commitment under the facility. Borrowings under the facility are
collateralized by certain loans, held for investment, and bear interest equal to
one-month LIBOR, plus a 1.9% margin.

In July 2021, we entered into a $500.0 millionMaster Repurchase and Securities
Contract Agreement with a financial institution (“KREF Lending IX Facility”). In
March 2022, we increased the borrowing capacity to $750.0 million. The facility,
which provides financing on a non-mark-to-market basis with partial recourse to
us, has a three-year draw period and matched term to the underlying loans.

Warehouse Facility

In March 2020, we entered into a $500.0 million Loan and Security Agreement with
HSBC Bank USA, National Association (“HSBC Facility”). The facility, which
matures in March 2023, provides warehouse financing on a non-mark-to-market
basis with partial recourse to us. Borrowings under the facility are
collateralized by certain loans, held for investment, and bear interest equal to
one-month LIBOR, plus a margin.

Asset Specific Financing

In August 2018, we entered into a $200.0 million loan financing facility with
BMO Harris Bank (the “BMO Facility”). In May 2019, we increased the borrowing
capacity to $300.0 million. The facility provides asset-based financing on a
non-mark-to-market basis with matched-term up to five years with partial
recourse to us.

Revolving Credit Agreement

In March 2022, we upsized our corporate revolving credit facility (“Revolver”),
administered by Morgan Stanley Senior Funding, Inc., to $520.0 million and
extended the maturity date to March 2027. We may use our Revolver as a source of
financing, which is designed to provide short-term liquidity to originate or
de-lever loans, pay operating expenses and borrow amounts for general corporate
purposes. Borrowings under the Revolver bear interest at a per annum rate equal
to the sum of (i) Term SOFR and (ii) a fixed margin. Our Revolver is secured by
corporate level guarantees and does not include asset-based collateral.

Collateralized Loan Obligations

In August 2021, we financed a pool of loan participations from our existing loan
portfolio through a managed collateralized loan obligation (“CLO” or “KREF
2021-FL2”) and, in February 2022, we financed a pool of loan participations from
our existing multifamily loan portfolio through a managed CLO (“KREF 2022-FL3”).
The CLOs provide us with match-term financing on a non-mark-to-market and
non-recourse basis. The CLOs have a two-year reinvestment feature that allows
principal proceeds of the collateral assets to be reinvested in qualifying
replacement assets, subject to the satisfaction of certain conditions set forth
in the indentures.

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The following table outlines the CLO collateral assets and respective borrowing
(dollars in thousands):

March 31, 2022
Outstanding
Count Principal Amortized Cost Carrying Value Wtd. Avg. Yield/Cost(A)

Wtd. Avg. Term(B)
KREF 2021-FL2
Collateral assets(C) 21 $ 1,300,000$ 1,300,000$ 1,295,901 + 3.4% August 2025
Financing provided 1 1,095,250 1,089,080 1,089,080 L + 1.7% February 2039
KREF 2022-FL3
Collateral assets(C) 16 1,000,000 1,000,000 997,782 + 3.0% September 2026
Financing provided 1 847,500 840,537 840,537 S + 2.1% February 2039

(A)Expressed as a spread over the relevant benchmark rates, which include
one-month LIBOR and Term SOFR, as applicable to each loan. As of March 31, 2022,
96.4% and 3.6% of the CLO collateral loan assets by principal balance earned a
floating rate of interest indexed to one-month LIBOR and Term SOFR,
respectively. In addition to cash coupon, yield/cost includes the amortization
of deferred origination/financing costs.
(B)Loan term represents weighted-average final maturity, assuming all extension
options are exercised by the borrower, weighted by outstanding principal.
Repayments of CLO notes are dependent on timing of underlying collateral loan
asset repayments post reinvestment period. The term of the CLO notes represents
the rated final distribution date.
(C)Collateral loan assets represent 33.7% of the principal of our commercial
real estate loans as of March 31, 2022. As of March 31, 2022, 100% of our loans
financed through the CLOs are floating rate loans.

Loan Participations Sold

In connection with our investments in CRE loans, we finance certain investments
through the syndication of a non-recourse, or limited-recourse, loan
participation to unaffiliated third parties. Our presentation of the senior loan
and related financing involved in the syndication depends upon whether GAAP
recognized the transaction as a sale, though such differences in presentation do
not generally impact our net stockholders’ equity or net income aside from
timing differences in the recognition of certain transaction costs.

To the extent that GAAP recognizes a sale resulting from the syndication, we
derecognize the participation in the senior/whole loan that we sold and continue
to carry the retained portion of the loan as an investment. While we do not
generally expect to recognize a material gain or loss on these sales, we would
realize a gain or loss in an amount equal to the difference between the net
proceeds received from the third party purchaser and our carrying value of the
loan participation we sold at time of sale. Furthermore, we recognize interest
income only on the portion of the senior loan that we retain as a result of the
sale.

To the extent that GAAP does not recognize a sale resulting from the
syndication, we do not derecognize the participation in the senior/whole loan
that we sold. Instead, we recognize a loan participation sold liability in an
amount equal to the principal of the loan participation syndicated less any
unamortized discounts or financing costs resulting from the syndication. We
continue to recognize interest income on the entire senior loan, including the
interest attributable to the loan participation sold, as well as interest
expense on the loan participation sold liability.

Non-Consolidated Senior Interests

In certain instances, we finance our loans through the non-recourse sale of a
senior loan interest that is not included in our condensed consolidated
financial statements. These non-consolidated senior interests provide structural
leverage on a non-mark-to-market, matched-term basis for our net investments,
which are typically reflected in the form of mezzanine loans or other
subordinate interests on our balance sheets and in our statements of income.

The following table details the subordinate interests retained on our balance
sheet and the related non-consolidated senior interests (dollars in thousands):

March 31, 2022
Principal Wtd. Avg.
Non-Consolidated Senior Interests Count Balance Carrying Value Wtd. Avg. Yield/Cost Guarantee Term
Total loan 3 $ 479,344 n.a. L + 3.6% n.a. June 2025
Senior participation 3 323,537 n.a. L + 2.3% n.a. August 2025
Interests retained 155,807 L + 6.4% December 2024

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Secured Term Loan

In September 2020, we entered into a $300.0 million secured term loan at a price
of 97.5%, which bears interest at a per annum rate equal to LIBOR plus a 4.75%
margin, subject to a 1.0% LIBOR floor, payable quarterly beginning in December
2020. The secured term loan is partially amortizing, with an amount equal to
1.0% per annum of the principal balance due in quarterly installments starting
March 31, 2021.

In November 2021, we completed a repricing of a $297.8 million existing secured
term loan and a $52.2 million add-on, for an aggregate principal amount of
$350.0 million, which was issued at par. The new secured term loan bears
interest at LIBOR plus a 3.50% margin, and is subject to a 0.50% LIBOR floor,
which is an aggregate improvement of 1.75% over the 2020 secured term loan.

The secured term loan matures on September 1, 2027 and contains restrictions
relating to liens, asset sales, indebtedness, investments and transactions with
affiliates. Our secured term loan is secured by corporate level guarantees and
does not include asset-based collateral. Refer to Notes 2 and 7 to our condensed
consolidated financial statements for additional discussion of our secured term
loan.

Convertible Notes

We may issue convertible debt to take advantage of favorable market conditions.
In May 2018, we issued $143.75 million of 6.125% Convertible Notes due on May
15, 2023. The Convertible Notes bear interest at a rate of 6.125% per year,
payable semi-annually in arrears on May 15 and November 15 of each year,
beginning on November 15, 2018. The Convertible Notes mature on May 15, 2023,
unless earlier repurchased or converted. Refer to Notes 2 and 8 to our condensed
consolidated financial statements for additional discussion of our Convertible
Notes.

Borrowing Activities

The following tables provide additional information regarding our borrowings
(dollars in thousands):

Three Months Ended March 31, 2022

Outstanding
Principal as of Average Daily Amount Maximum Amount Weighted Average
March 31, 2022 Outstanding(A) Outstanding Daily Interest Rate
Wells Fargo $ 665,620 $ 775,874 $ 980,593 1.6 %
Morgan Stanley 433,368 471,188 564,665 2.0
Goldman Sachs 105,301 153,422 192,313 2.3
Term Loan Facility 898,959 902,148 918,959 1.8
KREF Lending V 602,113 609,870 617,627 2.1
KREF Lending IX 340,467 394,996 500,000 1.9
BMO Facility – 8,000 60,000 1.8
Revolver – 19,333 140,000 2.1
Total/Weighted Average $ 3,045,828 1.9 %

(A) Represents the average for the period the facility was outstanding.

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Average Daily Amount Outstanding(A)
Three Months Ended
March 31, 2022 December 31, 2021
Wells Fargo $ 775,874 $ 566,984
Morgan Stanley 471,188 326,625
Goldman Sachs 153,422 99,140
Term Loan Facility 902,148 933,928
KREF Lending V 609,870 638,958
KREF Lending IX 394,996 422,974
BMO Facility 8,000 60,000
Revolver 19,333 119,837

(A) Represents the average for the period the debt was outstanding.

Covenants-Each of our repurchase facilities, term lending agreements, warehouse
facility and our Revolver contain customary terms and conditions, including, but
not limited to, negative covenants relating to restrictions on our operations
with respect to our status as a REIT, and financial covenants, such as:

•an interest income to interest expense ratio covenant (1.5 to 1.0);
•a minimum consolidated tangible net worth covenant (75.0% of the aggregate net
cash proceeds of any equity issuances made and any capital contributions
received by us and KKR Real Estate Finance Holdings L.P. (our “Operating
Partnership”) or up to approximately $1,309.4 million, depending on the
agreement;
•a cash liquidity covenant (the greater of $10.0 million or 5.0% of our recourse
indebtedness);
•a total indebtedness covenant (83.3% of our Total Assets, as defined in the
applicable financing agreements);

With respect to our secured term loan, we are required to comply with customary
loan covenants and event of default provisions that include, but not limited to,
negative covenants relating to restrictions on operations with respect to our
status as a REIT, and financial covenants. Such financial covenants include a
minimum consolidated tangible net worth of $650.0 million and a maximum total
debt to total assets ratio of 83.3% (the “Leverage Covenant”).

As of March 31, 2022, we were in compliance with the covenants of our financing
facilities.

Guarantees-In connection with our financing arrangements including; master
repurchase agreements, our term lending agreements, and our asset specific
financing, our Operating Partnership has entered into a limited guarantee in
favor of each lender, under which our Operating Partnership guarantees the
obligations of the borrower under the respective financing agreement (i) in the
case of certain defaults, up to a maximum liability of 25.0% of the
then-outstanding repurchase price of the eligible loans, participations or
securities, as applicable, or (ii) up to a maximum liability of 100.0% in the
case of certain “bad boy” defaults. The borrower in each case is a special
purpose subsidiary of us. In addition, some guarantees include certain full
recourse insolvency-related trigger events.

With respect to our Revolver, amounts borrowed are full recourse to certain
guarantor wholly-owned subsidiaries of us.

Real Estate Owned and Joint Venture

In 2015, we originated a $177.0 million senior loan secured by a retail property
in Portland, Oregon. The loan had a risk rating of 5 and was placed on a
non-accrual status in October 2020, with an amortized cost and carrying value of
$109.6 million and $69.3 million, respectively, as of September 30, 2021. In
December 2021, we took title to the retail property; such acquisition was
accounted for as an asset acquisition under ASC 805. Accordingly, we recognized
the property on our balance sheet as REO with a carrying value of $78.6 million,
which included the estimated fair value of the property and capitalized
transaction costs. In addition, we assumed $2.0 million in other net assets of
the REO. As a result, we recognized an $8.2 million benefit from the reversal of
the allowance for credit losses for GAAP, and a $32.1 million realized loss on
loan write-off through distributable earnings (representing the difference
between the carrying value of the foreclosed loan and the fair value of the
REO’s net assets).

Concurrently with taking the title of our sole REO asset, we contributed the
majority of the REO’s net assets to a joint venture with a third party local
development operator (“JV Partner”), whereby we have a 90% interest in the joint
venture and the JV
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Partner has a 10% interest. As of March 31, 2022, the joint venture held REO
assets with a net carrying value of $68.9 million. We have priority of
distributions up to $68.8 million before the JV Partner can participate in the
economics of the joint venture.
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Results of Operations

Three Months Ended March 31, 2022 Compared to Three Months Ended December 31,
2021

The following table summarizes the changes in our results of operations for the
three months ended March 31, 2022 and
December 31, 2021 (dollars in thousands, except per share data):

Three Months Ended, Increase (Decrease)
March 31, 2022 December 31, 2021 Dollars Percentage
Net Interest Income
Interest income $ 73,230 $ 72,715 $ 515 0.7 %
Interest expense 32,459 30,266 2,193 7.2
Total net interest income 40,771 42,449 (1,678) (4.0)
Other Income
Revenue from real estate owned
operations 2,629 – 2,629 100.0
Income (loss) from equity method
investments 1,886 1,863 23 1.2
Gain (loss) on sale of investments – 5,126 (5,126) (100.0)

Other income 1,915 390 1,525 391.0
Total other income (loss) 6,430 7,379 (949) (12.9)
Operating Expenses
General and administrative 4,446 3,383 1,063 31.4
Provision for (reversal of ) credit
losses, net (1,218) (3,077) 1,859 60.4
Management fee to affiliate 6,007 5,289 718 13.6
Incentive compensation to affiliate – 3,463 (3,463) (100.0)
Expenses from real estate owned
operations 2,554 – 2,554 100.0
Total operating expenses 11,789 9,058 2,731 30.2
Income (Loss) Before Income Taxes,
Noncontrolling Interests, Preferred
Dividends, Redemption Value Adjustment
and Participating Securities’ Share in
Earnings 35,412 40,770 (5,358) (13.1)
Income tax expense – 427 (427) (100.0)
Net Income (Loss) 35,412 40,343 (4,931) (12.2)
Noncontrolling interests in (income)
loss of consolidated joint venture 56 – 56 100.0
Net Income (Loss) Attributable to KKR
Real Estate Finance Trust Inc. and
Subsidiaries 35,468 40,343 (4,875) (12.1)
Preferred stock dividends and redemption
value adjustment 5,326 4,966 360 7.2
Participating securities’ share in
earnings 346 179 167 93.3
Net Income (Loss) Attributable to Common
Stockholders $ 29,796 $ 35,198 $ (5,402) (15.3) %

Net Income (Loss) Per Share of Common
Stock
Basic $ 0.47 $ 0.59 $ (0.12) (19.9) %
Diluted $ 0.46 $ 0.59 $ (0.13) (21.9) %

Weighted Average Number of Shares of
Common Stock Outstanding
Basic 63,086,452 59,364,672 3,721,780 6.3 %
Diluted 69,402,626 59,453,264 9,949,362 16.7 %

Dividends Declared per Share of Common
Stock $ 0.43 $ 0.43 $ – – %

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Net Interest Income

Net interest income decreased by $1.7 million during the three months ended
March 31, 2022, compared to the three months ended December 31, 2021. This
decrease was primarily due to an increase in the weighted-average index rates,
including LIBOR and Term SOFR, which increased our interest expense compared to
the prior quarter. Interest income increased slightly due to an increase in the
weighted average principal of our loan portfolio of $824.0 million, partially
offset by a decrease in the weighted average coupon.

In addition, we recognized $6.1 million of deferred loan fees and origination
discounts accreted into interest income during the three months ended March 31,
2022, as compared to $7.1 million during the three months ended December 31,
2021. We recorded $4.8 million of deferred financing costs amortization into
interest expense during the three months ended March 31, 2022, as compared to
$5.2 million during the three months ended December 31, 2021.

Other Income

Total other income decreased by $0.9 million during the three months ended
March 31, 2022, as compared to the three months ended December 31, 2021. This
decrease was primarily due to a non-recurring $5.1 million gain from the
redemption of our equity method investment in the Manager during the three
months ended December 31, 2021, which was partially offset by a $2.6 million
increase in REO operating revenue and $1.3 million of profit sharing income in
connection with the repayment of an industrial senior loan during the three
months ended March 31, 2022.

Operating Expenses

Total operating expenses increased by $2.7 million during the three months ended
March 31, 2022, as compared to the three months ended December 31, 2021. This
increase was primarily due to (i) a net increase of $1.9 million in provision
for credit losses, (ii) a $2.6 million increase in REO operating expenses and
(iii) a $0.7 million increase in noncash stock-based compensation expense. This
increase was partially offset by a $3.5 million decrease in Manager incentive
compensation for the three months ended March 31, 2022.

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Three Months Ended March 31, 2022 Compared to Three Months Ended March 31, 2021

The following table summarizes the changes in our results of operations for the
three months ended March 31, 2022 and 2021 (dollars in thousands, except per
share data):

Three Months Ended March 31, Increase (Decrease)
2022 2021 Dollars Percentage
Net Interest Income
Interest income $ 73,230$ 64,766$ 8,464 13.1 %
Interest expense 32,459 27,383 5,076 18.5
Total net interest income 40,771 37,383 3,388 9.1
Other Income
Revenue from real estate owned
operations 2,629 – 2,629 100.0
Income (loss) from equity method
investments 1,886 1,090 796 73.0

Other income 1,915 66 1,849 2,801.5
Total other income (loss) 6,430 1,156 5,274 456.2
Operating Expenses
General and administrative 4,446 3,505 941 26.8
Provision for (reversal of ) credit
losses, net (1,218) (1,588) 370 23.3
Management fee to affiliate 6,007 4,290 1,717 40.0
Incentive compensation to affiliate – 2,192 (2,192) (100.0)
Expenses from real estate owned
operations 2,554 – 2,554 100.0
Total operating expenses 11,789 8,399 3,390 40.4
Income (Loss) Before Income Taxes,
Noncontrolling Interests, Preferred
Dividends, Redemption Value Adjustment
and Participating Securities’ Share in
Earnings 35,412 30,140 5,272 17.5
Income tax expense – 48 (48) (100.0)
Net Income (Loss) 35,412 30,092 5,320 17.7
Noncontrolling interests in (income)
loss of consolidated joint venture 56 – 56 100.0
Net Income (Loss) Attributable to KKR
Real Estate Finance Trust Inc. and
Subsidiaries 35,468 30,092 5,376 17.9
Preferred stock dividends and redemption
value adjustment 5,326 908 4,418 486.6
Participating securities’ share in
earnings 346 – 346 100.0
Net Income (Loss) Attributable to Common
Stockholders $ 29,796$ 29,184$ 612 2.1 %

Net Income (Loss) Per Share of Common
Stock
Basic $ 0.47 $ 0.52$ (0.05) (9.2) %
Diluted $ 0.46 $ 0.52$ (0.06) (11.4) %

Weighted Average Number of Shares of
Common Stock Outstanding
Basic 63,086,452 55,619,428 7,467,024 13.4 %
Diluted 69,402,626 55,731,061 13,671,565 24.5 %

Dividends Declared per Share of Common
Stock $ 0.43 $ 0.43 $ – – %

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Net Interest Income

Net interest income increased by $3.4 million, during the three months ended
March 31, 2022, as compared to the three months ended March 31, 2021. This
increase was primarily due to an increase in the weighted average principal of
our loan portfolio of $1,565.5 million for the three months ended March 31,
2022, as compared to the three months ended March 31, 2021, as a result of
continuing capital deployment from loan repayments and deployment of the
proceeds from the preferred and common stock issuances.

The increase in interest expense was primarily due to an increase in market
rates and an increase in the weighted average principal balance of our financing
facilities of $1,299.6 million for the three months ended March 31, 2022, as
compared to the three months ended March 31, 2021. The proceeds from our
financing facilities were used to fund our loan originations and funding on
previously closed loans.

In addition, we recognized $6.1 million of deferred loan fees and origination
discounts accreted into interest income during the three months ended March 31,
2022, as compared to $4.8 million during the three months ended March 31, 2021.
We recorded $4.8 million of deferred financing costs amortization into interest
expense during the three months ended March 31, 2022, as compared to
$3.7 million during the three months ended March 31, 2021.

Other Income

Total other income increased by $5.3 million during the three months ended
March 31, 2022, as compared to the three months ended March 31, 2021. This
increase was primarily due to a $2.6 million increase in REO operating revenue
and $1.3 million of profit sharing income in connection with the repayment of an
industrial senior loan during the three months ended March 31, 2022. In
addition, we recognized a $1.0 million unrealized mark-to-market gain on our
RECOP I’s underlying CMBS investments during the three months ended March 31,
2022, as compared to a de minimis unrealized mark-to-market gain during the
three months ended March 31, 2021.

Operating Expenses

Total operating expenses increased by $3.4 million during the three months ended
March 31, 2022, as compared to the three months ended March 31, 2021. This
increase was primarily due to a (i) net increase of $0.4 million in the
provision for credit losses, (ii) $1.7 million increase in management fees
resulting from our preferred and common stock issuances and (iii) $2.6 million
increase in REO operating expenses. This increase was partially offset by a
$2.2 million decrease in incentive fee during the three months ended March 31,
2022.

The following table provides additional information regarding total operating
expenses (dollars in thousands):

Three Months Ended
December 31, September 30,
March 31, 2022 2021 2021 June 30, 2021 March 31, 2021
Operating expenses $ 2,320 $ 1,970$ 1,632$ 1,694$ 1,513
Stock-based compensation 2,126 1,413 2,027 1,994 1,992
Total general and
administrative expenses 4,446 3,383 3,659 3,688 3,505
Provision for (reversal of)
credit losses, net (1,218) (3,077) 1,165 (559) (1,588)
Management fee to affiliate 6,007 5,289 4,964 4,835 4,290
Incentive compensation to
affiliate – 3,463 2,215 2,403 2,192
Expenses from real estate
owned operations 2,554 – – – –
Total operating expenses $ 11,789$ 9,058$ 12,003$ 10,367$ 8,399

COVID-19 Impact

Since its onset in 2020, the COVID-19 pandemic has created significant
disruption in global supply chains, increased rates of unemployment and
adversely impacted many industries, including industries related to the
collateral underlying certain of our loans.

In 2021 and 2022, the global economy has, with certain setbacks, begun reopening
and wider distribution of vaccines will likely encourage greater economic
activity. Although we have observed signs of economic recovery and are generally
encouraged by
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the response of our borrowers, the pandemic has resulted in, and may continue to
result in, declines in rental rates and increases in rental concessions,
including free rent to renew tenants early, to retain tenants who are up for
renewal or to attract new tenants, or rent abatements for tenants severely
impacted by the COVID-19 pandemic. In addition, the COVID-19 pandemic continues
to disrupt global supply chains, has caused labor shortages and has added broad
inflationary pressures, which has a potential negative impact on our borrowers’
ability to execute on their business plans and potentially their ability to
perform under the terms of their loan obligations. Further, declines in economic
conditions caused by the COVID-19 pandemic could negatively impact real estate
and real estate capital markets and result in lower occupancy, lower rental
rates and declining values in our portfolio, which could adversely impact the
value of our investments, making it more difficult for us to make distributions
or meet our financing obligations.

We believe any future impact of COVID-19 on our business, financial performance
and operating results will in part be significantly driven by a number of
factors that we are unable to predict or control, including, for example: the
severity and duration of the pandemic; the distribution and acceptance of
vaccines and their impact on the timing and speed of economic recovery; the
spread of new variants of the virus; the pandemic’s impact on the U.S. and
global economies, including concerns regarding additional surges of the pandemic
or the expansion of the economic impact thereof as a result of certain
jurisdictions “re-opening” or otherwise lifting certain restrictions
prematurely; the availability of U.S. federal, state, local or non-U.S. funding
programs aimed at supporting the economy during the COVID-19 pandemic, including
uncertainties regarding the potential implementation of new or extended
programs; the timing, scope and effectiveness of additional governmental
responses to the pandemic; and the negative impact on our financing sources,
vendors and other business partners that may indirectly adversely affect us.
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Liquidity and Capital Resources

Overview

We have capitalized our business to date primarily through the issuance and sale
of our common stock and preferred stock, borrowings from Non-Mark-to-Market
Financing Sources(1), borrowings from three master repurchase agreements, the
issuance and sale of convertible notes and our secured term loan. Our
Non-Mark-to-Market Financing Sources, which accounted for 79% of our total
secured financing (excluding our corporate Revolver) as of March 31, 2022, are
not subject to credit or capital markets mark-to-market provisions. The
remaining 21% of our secured borrowings, which are comprised of three master
repurchase agreements, are only subject to credit marks. We have not received
any margin calls on our master repurchase agreements to date, nor do we expect
any at this time.

Our primary sources of liquidity include $173.2 million of cash on our
consolidated balance sheet, $520.0 million of available capacity on our
corporate revolver, $61.1 million of available borrowings under our financing
arrangements based on existing collateral and cash flows from operations. In
addition, we had $377.3 million of unencumbered senior loans that can be
financed, as of March 31, 2022. Our corporate revolver and secured term loan are
secured by corporate level guarantees and do not include asset-based collateral.
We may seek additional sources of liquidity from syndicated financing, other
borrowings (including borrowings not related to a specific investment) and
future offerings of equity and debt securities.

Our primary liquidity needs include our ongoing commitments to repay the
principal and interest on our borrowings and pay other financing costs,
financing our assets, meeting future funding obligations, making distributions
to our stockholders, funding our operations that includes making payments to our
Manager in accordance with the management agreement, and other general business
needs. We believe that our cash position and sources of liquidity will be
sufficient to meet anticipated requirements for financing, operating and other
expenditures in both the short- and long-term, based on current conditions.

As described in Note 10 to our condensed consolidated financial statements, we
have off-balance sheet arrangements related to VIEs that we account for using
the equity method of accounting and in which we hold an economic interest or
have a capital commitment. Our maximum risk of loss associated with our
interests in these VIEs is limited to the carrying value of our investment in
the entity and any unfunded capital commitments. As of March 31, 2022, we held
$36.6 million of interests in such entities, which does not include a remaining
commitment of $4.3 million to RECOP I that we are required to fund if called.

We are continuing to monitor the COVID-19 pandemic and its impact on our
operating partners, financing sources, borrowers and their tenants, and the
economy as a whole. While the availability of approved COVID-19 vaccines and
their impact on the economy is encouraging, the distribution and acceptance of
such vaccines and their effectiveness with respect to new variants of the virus
remain unknown. Accordingly, the ultimate magnitude and duration of the COVID-19
pandemic, as well as its impact on our borrowers, lenders and the economy as a
whole, remains uncertain and continues to evolve. To the extent that our
operating partners, financing sources, borrower’s and their tenants continue to
be impacted by the COVID-19 pandemic, or by the other risks disclosed in this
Quarterly Report on Form 10-Q and our Annual Report on Form 10-K, it would have
a material adverse effect on our liquidity and capital resources.

To facilitate future offerings of equity, debt and other securities, we have in
place an effective shelf registration statement (the “Shelf”) with the SEC. The
amount of securities to be issued pursuant to this Shelf was not specified when
it was filed and there is no specific dollar limit on the amount of securities
we may issue. The securities covered by this Shelf include: (i) common stock,
(ii) preferred stock, (iii) depository shares, (iv) debt securities, (v)
warrants, (vi) subscription rights, (vii) and purchase contracts, and (viii)
units. The specifics of any future offerings, along with the use of proceeds of
any securities offered, will be described in detail in a prospectus supplement,
or other offering material, at the time of any offering. In January 2022, we
issued 6,210,000 shares of 6.50% Series A Preferred Stock under the Shelf, which
included the exercise of the underwriters option to purchase additional shares
of Series A Preferred Stock, and received net proceeds after underwriting
discounts and commissions of $151.2 million. In March 2022, we issued 6,494,155
shares of Common Stock under the Shelf, which included the partial exercise of
the underwriters’ option to purchase additional shares of Common Stock, and
received net proceeds after underwriting discounts and commissions of
$133.8 million.

(1) Comprised of term loan financing, term lending agreements, collateralized
loan obligations, secured term loan, warehouse facility, asset specific
financing, and non-consolidated senior interests.

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We have also entered into an equity distribution agreement with certain sales
agents, pursuant to which we may sell, from time to time, up to an aggregate
sales price of $100.0 million of our common stock, pursuant to a continuous
offering program (the “ATM”), under the Shelf. Sales of our common stock made
pursuant to the ATM may be made in negotiated transactions or transactions that
are deemed to be “at the market” offerings as defined in Rule 415 under the
Securities Act. During the three months ended March 31, 2022, we issued and sold
68,817 shares of common stock under the ATM, generating net proceeds totaling
$1.4 million. As of March 31, 2022, $98.6 million remained available for
issuance under the ATM.

See Notes 5, 6, 7, 8 and 11 to our condensed consolidated financial statements
for additional details regarding our secured financing agreements,
collateralized loan obligations, secured term loan, convertible notes and stock
activity.

Debt-to-Equity Ratio and Total Leverage Ratio

The following table presents our debt-to-equity ratio and total leverage ratio:
March 31, 2022 December 31, 2021
Debt-to-equity ratio(A) 1.5x 2.3x
Total leverage ratio(B) 3.2x 3.7x

(A) Represents (i) total outstanding debt agreements (excluding non-recourse
term loan facility), secured term loan and convertible notes, less cash to (ii)
total permanent equity, in each case, at period end.

(B) Represents (i) total outstanding debt agreements, secured term loan,
convertible notes, and collateralized loan obligations, less cash to (ii) total
permanent equity, in each case, at period end.

Sources of Liquidity

Our primary sources of liquidity include cash and cash equivalents and available
borrowings under our secured financing agreements, inclusive of our Revolver.
Amounts available under these sources as of the date presented are summarized in
the following table (dollars in thousands):
March 31, 2022 December 31, 2021
Cash and cash equivalents $ 173,178 $ 271,487
Available borrowings under revolving credit
agreements 520,000 200,000
Available borrowings under master repurchase
agreements 61,135 51,601

Available borrowings under term lending agreements 4,951 5,826
Available borrowings under warehouse facility – –

$ 759,264 $ 528,914

We also had $377.3 million and $235.3 million of unencumbered senior loans that
can be pledged to financing facilities subject to lender approval, as of
March 31, 2022 and December 31, 2021. In addition to our primary sources of
liquidity, we have the ability to access further liquidity through our ATM
program and public offerings of debt and equity securities. Our existing loan
portfolio also provides us with liquidity as loans are repaid or sold, in whole
or in part, and the proceeds from repayment become available for us to invest.

Real Estate News 24

Real Estate News 24

KKR REAL ESTATE FINANCE TRUST INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)