UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, ~~2022~~2023

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________________ to ________________

Commission File Number: 001-38082

KKR Real Estate Finance Trust Inc.

(Exact name of registrant as specified in its charter)

Maryland

47-2009094

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

30 Hudson Yards,

Suite 7500

New York,

10001

(Address of principal executive offices)

(Zip Code)

(212) 750-8300

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common stock, par value $0.01 per share

KREF

New York Stock Exchange

6.50% Series A Cumulative Redeemable Preferred Stock, par value $0.01 per share

KREF PRA

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒ Accelerated filer ☐

Non-accelerated filer ☐ Smaller reporting company ☐

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

The number of shares of the registrant's common stock, par value $0.01 per share, outstanding as of July 20, ~~2022~~2023 was ~~69,252,688~~.69,106,061.

KKR REAL ESTATE FINANCE TRUST INC.

FORM 10-Q

FOR THE QUARTER ENDED JUNE 30, ~~2022~~2023

INDEX


			PAGE
Part I - Financial Information			5
Item 1. Condensed Consolidated Financial Statements (Unaudited)			5
Condensed Consolidated Balance Sheets (Unaudited) as of June ~~30, 2022~~ 3 0 , 2023 and December 31, ~~2021~~2022			5
Condensed Consolidated Statements of Income (Unaudited) for the Three and Six Months Ended June ~~30, 2022~~ 3 0 , 2023 and ~~2021~~2022			6
Condensed Consolidated Statements of Changes in Equity (Unaudited) for the Three and Six Months Ended June 30, ~~2022~~2023 and ~~2021~~2022			7
Condensed Consolidated Statements of Cash Flows (Unaudited) for the Six Months Ended June 30, ~~2022~~2023 and ~~2021~~2022			9
Notes to Condensed Consolidated Financial Statements (Unaudited)			11
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations			5250
Item 3. Quantitative and Qualitative Disclosures about Market Risk			8177
Item 4. Controls and Procedures			8379
Part II - Other Information			8480
Item 1. Legal Proceedings			8480
Item 1A. Risk Factors			8480
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			8581
Item 3. Defaults Upon Senior Securities			8581
Item 4. Mine Safety Disclosures			8581
Item 5. Other Information			8581
Item 6. Exhibits			8682
Signatures			8783

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which reflect our current views with respect to, among other things, our operations and financial performance. You can identify these forward-looking statements by the use of words such as "outlook," "believe," "expect," "potential," "continue," "may," "should," "seek," "approximately," "predict," "intend," "will," "plan," "estimate," "anticipate," the negative version of these words, other comparable words or other statements that do not relate strictly to historical or factual matters. By their nature, forward-looking statements speak only as of the date they are made, are not statements of historical fact or guarantees of future performance and are subject to risks, uncertainties, assumptions or changes in circumstances that are difficult to predict or quantify. Our expectations, beliefs and projections are expressed in good faith and we believe there is a reasonable basis for them. However, there can be no assurance that management's expectations, beliefs and projections will result or be achieved and actual results may vary materially from what is expressed in or indicated by the forward-looking statements.

There are a number of risks, uncertainties and other important factors that could cause our actual results to differ materially from the forward-looking statements contained in this Quarterly Report on Form 10-Q. Such risks, uncertainties and other important factors include, among others, the risks, uncertainties and factors set forth under Part I, Item 1A. "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2021~~2022 (the "Form 10-K"). Such risks and uncertainties include, but are not limited to, the following:

•the ~~potential negative impacts of COVID-19 on~~general political, economic and competitive conditions in the ~~global econo~~myUnited States and in any foreign jurisdictions in which we invest and their impact on our loan portfolio, ~~financial~~financial condition and business operations;

•~~how widely utilized COVID-19 vaccines will be, whether they will be effective~~accelerating inflationary trends, spurred by multiple factors including high commodity prices, a tight labor market, and low residential vacancy rates, may result further in ~~preventing the spread of COVID-19 (including its variant strains),~~interest rate increases and ~~their impact on the ultimate severity and duration of the COVID-19 pandemic;~~lead to increased market volatility;

•~~actions~~higher interest rates imposed by the Federal Reserve may lead to a decrease in prepayment speeds and an increase in the number of our borrowers who exercise extension options, which could extend beyond the term of certain secured financing agreements we use to finance our loan investments;

•the economic impact of escalating global trade tensions, the conflict between Russia and Ukraine, and the adoption; or expansion of economic sanctions or trade restrictions;

•reduced demand for office, multifamily or retail space, including as a result of the COVID-19 pandemic and/or hybrid work schedules which allow work from remote locations other than the employer's office premises;

•the impact of, and market dislocations that may ~~be taken by~~result from, governmental ~~authorities to contain~~intervention in the ~~COVID-19 outbreak~~economic and financial system or ~~to treat its impact;~~from regulatory reform of the oversight of financial markets;

•the failure of any banks with which we and/or our borrowers have a commercial relationship could adversely affect, among other things, our or our borrower’s ability to access deposits or borrow from financial institutions on favorable terms;

•interest rate mismatches between our target assets and any borrowings used to fund such assets;

•adverse developments in the availability of desirable investment opportunities whether they are due to competition, regulation or ~~otherwise;~~

•~~the general political, economic and competitive conditions in the United States and in any foreign jurisdictions in which we invest;~~otherwise, could adversely affect our results of operations;

•the level and volatility of prevailing interest rates and credit ~~spreads, including as a result of the planned~~spreads;

~~discontinuance of LIBOR and the transition to alternative reference rates;~~

•adverse changes in the real estate and real estate capital markets;

•difficulty or delays in redeploying the proceeds from repayments of our existing investments;

•general volatility of the securities markets in which we participate;

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•changes in our business, investment strategies or target assets;

•deterioration in the performance of the properties securing our investments that may cause deterioration in the performance of our investments, risks in collection of contractual interest payments, and potentially, principal losses to us;

•acts of God such as hurricanes, earthquakes and other natural disasters, pandemics such as COVID-19, acts of war and/or terrorism and other events that may cause unanticipated and uninsured performance declines and/or losses to us or the owners and operators of the real estate securing our investments;

•~~the economic impact of escalating global trade tensions, the conflict between Russia and Ukraine, and the adoption;~~

• ~~or expansion of economic sanctions or trade restrictions;~~

~~Table of Contents~~

•accelerating inflationary trends, spurred by multiple factors including high commodity prices, a tight labor market, and low residential vacancy rates, may result further in interest rate increases and lead to increased market volatility;

•the adequacy of collateral securing our investments and declines in the fair value of our investments;

•difficulty in obtaining financing or raising capital;

•difficulty in successfully managing our growth, including integrating new assets into our existing systems;

•reductions in the yield on our investments and increases in the cost of our financing;

•defaults by borrowers in paying debt service on outstanding indebtedness;

•the availability of qualified personnel and our relationship with ~~our Manager;~~KKR Real Estate Finance Manager LLC (" Manager");

•subsidiaries of KKR & Co. Inc. have significant influence over us and KKR's interests may conflict with those of our stockholders in the future;

•the cost of operating our platform, including, but not limited to, the cost of operating a real estate investment platform;

•adverse legislative or regulatory developments;

•our qualification as a real estate investment trust ("REIT") for U.S. federal income tax purposes and our exclusion from registration under the Investment Company Act of 1940, as amended (the "Investment Company Act"); and

•authoritative accounting principles generally accepted in the United States of America ("GAAP") or policy changes from such standard-setting bodies such as the Financial Accounting Standards Board (the "FASB"), the Securities and Exchange Commission (the "SEC"), the Internal Revenue Service, the New York Stock Exchange and other authorities that we are subject to, as well as their counterparts in any foreign jurisdictions where we might do business.

There may be other factors that may cause our actual results to differ materially from the forward-looking statements, including factors set forth under Part I, Item 1A. "Risk Factors" in the Form 10-K and Part I, Item 2. "Management's Discussion and Analysis of Financial Condition and Results of Operations" in this Form 10-Q, as such factors may be updated from time to time in our other periodic filings with the SEC, which are accessible on the SEC's website at www.sec.gov and on the investor relations section of our website at www.kkrreit.com. You should evaluate all forward-looking statements made in this Form 10-Q in the context of these risks and uncertainties.

We caution you that the risks, uncertainties and other factors referenced above may not contain all of the risks, uncertainties and other factors that are important to you. In addition, we cannot assure you that we will realize the results, benefits or developments that we expect or anticipate or, even if substantially realized, that they will result in the consequences or affect us or our business in the way expected. All forward-looking statements in this Form 10-Q apply only as of the date made and are expressly qualified in their entirety by the cautionary statements included in this Form 10-Q and in other filings we make with the SEC. We undertake no obligation to publicly update or revise any forward-looking statements to reflect subsequent events or circumstances, except as required by law.

Except where the context requires otherwise, the terms "Company," "we," "us," "our" and "KREF" refer to KKR Real Estate Finance Trust Inc., a Maryland corporation, and its subsidiaries; "Manager" refers to KKR Real Estate Finance Manager LLC, a Delaware limited liability company, our external manager; and "KKR" refers to KKR & Co. Inc., a Delaware corporation, and its subsidiaries.

Table of Contents

PART I — FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

KKR Real Estate Finance Trust Inc. and Subsidiaries

Condensed Consolidated Balance Sheets (Unaudited)

(Amounts in thousands, except share and per share data)

June 30, 2022 December 31, 2021
Assets
Cash and cash equivalents(A)
$ 118,020 $ 271,487
Commercial real estate loans, held-for-investment 7,473,101 6,316,733
Less: Allowance for credit losses (31,529) (22,244)
Commercial real estate loans, held-for-investment, net 7,441,572 6,294,489
Real estate owned, net 79,168 78,569
Equity method investments 36,782 35,537
Accrued interest receivable 22,498 15,241
Other assets(B)
15,569 7,916
Total Assets $ 7,713,609 $ 6,703,239
Liabilities and Equity
Liabilities
Secured financing agreements, net $ 3,569,581 $ 3,726,593
Collateralized loan obligations, net 1,931,605 1,087,976
Secured term loan, net 337,609 338,549
Convertible notes, net 142,538 141,851
Dividends payable 29,915 26,589
Accrued interest payable 9,837 6,627
Accounts payable, accrued expenses and other liabilities(C)
7,782 7,521
Due to affiliates 8,298 5,952
Total Liabilities 6,037,165 5,341,658
Commitments and Contingencies (Note 14) — —
Permanent Equity
Preferred Stock, 50,000,000 shares authorized
Series A cumulative redeemable preferred stock, $0.01 par value (13,110,000 and 6,900,000 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively; liquidation preference of $25.00 per share) 131 69
Common stock, $0.01 par value, 300,000,000 authorized (74,599,550 and 65,271,058 shares issued; 69,654,532 and 61,370,732 shares outstanding as of June 30, 2022 and December 31, 2021, respectively) 697 613
Additional paid-in capital 1,802,725 1,459,959
Accumulated deficit (48,158) (38,208)
Repurchased stock (4,945,018 and 3,900,326 shares repurchased as of June 30, 2022 and December 31, 2021, respectively) (79,070) (60,999)
Total KKR Real Estate Finance Trust Inc. Stockholders’ Equity 1,676,325 1,361,434
Noncontrolling interests in equity of consolidated joint venture 119 147
Total Permanent Equity 1,676,444 1,361,581
Total Liabilities and Equity $ 7,713,609 $ 6,703,239


	June 30, 2023		December 31, 2022
Assets
Cash and cash equivalents(A)	$	207,698	$	239,791
Commercial real estate loans, held-for-investment	7,445,958		7,494,138
Less: Allowance for credit losses	(223,767)		(106,974)
Commercial real estate loans, held-for-investment, net	7,222,191		7,387,164
Real estate owned, net	81,405		80,231
Accrued interest receivable	39,512		39,005
Equity method investments	35,486		36,849
Other assets	22,953		19,281
Total Assets	$	7,609,245	$	7,802,321

Liabilities and Equity
Liabilities
Secured financing agreements, net	$	3,807,758	$	3,748,691
Collateralized loan obligations, net	1,939,703		1,935,592
Secured term loan, net	336,105		336,828
Convertible notes, net	—		143,237

Dividends payable	29,716		29,711
Accrued interest payable	18,265		17,859
Other liabilities	9,635		10,245
Due to affiliates	8,328		8,722
Total Liabilities	6,149,510		6,230,885

Commitments and Contingencies (Note 13)	—		—




Equity
Preferred Stock, $0.01 par value, 50,000,000 shares authorized

Series A cumulative redeemable preferred stock, (13,110,000 shares issued and outstanding as of June 30, 2023 and December 31, 2022); liquidation preference of $25.00 per share	131		131
Common stock, $0.01 par value, 300,000,000 authorized (75,091,757 and 75,080,707 shares issued; 69,106,061 and 69,095,011 shares outstanding; as of June 30, 2023 and December 31, 2022, respectively)	691		691
Additional paid-in capital	1,813,309		1,808,983
Accumulated deficit	(257,512)		(141,503)
Repurchased stock (5,985,696 shares repurchased as of June 30, 2023 and December 31, 2022)	(96,764)		(96,764)
Total KKR Real Estate Finance Trust Inc. Stockholders’ Equity	1,459,855		1,571,538
Noncontrolling interests in equity of consolidated joint venture	(120)		(102)
Total Equity	1,459,735		1,571,436
Total Liabilities and Equity	$	7,609,245	$	7,802,321

(A) Includes ~~$0.5~~$80.0 million and ~~$54.0~~$151.0 million held in collateralized loan obligation as of June 30, ~~2022~~2023 and December 31, ~~2021, respectively.~~

~~(B) Includes~~ ~~$7.7 million~~ ~~and $2.3 million of restricted cash as of June 30,~~ 2022, ~~and December 31, 2021,~~ respectively.

~~(C) Includes~~ ~~$2.8 million~~ ~~and $1.5 million of expected loss reserve for unfunded loan commitments as of June 30, 2022 and December 31, 2021, respectively.~~

See Notes to Condensed Consolidated Financial Statements.

~~Table of Contents~~

KKR Real Estate Finance Trust Inc. and Subsidiaries

Condensed Consolidated Statements of Income (Unaudited)

(Amounts in thousands, except share and per share data)


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Net Interest Income	Net Interest Income									Net Interest Income
Interest income	Interest income	$	90,603	$	67,149	$	163,833	$	131,915	Interest income	$	159,629	$	90,603	$	312,159	$	163,833
Interest expense	Interest expense	44,733		26,958		77,192		54,341		Interest expense	115,677		44,733		221,653		77,192
Total net interest income	Total net interest income	45,870		40,191		86,641		77,574		Total net interest income	43,952		45,870		90,506		86,641

Other Income	Other Income									Other Income
Revenue from real estate owned operations	Revenue from real estate owned operations	1,833		—		4,462		—		Revenue from real estate owned operations	1,984		1,833		4,230		4,462
Income (loss) from equity method investments	Income (loss) from equity method investments	1,035		1,256		2,921		2,346		Income (loss) from equity method investments	551		1,035		204		2,921
Other income	Other income	1,237		100		3,152		166		Other income	4,437		1,237		7,148		3,152
Total other income (loss)		4,105		1,356		10,535		2,512
Total other income										Total other income	6,972		4,105		11,582		10,535

Operating Expenses	Operating Expenses									Operating Expenses
General and administrative	General and administrative	4,308		3,688		8,754		7,193		General and administrative	4,710		4,308		9,400		8,754
Provision for (reversal of) credit losses, net	Provision for (reversal of) credit losses, net	11,798		(559)		10,580		(2,147)		Provision for (reversal of) credit losses, net	56,335		11,798		116,802		10,580
Management fee to affiliate	Management fee to affiliate	6,506		4,835		12,513		9,125		Management fee to affiliate	6,559		6,506		13,082		12,513
Incentive compensation to affiliate	Incentive compensation to affiliate	—		2,403		—		4,595		Incentive compensation to affiliate	611		—		2,422		—
Expenses from real estate owned operations	Expenses from real estate owned operations	2,368		—		4,922		—		Expenses from real estate owned operations	2,656		2,368		5,414		4,922
Total operating expenses	Total operating expenses	24,980		10,367		36,769		18,766		Total operating expenses	70,871		24,980		147,120		36,769

Income (Loss) Before Income Taxes, Noncontrolling Interests, Preferred Dividends, Redemption Value Adjustment and Participating Securities' Share in Earnings		24,995		31,180		60,407		61,320
Income (Loss) Before Income Taxes, Noncontrolling Interests, Preferred Dividends and Participating Securities' Share in Earnings										Income (Loss) Before Income Taxes, Noncontrolling Interests, Preferred Dividends and Participating Securities' Share in Earnings	(19,947)		24,995		(45,032)		60,407
Income tax expense	Income tax expense	—		103		—		151		Income tax expense	177		—		346		—
Net Income (Loss)	Net Income (Loss)	24,995		31,077		60,407		61,169		Net Income (Loss)	(20,124)		24,995		(45,378)		60,407
Noncontrolling interests in (income) loss of consolidated joint venture		66		—		122		—
Net income (loss) attributable to noncontrolling interests										Net income (loss) attributable to noncontrolling interests	(96)		(66)		(273)		(122)
Net Income (Loss) Attributable to KKR Real Estate Finance Trust Inc. and Subsidiaries	Net Income (Loss) Attributable to KKR Real Estate Finance Trust Inc. and Subsidiaries	25,061		31,077		60,529		61,169		Net Income (Loss) Attributable to KKR Real Estate Finance Trust Inc. and Subsidiaries	(20,028)		25,061		(45,105)		60,529
Preferred stock dividends and redemption value adjustment		5,326		1,813		10,652		2,721
Preferred stock dividends										Preferred stock dividends	5,326		5,326		10,652		10,652
Participating securities' share in earnings	Participating securities' share in earnings	341		—		687		—		Participating securities' share in earnings	418		341		825		687
Net Income (Loss) Attributable to Common Stockholders	Net Income (Loss) Attributable to Common Stockholders	$	19,394	$	29,264	$	49,190	$	58,448	Net Income (Loss) Attributable to Common Stockholders	$	(25,772)	$	19,394	$	(56,582)	$	49,190

Net Income (Loss) Per Share of Common Stock	Net Income (Loss) Per Share of Common Stock									Net Income (Loss) Per Share of Common Stock
Basic	Basic	$	0.28	$	0.53	$	0.75	$	1.05	Basic	$	(0.37)	$	0.28	$	(0.82)	$	0.75
Diluted	Diluted	$	0.28	$	0.52	$	0.74	$	1.05	Diluted	$	(0.37)	$	0.28	$	(0.82)	$	0.74
Weighted Average Number of Shares of Common Stock Outstanding	Weighted Average Number of Shares of Common Stock Outstanding									Weighted Average Number of Shares of Common Stock Outstanding
Basic	Basic	68,549,049		55,632,322		65,832,841		55,625,911		Basic	69,115,654		68,549,049		69,105,389		65,832,841
Diluted	Diluted	68,549,049		55,907,086		72,149,015		55,819,110		Diluted	69,115,654		68,549,049		69,105,389		72,149,015

Dividends Declared per Share of Common Stock	Dividends Declared per Share of Common Stock	$	0.43	$	0.43	$	0.86	$	0.86	Dividends Declared per Share of Common Stock	$	0.43	$	0.43	$	0.86	$	0.86

See Notes to Condensed Consolidated Financial Statements.

~~Table of Contents~~

KKR Real Estate Finance Trust Inc. and Subsidiaries

Condensed Consolidated Statements of Changes in Equity (Unaudited)

(Amounts in thousands, except share data)

Permanent Equity Temporary Equity
KKR Real Estate Finance Trust Inc.
Preferred Stock Series A Preferred Stock Common Stock
Shares Stated Value Shares Par Value Shares Par Value Additional Paid-In Capital Accumulated Deficit Repurchased Stock Total KKR Real Estate Finance Trust Inc. Stockholders' Equity Noncontrolling Interests in Equity of Consolidated Joint Venture Total Permanent Equity Redeemable Preferred Stock
Balance at December 31, 2021 — $ — 6,900,000 $ 69 61,370,732 $ 613 $ 1,459,959 $ (38,208) $ (60,999) $ 1,361,434 $ 147 $ 1,361,581 $ —
Issuance of common stock — — — — 6,562.972 66 135,205 — — 135,271 — 135,271 —
Issuance of preferred stock — — 6,210,000 62 — — 151,105 — — 151,167 — 151,167 —
Offering costs — — — — — — (1,055) — — (1,055) — (1,055) —
Contribution by noncontrolling interest — — — — — — — — — — 94 94 —
Series A preferred dividends declared, $0.41 per share — — — — — — — (5,326) — (5,326) — (5,326) —
Common dividends declared, $0.43 per share — — — — — — — (29,211) — (29,211) — (29,211) —
Participating security dividends declared, $0.43 per share — — — — — — — (339) — (339) — (339) —
Stock-based compensation, net — — — — — — 2,126 — — 2,126 — 2,126 —
Net income (loss) — — — — — — — 35,468 — 35,468 (56) 35,412 —
Balance at March 31, 2022 — $ — 13,110,000 $ 131 67,933,704 $ 679 $ 1,747,340 $ (37,616) $ (60,999) $ 1,649,535 $ 185 $ 1,649,720 $ —
Issuance of common stock — — — — 2,750,000 28 53,625 — — 53,653 — 53,653 —
Offering costs — — — — — — (280) — — (280) — (280) —
Repurchase of common stock — — — — (1,044,692) (10) — — (18,071) (18,081) — (18,081) —
Series A preferred dividends declared, $0.41 per share — — — — — — — (5,326) — (5,326) — (5,326) —
Common dividends declared, $0.43 per share — — — — — — — (29,951) — (29,951) — (29,951) —
Participating security dividends declared, $0.43 per share — — — — — — — (326) — (326) — (326) —
Stock-based compensation, net — — — — 15,520 * 2,040 — — 2,040 — 2,040 —
Net income (loss) — — — — — — — 25,061 — 25,061 (66) 24,995 —
Balance at June 30, 2022 — $ — 13,110,000 $ 131 69,654,532 $ 697 $ 1,802,725 $ (48,158) $ (79,070) $ 1,676,325 $ 119 $ 1,676,444 $ —




	Series A Preferred Stock		Common Stock
		Shares	Par Value		Shares	Par Value		Additional Paid-In Capital		Accumulated Deficit		Repurchased Stock		Total KKR Real Estate Finance Trust Inc. Stockholders' Equity		Noncontrolling Interests in Equity of Consolidated Joint Venture		Total Equity
Balance at December 31, 2022		13,110,000	$	131	69,095,011	$	691	$	1,808,983	$	(141,503)	$	(96,764)	$	1,571,538	$	(102)	$	1,571,436



Contribution by noncontrolling interest		—	—		—	—		—		—		—		—		255		255
Series A preferred dividends declared, $0.41 per share		—	—		—	—		—		(5,326)		—		(5,326)		—		(5,326)
Common dividends declared, $0.43 per share		—	—		—	—		—		(29,711)		—		(29,711)		—		(29,711)
Participating security dividends declared, $0.43 per share		—	—		—	—		—		(407)		—		(407)		—		(407)
Stock-based compensation , net		—	—		—	—		2,152		—		—		2,152		—		2,152
Net income (loss)		—	—		—	—		—		(25,077)		—		(25,077)		(177)		(25,254)
Balance at March 31, 2023		13,110,000	$	131	69,095,011	$	691	$	1,811,135	$	(202,024)	$	(96,764)	$	1,513,169	$	(24)	$	1,513,145



Series A preferred dividends declared, $0.41 per share		—	—		—	—		—		(5,326)		—		(5,326)		—		(5,326)
Common dividends declared, $0.43 per share		—	—		—	—		—		(29,716)		—		(29,716)		—		(29,716)
Participating security dividends declared, $0.43 per share		—	—		—	—		—		(418)		—		(418)		—		(418)
Stock-based compensation , net		—	—		11,050	*		2,174		—		—		2,174		—		2,174
Net income (loss)		—	—		—	—		—		(20,028)		—		(20,028)		(96)		(20,124)
Balance at June 30, 2023		13,110,000	$	131	69,106,061	$	691	$	1,813,309	$	(257,512)	$	(96,764)	$	1,459,855	$	(120)	$	1,459,735

* Rounds to zero.

~~Table of Contents~~

Permanent Equity Temporary Equity
KKR Real Estate Finance Trust Inc.
Preferred Stock Series A Preferred Stock Common Stock
Shares Stated Value Shares Par Value Shares Par Value Additional Paid-In Capital Accumulated Deficit Repurchased Stock Total KKR Real Estate Finance Trust Inc. Stockholders' Equity Noncontrolling Interests in Equity of Consolidated Joint Venture Total Permanent Equity Redeemable Preferred Stock
Balance at December 31, 2020 1 $ — — $ — 55,619,428 $ 556 $ 1,169,695 $ (65,698) $ (60,999) $ 1,043,554 $ — $ 1,043,554 $ 1,852
Special non-voting preferred dividends declared — — — — — — — — — — — — (198)
Common dividends declared, $0.43 per share — — — — — — — (23,916) — (23,916) — (23,916) —
Stock-based compensation — — — — — — 1,994 — — 1,994 — 1,994 —
Adjustment of redeemable preferred stock to redemption value — — — — — — — (710) — (710) — (710) 710
Net income (loss) — — — — — — — 29,894 — 29,894 — 29,894 198
Balance at March 31, 2021 1 $ — — $ — 55,619,428 $ 556 $ 1,171,689 $ (60,430) $ (60,999) $ 1,050,816 $ — $ 1,050,816 $ 2,562
Issuance of preferred stock — — 6,900,000 69 — — 166,997 — — 167,066 — 167,066 —
Offering costs — — — — — — (720) — — (720) — (720) —
Series A preferred dividends declared, $0.27 per share — — — — — — — (1,838) — (1,838) — (1,838) —
Special non-voting preferred dividends declared — — — — — — — — — — — — (221)
Common dividends declared, $0.43 per share — — — — — — — (23,924) — (23,924) — (23,924) —
Stock-based compensation — — — — 18,052 * 1,993 — — 1,993 — 1,993 —
Adjustment of redeemable preferred stock to redemption value — — — — — — — 246 — 246 — 246 (246)
Net income (loss) — — — — — — — 30,856 — 30,856 — 30,856 221
Balance at June 30, 2021 1 $ — 6,900,000 $ 69 55,637,480 $ 556 $ 1,339,959 $ (55,090) $ (60,999) $ 1,224,495 $ — $ 1,224,495 $ 2,316




	Series A Preferred Stock		Common Stock
		Shares	Par Value		Shares	Par Value		Additional Paid-In Capital		Accumulated Deficit		Repurchased Stock		Total KKR Real Estate Finance Trust Inc. Stockholders' Equity		Noncontrolling Interests in Equity of Consolidated Joint Venture		Total Equity
Balance at December 31, 2021		6,900,000	$	69	61,370,732	$	613	$	1,459,959	$	(38,208)	$	(60,999)	$	1,361,434	$	147	$	1,361,581
Issuance of common stock		—	—		6,562,972	66		135,205		—		—		135,271		—		135,271
Issuance of preferred stock		6,210,000	62		—	—		151,105		—		—		151,167		—		151,167
Offering costs		—	—		—	—		(1,055)		—		—		(1,055)		—		(1,055)
Contribution by noncontrolling interest		—	—		—	—		—		—		—		—		94		94
Series A preferred dividends declared, $0.41 per share		—	—		—	—		—		(5,326)		—		(5,326)		—		(5,326)
Common dividends declared, $0.43 per share		—	—		—	—		—		(29,211)		—		(29,211)		—		(29,211)
Participating security dividends declared, $0.43 per share		—	—		—	—		—		(339)		—		(339)		—		(339)
Stock-based compensation , net		—	—		—	—		2,126		—		—		2,126		—		2,126
Net income (loss)		—	—		—	—		—		35,468		—		35,468		(56)		35,412
Balance at March 31, 2022		13,110,000	$	131	67,933,704	$	679	$	1,747,340	$	(37,616)	$	(60,999)	$	1,649,535	$	185	$	1,649,720
Issuance of common stock		—	—		2,750,000	28		53,625		—		—		53,653		—		53,653
Offering costs		—	—		—	—		(280)		—		—		(280)		—		(280)
Repurchase of common stock		—	—		(1,044,692)	(10)		—		—		(18,071)		(18,081)		—		(18,081)
Series A preferred dividends declared, $0.41 per share		—	—		—	—		—		(5,326)		—		(5,326)		—		(5,326)

Common dividends declared, $0.43 per share		—	—		—	—		—		(29,951)		—		(29,951)		—		(29,951)
Participating security dividends declared, $0.43 per share		—	—		—	—		—		(326)		—		(326)		—		(326)
Stock-based compensation , net		—	—		15,520	*		2,040		—		—		2,040		—		2,040

Net income (loss)		—	—		—	—		—		25,061		—		25,061		(66)		24,995
Balance at June 30, 2022		13,110,000	$	131	69,654,532	$	697	$	1,802,725	$	(48,158)	$	(79,070)	$	1,676,325	$	119	$	1,676,444

* Rounds to zero.

See Notes to Condensed Consolidated Financial Statements.

~~Table of Contents~~

KKR Real Estate Finance Trust Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows (Unaudited)

(Amounts in thousands)


		Six Months Ended June 30,					Six Months Ended June 30,
		2022		2021			2023		2022
Cash Flows From Operating Activities	Cash Flows From Operating Activities					Cash Flows From Operating Activities
Net income (loss)	Net income (loss)	$	60,407	$	61,169	Net income (loss)	$	(45,378)	$	60,407
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:	Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:					Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Amortization of deferred debt issuance costs and discounts	Amortization of deferred debt issuance costs and discounts	10,618		6,582		Amortization of deferred debt issuance costs and discounts	13,894		10,618
Accretion of deferred loan fees and discounts	Accretion of deferred loan fees and discounts	(11,961)		(9,200)		Accretion of deferred loan fees and discounts	(12,390)		(11,961)
Payment-in-kind interest	Payment-in-kind interest	(943)		(1,303)		Payment-in-kind interest	—		(943)
(Income) Loss from equity method investments		(1,245)		(727)
(Income) loss from equity method investments						(Income) loss from equity method investments	1,363		(1,245)
Provision for (reversal of) credit losses, net	Provision for (reversal of) credit losses, net	10,580		(2,147)		Provision for (reversal of) credit losses, net	116,802		10,580
Stock-based compensation expense	Stock-based compensation expense	4,166		3,987		Stock-based compensation expense	4,326		4,166
Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:
Accrued interest receivable, net	Accrued interest receivable, net	(7,257)		(996)		Accrued interest receivable, net	(507)		(7,257)
Other assets	Other assets	1,547		(594)		Other assets	140		1,547
Accrued interest payable	Accrued interest payable	3,210		92		Accrued interest payable	407		3,210
Accounts payable, accrued expenses and other liabilities		(1,287)		656
Other liabilities						Other liabilities	(1,422)		(1,287)
Due to affiliates	Due to affiliates	549		590		Due to affiliates	(127)		549
Net cash provided by (used in) operating activities	Net cash provided by (used in) operating activities	68,384		58,109		Net cash provided by (used in) operating activities	77,108		68,384

Cash Flows From Investing Activities	Cash Flows From Investing Activities					Cash Flows From Investing Activities
Proceeds from principal repayments and sale/syndication of commercial real estate loans, held-for-investment		647,814		514,490
Origination of commercial real estate loans, held-for-investment		(1,791,277)		(1,119,158)
Investment in real estate owned		(599)		—
Proceeds from principal repayments of commercial real estate loans						Proceeds from principal repayments of commercial real estate loans	435,155		647,814
Originations and fundings of commercial real estate loans						Originations and fundings of commercial real estate loans	(374,585)		(1,791,277)
Capital expenditures on real estate owned						Capital expenditures on real estate owned	(1,174)		(599)

Net cash provided by (used in) investing activities	Net cash provided by (used in) investing activities	(1,144,062)		(604,668)		Net cash provided by (used in) investing activities	59,396		(1,144,062)

Cash Flows From Financing Activities	Cash Flows From Financing Activities					Cash Flows From Financing Activities
Proceeds from borrowings under secured financing agreements	Proceeds from borrowings under secured financing agreements	1,817,044		1,014,306		Proceeds from borrowings under secured financing agreements	556,343		1,817,044
Proceeds from issuance of collateralized loan obligations	Proceeds from issuance of collateralized loan obligations	847,500		—		Proceeds from issuance of collateralized loan obligations	—		847,500
Proceeds from noncontrolling interest contributions						Proceeds from noncontrolling interest contributions	255		—
Net proceeds from issuance of common stock	Net proceeds from issuance of common stock	188,924		—		Net proceeds from issuance of common stock	—		188,924
Net proceeds from issuance of preferred stock	Net proceeds from issuance of preferred stock	151,167		167,066		Net proceeds from issuance of preferred stock	—		151,167
Payments of common stock dividends	Payments of common stock dividends	(55,600)		(47,832)		Payments of common stock dividends	(59,422)		(55,600)
Payments of preferred stock dividends	Payments of preferred stock dividends	(10,888)		(2,204)		Payments of preferred stock dividends	(10,652)		(10,888)
Principal repayments on borrowings under secured financing agreements		(1,972,793)		(572,503)

Principal repayments on borrowings under secured financing agreements						Principal repayments on borrowings under secured financing agreements	(504,679)		(1,972,793)
Principal repayments on borrowings under convertible notes						Principal repayments on borrowings under convertible notes	(143,750)		—
Payments of debt and collateralized debt obligation issuance costs	Payments of debt and collateralized debt obligation issuance costs	(18,552)		(1,806)		Payments of debt and collateralized debt obligation issuance costs	(2,300)		(18,552)
Payments of stock issuance costs	Payments of stock issuance costs	(1,140)		(408)		Payments of stock issuance costs	—		(1,140)
Payments to reacquire common stock		(18,081)		—
Tax withholding on stock-based compensation		—		(1,720)
Payments to repurchase common stock						Payments to repurchase common stock	—		(18,081)

Net cash provided by (used in) financing activities	Net cash provided by (used in) financing activities	927,581		554,899		Net cash provided by (used in) financing activities	(164,205)		927,581

Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash	Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash	(148,097)		8,340		Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash	(27,701)		(148,097)
Cash, Cash Equivalents and Restricted Cash at Beginning of Period	Cash, Cash Equivalents and Restricted Cash at Beginning of Period	273,770		110,832		Cash, Cash Equivalents and Restricted Cash at Beginning of Period	250,621		273,770
Cash, Cash Equivalents and Restricted Cash at End of Period	Cash, Cash Equivalents and Restricted Cash at End of Period	$	125,673	$	119,172	Cash, Cash Equivalents and Restricted Cash at End of Period	$	222,920	$	125,673

Reconciliation of cash, cash equivalents and restricted cash
Cash and cash equivalents		$	118,020	$	119,172
Restricted cash		7,653		—
Total cash, cash equivalents and restricted cash shown in the Condensed Consolidated Statements of Cash Flows		$	125,673	$	119,172

~~Table of Contents~~


							Six Months Ended June 30,
							2023		2022
Reconciliation of cash, cash equivalents and restricted cash						Reconciliation of cash, cash equivalents and restricted cash
Cash and cash equivalents						Cash and cash equivalents	$	207,698	$	118,020
Restricted cash						Restricted cash	15,222		7,653
Total cash, cash equivalents and restricted cash shown in the Condensed Consolidated Statements of Cash Flows						Total cash, cash equivalents and restricted cash shown in the Condensed Consolidated Statements of Cash Flows	$	222,920	$	125,673

Supplemental Disclosure of Cash Flow Information	Supplemental Disclosure of Cash Flow Information					Supplemental Disclosure of Cash Flow Information
Cash paid during the period for interest	Cash paid during the period for interest	$	63,365	$	46,296	Cash paid during the period for interest	$	207,352	$	63,365

Cash paid during the period for income taxes	Cash paid during the period for income taxes	—		409		Cash paid during the period for income taxes	134		—
Supplemental Schedule of Non-Cash Investing and Financing Activities	Supplemental Schedule of Non-Cash Investing and Financing Activities					Supplemental Schedule of Non-Cash Investing and Financing Activities
Loan principal payments held by servicer		—		167,057
Principal repayments on secured financing agreements on KREF's behalf by borrower		—		(67,259)

Modification accounted for as repayment and new loan, net of write-off						Modification accounted for as repayment and new loan, net of write-off	111,000		—
Dividend declared, not yet paid	Dividend declared, not yet paid	29,951		24,348		Dividend declared, not yet paid	29,716		29,951

See Notes to Condensed Consolidated Financial Statements.

Table of Contents

KKR Real Estate Finance Trust Inc.

Notes to Condensed Consolidated Financial Statements

(~~dollars~~amount in tables in thousands, except per share amounts)

Note 1. Business and Organization

KKR Real Estate Finance Trust Inc. (together with its consolidated subsidiaries, referred to throughout this report as the "Company" or "KREF") is a Maryland corporation that was formed and commenced operations on October 2, 2014 as a mortgage real estate investment trust ("REIT") that focuses primarily on originating and acquiring transitional senior loans secured by commercial real estate ("CRE") assets.

KREF has elected and intends to maintain its qualification to be taxed as a REIT under the requirements of the Internal Revenue Code of 1986, as amended (the "Internal Revenue Code"), for U.S. federal income tax purposes. As such, KREF will generally not be subject to U.S. federal income tax on that portion of its income that it distributes to stockholders if it distributes at least 90% of its REIT taxable income, determined without regard to the deduction for dividends paid and excluding any net capital gains. See Note 1716 regarding taxes applicable to KREF.

KREF is externally managed by KKR Real Estate Finance Manager LLC ("Manager"), an indirect subsidiary of KKR & Co. Inc. (together with its subsidiaries, "KKR"), through a management agreement ("Management Agreement") pursuant to which the Manager provides a management team and other professionals who are responsible for implementing KREF’s business strategy, subject to the supervision of KREF’s board of directors. For its services, the Manager is entitled to management fees and incentive compensation, both defined in, and in accordance with the terms of, the Management Agreement (Note ~~15)~~14).

As of June 30, ~~2022,~~2023, KKR beneficially owned 10,000,001 shares, or ~~14.4%~~14.5% of KREF's outstanding common ~~stock~~.stock.

KREF's principal business activities are related to the origination and purchase of credit investments related to CRE. Management assesses the performance of KREF's current portfolio of leveraged and unleveraged commercial real estate loans ~~and commercial mortgage-backed securities ("CMBS") as a whole~~ and makes operating decisions accordingly. As a result, management presents KREF's operations within a single reporting segment.

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KKR Real Estate Finance Trust Inc.

Notes to Condensed Consolidated Financial Statements

(~~dollars~~amount in tables in thousands, except per share amounts)

Note 2. Summary of Significant Accounting Policies

Basis of Presentation — The accompanying unaudited condensed consolidated financial statements and related notes of KREF are prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and instructions to Form 10-Q. The condensed consolidated financial statements, including the accompanying notes, are unaudited and exclude some of the disclosures required in annual financial statements. Accordingly, certain information and footnote disclosures normally included in the condensed consolidated financial statements have been condensed or omitted. The condensed consolidated financial statements include the accounts of KREF and its consolidated subsidiaries, and all intercompany transactions and balances have been eliminated. In the opinion of management, all adjustments considered necessary for a fair presentation of KREF’s financial position, results of operations and cash flows have been included and are of a normal and recurring nature. The operating results presented for interim periods are not necessarily indicative of the results that may be expected for any other interim period or for the entire year. These condensed consolidated financial statements should be read in conjunction with KREF's Annual Report on Form 10-K.

Risks and Uncertainties — The coronavirus pandemic ("COVID-19") has adversely impacted global commercial activity and has contributed to significant volatility in financial markets. During 2020, the COVID-19 pandemic created 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. ~~The impact of~~In response to the ~~outbreak has been rapidly evolving around the globe, with~~pandemic, several countries ~~taking~~took drastic measures to limit the spread of the virus by instituting quarantines or lockdowns, imposing travel restrictions and limiting operations of non-essential offices and retail centers.

~~In 2021 and 2022,~~While the global economy has ~~with certain setbacks, begun reopening, and wider distribution of vaccines will likely encourage greater economic activity. While vaccine availability and uptake has increased,~~re-opened, the longer-term macro-economic effects of the pandemic continue to impact many industries, including those of certain of KREF’s borrowers. ~~Moreover, with~~In particular, the ~~potential~~increase in remote working arrangements in response to the pandemic has contributed to a decline in commercial real estate values and reduced demand for ~~new strains~~commercial real estate compared to pre-pandemic levels, which may adversely impact certain of ~~COVID-19~~KREF's borrowers and has persisted even as the pandemic continues to emerge, governments and businesses may reinstitute restrictions, including mandatory business shut-downs, travel restrictions, reduced business operations and social distancing requirements, which could dampen or delay any economic recovery and could materially and adversely affect KREF’s results and financial condition.subside. In addition, the COVID-19 pandemic ~~continues~~has contributed to ~~disrupt~~ global supply ~~chains, has caused~~chain disruptions, labor shortages and has ~~added~~ broad inflationary pressures, each of which has a potential negative impact on KREF's borrowers’ ability to execute on their business plans and potentially their ability to perform under the terms of their loan obligations. ~~In response to such inflationary pressures, the~~The Federal Reserve has ~~begun raising~~raised interest rates inten times since January 2022, and has ~~indicated~~signaled that ~~it foresees~~ further interest rate increases may be forthcoming throughout the ~~year and into 2023 and 2024.~~year. Higher interest rates imposed by the Federal Reserve to address inflation may adversely impact real estate asset values and increase our interest expense, which expense may not be fully offset by any resulting increase in interest income, and may lead to decreased prepayments from ~~our~~KREF's borrowers and an increase in the number of ~~our~~KREF's borrowers who exercise extension options.

Use of Estimates — The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Management makes subjective estimates to project cash flows KREF expects to receive on its investments in loans and securities as well as the related market discount rates, which significantly impact the interest income, impairments, allowance for loan loss and fair values recorded or disclosed. The effects of COVID-19 may negatively and materially impact significant estimates and assumptions used by the Company including, but not limited to, estimates of expected credit losses, valuation of our equity method investments and the fair value estimates of the Company’s assets and liabilities. Actual results could materially differ from those estimates.

Consolidation — KREF consolidates those entities that (i) it controls through either majority ownership or voting rights or (ii) management determines that KREF is the primary beneficiary of entities deemed to be variable interest entities ("VIEs").

Variable Interest Entities — VIEs are entities (i) in which equity investors do not have an interest with the characteristics of a controlling financial interest, (ii) that do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties or (iii) established with non-substantive voting rights. A VIE is required to be consolidated only by its primary beneficiary, which is defined as the party that has the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and that has the obligation to absorb losses of, or the right to receive benefits from, the VIE that could be potentially significant to the VIE (Note ~~10)~~9).

~~Table of Contents~~

~~KKR Real Estate Finance Trust Inc.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(dollars in tables in thousands, except per share amounts)~~

To assess whether KREF has the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance, KREF considers all the facts and circumstances, including its role in establishing the VIE and its ongoing rights and responsibilities. This assessment includes, first, identifying the activities that most significantly impact the VIE’s economic performance; and second, identifying which party, if any, has power to direct those activities. To assess whether KREF has the

Table of Contents

KKR Real Estate Finance Trust Inc.

Notes to Condensed Consolidated Financial Statements

(amount in tables in thousands, except per share amounts)

obligation to absorb losses of, or the right to receive benefits from, the VIE that could potentially be significant to the VIE, KREF considers all of its economic interests and applies judgment in determining whether these interests, in the aggregate, are considered potentially significant to the VIE.

Collateralized Loan Obligations — KREF consolidates collateralized loan obligations (“CLOs”) when it determines that the CLO issuers, wholly-owned subsidiaries of KREF, are VIEs and that KREF is the primary beneficiary of such VIEs.

The collateral assets of KREF's CLOs, comprised of a pool of loan participations, are included in “Commercial real estate loans, held-for-investment, net” on the Condensed Consolidated Balance Sheets. The liabilities of KREF's consolidated CLOs consist solely of obligations to the senior CLO noteholders, excluding subordinated CLO tranches held by KREF as such interests are eliminated in consolidation, and are presented in “Collateralized loan obligations, net” on the Condensed Consolidated Balance Sheets. The collateral assets of the CLOs can only be used to settle the obligations of the consolidated CLOs. The interest income from the CLOs’ collateral assets and the interest expense on the CLOs’ liabilities are presented on a gross basis in “Interest income” and “Interest expense”, respectively, in KREF's Condensed Consolidated Statements of Income.

Real Estate Owned Joint Venture — KREF ~~consolidated~~consolidates a joint venture that ~~held~~holds the majority of KREF’s sole investment in real estate owned (“REO”) property that was acquired in the fourth quarter of 2021, in which a third party ~~owned~~owns a 10% noncontrolling interest (Note ~~10)~~9). Management determined the joint venture to be a VIE as the joint venture had insufficient ~~equity-at-risk.~~equity at risk. KREF owns 90% of the equity interest in the joint venture and participates in the profits and losses. Management concluded that KREF ~~to be~~is the primary beneficiary of the joint venture as KREF ~~held~~holds decision-making power over the activities that most significantly impact the economic performance of the joint venture and has the obligation to absorb losses of, or the right to receive benefits from, the joint venture that could be potentially significant to the joint venture.

Noncontrolling Interests — Noncontrolling interests represent the ownership interests in certain consolidated subsidiaries held by entities or persons other than KREF. These noncontrolling interests do not include redemption features and are presented as "Noncontrolling interests in equity of consolidated joint venture" on the Condensed Consolidated Balance ~~Sheet.~~

~~Temporary Equity~~— KREF's Special Non-Voting Preferred Stock (“SNVPS”) became redeemable by the SNVPS holder in the second quarter of 2018. As a result, starting with the second quarter of 2018, KREF adjusted the carrying value of the SNVPS to its redemption value quarterly. The SNVPS Redemption Value Adjustment was treated similar to a dividend on preferred stock for GAAP purposes and therefore was deducted from (or added back to) “Net Income (Loss)” to arrive at “Net Income (Loss) Attributable to Common Stockholders” on KREF's Condensed Consolidated Statements of Income.

~~KREF recorded a~~ ~~$3.3 million~~ non-cash redemption value adjustment to the SNVPS (“SNVPS Redemption Value Adjustment”) during the year ended December 31, 2021, which increased the carrying value of the SNVPS to its redemption value of $5.1 million prior to redemption of the SNVPS by KREF on October 1, 2021 for a cash redemption value of $5.1 million (Note 10).Sheets.

Equity Method Investments — Investments are accounted for under the equity method when KREF has significant influence over the operations of an investee but does not consolidate that investment. Equity method investments, for which management has not elected a fair value option, are initially recorded at cost and subsequently adjusted for KREF's share of net income or loss and cash contributions and distributions each period.

Management determined that KREF's investment in the Manager is an interest in a VIE, however KREF is not the primary beneficiary. KREF does not have substantive participating or kick-out rights nor the power to direct activities and the obligation to absorb losses of the Manager that could be significant to the Manager. KREF accounts for its investment in the Manager using the equity method. On October 1, 2021, KREF TRS redeemed its interest in the Manager for a cash call amount of $5.1 million when the KKR Member exercised its Call Option to redeem the Non-Voting Manager Units, including the Non-Voting Manager Units held by KREF TRS (Note 10).

~~Management determined that KREF's investment in~~ an aggregator vehicle alongside KKR Real Estate Credit Opportunity Partners L.P. ("RECOP I ") is an interest in a VIE, however KREF is not the primary beneficiary and does not have substantive

~~Table of Contents~~

~~KKR Real Estate Finance Trust Inc.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(dollars in tables in thousands, except per share amounts)~~

participating or kick-out rights. KREF records its share of net asset value in RECOP I in “Equity method investments” on its Condensed Consolidated Balance Sheets and its share of unrealized gains or losses in “Income (loss) from equity method investments” in its Condensed Consolidated Statements of Income. Management elected the fair value option for KREF's investment in RECOP I.

KREF classifies distributions received from equity method investees using the cumulative earnings approach. Distributions received up to the cumulative earnings from each equity method investee are considered returns on investment and presented within “Cash Flows from Operating Activities” in the Condensed Consolidated Statements of Cash Flows; excess distributions received are considered returns of investment and presented within “Cash Flows From Investing Activities” in the Condensed Consolidated Statements of Cash Flows.

Fair Value — GAAP requires the categorization of the fair value of financial instruments into three broad levels that form a hierarchy based on the transparency of inputs to the valuation.

Level 1 - Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.

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Level 2 - Inputs are other than quoted prices that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar instruments in active markets, and inputs other than quoted prices that are observable for the asset or liability.

Level 3 - Inputs are unobservable for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability.

KREF follows this hierarchy for its financial instruments. The classifications are based on the lowest level of input that is significant to the fair value measurement.

Valuation Process — The Manager reviews the valuation of Level 3 financial instruments as part of KKR's quarterly process. As of June 30, ~~2022,~~2023, KKR’s valuation process for Level 3 measurements, as described below, subjected valuations to the review and oversight of various committees. KKR has a global valuation committee assisted by the asset class-specific valuation committees, including a real estate valuation committee that reviews and approves all preliminary Level 3 valuations for real estate assets, including the financial instruments held by KREF. The global valuation committee is responsible for coordinating and implementing KKR’s valuation process to ensure consistency in the application of valuation principles across portfolio investments and between periods. All Level 3 valuations are also subject to approval by the global valuation committee.

Valuation of Commercial Real Estate Loans ~~and Participation Sold~~— Management ~~generally~~ considers KREF's commercial real estate loans to be Level 3 assets in the fair value hierarchy as such assets are illiquid, structured investments that are specific to the sponsor, underlying property and its operating performance (Note ~~16)~~15). OnFor financial statement disclosure purposes, on a quarterly basis, management generally engages an independent valuation firm to estimate the fair value of each loan categorized as a Level 3 asset. These loans are generally valued using a discounted cash flow model based on assumptions regarding the collection of principal and interest and estimated market rates. Management reviews the quarterly loan valuation estimates provided by the independent valuation firm. ~~These~~For collateral dependent loans, are generally valued using a discounted cash flow model using discount rates derived from observable market data applied to the capital structure of the respective sponsor and/or estimated property value. In the event that management's estimate of fair value differs fromKREF may apply alternative valuation methods based on the fair value ~~estimate provided by the independent valuation firm, KREF ultimately relies solely upon the valuation prepared by the investment personnel~~ of the ~~Manager.~~underlying collateral. Determination of collateral value involves significant judgement, including assumptions regarding capitalization rates, discount rates, leasing, occupancy rates, and other factors.

Valuation of CLO Consolidated VIEs — Management estimates the fair value of the CLO liabilities using prices obtained from an independent valuation firm. If prices received from the independent valuation firm are inconsistent with values determined in connection with management’s independent review, management makes inquiries to the independent valuation firm about the prices received and related methods. In the event management determines the price obtained from an independent valuation firm to be unreliable or an inaccurate representation of the fair value of the CLO liabilities (based on considerations given to observable market data), management then compiles evidence independently and presents the independent valuation firm with such evidence supporting a different value. As a result, the independent valuation firm may revise their price after evaluating any additional evidence.

However, if management continues to disagree with the price from the independent valuation firm, in light of evidence that management compiled independently and believes to be compelling, valuations are then prepared using inputs based on ~~non-~~

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~~binding~~non-binding broker quotes obtained from independent, well-known, major financial brokers that are CLO market makers. In validating any non-binding broker quote used in this circumstance, management compares the non-binding quote to the observable market data points in addition to understanding the valuation methodologies used by the market makers. These market participants may utilize a similar methodology as the independent valuation firm to value the CLO liabilities, with the key input of expected yield determined independently based on both observable and unobservable factors. To avoid reliance on any single broker-dealer, management receives a minimum of two non-binding quotes, of which the average is used.

Other Valuation Matters — For Level 3 financial assets originated, or otherwise acquired, and financial liabilities assumed during the current calendar quarter that were conducted in an orderly transaction with an unrelated party, management generally believes that the transaction price provides the most observable indication of fair value given the illiquid nature of these financial instruments, unless management is aware of any circumstances that may cause a material change in the fair value through the remainder of the ~~quarterly~~ reporting period. For instance, significant changes to the underlying property or its planned operations may cause material changes in the fair value of commercial real estate loans acquired, or originated, by KREF.

KREF’s determination of fair value is based upon the best information available for a given circumstance and may incorporate assumptions that are management’s best estimates after consideration of a variety of internal and external factors. When an

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independent valuation firm expresses an opinion on the fair value of a financial instrument in the form of a range, management selects a value within the range provided by the independent valuation firm, generally the midpoint, to assess the reasonableness of management’s estimated fair value for that financial instrument.

See Note 1615 for additional information regarding the valuation of KREF's financial assets and liabilities.

Sales of Financial Assets and Financing Agreements — KREF will, from time to time, transfer loans, securities and other assets as well as finance assets in the form of secured borrowings. In each case, management evaluates whether the transaction constitutes a sale through legal isolation of the transferred financial asset from KREF, the ability of the transferee to pledge or exchange the transferred asset without constraint and the transfer of control of the transferred asset. For transfers that constitute sales, KREF (i) recognizes the financial assets it retains and liabilities it has incurred, if any, (ii) derecognizes the financial assets it has sold, and derecognizes liabilities when extinguished and (iii) recognizes a realized gain, or loss, based upon the excess, or deficient, proceeds received over the carrying value of the transferred asset. KREF does not recognize a gain, or loss, on interests retained, if any, where management elected the fair value option prior to sale.

Balance Sheet Measurement

Cash and Cash Equivalents and Restricted Cash — KREF considers cash equivalents as highly liquid short-term investments with maturities of 90 days or less when purchased. KREF maintains its cash deposits with major financial institutions. Substantially all such amounts on deposit ~~with major financial institutions~~ exceed insured limits.

KREF must maintain sufficient cash and cash equivalents to satisfy liquidity covenants related to its secured financing agreements. However, such amounts are not restricted from use in KREF's current operations, and KREF does not present these cash and cash equivalents as restricted. As of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, KREF was required to maintain unrestricted cash and cash equivalents of at least ~~$51.7~~$57.1 million and ~~$65.6~~$54.4 million, respectively, to satisfy its liquidity covenants (Note 5).

As of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, KREF had ~~$7.7~~$15.2 million and ~~$2.3~~$10.8 million of restricted cash held in lender-controlled bank accounts, respectively. Such ~~amount is~~amounts are presented within "Other Assets" in the Condensed Consolidated Balance ~~Sheet.~~Sheets.

Commercial Real Estate Loans Held-For-Investment and Allowance for Credit Losses — KREF recognizes its investments in commercial real estate loans based on management's intent, and KREF's ability, to hold those investments through their contractual maturity. Management classifies those loans that management does not intend to sell in the foreseeable future, and KREF is able to hold until maturity, as held-for-investment. Loans that are held-for-investment are carried at their aggregate outstanding principal, net of applicable (i) unamortized origination or acquisition premiums and discounts, (ii) unamortized deferred nonrefundable fees and other direct loan origination costs, and (iii) allowance for credit losses, net of write-offs of impaired loans. If a loan is determined to be impaired, management writes off the loan through a charge to the "Allowance for credit losses" and to the respective loan balance. KREF applies the interest method to amortize origination or acquisition premiums

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and discounts and deferred nonrefundable fees or other direct loan origination costs, or on a straight-line basis when it approximates the interest method. Loans for which management elects the fair value option at the time of origination, or acquisition, are carried at fair value on a recurring basis (Note 3).

~~On January 1, 2020,~~ KREF ~~adopted ASU No. 2016-13,~~ ~~Financial Instruments-Credit Losses~~,recognizes and ~~subsequent amendments (“ASU 2016-13”), which replaced~~measures the ~~incurred loss methodology with an expected loss model known as~~allowance for credit losses under the Current Expected Credit Loss ("CECL") ~~model. CECL~~model which amended the previous credit loss model to reflect a reporting entity's current estimate of all expected credit losses, not only based on historical experience and current conditions, but also by including reasonable and supportable forecasts incorporating forward-looking information. The measurement of expected credit losses under CECL is applicable to financial assets measured at amortized cost, and off-balance sheet credit exposures such as unfunded loan commitments. The allowance for credit losses required under ASU 2016-13 is deducted from the respective loans’ amortized cost basis on KREF's Condensed Consolidated Balance Sheets. The allowance for credit losses attributed to unfunded loan commitments is included in ~~“Accounts payable, accrued expenses and other~~“Other liabilities” on the Condensed Consolidated Balance Sheets.

KREF has implemented loan loss forecasting models for estimating expected life-time credit losses, at the individual loan level, for its commercial real estate loan portfolio. The CECL forecasting methods used by KREF include (i) a probability of default and loss given default method using an underlying third-party CMBS/CRE loan database with historical loan losses from 1998 through ~~2022~~2023 and (ii) a probability weighted expected cash flow method, depending on the type of loan and the availability of

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relevant historical market loan loss data. KREF might use other acceptable alternative approaches in the future depending on, among other factors, the type of loan, underlying collateral and availability of relevant historical market loan loss data.

KREF estimates the CECL allowance for its loan portfolio, including unfunded loan commitments, at the individual loan level. Significant inputs to KREF’s forecasting methods include (i) key loan-specific inputs such as loan-to-value ("LTV"), vintage year, ~~loan-term,~~loan term, underlying property type, geographic location, and expected timing and amount of future loan fundings, (ii) performance against the underwritten business plan and KREF's internal loan risk rating and (iii) a macro-economic forecast. These estimates may change in future periods based on available future macro-economic data and might result in a material change in KREF’s future estimates of expected credit losses for its loan portfolio. KREF considers the individual loan internal risk rating as the primary credit quality indicator underlying the CECL assessment. In certain instances, KREF considers relevant loan-specific qualitative factors to certain loans to estimate its CECL allowance.

~~KREF considers loan investments that are both (i) expected to be substantially repaid through the operation or sale of the underlying~~For collateral ~~and (ii)~~dependent loans for which ~~the borrower is experiencing financial difficulty, to be “collateral-dependent” loans. For such loans that~~ KREF determines ~~that~~ foreclosure of the collateral is probable, KREF measures the expected losses based on the difference between the fair value of the collateral and the amortized cost basis of the loan as of the measurement date. For ~~collateral-dependent~~collateral dependent loans ~~that~~for which KREF determines foreclosure is not probable, KREF applies a practical expedient to estimate expected losses using the difference between the collateral’s fair value (less costs to sell the asset if repayment is expected through the sale of the collateral) and thethe amortized cost basis of the loan. A loan is determined to be collateral dependent if (i) a borrower or sponsor is experiencing financial difficulty, and (ii) the loan is expected to be substantially repaid through the sale of the underlying collateral. Such determination requires the use of significant judgment and can be based on several factors subject to uncertainty. Considerations used in determination of financial difficulty may include, but are not limited to, whether the borrower's operating cash flow is sufficient to cover the current and future debt service requirements, the borrower’s ability to refinance the loan, market liquidity and other circumstances that can affect the borrower’s ability to satisfy its contractual obligations under the loan agreement.

See "Expense Recognition — Commercial Real Estate Loans, Held-For-Investment" for additional discussion regarding management’s determination for loan losses.

Commercial Real Estate Loans Held-For-Sale — Loans that KREF originates or acquires, which KREF is unable to hold, or management intends to sell or otherwise dispose of, in the foreseeable future are classified as held-for-sale and are carried at the lower of amortized cost or fair value.

Real Estate Owned — To maximize recovery from a defaulted loan, KREF may assume legal title or physical possession of the underlying collateral through foreclosure or the execution of a deed in lieu of foreclosure. Foreclosed properties are generally recognized at fair value in accordance with ASC 805 on KREF's ~~consolidated balance sheets~~Condensed Consolidated Balance Sheets as ~~Real~~"Real Estate ~~Owned~~Owned" (“REO”) when KREF assumes either legal title or physical possession. KREF’s cost basis in REO equals the estimated fair value on the acquisition date plus related acquisition costs. Any difference between the estimated fair value of the REO from the net carrying value of the related loan is recorded in “Provision for (reversal of) credit losses, net” in the Consolidated Statements of Income.date.

REO assets, except for land, are depreciated using the straight-line method over estimated useful lives. Renovations and/or replacements that improve or extend the life of the REO asset are capitalized and depreciated over their estimated useful lives. The cost of ordinary repairs and maintenance are expensed as incurred.

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REO assets are evaluated for impairment on a quarterly basis. KREF considers the following factors when performing the impairment analysis: ~~(1)~~(i) significant underperformance relative to anticipated operating results; ~~(2)~~(ii) significant negative industry and economic outlook or trends; ~~(3)~~(iii) expected material costs necessary to extend the life or operate the REO asset; and (4) KREF’s ability to hold and dispose of the REO asset in the ordinary course of business. A REO asset is considered for impairment when the sum of estimated future undiscounted cash flows to be generated by the REO asset over the estimated remaining holding period is less than the carrying value of such REO asset. An impairment charge is recorded when the carrying value of the REO exceeds the fair value. When determining the fair value of a REO asset, KREF makes certain assumptions including, but not limited to, projected operating cash flows, comparable selling prices and projected cash flows from the eventual disposition of the REO asset.

Secured Financing Agreements — KREF's secured financing agreements, including uncommitted repurchase facilities, term lending agreements, warehouse facility, asset specific financings and term loan ~~financings,~~facility, are treated as floating-rate collateralized financing arrangements carried at their contractual amounts, net of unamortized debt issuance costs (Note 5). Included within KREF's secured financing agreements is KREF's corporate revolving credit ~~facility~~agreement ("Revolver"), which is full recourse to certain guarantor wholly-owned subsidiaries of KREF.

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Secured Term Loan, Net — KREF records its secured term loan at its contractual amount, net of unamortized original issuance discount and deferred financing costs (Note 7) on its Condensed Consolidated Balance Sheets. Any original issuance discount or deferred financing costs are amortized through the maturity date of the secured term loan as additional non-cash interest expense.

Convertible Notes, Net — KREF ~~accounts~~accounted for its convertible debt with a cash conversion feature in accordance with ASC 470-20, Debt with Conversion and Other Options, which requires the liability and equity components of convertible debt instruments that may be settled in cash upon conversion, including partial cash settlement, to be separately accounted for in a manner that reflects the issuer’s nonconvertible debt borrowing rate. The initial proceeds from the sale of convertible notes ~~are~~were allocated between a liability component and an equity component in a manner that reflects interest expense at the rate of similar nonconvertible debt that could have been issued at such time. The equity component represents the excess initial proceeds received over the fair value of the liability component of the notes as of the date of issuance. KREF measured the estimated fair value of the debt component of the 6.125% convertible senior notes due May 15, 2023 (“Convertible Notes”) as of the issuance date based on KREF’s nonconvertible debt borrowing rate. The equity component of the Convertible Notes iswas reflected within "Additional paid-in capital" on the Condensed Consolidated Balance Sheets, and the resulting debt discount iswas amortized over the period during which such Convertible Notes ~~are~~were expected to be outstanding (through the maturity date) as additional non-cash interest expense using the interest method, or on a straight line basis when it approximates the interest method. The additional non-cash interest expense attributable to such convertible notes ~~will increase~~increased in subsequent periods through the maturity date as the notes accrete to their par value over the same period (Note 8). The entire $143.75 million principal balance of the Convertible Notes matured and was repaid in cash on May 15, 2023. As of June 30, 2023, there were no Convertible Notes outstanding.

~~Loan Participations Sold, Net~~— In connection with its investments in CRE loans, KREF finances certain investments through the syndication of non-recourse, or limited-recourse, loan participation to unaffiliated third parties. KREF’s presentation of the senior loan and related financing involved in the syndication depends upon whether the transaction is recognized as a sale under GAAP, though such differences in presentation do not generally impact KREF’s net stockholders’ equity or net income aside from timing differences in the recognition of certain transaction costs.

To the extent that a sale is recognized under GAAP from the syndication, KREF derecognizes the participation in the senior/whole loan that KREF sold and continues to carry the retained portion of the loan as an investment. While KREF does not generally expect to recognize a material gain or loss on these sales, KREF would realize a gain or loss in an amount equal to the difference between the net proceeds received from the third party purchaser and its carrying value of the loan participation that KREF sold at time of sale. Furthermore, KREF recognizes interest income only on the portion of the loan that it retains as a result of the sale.

To the extent that a sale is not recognized under GAAP from the syndication, KREF does not derecognize the participation in the senior/whole loan that it sold. Instead, KREF recognizes 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. KREF continues 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 (Note 9).

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Other Assets ~~and Accounts Payable, Accrued Expenses~~ and Other Liabilities — As of June 30, ~~2022,~~2023, other assets included ~~$7.7~~$15.2 million of restricted cash, ~~$5.5~~$4.3 million of deferred financing costs related to KREF's Revolver (Note 5), ~~$0.8~~ and $1.2 million of prepaid ~~expenses and~~ ~~$0.6 million~~ ~~of REO accounts receivable.~~expenses. As of December 31, ~~2021,~~2022, other assets included ~~$2.3~~$10.8 million of restricted cash, $~~1.7~~4.9 million of deferred financing costs related to KREF's Revolver ~~$1.4 million of interest collections held by the servicer~~ and ~~$1.4~~$1.1 million of prepaid expenses.

As of June 30, ~~2022, accounts payable, accrued expenses and~~2023, other liabilities included $4.1 million of~~$3.0 million~~ ~~of REO liabilities,~~ ~~$2.8 million~~ of allowance for credit losses related to KREF's unfunded loan commitments, $3.7 million of REO liabilities and ~~$1.8~~$1.6 million of accrued ~~expenses~~expenses.. As of December 31, ~~2021, accounts payable, accrued expenses and~~2022, other liabilities included ~~$3.9 million of accrued expenses, $3.3 million~~ ~~of assumed REO liabilities,~~ ~~$1.5~~$4.1 million of allowance for credit losses related to KREF's unfunded loan commitments, $3.7 million of REO liabilities and ~~$0.6~~$2.1 million of ~~prepaid stub interests~~accrued expenses.

Dividends Payable — KREF records dividends payable on its common stock and preferred stock upon declaration of such dividends. In June ~~2022,~~2023, KREF's board of directors declared a dividend of ~~$0.43~~$0.43 per share of common stock to stockholders of record as of June 30, ~~2022,~~2023, which was accrued in “Dividends payable” on KREF’s Condensed Consolidated Balance ~~Sheet~~Sheets as of June 30, ~~2022~~2023 and was subsequently paid on July ~~15, 2022.~~ 14, 2023. In April ~~2022,~~2023, KREF's board of directors declared a dividend of $0.41 per each issued and outstanding share of the Company’s 6.50% Series A Cumulative Redeemable Preferred Stock, which represents an annual dividend of $1.625 per share. The dividend was paid on June 15, ~~2022~~2023 to KREF’s preferred stockholders of record as of May 31, ~~2022.~~

~~Special Non-Voting Preferred Stock~~ — Equity instruments that are redeemable for cash or other assets are classified as temporary equity if the instrument is redeemable, at the option of the holder, at a fixed or determinable price on a fixed or determinable date or upon the occurrence of an event that is not solely within the control of the issuer. Redeemable equity instruments are initially carried at the fair value of the equity instrument at the issuance date, which is subsequently adjusted at each balance sheet date if the instrument is currently redeemable or probable of becoming redeemable. KREF accounted for the SNVPS as redeemable preferred stock since a third party held a redemption option, exercisable after May 5, 2018, and such redemption was not solely within KREF's control. As a result, starting with the second quarter of 2018, KREF adjusted the carrying value of the SNVPS to its redemption value quarterly.

~~KREF recorded a~~ ~~$3.3 million~~ SNVPS Redemption Value Adjustment during the year ended December 31, 2021, which increased the carrying value of the SNVPS to its redemption value of $5.1 million prior to SNVPS redemption by KREF on October 1, 2021 for a cash redemption value of $5.1 million (Note 11).2023.

Repurchased Stock — KREF accounts for repurchases of its common stock based on the settlement date and presents repurchased stock in “Repurchased stock” on its Condensed Consolidated Balance Sheets (Note ~~11)~~10). Payments for stock repurchases that are not yet settled as of the reporting date are presented within “Other assets” on the Condensed Consolidated Balance Sheets. As of June 30, ~~2022,~~2023, KREF did not retire any repurchased stock.

Income Recognition

Interest Income — ~~Loans where management expects to collect all contractually required principal and interest payments are considered performing loans.~~ KREF accrues interest income on ~~performing~~ loans based on the outstanding principal amount and contractual terms of the loan. Interest income also includes origination fees, direct loan origination costs and related exit fees for loans that KREF originates, but where management did not elect the fair value option, as a yield adjustment using the interest method over the loan term, or on a straight line basis when it approximates the interest method. KREF expenses origination fees and direct loan origination costs for loans acquired, but not originated, by KREF as well as loans for which management elected the fair value option, as incurred.

Revenue from Real Estate Owned Operations — Revenue from REO operations is primarily comprised of rental income, including base rent and reimbursements of property operating expenses. For leases that have fixed and measurable base rent

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escalations, KREF recognizes base rent on a straight-line basis over the non-cancelable lease terms. The difference between such rental income earned and the cash rent amount is recorded as straight-line rent receivable and presented within "Other assets" on the Condensed Consolidated Balance Sheets. Reimbursement of property operating expenses arises from tenant leases which provide for the recovery of certain operating expenses and real estate taxes of the respective property. This revenue is accrued in the same periods as the expenses are incurred. Rental income is presented within “Revenue from real estate owned operations” in the Condensed Consolidated Statements of Income.

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Other Income — KREF recognizes interest income earned on its cash balances and miscellaneous fee income in “Other income” on its Condensed Consolidated Statements of Income.

Realized Gain (Loss) on Sale of Investments — KREF recognizes the excess, or deficiency, of net proceeds received, less the net carrying value of such investments, as realized gains or losses, respectively. KREF reverses cumulative, unrealized gains or losses previously reported in its Condensed Consolidated Statements of Income with respect to the investment sold at the time of sale.

Expense Recognition

Commercial Real Estate Loans, Held-For-Investment — For each loan in KREF's portfolio, management performs aan evaluation, at least quarterly, ~~evaluation~~ of credit quality indicators of loans classified as held-for-investment using applicable loan, property, market and sponsor information obtained from borrowers, loan servicers and local market participants. Such indicators may include the net present value of the underlying collateral, property operating cash flows, the sponsor’s financial wherewithal and competency in managing the property, macroeconomic trends, and property submarket—specific economic factors. The evaluation of these credit quality indicators requires significant judgment by management to determine whether failure to collect contractual amounts is probable.

If management deems that it is probable that KREF will be unable to collect all amounts owed according to the contractual terms of a loan, deterioration in credit quality of that loan is indicated. Management evaluates all available facts and circumstances that might impact KREF’s ability to collect outstanding loan balances when determining loan write-offs. These facts and circumstances may vary and may include, but are not limited to, (i) ~~significant deterioration in~~ the underlying collateral performance and/or value, ~~if repayment is solely based on the collateral,~~ (ii) ~~correspondence from~~communications with the borrower, ~~indicating that it does not intend to pay the contractual principal and interest,~~ (iii) ~~violation of multiple~~compliance with debt covenants, ~~without indication the borrower has the ability to remediate such violations,~~ (iv) ~~occurrence of one or more~~ events of default by the borrower, or (v) ~~KREF has sufficient information~~other facts that impact the borrower’s ability to ~~determine that~~pay the ~~borrower is insolvent, or~~contractual amounts due under the ~~borrower has filed for bankruptcy, and the value~~terms of the ~~underlying collateral is below the loan basis.~~loan.

If management considers a loan to be impaired, management ~~writes-off~~writes off the loan through a charge to "Allowance for credit losses" based on the present value of expected future cash flows discounted at the loan’s contractual effective rate or the fair value of the collateral, if repayment is expected solely from the collateral. Significant judgment is required in determining impairment and in estimating the resulting credit loss allowance, and actual losses, if any, could materially differ from those estimates.

~~Management considers loans to be past due when a monthly payment is due and unpaid for 60 days or more.~~ Loans are placed on nonaccrual status ~~and considered non-performing when full repayment of principal and interest is in doubt, which generally occurs~~ when principal or interest is ~~120~~90 days or more past due unless the loan is both well secured and in the process of ~~collection.~~collection, or when repayment of interest and principal is, in management's judgment, in doubt. Interest received on loans placed on nonaccrual status ~~are~~may be accounted for under the cost-recovery method ~~until qualifying for return~~under certain circumstances, whereby interest collected on a loan is a reduction to ~~accrual.~~its amortized cost. Management may return a loan to accrual status when repayment of principal and interest is reasonably ~~assured under the terms of the restructured loan. As of~~ ~~June 30, 2022, 1 mezzanine loan with an outstanding principal balance of $5.5 million was on nonaccrual status and was fully written-off~~ ~~(Note 3).~~assured.

In certain circumstances, KREF may also modify ~~the original~~ terms of a loan agreement ~~by granting a concession~~ to accommodate a borrower experiencing financial difficulty. Such modifications ~~are considered troubled debt restructurings (“TDR”) under GAAP and~~ typically include interest rate reductions, payment extension and modification of loan covenants. ~~None of KREF’s loan modifications in 2022 to-date are considered a TDR.~~

In conjunction with reviewing commercial real estate loans held-for-investment for impairment, the Manager evaluates KREF's commercial real estate loans ~~on a quarterly basis,~~at least once per quarter, assesses the risk factors of each loan, and assigns a risk rating based on a variety of factors, including, without limitation, 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 loan-to-value ratios, debt service coverage ratios, loan structure, real estate and credit market dynamics, and risk of default or principal loss. Based on a five-point scale, KREF's loans are rated "1" through "5," from less risk to greater risk, which ratings are defined as follows: 1 (Very Low Risk); 2 (Low Risk); 3 (Medium Risk); 4 (High Risk/Potential for Loss); and 5 (Impaired/Loss Likely).

1918

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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 loan-to-value ratio (<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 loan-to-value ratio (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 loan-to-value ratio (<75%). Loan structure appropriately mitigates additional risks. The sponsor/manager has a stable credit history and experience owning or operating similar real estate.

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 loan-to-value ratio (>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 loan-to-value ratio (>90%), and default may be imminent.

Commercial Real Estate Loans, Held-For-Sale — For commercial real estate loans held-for-sale, KREF applies the lower of cost or fair value accounting and may be required, from time to time, to record a nonrecurring fair value adjustment.

Accrued Interest Receivables — KREF elected not to measure an allowance for credit losses for accrued interest receivables. KREF generally writes off an accrued interest receivable balance when interest is ~~120~~90 days or more past due unless the loan is both well secured and in the process of collection. Write-offs of accrued interest receivable are recognized as “Provision for (reversal of) credit losses, net” in the Condensed Consolidated Statements of Income.

Tenant Receivables — KREF periodically reviews its REO tenant receivables for collectability, taking into consideration changes in factors such as the tenant’s payment history, the financial condition of the tenant, business conditions in the industry in which the tenant operates and economic conditions in the area where the property is located. Tenant receivables, including receivables arising from the straight-lining of rents, are written-off directly when management deems that the collectability of substantially all future lease payments from a specified lease is not probable of collection, at which point, KREF will begin recognizing revenue on a cash basis, based on actual amounts received. Any receivables that are deemed to be ~~uncollectable~~uncollectible are recognized as a reduction to “Revenue from real estate owned operations” in the Condensed Consolidated Statements of Income.

Interest Expense — KREF expenses contractual interest due in accordance with KREF's financing agreements as incurred.

Deferred Debt Issuance Costs — KREF capitalizes and amortizes deferred financing costs incurred in connection with financing arrangements over their respective expected term using the interest method, or on a straight line basis when it approximates the interest method. KREF presents such expensed amounts, as well as deferred amounts written off, as additional interest expense in its Condensed Consolidated Statements of Income.

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~~KKR Real Estate Finance Trust Inc.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(dollars in tables in thousands, except per share amounts)~~

General and Administrative Expenses — KREF expenses general and administrative costs, including legal, diligence and audit fees; information technology costs; insurance premiums; and other costs as incurred.

Management and Incentive Compensation to Affiliate — KREF expenses management fees and incentive compensation earned by the Manager on a quarterly basis in accordance with the Management Agreement (Note ~~15)~~14).

Income Taxes — Certain activities of KREF are conducted through joint ventures that are formed as limited liability companies, taxed as partnerships, and consolidated by KREF. Some of these joint ventures are subject to state and local income taxes, based on the tax jurisdictions in which they operate. In addition, certain activities of KREF are conducted through taxable REIT subsidiaries consolidated by KREF. Taxable REIT subsidiaries are subject to federal, state and local income taxes (Note ~~17)~~16).

As of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, KREF did not have any material deferred tax assets or liabilities arising from future tax consequences attributable to differences between the carrying amounts of existing assets and liabilities in accordance with GAAP and their respective tax bases.

KREF recognizes tax benefits for uncertain tax positions only if it is more likely than not that the position is sustainable based on its technical merits. Interest and penalties on uncertain tax positions are included as a component of the provision for income taxes in KREF's Condensed Consolidated Statements of Income. As of June 30, ~~2022,~~2023, KREF did not have any material uncertain tax positions.

Stock-Based Compensation

KREF's stock-based compensation consists of awards issued to employees of the Manager or its affiliates that vest over the life of the awards, as well as restricted stock units issued to certain members of KREF's board of directors. KREF recognizes the compensation cost of stock-based awards to its directors and employees of the Manager or its affiliates on a straight-line basis over the awards’ term at their grant date fair value. Certain stock-based awards are entitled to nonforfeitable dividends, at the same rate as those declared on the common stock, during the vesting period. Such nonforteitable dividends are deducted from "Retained earnings (Accumulated deficit)" in the condensed consolidated financial statements. KREF accounts for forfeitures as they occur. Refer to Note 1211 for additional information.

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KKR Real Estate Finance Trust Inc.

Notes to Condensed Consolidated Financial Statements

(amount in tables in thousands, except per share amounts)

Earnings per Share

KREF calculates basic earnings per share ("EPS") using the two-class method, which defines unvested share-based payment awards that contain nonforfeitable rights to dividends as participating securities. The two-class method is an allocation formula that determines earnings per share for each share of common stock and participating securities according to dividends declared and participation rights in undistributed earnings. Under this method, all earnings (distributed and undistributed) are allocated to common shares and participating securities based on their respective rights. Basic EPS, is calculated by dividing net income (loss) attributable to common stockholders by the weighted average number of common stock outstanding for the period.

On January 1, 2022, KREF adopted ASU No. 2020-06, Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which requires KREF to include convertible instruments in the diluted EPS calculation, regardless of a company's intent and ability to settle such debt in cash. As of June 30, 2023, KREF had no outstanding convertible instruments and, as a result, no potentially issuable shares related to convertible instruments have been included in the dilutive EPS calculations for the three and six months ended June 30, 2023. For the six months ended June 30, 2022, 6,316,174 potentially issuable shares related to ~~its~~the Convertible Notes ~~when dilutive,~~were included in the dilutive EPS ~~calculations starting with~~denominator after the ~~first quarter~~adoption of ~~2022.~~ASU 2020-06. For the three months ended June 30, 2022, such shares were excluded from the dilutive EPS denominator as the effect was anti-dilutive.

KREF presents diluted EPS under the more dilutive of the treasury stock and if-converted methods or the two-class method. Under the treasury stock and if-converted methods, the denominator includes weighted average common stock outstanding plus the incremental dilutive shares issuable from restricted stock units and an assumed conversion of ~~the Convertible Notes.~~convertible instruments. The numerator includes any changes in income (loss) attributable to common stockholders that would result from the assumed conversion of these potential shares of common stock. Refer to Note 1112 for additional discussion of earnings per share.

Recent Accounting Pronouncements

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides temporary optional expedients and exceptions to the US GAAP

~~Table of Contents~~

~~KKR Real Estate Finance Trust Inc.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(dollars in tables in thousands, except per share amounts)~~

guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from LIBOR and other interbank offered rates to alternative reference rates. The guidance is effective upon issuance and generally may be elected over time through December 31, ~~2022.~~2024, as extended under ASU No. 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848. KREF has not adopted any of the optional expedients or exceptions through June 30, ~~2022,~~2023, but will continue to evaluate the possible adoption of any such expedients or exceptions during the effective period as circumstances evolve.

In March 2022, the FASB issued ASU No. 2022-02, Financial Instruments — Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures, which eliminates the recognition and measurement guidance for a troubled debt restructuring ~~(TDR)~~ for creditors that have adopted CECL and requires public business entities to present gross write-offs by year of origination in their vintage disclosures. ~~The guidance is effective for~~On January 1, 2023, KREF ~~in the first quarter of 2023.~~ ~~The guidance allows the use of~~adopted ASU 2022-02 on a prospective ~~or modified retrospective transition method. KREF is evaluating~~basis and the adoption had no significant impact ~~of ASU 2022-02.~~on KREF's condensed consolidated financial statements.

2220

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KKR Real Estate Finance Trust Inc.

Notes to Condensed Consolidated Financial Statements

(~~dollars~~amount in tables in thousands, except per share amounts)

Note 3. Commercial Real Estate Loans

The following table summarizes KREF's investments in commercial real estate loans as of June 30, ~~2022~~2023 and December 31, ~~2021:~~

2022
:


									Weighted Average(C)													Weighted Average(C)
Loan Type	Loan Type	Outstanding Principal		Amortized Cost(A)		Carrying Value(B)		Loan Count	Floating Rate Loan %		Coupon(D)		Life (Years)(E)	Loan Type	Outstanding Principal		Amortized Cost(A)		Carrying Value(B)		Loan Count	Floating Rate Loan %		Coupon(D)		Life (Years)(E)
June 30, 2022
June 30, 2023														June 30, 2023
Loans held-for-investment	Loans held-for-investment													Loans held-for-investment
Senior loans(F)	Senior loans(F)	$	7,421,886	$	7,374,986	$	7,343,629	73	100.0	%	5.0	%	3.6	Senior loans(F)	$	7,427,682	$	7,386,533	$	7,164,203	69	99.0	%	8.5	%	3.0
Mezzanine and other loans(G)		104,025		98,115		97,943		4	94.7		12.3		3.5
Mezzanine loans(G)														Mezzanine loans(G)	59,394		59,425		57,988		2	100.0		15.0		2.5
Total/Weighted Average	Total/Weighted Average	$	7,525,911	$	7,473,101	$	7,441,572	77	99.9	%	5.1	%	3.6	Total/Weighted Average	$	7,487,076	$	7,445,958	$	7,222,191	71	99.0	%	8.5	%	3.0
December 31, 2021
December 31, 2022														December 31, 2022
Loans held-for-investment	Loans held-for-investment													Loans held-for-investment
Senior loans(F)	Senior loans(F)	$	6,263,370	$	6,222,058	$	6,200,078	59	100.0	%	3.9	%	3.6	Senior loans(F)	$	7,463,459	$	7,395,463	$	7,288,635	73	100.0	%	7.7	%	3.3
Mezzanine and other loans~~(G)~~(H)	Mezzanine and other loans~~(G)~~(H)	100,735		94,675		94,411		4	94.5		11.2		4.0	Mezzanine and other loans~~(G)~~(H)	98,933		98,675		98,529		3	100.0		15.0		3.0
Total/Weighted Average	Total/Weighted Average	$	6,364,105	$	6,316,733	$	6,294,489	63	99.9	%	4.1	%	3.6	Total/Weighted Average	$	7,562,392	$	7,494,138	$	7,387,164	76	100.0	%	7.8	%	3.3

(A) Amortized cost represents the outstanding principal of loan, net of applicable unamortized discounts, loan origination fees, cost recovery interest and write-off on ~~uncollectable~~uncollectible loan balances.

(B) Carrying value represents the amortized cost of loan, net of applicable allowance for credit losses.

(D) Weighted average coupon assumes the greater of applicable index rate, including one-month LIBOR and Term SOFR, or the applicable contractual rate floor. Excludes loans accounted for under the cost recovery method.

(E) The weighted average life assumes all extension options are exercised by the borrowers.

(F) Senior loans may include accommodation mezzanine loans in connection with the senior mortgage financing. ~~Also, includes CLO loan participations~~

(G) Excludes two fully written off risk-rated 5 mezzanine loans with a combined outstanding principal balance of ~~$2,299.5~~$30.5 million ~~and $1,246.0 million a~~s as of June 30, ~~2022 and~~2023. Excludes one fully written off risk-rated 5 mezzanine loan with an outstanding principal balance of $5.5 million as of December 31, ~~2021, respectively.~~2022.

~~(G)~~(H) Includes 1one real estate corporate loan to a multifamily operator with a principal and a carrying value of ~~$42.0 million~~ ~~and~~ ~~$41.5 million, respectively, as of June 30, 2022, and $41.1~~$40.4 million and ~~$40.3~~$40.1 million, respectively, as of December 31, ~~2021.~~2022. This loan was fully repaid during the first quarter of 2023.

Activity — For the six months ended June 30, ~~2022,~~2023, the loan portfolio activity was as follows:

Amortized Cost Allowance for
Credit Losses Carrying Value
Balance at December 31, 2021 $ 6,316,733 $ (22,244) $ 6,294,489
Originations and future fundings, net(A)
1,791,277 — 1,791,277
Proceeds from sales and loan repayments (647,813) — (647,813)
Accretion of loan discount and other amortization, net(B)
11,961 — 11,961
Payment-in-kind interest 943 — 943
(Provision for) Reversal of credit losses — (9,285) (9,285)
Balance at June 30, 2022 $ 7,473,101 $ (31,529) $ 7,441,572


	Amortized Cost		Allowance for Credit Losses		Carrying Value









Balance at December 31, 2022	$	7,494,138	$	(106,974)	$	7,387,164
Originations and future fundings, net(A)(B)	485,585		—		485,585
Proceeds from loan repayments and cost recovery interest(B)(C)	(546,155)		—		(546,155)
Accretion of loan discount and other amortization, net	12,390		—		12,390

(Provision for) Reversal of credit losses	—		(116,793)		(116,793)

Balance at June 30, 2023	$	7,445,958	$	(223,767)	$	7,222,191

(A) Net of applicable premiums, discounts and deferred loan origination costs. Includes fundings on previously originated loans.

(B) Includes ~~accretion~~$111.0 million of ~~applicable discounts, certain fees and deferred~~amortized cost of a loan ~~origination costs.~~modification accounted for as a new loan for GAAP purposes.

As of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, there ~~was~~was $32.2 million and $~~47.3 million~~ ~~and~~ ~~$41.9~~43.3 million, respectively, of unamortized origination discounts and deferred fees included in "Commercial real estate loans, held-for-investment, net" on the Condensed Consolidated Balance Sheets. KREF recognized prepayment fee income of ~~$4.0~~$0.8 million and ~~$4.1~~$1.1 million,~~, respectively,~~ during the three and six months ended June 30, ~~2022.~~ 2023, respectively. KREF recognized net accelerated fee income of ~~$0.0~~$0.9 million and $~~0.8~~1.2 million, respectively, relating to loan repayments, during the three and six months ended June 30, ~~2022. KREF recognized net accelerated fee income of~~ ~~$1.1 million~~ ~~and~~ ~~$2.1 million, respectively, during~~2023. During the three and six months ended June 30, ~~2021.~~2022, KREF recognized prepayment fee income of $4.0 million and $4.1 million, respectively, and recognized net accelerated fee income of $0.0 million and $0.8 million, respectively.

KREF may enter into loan modifications that include, among other changes, incremental capital contributions or partial repayments from certain borrowers, repurposing of reserves, and a temporary partial deferral for a portion of the coupon as payment-in-kind interest (“PIK Interest”) due, which is capitalized, compounded, and added to the outstanding principal balance of the respective loans. ~~As of June 30, 2022, KREF had no outstanding PIK interest in connection with loan modifications.~~

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KKR Real Estate Finance Trust Inc.

Notes to Condensed Consolidated Financial Statements

(~~dollars~~amount in tables in thousands, except per share amounts)

In January 2023, KREF completed the modification of a risk-rated 5 senior office loan located in Philadelphia, PA, with an outstanding principal balance of $161.0 million, of which $25.0 million was deemed uncollectible and written off, as of December 31, 2022. The terms of the modification included, among others, a $25.0 million principal repayment and a restructure of the $136.0 million senior loan (after the $25.0 million repayment) into (i) a $116.5 million committed senior mortgage loan (with $5.5 million in unfunded commitment) and (ii) a $25.0 million junior mezzanine note. The junior mezzanine note is subordinated to a new $41.5 million committed senior mezzanine note (with $16.5 million in unfunded commitment) held by the sponsor. The restructured senior loan earns a coupon rate of S+3.25% and has a new term of up to four years, assuming all extension options are exercised. This loan modification was accounted for as a new loan for GAAP purposes. The restructured senior loan was risk-rated 3 as of June 30, 2023.

In June 2023, KREF completed the modification of a risk-rated 4 senior multifamily loan located in West Hollywood, CA, with an outstanding principal balance of $102.0 million as of March 31, 2023. The terms of the modification included, among others, an additional borrower deposit in escrow in exchange for an upsize in the loan commitment structured as (i) an accompanying senior mezzanine note with a commitment of $4.2 million, at a fixed interest rate of 10.0%, and (ii) an accompanying junior mezzanine note with a commitment of $0.8 million, at a fixed interest rate of 10.0% with certain profit share provisions, as defined in the loan agreement. Both senior mezzanine and junior mezzanine notes were unfunded as of June 30, 2023. The modified whole loan was risk-rated 4 as of June 30, 2023.

In June 2023, KREF completed the modification of a risk-rated 5 senior office loan located in Minneapolis, MN, with an outstanding principal balance of $194.4 million as of March 31, 2023. The terms of the modification included, among others, a restructure of the $194.4 million senior loan into (i) a $120.0 million senior mortgage loan (fully funded) and (ii) a $79.4 million mezzanine note (with $5.0 million in unfunded commitment). The restructured senior loan earns a coupon rate of S+2.25% and the mezzanine note earns a fixed 4.5% PIK interest rate. Post modification, the whole loan’s maximum maturity is July 2025, assuming all extension options are exercised. The restructured whole loan was risk-rated 5 as of June 30, 2023.

Loan Risk Ratings — As further described in Note 2, our Manager evaluates KREF's commercial real estate loan portfolio ~~on a quarterly basis.~~at least once per quarter. In conjunction with ~~the quarterly~~its commercial real estate loan portfolio review, KREF's Manager assesses the risk factors of each loan and assigns a risk rating based on a variety of factors. Loans are rated “1” ~~(very low risk)~~(Very Low Risk) through “5” Impaired/Loss Likely), which ratings are defined in Note 2.

The following tables summarize the carrying value of the loan portfolio based on KREF's internal risk ratings:


June 30, 2022									December 31, 2021
June 30, 2023																June 30, 2023								December 31, 2022
Risk Rating	Risk Rating	Number of Loans(B)	Carrying Value		Total Loan Exposure(A)		Total Loan Exposure %		Number of Loans(B)	Carrying Value		Total Loan Exposure(A)		Total Loan Exposure %		Risk Rating	Number of Loans(A)	Carrying Value		Total Loan Exposure(B)		Total Loan Exposure %*		Number of Loans(A)	Carrying Value		Total Loan Exposure(B)		Total Loan Exposure %*
1	1	—	$	—	$	—	—	%	1	$	243,549	$	243,552	3.6	%	1	—	$	—	$	—	—	%	—	$	—	$	—	—	%
2	2	3	415,670		416,146		5.4		3	410,293		411,424		6.2		2	1	9,814		9,904		—		—	—		—		—
3	3	71	6,739,319		7,038,720		90.6		54	5,268,590		5,627,927		84.3		3	62	6,303,998		6,451,416		83		70	6,560,166		6,864,941		88
4	4	2	318,112		318,045		4.0		4	394,301		394,336		5.9		4	5	592,975		744,442		10		3	443,957		446,322		6
5	5	1	—		—		—		1	—		—		—		5	3	539,171		549,273		7		3	490,015		489,214		6

Total loan receivable	Total loan receivable	77	$	7,473,101	$	7,772,911	100.0	%	63	$	6,316,733	$	6,677,239	100.0	%	Total loan receivable	71	$	7,445,958	$	7,755,035	100	%	76	$	7,494,138	$	7,800,477	100	%
Allowance for credit losses	Allowance for credit losses		(31,529)							(22,244)						Allowance for credit losses		(223,767)							(106,974)
Loan receivable, net	Loan receivable, net		$	7,441,572						$	6,294,489					Loan receivable, net		$	7,222,191						$	7,387,164

*Numbers presented may not foot due to rounding.

(A) Excludes two fully written off risk-rated 5 mezzanine loans with a combined outstanding principal balance of $30.5 million as of June 30, 2023. Excludes one fully written off risk-rated 5 mezzanine loan with an outstanding principal balance of $5.5 million as of December 31, 2022.

(B) In certain instances, KREF finances its loans through the non-recourse sale of a senior interest that is not included in the condensed consolidated financial statements. Total loan exposure includes the entire loan KREF originated and financed, including $~~252.5~~268.0 million and ~~$318.6~~$263.1 million of such ~~non-consolidated~~non-consolidated interests as of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively.

~~(B) Includes 1 impaired 5-rated mezzanine retail loan that was fully written off.~~

As of June 30, ~~2022,~~2023, the average risk rating of KREF's portfolio was ~~3.0~~ ~~(Average Risk),~~3.2, weighted by total loan exposure, ~~as compared to 2.9~~consistent with that a ass of March 31, ~~2022~~2023 and December 31, ~~2021.~~2022.

Table of Contents

KKR Real Estate Finance Trust Inc.

Notes to Condensed Consolidated Financial Statements

(amount in tables in thousands, except per share amounts)

Loan Vintage — The following tables present the amortized cost of the loan portfolio by KREF's internal risk rating and year of origination. The risk ratings are updated as of June 30, ~~2022~~2023 and December 31, ~~2021~~2022 in the corresponding table.


June 30, 2022
June 30, 2023																			June 30, 2023
					Amortized Cost by Year of Origination																		Amortized Cost by Year of Origination
Risk Rating	Risk Rating	Number of Loans	Outstanding Principal		2022		2021		2020		2019		2018		Prior		Total		Risk Rating	Number of Loans(A)	Outstanding Principal(A)		2023		2022		2021		2020		2019		Prior		Total
Commercial Real Estate Loans	Commercial Real Estate Loans																		Commercial Real Estate Loans
1	1	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	1	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
2	2	3	416,146		—		—		135,404		—		86,075		194,191		415,670		2	1	9,903		—		—		—		9,814		—		—		9,814
3	3	71	6,786,221		1,570,594		3,639,210		213,290		714,377		576,612		25,236		6,739,319		3	62	6,333,458		112,743		1,968,580		3,343,854		239,066		343,922		295,833		6,303,998
4	4	2	318,044		—		—		—		156,758		161,354		—		318,112		4	5	594,442		—		101,595		211,257		—		280,123		—		592,975
5	5	1	5,500		—		—		—		—		—		—		—		5	3	549,273		—		—		199,025		—		150,033		190,112		539,171
		77	$	7,525,911	$	1,570,594	$	3,639,210	$	348,694	$	871,135	$	824,041	$	219,427	$	7,473,101		71	$	7,487,076	$	112,743	$	2,070,175	$	3,754,136	$	248,880	$	774,078	$	485,945	$	7,445,958
Current period gross write-off																			Current period gross write-off				$	—	$	—	$	—	$	—	$	—	$	—	$	—

December 31, 2021
Amortized Cost by Year of Origination
Risk Rating Number of Loans Outstanding Principal 2021 2020 2019 2018 2017 Prior Total
Commercial Real Estate Loans
1 1 $ 243,552 $ — $ — $ — $ 243,549 $ — $ — $ 243,549
2 3 411,424 — 130,400 — 85,943 193,950 — 410,293
3 54 5,309,293 3,523,611 203,961 1,017,080 523,938 — — 5,268,590
4 4 394,336 — — 76,221 210,701 107,379 — 394,301
5 1 5,500 — — — — — — —
63 $ 6,364,105 $ 3,523,611 $ 334,361 $ 1,093,301 $ 1,064,131 $ 301,329 $ — $ 6,316,733
(A) Excludes two fully written off risk-rated 5 mezzanine loans with a combined outstanding principal balance of $30.5 million.


December 31, 2022
				Amortized Cost by Year of Origination
Risk Rating	Number of Loans(A)	Outstanding Principal(A)		2022		2021		2020		2019		2018		Prior		Total
Commercial Real Estate Loans
1	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
2	—	—		—		—		—		—		—		—		—
3	70	6,601,856		1,812,576		3,594,235		353,506		472,125		307,582		20,142		6,560,166
4	3	446,322		101,469		193,883		—		148,605		—		—		443,957
5	3	514,214		—		—		—		158,698		136,825		194,492		490,015
	76	$	7,562,392	$	1,914,045	$	3,788,118	$	353,506	$	779,428	$	444,407	$	214,634	$	7,494,138
Current period gross write-off				$	—	$	—	$	—	$	—	$	25,000	$	—	$	25,000

~~Table of Contents~~

~~KKR Real Estate Finance Trust Inc.~~(A) Excludes one fully written off risk-rated 5 mezzanine loan with an outstanding principal balance of $5.5 million.

~~Notes to Condensed Consolidated Financial Statements~~

~~(dollars in tables in thousands, except per share amounts)~~

Allowance for Credit Losses — The following tables present the changes to the allowance for credit losses for the six months ended June 30, 2023 and 2022, respectively:


	Commercial Real Estate Loans		Unfunded Loan Commitments		Total




Balance at December 31, 2022	$	106,974	$	4,138	$	111,112
Provision for (reversal of) credit losses, net	116,793		9		116,802


Balance at June 30, 2023	$	223,767	$	4,147	$	227,914


	Commercial Real Estate Loans		Unfunded Loan Commitments		Total
Balance at December 31, 2021	$	22,244	$	1,495	$	23,739
Provision for (reversal of) credit losses, net	9,285		1,295		10,580


Balance at June 30, 2022	$	31,529	$	2,790	$	34,319

As of June 30, 2023, the allowance for credit losses was $227.9 million, which represented an increase of $116.8 million during the six months ended June 30, 2023. The increase in the CECL provision was due primarily to additional reserves on risk-rated 5 senior office loans, as well as macroeconomic conditions.

KREF had one risk-rated 5 senior office loan located in Mountain View, CA, originated in July 2021, with an outstanding principal balance of $200.2 million and an unfunded commitment of $49.8 million as of June 30, 2023. The loan had an amortized cost of $199.0 million as of June 30, 2023. The property is a recently renovated office campus located in a challenged leasing market. During the three and six months ended June 30, 2023, KREF recognized $3.2 million and $7.3 million, respectively, of interest income on this loan. In June 2023, this loan was placed on nonaccrual status and

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KKR Real Estate Finance Trust Inc.

Notes to Condensed Consolidated Financial Statements

(amount in tables in thousands, except per share amounts)

subsequent interest collections are accounted for under the cost recovery method. This loan's maximum maturity is August 2026, assuming all extension options are exercised.

KREF had one risk-rated 5 senior office loan located in Minneapolis, MN, originated in November 2017, with an outstanding principal balance of $194.4 million (fully funded) and an amortized cost of $190.1 million as of June 30, 2023. The property is located in challenging market where there is reduced tenant demand and liquidity. In June 2023, KREF restructured the $194.4 million senior loan into (i) a $120.0 million senior mortgage loan (fully funded) and (ii) a $79.4 million mezzanine note (with $5.0 million in unfunded commitment). The restructured senior loan earns a coupon rate of S+2.25% and the mezzanine note earns a fixed 4.5% PIK interest rate. Post modification, the whole loan’s maximum maturity is July 2025, assuming all extension options are exercised. During the three and six months ended June 30, 2023, KREF recognized $0.0 million and $2.8 million, respectively, of interest income on this loan. During the three and six months ended June 30, 2023, an additional $4.3 million and $4.3 million of contractual interest payments was received and applied as a reduction to the loan amortized cost under the cost recovery method of accounting. As of June 30, 2023, the senior loan was placed solely on nonaccrual status.

KREF had one risk-rated 5 senior office loan located in Philadelphia, PA, originated in April 2019, with an outstanding principal balance of $154.7 million and an unfunded commitment of $22.0 million as of June 30, 2023. The loan had an amortized cost of $150.0 million as of June 30, 2023. The property experienced slower than anticipated leasing activity due to softness in the overall Philadelphia market and COVID-impacted office trends. In December 2022, this loan was placed on nonaccrual status and ~~2021, respectively:~~subsequent interest collections are accounted for under the cost recovery method. During the three and six months ended June 30, 2023, $1.9 million and $4.7 million of contractual interest payments were received and applied as a reduction to the loan amortized cost. This loan's maximum maturity is August 2023, assuming all extension options are exercised.

The 5-rated loans were determined to be collateral dependent as of June 30, 2023. KREF estimated expected losses based on each loan’s collateral fair value, which was determined by applying a capitalization rate between 6.5% to 8.7% and a discount rate between 9.0% to 10.1%, respectively.

Commercial
Real Estate Loans Unfunded Loan Commitments Total
Balance at December 31, 2021 $ 22,244 $ 1,495 $ 23,739
Provision for (reversal of) credit losses, net 9,285 1,295 10,580
Write-off charged — — —
Recoveries — — —
Balance as June 30, 2022 $ 31,529 $ 2,790 $ 34,319

Commercial
Real Estate Loans Unfunded Loan Commitments Total
Balance at December 31, 2020 $ 59,801 $ 902 $ 60,703
Provision for (reversal of) credit losses, net (1,790) (357) (2,147)
Write-off charged — — —
Recoveries — — —
Balance as June 30, 2021 $ 58,011 $ 545 $ 58,556

The $10.6 million increase in the provision for credit losses during the six months ended June 30, 2022 was primarily due to increased uncertainty in the macro-economic outlook and increased reserves on watch list loans, as well as growth in the loan portfolio. The $2.1 million net benefit from the reversal of credit losses during the six months ended June 30, 2021 was primarily attributable to a more stable macro-economic outlook based on improved observed economic data, partially offset by an increase to the allowance for certain loans.

Concentration of Credit Risk — The following tables present the geographies and property types of collateral underlying KREF's commercial real estate loans as a percentage of the loans' principal amounts:


	June 30, 2023		December 31, 2022(A)			June 30, 2023		December 31, 2022
Geography					Collateral Property Type
California	17.4	%	16.9	%	Multifamily	42.9	%	46.8	%
Texas	15.0		16.1		Office	23.7		23.0
Florida	9.9		11.1		Industrial	14.0		12.7
Massachusetts	9.4		8.3		Life Science	8.9		7.7
Virginia	7.5		8.4		Hospitality	5.0		4.8
Washington D.C.	6.2		5.9		Condo (Residential)	2.2		2.6
New York	5.7		5.6		Student Housing	1.5		1.5
Pennsylvania	5.5		5.7		Self-Storage	0.9		0.5
North Carolina	4.1		4.0		Single Family Rental	0.8		0.3
Washington	3.5		2.9		Retail	0.1		0.1
Arizona	3.0		2.6		Total	100.0	%	100.0	%
Minnesota	2.7		2.7
Georgia	2.6		2.5
Nevada	2.0		2.0
Illinois	1.6		1.6
Colorado	1.1		1.0
Other U.S.	2.8		2.7
Total	100.0	%	100.0	%

June 30, 2022 December 31, 2021 June 30, 2022 December 31, 2021
Geography(A)
Collateral Property Type
California 16.2 % 10.8 % Multifamily 48.6 % 46.7 %
Texas 15.7 15.0 Office 23.2 25.4
Florida 9.8 10.5 Industrial 11.0 4.4
New York 8.9 11.5 Life Science 6.0 9.3
Virginia 8.3 6.7 Hospitality 4.8 6.9
Pennsylvania 6.9 8.2 Condo (Residential) 3.2 3.9
Massachusetts 6.9 10.3 Student Housing 2.7 3.1
Washington D.C. 5.4 4.7 Single Family Rental 0.4 0.2
Washington 3.4 3.6 Retail 0.1 0.1
North Carolina 2.7 2.0 Total 100.0 % 100.0 %
Minnesota 2.7 3.1
Colorado 2.3 2.7
Georgia 2.2 2.2
Nevada 2.0 1.6
Arizona 1.9 1.2
Illinois 1.8 3.8
Alabama 0.9 1.1
Other U.S. 2.0 1.0
Total 100.0 % 100.0 %

(A) Excludes 1one real estate corporate loan to a multifamily operator with an outstanding principal amount of $~~42.0 million~~ ~~and~~ ~~$41.1~~40.4 million, ~~representing~~ representin~~0.6%~~g 0.5% of KREF’s commercial real estate loans, as of ~~June 30, 2022 and~~ December 31, ~~2021, respectively.~~2022. This loan was fully repaid during the first quarter of 2023.

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Notes to Condensed Consolidated Financial Statements

(~~dollars~~amount in tables in thousands, except per share amounts)

Note 4. Real Estate Owned

In 2015, KREF 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 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. OnOR. In December ~~17,~~ 2021, KREF took title to the retail property. Such acquisition was accounted for as an asset acquisition under ASC 805. Accordingly, KREF recognized the property on the Condensed Consolidated Balance ~~Sheets~~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, KREF assumed $2.0 million in other net assets of the REO. As a result KREF recognized an $8.2 million benefit from the reversal of credit losses, representing the difference between the carrying value of the foreclosed loan and the fair value of the REO’s net assets.

The following table presents the REO assets and liabilities included on KREF's Condensed Consolidated Balance Sheets:

June 30, 2022
December 17, 2021(C)
Assets
Cash $ 1,619 $ 3,377
Real estate owned - land 78,569 78,569
Real estate owned - land improvements 599 —
In-place lease intangibles(A)
301 335
Tenant receivables(A)
566 —
Other assets(A)
24 1,119
Total $ 81,678 $ 83,400
Liability
Below-market lease intangibles(B)
$ 1,643 $ 1,825
Accounts payable, accrued expenses and other liabilities(B)
1,376 1,742
Total $ 3,019 $ 3,567


	June 30, 2023		December 31, 2022
Assets
Cash	$	3,125	$	781
Real estate owned - land	78,569		78,569
Real estate owned - land improvements	2,836		1,662
Real estate owned, net	81,405		80,231
In-place lease intangibles(A)	234		268
Tenant receivables(A)	494		541
Other assets(A)	501		1,304
Total	$	85,759	$	83,125
Liabilities
Below-market lease intangibles(B)	$	1,278	$	1,460
Other liabilities(B)	2,448		2,254
Total	$	3,726	$	3,714

(A) Included in “Other assets” on the Condensed Consolidated Balance Sheets.

(B) Included in ~~“Accounts payable, accrued expenses and other~~“Other liabilities” on the Condensed Consolidated Balance Sheets.

~~(C) The REO operations and related income (loss) were immaterial between the acquisition date and December 31, 2021.~~

KREF assumed certain legacy lease arrangements upon the acquisition of the REO and has entered into short-term lease arrangements during the redevelopment process. These arrangements entitle KREF to receive contractual rent payments during the lease periods and tenant reimbursements for certain property operating expenses, including common area costs, insurance, utilities and real estate taxes. KREF elects the practical expedient to not separate the lease and non-lease components of the rent payments and accounts for these lease arrangements as operating leases.

The following table presents the REO operations and related income (loss) included in KREF’s Condensed Consolidated Statements of Income:


		Three Months Ended		Six Months Ended			Three Months Ended				Six Months Ended
		June 30, 2022		June 30, 2022			June 30, 2023		June 30, 2022		June 30, 2023		June 30, 2022
Rental income(A)	Rental income(A)	$	1,578	$	3,865	Rental income(A)	$	1,782	$	1,578	$	3,452	$	3,865
Other operating income(A)	Other operating income(A)	255		597		Other operating income(A)	202		255		778		597
Revenue from rest estate owned operations						Revenue from rest estate owned operations	1,984		1,833		4,230		4,462
Expenses from real estate owned operations	Expenses from real estate owned operations	(2,368)		(4,922)		Expenses from real estate owned operations	(2,656)		(2,368)		(5,414)		(4,922)
Other income(B)	Other income(B)	934		1,337		Other income(B)	1,378		934		1,666		1,337
Total	Total	$	399	$	877	Total	$	706	$	399	$	482	$	877

(A) Included in “Revenue from real estate owned operations” on the Condensed Consolidated Statements of Income.

(B) Represents nonrecurring proceeds from insurance claims and local tax and energy ~~credits received.~~credits.

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Notes to Condensed Consolidated Financial Statements

(~~dollars~~amount in tables in thousands, except per share amounts)

The following table presents the amortization of lease intangibles included in KREF’s Condensed Consolidated Statements of Income:

Three Months Ended

Six Months Ended

Three Months Ended

Six Months Ended

Income Statement Location

June 30, 2022

Income Statement Location

June 30, 2023

June 30, 2022

June 30, 2023

June 30, 2022

Asset

In-place lease intangibles

Expenses from real estate owned operations

In-place lease intangibles

Expenses from real estate owned operations

Liability

Below-market lease intangibles

Revenue from real estate owned operations

182

Below-market lease intangibles

Revenue from real estate owned operations

183

182

The following table presents the amortization of lease intangibles for each of the ~~five~~ succeeding fiscal years:


Year	Year	In-place Lease Intangible Assets		Below-market Lease Intangible Liabilities		Year	In-place Lease Intangible Assets		Below-market Lease Intangible Liabilities
2022		$	34	$	183
2023	2023	67		365		2023	$	33	$	183
2024	2024	67		365		2024	67		365
2025	2025	67		365		2025	67		365
2026	2026	67		365		2026	67		365

Future Minimum Lease Payments — The following table presents the future minimum lease payments to be collected under non-cancelable operating leases, excluding tenant reimbursements of expenses:


Year	Year	Contractual Lease Payments		Year	Contractual Lease Payments
2022		$	2,505
2023	2023	4,236		2023	$	2,150
2024	2024	3,462		2024	1,898
2025	2025	2,715		2025	832
2026	2026	1,850		2026	443
2027				2027	22
Thereafter	Thereafter	45		Thereafter	—

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Notes to Condensed Consolidated Financial Statements

(~~dollars~~amount in tables in thousands, except per share amounts)

Note 5. Debt Obligations

The following table summarizes KREF's secured master repurchase agreements and other financing arrangements in place as of June 30, ~~2022~~2023 and December 31, ~~2021:~~2022:


		June 30, 2022																				December 31, 2021				June 30, 2023																											December 31, 2022
		Facility											Collateral									Facility				Facility																	Collateral										Facility
		Month Issued	Maximum Facility Size		Outstanding Principal		Carrying Value(A)		Final Stated Maturity	Weighted Average Funding Cost(B)		Weighted Average Life (Years)(B)	Outstanding Principal		Amortized Cost Basis		Carrying Value			Weighted Average Life (Years)(C)		Carrying Value(A)				Month Issued		Maximum Facility Size			Outstanding Principal			Carrying Value(A)			Final Stated Maturity		Weighted Average Funding Cost(B)		Weighted Average Life (Years)(B)		Outstanding Principal			Amortized Cost Basis			Carrying Value			Weighted Average Life (Years)(C)	Carrying Value(A)
Master Repurchase Agreements(D)	Master Repurchase Agreements(D)																		Master Repurchase Agreements(D)
Wells Fargo(E)	Wells Fargo(E)	Oct 2015	$	1,000,000	$	689,958	$	688,735	Sep 2026	2.9	%	2.8	$	935,728	$	923,910	$	921,614		4.2		$	978,615	Wells Fargo(E)		Oct 2015		$	1,000,000		$	681,569		$	680,538		Sep 2026		6.9	%	2.0		$	950,890		$	943,996		$	890,038		3.4	$	670,824
Morgan Stanley(F)	Morgan Stanley(F)	Dec 2016	600,000		573,542		572,830		Dec 2023	3.6		1.3	777,737		772,289		770,521			3.5		382,081		Morgan Stanley(F)		Dec 2016		600,000			506,232			505,513			Dec 2025		7.2		1.4		742,200			739,367			727,544			2.5	593,136
Goldman Sachs(G)	Goldman Sachs(G)	Sep 2016	240,000		123,658		123,089		Oct 2023	4.2		1.5	219,026		213,876		212,954			4.2		189,456		Goldman Sachs(G)		Sep 2016		400,000			362,250			361,385			Oct 2025		8.4		1.2		598,102			590,503			519,833			2.4	168,369
Term Lending Agreements	Term Lending Agreements																		Term Lending Agreements
KREF Lending V(H)		Jun 2019	583,304		555,239		554,662		Jun 2026	3.3		0.6	724,378		723,836		721,638			1.5		617,185
KREF Lending IX(I)		Jul 2021	750,000		642,438		634,579		n.a	3.5		2.6	803,846		795,549		793,445			4.6		493,853
KREF Lending IX(H)																			KREF Lending IX(H)		Jul 2021				1,000,000		763,076			757,218			n.a			7.5		1.7		956,052		950,248			943,299			3.7			719,000
KREF Lending V(I)																			KREF Lending V(I)		Jun 2019				396,403		369,695			369,367			Jun 2026			7.2		0.6		491,106		490,856			481,973			1.3			502,539
KREF Lending XII(J)	KREF Lending XII(J)	Jun 2022	350,000		161,140		159,365		n.a	3.5		3.4	213,907		212,085		211,597			4.7		—		KREF Lending XII(J)		Jun 2022		350,000			166,771			165,841			n.a		6.9		2.4		223,382			222,116			220,888			3.7	159,784
BMO Facility(K)																			BMO Facility(K)		Aug 2018				300,000		138,615			137,442			n.a			7.0		2.0		179,601		178,727			178,250			4.0			137,170
Warehouse Facility	Warehouse Facility																		Warehouse Facility
HSBC Facility(K)		Mar 2020	500,000		—		—		Mar 2023	—		0.7	—		—		—			n.a		(55)
HSBC Facility(L)																			HSBC Facility(L)		Mar 2020				500,000		—			—			Mar 2026			—		2.7		—		—			—			n.a			—
Asset Specific Financing	Asset Specific Financing																		Asset Specific Financing
BMO Facility(L)		Aug 2018	300,000		—		—		n.a	—		0.0	—		—		—			n.a		60,000
KREF Lending XI(M)		Apr 2022	100,000		96,278		95,089		n.a	4.5		2.2	123,838		123,074		122,939			4.2		—
KREF Lending XIII(M)																			KREF Lending XIII(M)		Aug 2022				265,625		120,159			117,489			n.a			8.5		3.1		141,367		138,950			138,778			4.1			69,777
KREF Lending XIV(N)																			KREF Lending XIV(N)		Oct 2022				125,000		—			(1,438)			n.a			—		0.0		—		(1,181)			(1,181)			4.3			(1,655)
KREF Lending XI(O)																			KREF Lending XI(O)		Apr 2022				100,000		100,000			99,262			n.a			8.5		1.2		125,000		124,583			123,763			3.2			98,990
Revolving Credit Agreement	Revolving Credit Agreement																		Revolving Credit Agreement
Revolver(N)		Dec 2018	610,000		—		—		Mar 2027	—		4.7	n.a		n.a		n.a			n.a		135,000
Revolver(P)																			Revolver(P)		Dec 2018				610,000		50,000			50,000			Mar 2027			7.3		3.7		n.a		n.a			n.a			n.a			—
Total / Weighted Average	Total / Weighted Average		$	5,033,304	$	2,842,253	$	2,828,349		3.4	%	2.0										$	2,856,135	Total / Weighted Average				$	5,647,028		$	3,258,367		$	3,242,617				7.4	%	1.6												$	3,117,934

(A) Net of $~~13.9~~15.8 million and ~~$11.3~~$21.2 million unamortized deferred financing costs as of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively.

(B) ~~Average weighte~~dFunding cost includes deferred financing costs. Weighted average life represents the earlier of the next loan maturity date and final stated facility maturity date, weighted by the outstanding principal of borrowings. ~~Funding cost includes deferred financing costs.~~

(D) Borrowings under these repurchase agreements are collateralized by senior loans, held-for-investment, and bear interest equal to the sum of (i) ~~a floating rate index, including one-month LIBOR and~~ Term SOFR, and (ii) a ~~margin, based on the collateral.~~financing spread. As of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, the percentage of the outstanding principal of the collateral sold and not borrowed under these repurchase agreements, or average "haircut" weighted by outstanding principal of collateral, was ~~28.2%~~32.3% and ~~30.3%~~31.5%, respectively (or ~~25.4%~~31.1% and ~~25.9%~~25.6%, respectively, if KREF had borrowed the maximum amount approved by its repurchase agreement counterparties as of such dates).

(E) The current stated maturity date is September 2024, which does not reflect 2two twelve-month facility ~~term~~term extension options available to KREF, which are subject to certain covenants and thresholds. As of June 30, ~~2022,~~2023, the ~~collateral-based margin~~financing spread was ~~between 1.25%~~between 1.41% and ~~1.55%~~1.65%.

(F) ~~The~~In March 2023, KREF extended the current stated maturity isto December ~~2022, with a one-year extension option upon~~2025. Following the maturity date, KREF ~~giving written notice and another 2~~has two one-year extension periods subject to approval by ~~the lender.~~Morgan Stanley. In addition, KREF has the option to increase the facility amount to $750.0 million. As of June 30, ~~2022,~~2023, the ~~collateral-based margin~~financing spread was be~~tween~~between 1.70% and 2.40%.

(G) TheThe current stated maturity date is October 20 ~~2022.~~ 23, with two one-year extension options available to KREF. In May 2023, KREF increased the borrowing capacity to $400 million. A~~In addition, KREF has the option to extend the maturity date to October 31, 2023, subject to the satisfaction of certain conditions. As~~s of June 30, ~~2022,~~2023, the ~~collateral-base margin~~financing spread was between 1.75% and ~~3.20%~~3.40%.

(H) KREF, through its wholly–owned subsidiary KREF Lending IX LLC, entered into a $500.0 million Master Repurchase and Securities Contract Agreement with a financial institution ("KREF Lending IX Facility"). In March 2022, KREF increased the borrowing capacity to $750.0 million. In August 2022, KREF further increased the borrowing capacity to $1,000.0 million. The facility, which provides financing on a non-mark-to-market basis with partial recourse to KREF, has a three-year draw period and match-term to the underlying loans. As of June 30, 2023, the financing spread was between 1.65% and 2.50%.

(I) KREF, through its wholly–owned subsidiary KREF Lending V LLC, 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. The Initial Buyer subsequently syndicated a portion of the facility to multiple financial institutions. As of June 30, ~~2022,~~2023, the Initial Buyer held ~~23.8%~~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~~ ~~1.90%~~ ~~margin.~~ ~~In June 2022, the~~The current stated maturity ~~was extended~~is June 2024, subject to ~~June 2023, subject to~~ 3two additional one-year extension options, which may be exercised by KREF upon the satisfaction of certain customary conditions and thresholds.

(I) KREF, through its wholly–owned subsidiary KREF Lending IX LLC, entered into a $500.0 million Master Repurchase and Securities Contract Agreement with a financial institution ("KREF Lending IX Facility"). ~~In March 2022,~~ KREF increased the borrowing capacity to $750.0 million. The facility, which provides financing on a non-mark-to-market basis with partial recourse to KREF, has a three-year draw period and match-term to the underlying loans. As of June 30, ~~2022,~~2023, the ~~collateral-based margin~~financing spread was ~~between 1.65% and 1.79%~~ 2.00%.

(J) KREF, through its wholly–owned subsidiary KREF Lending XII LLC, entered into a $350.0 million Master Repurchase Agreement and Securities Contract with a financial institution ("KREF Lending XII Facility"). The facility, which provides financing on a non-mark-to-market basis with partial recourse to KREF, has a two-year draw period and match-term to the underlying loans. In addition, KREF has the option to increase the facility amount to $500.0 million. As of June 30, ~~2022,~~2023, the ~~collateral-based margin~~financing spread was ~~between~~between 1.35% and 1.45%.

(K) KREF 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 KREF.

~~(L)~~ KREF entered into a $200.0 million loan financing facility with BMO Harris Bank ("BMO Facility") and subsequently increased the borrowing capacity to $300.0 million. The facility provides ~~asset-based financing~~financing on a ~~non-mark to market~~non-mark-to-market basis with match-term up to five years with partial recourse to KREF. As of June 30, 2023, the financing spread was 1.85%.

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Notes to Condensed Consolidated Financial Statements

(~~dollars~~amount in tables in thousands, except per share amounts)

(L) KREF entered into a $500.0 million Loan and Security Agreement with HSBC Bank USA, National Association (“HSBC Facility”). In March 2023, KREF extended the facility maturity date to March 2026. The facility provides warehouse financing on a non-mark-to-market basis with partial recourse to KREF.

(M) KREF, through its wholly-owned subsidiary KREF Lending XIII LLC, entered into a $265.6 million loan financing facility with a financial institution ("KREF Lending XIII Facility"). The facility provides match-term asset-based financing on a non-mark-to-market and non-recourse basis. As of June 30, 2023, the financing spread was 3.00%.

(N) KREF, through its wholly-owned subsidiary KREF Lending XIV LLC, entered into a $125.0 million loan financing facility with a financial institution ("KREF Lending XIV Facility"). The facility provides match-term asset-based financing on a non-mark-to-market and non-recourse basis. As of June 30, 2023, the financing spread was 2.75%.

(O) KREF, through its wholly-owned subsidiary KREF Lending XI LLC, entered into a $100.0 million loan financing facility with a financial institution ("KREF Lending XI Facility"). The facility provides match-term asset-based financing on a non-mark-to-market and non-recourse basis. As of June 30, 2023, the financing spread was 2.76%.

~~(N)~~(P) KREF entered into a $100.0 million corporate revolving credit ~~facility~~agreement (“Revolver”) administered by Morgan Stanley Senior Funding, Inc. Additional lenders were added subsequently, further increasing the Revolver borrowing capacity to $610.0 million as of June 30, ~~2022.~~2023. The current stated maturity of the facility is March 2027. Borrowings under the facility bear interest at a per annum rate equal to the sum of (i) a floating rate index and (ii) a fixed margin. Borrowings under this facility are full recourse to certain guarantor wholly-owned subsidiaries of KREF. As of June 30, ~~2022,~~2023, the carrying value excluded ~~$5.5~~$4.3 million unamortized debt issuance costs presented within "Other assets" on KREF's Condensed Consolidated Balance Sheets.

As of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, KREF had outstanding repurchase agreements and term lending agreements where the amount at risk with any individual counterparty, or group of related counterparties, exceeded 10.0% of KREF’s stockholders' equity. The amount at risk under these agreements is the net counterparty exposure, defined as the excess of the carrying amount (or market value, if higher than the carrying amount, for repurchase agreements) of the assets sold under agreement to repurchase, including accrued interest plus any cash or other assets on deposit to secure the repurchase obligation, over the amount of the repurchase liability, adjusted for accrued interest. The following table summarizes certain characteristics of KREF's repurchase agreements where the amount at risk with any individual counterparty, or group of related counterparties, exceeded 10.0% of KREF’s stockholders' equity as of June 30, ~~2022~~2023 and December 31, ~~2021:~~2022:


		Outstanding Principal		Net Counterparty Exposure		Percent of Stockholders' Equity		Weighted Average Life (Years)(A)		Outstanding Principal		Net Counterparty Exposure		Percent of Stockholders' Equity		Weighted Average Life (Years)(A)
June 30, 2022
June 30, 2023									June 30, 2023
Morgan Stanley									Morgan Stanley	$	506,232	$	225,276	15.5	%	1.4
Wells Fargo									Wells Fargo	681,569		217,187		14.4		2.0
KREF Lending IX									KREF Lending IX	763,076		186,636		12.8		1.7
Goldman Sachs									Goldman Sachs	362,250		160,138		11.0		1.2
Total / Weighted Average									Total / Weighted Average	$	2,313,127	$	789,237	53.7	%	1.6
December 31, 2022									December 31, 2022
Wells Fargo	Wells Fargo	$	689,958	$	240,780	14.4	%	2.8	Wells Fargo	$	672,556	$	240,897	15.3	%	2.5
Morgan Stanley	Morgan Stanley	573,542		198,572		11.8		1.3	Morgan Stanley	594,537		199,485		12.7		0.8
Goldman Sachs									Goldman Sachs	169,073		190,917		12.1		2.1
KREF Lending V(B)	KREF Lending V(B)	555,239		168,217		10.0		0.6	KREF Lending V(B)	502,878		182,774		11.6		0.3
KREF Lending IX									KREF Lending IX	727,472		177,358		11.3		2.2
Total / Weighted Average	Total / Weighted Average	$	1,818,739	$	607,569	36.2	%	1.6	Total / Weighted Average	$	2,666,516	$	991,431	63.0	%	1.6
December 31, 2021
Wells Fargo		$	980,593	$	409,489	30.1	%	3.4
Morgan Stanley		383,592		166,426		12.2		0.8
KREF Lending V(B)		617,627		139,149		10.2		0.5
Total / Weighted Average		$	1,981,812	$	715,064	52.5	%	2.0

(A) Average weighted by the outstanding principal of borrowings under the secured financing agreement.

(B) There were multiple counterparties to the KREF Lending V Facility. Morgan Stanley Bank, N.A. represented ~~2.4% and 2.5%~~2.8% of the net counterparty exposure as a percent of stockholders' equity ~~as of June 30, 2022~~ ~~and~~December 31, ~~2021, respectively.~~2022.

Debt obligations included in the tables above are obligations of KREF’s consolidated subsidiaries, which own the related collateral, and such collateral is generally not available to other creditors of KREF.

While KREF is generally not required to post margin under certain repurchase agreement terms for changes in general capital market conditions such as changes in credit spreads or interest rates, KREF may be required to post margin for changes in conditions to specific loans that serve as collateral for those repurchase agreements. Such changes may include declines in the appraised value of property that secures a loan or a negative change in the borrower's ability or willingness to repay a loan. To the extent that KREF is required to post margin, KREF's liquidity could be significantly impacted. Both KREF and its lenders work cooperatively to monitor the performance of the properties and operations related to KREF's loan investments to mitigate investment-specific credit risks. Additionally, KREF incorporates terms in the loans it originates to further mitigate risks related to loan nonperformance.

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KKR Real Estate Finance Trust Inc.

Notes to Condensed Consolidated Financial Statements

(amount in tables in thousands, except per share amounts)

Term Loan ~~Financing~~Facility

In April 2018, KREF, through its consolidated subsidiaries, entered into a term loan financing agreement (“Term Loan Facility”) with third party lenders for an initial borrowing capacity of $200.0 million that was subsequently increased to $1.0 billion in October 2018. The facility provides asset-based financing on a non-mark-to-market basis with match-term up to five years and is non-recourse to KREF. Borrowings under the facility are collateralized by senior loans, held-for-investment, and bear interest equal to one-month ~~LIBOR~~Term SOFR plus a margin. The weighted average margin on the facility ~~were 1.7%~~was1.9% and ~~1.6%~~1.8% as of June 30, ~~2022~~2023 and December 31, ~~2021, respectively.~~2022, respectively.

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~~KKR Real Estate Finance Trust Inc.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(dollars in tables in thousands, except per share amounts)~~

The following tables summarize our borrowings under the Term Loan Facility:

June 30, 2023

Term Loan Facility

Count

Outstanding Principal

Amortized Cost

Carrying Value

Wtd. Avg. Yield/Cost(A)

Guarantee(B)

Wtd. Avg. Term(C)

Collateral assets

707,602

704,026

698,591

S + 3.6%

n.a.

September 2026

Financing provided

n.a.

565,748

565,141

S + 2.0%

n.a.

September 2026

June 30, 2022
Term Loan Facility Count Outstanding Principal Amortized Cost Carrying Value
Wtd. Avg. Yield/Cost(A)
Guarantee(B)
Wtd. Avg. Term(C)
Collateral assets 13 $ 907,931 $ 903,544 $ 893,694 + 3.5% n.a. October 2025
Financing provided n.a. 741,640 741,232 741,232 + 1.7% n.a. October 2025

December 31, 2021

December 31, 2022

Term Loan Facility

Count

Outstanding Principal

Amortized Cost

Carrying Value

Wtd. Avg. Yield/Cost(A)

Guarantee(B)

Wtd. Avg. Term(C)

Term Loan Facility

Count

Outstanding Principal

Amortized Cost

Carrying Value

Wtd. Avg. Yield/Cost(A)

Guarantee(B)

Wtd. Avg. Term(C)

Collateral assets

1,078,795

1,076,241

1,074,116

L + 3.4%

n.a.

August 2024

Collateral assets

785,076

780,526

751,579

+ 3.4%

n.a.

April 2026

Financing provided

n.a.

870,458

L + 1.6%

n.a.

August 2024

Financing provided

n.a.

631,557

630,757

+ 1.9%

n.a.

April 2026

(A) ~~Floating rate loans and related liabilities~~Collateral assets are indexed to one-month LIBOR and/or Term SOFR. ~~KREF's net interest rate exposure is in direct proportion to its interest in the net assets indexed to that rate.~~ 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 KREF.

(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.

Activity — For the six months ended June 30, ~~2022,~~2023, the activity related to the carrying value of KREF’s secured financing agreements were as follows:


	Secured Financing Agreements, Net





Balance as of December 31, ~~2021~~2022	$	~~3,726,593~~3,748,691
Principal borrowings	~~1,817,044~~556,343
Principal repayments/sales	~~(1,971,043)~~(502,929)
Deferred debt issuance costs	~~(7,773)~~(1,851)
Amortization of deferred debt issuance costs	~~4,759~~7,504
Balance as of June 30, ~~2022~~2023	$	~~3,569,580~~3,807,758

Maturities — KREF’s secured financing agreements, term loan ~~financing~~facility and other consolidated debt obligations in place as of June 30, ~~2022~~2023 had contractual maturities(A) as follows:


Year	Year	Nonrecourse		Recourse(A)		Total		Year	Nonrecourse		Recourse(B)		Total
2022		$	383,416	$	73,505	$	456,921
2023	2023	945,058		253,343		1,198,401		2023	$	212,331	$	46,510	$	258,841
2024	2024	839,576		144,625		984,201		2024	1,350,478		306,970		1,657,448
2025	2025	356,749		118,916		475,665		2025	909,877		292,150		1,202,027
2026								2026	503,421		101,422		604,843
Thereafter	Thereafter	372,600		96,104		468,704		Thereafter	50,956		50,000		100,956
		$	2,897,399	$	686,493	$	3,583,892		$	3,027,063	$	797,052	$	3,824,115

(A) Represents earlier of the next maturity of the underlying loans and the maximum maturity of the secured financing agreements.

(B) Except for the Revolver, which is full recourse, amounts borrowed subject to a maximum 25.0% recourse limit. The Revolver ~~expires~~matures in March 2027.

Covenants — KREF is required to comply with customary loan covenants and event of default provisions related to its secured financing agreements and Revolver, including, but not limited to, negative covenants relating to restrictions on operations with respect to KREF’s status as a REIT, and financial covenants. Such financial covenants include ana trailing four quarter interest

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KKR Real Estate Finance Trust Inc.

Notes to Condensed Consolidated Financial Statements

(amount in tables in thousands, except per share amounts)

income to interest expense ratio covenant (1.5 to 1.0); a minimum consolidated tangible net worth covenant (75.0% of the aggregate cash proceeds of any equity issuances made and any capital contributions received by KREF and certain subsidiaries or up to approximately $~~1,349.4~~1,353.4 million depending upon the facility); a cash liquidity covenant (the greater of $10.0 million or 5.0% of KREF's recourse indebtedness); and a total indebtedness covenant (83.3% of KREF's Total Assets, as defined in the applicable financing agreements). As of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, KREF was in compliance with its financial debt covenants.

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KKR Real Estate Finance Trust Inc.

Notes to Condensed Consolidated Financial Statements

(~~dollars~~amount in tables in thousands, except per share amounts)

Note 6. Collateralized Loan Obligations

In August 2021, KREF financed a pool of loan participations from its existing loan portfolio through a managed CLO ("KREF 2021-FL2"). KREF 2021-FL2 provides KREF with match-term financing on a non-mark-to-market and non-recourse basis. KREF 2021-FL2 has 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 indenture. Upon the execution of the KREF 2021-FL2, KREF recorded $8.9 million in issuance costs, inclusive of $0.9 million in structuring and placement agent fees paid to KKR Capital Markets LLC ("KCM"), an affiliate of KREF.

In February 2022, KREF financed a pool of loan participations from its existing multifamily loan portfolio through a managed CLO ("KREF 2022-FL3"). KREF 2022-FL3 provides KREF with match-term financing on a non-mark-to-market and non-recourse basis and has a two-year reinvestment feature. Upon the execution of the KREF 2022-FL3, KREF recorded $7.4 million in issuance costs, inclusive of $0.5 million in structuring and placement agent fees paid to KCM.

The CLO issuance costs are netted against the outstanding principal balance of the CLO notes in "Collateralized loan obligations, net" in the Condensed Consolidated Balance Sheets.

The following tables outline CLO collateral assets and respective borrowing as of June 30, ~~2022~~2023 and December 31, ~~2021:~~2022:


		June 30, 2022										June 30, 2023
		Count	Outstanding Principal		Amortized Cost		Carrying Value		Wtd. Avg. Yield/Cost(A)	Wtd. Avg. Term(B)		Count	Outstanding Principal		Amortized Cost		Carrying Value		Wtd. Avg. Yield/Cost(A)	Wtd. Avg. Term(B)
KREF 2021-FL2	KREF 2021-FL2										KREF 2021-FL2
Collateral assets(C)(D)	Collateral assets(C)(D)	21	$	1,300,000	$	1,300,000	$	1,293,709	+ 3.3%	December 2025	Collateral assets(C)(D)	17	$	1,300,000	$	1,300,000	$	1,265,775	S + 3.2%	May 2026
Financing provided	Financing provided	1	1,095,250		1,090,150		1,090,150		L + 1.7%	February 2039	Financing provided	1	1,095,250		1,094,641		1,094,641		S + 1.8%	February 2039
KREF 2022-FL3	KREF 2022-FL3										KREF 2022-FL3
Collateral assets(C)	Collateral assets(C)	16	$	1,000,000	$	1,000,000	$	996,846	+ 3.0%	September 2026	Collateral assets(C)	16	$	1,000,000	$	1,000,000	$	985,199	S + 3.1%	September 2026
Financing provided	Financing provided	1	847,500		841,455		841,455		S + 2.1%	February 2039	Financing provided	1	847,500		845,062		845,062		S + 2.2%	February 2039


												December 31, 2022
		December 31, 2021										Count	Outstanding Principal		Amortized Cost		Carrying Value		Wtd. Avg. Yield/Cost(A)	Wtd. Avg. Term(B)
KREF 2021-FL2	KREF 2021-FL2	Count	Outstanding Principal		Amortized Cost		Carrying Value		Wtd. Avg. Yield/Cost	Wtd. Avg. Term(B)	KREF 2021-FL2
Collateral assets(C)(D)	Collateral assets(C)(D)	20	$	1,300,000	$	1,300,000	$	1,296,745	L + 3.4%	June 2025	Collateral assets(C)(D)	17	$	1,300,000	$	1,300,000	$	1,283,162	+ 3.3%	April 2026
Financing provided	Financing provided	1	1,095,250		1,087,976		1,087,976		L + 1.7%	February 2039	Financing provided	1	1,095,250		1,092,332		1,092,332		L + 1.7%	February 2039
KREF 2022-FL3											KREF 2022-FL3
Collateral assets(C)											Collateral assets(C)	16	$	1,000,000	$	1,000,000	$	991,452	+ 3.1%	October 2026
Financing provided											Financing provided	1	847,500		843,260		843,260		S + 2.2%	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 June 30, 2023, 100.0% of the CLO collateral loan assets by principal balance earned a floating rate of interest indexed to Term SOFR. As of December 31, 2022 ~~91.1%~~, 64.1% and ~~8.9%~~35.9% 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 borrowers, 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 ~~30.6%~~ 29.5% and 28.4% of~~and 19.6% of~~ the principal of KREF's commercial real estate loans as of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively. As of June 30, ~~2022~~2023 and December 31, ~~2021,~~ 2022, 100% of KREF loans financed through the CLOs are floating rate loans.

(D) Including ~~$0.5~~$80.0 million and ~~$54.0~~$151.0 million cash held in CLO 2021-FL2 as of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively.

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KKR Real Estate Finance Trust Inc.

Notes to Condensed Consolidated Financial Statements

(~~dollars~~amount in tables in thousands, except per share amounts)

The following table presents the CLO assets and liabilities included in KREF’s Condensed Consolidated Balance Sheets:

Assets June 30, 2022 December 31, 2021
Cash $ 500 $ 54,000
Commercial real estate loans, held-for-investment 2,299,500 1,246,000
Less: Allowance for credit losses (9,445) (3,255)
Commercial real estate loans, held-for-investment, net 2,290,055 1,242,745
Accrued interest receivable 6,736 3,091
Other assets 206 766
Total $ 2,297,497 $ 1,300,602
Liabilities
Collateralized loan obligations, net(A)
$ 1,931,605 $ 1,087,976
Accrued interest payable 1,883 852
Total $ 1,933,488 $ 1,088,828

~~(A) Net of~~ ~~$11.1 million~~ ~~and~~ ~~$7.3 million~~ ~~of unamortized deferred financing costs as of~~ ~~June 30, 2022 and~~ ~~December 31, 2021, respectively.~~


Assets	June 30, 2023		December 31, 2022
Cash	$	80,000	$	151,000
Commercial real estate loans, held-for-investment	2,220,000		2,149,000
Less: Allowance for credit losses	(49,026)		(25,387)
Commercial real estate loans, held-for-investment, net	2,170,974		2,123,613
Accrued interest receivable	12,138		10,693
Other assets	155		155
Total	$	2,263,267	$	2,285,461
Liabilities
Collateralized loan obligations	$	1,942,750	$	1,942,750
Deferred financing costs	(3,047)		(7,158)
Collateralized loan obligations, net	$	1,939,703	$	1,935,592
Accrued interest payable	4,544		4,442

Total	$	1,944,247	$	1,940,034

The following table presents the components of net interest income of CLOs included in KREF’s Condensed Consolidated Statements of Income:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Net Interest Income
Interest income	Interest income	$	23,775	$	10,832	$	40,886	$	21,953	Interest income	$	44,242	$	23,775	$	85,988	$	40,886
Interest expense(A)	Interest expense(A)	13,059		2,906		20,827		5,931		Interest expense(A)	33,862		13,059		65,085		20,827
Net interest income	Net interest income	$	10,716	$	7,926	$	20,059	$	16,022	Net interest income	$	10,380	$	10,716	$	20,903	$	20,059

(A) ~~Net of interest expense on internally held CLO notes. Includ~~Incluesdes $2.2 million and $4.3 million o~~$2.1~~f deferred financing costs amortization for the three and six months ended June 30, 2023, respectively. Includes $2.1 million and ~~$3.7~~$3.7 million of deferred financing costs amortization for the three and six months ended June 30, 2022, respectively.

~~, respectively.~~

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KKR Real Estate Finance Trust Inc.

Notes to Condensed Consolidated Financial Statements

(~~dollars~~amount in tables in thousands, except per share amounts)

Note 7. Secured Term Loan, Net

In September 2020, KREF 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. The secured term loan matures on September 1, 2027 and contains restrictions relating to liens, asset sales, indebtedness, investments and transactions with affiliates. The secured term loan is secured by KREF level guarantees and does not include asset-based collateral. Upon the execution of the secured term loan, KREF recorded a $7.5 million issuance discount and $5.1 million in issuance costs, inclusive of $1.1 million in arrangement and structuring fees paid to KCM.

In November 2021, KREF completed the repricing of a $297.8 million ~~then existing~~then-existing secured term loan and a $52.2 million add-on, for an aggregate principal amount of $350.0 million due September 2027, which was issued at par. The upsize of the secured term loan was accounted for as partial debt extinguishment under GAAP, accordingly, KREF recognized an accelerated deferred loan financing cost of $0.7 million during the fourth quarter of 2021. The new secured term loan bears interest at LIBOR plus 3.5% and is subject to a LIBOR floor of 0.5%. KREF recorded $2.0 million in issuance costs, inclusive of $0.8 million in arrangement and structuring fees paid to KCM.

In June 2023, KREF transitioned the secured term loan from LIBOR to Term SOFR. Inclusive of the amortization of the discount and issuance costs, KREF’s total cost of the secured term loan is ~~LIBOR~~Adjusted SOFR, as defined, plus ~~4.1%~~a 3.5% margin per annum, subject to the applicable ~~LIBOR~~SOFR floor, as of June 30, ~~2022.~~2023. The following table summarizes KREF’s secured term loan at June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively:

June 30, 2022 December 31, 2021
Principal amount $ 348,250 $ 350,000
Unamortized discount (5,158) (5,652)
Deferred financing costs (5,483) (5,799)
Carrying amount $ 337,609 $ 338,549


	June 30, 2023		December 31, 2022
Principal	$	344,750	$	346,500
Deferred financing costs	(4,484)		(5,016)
Unamortized discount	(4,161)		(4,656)
Carrying value	$	336,105	$	336,828

Covenants — KREF is required to comply with customary loan covenants and event of default provisions related to its secured term loan that include, but are not limited to, negative covenants relating to restrictions on operations with respect to KREF’s 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, as defined in the secured term loan agreements, of 83.3% (the “Leverage Covenant”). KREF was in compliance with such covenants as of June 30, ~~2022~~2023 and December 31, ~~2021.~~2022.

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KKR Real Estate Finance Trust Inc.

Notes to Condensed Consolidated Financial Statements

(~~dollars~~amount in tables in thousands, except per share amounts)

Note 8. Convertible Notes, Net

In May 2018, KREF issued $143.75 million of the Convertible Notes ~~which bear interest~~ at a fixed interest 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~~matured on May 15, ~~2023, unless earlier repurchased or converted.~~2023. The Convertible Notes’ issuance costs of $5.1 million ~~are~~was amortized through interest expense over the life of the Convertible Notes.

The ~~initial conversion rate for the Convertible Notes is 43.9386 shares of KREF’s common stock per $1,000~~entire $143.75 million principal amount of Notes, which is equivalent to an initial conversion price of approximately $22.76 per share of KREF’s common stock, which represents a 10% conversion premium over the last reported sale price of $20.69 per share of KREF’s common stock on the New York Stock Exchange on May 15, 2018. The conversion rate is subject to adjustment under certain circumstances. In addition, upon a make-whole fundamental change as defined within the indenture governing the Convertible Notes, KREF will, under certain circumstances, increase the applicable conversion rate for a holder that elects to convert its Notes in connection with such make-whole fundamental change. Prior to February 15, 2023, the Convertible Notes will be convertible only upon satisfaction of certain conditions and during certain periods, and thereafter, at any time until the close of business on the second scheduled trading day immediately preceding the maturity date. KREF will satisfy any conversion elections by paying or delivering, as the case may be, cash, shares of KREF’s common stock or a combination of cash and shares of KREF’s common stock, at its election.

~~Upon the issuance~~balance of the Convertible Notes ~~KREF recorded a $1.8 million discount based~~matured and was repaid in cash on ~~the implied value~~May 15, 2023. As of the conversion option and an assumed effective interest rate of 6.50%, as well as $5.1 million of initial issuance costs, inclusive of $0.8 million paid to KCM. Inclusive of the amortization of this discount and the issuance costs, KREF’s total cost of the May 2018June 30, 2023, there were no Convertible Notes ~~issuance is 6.92% per annum.~~outstanding.

The following table details the carrying value of the Convertible Notes on KREF's Condensed Consolidated Balance Sheets:

June 30, 2022 December 31, 2021
Principal $ 143,750 $ 143,750
Deferred financing costs (897) (1,405)
Unamortized discount (315) (494)
Carrying value $ 142,538 $ 141,851


	June 30, 2023		December 31, 2022
Principal	$	—	$	143,750
Deferred financing costs	—		(380)
Unamortized discount	—		(133)
Carrying value	$	—	$	143,237

The following table details the interest expense related to the Convertible Notes:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended June 30,			Six Months Ended June 30,
		2022		2021		2022		2021				2023		2022		2023		2022
Cash coupon	Cash coupon	$	2,201	$	2,201	$	4,402	$	4,402	Cash coupon		$	1,050	$	2,201	$	3,276	$	4,402
Discount and issuance cost amortization	Discount and issuance cost amortization	346		345		687		687		Discount and issuance cost amortization		171		346		513		687
Total interest expense	Total interest expense	$	2,547	$	2,546	$	5,089	$	5,089	Total interest expense		$	1,221	$	2,547	$	3,789	$	5,089

Accrued interest payable for the Convertible Notes was ~~$1.1~~zero and $1.1 million as of June 30, ~~2022~~2023 and December 31, ~~2021.~~2022, respectively. Refer to Note 2 for additional discussion of accounting policies for the Convertible Notes.

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KKR Real Estate Finance Trust Inc.

Notes to Condensed Consolidated Financial Statements

(~~dollars~~amount in tables in thousands, except per share amounts)

~~Note 9. Loan Participations Sold~~

KREF finances certain loan investments through the syndication of a non-recourse, or limited-recourse, loan participations to unaffiliated third parties. In October 2019, KREF syndicated a $65.0 million vertical participation in one of its loan investments with a principal balance of $328.5 million to an unaffiliated third party, at par value. In June 2020, KREF increased the maximum loan amount by $6.5 million and syndicated an additional $1.2 million vertical participation to the same third party. Such syndications did not qualify for "sale" accounting under GAAP and therefore were consolidated in KREF's condensed consolidated financial statements. In September 2021, KREF fully repaid the $66.2 million vertical loan participation in connection with the payoff of the underlying loan.

~~Table of Contents~~

~~KKR Real Estate Finance Trust Inc.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(dollars in tables in thousands, except per share amounts)~~

Note ~~10.~~9. Variable Interest Entities

Collateralized Loan Obligations — KREF consolidates CLOs when it determines that the CLO issuers, wholly-owned subsidiaries of KREF, are VIEs and that KREF is the primary beneficiary of ~~its consolidated CLOs~~such VIEs (Note 6). Management considers ~~the CLO Issuers, wholly-owned subsidiaries of~~ KREF to be the primary beneficiary asof the CLO ~~Issuers have~~issuers as KREF has the ability to control the most significant activities of the CLO issuers, the obligation to absorb losses, and the right to receive benefits of the ~~CLO~~CLOs through the subordinate interests the CLO ~~Issuers~~issuers own.

Real Estate Owned Joint Venture — Concurrently with taking title of KREF’s sole REO asset, KREF contributed the REO to a joint venture with a third party local developer operator (“JV Partner”), whereby KREF has a 90% interest in the joint venture and the JV Partner has a 10% interest. Management determined the joint venture to be a VIE as the joint venture has insufficient equity-at-risk and concluded that KREF is the primary beneficiary of the joint venture as KREF holds decision-making power over the activities that most significantly impact the economic performance of the joint venture and has the obligation to absorb losses of, or the right to receive benefits from, the joint venture that could be potentially significant to the joint venture.

As of June 30, ~~2022,~~2023, the joint venture held REO assets with a net carrying value of $71.5 million.~~$69.3 million~~. KREF has priority of distributions up to ~~$69.5~~$74.7 million before the JV Partner can participate in the economics of the joint venture.

Equity Method Investments

As of June 30, ~~2022,~~2023, KREF held a 3.5% interest in RECOP I, an unconsolidated VIE of which KREF is not the primary beneficiary, at its fair value of ~~$36.8 million~~.$35.5 million. The aggregator vehicle in which KREF invests is controlled and advised by affiliates of the Manager. RECOP I primarily acquired junior tranches of CMBS newly issued by third parties. KREF will not pay any fees to RECOP I, but KREF bears its pro rata share of RECOP I's expenses. KREF reported its share of the net asset value of RECOP I in its Condensed Consolidated Balance Sheets, presented as “Equity method investments” and its share of net income, presented as “Income (loss) from equity method investments” in the Condensed Consolidated Statements of Income.

KREF, through a Taxable REIT Subsidiary ("TRS"), held non-voting limited liability company interests issued by the Manager ("Non-Voting Manager Units"), a VIE, for the benefit of the holder of the SNVPS (Note 11). KREF reported its share of net income, presented as “Income (loss) from equity method investments” in the Condensed Consolidated Statements of Income. On October 1, 2021, KREF TRS redeemed its interest in the Manager for a cash call amount of $5.1 million when the KKR Member exercised its Call Option to redeem the Non-Voting Manager Units, including the Non-Voting Manager Units held by KREF TRS.

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Notes to Condensed Consolidated Financial Statements

(~~dollars~~amount in tables in thousands, except per share amounts)

Note ~~11.~~10. Equity

Authorized Capital — On October 2, 2014, KREF's board of directors authorized KREF to issue up to 350,000,000 shares of stock, at $0.01 par value per share, consisting of 300,000,000 shares of common stock and 50,000,000 shares of preferred stock, subject to certain restrictions on transfer and ownership of shares. Restrictions placed on the transfer and ownership of shares relate to KREF's REIT qualification requirements.

Common Stock — As further described below, since December ~~2015,~~31, 2019, KREF issued the following shares of common stock:

Pricing Date
Shares Issued(A)
Net Proceeds
As of December 31, 2015 13,636,416 $ 272,728
February 2016 2,000,000 40,000
May 2016 3,000,138 57,130
June 2016(B)
21,838 —
August 2016 5,500,000 109,875
As of December 31, 2016 24,158,392 $ 479,733
February 2017 7,386,208 147,662
April 2017 10,379,738 207,595
May 2017 - Initial Public Offering 11,787,500 219,356
As of December 31, 2017 53,711,838 $ 1,054,346
August 2018 5,000,000 98,326
November 2018 500,000 9,351
As of December 31, 2018 59,211,838 $ 1,162,023
November 2021 5,000,000 108,800
November 2021(C)
1 —
November 2021 547,361 11,911
As of December 31, 2021 64,759,200 $ 1,282,734
February 2022 68,817 1,426
March 2022 6,494,155 133,845
As of March 31, 2022 71,322,172 $ 1,418,005
June 2022 2,750,000 53,653
As of June 30, 2022 $ 74,072,172 $ 1,471,658


Pricing Date	Shares Issued(A)	Net Proceeds
As of December 31, 2019	59,211,838	$	1,162,023
November 2021	5,000,000	108,800
November 2021(B)	1	—
November 2021	547,361	11,911
As of December 31, 2021	64,759,200	$	1,282,734
February 2022(C)	68,817	1,426
March 2022	6,494,155	133,845
June 2022	2,750,000	53,653
August 2022(C)	271,641	5,300
As of June 30, 2023	74,343,813	$	1,476,958

(A) Excludes ~~527,378~~747,944 net shares of common stock issued to-date in connection with vested restricted stock units.

(B) KREF did not receive any proceeds with respect to 21,838 shares of common stock issued to certain current and former employees of, and non-employee consultants to, KKR and third-party investors in the private placement completed in March 2016, in accordance with KREF's Stockholders Agreement dated as of March 29, 2016.

~~(C) KREF did not receive any proceeds with respect to 1~~one share of common stock issued to KKR in connection with the conversion of the special voting preferred stock, in accordance with KREF’s Articles of Restatement dated as of May 10, 2017.

In March and June of 2022, KREF issued 6,494,155 and 2,750,000 shares of common stock, respectively, in separate underwritten offerings each of 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 and $53.7 million, respectively.

During the six months ended June 30, 2023 and 2022, 11,050 and 15,520 shares of common stock were issued related to the vesting of restricted stock units. Upon any payment of shares as a result of restricted stock unit vesting, the related tax withholding obligation will generally be satisfied by KREF, reducing the number of shares to be delivered by a number of shares necessary to satisfy the related applicable tax withholding obligation. Refer to Note 11 for further detail.

Of the 75,091,757 common shares KREF issued, there were 69,106,061 common shares outstanding as of June 30, 2023, which includes 747,944 net shares of common stock issued in connection with vested restricted stock units and is net of 5,985,696 common shares repurchased.

In May 2021 and June 2022, KKR sold 5,750,000 and 4,250,000 shares of KREF common stock, respectively, through secondary offerings, including the exercise of the underwriters' option to purchase additional common shares, and received ~~all of the~~ $100.4 million and $82.9 million of net proceeds from the offerings, respectively. On November 1, 2021, KKR converted its special voting preferred stock into 1one share of KREF common stock when KREF issued 5,000,000 shares of common stock, resulting in KKR’s ownership to decrease below 25.0% of KREF’s outstanding common stock.

KKR and affiliates beneficially owned 10,000,001 ~~and 14,250,001~~ shares, or ~~14.4%~~ ~~and 23.2%~~14.5% of KREF's outstanding common stock as of each of June 30, ~~2022~~2023 and December 31, ~~2021, respectively.~~

In March and June of 2022, KREF issued 6,494,155 and 2,750,000 shares of common stock in an underwritten offering, respectively, 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 and $53.7 million, respectively.

~~During the six months ended June 30, 2022 and 2021,~~ ~~15,520 and 18,052 shares of~~ ~~common stock were issued related to the vesting of restricted stock units. Upon any payment of shares as a result of restricted stock unit vesting, the related tax~~

~~Table of Contents~~

~~KKR Real Estate Finance Trust Inc.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(dollars in tables in thousands, except per share amounts)~~

withholding obligation will generally be satisfied by KREF, reducing the number of shares to be delivered by a number of shares necessary to satisfy the related applicable tax withholding obligation. Refer to Note 12 for further detail.

~~Of the 74,599,550 common shares KREF issued, there were~~ ~~69,654,532~~ ~~common shares outstanding as of June 30, 2022, which includes 527,378 net shares of common stock issued in connection with vested restricted stock units and is net of~~ ~~4,945,018~~ ~~common shares repurchased.~~2022.

Share Repurchase Program — Under ~~the Company’s~~KREF's current share repurchase program, which has no expiration date, ~~the Company~~KREF may repurchase up to an aggregate of $100.0 million of its common stock ~~beginning July 1, 2020,~~effective as of February 3, 2023, of which up to $50.0 million may be repurchased under a pre-set trading plan meeting the requirements of Rule 10b5-1 under the Exchange Act, and provide for repurchases of common stock when the market price per share is below book value per share (calculated in accordance with GAAP as of the end of the most recent quarterly period for which financial statements are available), and the remaining $50.0 million may be used for repurchases in the open market, pursuant to pre-set trading plans meeting the requirements of Rule 10b5-1 under the Exchange Act, in privately negotiated transactions or otherwise. The timing, manner, price and amount of any common stock repurchases will be determined by ~~the Company~~KREF in its discretion and will depend on a variety

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Notes to Condensed Consolidated Financial Statements

(amount in tables in thousands, except per share amounts)

of factors, including legal requirements, price, liquidity and economic considerations, and market conditions. The program does not require ~~the Company~~KREF to repurchase any specific number of shares of common ~~stock,~~stock. The program does not have an expiration date and ~~the program~~ may be suspended, ~~extended,~~ modified or discontinued at any time.

During the three months ended June 30, 2023, KREF did not repurchase any of its common stock under the repurchase program. During the three months ended June 30, 2022, KREF repurchased 1,044,692 shares of common stock under the repurchase

program at an average price per share ofof $17.28 for a total of $18.1 million. ~~During the six months ended June 30, 2021, KREF did not repurchase any of its common stock.~~ As of June 30, ~~2022,~~2023, KREF had ~~$81.9~~$100.0 million of remaining capacity to repurchase shares under the program.

At the Market Stock Offering Program — On February 22, 2019, KREF entered into an equity distribution agreement with certain sales agents, pursuant to which KREF may sell, from time to time, up to an aggregate sales price of $100.0 million of its common stock pursuant to a continuous offering program (the “ATM”). Sales of KREF’s 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 of 1933, as amended. The timing and amount of actual sales will depend on a variety of factors including market conditions, the trading price of KREF’s common stock, KREF’s capital needs, and KREF’s determination of the appropriate sources of funding to meet such needs.

During the six months ended June 30, ~~2022,~~2023, KREF ~~issued and sold 68,817~~did not issue or sell any shares of common stock under the ~~ATM, generating net proceeds totaling $1.4 million.~~ATM. As of June 30, ~~2022,~~ ~~$98.6~~2023, $93.2 million remained available for issuance under the ATM.

Special Voting Preferred Stock — In March 2016, KREF issued 1one share of special voting preferred stock to KKR Fund Holdings L.P. ("KKR Fund Holdings") for $20.00 per share, which KKR Fund Holdings transferred to its subsidiary, KKR REFT Asset Holdings LLC. The holder of the special voting preferred stock had special voting rights related to the election of members to KREF's board of directors until KKR and its affiliates ceased to own at least 25.0% of KREF's issued and outstanding common stock.

On November 1, 2021, KREF issued 5,000,000 shares of common stock, which resulted in KKR’s ownership decreasing below 25.0% of KREF’s outstanding common stock. Accordingly, KKR converted its special voting preferred share into one share of KREF common stock and ceased to possess its special voting rights related to the election of members to KREF's board of directors.

~~Special Non-Voting Preferred Stock~~ —In connection with KREF's initial investors’ subscription for shares of KREF's common stock in the private placements prior to the initial public offering of KREF's equity on May 5, 2017, those investors were also allocated a class of non-voting limited liability company interest in the Manager ("Non-Voting Manager Units"). In February 2017, KREF issued an investor 1 share of SNVPS, at $0.01 per share, in lieu of that investor receiving Non-Voting Manager Units to facilitate compliance by the investor with regulatory requirements applicable to it. The corresponding Non-Voting Manager Units were held by a wholly-owned TRS of KREF ("KREF TRS"). All distributions received by KREF TRS from these Non-Voting Manager Units were passed through to the investor as preferred distributions on its SNVPS, less applicable taxes and withholdings. Except for the Non-Voting Manager Units, an indirect subsidiary of KKR ("KKR Member"), owned and controlled the limited liability company interests of the Manager.

~~Table of Contents~~

~~KKR Real Estate Finance Trust Inc.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(dollars in tables in thousands, except per share amounts)~~

Dividends on the SNVPS were payable quarterly, and accrued whether or not KREF had earnings, there were assets legally available for the payment of those dividends or those dividends had been declared. Any dividend payment made on the SNVPS would first be credited against the earliest accumulated but unpaid dividend due with respect to the SNVPS. Upon redemption of the SNVPS or liquidation of KREF, the holder of the SNVPS was entitled to payment of $0.01 per share, together with any accumulated but unpaid preferred distributions, including respective call or put amounts, before any holder of junior security interests, which included KREF's common stock. As KREF did not control the circumstances under which the holder of the SNVPS could redeem its interests, management considered the SNVPS as temporary equity (Note 2).

KREF was required to redeem the SNVPS at the option of the holder at any time or upon the redemption by the KKR Member of the Non-Voting Manager Units (the "Call Option"). Upon redemption, KREF paid a price in cash equal to $0.01 per share of the SNVPS, together with any accumulated but unpaid preferred distributions, including respective call or put amounts, and the SNVPS was canceled automatically and ceased to be outstanding. Concurrently, upon redemption of the SNVPS, the KKR Member acquired from KREF TRS its respective Non-Voting Manager Units, resulting in a one-time gain, thus substantially eliminating the historical cumulative impact of the SNVPS redemption value adjustments recorded in KREF's permanent equity.

On October 1, 2021, the KKR Member exercised its Call Option to redeem the Non-Voting Manager Units, including the Non-Voting Manager Units held by KREF TRS. Accordingly, KREF TRS received a cash call amount of $5.1 million and KREF concurrently redeemed the SNVPS, which resulted in book value accretion in the fourth quarter of $2.6 million, or $0.05 per common share, thus eliminating the cumulative negative impact of the SNPVS on book value.

6.50% Series A Cumulative Redeemable Preferred Stock — In April 2021 and January 2022, KREF issued, respectively, 6,900,000 and 6,210,000 shares of 6.50% Series A Cumulative Redeemable Preferred Stock (the “Series A Preferred Stock”), which included the exercise of the underwriters' option to purchase additional shares of Series A Preferred Stock, and received net proceeds after underwriting discount and commission of $167.1 million and $151.2 million, respectively.

The perpetual Series A Preferred Stock is redeemable, at KREF's option, at a liquidation price of $25.00 per share plus accrued and unpaid dividends commencing in April 2026. Dividends on the Series A Preferred Stock are payable quarterly at a rate of 6.50% per annum of the $25.00 liquidation preference, which is equivalent to $1.625 per annum per share. With respect to dividend rights and liquidation, the Series A Preferred Stock ranks senior to KREF's common stock.

Noncontrolling Interests — Noncontrolling interests represent a third party’s 10.0% interest in a joint venture, a consolidated VIE, that holds portion of KREF’s sole REO investment. KREF and the noncontrolling interest holder contribute to the joint venture’s ongoing operating shortfalls and capital expenditures on a pari passu basis. Distributions from the joint venture are allocated between KREF and the noncontrolling interest holder based on contractual terms and waterfalls as outlined in the joint venture agreement.

~~Dividends— During the six months ended June 30, 2022 and 2021, KREF's board of directors declared the following dividends on shares of its common stock and special voting preferred stock:~~

Amount
Declaration Date Record Date Payment Date Per Share Total
2022
March 15, 2022 March 31, 2022 April 15, 2022 $ 0.43 $ 29,211
June 15, 2022 June 30, 2022 July 15, 2022 0.43 29,951
$ 59,162
2021
March 15, 2021 March 31, 2021 April 15, 2021 $ 0.43 $ 23,916
June 15, 2021 June 30, 2021 July 15, 2021 0.43 23,924
$ 47,840

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Notes to Condensed Consolidated Financial Statements

(~~dollars~~amount in tables in thousands, except per share amounts)

Dividends— During the six months ended June 30, 2023 and 2022, KREF's board of directors declared the following dividends on shares of its common stock:


			Amount
Declaration Date	Record Date	Payment Date	Per Share		Total
2023
March 17, 2023	March 31, 2023	April 14, 2023	$	0.43	$	29,711
June 15, 2023	June 30, 2023	July 14, 2023	0.43		29,716


					$	59,427
2022
March 15, 2022	March 31, 2022	April 15, 2022	$	0.43	$	29,211
June 15, 2022	June 30, 2022	July 15, 2022	0.43		29,951


					$	59,162

During the six months ended June 30, 2023 and 2022, KREF's board of directors declared the following dividends on shares of its Series A Preferred Stock:

Amount
Declaration Date Record Date Payment Date Per Share Total
2022
February 1, 2022 February 28, 2022 March 15, 2022 $ 0.41 $ 5,326
April 22, 2022 May 31, 2022 June 15, 2022 $ 0.41 5,326
$ 10,652
2021
April 23, 2021 May 31, 2021 June 15, 2021 $ 0.27 $ 1,838
$ 1,838


			Amount
Declaration Date	Record Date	Payment Date	Per Share		Total
2023
February 3, 2023	February 28, 2023	March 15, 2023	$	0.41	$	5,326
April 21, 2023	May 31, 2023	June 15, 2023	0.41		5,326


					$	10,652
2022
February 1, 2022	February 28, 2022	March 15, 2022	$	0.41	$	5,326
April 22, 2022	May 31, 2022	June 15, 2022	0.41		5,326

					$	10,652

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Notes to Condensed Consolidated Financial Statements

(~~dollars~~amount in tables in thousands, except per share amounts)

Note ~~12.~~11. Stock-based Compensation

KREF is externally managed by the Manager and does not currently have any employees. However, as of June 30, ~~2022,~~2023, certain individuals employed by the Manager and affiliates of the Manager and certain members of KREF's board of directors were compensated, in part, through the issuance of stock-based awards.

As of June 30, ~~2022,~~2023, KREF had restricted stock unit (“RSU”) awards outstanding under the KKR Real Estate Finance Trust Inc. 2016 Omnibus Incentive Plan that was adopted on February 12, 2016 and amended and restated on November 17, 2016 (the "Incentive Plan") to certain members of KREF’s board of directors and employees of the Manager or its affiliates, none of whom are KREF employees. RSUs awarded to employees of the Manager or its affiliates, generally vest over 3three consecutive one-year periods and awards to certain members of KREF's board of directors generally vest over a one-year period, pursuant to the terms of the respective award agreements and the terms of the Incentive Plan.

In December 2021, KREF's board of directors granted 400,000 shares of RSU awards that are entitled to nonforfeitable dividends during the vesting periods, at the same rate as those declared on the common stock. In February 2022, KREF's board of directors approved a modification that entitled the unvested RSU awards granted prior to December 2021 to dividends during the vesting periods, at the same rate as those declared on the common stock, starting with the first quarter of 2022.

The following table summarizes the activity in KREF’s outstanding RSUs and the weighted-average grant date fair value per RSU:

Restricted Stock Units
Weighted Average Grant Date Fair Value Per RSU(A)
Unvested as of December 31, 2021 808,330 $ 19.50
Granted 27,625 19.91
Vested (15,520) 19.65
Forfeited / cancelled (28,501) 19.04
Unvested as of June 30, 2022 791,934 $ 19.53


	Restricted Stock Units	Weighted Average Grant Date Fair Value Per RSU(A)
Unvested as of December 31, 2022	935,218	$	16.80
Granted	48,370	11.37
Vested	(27,625)	19.91
Forfeited / cancelled	(567)	20.27
Unvested as of June 30, 2023	955,396	$	16.43

(A) The grant-date fair value is based upon the closing price of KREF’s common stock at the date of grant.

KREF expects the unvested RSUs outstanding to vest during the following years:


Year	Year	Restricted Stock Units	Year	Restricted Stock Units
2022		375,716
2023	2023	286,439	2023	431,351
2024	2024	129,779	2024	350,685
2025			2025	173,360
Total	Total	791,934	Total	955,396

KREF recognizes the compensation cost of RSUs awarded to employees of the Manager, or one or more of its affiliates, on a straight-line basis over the awards’ term at their grant date fair value, consistent with the RSUs awarded to certain members of KREF's board of directors.

During the three and six months ended June 30, ~~2022,~~2023, KREF recognized ~~$2.0~~$2.2 million and ~~$4.2~~$4.3 million,, respectively, of stock-based compensation expense included in “General and administrative” expense in the Condensed Consolidated Statements of Income. During the three and six months ended June 30, ~~2021,~~2022, KREF recognized ~~$2.0~~$2.0 million and ~~$4.0~~$4.2 million,, respectively, of ~~stock-based~~stock based compensation ~~expense.~~expense included in “General and administrative” expense in the Condensed Consolidated Statements of Income. As of June 30, ~~2022,~~2023, there was ~~$10.1~~$10.2 million of total unrecognized stock-based compensation expense related to unvested share-based compensation arrangements. This cost is expected to be recognized over a weighted average period of 1.0 ~~year~~.years.

During the six months ended June 30, 2023 and 2022, ~~and 2021,~~ KREF ~~declared~~ dec~~$0.7~~lared $0.8 million and ~~$0.0~~$0.7 million,, respectively, of nonforfeitable dividends on unvested RSUs. Such nonforfeitable dividends were deducted from “Retained earnings (Accumulated deficit)” in the Condensed Consolidated Statement of Changes in Equity.

Directors and Officers Deferral Plan — In March 2022, KREF's board of directors adopted the KKR Real Estate Finance Trust Inc. Directors and Officers Deferral Plan (the “ Deferral Plan”). Pursuant to the Deferral Plan, participants may elect to

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KKR Real Estate Finance Trust Inc.

Notes to Condensed Consolidated Financial Statements

(amount in tables in thousands, except per share amounts)

defer receipt of all or a portion of any shares of KREF’s common stock issuable upon vesting of any RSU granted to such participant in 25% increments. Deferred stock units (“DSU”) credited to a participant are non-voting but shall be entitled to dividend equivalent payments upon payment of dividends on shares of KREF’s common stock in the same form and amount equal to the amount of such dividends and are not subject to deferral under the Deferral Plan. In April 2023, 16,575 vested RSUs were deferred under the Deferral Plan. As of June 30, 2023, there were 16,575 DSUs outstanding.

Upon any payment of shares as a result of restricted stock unit vesting, the related tax withholding obligation will generally be satisfied by KREF, reducing the number of shares to be delivered by a number of shares necessary to satisfy the related

~~Table of Contents~~

~~KKR Real Estate Finance Trust Inc.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(dollars in tables in thousands, except per share amounts)~~

applicable tax withholding obligation. The amount results in a cash payment related to this tax liability and a corresponding reduction to additional paid-in capital in the Condensed Consolidated Statement of Changes in ~~Equity. No~~

Equity. 11,050 shares of common stock were delivered for vested RSUs during the six months ended June 30, ~~2022.~~2023.

Refer to Note 1514 for additional information regarding the Incentive Plan.

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(~~dollars~~amount in tables in thousands, except per share amounts)

Note ~~13.~~12. Earnings (Loss) per Share

Earnings (Loss) per Share — KREF calculates its basic EPS using the two-class method, which defines unvested share-based payment awards that contain nonforfeitable rights to dividends as participating securities. Under the two-class method earnings (distributed and undistributed) are allocated to common shares and participating securities based on their respective rights. Basic EPS, is calculated by dividing net income (loss) attributable to common stockholders by the weighted average common stock outstanding for the period.

KREF presents diluted EPS under the more dilutive of the treasury stock and if-converted methods or the two-class method. Under the treasury stock and if-converted methods, the denominator includes weighted average common stock outstanding plus the incremental dilutive shares issuable from restricted stock units and an assumed conversion of the Convertible ~~Notes.~~Notes (for the periods in which such notes were outstanding). The numerator includes any changes in income (loss) that would result from the assumed conversion of these potential shares of common stock.

For the six months ended June 30, 2022, 6,316,174 potentially issuable shares related to the Convertible Notes were included in the dilutive EPS denominator after the adoption of ASU 2020-06. For the three months ended June 30, 2022, such shares were excluded from the dilutive EPS denominator because the effect was anti-dilutive. ~~For~~

On May 15, 2023, the ~~three and six months ended June 30, 2021, before the adoption~~$143.75 million principal balance of ~~ASU 2020-06, all potentially issuable shares related to~~ the Convertible Notes ~~were excluded from the calculation of diluted EPS because KREF had the intent~~matured and ~~ability to settle the Convertible Notes~~was repaid in cash. As of June 30, 2023, there were no convertible instruments outstanding.

The following table illustrates the computation of basic and diluted EPS for the three and six months ended June 30, ~~2022~~2023 and ~~2021:~~2022:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Basic Earnings	Basic Earnings									Basic Earnings
Net Income (Loss)	Net Income (Loss)	$	25,061	$	31,077	$	60,529	$	61,169	Net Income (Loss)	$	(20,028)	$	25,061	$	(45,105)	$	60,529
Less: Preferred stock dividends and redemption value adjustment		5,326		1,813		10,652		2,721
Less: Preferred stock dividends										Less: Preferred stock dividends	5,326		5,326		10,652		10,652
Less: Participating securities' share in earnings	Less: Participating securities' share in earnings	341		—		687		—		Less: Participating securities' share in earnings	418		341		825		687
Net income (loss) attributable to common stockholders	Net income (loss) attributable to common stockholders	$	19,394	$	29,264	$	49,190	$	58,448	Net income (loss) attributable to common stockholders	$	(25,772)	$	19,394	$	(56,582)	$	49,190

Diluted Earnings	Diluted Earnings									Diluted Earnings
Net income (loss) attributable to common stockholders	Net income (loss) attributable to common stockholders	$	19,394	$	29,264	$	49,190	$	58,448	Net income (loss) attributable to common stockholders	$	(25,772)	$	19,394	$	(56,582)	$	49,190
Add: Interest expense attributable to the Convertible Notes	Add: Interest expense attributable to the Convertible Notes	—		—		4,402		—		Add: Interest expense attributable to the Convertible Notes	—		—		—		4,402
Less: Reallocation of undistributed earnings to participating securities	Less: Reallocation of undistributed earnings to participating securities	—		—		—		—		Less: Reallocation of undistributed earnings to participating securities	—		—		—		—
Net income (loss) attributable to common stockholders, diluted	Net income (loss) attributable to common stockholders, diluted	$	19,394	$	29,264	$	53,592	$	58,448	Net income (loss) attributable to common stockholders, diluted	$	(25,772)	$	19,394	$	(56,582)	$	53,592

Denominator	Denominator									Denominator
Basic weighted average common shares outstanding	Basic weighted average common shares outstanding	68,549,049		55,632,322		65,832,841		55,625,911		Basic weighted average common shares outstanding	69,103,268		68,549,049		69,099,162		65,832,841
Add: Deferred stock units										Add: Deferred stock units	12,386		—		6,227		—
Basic weighted average common shares outstanding										Basic weighted average common shares outstanding	69,115,654		68,549,049		69,105,389		65,832,841
Dilutive shares under assumed conversion of the Convertible Notes	Dilutive shares under assumed conversion of the Convertible Notes	—		—		6,316,174		—		Dilutive shares under assumed conversion of the Convertible Notes	—		—		—		6,316,174
Dilutive restricted stock units(A)	Dilutive restricted stock units(A)	—		274,764		—		193,199		Dilutive restricted stock units(A)	—		—		—		—
Diluted weighted average common shares outstanding	Diluted weighted average common shares outstanding	68,549,049		55,907,086		72,149,015		55,819,110		Diluted weighted average common shares outstanding	69,115,654		68,549,049		69,105,389		72,149,015

Net income (loss) attributable to common stockholders, per:	Net income (loss) attributable to common stockholders, per:									Net income (loss) attributable to common stockholders, per:
Basic common share	Basic common share	$	0.28	$	0.53	$	0.75	$	1.05	Basic common share	$	(0.37)	$	0.28	$	(0.82)	$	0.75
Diluted common share	Diluted common share	$	0.28	$	0.52	$	0.74	$	1.05	Diluted common share	$	(0.37)	$	0.28	$	(0.82)	$	0.74

~~(A)~~(A) For the three and six months ended June 30, 2023, zero and 10,213 weighted average unvested RSUs, respectively, were excluded from the calculation of diluted EPS because the effect was anti-dilutive. For the three and six months ended June 30, 2022, 199,713 and 190,637 weighted average unvested RSUs, respectively, were excluded from the calculation of diluted EPS because the effect was anti-dilutive.

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Notes to Condensed Consolidated Financial Statements

(~~dollars~~amount in tables in thousands, except per share amounts)

Note ~~14.~~13. Commitments and Contingencies

As of June 30, ~~2022,~~2023, KREF was subject to the following commitments and contingencies:

Litigation — From time to time, KREF may be involved in various claims and legal actions arising in the ordinary course of business. KREF establishes an accrued liability for legal proceedings only when those matters present loss contingencies that are both probable and reasonably estimable.

As of June 30, ~~2022,~~2023, KREF was not involved in any material legal proceedings regarding claims or legal actions against KREF.

Indemnifications — In the normal course of business, KREF enters into contracts that contain a variety of representations and warranties that provide general indemnifications and other indemnities relating to contractual performance. In addition, certain of KREF’s subsidiaries have provided certain indemnities relating to environmental and other matters and has provided nonrecourse carve-out guarantees for fraud, willful misconduct and other customary wrongful acts, each in connection with the financing of certain real estate investments that KREF has made. KREF’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against KREF that have not yet occurred. However, KREF expects the risk of material loss to be low.

Capital Commitments — As of June 30, ~~2022,~~2023, KREF had future funding commitments of $~~1,412.2~~1,194.8 million related to its investments in commercial real estate loans. These future funding commitments primarily relate to construction projects, capital improvements, tenant improvements and leasing commissions. Generally, funding commitments are subject to certain conditions that must be met, such as customary construction draw certifications, minimum credit metrics or executions of new leases before advances are made to the borrower.

In January 2017, KREF committed $40.0 million to invest in an aggregator vehicle alongside RECOP I. The two-year investment period for RECOP I ended in April 2019. As of June 30, ~~2022,~~2023, KREF had a remaining commitment of ~~$4.3~~$4.3 million to RECOP I.

~~Impact of the COVID-19 Pandemic~~Macroeconomic Environment — The ~~full extent of the impact of COVID-19 and certain macroeconomic indicators, including inflation and~~Federal Reserve has raised interest rates onten times since January 2022, and has signaled that further increases may be forthcoming throughout the ~~global economy generally,~~year. Higher interest rates imposed by the Federal Reserve to address inflation may adversely impact real estate asset values and increase our interest expense, which expense may not be fully offset by any resulting increase in interest income, and may lead to decreased prepayments from KREF's ~~business in particular, is uncertain.~~ ~~However, to the extent COVID-19~~borrowers and ~~other macroeconomic indicators continue to cause dislocations~~an increase in the ~~global economy,~~number of KREF's ~~financial condition, results of operations and cash flows may be adversely impacted. Refer to “Note 2 — Summary of Significant Accounting Policies” for further discussion regarding COVID-19.~~

borrowers who exercise extension options.

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Notes to Condensed Consolidated Financial Statements

(~~dollars~~amount in tables in thousands, except per share amounts)

Note ~~15.~~14. Related Party Transactions

Management Agreement — The Management Agreement between KREF and the Manager is a three-year agreement that provides for automatic one-year renewal periods starting October 8, 2017, subject to certain termination and nonrenewal rights, which in the case of KREF are exercisable by a two-thirds vote by the independent directors of KREF's board of directors. If the independent directors of KREF's board of directors decline to renew the Management Agreement other than for cause, KREF is required to pay the Manager a termination fee equal to 3three times the total 24-month trailing average annual management fee and incentive compensation earned by the Manager through the most recently completed calendar quarter. For administrative efficiency purposes, the Management Agreement was amended in August 2019 to change the expiration date of each automatic renewal period from October 7th to December 31st.

Pursuant to the Management Agreement, the Manager, as agent to KREF and under the supervision of KREF's board of directors, manages the investments, subject to investment guidelines approved by KREF's board of directors; financing activities; and day-to-day business and affairs of KREF and its subsidiaries.

For its services to KREF, the Manager is entitled to a quarterly management fee equal to the greater of $62,500 or 0.375% of 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 the Manager) over (b) 7.0% of the trailing 12-month weighted average adjusted equity (“Hurdle Rate”), less incentive compensation KREF already paid to the Manager with respect to the first 3three calendar quarters of such trailing 12-month period. The quarterly incentive compensation is calculated and paid in arrears with a one-quarter lag.

Adjusted equity generally represents the proceeds received by KREF and its subsidiaries from equity issuances, without duplication and net of offering costs, and distributable earnings, reduced by distributions, equity repurchases, and incentive compensation paid. Distributable earnings generally represent the net income, or loss, attributable to equity interests in KREF and its subsidiaries, without duplication, as well as realized losses not otherwise included in such net income, or loss, excluding non-cash equity compensation expense, incentive compensation, depreciation and amortization and unrealized gains or losses, from and after the effective date to the end of the most recently completed calendar quarter. KREF's board of directors, after majority approval by independent directors, may also exclude one-time events pursuant to changes in GAAP and certain material non-cash income or expense items from distributable earnings. For purposes of calculating incentive compensation, adjusted equity excludes: (i) the effects of equity issued by KREF and its subsidiaries that provides for fixed distributions or other debt characteristics and (ii) unrealized provision for (reversal of) credit losses.

KREF is also required to reimburse the Manager or its affiliates for documented costs and expenses incurred by it and its affiliates on behalf of KREF, except those specifically required to be borne by the Manager under the Management Agreement. The Manager is responsible for, and KREF does not reimburse the Manager or its affiliates for, the expenses related to investment personnel of the Manager and its affiliates who provide services to KREF. However, KREF does reimburse the Manager for KREF's allocable share of compensation paid to certain of the Manager’s non-investment personnel, based on the percentage of time devoted by such personnel to KREF's affairs.

Incentive Plan — KREF's compensation committee or board of directors may administer the Incentive Plan, which provides for awards of stock options; stock appreciation rights; restricted stock; RSUs; limited partnership interests of KKR Real Estate Finance Holdings L.P. (the "Operating Partnership"), a wholly owned subsidiary of KREF, that are directly or indirectly convertible into or exchangeable or redeemable for shares of KREF's common stock pursuant to the limited partnership agreement of the Operating Partnership (“OP Interests”); awards payable by (i) delivery of KREF's common stock or other equity interests, or (ii) reference to the value of KREF's common stock or other equity interests, including OP Interests; cash-based awards; or performance compensation awards.

No more than 7.5% of the issued and outstanding shares of common stock on a fully diluted basis, assuming the exercise of all outstanding stock options granted under the Incentive Plan and the conversion of all warrants and convertible securities into shares of common stock, or a total of 4,028,387 shares of common stock, will be available for awards under the Incentive Plan. In addition, (i) the maximum number of shares of common stock subject to awards granted during a single fiscal year to any non-employee director (as defined in the Incentive Plan), taken together with any cash fees paid to such non-employee director during the fiscal year, may not exceed $1.0 million and (ii) the maximum amount that can be paid to any participant for a single fiscal year during a performance period (or with respect to each single fiscal year if a performance period extends beyond a single fiscal year) pursuant to a performance compensation award denominated in cash may not exceed $10.0 million.

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Notes to Condensed Consolidated Financial Statements

(~~dollars~~amount in tables in thousands, except per share amounts)

No awards may be granted under the Incentive Plan on and after February 12, 2026. The Incentive Plan will continue to apply to awards granted prior to such date. During the three and six months ended June 30, ~~2022, KREF~~2023, 48,370 awards were granted~~27,625~~ ~~RSUs~~ to KREF's directors. During the three and six months ended June 30, ~~2021, KREF~~2022, 27,625 awards were granted ~~15,520 RSUs~~ to KREF's directors. ~~During the year ended December 31, 2021, KREF granted~~ ~~415,520~~ ~~RSUs to KREF's directors and employees of the Manager.~~ As of June 30, ~~2022, 2,709,075 shar~~es2023, 2,308,472 shares of common stock remained available for awards under the Incentive Plan.

Due to Affiliates — The following table contains the amounts presented in KREF's Condensed Consolidated Balance Sheets that it owes to affiliates:


		June 30, 2022		December 31, 2021			June 30, 2023		December 31, 2022
Management fees	Management fees	$	6,506	$	5,289	Management fees	$	6,551	$	6,578
Expense reimbursements and other(A)		1,791		663
Expense reimbursements						Expense reimbursements	—		100
KCM fees						KCM fees	1,777		2,044
		$	8,297	$	5,952		$	8,328	$	8,722

~~(A) Includes~~ ~~$1.8 million and $0.6 million of accrued KCM fees as of June 30, 2022 and December 31, 2021, respectively.~~

Affiliates Expenses — The following table contains the amounts included in KREF's Condensed Consolidated Statements of Income that arose from transactions with the Manager:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Management fees	Management fees	$	6,506	$	4,835	$	12,513	$	9,125	Management fees	$	6,559	$	6,506	$	13,082	$	12,513
Incentive compensation	Incentive compensation	—		2,403		—		4,595		Incentive compensation	611		—		2,422		—
Expense reimbursements and other(A)	Expense reimbursements and other(A)	1,781		447		2,507		799		Expense reimbursements and other(A)	1,293		1,781		2,446		2,507
		$	8,287	$	7,685	$	15,020	$	14,519		$	8,463	$	8,287	$	17,950	$	15,020

(A) ~~KREF presents these amounts in~~Presented within "General and administrative" in ~~its~~the Condensed Consolidated Statements of Income. Affiliate expense reimbursements presented in the table above exclude the out-of-pocket amounts paid by the Manager to parties unaffiliated with the Manager on behalf of KREF, and for which KREF reimburses the Manager in cash. For the three and six months ended June 30, 2022, these cash reimbursements totaled $1.8 million and $2.6 million, respectively; and for the three and six months ended June 30, 2021, these cash reimbursements totaled $0.3 million and $2.4 million, respectively.

In connection with the ATM, KCM, in its capacity as one of the sales agents, will receive commissions for the shares of KREF’s common stock it sells. This amount is not to exceed, but may be less than, 2.0% of the gross sales price per share. KREF ~~sold 68,817~~did not sell shares under the ATM through a third-party broker and did not incur or pay any commissions to KCM during the six months ended June 30, 2023 and 2022.

In connection with the BMO Facility, and in consideration for its services as the structuring agent, KREF is obligated to pay KCM a structuring fee equal to 0.35% of the respective committed loan advances under the agreement. Such fees are capitalized as deferred financing cost and amortized to interest expense over the draw period of the facility. KREF did not incur or pay any KCM structuring fees in connection with the facility during the six months ended June 30, 2023 and 2022.

In connection with the HSBC Facility entered into in March 2020, and in consideration for structuring and sourcing this arrangement, KREF is obligated to pay KCM a structuring fee equal to 0.25% of the respective committed loan advances under the agreement. Such fees are capitalized as deferred financing cost and amortized to interest expense over the lesser of the initial term of the loan or the facility. During the six months ended June 30, ~~2022~~2023 and ~~2021,~~2022, KREF did not incur or pay any KCM structuring fees in connection with the facility.

In connection with the secured term loan, and in consideration for structuring and arranging the loan, KREF paid KCM a $1.1 million arrangement and structuring fee equal to 0.37% of the principal amount of the secured term loan in the third quarter of 2020. In addition, KREF paid KCM a ~~$0.8 million~~ arrangement and structuring fee in connection with the secured term loan repricing and upsize in the fourth quarter of 2021. Such fees were capitalized as deferred financing cost and amortized to interest expense over the life of the secured term loan.

In connection with the syndication of a senior mortgage loan in February 2021, and in consideration for its services as the placement agent, KREF paid KCM a $0.4 million placement agent fee equal to 0.25% of KREF’s proportionate share of the senior loan commitment. Such fee was capitalized as a direct loan origination cost and amortized to interest income over the life of the loan.

~~Table of Contents~~

~~KKR Real Estate Finance Trust Inc.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(dollars in tables in thousands, except per share amounts)~~

In connection with the Series A Preferred Stock issuance in April 2021 and January 2022, and in consideration for its services as joint bookrunner, KREF incurred and paid KCM $1.6 million and $1.3 million in underwriting discount and commission, respectively. The underwriting discount and commission was settled net of the preferred stock issuance proceeds and recorded as a reduction to additional paid-in-capital in KREF's condensed consolidated financial statements.

In connection with the KREF Lending IX Facility entered into in July 2021, and in consideration for structuring and sourcing this arrangement, KREF is obligated to pay KCM a structuring fee equal to 0.75% of the respective committed loan advances under the agreement. Such fees are capitalized as deferred financing cost and amortized to interest expense over the draw period of the facility. In connection with the upsize of the KREF Lending IX Facility in March and August 2022, and in consideration for its services as the arranger, KREF paid KCM ~~$0.6~~$2.3 million in structuring ~~fees during~~fees. During the six months ended June 30, ~~2022.~~2023 and 2022, KREF paid $0.3 million and $0.6 million KCM structuring fees in connection with the facility, respectively.

Table of Contents

KKR Real Estate Finance Trust Inc.

Notes to Condensed Consolidated Financial Statements

(amount in tables in thousands, except per share amounts)

In connection with the KREF 2021-FL2 and KREF 2022-FL3 CLO issuances in August 2021 and February 2022, and in consideration for its services as the co-lead manager and joint bookrunner, KREF paid KCM ~~$0.9~~$0.9 million and ~~$0.5~~$0.5 million, respectively, in structuring and placement agent fees in the third quarter of 2021 and first quarter of 2022. These fees were capitalized as deferred financing cost and amortized to interest expense over the estimated life of the CLOs.

In connection with the extension and upsize of the Revolver in March 2022, and in consideration for its services as the arranger, KREF is obligated to pay KCM an arrangement fee equal to 0.375% of the aggregate amount of existing commitments plus 0.75% of the aggregate amount of new commitments. ~~Such fees were capitalized as deferred financing cost included within "Other assets" on the Condensed Consolidated Balance Sheet and amortized to interest expense over the life of the Revolver.~~ KREF paid ~~$3.3~~$3.3 million of arrangement fees in connection with the Revolver in the second quarter of 2022. Such fees were capitalized as deferred financing cost and amortized to interest expense over the estimated life of the Revolver.

In connection with the KREF Lending XI Facility entered into in April 2~~022,~~2022, and in consideration for its services as the structuring agent, KREF paid KCM ~~$0.5~~$0.5 million in structuring fees in the second quarter of 2022. Such fees are capitalized as deferred financing cost and amortized to interest expense over the estimated life of the facility.

In connection with the KREF Lending XII Facility entered into in June 2022, and in consideration for structuring and sourcing this arrangement, KREF is obligated to pay KCM a structuring fee ~~equ~~alequal to 0.35% of the respective loan advances under the agreement. KREF paid $0.6 million in KCM structuring fees in connection with the facility in the third quarter of 2022. Such fees are capitalized as deferred financing cost and amortized to interest expense over the draw period of the facility.

In connection with the KREF ~~accrued~~ ~~$0.6~~Lending XIII Facility entered into in August 2022, and in consideration for structuring and sourcing this arrangement, KREF is obligated to pay KCM a structuring fee equal to 0.5% of the facility amount under the agreement. KREF paid $1.3 million in KCM structuring fees in connection with the facility in the third quarter of 2022. Such fees are capitalized as deferred financing cost and amortized to interest expense over the draw period of ~~June 30,~~the facility.

In connection with the KREF Lending XIV Facility entered into in October 2022, and in consideration for its services as the structuring agent, KREF paid KCM $0.6 million in structuring fees in the fourth quarter of 2022. Such fees are capitalized as deferred financing cost and amortized to interest expense over the estimated life of the facility.

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Notes to Condensed Consolidated Financial Statements

(~~dollars~~amount in tables in thousands, except per share amounts)

Note ~~16.~~15. Fair Value of Financial Instruments

The carrying values and fair values of KREF’s ~~financial~~financial assets and liabilities recorded at fair value on a recurring basis, as well as other financial instruments not carried at fair value, as of June 30, ~~2022, were~~2023, were as follows:


								Fair Value															Fair Value
		Principal Balance		Amortized Cost(A)		Carrying Value(B)		Level 1		Level 2		Level 3		Total			Principal Balance		Amortized Cost(A)		Carrying Value(B)		Level 1		Level 2		Level 3		Total
Assets	Assets															Assets
Cash and cash equivalents	Cash and cash equivalents	$	118,020	$	118,020	$	118,020	$	118,020	$	—	$	—	$	118,020	Cash and cash equivalents	$	207,698	$	207,698	$	207,698	$	207,698	$	—	$	—	$	207,698
Commercial real estate loans, held-for-investment, net(C)	Commercial real estate loans, held-for-investment, net(C)	7,525,911		7,473,101		7,441,572		—		—		7,452,409		7,452,409		Commercial real estate loans, held-for-investment, net(C)	7,487,076		7,445,958		7,222,191		—		—		7,248,031		7,248,031
Equity method investments	Equity method investments	36,782		36,782		36,782		—		—		36,782		36,782		Equity method investments	35,486		35,486		35,486		—		—		35,486		35,486
		$	7,680,713	$	7,627,903	$	7,596,374	$	118,020	$	—	$	7,489,191	$	7,607,211		$	7,730,260	$	7,689,142	$	7,465,375	$	207,698	$	—	$	7,283,517	$	7,491,215
Liabilities	Liabilities															Liabilities
Secured financing agreements, net	Secured financing agreements, net	$	3,583,894	$	3,569,581	$	3,569,581	$	—	$	—	$	3,569,581	$	3,569,581	Secured financing agreements, net	$	3,824,115	$	3,807,758	$	3,807,758	$	—	$	—	$	3,807,758	$	3,807,758
Collateralized loan obligations, net	Collateralized loan obligations, net	1,942,750		1,931,605		1,931,605		—		—		1,869,554		1,869,554		Collateralized loan obligations, net	1,942,750		1,939,703		1,939,703		—		—		1,868,198		1,868,198
Secured term loan, net	Secured term loan, net	348,250		337,609		337,609		—		346,073		—		346,073		Secured term loan, net	344,750		336,105		336,105		—		328,374		—		328,374
Convertible notes, net		143,750		142,538		142,538		—		142,816		—		142,816
		$	6,018,644	$	5,981,333	$	5,981,333	$	—	$	488,889	$	5,439,135	$	5,928,024		$	6,111,615	$	6,083,566	$	6,083,566	$	—	$	328,374	$	5,675,956	$	6,004,330

(A) The amortized cost of commercial real estate loans is net of $~~5.5~~32.2 million ~~write-off on a mezzanine loan and~~ ~~$47.3 million~~of unamortized origination discounts, cost recovery interest and deferred fees. The amortized cost of secured financing agreements is net of $~~14.3~~16.4 million unamortized debt issuance costs. The amortized cost of collateralized loan obligations is net of $~~11.1~~3.0 million unamortized debt issuance costs.

(B) The carrying value of commercial mortgage loans is net of $~~31.5~~223.8 million allowance for credit losses.

(C) Includes $~~2,299.5~~2,220.0 million of CLO loan participations as of June 30, ~~2022.~~2023. Excludes two fully written off risk-rated 5 mezzanine loans with a combined outstanding principal balance of $30.5 million as of June 30, 2023.

The carrying values and fair values of KREF’s financial assets recorded at fair value on a recurring basis, as well as other financial instruments for which fair value is disclosed, as of December 31, ~~2021,~~2022, were as follows:


								Fair Value															Fair Value
		Principal Balance		Amortized Cost(A)		Carrying Value(B)		Level 1		Level 2		Level 3		Total			Principal Balance		Amortized Cost(A)		Carrying Value(B)		Level 1		Level 2		Level 3		Total
Assets	Assets															Assets
Cash and cash equivalents	Cash and cash equivalents	$	271,487	$	271,487	$	271,487	$	271,487	$	—	$	—	$	271,487	Cash and cash equivalents	$	239,791	$	239,791	$	239,791	$	239,791	$	—	$	—	$	239,791
Commercial real estate loans, held-for-investment, net(C)	Commercial real estate loans, held-for-investment, net(C)	6,364,105		6,316,733		6,294,489		—		—		6,340,837		6,340,837		Commercial real estate loans, held-for-investment, net(C)	7,562,392		7,494,138		7,387,164		—		—		7,393,279		7,393,279
Equity method investments	Equity method investments	35,537		35,537		35,537		—		—		35,537		35,537		Equity method investments	36,849		36,849		36,849		—		—		36,849		36,849
		$	6,671,129	$	6,623,757	$	6,601,513	$	271,487	$	—	$	6,376,374	$	6,647,861		$	7,839,032	$	7,770,778	$	7,663,804	$	239,791	$	—	$	7,430,128	$	7,669,919
Liabilities	Liabilities															Liabilities
Secured financing agreements, net	Secured financing agreements, net	$	3,737,893	$	3,726,593	$	3,726,593	$	—	$	—	$	3,726,593	$	3,726,593	Secured financing agreements, net	$	3,770,701	$	3,748,691	$	3,748,691	$	—	$	—	$	3,748,691	$	3,748,691
Collateralized loan obligations, net	Collateralized loan obligations, net	1,095,250		1,087,976		1,087,976		—		—		1,094,834		1,094,834		Collateralized loan obligations, net	1,942,750		1,935,592		1,935,592		—		—		1,857,042		1,857,042
Secured term loan, net	Secured term loan, net	350,000		338,549		338,549		—		352,625		—		352,625		Secured term loan, net	346,500		336,828		336,828		—		339,137		—		339,137
Convertible notes, net	Convertible notes, net	143,750		141,851		141,851		—		152,203		—		152,203		Convertible notes, net	143,750		143,237		143,237		—		141,617		—		141,617
		$	5,326,893	$	5,294,969	$	5,294,969	$	—	$	504,828	$	4,821,427	$	5,326,255		$	6,203,701	$	6,164,348	$	6,164,348	$	—	$	480,754	$	5,605,733	$	6,086,487

(A) The amortized cost of commercial real estate loans is net of ~~$5.5~~$43.3 million ~~write-off on a mezzanine loan and $41.9 million~~of unamortized origination discounts and deferred ~~fees.~~fees, a $25.0 million write-off on a defaulted senior office loan. The amortized cost of secured financing agreements is net of ~~$11.3~~$22.0 million unamortized debt issuance costs. The amortized cost of collateralized loan obligations is net of ~~$7.3~~$7.2 million unamortized debt issuance costs.

(B) The carrying value of commercial mortgage loans is net of ~~$22.2~~$107.0 million allowance for credit losses.

(C) Includes ~~$1,246.0~~$2,149.0 million of CLO loan participations as of December 31, ~~2021.~~2022. Excludes one fully written off risk-rated 5 mezzanine loan with an outstanding principal balance of $5.5 million as of December 31, 2022.

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KKR Real Estate Finance Trust Inc.

Notes to Condensed Consolidated Financial Statements

(~~dollars~~amount in tables in thousands, except per share amounts)

The following table contains the Level 3 inputs used to value assets and liabilities on a recurring and nonrecurring basis or where KREF discloses fair value as of June 30, ~~2022:~~2023:


		Fair Value		Valuation Methodologies	Unobservable Inputs(A)	Weighted Average(B)	Range		Fair Value		Valuation Methodologies	Unobservable Inputs(A)	Weighted Average(B)	Range
Assets and Liabilities(C)	Assets and Liabilities(C)							Assets and Liabilities(C)
Commercial real estate loans, held-for-investment(D)	Commercial real estate loans, held-for-investment(D)	$	7,452,409	Discounted cash flow	Discount rate	4.1%	2.6% - 16.6%	Commercial real estate loans, held-for-investment(D)	$	7,248,031	Discounted cash flow	Discount margin	4.3%	3.2% - 15.7%
		$	7,452,409									Discount rate	9.6%	9.0% - 10.1%
												Capitalization rate	7.7%	6.5% - 8.7%
									$	7,248,031

(A) An increase (decrease) in the valuation input results in a decrease (increase) in value.

(B) Represents the average of the input value, weighted by the unpaid principal balance of the financial instrument.

(C) KREF carries a ~~$36.8~~$35.5 million investment in an aggregator vehicle alongside RECOP I (Note ~~10)~~9) at its pro rata share of the aggregator's net asset value, which management believes approximates fair value.

(D) Commercial real estate loans are generally valued using a discounted cash flow model using a discount rate derived from relevant market indices and/or estimates of the underlying property's value.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Certain assets not measured at fair value on an ongoing basis but subject to fair value adjustments only in certain circumstances, such as when there is evidence of impairment, are measured at fair value on a nonrecurring basis. KREF measures commercial real estate loans held-for-sale at the lower of cost or fair value and may be required, from time to time, to record a nonrecurring fair value adjustment. KREF measures commercial real estate loans held-for-investment at amortized cost, but may be required, from time to time, to record a nonrecurring fair value adjustment in the form of a valuation provision or impairment.

KREF did not report any significant financial assets or liabilities at fair value on a nonrecurring basis as of June 30, ~~2022~~2023 and ~~December 31, 2021.~~2022.

Assets and Liabilities for Which Fair Value is Only Disclosed

KREF does not carry its secured financing agreements at fair value as management did not elect the fair value option for these liabilities. As of June 30, ~~2022,~~2023, the fair value of KREF's financing facilities approximated their respective carrying value.

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KKR Real Estate Finance Trust Inc.

Notes to Condensed Consolidated Financial Statements

(~~dollars~~amount in tables in thousands, except per share amounts)

Note ~~17.~~16. Income Taxes

KREF has elected to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code commencing with its taxable year ended December 31, 2014. A REIT is generally not subject to U.S. federal and state income tax on that portion of its income that is distributed to stockholders if it distributes at least 90% of its REIT taxable income, determined without regard to the deduction for dividends paid and excluding any net capital gains. A REIT will also be subject to a nondeductible excise tax to the extent certain percentages of its taxable income are not distributed within specified dates. While KREF expects to distribute at least 90% of its net taxable income for the foreseeable future, KREF will continue to evaluate its capital and liquidity needs in light of ~~the significant uncertainties created by the COVID-19 pandemic, including the potential for a continued and prolonged adverse impact on~~existing economic and market conditions.

KREF consolidates subsidiaries that incur U.S. federal, state and local income taxes, based on the tax jurisdiction in which each subsidiary operates. During the six months ended June 30, 2023 and 2022, KREF recorded no ~~income tax provision. During the six months ended June 30, 2021, KREF recorded a current~~an income tax provision of ~~$0.2~~$0.3 million and $0.0 million, respectively, related to the operations of its taxable REIT subsidiaries and various other state and local taxes. There were no material deferred tax assets or liabilities as of June 30, ~~2022~~2023 and December 31, ~~2021.~~2022.

As of June 30, ~~2022,~~2023, tax years ~~2017~~2019 through ~~2021~~2023 remain subject to examination by taxing authorities.

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KKR Real Estate Finance Trust Inc.

Notes to Condensed Consolidated Financial Statements

(~~dollars~~amount in tables in thousands, except per share amounts)

Note ~~18.~~17. Subsequent Events

The following events occurred subsequent to June 30, ~~2022:~~2023:

Corporate Activities

~~Stock Repurchase~~Dividends

In July ~~2022, KREF repurchased 401,844 shares of its common stock at an average price per share of $17.44 for a total of $7.0 million.~~

~~Dividends~~

~~In July 2022,~~2023, KREF paid ~~$30.0~~$29.7 million in dividends on its common stock, or ~~$0.43~~$0.43 per share, with respect to the second quarter of ~~2022,~~2023, to stockholders of record on June 30, ~~2022.~~

2023.

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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~~top 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 1514 to our condensed consolidated financial statements included in this Form 10-Q.

Macroeconomic Environment

The year ended December 31, 2022 and period ended June 30, 2023 were impacted by significant volatility in global markets, largely driven by rising inflation, rising interest rates, slowing economic growth, geopolitical uncertainty and instability in the banking sector following multiple bank failures. Central banks have responded to rapidly rising inflation with monetary policy tightening actions that are likely to create headwinds to economic growth. The Federal Reserve has raised interest rates ten times since January 2022, and has signaled that further interest rate increases may be forthcoming throughout the year. Although our business model is such that rising interest rates will generally correlate to increases in our net income, increases in interest rates may adversely affect our existing borrowers. Higher interest rates imposed by the Federal Reserve to address inflation may adversely impact real estate asset values and increase our interest expense, which expense may not be fully offset by any resulting increase in interest income, and may lead to decreased prepayments from our borrowers and an increase in the number of our borrowers who exercise extension options.

With respect to the COVID-19 pandemic, while the global economy has re-opened, the longer-term macro-economic effects of the pandemic continue to impact many industries, including those of certain of our borrowers. In particular, the increase in

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remote working arrangements in response to the pandemic has contributed to a decline in commercial real estate values and reduced demand for commercial real estate compared to pre-pandemic levels, which may adversely impact certain of our borrowers and has persisted even as the pandemic continues to subside.

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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,					Three Months Ended,
		June 30, 2022		March 31, 2022			June 30, 2023		March 31, 2023
Net income attributable to common stockholders		$	19,394	$	29,796
Net income (loss) attributable to common stockholders						Net income (loss) attributable to common stockholders	$	(25,772)	$	(30,810)
Weighted-average number of shares of common stock outstanding	Weighted-average number of shares of common stock outstanding					Weighted-average number of shares of common stock outstanding
Basic	Basic	68,549,049		63,086,452		Basic	69,115,654		69,095,011
Diluted	Diluted	68,549,049		69,402,626		Diluted	69,115,654		69,095,011
Net income per share, basic		$	0.28	$	0.47
Net income per share, diluted		$	0.28	$	0.46
Net income (loss) per share, basic						Net income (loss) per share, basic	$	(0.37)	$	(0.45)
Net income (loss) per share, diluted						Net income (loss) per share, diluted	$	(0.37)	$	(0.45)
Dividends declared per share	Dividends declared per share	$	0.43	$	0.43	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 generally 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~~if, in our determination, it is nearly certain that all amounts due under ~~any~~a loan ~~when such amount is determined to~~will not be ~~non-collectible.~~collected.

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, when the effect is dilutive. Consistent with the treatment of other unrealized adjustments to Distributable

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Earnings, these potentially 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,
June 30, 2022 March 31, 2022
Diluted weighted average common shares outstanding, GAAP 68,549,049 69,402,626
Less: Dilutive shares under assumed conversion of the Convertible Notes (ASU 2020-06) — (6,316,174)
Less: Anti-dilutive restricted stock units — —
Diluted weighted average common shares outstanding, Distributable Earnings 68,549,049 63,086,452

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.

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(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) the 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,
June 30, 2022 March 31, 2022
Net Income (Loss) Attributable to Common Stockholders $ 19,394 $ 29,796
Adjustments
Non-cash equity compensation expense 2,040 2,126
Unrealized (gains) or losses(A)
(190) (1,032)
Provision for (reversal of) credit losses, net 11,798 (1,218)
Non-cash convertible notes discount amortization 90 89
Distributable Earnings $ 33,132 $ 29,761
Weighted average number of shares of common stock outstanding
Basic 68,549,049 63,086,452
Adjusted Diluted Shares Outstanding(B)
68,549,049 63,086,452
Distributable Earnings per Diluted Weighted Average Share(C)
$ 0.48 $ 0.47

~~(A) Includes ($0.2) million and ($1.0) million of unrealized mark-to-market adjustment to our RECOP I's underlying CMBS investments for the three months ended June 30, 2022 and March 31, 2022, respectively.~~

~~(B) 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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	Three Months Ended,
	June 30, 2023		March 31, 2023
Net Income (Loss) Attributable to Common Stockholders	$	(25,772)	$	(30,810)
Adjustments
Non-cash equity compensation expense	2,174		2,152
Unrealized (gains) or losses, net	292		1,173
Provision for (reversal of) credit losses, net	56,335		60,467
Non-cash convertible notes discount amortization	44		89


Distributable Earnings	$	33,073	$	33,071
Weighted average number of shares of common stock outstanding
Basic	69,115,654		69,095,011
Diluted	69,115,654		69,095,011
Distributable Earnings per Diluted Weighted Average Share	$	0.48	$	0.48

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):


		June 30, 2022		December 31, 2021			June 30, 2023		December 31, 2022
KKR Real Estate Finance Trust Inc. stockholders' equity	KKR Real Estate Finance Trust Inc. stockholders' equity	$	1,676,325	$	1,361,434	KKR Real Estate Finance Trust Inc. stockholders' equity	$	1,459,855	$	1,571,538
Series A preferred stock (liquidation preference of $25.00 per share)	Series A preferred stock (liquidation preference of $25.00 per share)	(327,750)		(172,500)		Series A preferred stock (liquidation preference of $25.00 per share)	(327,750)		(327,750)
Common stockholders' equity	Common stockholders' equity	$	1,348,575	$	1,188,934	Common stockholders' equity	$	1,132,105	$	1,243,788
Shares of common stock issued and outstanding at period end	Shares of common stock issued and outstanding at period end	69,654,532		61,370,732		Shares of common stock issued and outstanding at period end	69,106,061		69,095,011
Book value per share of common stock		$	19.36	$	19.37
Add: Deferred stock units						Add: Deferred stock units	16,575		—
Total shares outstanding at period end						Total shares outstanding at period end	69,122,636		69,095,011
Book value per share						Book value per share	$	16.38	$	18.00

Book value as of June 30, ~~2022~~2023 included the impact of an estimated CECL credit loss allowance of ~~$34.3~~$227.9 million,, or ($~~0.49)~~3.30) 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 ~~$7,887.8~~$7,872.1 million portfolio of diversified investments, consisting primarily of ~~performing~~ senior and mezzanine commercial real estate loans as of June 30, ~~2022.~~2023.

~~Our loan portfolio~~ ~~is 100.0% performing as of~~ ~~June 30, 2022.~~ During the six months ended June 30, ~~2022,~~2023, we ~~collected 100.0%~~collected 99.4% of interest payments due on our loan portfolio. As of June 30, ~~2022,~~2023, the average risk rating of our loan portfolio was ~~3.0~~3.2 ~~(Average Risk)~~, weighted by total loan exposure. As of June 30, ~~2022,~~ ~~96.0%~~ ~~of our loans, based on total loan exposure, was risk-rated 3 or better. As of June 30, 2022,~~2023, the average loan commitment in our portfolio was $~~121.3~~126.3 million and multifamily and ~~office~~industrial loans comprised ~~73%~~56% of our loan ~~portfolio, while hospitality loans comprised~~ 5% ~~of the~~ portfolio.

In addition, ~~to our loan portfolio, as of June 30, 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 ~~$79.2~~$81.4 million, comprised of the fair value of the acquired retail property and ~~the~~ capitalized transaction and redevelopment costs, as of June 30, ~~2022.~~2023. This property is held for investment and reflected on our ~~condensed consolidated balance sheets.~~Condensed Consolidated Balance Sheet.

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 June 30, ~~2022,~~2023, ~~100.0%~~99% of our accruing 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 June 30, ~~2022,~~2023, 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 June 30, ~~2022:~~2023:

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

(A) Excludes: (i) one REO retail asset ~~on a defaulted loan~~ with net carrying value of ~~$79.2~~$81.4 million as of June 30, ~~2022,~~2023, (ii) CMBS B-Piece investments held through RECOP I, an equity method investment and (iii) ~~one impaired~~two fully written off risk-rated 5 mezzanine ~~loan~~loans with ana combined outstanding principal balance of ~~$5.5 million~~ ~~that was fully written off.~~$30.5 million.

(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~~science-related space.

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~~(D) Excludes one real estate corporate loan to a multifamily operator with an outstanding principal amount of~~ ~~$42.0 million, representing~~ ~~0.5%~~ ~~of our commercial real estate loans as of June 30, 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.(D) Other property type includes Condo (Residential) (2%), Student Housing (1%), Single Family Rental (1%) and Self-Storage (1%).

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

Three Months Ended
June 30, 2022 March 31, 2022 December 31, 2021 September 30, 2021
Loan originations $ 1,034,191 $ 843,624 $ 1,804,897 $ 1,536,993
Loan fundings(A)
$ 1,077,132 $ 744,192 $ 1,680,890 $ 1,142,969
Loan repayments/syndications (444,313) (282,282) (679,749) (934,899)
Net fundings 632,819 461,910 1,001,141 208,070
PIK interest 479 464 418 373
Write-off — — (32,905) —
Transfer to REO — — (77,516) —
Total activity $ 633,298 $ 462,374 $ 891,138 $ 208,443

~~(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 June 30, 2022 (dollars in thousands):~~

Total Loan Exposure(A)
Balance Sheet Portfolio Total Loan Portfolio Floating Rate Loans Fixed Rate Loans
Number of loans 77 76 76 —
Principal balance $ 7,525,911 $ 7,772,911 $ 7,772,911 $ —
Amortized cost $ 7,473,101 $ 7,725,600 $ 7,725,600 $ —
Unfunded loan commitments(B)
$ 1,412,237 $ 1,412,237 $ 1,412,237 $ —
Weighted-average cash coupon(C)
5.1 % + 3.3 % + 3.3 % n.a.
Weighted-average all-in yield(C)
5.5 % + 3.6 % + 3.6 % n.a.
Weighted-average maximum maturity (years)(D)
3.6 3.6 3.6 n.a.
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 June 30, 2022, 73.7% and 26.3% 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 June 30, 2022, based on total loan exposure,~~ ~~69.8%~~ ~~of our loans were subject to yield maintenance or other prepayment restrictions and~~ ~~30.2%~~ ~~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~~risk-rated 5 loans.

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


	Three Months Ended
	June 30, 2023		March 31, 2023		December 31, 2022		September 30, 2022
Loan originations	$	—	$	—	$	370,400	$	457,685
Loan fundings(A)	$	177,162	$	203,612	$	423,330	$	224,724
Loan repayments	(339,288)		(86,928)		(209,152)		(387,264)
Net fundings	(162,126)		116,684		214,178		(162,540)
PIK interest	—		—		457		470
Write-off (B)	—		—		(25,000)		—

Total activity	$	(162,126)	$	116,684	$	189,635	$	(162,070)

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

(B) Includes a ~~multifamily operator with an outstanding principal~~$25.0 million write-off on a portion of a $161.0 million~~$42.0 million~~defaulted senior office loan that was deemed uncollectible during the three months ended December 31, 2022.

The following table details overall statistics for our loan portfolio(A) as of June 30, ~~2022.~~2023 (dollars in thousands):


				Total Loan Exposure(B)
	Balance Sheet Portfolio			Total Loan Portfolio			Floating Rate Loans			Fixed Rate Loans(C)
Number of loans	71			71			71			—
Principal balance	$	7,487,076		$	7,755,035		$	7,680,635		$	74,400
Amortized cost	$	7,445,958		$	7,713,916		$	7,643,804		$	70,112
Unfunded loan commitments(D)	$	1,194,838		$	1,194,838		$	1,184,838		$	10,000
Weighted average cash coupon(E)	8.5		%	+3.4		%	+3.4		%	n/a
Weighted average all-in yield(E)	8.8		%	+3.7		%	+3.7		%	n/a
Weighted average maximum maturity (years)(F)	3.0			3.0			3.0			2.0
LTV(G)	65		%	65		%	66		%	n/a

(A) Excludes two fully written off risk-rated 5 mezzanine loans with a combined outstanding principal balance of $30.5 million.

(B) 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.

(C) Represents mezzanine notes with commitments of $79.4 million and $5.0 million, respectively, accompanying two senior office loans. $74.4 million was funded as of June 30, 2023 and was placed on nonaccrual status. Refer to Note 3 to our condensed consolidated financial statements for additional information.

(D) 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.

(E) In addition to cash coupon, all-in yield includes the amortization of deferred origination fees, loan origination costs and purchase discounts. The calculations of weighted average cash coupon and all-in yield excludes loans accounted for under the cost recovery method.

(F) Maximum maturity assumes all extension options are exercised by the borrower; however, our loans may be repaid prior to such date. As of June 30, 2023, based on total loan exposure, 31.8% of our loans were subject to yield maintenance or other prepayment restrictions and 68.2% were open to repayment by the borrower without penalty.

(G) 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 risk-rated 5 loans.

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The table below sets forth additional information relating to our portfolio as of June 30, ~~2022~~2023 (dollars in millions):


		Investment(A)	Location	Property Type	Investment Date	Total Whole Loan(B)		Committed Principal Amount(B)		Current Principal Amount		Net Equity(C)		Coupon(D)(E)		Max Remaining Term (Years)(D)(F)	Loan Per SF / Unit / Key(G)	LTV(D)(H)		Risk Rating		Investment(A)	Location	Property Type	Investment Date	Total Whole Loan(B)		Committed Principal Amount(B)		Current Principal Amount		Net Equity(C)		Coupon(D)(E)		Max Remaining Term (Years)(D)(F)	Loan Per SF / Unit / Key(G)	LTV(D)(H)		Risk Rating
		Senior Loans(J)																				Senior Loans(I)
1	1	Senior Loan	Arlington, VA	Multifamily	9/30/2021	$	381.0	$	381.0	$	353.9	$	71.2	+	3.2%	4.3	$ 318,784 / unit	69	%	3	1	Senior Loan	Arlington, VA	Multifamily	9/30/2021	$	381.0	$	381.0	$	367.6	$	73.1	+	3.3%	3.3	$331,144 / unit	69	%	3
2	2	Senior Loan	Bellevue, WA	Office	9/13/2021	520.8		260.4		75.4		19.7		+	3.6	4.8	$ 855 / SF	63		3	2	Senior Loan	Boston, MA	Life Science	8/3/2022	312.5		312.5		141.4		18.8		+	4.2	4.1	$747 / SF	56		3
3	3	Senior Loan	Los Angeles, CA	Multifamily	2/19/2021	260.0		260.0		250.0		38.1		+	3.6	3.7	$ 466,400 / unit	68		3	3	Senior Loan	Bellevue, WA	Office	9/13/2021	520.8		260.4		148.6		35.9		+	3.7	3.8	$855 / SF	63		3
4	4	Senior Loan	Various	Industrial	4/28/2022	504.5		252.3		252.3		48.7		+	2.7	4.9	$ 98 / SF	64		3	4	Senior Loan	Los Angeles, CA	Multifamily	2/19/2021	260.0		260.0		250.0		38.7		+	3.7	2.7	$466,400 / unit	68		3
5	5	Senior Loan	Mountain View, CA	Office	7/14/2021	362.8		250.0		189.3		47.5		+	3.3	4.1	$ 616 / SF	73		3	5	Senior Loan	Various	Industrial	4/28/2022	504.5		252.3		252.3		49.9		+	2.7	3.9	$98 / SF	64		3
6	6	Senior Loan	New York, NY	Condo (Residential)	12/20/2018	234.5		234.5		218.1		62.6		+	3.6	1.5	$ 1,362 / SF	69		3	6	Senior Loan	Mountain View, CA	Office	7/14/2021	362.8		250.0		200.2		65.2		+	3.4	3.1	$651 / SF	n.a.		5
7	7	Senior Loan	Bronx, NY	Industrial	8/27/2021	381.2		228.7		124.8		26.9		+	4.1	4.2	$ 277 / SF	52		3	7	Senior Loan	Bronx, NY	Industrial	8/27/2021	381.2		228.7		181.3		38.8		+	4.2	3.2	$277 / SF	52		3
8	8	Senior Loan	Various	Multifamily	5/31/2019	216.5		216.5		216.3		39.0		+	4.0	1.9	$ 202,104 / unit	74		3	8	Senior Loan	Various	Multifamily	5/31/2019	206.5		206.5		206.5		39.2		+	4.0	1.9	$192,991 / unit	74		3
9	9	Senior Loan(K)	Various	Industrial	6/30/2021	425.0		212.5		30.2		28.5		+	5.5	4.0	$ 163 / SF	67		3	9	Senior Loan	Minneapolis, MN	Office	11/13/2017	199.4		199.4		194.4		89.0		+	2.3	2.0	$182 / SF	n.a.		5
10	10	Senior Loan	Minneapolis, MN	Office	11/13/2017	194.4		194.4		194.4		33.1		+	3.8	0.4	$ 179 / SF	77		2	10	Senior Loan	Various	Industrial	6/15/2022	375.5		187.8		167.2		33.1		+	2.9	4.0	$120 / SF	50		3
11	11	Senior Loan	Various	Industrial	6/15/2022	375.5		187.8		132.6		25.3		+	2.9	5.0	$ 95 / SF	50		3	11	Senior Loan	Washington, D.C.	Office	11/9/2021	187.7		187.7		174.6		51.7		+	3.4	3.4	$489 / SF	55		4
12	12	Senior Loan	Washington, D.C.	Office	11/9/2021	187.7		187.7		145.1		38.5		+	3.3	4.4	$ 417 / SF	55		3	12	Senior Loan	Boston, MA	Office	2/4/2021	375.0		187.5		187.5		37.5		+	3.4	2.6	$506 / SF	71		4
13	13	Senior Loan	Boston, MA	Office	2/4/2021	375.0		187.5		187.5		37.4		+	3.3	3.6	$ 506 / SF	71		3	13	Senior Loan	Various	Self Storage	12/21/2022	371.6		185.8		66.0		21.2		+	3.8	4.5	$19,792 / unit	65		3
14	14	Senior Loan	The Woodlands, TX	Hospitality	9/15/2021	183.3		183.3		169.3		31.0		+	4.2	4.3	$ 186,198 / key	64		3	14	Senior Loan	The Woodlands, TX	Hospitality	9/15/2021	183.3		183.3		178.7		32.7		+	4.3	3.3	$196,635 / key	64		3
15	15	Senior Loan	Philadelphia, PA	Office	4/11/2019	182.6		182.6		157.0		25.0		+	2.6	1.9	$ 220 / SF	68		4	15	Senior Loan	Philadelphia, PA	Office	4/11/2019	176.7		176.7		154.7		100.0		+	2.6	0.1	$216 / SF	n.a.		5
16	16	Senior Loan	Washington, D.C.	Office	12/20/2019	175.5		175.5		134.6		36.8		+	3.4	2.5	$ 659 / SF	58		3	16	Senior Loan	Washington, D.C.	Office	12/20/2019	175.5		175.5		161.9		71.7		+	3.5	1.5	$792 / SF	58		4
17	17	Senior Loan	West Palm Beach, FL	Multifamily	12/29/2021	171.5		171.5		169.6		25.3		+	2.7	4.5	$ 208,857 / unit	73		3	17	Senior Loan	West Palm Beach, FL	Multifamily	12/29/2021	171.5		171.5		170.7		25.7		+	2.8	3.5	$210,275 / unit	73		3
18	18	Senior Loan	Chicago, IL	Office	7/15/2019	170.0		170.0		137.6		40.5		+	3.3	2.1	$ 132 / SF	57		3	18	Senior Loan	New York, NY	Condo (Residential)	12/20/2018	169.4		169.4		166.2		60.5		+	3.7	0.5	$2,480,099 / unit	69		3
19	19	Senior Loan	Boston, MA	Life Science	4/27/2021	332.3		166.2		130.7		22.5		+	3.6	3.9	$ 543 / SF	66		3	19	Senior Loan	Boston, MA	Life Science	4/27/2021	332.3		166.2		153.0		30.6		+	3.7	2.9	$635 / SF	66		3
20	20	Senior Loan	New York, NY	Multifamily	12/5/2018	163.0		163.0		148.5		22.9		+	4.0	1.4	$ 558,300 / unit	77		3	20	Senior Loan	Oakland, CA	Office	10/23/2020	509.9		159.7		139.9		22.0		+	4.4	2.4	$430 / SF	55		3
21	21	Senior Loan	Philadelphia, PA	Office	6/19/2018	161.0		161.0		161.0		161.4		+	3.5	1.0	$ 165 / SF	71		4	21	Senior Loan	Plano, TX	Office	2/6/2020	150.7		150.7		150.7		23.1		+	2.8	1.6	$208 / SF	63		3
22	22	Senior Loan	Oakland, CA	Office	10/23/2020	509.9		159.7		121.5		19.1		+	4.3	3.4	$ 373 / SF	65		3	22	Senior Loan	Chicago, IL	Office	7/15/2019	150.0		150.0		118.4		21.4		+	3.3	1.1	$114 / SF	57		4
23	23	Senior Loan	Plano, TX	Office	2/6/2020	153.7		153.7		135.7		21.4		+	2.7	2.6	$ 188 / SF	63		2	23	Senior Loan	Redwood City, CA	Life Science	9/30/2022	580.7		145.2		—		(1.2)		+	4.5	4.3	$885 / SF	53		3
24	24	Senior Loan	Seattle, WA	Life Science	10/1/2021	188.0		140.3		96.2		25.3		+	3.1	4.3	$ 614 / SF	69		3	24	Senior Loan	Seattle, WA	Life Science	10/1/2021	188.0		140.3		115.2		33.8		+	3.2	3.3	$735 / SF	69		3
25	25	Senior Loan	Dallas, TX	Office	12/10/2021	138.0		138.0		135.8		25.1		+	3.6	4.4	$ 432 / SF	68		3	25	Senior Loan	Dallas, TX	Office	12/10/2021	138.0		138.0		138.0		25.6		+	3.7	3.4	$439 / SF	68		3
26	26	Senior Loan	Boston, MA	Multifamily	3/29/2019	137.0		137.0		137.0		30.7		+	2.7	1.8	$ 351,282 / unit	59		3	26	Senior Loan	Boston, MA	Multifamily	3/29/2019	137.0		137.0		137.0		28.1		+	3.4	0.8	$351,282 / unit	59		3
27	27	Senior Loan	Arlington, VA	Multifamily	1/20/2022	135.3		135.3		130.9		31.6		+	2.9	4.6	$ 436,300 / unit	65		3	27	Senior Loan	Arlington, VA	Multifamily	1/20/2022	135.3		135.3		131.9		30.5		+	2.9	3.6	$439,817 / unit	78		3
28	28	Senior Loan	Fort Lauderdale, FL	Hospitality	11/9/2018	130.0		130.0		130.0		24.2		+	3.4	1.4	$ 375,723 / key	66		3	28	Senior Loan	Fontana, CA	Industrial	5/11/2021	132.0		132.0		101.8		35.1		+	4.7	2.9	$113 / SF	64		3
29	29	Senior Loan	San Carlos, CA	Life Science	2/1/2022	195.9		125.0		82.0		21.1		+	3.6	4.6	$ 560 / SF	68		3	29	Senior Loan	Fort Lauderdale, FL	Hospitality	11/9/2018	130.0		130.0		130.0		24.2		+	3.5	0.4	$375,723 / key	66		3
30	30	Senior Loan	Fontana, CA	Industrial	5/11/2021	119.9		119.9		57.0		28.0		+	4.6	3.9	$ 102 / SF	64		3	30	Senior Loan	San Carlos, CA	Life Science	2/1/2022	195.9		125.0		93.8		27.4		+	3.6	3.6	$640 / SF	68		3
31	31	Senior Loan	Irving, TX	Multifamily	4/22/2021	117.6		117.6		112.0		19.1		+	3.3	3.9	$ 123,317 / unit	70		3	31	Senior Loan(J)	Various	Industrial	6/30/2021	242.0		121.0		86.5		29.0		+	5.5	3.0	$75 / SF	62		3
32	32	Senior Loan	Cambridge, MA	Life Science	12/22/2021	401.3		115.7		57.1		14.8		+	3.9	4.5	$ 1,072 / SF	51		3	32	Senior Loan(K)	Philadelphia, PA	Office	6/19/2018	116.5		116.5		111.9		18.8		+	3.3	3.6	$114 / SF	53		3
33	33	Senior Loan	Pittsburgh, PA	Student Housing	6/8/2021	112.5		112.5		112.5		17.0		+	2.9	3.9	$ 155,602 / unit	74		3	33	Senior Loan	Cambridge, MA	Life Science	12/22/2021	401.3		115.7		76.7		19.9		+	4.0	3.5	$1,072 / SF	51		3
34	34	Senior Loan	Las Vegas, NV	Multifamily	12/28/2021	106.3		106.3		102.0		19.8		+	2.7	4.5	$ 193,182 / unit	61		3	34	Senior Loan	Pittsburgh, PA	Student Housing	6/8/2021	112.5		112.5		112.5		17.2		+	3.0	2.9	$155,602 / unit	74		3
35	35	Senior Loan	Doral, FL	Multifamily	12/10/2021	212.0		106.0		106.0		20.9		+	2.8	4.4	$ 335,975 / unit	77		3	35	Senior Loan	Miami, FL	Multifamily	10/28/2022	110.4		110.4		94.0		22.6		+	3.8	4.4	$333,333 / unit	51		3
36	36	Senior Loan	San Diego, CA	Multifamily	10/20/2021	103.5		103.5		103.5		18.4		+	2.8	4.4	$ 448,052 / unit	71		3	36	Senior Loan	West Hollywood, CA	Multifamily	1/26/2022	107.0		107.0		102.0		15.5		+	3.1	3.6	$2,756,757 / unit	65		4
37	37	Senior Loan	Orlando, FL	Multifamily	12/14/2021	102.4		102.4		88.9		21.4		+	3.0	4.5	$ 234,565 / unit	74		3	37	Senior Loan	Las Vegas, NV	Multifamily	12/28/2021	106.3		106.3		102.0		20.0		+	2.8	3.5	$193,182 / unit	61		3

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Table of Contents


		Investment(A)	Location	Property Type	Investment Date	Total Whole Loan(B)	Committed Principal Amount(B)	Current Principal Amount	Net Equity(C)	Coupon(D)(E)		Max Remaining Term (Years)(D)(F)		Loan Per SF / Unit / Key(G)		LTV(D)(H)		Risk Rating			Investment(A)		Location			Property Type			Investment Date			Total Whole Loan(B)			Committed Principal Amount(B)			Current Principal Amount		Net Equity(C)		Coupon(D)(E)				Max Remaining Term (Years)(D)(F)		Loan Per SF / Unit / Key(G)	LTV(D)(H)	Risk Rating
38	38	Senior Loan	West Hollywood, CA	Multifamily	1/26/2022	102.0	102.0	102.0	15.2	+	3.0	4.6		$ 2,756,757 / unit		65		3		38	Senior Loan		San Diego, CA			Multifamily			10/20/2021			103.5			103.5			103.5		18.7		+	2.9			3.4		$448,052 / unit	71	3
39	39	Senior Loan	Boston, MA	Industrial	6/28/2022	285.5	100.0	98.2	97.4	+	3.0	5.0		$ 196 / SF		52		3		39	Senior Loan		Orlando, FL			Multifamily			12/14/2021			102.4			102.4			91.7		24.5		+	3.1			3.5		$242,027 / unit	74	3
40	40	Senior Loan	Washington, D.C.	Office	1/13/2022	228.5	100.0	57.7	9.2	+	3.2	5.6		$ 211 / SF		55		3		40	Senior Loan		Boston, MA			Industrial			6/28/2022			285.5			100.0			99.3		20.3		+	3.0			4.0		$198 / SF	52	3
41	41	Senior Loan	Phoenix, AZ	Industrial	1/13/2022	195.3	100.0	14.2	2.9	+	4.0	4.6		$ 57 / SF		57		3		41	Senior Loan		Washington, D.C.			Office			1/13/2022			228.5			100.0			60.4		9.5		+	3.3			4.6		$221 / SF	55	3
42	42	Senior Loan	Brisbane, CA	Life Science	7/22/2021	95.0	95.0	88.4	19.9	+	3.0	4.1		$ 763 / SF		71		3		42	Senior Loan		Phoenix, AZ			Industrial			1/13/2022			195.3			100.0			50.4		13.9		+	4.0			3.6		$57 / SF	57	3
43	43	Senior Loan	State College, PA	Student Housing	10/15/2019	93.4	93.4	89.1	23.1	+	2.7	2.4		$ 74,659 / unit		64		3		43	Senior Loan		Cary, NC			Multifamily			11/21/2022			100.0			100.0			94.6		18.0		+	3.4			4.4		$242,484 / unit	63	3
44	44	Senior Loan	Brandon, FL	Multifamily	1/13/2022	90.3	90.3	63.4	9.9	+	3.1	4.6		$ 192,590 / unit		75		3		44	Senior Loan		Brisbane, CA			Life Science			7/22/2021			95.0			95.0			90.8		17.8		+	3.1			3.1		$784 / SF	71	3
45	45	Senior Loan	Dallas, TX	Multifamily	12/23/2021	90.0	90.0	77.5	14.9	+	2.8	4.5		$ 238,488 / unit		67		3		45	Senior Loan		Brandon, FL			Multifamily			1/13/2022			90.3			90.3			66.2		9.7		+	3.1			3.6		$196,506 / unit	75	3
46	46	Senior Loan	Miami, FL	Multifamily	10/14/2021	89.5	89.5	89.5	17.1	+	2.8	4.4		$ 304,422 / unit		76		3		46	Senior Loan		Dallas, TX			Multifamily			12/23/2021			90.0			90.0			78.4		15.4		+	2.9			3.5		$241,221 / unit	67	3
47	47	Senior Loan	Denver, CO	Multifamily	6/24/2021	88.5	88.5	88.5	15.4	+	3.0	4.0		$ 295,000 / unit		77		3		47	Senior Loan		Miami, FL			Multifamily			10/14/2021			89.5			89.5			89.5		17.3		+	2.9			3.4		$304,422 / unit	76	3
48	48	Senior Loan	Dallas, TX	Office	1/22/2021	87.0	87.0	87.0	21.2	+	3.3	3.6		$ 288 / SF		65		3		48	Senior Loan		Dallas, TX			Office			1/22/2021			87.0			87.0			87.0		19.5		+	3.4			2.6		$294 / SF	63	3
49	49	Senior Loan	Charlotte, NC	Multifamily	12/14/2021	86.8	86.8	76.0	10.9	+	3.0	4.5		$ 206,522 / unit		74		3		49	Senior Loan		Charlotte, NC			Multifamily			12/14/2021			86.8			86.8			81.1		16.3		+	3.1			3.5		$220,377 / unit	74	3
50	50	Senior Loan	San Antonio, TX	Multifamily	6/1/2022	246.5	86.3	80.3	79.9	+	2.8	4.9		$ 88,134 / unit		68		3		50	Senior Loan		San Antonio, TX			Multifamily			6/1/2022			246.5			86.3			80.3		19.8		+	2.8			3.9		$103,007 / unit	68	3
51	51	Senior Loan	New York, NY	Multifamily	3/29/2018	86.0	86.0	86.0	13.3	+	4.0	0.8		$ 462,366 / unit		63		2		51	Senior Loan		Scottsdale, AZ			Multifamily			5/9/2022			169.0			84.5			84.5		12.9		+	2.9			3.9		$457,995 / unit	64	3
52	52	Senior Loan	Scottsdale, AZ	Multifamily	5/9/2022	169.0	84.5	84.5	12.7	+	2.9	4.9		$ 457,995 / unit		64		3		52	Senior Loan		Raleigh, NC			Multifamily			4/27/2022			82.9			82.9			78.5		15.6		+	3.0			3.9		$245,294 / unit	68	3
53	53	Senior Loan	Raleigh, NC	Multifamily	4/27/2022	82.9	82.9	76.5	14.7	+	3.0	4.9		$ 239,063 / unit		68		3		53	Senior Loan		Hollywood, FL			Multifamily			12/20/2021			81.0			81.0			81.0		15.0		+	3.1			3.5		$327,935 / unit	74	3
54	54	Senior Loan	Hollywood, FL	Multifamily	12/20/2021	81.0	81.0	81.0	14.7	+	3.0	4.5		$ 327,935 / unit		74		3		54	Senior Loan		Phoenix, AZ			Single Family Rental			4/22/2021			72.1			72.1			58.0		14.3		+	4.9			2.9		$157,092 / unit	50	3
55	55	Senior Loan	Seattle, WA	Office	3/20/2018	80.7	80.7	80.7	46.9	+	4.1	0.8		$ 468 / SF		56		3		55	Senior Loan		Denver, CO			Multifamily			9/14/2021			70.3			70.3			70.2		12.2		+	2.8			3.3		$290,216 / unit	78	3
56	56	Senior Loan	Phoenix, AZ	Single Family Rental	4/22/2021	72.1	72.1	27.2	9.8	+	4.8	3.9		$ 157,092 / unit		50		3		56	Senior Loan		Washington, D.C.			Multifamily			12/4/2020			69.0			69.0			66.8		10.6		+	3.6			2.4		$267,000 / unit	63	3
57	57	Senior Loan	Arlington, VA	Multifamily	10/23/2020	141.8	70.9	70.9	11.6	+	3.8	3.3		$ 393,858 / unit		73		3		57	Senior Loan		Dallas, TX			Multifamily			8/18/2021			68.2			68.2			68.2		10.1		+	3.9			3.2		$189,444 / unit	70	3
58	58	Senior Loan	Denver, CO	Multifamily	9/14/2021	70.3	70.3	69.3	11.0	+	2.7	4.3		$ 286,157 / unit		78		3		58	Senior Loan		Manassas Park, VA			Multifamily			2/25/2022			68.0			68.0			68.0		13.3		+	2.7			3.7		$223,684 / unit	73	3
59	59	Senior Loan	Washington, D.C.	Multifamily	12/4/2020	69.0	69.0	66.4	10.5	+	3.5	3.4		$ 265,617 / unit		63		3		59	Senior Loan		Plano, TX			Multifamily			3/31/2022			67.8			67.8			66.6		18.2		+	2.8			3.8		$250,255 / unit	75	3
60	60	Senior Loan	Dallas, TX	Multifamily	8/18/2021	68.2	68.2	68.2	9.8	+	3.8	4.2		$ 189,444 / unit		70		3		60	Senior Loan		Nashville, TN			Hospitality			12/9/2021			66.0			66.0			64.7		10.0		+	3.7			3.5		$281,237 / key	68	3
61	61	Senior Loan	Manassas Park, VA	Multifamily	2/25/2022	68.0	68.0	68.0	13.1	+	2.7	4.7		$ 223,684 / unit		73		3		61	Senior Loan		Atlanta, GA			Multifamily			12/10/2021			61.5			61.5			58.6		15.3		+	3.0			3.5		$194,112 / unit	67	3
62	62	Senior Loan	Plano, TX	Multifamily	3/31/2022	67.8	67.8	64.2	17.0	+	2.8	4.8		$ 241,165 / unit		75		3		62	Senior Loan		Durham, NC			Multifamily			12/15/2021			60.0			60.0			55.1		11.3		+	3.0			3.5		$159,714 / unit	67	3
63	63	Senior Loan	Nashville, TN	Hospitality	12/9/2021	66.0	66.0	64.3	9.8	+	3.6	4.5		$ 279,498 / key		68		3		63	Senior Loan		San Antonio, TX			Multifamily			4/20/2022			57.6			57.6			56.2		10.4		+	2.7			3.9		$164,275 / unit	79	3
64	64	Senior Loan	Atlanta, GA	Multifamily	12/10/2021	61.5	61.5	56.7	14.6	+	2.9	4.5		$ 187,771 / unit		67		3		64	Senior Loan		Sharon, MA			Multifamily			12/1/2021			56.9			56.9			56.9		8.4		+	2.9			3.4		$296,484 / unit	70	3
65	65	Senior Loan	Durham, NC	Multifamily	12/15/2021	60.0	60.0	51.0	9.1	+	2.9	4.5		$ 147,758 / unit		67		3		65	Senior Loan		Queens, NY			Industrial			2/22/2022			55.3			55.3			53.0		14.0		+	4.0			0.7		$86 / SF	68	3
66	66	Senior Loan	San Antonio, TX	Multifamily	4/20/2022	57.6	57.6	55.2	9.9	+	2.7	4.9		$ 161,404 / unit		79		3		66	Senior Loan		Reno, NV			Industrial			4/28/2022			140.4			50.5			50.5		11.3		+	2.7			3.9		$117 / SF	74	3
67	67	Senior Loan	Sharon, MA	Multifamily	12/1/2021	56.9	56.9	56.9	8.3	+	2.8	4.4		$ 296,484 / unit		70		3		67	Senior Loan		Carrollton, TX			Multifamily			4/1/2022			48.5			48.5			46.9		13.1		+	2.9			3.8		$146,612 / unit	74	3
68	68	Senior Loan	Queens, NY	Industrial	2/22/2022	55.3	55.3	52.0	12.8	+	4.0	1.7		$ 84 / SF		68		3		68	Senior Loan		Dallas, TX			Multifamily			4/1/2022			43.9			43.9			41.9		10.8		+	2.9			3.8		$117,693 / unit	73	3
69	69	Senior Loan	Reno, NV	Industrial	4/28/2022	140.4	50.5	50.5	11.0	+	2.7	4.9		$ 117 / SF		74		3		69	Senior Loan		Georgetown, TX			Multifamily			12/16/2021			41.8			41.8			41.8		10.2		+	3.4			3.5		$199,048 / unit	68	3
70	70	Senior Loan	Carrollton, TX	Multifamily	4/1/2022	48.5	48.5	43.4	11.6	+	2.9	4.8		$ 135,778 / unit		74		3		70	Senior Loan		San Diego, CA			Multifamily			4/29/2022			203.0			40.0			39.5		6.4		+	2.6			3.9		$453,089 / unit	63	3
71	71	Senior Loan	Dallas, TX	Multifamily	4/1/2022	43.9	43.9	38.3	9.2	+	2.9	4.8		$ 107,607 / unit		73		3		71	Senior Loan		Denver, CO			Industrial			12/11/2020			15.4			15.4			9.9		6.0		+	3.8			2.5		$47 / SF	61	2
72		Senior Loan	Georgetown, TX	Multifamily	12/16/2021	41.8	41.8	41.8	10.1	+	3.3	4.5		$ 199,048 / unit		68		3
73		Senior Loan	San Diego, CA	Multifamily	4/29/2022	203.0	40.0	38.5	6.1	+	2.6	4.9		$ 441,379 / unit		63��		3
74		Senior Loan	Denver, CO	Industrial	12/11/2020	28.8	28.8	16.2	5.6	+	3.8	3.5		$ 58 / SF		61		3
75		Senior Loan(L)	New York, NY	Condo (Residential)	8/4/2017	25.2	25.2	25.2	25.2	+	4.2	0.3		$ 1,120 / SF		73		3
															Total/Weighted Average Senior Loans Unlevered									$	12,689.8		$	8,966.6		$	7,755.0		$	1,796.5		+	3.3%		3.0					65	%		3.2
															Non-Senior Loans
															CMBS B-Pieces
1													1		RECOP I(L)		Various		Various			2/13/2017		n.a.			40.0			35.7			35.7				4.8		5.9		n.a.			58			n.a.
															Total/Weighted Average CMBS B-Pieces Unlevered												$	40.0		$	35.7		$	35.7			4.8%		5.9					58	%

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Investment(A)
Location Property Type Investment Date
Total Whole Loan(B)
Committed Principal Amount(B)
Current Principal Amount
Net Equity(C)
Coupon(D)(E)
Max Remaining Term (Years)(D)(F)
Loan Per SF / Unit / Key(G)
LTV(D)(H)
Risk Rating
Total/Weighted Average
Senior Loans Unlevered $ 12,545.6 $ 9,175.3 $ 7,730.9 $ 1,905.3 + 3.3% 3.6 67 % 3.0
Non-Senior Loans
1 Corporate n.a. Multifamily 12/11/2020 105.0 42.0 42.0 41.6 + 12.0 3.5 n.a. n.a. 3
Total/Weighted Average
Non-Senior Loans Unlevered $ 105.0 $ 42.0 $ 42.0 $ 41.6 + 12.0% 3.5 n.a. 3.0
CMBS B-Pieces
1
RECOP I(I)
Various Various 2/13/2017 n.a. 40.0 35.7 35.7 4.8 6.9 n.a. 58 n.a.
Total/Weighted Average
CMBS B-Pieces Unlevered $ 40.0 $ 35.7 $ 35.7 4.8% 6.9 58 %
Real Estate Owned
1 Real Estate Asset Portland, OR Retail 12/16/2021 n.a. n.a. 79.2 79.2 n.a. n.a. n.a. n.a. n.a.
Total/Weighted Average
Real Estate Owned $ 79.2 $ 79.2
Grand Total / Weighted Average $ 9,257.3 $ 7,887.8 $ 2,061.7 5.1% 3.6 67 % 3.0


	Investment(A)	Location	Property Type	Investment Date	Total Whole Loan(B)	Committed Principal Amount(B)		Current Principal Amount		Net Equity(C)		Coupon(D)(E)		Max Remaining Term (Years)(D)(F)	Loan Per SF / Unit / Key(G)	LTV(D)(H)		Risk Rating
	Real Estate Owned
1	Real Estate Asset	Portland, OR	Retail	12/16/2021	n.a.	n.a.		81.4		81.4			n.a.	n.a.	n.a.	n.a.		n.a.
	Total/Weighted Average Real Estate Owned							$	81.4	$	81.4
	Grand Total / Weighted Average					$	9,006.6	$	7,872.1	$	1,913.6		8.5%	3.0		65	%	3.2

* Numbers presented may not foot due to rounding.

(A) Our total portfolio represents the current principal amount on senior ~~mezzanine~~ and ~~corporate~~mezzanine 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~~$5.5 million that was fully written off.

For Senior Loan 9, the total whole loan is $199.4 million, including (i) a fully funded senior mortgage loan of $120.0 million, at an interest rate of S+2.25% and (ii) a mezzanine note with a commitment of $79.4 million, of which $74.4 million was funded as of June 30, 2023, at a fixed interest rate of 4.5%. The mezzanine note interest is payment-in-kind (“PIK Interest”), which is capitalized, compounded, and added to the outstanding principal balance of the respective loans.

For Senior Loan 1312, 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 June 30, ~~2022,~~2023, at an interest rate of L+S+~~7.9%~~7.96%.

For Senior Loan ~~22,~~20, 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 ~~$19.0~~$21.9 million was funded as of June 30, ~~2022,~~2023, at an interest rate of L+S+~~12.9%~~13.02%.

For Senior Loan 36, the total whole loan is $107.0 million, including (i) a fully funded senior mortgage loan of $102.0 million, at an interest rate of S+3.06%, (ii) a senior mezzanine note with an unfunded commitment of $4.2 million as of June 30, 2023, at a fixed interest rate of 10.0% and (iii) a junior mezzanine note with an unfunded commitment of $0.8 million as of June 30, 2023, at a fixed interest rate 10.0% with certain profit share provisions, as defined in the loan agreement.

(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~~mezzanine loans and by net equity for our RECOP I CMBS B-Pieces. Risk-rated 5 loans are excluded from the weighted average LTV.

(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~~ ~~June 30, 2022, 73.7% and 26.3% of floating rate loans by principal amount were indexed to one-month LIBOR and Term SOFR, respectively.~~SOFR.

(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, 3, 7, ~~9, 30, 32, 41, 56,~~23, 28, 31, 33, 42, 54, and ~~74, L~~71, Loa~~oan~~n 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 amoun~~risk rated-5 loans~~t of $42.0 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 75,~~Loans 18, LTV is based on the current principal amount divided by the adjusted appraised gross sellout value net of sales cost.

For Senior Loans 2, 3, 7, ~~9, 30, 32, 41, 56~~23, 28, 31, 33, 42, 54, and ~~74,~~71, 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)~~(J) For Senior Loan 9,31, the total whole loan facility is ~~$425.0~~$242.0 million, co-originated and co-funded by us and a KKR affiliate. Our interest was 50% of the facility or ~~$212.5~~$121.0 million. The facility is comprised of individual cross-collateralized whole loans. As of June 30, ~~2022,~~2023, there were ~~seven u~~eight un~~nderlying~~derlying senior loans in the facility with a commitment of $~~83.0~~121.0 million and outstanding principal of $~~30.2~~86.5 million.

(K) For Senior Loan 32, Total Whole Loan, Committed Principal Amount, and Current Principal Amount excludes junior mezzanine notes with a total outstanding principal of $25.0 million that was fully written off.

(L) ~~For Senior Loan 75, Loan per SF of $1,120 is based on~~Represents our investment in an aggregator vehicle alongside RECOP I that invests in CMBS B-Pieces. Committed principal represents our total commitment to the ~~allocated loan amount of~~aggregator vehicle whereas current principal represents the ~~residential units. Excluding the value of the retail and parking components of the collateral, the Loan per SF is~~ ~~$1,987 based~~ ~~on allocating the full amount of the loan to only the residential units.~~current funded amount.

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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 maximize the performance of our portfolio, including during periods of ~~volatility such as the COVID-19 pandemic.~~volatility.

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.~~at least once per quarter. 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~~ 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.

~~4—High~~Risk); 2 (Low Risk); 3 (Medium Risk); 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%),Loss); and ~~the loan covenants are unlikely to fully mitigate some risks. Interest payments may come from an interest reserve or sponsor equity.~~

~~Table of Contents~~

~~5—Impaired/~~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.Likely).

As of June 30, ~~2022,~~2023, the average risk rating of our loan portfolio was ~~3.0~~3.2 ~~(Average Risk)~~, weighted by total loan exposure, ~~as compared to 2.9 (Average Risk)~~consistent with that as of December 31, ~~2021.~~2022.


June 30, 2022									December 31, 2021
June 30, 2023																June 30, 2023								December 31, 2022
Risk Rating	Risk Rating	Number of Loans	Carrying Value		Total Loan Exposure(A)		Total Loan Exposure %		Number of Loans	Carrying Value		Total Loan Exposure(A)		Total Loan Exposure %		Risk Rating	Number of Loans(A)	Carrying Value		Total Loan Exposure(A)		Total Loan Exposure %*		Number of Loans(A)	Carrying Value		Total Loan Exposure(B)		Total Loan Exposure %*
1	1	—	$	—	$	—	—	%	1	$	243,549	$	243,552	3.6	%	1	—	$	—	$	—	—	%	—	$	—	$	—	—	%
2	2	3	415,670		416,146		5.4		3	410,293		411,424		6.2		2	1	9,814		9,904		—		—	—		—		—
3	3	71	6,739,319		7,038,720		90.6		54	5,268,590		5,627,927		84.3		3	62	6,303,998		6,451,416		83		70	6,560,166		6,864,941		88
4	4	2	318,112		318,045		4.0		4	394,301		394,336		5.9		4	5	592,975		744,442		10		3	443,957		446,322		6
5	5	1	—		—		—		1	—		—		—		5	3	539,171		549,273		7		3	490,015		489,214		6
Total loan receivable	Total loan receivable	77	$	7,473,101	$	7,772,911	100.0	%	63	$	6,316,733	$	6,677,239	100.0	%	Total loan receivable	71	$	7,445,958	$	7,755,035	100	%	76	$	7,494,138	$	7,800,477	100	%
Allowance for credit losses	Allowance for credit losses		(31,529)							(22,244)						Allowance for credit losses		(223,767)							(106,974)
Loan receivable, net	Loan receivable, net		$	7,441,572						$	6,294,489					Loan receivable, net		$	7,222,191						$	7,387,164

*Numbers presented may not foot due to rounding.

(B) In certain instances, ~~we finance our~~KREF finances its loans through the non-recourse sale of a senior interest that is not included in ~~our~~the condensed consolidated financial ~~statements under GAAP.~~statements. Total loan exposure includes the entire loan weKREF originated and financed, including $~~252.5~~268.0 million and ~~$318.6~~$263.1 million of such ~~non-consolidated senior~~non-consolidated interests as of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively.

Table of Contents

In January 2023, we completed the modification of a risk-rated 5 senior office loan located in Philadelphia, PA, with an outstanding principal balance of $161.0 million, of which $25.0 million was deemed uncollectible and written off, as of December 31, 2022. The terms of the modification included, among others, a $25.0 million principal repayment and a restructure of the $136.0 million senior loan (after the $25.0 million repayment) into (i) a $116.5 million committed senior mortgage loan (with $5.5 million in unfunded commitment) and (ii) a $25.0 million junior mezzanine note. The junior mezzanine note is subordinated to a new $41.5 million committed senior mezzanine note (with $16.5 million in unfunded commitment) held by the sponsor. The restructured senior loan earns a coupon rate of S+3.25% and has a new term of up to four years, assuming all extension options are exercised. The restructured senior loan was risk-rated 3 as of June 30, 2023.

In June 2023, we completed the modification of a risk-rated 4 senior multifamily loan located in West Hollywood, CA, with an outstanding principal balance of $102.0 million as of March 31, 2023. The terms of the modification included, among others, an additional borrower deposit in escrow in exchange for an upsize in the loan commitment structured as (i) an accompanying senior mezzanine note with a commitment of $4.2 million, at a fixed interest rate of 10.0%, and (ii) an accompanying junior mezzanine note with a commitment of $0.8 million, at a fixed interest rate of 10.0% with certain profit share provisions, as defined in the loan agreement. Both senior mezzanine and junior mezzanine notes were unfunded as of June 30, 2023. The modified whole loan was risk-rated 4 as of June 30, 2023.

In June 2023, we completed the modification of a risk-rated 5 senior office loan located in Minneapolis, MN, with an outstanding principal balance of $194.4 million as of March 31, 2023. The terms of the modification included, among others, a restructure of the $194.4 million senior loan into (i) a $120.0 million senior mortgage loan (fully funded) and (ii) a $79.4 million mezzanine note (with $5.0 million in unfunded commitment). The restructured senior loan earns a coupon rate of S+2.25% and the mezzanine note earns a fixed 4.5% PIK interest rate. Post modification, the whole loan’s maximum maturity is July 2025, assuming all extension options are exercised. The restructured whole loan was risk-rated 5 as of June 30, 2023.

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.

~~Portfolio~~Total Financing

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

Our Non-Mark-to-Market Financing Sources, which ~~accounte~~daccounted for ~~77%~~76% of our total ~~secured~~ financing ~~(excluding our corporate revolver)~~ as of June 30, ~~2022,~~2023, are not subject to credit or capital markets mark-to-market provisions. The remaining ~~23%~~24% of our ~~secured borrowings,~~total financing, which is primarily comprised of three master repurchase agreements, are only subject to credit marks.

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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.

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


			Portfolio Financing Outstanding Principal Balance						Financing Outstanding Principal Balance
		Non-/Mark-to-Market	June 30, 2022		December 31, 2021			Non-/Mark-to-Market	June 30, 2023		December 31, 2022
Master repurchase agreements	Master repurchase agreements	Mark-to-Credit	$	1,387,158	$	1,554,808	Master repurchase agreements	Mark-to-Credit	$	1,550,051	$	1,436,166
Collateralized loan obligations	Collateralized loan obligations	Non-Mark-to-Market	1,942,750		1,095,250		Collateralized loan obligations	Non-Mark-to-Market	1,942,750		1,942,750
Term lending agreements	Term lending agreements	Non-Mark-to-Market	1,358,817		1,117,627		Term lending agreements	Non-Mark-to-Market	1,438,157		1,530,105
Term loan financing		Non-Mark-to-Market	741,640		870,458
Term loan facility							Term loan facility	Non-Mark-to-Market	565,748		631,557
Secured term loan	Secured term loan	Non-Mark-to-Market	348,250		350,000		Secured term loan	Non-Mark-to-Market	344,750		346,500
Asset specific financing	Asset specific financing	Non-Mark-to-Market	96,278		60,000		Asset specific financing	Non-Mark-to-Market	220,159		172,873
Warehouse facility	Warehouse facility	Non-Mark-to-Market	—		—		Warehouse facility	Non-Mark-to-Market	—		—
Revolver							Revolver	Non-Mark-to-Market	50,000		—
Non-consolidated senior interests	Non-consolidated senior interests	Non-Mark-to-Market	252,500		318,634		Non-consolidated senior interests	Non-Mark-to-Market	267,958		263,086
Total portfolio financing			$	6,127,393	$	5,366,777
Total financing							Total financing		$	6,379,573	$	6,323,037

Financing Agreements

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


		June 30, 2022											June 30, 2023
		Maximum		Collateral		Borrowings							Maximum		Collateral		Borrowings
		Facility Size(A)		Assets(B)		Potential(C)		Outstanding		Available			Facility Size(A)		Assets(B)		Potential(C)		Outstanding		Available
Master Repurchase Agreements	Master Repurchase Agreements											Master Repurchase Agreements
Wells Fargo	Wells Fargo	$	1,000,000	$	935,728	$	701,796	$	689,958	$	11,838	Wells Fargo	$	1,000,000	$	950,890	$	688,031	$	681,569	$	6,462
Morgan Stanley	Morgan Stanley	600,000		777,737		582,493		573,542		8,951		Morgan Stanley	600,000		742,200		516,922		506,232		10,690
Goldman Sachs	Goldman Sachs	240,000		219,026		157,124		123,658		33,466		Goldman Sachs	400,000		598,102		373,829		362,250		11,579
Term Loan Facility	Term Loan Facility	1,000,000		907,931		741,640		741,640		—		Term Loan Facility	1,000,000		707,602		565,748		565,748		—
Term Lending Agreements	Term Lending Agreements											Term Lending Agreements
KREF Lending IX												KREF Lending IX	1,000,000		956,052		763,714		763,076		638
KREF Lending V	KREF Lending V	583,304		724,378		556,390		555,239		1,151		KREF Lending V	396,403		491,106		370,367		369,695		672
KREF Lending IX		750,000		803,846		646,497		642,438		4,059
KREF Lending XII	KREF Lending XII	350,000		213,907		161,140		161,140		—		KREF Lending XII	350,000		223,382		168,099		166,771		1,328
BMO Facility												BMO Facility	300,000		179,601		139,109		138,615		494
Warehouse Facility	Warehouse Facility											Warehouse Facility
HSBC	HSBC	500,000		—		—		—		—		HSBC	500,000		—		—		—		—
Asset Specific Financing	Asset Specific Financing											Asset Specific Financing
BMO Facility		300,000		—		—		—		—
KREF Lending XIII												KREF Lending XIII	265,625		141,367		120,159		120,159		—
KREF Lending XIV												KREF Lending XIV	125,000		—		—		—		—
KREF Lending XI	KREF Lending XI	100,000		123,838		99,071		96,278		2,793		KREF Lending XI	100,000		125,000		100,000		100,000		—
Revolver	Revolver	610,000		—		610,000		—		610,000		Revolver	610,000		—		610,000		50,000		560,000
		$	6,033,304	$	4,706,391	$	4,256,151	$	3,583,893	$	672,258		$	6,647,028	$	5,115,302	$	4,415,978	$	3,824,115	$	591,863

(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.

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

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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 June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, the weighted average haircut under our repurchase ~~agreements~~agreements was ~~28.2%~~32.3% and ~~30.3%~~31.5%, respectively (or 31.1% a~~25.4%~~ ~~and 25.9%~~nd 25.6%, 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~~Facility

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,~~April 2018, 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 match-term up to five years and is non-recourse to us. Borrowings under the facility are collateralized by senior loans, held-for-investment.

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

~~(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.~~Lending Agreements

~~Term Lending Agreements~~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 financing on a non-mark-to-market basis with match-term up to five years with partial recourse to us.

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 June ~~2022,~~2023, the current stated maturity was extended to June ~~2023,~~2024, subject to ~~three~~two additional one-year extension options, which we may ~~be exercised by us~~exercise 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 June 30, ~~2022,~~2023, the Initial Buyer held ~~23.8%~~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.~~

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In July 2021, we entered into a $500.0 million Master 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. In August 2022, we further increased the borrowing capacity to $1,000.0 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 match- term to the underlying loans.

In June 2022, we entered into a $350.0 million Master Repurchase Agreement and Securities Contract with a financial institution (“KREF Lending XII Facility”). The facility, which provides financing on a non-mark-to-market basis with partial recourse to KREF, has a two-year draw period and match-term to the underlying loans. In addition, we have the option to increase the facility amount to $500.0 million.

Warehouse Facility

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In March 2020, we entered into a $500.0 million Loan and Security Agreement with HSBC Bank USA, National Association (“HSBC Facility”). In March 2023, we extended the facility maturity date to March 2026. 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 match-term up to five years with partial recourse to us.

In April 2022, we entered into a $100.0 million loan financing facility with a financial institution ("KREF Lending XI Facility"). The facility provides non-recourse match-term asset-based financing on a non-mark-to-market ~~and~~basis.

In August 2022, we entered into a $265.6 million loan financing facility with a financial institution ("KREF Lending XIII Facility"). The facility provides non-recourse match-term asset-based financing on a non-mark-to-market basis.

In October 2022, we entered into a $125.0 million loan financing facility with a financial institution ("KREF Lending XIV Facility"). The facility provides non-recourse match-term asset-based financing on a non-mark-to-market basis.

Revolving Credit Agreement

In March 2022, we upsized our corporate revolving credit ~~facility~~agreement (“Revolver”), administered by Morgan Stanley Senior Funding, Inc., to $520.0 million and extended the maturity date to March 2027. In April 2022, we further upsized our Revolver to $610.0 million. 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)~~plus a fixed margin. Our Revolver is secured by corporate level guarantees and includes net equity interests in the investment portfolio.

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):


		June 30, 2022										June 30, 2023
		Count	Outstanding Principal		Amortized Cost		Carrying Value		Wtd. Avg. Yield/Cost(A)	Wtd. Avg. Term(B)		Count	Outstanding Principal		Amortized Cost		Carrying Value		Wtd. Avg. Yield/Cost(A)	Wtd. Avg. Term(B)
KREF 2021-FL2	KREF 2021-FL2										KREF 2021-FL2
Collateral assets(C)(D)	Collateral assets(C)(D)	21	$	1,300,000	$	1,300,000	$	1,293,709	+ 3.3%	December 2025	Collateral assets(C)(D)	17	$	1,300,000	$	1,300,000	$	1,265,775	S + 3.2%	May 2026
Financing provided	Financing provided	1	1,095,250		1,090,150		1,090,150		L + 1.7%	February 2039	Financing provided	1	1,095,250		1,094,641		1,094,641		S + 1.8%	February 2039
KREF 2022-FL3	KREF 2022-FL3										KREF 2022-FL3
Collateral assets(C)	Collateral assets(C)	16	1,000,000		1,000,000		996,846		+ 3.0%	September 2026	Collateral assets(C)	16	$	1,000,000	$	1,000,000	$	985,199	S + 3.1%	September 2026
Financing provided	Financing provided	1	847,500		841,455		841,455		S + 2.1%	February 2039	Financing provided	1	847,500		845,062		845,062		S + 2.2%	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, 91.1% and 8.9% 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 ~~30.6%~~29.5% of the principal of our commercial real estate loans as of June 30, ~~2022.~~2023. As of June 30, ~~2022,~~ 2023, 100% of our loans financed through the CLOs are floating rate loans.

(D)Including ~~$0.5~~$80.0 million cash held in ~~CLO~~the KREF 2021-FL2 as of June 30, ~~2022.~~2023.

~~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~~

Table 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 after the sale.

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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, match-term basis for our net investments, which are typically reflected in the form of mezzanine loans or other subordinate interests on our condensed consolidated balance ~~sheets~~sheet and in our ~~statements~~condensed consolidated statement of income.

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

June 30, 2022
Non-Consolidated Senior Interests Count Principal Balance Carrying Value Wtd. Avg. Yield/Cost Guarantee
Wtd. Avg.
Term
Total loan 2 $ 309,025 n.a. L + 3.7% n.a. January 2026
Senior participation 2 252,500 n.a. L + 2.3% n.a. December 2025
Interests retained 56,525 L + 9.6% January 2026

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June 30, 2023

Non-Consolidated Senior Interests

Count

Principal Balance

Carrying Value

Wtd. Avg. Yield/Cost

Guarantee

Wtd. Avg.

Term

Total loan

327,353

n.a

S + 3.8%

n.a.

December 2025

Senior participation

267,958

n.a

S + 2.5%

n.a.

December 2025

Interests retained

59,394

S + 9.8%

January 2026

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.~~

installments. 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. In June 2023, the secured term loan was amended to transition the benchmark rate from LIBOR to SOFR. The new secured term loan bears interest at ~~LIBOR~~adjusted SOFR, as defined, 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.~~SOFR floor.

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%~~the Convertible Notes ~~due on May 15, 2023. The Convertible Notes bear interest~~ at a fixed interest 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 entire $143.75 million principal balance of the Convertible Notes ~~mature~~matured and was repaid in cash on May 15, 2023. As of June 30, 2023, ~~unless earlier repurchased or converted.~~there were no Convertible Notes outstanding. Refer to Notes 2 and 8 to our condensed consolidated financial statements for additional discussion of our Convertible Notes.

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Borrowing Activities

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


				Six Months Ended June 30, 2022									Six Months Ended June 30, 2023
		Outstanding Principal as of June 30, 2022		Average Daily Amount Outstanding(A)		Maximum Amount Outstanding		Weighted Average Daily Interest Rate			Outstanding Principal as of June 30, 2023		Average Daily Amount Outstanding(A)		Maximum Amount Outstanding		Weighted Average Daily Interest Rate
Master Repurchase Agreements	Master Repurchase Agreements									Master Repurchase Agreements
Wells Fargo	Wells Fargo	$	689,958	$	723,253	$	980,593	1.9	%	Wells Fargo	$	681,569	$	679,859	$	714,666	6.3	%
Morgan Stanley	Morgan Stanley	573,542		486,114		573,542		2.4		Morgan Stanley	506,232		573,001		594,537		6.7
Goldman Sachs	Goldman Sachs	123,658		129,479		192,313		2.6		Goldman Sachs	362,250		240,839		362,250		7.3
Term Loan Facility	Term Loan Facility	741,640		856,877		918,959		2.1		Term Loan Facility	565,748		614,863		644,378		6.6
Term Lending Agreements	Term Lending Agreements									Term Lending Agreements
KREF Lending IX										KREF Lending IX	763,076		742,500		763,076		6.6
KREF Lending V	KREF Lending V	555,239		604,158		617,627		2.4		KREF Lending V	369,695		482,870		502,878		6.8
KREF Lending IX		642,438		444,166		642,438		2.2
KREF Lending XII	KREF Lending XII	161,140		81,085		161,140		2.9		KREF Lending XII	166,771		164,003		166,771		6.2
BMO Facility										BMO Facility	138,615		138,615		138,615		6.6
Asset Specific Financing	Asset Specific Financing									Asset Specific Financing
BMO Facility		—		3,978		60,000		1.8
KREF Lending XIII										KREF Lending XIII	120,159		92,201		120,159		7.8
KREF Lending XIV										KREF Lending XIV	—		—		—		—
KREF Lending XI	KREF Lending XI	96,278		96,278		96,278		3.6		KREF Lending XI	100,000		100,000		100,000		7.5
Revolver	Revolver	—		83,646		395,000		3.2		Revolver	50,000		20,166		150,000		7.1
Total/Weighted Average	Total/Weighted Average	$	3,583,893					2.3	%	Total/Weighted Average	$	3,824,115					6.7	%

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

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		Average Daily Amount Outstanding(A)						Average Daily Amount Outstanding(A)
		Three Months Ended						Three Months Ended
		June 30, 2022		March 31, 2022				June 30, 2023		March 31, 2023
Master Repurchase Agreements	Master Repurchase Agreements					Master Repurchase Agreements
Wells Fargo	Wells Fargo	$	671,211	$	775,874		Wells Fargo	$	682,498	$	677,192
Morgan Stanley	Morgan Stanley	500,877		471,188			Morgan Stanley	552,152		594,082
Goldman Sachs	Goldman Sachs	105,799		153,422			Goldman Sachs	302,828		178,162
Term Loan Facility	Term Loan Facility	812,104		902,148			Term Loan Facility	595,071		634,874
Term Lending Facility	Term Lending Facility						Term Lending Facility
KREF Lending IX							KREF Lending IX	752,850		732,035
KREF Lending V	KREF Lending V	598,508		609,870			KREF Lending V	472,936		492,915
KREF Lending IX		492,795		394,996
KREF Lending XII	KREF Lending XII	81,085		—			KREF Lending XII	166,771		161,203
BMO Facility							BMO Facility	138,615		138,615
Asset Specific Financing	Asset Specific Financing						Asset Specific Financing
BMO Facility		—		8,000
KREF Lending XIII							KREF Lending XIII	104,383		79,884
KREF Lending XIV							KREF Lending XIV	—		—
KREF Lending XI	KREF Lending XI	96,278		—			KREF Lending XI	100,000		100,000
Revolver	Revolver	147,253		19,333			Revolver	40,110		—

(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:

•ana trailing four quarter interest income to interest expense ratio covenant (1.5 to 1.0);

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•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 $~~1,349.4~~1,353.4 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 are 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 June 30, ~~2022,~~2023, 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 ours. 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 ours.

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~~

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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 Partner has a 10% interest. As of June 30, ~~2022,~~2023, the joint venture held REO assets with a net carrying value of $~~69.3 million.~~ 71.5 million. We have priority of distributions up to ~~$69.5~~$74.7 million before the JV Partner can participate in the economics of the joint venture.

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Results of Operations

Three Months Ended June 30, ~~2022~~2023 Compared to Three Months Ended March 31, ~~2022~~2023

The following table summarizes the changes in our results of operations for ~~the~~ three months ended June 30, ~~2022~~2023 and March 31, ~~2022~~2023 (dollars in thousands, except per share data):


	Three Months Ended				Increase (Decrease)
	June 30, 2023		March 31, 2023		Dollars			Percentage
Net Interest Income
Interest income	$	159,629	$	152,530	$	7,099		5	%
Interest expense	115,677		105,976		9,701			9
Total net interest income	43,952		46,554		(2,602)			(6)
Other Income
Revenue from real estate owned operations	1,984		2,246		(262)			(12)
Income (loss) from equity method investments	551		(347)		898			259
Other income	4,437		2,711		1,726		—	64


Total other income	6,972		4,610		2,362			51
Operating Expenses
General and administrative	4,710		4,690		20			—
Provision for (reversal of ) credit losses, net	56,335		60,467		(4,132)			(7)
Management fee to affiliate	6,559		6,523		36			1
Incentive compensation to affiliate	611		1,811		(1,200)			(66)
Expenses from real estate owned operations	2,656		2,758		(102)			(4)
Total operating expenses	70,871		76,249		(5,378)			(7)
Income (Loss) Before Income Taxes, Noncontrolling Interests, Preferred Dividends and Participating Securities' Share in Earnings	(19,947)		(25,085)		5,138			20
Income tax expense	177		169		8			5
Net Income (Loss)	(20,124)		(25,254)		5,130			20
Net income (loss) attributable to noncontrolling interests	(96)		(177)		81			46
Net Income (Loss) Attributable to KKR Real Estate Finance Trust Inc. and Subsidiaries	(20,028)		(25,077)		5,049			20
Preferred stock dividends	5,326		5,326		—			—
Participating securities' share in earnings	418		407		11			3
Net Income (Loss) Attributable to Common Stockholders	$	(25,772)	$	(30,810)	$	5,038		16

Net Income (Loss) Per Share of Common Stock
Basic	$	(0.37)	$	(0.45)	$	0.08		18
Diluted	$	(0.37)	$	(0.45)	$	0.08		18

Weighted Average Number of Shares of Common Stock Outstanding
Basic	69,115,654		69,095,011		20,643			—
Diluted	69,115,654		69,095,011		20,643			—

Dividends Declared per Share of Common Stock	$	0.43	$	0.43	$	—		—

Three Months Ended, Increase (Decrease)
June 30, 2022 March 31, 2022 Dollars Percentage
Net Interest Income
Interest income $ 90,603 $ 73,230 $ 17,373 23.7 %
Interest expense 44,733 32,459 12,274 37.8
Total net interest income 45,870 40,771 5,099 12.5
Other Income
Revenue from real estate owned operations 1,833 2,629 (796) (30.3)
Income (loss) from equity method investments 1,035 1,886 (851) (45.1)
Other income 1,237 1,915 (678) (35.4)
Total other income (loss) 4,105 6,430 (2,325) (36.2)
Operating Expenses
General and administrative 4,308 4,446 (138) (3.1)
Provision for (reversal of ) credit losses, net 11,798 (1,218) 13,016 1,068.6
Management fee to affiliate 6,506 6,007 499 8.3
Expenses from real estate owned operations 2,368 2,554 (186) (7.3)
Total operating expenses 24,980 11,789 13,191 111.9
Income (Loss) Before Income Taxes, Noncontrolling Interests, Preferred Dividends and Participating Securities' Share in Earnings 24,995 35,412 (10,417) (29.4)
Income tax expense — — — —
Net Income (Loss) 24,995 35,412 (10,417) (29.4)
Noncontrolling interests in (income) loss of consolidated joint venture 66 56 10 17.9
Net Income (Loss) Attributable to KKR Real Estate Finance Trust Inc. and Subsidiaries 25,061 35,468 (10,407) (29.3)
Preferred stock dividends 5,326 5,326 — —
Participating securities' share in earnings 341 346 (5) (1.4)
Net Income (Loss) Attributable to Common Stockholders $ 19,394 $ 29,796 $ (10,402) (34.9) %
Net Income (Loss) Per Share of Common Stock
Basic $ 0.28 $ 0.47 $ (0.19) (40.7) %
Diluted $ 0.28 $ 0.46 $ (0.18) (39.2) %
Weighted Average Number of Shares of Common Stock Outstanding
Basic 68,549,049 63,086,452 5,462,597 8.7 %
Diluted 68,549,049 69,402,626 (853,577) (1.2) %
Dividends Declared per Share of Common Stock $ 0.43 $ 0.43 $ — — %

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Net Interest Income

Net interest income ~~increased~~decreased by ~~$5.1~~$2.6 million during the three months endedJune 30, ~~2022~~,2023, as compared to the ~~three~~ ~~months ended~~ ~~March 31, 2022.~~preceding three-month period. This ~~increase~~decrease was primarily due to the suspension of interest income accrual on loans accounted for under the cost recovery method, partially offset with a benefit from an increase in the ~~weighted-average~~ index ~~rates, including LIBOR and Term SOFR. Interest income further increased due to a $604.2~~rates. During the three months ended June 30, 2023, $6.2 million ~~quarter-over-quarter increase in our weighted average loan principal,~~of interest collections on nonaccrual loans were applied as a ~~result of continuing capital deployment from~~reduction to the loan ~~repayments and a common stock issuance. Interest expense increased accordingly due~~amortized cost, as compared to ~~a $445.2~~$2.7 million ~~quarter-over-quarter increase~~ in ~~our weighted average portfolio financing.~~the preceding period.

In addition, interest income included ~~$4.0~~$0.8 million in prepayment penalty income in connection with loan repayments during the three ~~month~~months ended June 30, ~~2022~~.2023, as compared to $0.4 million for the preceding period. We recognized ~~$5.9~~$6.5 million of deferred loan fees and origination discounts accreted into interest income during the three months endedJune 30, ~~2022, consistent with those during~~2023, as compared to $5.9 million for the ~~prior quarter.~~preceding period. We recorded ~~$5.8~~$7.1 million of deferred financing costs amortization into interest expense during the three months endedJune 30, ~~2022, as compared to $4.8 million during~~2023, consistent with the ~~prior quarter.~~preceding period.

Other Income

Total other income ~~decreased~~increased by ~~$2.3~~$2.4 million during the three months ended June 30, ~~2022,~~2023, as compared to the ~~prior quarter.~~preceding period. This ~~decrease was primarily due to~~increase included a $0.9 million ~~decrease~~change in unrealized mark-to-market ~~gain~~adjustment on our RECOP I's underlying CMBS investments and $0.8 million decrease in REO operating revenue. In addition, other income decreased due to $1.3 million of nonrecurring profit sharing income in connection with an industrial senior loan payoff induring the ~~prior quarter.~~three months ended June 30, 2023.

Operating Expenses

Total operating expenses ~~increased~~decreased by ~~$13.2~~$5.4 million during the three months ended June 30, ~~2022,~~2023, as compared to the ~~prior quarter.~~preceding period. This ~~increase~~decrease was primarily due to ~~(i)~~ a net ~~increase~~decrease of ~~$13.0~~$4.1 million in the provision for credit ~~losses~~losses and ~~(ii)~~ a ~~$0.5~~$1.2 million ~~increase~~decrease in ~~management fees resulting from our common stock issuance.~~Manager incentive compensation.

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Six Months Ended June 30, ~~2022~~2023 Compared to Six Months Ended June 30, ~~2021~~2022

The following table summarizes the changes in our results of operations for the six months ended June 30, ~~2022~~2023 and ~~2021~~2022 (dollars in thousands, except per share data):


		Six Months Ended June 30,				Increase (Decrease)				Six Months Ended June 30,				Increase (Decrease)
		2022		2021		Dollars		Percentage				2023		2022		Dollars		Percentage
Net Interest Income	Net Interest Income										Net Interest Income
Interest income	Interest income	$	163,833	$	131,915	$	31,918	24.2	%		Interest income	$	312,159	$	163,833	$	148,326	91	%
Interest expense	Interest expense	77,192		54,341		22,851		42.1			Interest expense	221,653		77,192		144,461		187
Total net interest income	Total net interest income	86,641		77,574		9,067		11.7			Total net interest income	90,506		86,641		3,865		4
Other Income	Other Income										Other Income
Revenue from real estate owned operations	Revenue from real estate owned operations	4,462		—		4,462		100.0			Revenue from real estate owned operations	4,230		4,462		(232)		(5)

Income (loss) from equity method investments	Income (loss) from equity method investments	2,921		2,346		575		24.5			Income (loss) from equity method investments	204		2,921		(2,717)		(93)

Other income	Other income	3,152		166		2,986		1,798.8			Other income	7,148		3,152		3,996		127
Total other income (loss)	Total other income (loss)	10,535		2,512		8,023		319.4			Total other income (loss)	11,582		10,535		1,047		10
Operating Expenses	Operating Expenses										Operating Expenses
General and administrative	General and administrative	8,754		7,193		1,561		21.7			General and administrative	9,400		8,754		646		7
Provision for (reversal of ) credit losses, net	Provision for (reversal of ) credit losses, net	10,580		(2,147)		12,727		592.8			Provision for (reversal of ) credit losses, net	116,802		10,580		106,222		1,004
Management fee to affiliate	Management fee to affiliate	12,513		9,125		3,388		37.1			Management fee to affiliate	13,082		12,513		569		5
Incentive compensation to affiliate	Incentive compensation to affiliate	—		4,595		(4,595)		(100.0)			Incentive compensation to affiliate	2,422		—		2,422		100
Expenses from real estate owned operations	Expenses from real estate owned operations	4,922		—		4,922		100.0			Expenses from real estate owned operations	5,414		4,922		492		10
Total operating expenses	Total operating expenses	36,769		18,766		18,003		95.9			Total operating expenses	147,120		36,769		110,351		300
Income (Loss) Before Income Taxes, Noncontrolling Interests, Preferred Dividends, Redemption Value Adjustment and Participating Securities' Share in Earnings		60,407		61,320		(913)		(1.5)
Income (Loss) Before Income Taxes, Noncontrolling Interests, Preferred Dividends and Participating Securities' Share in Earnings											Income (Loss) Before Income Taxes, Noncontrolling Interests, Preferred Dividends and Participating Securities' Share in Earnings	(45,032)		60,407		(105,439)		(175)
Income tax expense	Income tax expense	—		151		(151)		(100.0)			Income tax expense	346		—		346		100
Net Income (Loss)	Net Income (Loss)	60,407		61,169		(762)		(1.2)			Net Income (Loss)	(45,378)		60,407		(105,785)		(175)
Noncontrolling interests in (income) loss of consolidated joint venture		122		—		122		100.0
Net income (loss) attributable to noncontrolling interests											Net income (loss) attributable to noncontrolling interests	(273)		(122)		(151)		124
Net Income (Loss) Attributable to KKR Real Estate Finance Trust Inc. and Subsidiaries	Net Income (Loss) Attributable to KKR Real Estate Finance Trust Inc. and Subsidiaries	60,529		61,169		(640)		(1.0)			Net Income (Loss) Attributable to KKR Real Estate Finance Trust Inc. and Subsidiaries	(45,105)		60,529		(105,634)		(175)
Preferred stock dividends and redemption value adjustment		10,652		2,721		7,931		291.5
Preferred stock dividends											Preferred stock dividends	10,652		10,652		—		—
Participating securities' share in earnings	Participating securities' share in earnings	687		—		687		100.0			Participating securities' share in earnings	825		687		138		20
Net Income (Loss) Attributable to Common Stockholders	Net Income (Loss) Attributable to Common Stockholders	$	49,190	$	58,448	$	(9,258)	(15.8)	%		Net Income (Loss) Attributable to Common Stockholders	$	(56,582)	$	49,190	$	(105,772)	(215)

Net Income (Loss) Per Share of Common Stock	Net Income (Loss) Per Share of Common Stock										Net Income (Loss) Per Share of Common Stock
Basic	Basic	$	0.75	$	1.05	$	(0.30)	(28.6)	%		Basic	$	(0.82)	$	0.75	$	(1.57)	(209)
Diluted	Diluted	$	0.74	$	1.05	$	(0.31)	(29.5)	%		Diluted	$	(0.82)	$	0.74	$	(1.56)	(211)

Weighted Average Number of Shares of Common Stock Outstanding	Weighted Average Number of Shares of Common Stock Outstanding										Weighted Average Number of Shares of Common Stock Outstanding
Basic	Basic	65,832,841		55,625,911		10,206,930		18.3	%		Basic	69,105,389		65,832,841		3,272,548		5
Diluted	Diluted	72,149,015		55,819,110		16,329,905		29.3	%		Diluted	69,105,389		72,149,015		(3,043,626)		(4)

Dividends Declared per Share of Common Stock	Dividends Declared per Share of Common Stock	$	0.86	$	0.86	$	—	—	%		Dividends Declared per Share of Common Stock	$	0.86	$	0.86	$	—	—

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Net Interest Income

Net interest ~~incom~~eincome increased by ~~$9.1~~$3.9 million,, during the six months ended June 30, ~~2022,~~2023, as compared to the corresponding period in ~~the~~ prior year. ~~This~~The increase was primarily attributable to an increase in the index rates, including Term SOFR and LIBOR. Interest income further increased due to an increase in the weighted average principal of our loan portfolio of ~~$1,775.7 million~~for the six months ended June 30, ~~2022,~~2023, as compared to the prior year ~~period,~~period. The increase was partially offset by the suspension of interest income accrual on loans accounted for under the cost recovery method. During the six months ended June 30, 2023, $8.9 million of interest collections on nonaccrual loans were applied as a ~~result of continuing capital deployment from~~cost reduction to the loan ~~repayments and deployment of the proceeds from the preferred and common stock issuances.~~amortized cost.

The increase in interest expense was due primarily ~~due~~ to an increase in market rates and an increase in the weighted average principal balance of our financing facilities o~~f $1,518.9 million~~for the six months ended June 30, ~~2022,~~2023, as compared to the prior year period. The proceeds from our financing facilities were used to fund our ~~loan originations and funding~~draws on previously closed ~~loans.~~loans and pay off our convertible notes.

In addition, we recognized ~~$12.0~~$12.4 million of deferred loan fees and origination discounts accreted into interest income during the six months ended June 30, ~~2022,~~2023, as compared to ~~$9.5~~$12.0 million during the ~~prior year period.~~six months ended June 30, 2022. We recorded

$~~10.6~~13.9 million of deferred financing costs amortization into interest expense during the six months ended June 30, ~~2022,~~2023, as compared to ~~$6.6~~$10.6 million during the prior year period.

Other Income

Total other income increased by ~~$8.0~~$1.0 million during the six months endedJune 30, ~~2022~~,2023, as compared to the prior year period. This increase was primarily due to ~~a $4.5~~$5.0 million increase in ~~REO operating revenue~~interest income earned on our cash balances, as compared to the prior year period, resulting from higher market rates. The increase was partially offset by (i) a $2.7 million change in unrealized mark-to-market adjustment on our RECOP I's underlying CMBS investments, as compared to the prior year period, and (ii) a nonrecurring $1.3 million of profit sharing income in connection with the repayment of an industrial senior ~~loan. In addition, the unrealized mark-to-market gain on our RECOP I's underlying CMBS investments increased by~~ ~~$1.1 million~~ ~~compared to~~loan during the prior year period.

Operating Expenses

Total operating expenses increased by ~~$18.0~~$110.4 million during the six months ended June 30, ~~2022,~~2023, as compared to the prior year period. T~~his~~This increase waswas primarily due to a ~~(i)~~ net increase of ~~$12.7~~$106.2 million in the provision for credit losses ~~(ii)~~ ~~$4.9~~and a $2.4 million increase in ~~REO operating expenses and (iii)~~ ~~$3.4 million~~ ~~increase in management fees resulting from our preferred and common stock issuances. This increase was partially offset by a~~ ~~$4.6 million~~ ~~decrease in~~Manager incentive ~~fee, as compared to the prior year period.~~compensation.

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

Three Months Ended
June 30, 2022 March 31, 2022 December 31, 2021 September 30, 2021 June 30, 2021
Operating expenses $ 2,268 $ 2,320 $ 1,970 $ 1,632 $ 1,694
Stock-based compensation 2,040 2,126 1,413 2,027 1,994
Total general and administrative expenses 4,308 4,446 3,383 3,659 3,688
Provision for (reversal of) credit losses, net 11,798 (1,218) (3,077) 1,165 (559)
Management fee to affiliate 6,506 6,007 5,289 4,964 4,835
Incentive compensation to affiliate — — 3,463 2,215 2,403
Expenses from real estate owned operations 2,368 2,554 — — —
Total operating expenses $ 24,980 $ 11,789 $ 9,058 $ 12,003 $ 10,367

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. Moreover, the increase in remote working arrangements in response to the pandemic has contributed to and may further contribute to a decline in commercial real estate values and reduce demand for commercial real estate compared to pre-pandemic levels, which may adversely impact certain of our borrowers and may persist even as the pandemic continues to subside.

~~In 2021 and 2022,~~While the global economy has ~~with~~largely re-opened, the longer-term macro-economic effects of the pandemic continue to impact many industries, including those of 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 the response of our borrowers, with the potential for new strains of COVID-19 to emerge, governments and businesses may re-impose aggressive measures to help slow its spread in the future, and for this reason, among others, as the COVID-19 pandemic continues, the potential global impacts remain uncertain and difficult to assess.borrowers. In addition, the COVID-19 pandemic ~~continues~~

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has contributed to ~~disrupt~~ global supply ~~chains, has caused~~chain disruptions, labor shortages and has ~~added~~ broad inflationary pressures, each of 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. ~~In response to such inflationary pressures, the~~The Federal Reserve has ~~begun raising~~raised interest rates inten times since January 2022, and has ~~indicated~~signaled that ~~it foresees~~ further ~~interest rate~~ increases may be forthcoming throughout the ~~year and into 2023 and 2024.~~year. Higher interest rates imposed by the Federal Reserve to address inflation may adversely impact real estate asset values and increase our interest ~~expenses,~~expense, which ~~expenses~~expense may not be fully offset by any resulting increase in interest income, and may lead to decreased prepayments from our borrowers and an increase in the number of our borrowers who exercise extension options. 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 our Non-Mark-to-Market Financing Sources(1), and borrowings from three master repurchase ~~agreements, the issuance and sale of convertible notes and our secured term loan.~~agreements. Our Non-Mark-to-Market Financing Sources, which accounted for ~~77%~~76% of our total ~~secured~~ financing ~~(excluding our corporate Revolver)~~ as of June 30, ~~2022,~~2023, are not subject to credit or capital markets mark-to-market provisions. The remaining ~~23%~~24% of our ~~secured borrowings,~~total financing, 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.~~date.

Our primary sources of liquidity include ~~$118.0~~$207.7 million of cash on our ~~consolidated balance sheet, $610.0~~Condensed Consolidated Balance Sheet, $560.0 million of available capacity on our corporate ~~revolver, $62.3~~Revolver, $31.9 million of available borrowings under our financing arrangements based on existing collateral and cash flows from operations. In addition, we had ~~$416.0~~$18.0 million of unencumbered senior loans that can be financed, as of June 30, ~~2022.~~2023. Our corporate ~~revolver~~Revolver and secured term loan are secured by corporate level guarantees and ~~includes~~include net equity interests in the investment portfolio. 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 to 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 109 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 June 30, ~~2022,~~2023, we held $~~36.8~~35.5 million of interests in such entities, which does not include a remaining commitment of ~~$4.3~~$4.3 million to RECOP I that we are required to fund if called.

~~We are continuing to monitor~~The six months ended June 30, 2023 witnessed significant volatility in the ~~COVID-19 pandemic and its impact on our operating partners, financing sources, borrowers and their tenants, and the economy~~banking sector as a ~~whole.~~result of disruptions to the banking system and financial market volatility resulting from multiple bank failures. While ~~the availability~~we maintained no accounts at these failed banks, substantially all of ~~approved COVID-19 vaccines~~our cash currently on deposit with other major financial institutions exceeds insured limits. We limit exposure relating to our short-term financial instruments by diversifying these financial instruments among various counterparties. Generally, deposits may be redeemed upon demand and ~~their impact on the economy is encouraging, the distribution~~are maintained with financial institutions with reputable credit 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.therefore we believe bear minimal credit risk.

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) 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 and June of 2022, we issued 6,494,155 and 2,750,000 shares of Common Stock under the Shelf, respectively, 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 and ~~$53.7 million, respectively.~~

(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 six months ended June 30, ~~2022,~~2023, we ~~issued and sold 68,817~~did not sell any shares of common stock under the ~~ATM, generating net proceeds totaling $1.4 million.~~ATM. As of June 30, ~~2022,~~2023, $~~98.6~~93.2 million remained available for issuance under the ATM.

See Notes 5, 6, 7, 8 and 1110 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.

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

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Debt-to-Equity Ratio and Total Leverage Ratio

The following table presents our debt-to-equity ratio and total leverage ratio:

June 30, ~~2022~~2023

December 31, ~~2021~~2022

Debt-to-equity ratio(A)

~~1.9x~~2.2x

~~2.3x~~2.0x

Total leverage ratio(B)

~~3.5x~~4.0x

~~3.7x~~3.8x

(A) Represents (i) total outstanding debt agreements (excluding non-recourse facilities), and 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):


		June 30, 2022		December 31, 2021			June 30, 2023		December 31, 2022
Cash and cash equivalents	Cash and cash equivalents	$	118,020	$	271,487	Cash and cash equivalents	$	207,698	$	239,791
Available borrowings under revolving credit agreements	Available borrowings under revolving credit agreements	610,000		200,000		Available borrowings under revolving credit agreements	560,000		610,000
Available borrowings under master repurchase agreements	Available borrowings under master repurchase agreements	54,255		51,601		Available borrowings under master repurchase agreements	28,731		94,426

Available borrowings under term lending agreements	Available borrowings under term lending agreements	5,210		5,826		Available borrowings under term lending agreements	3,132		7,583

Available borrowings under asset specific financing		2,793		—

		$	790,278	$	528,914
							$	799,561	$	951,800

We also had $~~416.0~~18.0 million and ~~$235.3~~$179.4 million of unencumbered senior loans that can be pledged to financing facilities subject to lender approval, as of June 30, ~~2022~~2023 and December 31, ~~2021.~~2022, respectively. 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.

Cash Flows

The following table sets forth changes in cash and cash equivalents for the six months ended June 30, ~~2022~~2023 and ~~2021~~2022 (dollars in thousands):


		Six Months Ended June 30,					Six Months Ended June 30,
		2022		2021			2023		2022
Cash Flows From Operating Activities	Cash Flows From Operating Activities	$	68,384	$	58,109	Cash Flows From Operating Activities	$	77,108	$	68,384
Cash Flows From Investing Activities	Cash Flows From Investing Activities	(1,144,062)		(604,668)		Cash Flows From Investing Activities	59,396		(1,144,062)
Cash Flows From Financing Activities	Cash Flows From Financing Activities	927,581		554,899		Cash Flows From Financing Activities	(164,205)		927,581
Net Increase (Decrease) in Cash, Cash Equivalents, and Restricted Cash	Net Increase (Decrease) in Cash, Cash Equivalents, and Restricted Cash	$	(148,097)	$	8,340	Net Increase (Decrease) in Cash, Cash Equivalents, and Restricted Cash	$	(27,701)	$	(148,097)

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Cash Flows from Operating Activities

Our cash flows from operating activities were primarily driven by our net interest income, which is driven by the income generated by our investments less financing costs. The following table sets forth interest received ~~by,~~from, and paid for, our investments for the six months ended June 30, ~~2022~~2023 and ~~2021~~2022 (dollars in thousands):


		Six Months Ended June 30,					Six Months Ended June 30,
		2022		2021			2023		2022
Interest Received:	Interest Received:					Interest Received:
Commercial real estate loans	Commercial real estate loans	$	139,532	$	118,304	Commercial real estate loans	$	298,489	$	139,532

		139,532		118,304			298,489		139,532
Interest Paid:	Interest Paid:					Interest Paid:
Interest expense	Interest expense	63,365		46,296		Interest expense	207,352		63,365
Net interest collections	Net interest collections	$	76,167	$	72,008	Net interest collections	$	91,137	$	76,167

Our net interest collections were partially offset by cash used to pay management and incentive fees, as follows (dollars in thousands):


		Six Months Ended June 30,					Six Months Ended June 30,
		2022		2021			2023		2022
Management Fees to affiliate	Management Fees to affiliate	$	11,296	$	8,541	Management Fees to affiliate	$	13,109	$	11,296
Incentive Fees to affiliate	Incentive Fees to affiliate	—		4,595		Incentive Fees to affiliate	2,422		—
Net decrease in cash and cash equivalents	Net decrease in cash and cash equivalents	$	11,296	$	13,136	Net decrease in cash and cash equivalents	$	15,531	$	11,296

Cash Flows from Investing Activities

Our cash flows from investing activities consisted of cash outflows to fund new loan originations and our commitments under existing loan investments, partially offset by cash inflows from the sale/syndication and principal repayments on our loan investments. During the six months ended June 30, 2023, we funded $374.6 million of CRE loans and received $435.2 million from repayments of CRE loans.

During the six months ended June 30, 2022, we funded $1,791.3 million of CRE loans and received $647.8 million f~~rom repayments of CRE loans.~~

~~During the six months ended June 30, 2021, we funded $1,119.2 million of CRE loans and received $514.5 million~~ from the ~~sale/syndication and~~ repayments of CRE loans.

Cash Flows from Financing Activities

Our cash flows from financing activities were primarily driven by proceeds from borrowings under our financing agreements of $556.3 million during six months ended June 30, 2023, partially offset by (i) repayments of $504.7 million on borrowings under our financing agreements, (ii) repayment of $143.75 million convertible notes, and (iii) payment of $70.1 million in dividends.

~~Our~~

During the six months ended June 30, 2022, our cash flows from financing activities were primarily driven by proceeds from borrowings under our financing agreements of $1,817.0 million, proceeds from CLO KREF 2022-FL3 issuance ~~proceeds~~ of $847.5 million and net proceeds from Series A ~~preferred~~Preferred and ~~common~~Common stock ~~issuances~~issuance of $340.1 million, du~~ring the~~ ~~six months ended~~ ~~June 30, 2022,~~ partially offset by (i) ~~repayments~~repayments of $1,972.8 million on borrowings under our financing agreements, (ii) payment of $66.5 million in dividends, and (iii) the payment of $18.1 million for our share repurchases.

During the six months ended June 30, 2021, our cash flows from financing activities were primarily driven by proceeds from borrowings under our financing agreements of $1,014.3 million and net proceeds from Series A preferred stock issuance of $167.1 million, which were offset by (i) repayments of $572.5 million on borrowings under our financing agreements and (ii) payment of ~~$50.0 million~~ ~~in dividends.~~

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Contractual Obligations and Commitments

The following table presents our contractual obligations and commitments (including interest payments) as of June 30, ~~2022~~2023 (dollars in thousands):


		Total		Less than 1 year		1 to 3 years		3 to 5 years		Thereafter			Total		Less than 1 year		1 to 3 years		3 to 5 years		Thereafter
Recourse Obligations:	Recourse Obligations:											Recourse Obligations:
Master Repurchase Facilities(A)	Master Repurchase Facilities(A)											Master Repurchase Facilities(A)
Wells Fargo(B)	Wells Fargo(B)	$	732,737	$	19,135	$	713,602	$	—	$	—	Wells Fargo(B)	$	738,711	$	46,373	$	692,338	$	—	$	—
Morgan Stanley(C)	Morgan Stanley(C)	581,846		581,846		—		—		—		Morgan Stanley(C)	595,330		36,640		558,690		—		—
Goldman Sachs(D)	Goldman Sachs(D)	125,135		125,135		—		—		—		Goldman Sachs(D)	429,031		28,654		400,377		—		—
Term Lending Agreements(A)	Term Lending Agreements(A)											Term Lending Agreements(A)
KREF Lending IX												KREF Lending IX	853,816		192,287		570,556		90,973		—
KREF Lending V(E)	KREF Lending V(E)	573,140		573,140		—		—		—		KREF Lending V(E)	396,167		396,167		—		—		—
KREF Lending IX		701,927		22,778		544,958		134,191		—
KREF Lending XII	KREF Lending XII	178,060		5,015		69,849		103,196				KREF Lending XII	192,774		11,030		181,744		—		—
BMO Facility												BMO Facility	158,130		9,852		148,278		—		—
Warehouse Facility	Warehouse Facility											Warehouse Facility
HSBC	HSBC	—		—		—		—		—		HSBC	—		—		—		—		—
Asset Specific Financing
BMO Facility(A)		—		—		—		—		—
Total secured financing agreements		2,892,845		1,327,049		1,328,409		237,387		—
Convertible Notes		151,552		7,802		143,750		—		—
Secured Term Loan	Secured Term Loan	419,535		17,570		34,753		34,147		333,065		Secured Term Loan	470,590		34,218		67,332		33,198		335,842
Future funding obligations(F)	Future funding obligations(F)	1,412,237		627,162		722,431		62,644		—		Future funding obligations(F)	1,194,838		620,135		542,637		32,066		—
RECOP I commitment(G)	RECOP I commitment(G)	4,324		4,324		—		—		—		RECOP I commitment(G)	4,324		4,324		—		—		—
Revolver(H)	Revolver(H)	—		—		—		—		—		Revolver(H)	53,630		53,630		—		—		—
Total recourse obligations	Total recourse obligations	4,880,493		1,983,907		2,229,343		334,178		333,065		Total recourse obligations	5,087,341		1,433,310		3,161,952		156,237		335,842
Non-Recourse Obligations:	Non-Recourse Obligations:											Non-Recourse Obligations:
Collateralized Loan Obligations	Collateralized Loan Obligations	2,237,725		58,963		117,925		118,087		1,942,750		Collateralized Loan Obligations	2,601,643		131,995		262,908		263,990		1,942,750
Term Loan Financing		785,691		369,540		327,809		88,342		—
Term Loan Facility												Term Loan Facility	627,136		258,695		315,262		53,179		—
Asset Specific Financing												Asset Specific Financing
KREF Lending XIII												KREF Lending XIII	150,944		9,918		19,835		121,191		—
KREF Lending XIV												KREF Lending XIV	—		—		—		—		—
KREF Lending XI	KREF Lending XI	105,770		4,331		101,439		—		—		KREF Lending XI	109,525		8,011		101,514		—		—
Total	Total	$	8,009,679	$	2,416,741	$	2,776,516	$	540,607	$	2,275,815	Total	$	8,576,589	$	1,841,929	$	3,861,471	$	594,597	$	2,278,592

(A) The allocation of repurchase facilities and term lending agreements is based on the current maturity date of each individual borrowing under these facilities. The amounts include the related future interest payment obligations, which are estimated by assuming the amounts outstanding under these facilities and the interest rates in effect as of June 30, ~~2022~~2023 will remain constant into the future. This is only an estimate, as actual amounts borrowed and rates may vary over time. Amounts borrowed are subject to a maximum 25.0% recourse limit.

(B) The current stated maturity is September 2024, with two twelve-month facility term ~~extensions~~extension options available to us ~~which are contingent upon~~subject to certain covenants and ~~thresholds.~~thresholds.

(C) ~~The~~The current stated maturity is December ~~2022,~~2025, with ~~one-year extension option upon KREF giving written notice and another~~ two one-year extension periods subject to approval by Morgan Stanley.

(D) ~~The current stated~~In September 2022, we extended the final maturity isdate to October ~~2022, with one twelve-month extension option available to us, subject to the satisfaction of certain conditions.~~2025.

(E) The current stated maturity is June ~~2023,~~2024, with ~~three~~two additional one-year extension options, which we may ~~be exercised by us~~exercise upon the satisfaction of certain customary conditions and thresholds.

(F) We have future funding obligations related to our investments in senior loans. These future funding obligations primarily relate to construction projects, capital improvements, tenant improvements and leasing commissions. Generally, funding obligations are subject to certain conditions that must be met, such as customary construction draw certifications, minimum debt service coverage ratios, minimal debt yield tests, or executions of new leases before advances are made to the borrower. As such, the allocation of our future funding obligations is based on the earlier of the expected funding or commitment expiration date.

(G) Amounts committed to invest in an aggregator vehicle alongside RECOP I, which had a two-year investment period which ended in April 2019.

(H) Any amounts borrowed are full recourse to certain subsidiaries of KREF. Includes principal and assumes interest outstanding over a one-year period. Amounts are estimated based on the amount outstanding under the Revolver and the interest rate in effect as of June 30, ~~2022.~~2023. This is only an estimate as actual amounts borrowed, the timing of repayments and interest rates may vary over time. The Revolver matures in March 2027.

We are required to pay our Manager a base management fee, an incentive fee and reimbursements for certain expenses pursuant to our management agreement. The table above does not include the amounts payable to our Manager under our management agreement as they are not fixed and determinable. See Note 1514 to our condensed consolidated financial statements included in this Form 10-Q for additional terms and details of the fees payable under our management agreement.

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As a REIT, we generally must distribute at least 90% of our REIT taxable income, determined without regard to the deduction for dividends paid and excluding net capital gains, to stockholders in the form of dividends to comply with the REIT provisions

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of the Code. Our taxable income does not necessarily equal our net income as calculated in accordance with GAAP, or our Distributable Earnings as described above under "Key Financial Measures and Indicators — Distributable Earnings."

Subsequent Events

Our subsequent events are detailed in Note 1817 to our condensed consolidated financial statements.

Critical Accounting Policies and Use of Estimates

Our discussion and analysis of our financial condition and results of operations is based upon our condensed consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these condensed consolidated financial statements requires our Manager to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. Actual results could differ from these estimates. There have been no material changes to our Critical Accounting Policies and Use of Estimates described in our Annual Report on Form 10-K.

Allowance for Credit Losses

We originate and purchase CRE debt and related instruments generally to be held as long-term investments at amortized cost. We adopted ASU No. 2016-13, Financial Instruments—Credit Losses, and subsequent amendments (“ASU 2016-13”), which replaced the incurred loss methodology with an expected loss model known as the Current Expected Credit Loss ~~or CECL~~("CECL") model. CECL ~~amends~~amended the previous credit loss model to reflect our current estimate of all expected credit losses, not only based on historical experience and current conditions, but also by including reasonable and supportable forecasts incorporating forward-looking ~~information.~~information.. The measurement of expected credit losses under CECL is applicable to financial assets measured at amortized cost, and off-balance sheet credit exposures such as unfunded loan commitments. The allowance for credit losses required under ASU 2016-13 is deducted from the respective loans’ amortized cost basis on our Condensed Consolidated Balance Sheets. The allowance for credit losses attributed to unfunded loan commitments is included in “Other liabilities” on the Condensed Consolidated Balance Sheets.

We have implemented loan loss forecasting models for estimating expected life-time credit losses, at the individual loan level, for our commercial ~~mortgage~~real estate loan portfolio. The CECL forecasting methods ~~used by us~~we use include (i) a probability of default and loss given default method using an underlying third-party CMBS/CRE loan database with historical loan losses from 1998 ~~to 2020,~~through 2023, and (ii) a probability weighted expected cash flow method, depending on the type of loan and the availability of relevant historical market loan loss data. We might use other acceptable alternative approaches in the future depending on, among other factors, the type of loan, underlying collateral, and availability of relevant historical market loan loss data.

We estimate ~~our~~the CECL allowance for our loan portfolio, including unfunded loan commitments, at the individual loan level. Significant inputs to our forecasting methods include (i) key loan-specific inputs such as loan-to-value ("LTV"), vintage year, loan-term, underlying property type, geographic location, and expected timing and amount of future loan fundings, (ii) performance against the underwritten business plan and our internal loan risk rating and (iii) a macro-economic forecast. ~~In certain instances, we consider relevant loan-specific qualitative factors to certain loans to estimate its CECL allowance.~~

We consider loan investments that are both (i) expected to be substantially repaid through the operation or sale of the underlying collateral, and (ii) for which the borrower is experiencing financial difficulty, to be “collateral-dependent” loans. For such loans that we determine that foreclosure of the collateral is probable, we measure the expected lossesThese estimates may change in future periods based on ~~the difference between the fair value~~available future macro-economic data and might result in a material change in our future estimates of ~~the collateral and the amortized cost basis of the~~expected credit losses for its loan as of the measurement date. For collateral-dependent loans that we determine foreclosure is not probable, we apply a practical expedient to estimate expected losses using the difference between the collateral’s fair value (less costs to sell the asset if repayment is expected through the sale of the collateral) and the amortized cost basis of the loan.

portfolio. We consider the individual loan internal risk rating as the primary credit quality indicator underlying the CECL assessment. We perform a review, at least quarterly, ~~review~~ of our loan portfolio at the individual loan level to determine the internal risk rating for each of our loans by assessing the risk factors of each loan, including, without limitation, LTV, debt yield, property type, geographic and local market dynamics, physical condition, cash flow volatility, leasing and tenant profile, loan structure and exit plan, and project sponsorship. Considering these factors, we rate our loans based on a five-point scale, "1" though "5", from less risk to greater ~~risk, which ratings are defined as follows:~~risk.

~~1—Very Low Risk—The underlying property performance has surpassed underwritten expectations,~~For collateral dependent loans that we determine foreclosure of the collateral is probable, we measure the expected losses based on the difference between the fair value of the collateral and the ~~sponsor’s business plan~~amortized cost basis of the loan as of the measurement date. For collateral dependent loans where we determine foreclosure is ~~generally complete. The property demonstrates stabilized occupancy and/or rental rates resulting in~~not probable, we apply a practical expedient to estimate expected losses using the difference between the collateral’s fair value (less costs to sell the asset if repayment is expected through the sale of the collateral) and the amortized cost basis of the loan. A loan is determined to be collateral dependent if (i)

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~~strong current~~a borrower or sponsor is experiencing financial difficulty, and (ii) the loan is expected to be substantially repaid through the sale of the underlying collateral; such determination requires the use of significant judgment and can be based on several factors subject to uncertainty. Considerations used in determination of financial difficulty may include, but are not limited to, whether the borrower's operating cash flow ~~and/or a very low loan-to-value ratio (<65%). At~~is sufficient to cover 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,~~current 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 loan-to-value ratio (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~~future debt service ~~payments, or there is an ample interest reserve or loan structure in place~~requirements, the borrower’s ability to provide the sponsor time to execute the value-improvement plan. The property exhibits a moderate loan-to-value ratio (<75%). Loan structure appropriately mitigates additional risks. The sponsor/manager has a stable credit history and experience owning or operating similar real estate.

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 loan-to-value ratio (>80%), andrefinance the loan, ~~covenants are unlikely~~market liquidity and other circumstances that can affect the borrower’s ability to ~~fully mitigate some risks. Interest payments may come from an interest reserve or sponsor equity.~~

~~5—Impaired/Loss Likely—A~~satisfy its contractual obligations under the 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 loan-to-value ratio (>90%), and default may be imminent.

agreement.

Refer to Note 2 to our condensed consolidated financial statements for the description of our significant accounting policies.

Recently ~~Adopted~~ Accounting ~~Standard~~

~~Earnings per Share~~Pronouncements

~~On January 1, 2022, we adopted~~In March 2020, the FASB issued ASU No. ~~2020-06,~~2020-04, ~~Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40)~~Reference Rate Reform (Topic 848): ~~Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity~~Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which ~~requires us~~provides temporary optional expedients and exceptions to ~~include convertible instruments in~~ the ~~diluted EPS calculation, regardless~~US GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens of ~~a company’s intent~~the expected market transition from LIBOR and ~~ability~~other interbank offered rates to ~~settle~~alternative reference rates. The guidance is effective upon issuance and generally may be elected over time through December 31, 2024, as extended under ASU No. 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848. We have not adopted any of the optional expedients or exceptions through June 30, 2023, but will continue to evaluate the possible adoption of any such ~~debt in cash.~~expedients or exceptions during the effective period as circumstances evolve.

~~We included~~In March 2022, the ~~potentially issuable shares related~~FASB issued ASU No. 2022-02, Financial Instruments — Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures, which eliminates the recognition and measurement guidance for a troubled debt restructuring for creditors that have adopted CECL and requires public business entities to present gross write-offs by year of origination in their vintage disclosures. On January 1, 2023, we adopted ASU 2022-02 on a prospective basis and the adoption had no significant impact on our Convertible Notes, when dilutive, in the diluted EPS calculations starting with the first quarter of 2022. Prior to December 31, 2021, all potentially issuable shares related to the Convertible Notes were excluded from the calculation of diluted EPS because we had the intent and ability to settle the Convertible Notes in cash.condensed consolidated financial statements.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We seek to manage our risks related to the credit quality of our assets, interest rates, liquidity, prepayment rates and market value, while at the same time seeking to provide an opportunity to stockholders to realize attractive risk-adjusted returns. While risks are inherent in any business enterprise, we seek to quantify and justify risks in light of available returns and to maintain capital levels consistent with the risks we undertake.

Credit Risk

Our investments are subject to credit risk, including the risk of default. The performance and value of our investments depend upon the sponsors' ability to operate the properties that serve as our collateral so that they produce cash flows adequate to pay interest and principal due to us. To monitor this risk, our Manager reviews our investment portfolio and is in regular contact with the sponsors, monitoring performance of the collateral and enforcing our rights as necessary.

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. The COVID-19 pandemic has adversely impacted the commercial real estate markets, causing reduced occupancy, requests from tenants for rent deferral or abatement, and delays in property renovations currently planned or underway. While the economy has improved significantly from the initial outbreak of the COVID-19 pandemic, these negative conditions may persist into the future and impair our borrowers’ ability to pay principal and interest due under our loan agreements. We maintain robust asset management relationships with our borrowers and have leveraged these relationships to address the potential impact of the COVID-19 pandemic on our loans secured by properties experiencing cash flow pressure, most significantly hospitality and retail assets, to which we have limited exposure.

Based on the limited loan modifications completed to date, and the relative performance of most modified loans, we are encouraged by our borrowers’ response to the COVID-19 pandemic’s impact on their properties and current trends. We believe our loan sponsors are generally committed to supporting assets collateralizing our loans through additional equity investments. While we believe the principal amounts of our loans are generally adequately protected by underlying collateral value and have adequate CECL reserves, there is a risk that we will not realize the entire principal value of certain investments.

Credit Yield Risk

Credit yields measure the return demanded on financial instruments by the lending market based on their risk of default. Increasing supply of credit-sensitive financial instruments and reduced demand will generally cause the market to require a higher yield on such financial instruments, resulting in a lower price for the financial instruments we hold.

Interest Rate Risk

~~Generally, the~~The composition of our investments is such that rising interest rates will increase our net income, while declining interest rates will generally decrease our net income. ~~Our net interest income currently benefits from in-the-money rate~~Rate floors inrelating to our loan portfolio ~~which benefit is expected to decrease as~~may offset some of the ~~index rates increase.~~impact from declining rates. There can be no assurance that we will continue to utilize rate floors. There can be no assurance of how our net income may be affected in future quarters, which will depend on, among other things, the interest rate environment and our then-current portfolio.

~~Recently,~~In recent years, interest rates ~~have~~had remained at relatively low levels on a historical ~~basis and~~basis. However, the ~~Federal Reserve maintained the~~

~~federal funds target range at 0.0% to 0.25% for much of 2021. However, in March 2022, the Federal Reserve approved a 0.25%~~

~~rate increase and in June 2022 approved a further 0.75% rate increase. The~~U.S. Federal Reserve has ~~indicated~~raised interest rates ten times since January 2022, and has also signaled that ~~in light of increasing signs of inflation, it foresees~~ further increases ~~in interest rates~~may be forthcoming throughout the ~~year and into 2023 and 2024.~~year.

As of June 30, ~~2022, 100.0% of~~2023, our accruing loan portfolio and related portfolio financing by principal amount earned or paid a floating rate of interest indexed ~~to one-month USD LIBOR and/or~~ Term SOFR. Accordingly, our interest income and expense will generally change directionally with index rates; however, in certain circumstances, rate floors relating to our loan portfolio may partially offset the impact from changing rates. As of June 30, ~~2022,~~2023, a 50 basis point and a 100 basis point decrease in the index rates would decrease our expected cash flows by approximately ~~$3.4~~$4.6 million and $9.3 million, or ~~$0.05~~($0.07) and ($0.13) per common share, respectively, for the following twelve-month period. Conversely, a 50 basis point and a 100 basis point increase in the index rates would increase our expected cash flows by approximately ~~$5.4~~$4.6 million and ~~$12.8~~$9.3 million, or ~~$0.08~~$0.07 and ~~$0.18~~$0.13 per common share, respectively, for the same period.

LIBOR Transition

OnOn March 5, 2021, the Financial Conduct Authority of the U.K. (the “FCA”), which regulates LIBOR, announced (the “FCA Announcement”) that all relevant LIBOR tenors ~~relevant to us~~ will cease to be published or will no longer be representative after June 30, 2023. The FCA Announcement coincides with the March 5, 2021 announcement of LIBOR’s administrator, the ICE Benchmark Administration Limited (the “IBA”), indicating that, as a result of not having access to input data necessary to calculate relevant LIBOR tenors ~~relevant to us~~ on a representative basis after June 30, 2023, the IBA would have to cease publication of such LIBOR tenors immediately after the last publication on June 30, 2023. Further, on March 15, 2022, the Consolidated Appropriations Act of 2022, which includes the Adjustable Interest Rate (LIBOR) Act, was signed into law in the United States. This legislation establishes a uniform benchmark replacement process for financial contracts maturing after June 30, 2023 that do not contain clearly defined or practicable fallback provisions. The legislation also creates a safe harbor that shields lenders from litigation if they choose to utilize a replacement rate recommended by the Board of Governors of the Federal Reserve.

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The United States Federal Reserve has also advised banks to cease entering into new contracts that use USD LIBOR as a reference rate. The Federal Reserve, in conjunction with the Alternative Reference Rate Committee, a committee convened by the Federal Reserve that includes major market participants, has identified the Secured Overnight Financing Rate, or SOFR, a new index calculated by short-term repurchase agreements, backed by Treasury securities, as its preferred alternative rate for LIBOR. There are significant differences between LIBOR and SOFR, such as LIBOR being an unsecured lending rate while SOFR is a secured lending rate, and SOFR is an overnight rate while LIBOR reflects term rates at different maturities. If our LIBOR-based borrowings are converted to SOFR, the differences between LIBOR and SOFR, could result in higher interest costs for us, which could have a material adverse effect on our operating results. Although SOFR is the ARRC’s recommended replacement rate, it is also possible that lenders may instead choose alternative replacement rates that may differ from LIBOR in ways similar to SOFR or in other ways that would result in higher interest costs for us. We cannot predict the effect of the decision not to sustain LIBOR, or the potential transition to SOFR or another alternative reference rate as LIBOR’s replacement.

As of June 30, ~~2022,~~ ~~73.7%~~2023, our loan portfolio and ~~26.3%~~ of our ~~loans by principal amount earned a floating rate of interest indexed to LIBOR and Term SOFR, respectively; and~~ ~~64.0%~~ ~~and~~ ~~36.0%~~ ~~of our outstanding~~ floating rate financing arrangements ~~bear interest indexed~~have been transitioned from LIBOR to ~~LIBOR and~~ Term SOFR, respectively. All of our LIBOR-based arrangements provide procedures for determining an alternative base rate in the event that LIBOR is discontinued. Regardless, there can be no assurances as to what additional alternative base rates may be and whether such base rate will be more or less favorable than LIBOR and any other unforeseen impacts of the discontinuation of LIBOR. We are monitoring the developments with respect to the phasing out of LIBOR and are working with our lenders and borrowers to minimize the impact of any LIBOR transition on our financial condition and results of operations, but can provide no assurances regarding the impact of the discontinuation of LIBOR.SOFR.

Prepayment Risk

Prepayment risk is the risk that principal will be repaid at an earlier date than anticipated, potentially causing the return on certain investments to be less than expected. As we receive prepayments of principal on our assets, any premiums paid on such assets are amortized against interest income. In general, an increase in prepayment rates accelerates the amortization of purchase premiums, thereby reducing the interest income earned on the assets. Conversely, discounts on such assets are accreted into interest income. In general, an increase in prepayment rates accelerates the accretion of purchase discounts, thereby increasing the interest income earned on the assets. Additionally, we may not be able to reinvest the principal repaid at the same or higher yield of the original investment.

Higher interest rates imposed by the Federal Reserve ~~to rein in inflation~~ may lead to a decrease in prepayment speeds and an increase in the number of our borrowers who exercise extension options, which could extend beyond the term of certain secured financing agreements we use to finance our loan investments. This could have a negative impact on our results of operations, and in some situations, we may be forced to sell assets to maintain adequate liquidity, which could cause us to incur losses.

Financing Risk

We finance our target assets using our repurchase facilities, our term lending agreements, our Term Loan ~~Financing,~~Facility, Warehouse Facility, Asset Based Financing, secured term loan, collateralized loan obligations and through syndicating senior participations in our originated senior loans. Over time, as market conditions change, we may use other forms of leverage in addition to these methods of financing. Weakness or volatility in the financial markets, the CRE and mortgage markets or the economy generally could adversely affect one or more of our lenders or potential lenders and could cause one or more of our lenders or potential lenders to be unwilling or unable to provide us with financing, or to decrease the amount of our available financing through a market to market, or to increase the costs of that financing.

Real Estate Risk

The market values of commercial real estate assets are subject to volatility and may be adversely affected by a number of factors, including, but not limited to, national, regional and local economic conditions (which may be adversely affected by industry slowdowns and other factors); local real estate conditions; changes or continued weakness in specific industry segments; construction quality, age and design; demographic factors; and retroactive changes to building or similar codes. In addition, decreases in property values reduce the value of the collateral and the potential proceeds available to a borrower to repay the underlying loans, which could also cause us to suffer losses.

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ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) that are designed to ensure that the information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and such information is accumulated and communicated to management, including the Chief Executive Officer and the Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurances of achieving the desired controls.

As of June 30, ~~2022,~~2023, we carried out an evaluation, under the supervision and with the participation of our management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of June 30, ~~2022,~~2023, our disclosure controls and procedures were effective to accomplish their objectives at the reasonable assurance level.

Changes in Internal Control over Financial Reporting

No change in our internal control over financial reporting (as such term is defined in Rule 13a-15(f) of the Exchange Act) occurred during the quarter ended June 30, ~~2022~~2023 that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The section entitled “Litigation” appearing in Note 1413 of our condensed consolidated financial statements included in this Form 10-Q is incorporated herein by reference.

ITEM 1A. RISK FACTORS

For information regarding the risk factors that could affect the Company’s business, results of operations, financial condition and liquidity, see the information under Part I, Item 1A. “Risk Factors” in the Form 10-K, which is accessible on the SEC’s website at www.sec.gov. There have been no material changes to the risk factors previously disclosed in the Form 10-K.

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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Issuer Purchases of Equity Securities

~~In May 2018, our board of directors approved a $100.0 million~~Under the Company's current share repurchase program, ~~effective June 12, 2018,~~ which was originally ~~scheduled to expire~~announced on ~~June 30, 2019. On~~May 9, 2018, and subsequently extended and/or increased on June 17, 2019, ~~we announced that our board of directors approved an extension of the program through June 30, 2020, and on~~ June 15, 2020 ~~our board of directors authorized a further extension of the program. Under the extended program, which no longer has an expiration date,~~and February 3, 2023, we may repurchase up to an aggregate of $100.0 million of our common stock ~~beginning July 1, 2020,~~effective as of February 3, 2023, of which up to $50.0 million may be repurchased under a pre-set trading plan meeting the requirements of Rule 10b5-1 under the Exchange Act, ~~that provides~~and provide for repurchases of common stock when the market price per share is below book value per share (calculated in accordance with GAAP as of ~~the~~ end of the most recent quarterly period for which financial statements are available), and the remaining $50.0 million may be used for repurchases in the open market, pursuant to pre-set trading plans meeting the requirements of Rule 10b5-1 under the Exchange Act, in privately negotiated transactions or otherwise. The timing, manner, price and amount of any common stock repurchases will be determined by us in our discretion and will depend on a variety of factors, including legal requirements, price and economic considerations, and market conditions. The program does not require us to repurchase any specific number of shares of common ~~stock,~~stock. The program does not have an expiration date and ~~the program~~ may be suspended, ~~extended,~~ modified or discontinued at any time.

~~The following table sets forth information regarding purchases of~~We did not repurchase any shares of our common stock ~~by us or on our behalf~~ during the

three months ended June 30, ~~2022:~~

Period Beginning Period Ending Total number of shares purchased Average price paid per share Total number of shares purchased as part of publicly announced program Amounts paid for shares purchased as part of publicly announced program
Approximate dollar value of shares that may yet be purchased under the program(A)
April 1, 2022 April 30, 2022 — $ — — $ — $ 100,000,000
May 1, 2022 May 31, 2022 — — — — 100,000,000
June 1, 2022 June 30, 2022 1,044,692 17.28 1,044,692 18,081,490 81,918,510
Total/Average 1,044,692 $ 17.28 $ 18,081,490

~~(A) Includes $31.9 million reserved for repurchases at prices below the then book value per share under pre-set trading plans meeting the requirements~~

~~of Rule 10b5-1 under the Exchange Act as~~2023. As of June 30, ~~2022.~~2023, we had $100.0 million of remaining capacity to repurchase shares under the program.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

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ITEM 6. EXHIBITS


Exhibit Number		Exhibit Description

	4.1	Supplemental Indenture No. 1, dated as of June 26, 2023, among KREF 2021-FL2 Ltd., KREF 2021-FL2 LLC, KREF CLO Loan Seller LLC, Wilmington Trust, National Association, and Wells Fargo Bank, National Association.

	10.1*	Amended and Restated Loan and Servicing Agreement, dated as of December 20, 2022, among KREF Holdings VII LLC, KREF Lending VII LLC, PNC Bank, National Association, Midland Loan Services, a division of PNC Bank, National Association, the Initial Lender, and KKR Capital Markets LLC.

	10.2*	First Amendment to Amended and Restated Loan and Servicing Agreement, dated as of June 27, 2023, among KREF Holdings VII LLC, KREF Lending VII LLC, PNC Bank, National Association, Midland Loan Services, a division of PNC Bank, National Association, and the Lender s parties thereto.

	10.3	Sixth Amendment to Amended and Restated Master Repurchase Agreement, dated May 10, 2023, between KREF Lending III LLC, KREF Lending III TRS LLC, Goldman Sachs Bank USA and, solely with respect to Section 3 thereof, KREF Holdings III LLC and KKR Real Estate Finance Holdings L.P.

	10.4	Third Omnibus Amendment to Master Repurchase Agreement, dated as of June 24, 2022, by and among Morgan Stanley Mortgage Capital Holdings LLC, for the benefit of the Buyers identified therein, and KREF Lending V LLC.

	10.5*	Fourth Omnibus Amendment to Master Repurchase Agreement, dated as of December 5, 2022, by and among Morgan Stanley Mortgage Capital Holdings LLC, for the benefit of the Buyers identified therein, KREF Lending V LLC, and KKR Real Estate Finance Holdings L.P.

	10.6*	Fifth Omnibus Amendment to Master Repurchase Agreement, dated as of April 28, 2023, by and among Morgan Stanley Mortgage Capital Holdings LLC, for the benefit of the Buyers identified therein, KREF Lending V LLC, and KKR Real Estate Finance Holdings L.P.

	31.1	Certificate of Matthew A. Salem, Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

	31.2	Certificate of Kendra L. Decious, Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

	32.1	Certificate of Matthew A. Salem, Chief Executive Officer, pursuant to Section 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).

	32.2	Certificate of Kendra L. Decious, Chief Financial Officer, pursuant to Section 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).

	101.INS	Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

	101.SCH	Inline XBRL Taxonomy Extension Schema Document.

	101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document.

	101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document.

	101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document.

	101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document.

	104	Cover Page Interactive Data File, formatted in Inline XBRL and contained in Exhibit 101.

~~_______________________~~* Certain information contained in this agreement has been omitted because it is not material and is the type that the registrant treats as private or confidential.

_____________________

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		KKR REAL ESTATE FINANCE TRUST INC.

Date:	July ~~25, 2022~~24, 2023	By:	/s/ Matthew A. Salem
			Name: Matthew A. Salem
			Title: Chief Executive Officer
			(Principal Executive Officer)

Date:	July ~~25, 2022~~24, 2023	By:	/s/ Kendra L. Decious
			Name: Kendra L. Decious
			Title: Chief Financial Officer and Treasurer
			(Principal Financial and Accounting Officer)

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	Permanent Equity																				Temporary Equity
	KKR Real Estate Finance Trust Inc.
	Preferred Stock			Series A Preferred Stock			Common Stock
	Shares	Stated Value		Shares	Par Value		Shares	Par Value		Additional Paid-In Capital		Accumulated Deficit		Repurchased Stock		Total KKR Real Estate Finance Trust Inc. Stockholders' Equity		Noncontrolling Interests in Equity of Consolidated Joint Venture		Total Permanent Equity		Redeemable Preferred Stock
Balance at December 31, 2021	—	$	—	6,900,000	$	69	61,370,732	$	613	$	1,459,959	$	(38,208)	$	(60,999)	$	1,361,434	$	147	$	1,361,581	$	—
Issuance of common stock	—	—		—	—		6,562.972	66		135,205		—		—		135,271		—		135,271		—
Issuance of preferred stock	—	—		6,210,000	62		—	—		151,105		—		—		151,167		—		151,167		—
Offering costs	—	—		—	—		—	—		(1,055)		—		—		(1,055)		—		(1,055)		—
Contribution by noncontrolling interest	—	—		—	—		—	—		—		—		—		—		94		94		—

Series A preferred dividends declared, $0.41 per share	—	—		—	—		—	—		—		(5,326)		—		(5,326)		—		(5,326)		—
Common dividends declared, $0.43 per share	—	—		—	—		—	—		—		(29,211)		—		(29,211)		—		(29,211)		—
Participating security dividends declared, $0.43 per share	—	—		—	—		—	—		—		(339)		—		(339)		—		(339)		—
Stock-based compensation, net	—	—		—	—		—	—		2,126		—		—		2,126		—		2,126		—
Net income (loss)	—	—		—	—		—	—		—		35,468		—		35,468		(56)		35,412		—
Balance at March 31, 2022	—	$	—	13,110,000	$	131	67,933,704	$	679	$	1,747,340	$	(37,616)	$	(60,999)	$	1,649,535	$	185	$	1,649,720	$	—
Issuance of common stock	—	—		—	—		2,750,000	28		53,625		—		—		53,653		—		53,653		—
Offering costs	—	—		—	—		—	—		(280)		—		—		(280)		—		(280)		—

Repurchase of common stock	—	—		—	—		(1,044,692)	(10)		—		—		(18,071)		(18,081)		—		(18,081)		—
Series A preferred dividends declared, $0.41 per share	—	—		—	—		—	—		—		(5,326)		—		(5,326)		—		(5,326)		—
Common dividends declared, $0.43 per share	—	—		—	—		—	—		—		(29,951)		—		(29,951)		—		(29,951)		—
Participating security dividends declared, $0.43 per share	—	—		—	—		—	—		—		(326)		—		(326)		—		(326)		—
Stock-based compensation, net	—	—		—	—		15,520	*		2,040		—		—		2,040		—		2,040		—
Net income (loss)	—	—		—	—		—	—		—		25,061		—		25,061		(66)		24,995		—
Balance at June 30, 2022	—	$	—	13,110,000	$	131	69,654,532	$	697	$	1,802,725	$	(48,158)	$	(79,070)	$	1,676,325	$	119	$	1,676,444	$	—


	June 30, 2022		December 17, 2021(C)
Assets
Cash	$	1,619	$	3,377
Real estate owned - land	78,569		78,569
Real estate owned - land improvements	599		—
In-place lease intangibles(A)	301		335
Tenant receivables(A)	566		—
Other assets(A)	24		1,119
Total	$	81,678	$	83,400
Liability
Below-market lease intangibles(B)	$	1,643	$	1,825
Accounts payable, accrued expenses and other liabilities(B)	1,376		1,742
Total	$	3,019	$	3,567


	June 30, 2022		December 31, 2021
Principal amount	$	348,250	$	350,000
Unamortized discount	(5,158)		(5,652)
Deferred financing costs	(5,483)		(5,799)
Carrying amount	$	337,609	$	338,549


	Restricted Stock Units	Weighted Average Grant Date Fair Value Per RSU(A)
Unvested as of December 31, 2021	808,330	$	19.50
Granted	27,625	19.91
Vested	(15,520)	19.65
Forfeited / cancelled	(28,501)	19.04
Unvested as of June 30, 2022	791,934	$	19.53


Period Beginning	Period Ending	Total number of shares purchased	Average price paid per share		Total number of shares purchased as part of publicly announced program	Amounts paid for shares purchased as part of publicly announced program		Approximate dollar value of shares that may yet be purchased under the program(A)
April 1, 2022	April 30, 2022	—	$	—	—	$	—	$	100,000,000
May 1, 2022	May 31, 2022	—	—		—	—		100,000,000
June 1, 2022	June 30, 2022	1,044,692	17.28		1,044,692	18,081,490		81,918,510
Total/Average		1,044,692	$	17.28		$	18,081,490