KKR REAL ESTATE FINANCE TRUST INC. MANAGEMENT REPORT OF FINANCIAL POSITION AND RESULTS OF OPERATIONS (Form 10-K)

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The following discussion should be read in conjunction with the consolidated
financial statements and notes thereto appearing elsewhere in this Annual Report
on Form 10-K. 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 "Cautionary Note Regarding
Forward-Looking Statements," and Part I, Item 1A. "Risk Factors" in this Annual
Report on Form 10-K. Actual results may differ materially from those contained
in any forward-looking statements.

introduction


KKR Real Estate Finance Trust Inc. is a real estate finance company that focuses
primarily on originating and acquiring senior loans secured by CRE assets. We
are externally managed by KKR Real Estate Finance Manager LLC, an indirect
subsidiary of KKR, and are a REIT traded on the NYSE under the symbol "KREF." We
are headquartered in New York City.

We conduct our operations as a REIT for U.S. federal income tax purposes. We
generally will not be subject to U.S. federal income taxes on our taxable income
to the extent that we annually distribute at least 90% of our net taxable income
to stockholders and maintain our qualification as a REIT. We also operate our
business in a manner that permits us to maintain an exclusion from registration
under the Investment Company Act. We are organized as a holding company and
conduct our business primarily through our various subsidiaries.

2021 Highlights

Operating results:


•Net Income Attributable to Common Stockholders of $125.6 million, or $2.21 per
diluted share of common stock, a 130% increase over 2020 on a per share basis.
•Distributable Earnings of $92.4 million, or $1.63 per diluted share of common
stock, net of $32.9 million, or ($0.58) per diluted share, of realized losses on
loan write-offs.
•Declared dividends of $1.72 per common share. The fourth quarter dividend of
$0.43 per common share produced an annualized yield of 8.26% on our closing
stock price as of December 31, 2021.

Investing activity:


•Originated and funded a record $4.8 billion and $3.6 billion, respectively,
relating to 37 floating-rate loans. Total originations for 2021 represented a
428% and 56% increase over 2020 and 2019 originations, respectively.
•Current funded loan portfolio of $6.7 billion is 100% performing, 100% floating
rate with a weighted average LTV of 68% as of December 31, 2021.
•Took title to the collateral of one defaulted senior retail loan with an
outstanding principal balance and net carrying value of $109.6 million and
$69.3 million, respectively. Accordingly, we recognized an $8.2 million GAAP
gain from reversal of the allowance for credit losses and recognized a $32.1
million realized loss on write-off through distributable earnings.

Portfolio financing:


•Non-mark-to-market financing is $3.8 billion as of December 31, 2021,
representing 71% of our total outstanding portfolio financing.
•Closed a $1.3 billion managed CLO with two-year reinvestment period providing
$1.1 billion of non-mark financing equating to an 84.25% advance rate, at a
weighted average cost of capital of L+1.30% before transaction costs.
Concurrently, fully repaid the outstanding notes under our 2018 CLO.
•Completed repricing of $297.8 million existing secured term loan and a $52.2
million add-on, for an aggregate principal amount of $350.0 million due
September 2027. The new secured term loan bears interest at L+3.50% and is
subject to a LIBOR floor of 0.50%, which is an aggregate improvement of 1.75%.
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•Entered into a new $500.0 million term lending agreement, which provides
asset-based financing on a non-mark-to-market basis with matched-term up to five
years.

Capital Markets Activity:

•Issued 6,900,000 shares of 6.5% Series A Cumulative Redeemable Preferred Stock
(the "Series A Preferred Stock"), at a liquidation price of $25.00 per share,
and received net proceeds of $167.1 million.
•Completed an accretive underwritten public offering of 5,547,361 common shares
at $21.76 per share, less applicable transaction costs, resulting in $120.4
million of net proceeds. The offering was $0.22 per share accretive to book
value per share.
•Our common book value was $1,188.9 million, or $19.37 per common share, as of
December 31, 2021, representing seven consecutive quarters of book value
accretion.

RECENT DEVELOPMENTS

In January 2022we issued an additional 6,210,000 shares of 6.5% Series A Preferred Shares, which included the exercise of the underwriters’ option to purchase additional Series A Preferred Shares, and received net proceeds after subscription discount and commission of $151.2 million.

In February 2022we set a price $1.0 billion Managed Multi-Family CLO (“KREF 2022-FL3”) should close to or around February 10, 2022, subject to customary closing conditions. KREF 2022-FL3 will provide us with equal term financing on a non-mark-to-market, non-recourse basis, and includes a two-year reinvestment period with an 84.75% upfront rate at an average operating cost weighted capital of Terme SOFR plus 1.71%, before transaction costs.

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Key Financial Measures and Indicators

As a real estate finance company, we believe that the primary financial measures and indicators of our business are earnings per share, declared dividends, 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
                                                     December 31,                    Year Ended December 31,
                                                         2021                      2021                      2020
Net income attributable to common                 $        35,198          $     125,635               $      53,553

shareholders

Weighted-average number of shares of common
stock outstanding
Basic                                                     59,364,672                  56,571,200             55,985,014
Diluted                                                   59,453,264                  56,783,388             56,057,237
Net income per share, basic                       $          0.59          $        2.22               $        0.96
Net income per share, diluted                     $          0.59          $        2.21               $        0.96
Dividends declared per share                      $          0.43          $        1.72               $        1.72



Distributable Earnings

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

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

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

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

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

(1) For purposes of calculating incentive compensation under our management agreement, adjusted equity excludes: (i) issued equity instruments that provide for fixed distributions or other debt features and (ii ) the unrealized provision for (the reversal of) credit losses.

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Contents

The following table provides a reconciliation between GAAP net income attributable to common shareholders and distributable income (amounts in thousands, except per share and per share data):

                                                 Three Months Ended
                                                    December 31,                    Year Ended December 31,
                                                        2021                      2021                     2020

Net income (loss) attributable to common shares $35,198 $

     125,635              $      53,553

Shareholders

Adjustments

Non-cash equity compensation expense                       1,413                  7,428                      5,676
Unrealized (gains) or losses(A)                            1,463                  1,059                      4,036
Provision for (reversal of) credit losses,                (3,077)                (4,059)                    50,344

report

Loan write-offs(B)                                       (32,905)               (32,905)                    (4,650)
Gain on redemption of non-voting manager                  (5,126)                (5,126)                         -

units

Non-cash convertible notes discount                           91                    361                        362

amortization

Distributable Earnings                           $        (2,943)         $      92,393              $     109,321
Weighted average number of shares of
common stock outstanding
 Basic                                                   59,364,672                 56,571,200             55,985,014
 Diluted(C)                                              59,364,672                 56,783,388             56,057,237
Distributable Earnings per Diluted               $         (0.05)         $        1.63              $        1.95
Weighted Average Share



(A)  Includes $2.5 million, $3.3 million and $0.2 million non-cash redemption
value adjustment of our Special Non-Voting Preferred Stock, and ($1.1) million,
($2.2) million and $3.9 million of unrealized mark-to-market adjustment to our
RECOP I's underlying CMBS investments for the three months ended December 31,
2021, and for the years ended December 31, 2021 and 2020, respectively.
(B)  Includes $32.1 million write-off on a defaulted senior retail loan which we
took title of the underlying property and $0.9 million write-off of the
remaining balance on an impaired mezzanine retail loan during the year ended
December 31, 2021. Includes $4.7 million write-off on a $5.5 million mezzanine
retail loan, which was 5-rated and put on non-accrual status, during the year
ended December 31, 2020.
(C)  Includes zero, 212,188 and 72,223 dilutive restricted stock units for the
three months ended December 31, 2021 and for the years ended December 31, 2021
and 2020, respectively.

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):
                                                                       Year Ended December 31,
                                                                     2021                    2020

KKR Real Estate Financing Trust Inc. Equity $1,361,434 $1,043,554
Series A Preferred Shares (Preferred Liquidation of

                  (172,500)                      -
$25.00 per share)
Common stockholders' equity                                   $     1,188,934          $    1,043,554
Shares of common stock issued and outstanding at period            61,370,732              55,619,428

to finish

Book value per share of common stock                          $         

7:37 p.m. $18.76




Book value as of December 31, 2021 included the impact of an estimated CECL
credit loss allowance of $23.7 million, or ($0.39) per common share. See Note 2
- Summary of Significant Accounting Policies, to our consolidated financial
statements included in this Form 10-K for detailed discussion of allowance for
credit losses.

Book value as of December 31, 2020 included a cumulative non-cash redemption
value adjustment (since issuance of the Special Non-Voting Preferred Stock, or
"SNVPS"), which decreased our book value by $1.9 million, or ($0.03) per common
share. On October 1, 2021, the KKR Member exercised its Call Option to redeem
the non-voting units in our Manager, including the non-voting manager units held
by us. Accordingly, we received a cash call amount of $5.1 million and
concurrently redeemed the SNVPS, which resulted in a net book value accretion of
$1.9 million, or $0.03 per common share, during the year ended December 31,
2021, thus eliminating the cumulative negative impact of the SNVPS on our book
value. See Note 11 - Equity, to our consolidated financial statements included
in this Form 10-K for detailed discussion of the SNVPS.
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Our Portfolio

We have established a $6,791.5 million portfolio of diversified investments,
consisting primarily of performing senior and mezzanine commercial real estate
loans as of December 31, 2021.

Our loan portfolio is 100.0% performing as of December 31, 2021. During the year
ended December 31, 2021 and the month ended January 31, 2022, we collected 97.3%
and 100.0% of interest payments due on our loan portfolio, respectively. As of
December 31, 2021, the average risk rating of our loan portfolio was 2.9
(Average Risk), weighted by total loan exposure. As of December 31, 2021, 94.1%
of our loans, based on total loan exposure, was risk-rated 3 or better. As of
December 31, 2021, the average loan commitment in our portfolio was
$130.5 million and multifamily and office loans comprised 74% of our loan
portfolio, while hospitality loans comprised 7% of the portfolio.

In addition to our loan portfolio, as of December 31, 2021, as a result of
taking title to the collateral of one defaulted senior retail loan, we owned one
REO asset with a net carrying value of $78.6 million, comprised of the fair
value of the acquired retail property and the capitalized transaction costs, as
of December 31, 2021. This property is held for investment and reflected on our
consolidated balance sheets at its estimated fair value at the time of
acquisition plus related acquisition costs.

Since our IPO, we have continued to execute on our primary investment strategy
of originating floating-rate transitional senior loans and, as we continue to
scale our loan portfolio, we expect that our originations will continue to be
heavily weighted toward floating-rate loans. As of December 31, 2021, 100.0% of
our loans by total loan exposure earned a floating rate of interest and
approximately 54% of our portfolio was subject to a LIBOR floor of at least
0.25%, with a weighted average floor of 0.74%. 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
December 31, 2021, 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 December 31, 2021:
                    [[Image Removed: kref-20211231_g5.jpg]]

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


(A)  Excludes: (i) one REO retail asset on a defaulted loan with net carrying
value of $78.6 million as of December 31, 2021, (ii) CMBS B-Piece investments
held through RECOP I, an equity method investment and (iii) one impaired
mezzanine loan with an outstanding principal of $5.5 million that was fully
written off.
(B)  Senior loans include senior mortgages and similar credit quality loans,
including related contiguous junior participations in senior loans where we have
financed a loan with structural leverage through the non-recourse sale of a
corresponding first mortgage.
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(C)  We classify a loan as life science if more than 50% of the gross leasable
area is leased to, or will be converted to, life science-related space.
(D)  Excludes one real estate corporate loan to a multifamily operator with an
outstanding principal amount of $41.1 million, representing 0.6% of our
commercial real estate loans as of December 31, 2021.
(E)  LTV is generally based on the initial loan amount divided by the as-is
appraised value as of the date the loan was originated or by the current
principal amount as of the date of the most recent as-is appraised value.

The following table details our quarterly loan activity (dollars in thousands):
                                                                              Three Months Ended                                                      Year Ended
                                                                                              September 30,         December 31,          December 31,          December 31,
                                              March 31, 2021           June 30, 2021              2021                  2021                  2021                  2020
Loan originations                           $       534,500          $      967,108          $  1,536,993          $  1,804,897          $  4,843,498          $    917,851
Loan fundings(A)                            $       575,826          $      558,387          $  1,142,969          $  1,680,890          $  3,958,072          $    961,455
Loan repayments/syndications(B)                    (244,348)               (270,980)             (934,899)             (679,749)           (2,129,976) 

(1,042,864)

Net fundings                                        331,478                 287,407               208,070             1,001,141             1,828,096               (81,409)
PIK interest                                            845                     458                   373                   418                 2,094                 4,231
Write-off                                                 -                       -                     -               (32,905)              (32,905)               (4,650)
Transfer to REO                                           -                       -                     -               (77,516)              (77,516)                    -
Total activity                              $       332,323          $     

287,865 $208,443 $891,138 $1,719,769

($81,828)



(A)  Includes initial funding of new loans and additional fundings made under
existing loans.
(B)  Excludes $150.5 million, $150.5 million and $79.9 million of proceeds from
senior note syndications during the three months ended March 31, 2021 and the
years ended December 31, 2021 and 2020, respectively.

The following table details the overall statistics of our loan portfolio in
December 31, 2021 (dollars in thousands):

                                                                                       Total Loan Exposure(A)
                                          Balance Sheet              Total Loan             Floating Rate
                                            Portfolio                Portfolio                  Loans              Fixed Rate Loans
Number of loans                                         63                       62                      62                        -
Principal balance                       $        6,364,105       $        6,677,239       $       6,677,239       $                -
Amortized cost                          $        6,316,733       $        6,635,366       $       6,635,366       $                -
Unfunded loan commitments(B)            $        1,367,880       $        1,367,880       $       1,367,880       $                -
Weighted-average cash coupon(C)                     4.1  %               L + 3.3  %              L + 3.3  %                     n.a.
Weighted-average all-in yield(C)                    4.4  %               L + 3.6  %              L + 3.6  %                     n.a.
Weighted-average maximum maturity                      3.6                      3.6                     3.6                     n.a.
(years)(D)
LTV(E)                                               68  %                    68  %                   68  %                     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 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 December 31, 2021, 100.0% of floating rate loans by principal
balance are indexed to one-month USD LIBOR. In addition to cash
coupon, all-in yield includes the amortization of deferred origination fees,
loan origination costs and purchase discounts. Cash coupon and all-in yield for
the total portfolio assume applicable floating benchmark rates as of
December 31, 2021. L = the greater of one-month USD LIBOR; spot rate of 0.10%,
and the applicable contractual LIBOR floor, included in portfolio-wide averages
represented as fixed rates. Does not factor in prepayment fee income that might
be earned upon prepayment.
(D)   Maximum maturity assumes all extension options are exercised by the
borrower; however, our loans may be repaid prior to such date. As of
December 31, 2021, based on total loan exposure, 65.4% of our loans were subject
to yield maintenance or other prepayment restrictions and 34.6% were open to
repayment by the borrower without penalty.
(E)   LTV is generally based on the initial loan amount divided by the as-is
appraised value as of the date the loan was originated or by the current
principal amount as of the date of the most recent as-is appraised value.
Weighted average LTV excludes one real estate corporate loan to a multifamily
operator with an outstanding principal of $41.1 million as of December 31, 2021.



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The table below sets forth additional information relating to our portfolio as
of December 31, 2021 (dollars in millions):
                                                                                                                                              Committed               Current
                                                                                                                        Total Whole           Principal              Principal                                                          Max Remaining Term          Loan Per SF / Unit
            Investment(A)                  Location                  Property Type             Investment Date            Loan(B)             Amount(B)               Amount              Net Equity(C)          Coupon(D)(E)              (Years)(D)(F)                   / Key                 LTV(D)(G)           Risk Rating
        Senior Loans(I)
      1 Senior Loan                 Arlington, VA                Multifamily                           9/30/2021       $    381.0          $       381.0          $      352.9          $         78.8              L + 3.2                        4.8              $ 317,965 / unit                    69  %             3
      2 Senior Loan                 Bellevue, WA                 Office                                9/13/2021            520.8                  260.4                  61.0                    26.4              L + 3.6                        5.3              $ 200 / SF                          63                3
      3 Senior Loan                 Los Angeles, CA              Multifamily                           2/19/2021            260.0                  260.0                 249.7                    50.8              L + 3.6                        4.2              $ 465,874 / unit                    68                3
      4 Senior Loan                 Boston, MA                   Life Science                          5/24/2018            250.5                  250.5                 243.6                    55.4              L + 3.2                        2.0              $ 521 / SF                          53                1
      5 Senior Loan                 Mountain View, CA            Office                                7/14/2021            362.8                  250.0                 184.1                    45.9              L + 3.3                        4.6              $ 599 / SF                          73                3
      6 Senior Loan                 New York, NY                 Condo (Residential)                  12/20/2018            234.5                  234.5                 210.7                    40.0              L + 3.6                        2.0              $ 1,316 / SF                        71                4
      7 Senior Loan                 Bronx, NY                    Industrial                            8/27/2021            381.2                  228.7                  97.5                    95.8              L + 4.1                        4.7              $ 118 / SF                          52                3
      8 Senior Loan                 Various                      Multifamily                           5/31/2019            216.5                  216.5                 215.3                    37.7              L + 3.1                        2.4              $ 201,206 / unit                    74                3
      9 Senior Loan(J)              Various                      Industrial                            6/30/2021            425.0                  212.5                   3.7                     1.0              L + 5.4                        4.5              $ 8 / SF                            74                3
     10 Senior Loan                 Minneapolis, MN              Office                               11/13/2017            194.4                  194.4                 194.4                    32.8              L + 3.8                        0.9              $ 179 / SF                          65                2
     11 Senior Loan                 Washington, D.C.             Office                                11/9/2021            187.7                  187.7                 111.9                    26.7              L + 3.3                        4.9              $ 321 / SF                          55                3
     12 Senior Loan                 Boston, MA                   Office                                 2/4/2021            375.0                  187.5                 187.5                    37.4              L + 3.3                        4.1              $ 506 / SF                          71                3
     13 Senior Loan                 Chicago, IL                  Multifamily                            6/6/2019            186.0                  186.0                 179.5                    32.4              L + 3.6                        2.4              $ 364,837 / unit                    72                3
     14 Senior Loan                 The Woodlands, TX            Hospitality                           9/15/2021            183.3                  183.3                 168.3                    29.8              L + 4.2                        4.8              $ 185,155 / key                     64                3
     15 Senior Loan                 Philadelphia, PA             Office                                4/11/2019            182.6                  182.6                 156.9                    24.6              L + 2.6                        2.4              $ 219 / SF                          68                3
     16 Senior Loan                 Washington, D.C.             Office                               12/20/2019            175.5                  175.5                 119.7                    36.5              L + 3.4                        3.0              $ 586 / SF                          58                3
     17 Senior Loan                 West Palm Beach, FL          Multifamily                          12/29/2021            171.5                  171.5                 169.2                    70.6              L + 2.7                        5.0              $ 208,405 / unit                    73                3
     18 Senior Loan                 Chicago, IL                  Office                                7/15/2019            170.0                  170.0                 136.6                    25.9              L + 3.3                        2.6              $ 131 / SF                          59                3
     19 Senior Loan                 Boston, MA                   Life Science                          4/27/2021            332.3                  166.2                 123.1                    33.3              L + 3.6                        4.4              $ 511 / SF                          66                3
     20 Senior Loan                 Philadelphia, PA             Office                                6/19/2018            165.0                  165.0                 165.0                    72.1              L + 2.5                        1.5              $ 169 / SF                          71                3
     21 Senior Loan                 New York, NY                 Multifamily                           12/5/2018            163.0                  163.0                 148.0                    22.3              L + 2.6                        1.9              $ 556,391 / unit                    77                3
     22 Senior Loan                 Oakland, CA                  Office                               10/23/2020            509.9                  159.7                 106.5                    16.8              L + 4.3                        3.9              $ 306 / SF                          65                3
     23 Senior Loan                 Plano, TX                    Office                                 2/6/2020            153.7                  153.7                 131.0                    19.8              L + 2.7                        3.1              $ 182 / SF                          63                2
     24 Senior Loan                 Seattle, WA                  Life Science                          10/1/2021            188.0                  140.3                  87.3                    21.1              L + 3.1                        4.8              $ 555 / SF                          69                3
     25 Senior Loan                 Boston, MA                   Multifamily                           3/29/2019            138.0                  138.0                 137.0                    29.5              L + 2.7                        2.3              $ 351,282 / unit                    63                3
     26 Senior Loan                 Dallas, TX                   Office                               12/10/2021            138.0                  138.0                 135.8                    24.8              L + 3.6                        4.9              $ 432 / SF                          68                3
     27 Senior Loan                 Fort Lauderdale, FL          Hospitality                           11/9/2018            130.0                  130.0                 130.0                    24.1              L + 3.4                        1.9              $ 375,723 / key                     66                3
     28 Senior Loan                 Fontana, CA                  Industrial                            5/11/2021            119.9                  119.9                  43.2                    14.0              L + 4.6                        4.4              $ 37 / SF                           64                3
     29 Senior Loan                 Irving, TX                   Multifamily                           4/22/2021            117.6                  117.6                 108.9                    17.1              L + 3.3                        4.4              $ 119,949 / unit                       70             3
     30 Senior Loan                 Cambridge, MA                Life Science                         12/22/2021            401.3                  115.7                  50.6                    11.5              L + 3.9                        5.0              $ 469 / SF                          51                3
     31 Senior Loan                 Pittsburgh, PA               Student Housing                        6/8/2021            112.5                  112.5                 112.5                    16.9              L + 2.9                        4.4              $ 155,602 / bed                     74                3
     32 Senior Loan                 Las Vegas, NV                Multifamily                          12/28/2021            106.3                  106.3                 102.0                    24.5              L + 2.7                        5.0              $ 193,182 / unit                    61                3
     33 Senior Loan                 Doral, FL                    Multifamily                          12/10/2021            212.0                  106.0                 106.0                    25.6              L + 2.8                        4.9              $ 335,975 / unit                    77                3
     34 Senior Loan                 San Diego, CA                Multifamily                          10/20/2021            103.5                  103.5                 103.5                    18.3              L + 2.8                        4.9              $ 448,052 / unit                    71                3
     35 Senior Loan                 Orlando, FL                  Multifamily                          12/14/2021            102.4                  102.4                  88.9                    21.2              L + 3.0                        5.0              $ 234,565 / unit                    74                3
     36 Senior Loan                 Brisbane, CA                 Life Science                          7/22/2021             95.0                   95.0                  85.0                    16.3              L + 3.0                        4.6              $ 734 / SF                          71                3
     37 Senior Loan                 State College, PA            Student Housing                      10/15/2019             93.4                   93.4                  85.3                    27.6              L + 2.7                        2.9              $ 71,474 / bed                      64                3


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                                                                                                                                                     Committed             Current
                                                                                                                              Total Whole            Principal            Principal                                                          Max Remaining Term          Loan Per SF / Unit
              Investment(A)                    Location                   Property Type              Investment Date            Loan(B)              Amount(B)              Amount             Net Equity(C)          Coupon(D)(E)              (Years)(D)(F)                   / Key                 LTV(D)(G)           Risk Rating
    38 Senior Loan                       Dallas, TX                  Multifamily                            12/23/2021              90.0                  90.0                 77.5                    18.7              L + 2.8                        5.0              $ 238,488 / unit                    67                3
    39 Senior Loan                       Miami, FL                   Multifamily                            10/14/2021              89.5                  89.5                 89.5                    20.5              L + 2.8                        4.9              $ 304,422 / unit                    76                3
    40 Senior Loan                       Denver, CO                  Multifamily                             6/24/2021              88.5                  88.5                 88.5                    16.2              L + 3.0                        4.5              $ 295,000 / unit                    77                3
    41 Senior Loan                       Dallas, TX                  Office                                  1/22/2021              87.0                  87.0                 87.0                    21.1              L + 3.3                        4.1              $ 288 / SF                          65                3
    42 Senior Loan                       Charlotte, NC               Multifamily                            12/14/2021              86.8                  86.8                 76.0                    18.1              L + 3.0                        5.0              $ 206,522 / unit                    74                3
    43 Senior Loan                       New York, NY                Multifamily                             3/29/2018              86.0                  86.0                 86.0                    13.2              L + 4.0                        1.3              $ 462,366 / unit                    63                2
    44 Senior Loan                       Mesa, AZ                    Industrial                               5/4/2021              84.3                  84.3                 57.0                    23.9              L+ 3.2                         4.4              $ 66 / SF                           55                3
    45 Senior Loan                       Hollywood, FL               Multifamily                            12/20/2021              81.0                  81.0                 81.0                    19.4              L + 3.0                        5.0              $ 327,935 / unit                    74                3
    46 Senior Loan                       Seattle, WA                 Office                                  3/20/2018              80.7                  80.7                 80.7                    13.4              L + 4.1                        1.3              $ 468 / SF                          56                3
    47 Senior Loan                       Brooklyn, NY                Hospitality                             1/18/2019              76.2                  76.2                 76.2                    16.2              L + 2.9                        2.1              $ 389,000 / key                     69                4
    48 Senior Loan                       Phoenix, AZ                 Single Family Rental                    4/22/2021              72.1                  72.1                 15.7                     8.1              L + 4.8                        4.4              $ 34,268 / unit                     50                3
    49 Senior Loan                       Arlington, VA               Multifamily                            10/23/2020             141.8                  70.9                 70.9                    11.5              L + 3.8                        3.8              $ 393,858 / unit                    73                3
    50 Senior Loan                       Denver, CO                  Multifamily                             9/14/2021              70.3                  70.3                 69.3                    12.0              L + 2.7                        4.8              $ 286,157 / unit                    78                3
    51 Senior Loan                       Queens, NY                  Industrial                              7/21/2017              70.1                  70.1                 67.5                    17.3              L + 3.0                        0.6              $ 112 / SF                          77                4
    52 Senior Loan                       Washington, D.C.            Multifamily                             12/4/2020              69.0                  69.0                 66.3                    10.3              L + 3.5                        3.9              $ 265,132 / unit                    63                3
    53 Senior Loan                       Dallas, TX                  Multifamily                             8/18/2021              68.2                  68.2                 68.2                     9.6              L + 3.8                        4.7              $ 189,444 / unit                    70                3
    54 Senior Loan                       Austin, TX                  Multifamily                             9/12/2019              67.5                  67.5                 67.5                    10.5              L + 2.5                        2.7              $ 191,218 / unit                    74                3
    55 Senior Loan                       Nashville, TN               Hospitality                             12/9/2021              66.0                  66.0                 64.3                     9.7              L + 3.6                        5.0              $ 279,498 / key                     68                3
    56 Senior Loan                       Atlanta, GA                 Multifamily                            12/10/2021              61.5                  61.5                 55.4                    13.3              L + 2.9                        5.0              $ 183,542 / unit                    67                3
    57 Senior Loan                       Durham, NC                  Multifamily                            12/15/2021              60.0                  60.0                 50.0                    49.4              L + 2.9                        5.0              $ 144,795 / unit                    67                3
    58 Senior Loan                       Sharon, MA                  Multifamily                             12/1/2021              56.9                  56.9                 56.9                    13.8              L + 2.8                        4.9              $ 296,484 / unit                    70                3
    59 Senior Loan                       Georgetown, TX              Multifamily                            12/16/2021              41.8                  41.8                 41.8                    41.4              L + 3.3                        5.0              $ 199,048 / unit                    68                3
    60 Senior Loan(K)                    New York, NY                Condo (Residential)                      8/4/2017              39.9                  39.9                 39.9                    20.4              L + 4.2                        0.3              $ 1,333 / SF                        73                4
    61 Senior Loan                       Denver, CO                  Industrial                             12/11/2020              28.8                  28.8                 10.7                    10.3              L + 3.8                        4.0              $ 21 / SF                           61                3
       Total/Weighted Average                                                                                                $  10,004.1          $    8,051.8          $   6,636.2          $      1,623.6             L + 3.2%                        3.6                                                  68  %            2.9
       Senior Loans Unlevered
       Non-Senior Loans
     1 Corporate                         n.a.                        Multifamily                            12/11/2020             102.6                  41.1                 41.1                    40.5             L + 12.0                        4.0              n.a.                                 n.a.             3
       Total/Weighted Average                                                                                                $     102.6          $       41.1          $      41.1          $         40.5               12.3%                         4.0                                                   n.a.            3.0

Deleveraged non-senior loans

       CMBS B-Pieces
     1 RECOP I(H)                        Various                     Various                                 2/13/2017                 n.a.               40.0                 35.7                    35.7                4.6                          7.4              n.a.                                58               n.a.
       Total/Weighted Average                                                                                                                     $       40.0          $      35.7          $         35.7               4.6%                          7.4                                                  58  %
       CMBS B-Pieces Unlevered
       Real Estate Owned
     1 Real Estate Asset                 Portland, OR                Retail                                 12/16/2021                 n.a.                  n.a.              78.6                    78.4               n.a.                                n.a.       n.a.                                 n.a.            n.a.
       Total/Weighted Average                                                                                                                                           $      78.6          $         78.4
       Real Estate Owned
       Grand Total / Weighted                                                                                                                     $    8,132.8          $   6,791.5          $      1,778.2               4.0%                          3.6                                                  68  %            2.9
       Average


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*  Numbers presented may not foot due to rounding.
(A)  Our total portfolio represents the current principal amount on senior,
mezzanine and corporate loans, net equity in RECOP I, which holds CMBS B-Piece
investments, and net carrying value of our sole REO investment. Excludes one
impaired mezzanine loan with an outstanding principal of $5.5 million that was
fully written off.
For Senior Loan 12, the total whole loan is $375.0 million, co-originated and
co-funded by us and a KKR affiliate. Our interest was 50% of the loan or
$187.5 million, of which $150.0 million in senior notes were syndicated to a
third party. Post syndication, we retained a mezzanine loan with a commitment of
$37.5 million, fully funded as of December 31, 2021, at an interest rate of
L+7.9%.
For Senior Loan 13, the total whole loan is $186.0 million, of which an
$81.6 million senior note was syndicated to a third party lender. Post
syndication, we retained the mezzanine loan and a 45% interest in the senior
loan with a total commitment of $104.4 million, of which $100.7 million was
funded as of December 31, 2021, at a blended interest rate of L+4.7%.
For Senior Loan 22, the total whole loan is $509.9 million, co-originated and
co-funded by us and a KKR affiliate. Our interest was 31% of the loan or $159.7
million, of which $134.7 million in senior notes were syndicated to third party
lenders. Post syndication, we retained a mezzanine loan with a commitment of
$25.0 million, of which $16.7 million was funded as of December 31, 2021, at an
interest rate of L+12.9%.
(B)  Total Whole Loan represents total commitment of the entire whole loan
originated. Committed Principal Amount includes participations by KKR affiliated
entities and third parties that are syndicated/sold.
(C)  Net equity reflects (i) the amortized cost basis of our loans, net of
borrowings; and (ii) the cost basis of our investments in RECOP I and REO.
(D)  Weighted average is weighted by current principal amount for our senior,
mezzanine and corporate loans and by net equity for our RECOP I CMBS B-Pieces.
(E)  L = the greater of one-month USD LIBOR; spot rate of 0.10%, and the
applicable contractual LIBOR floor, included in portfolio-wide averages
represented as fixed rates.
(F)  Max remaining term (years) assumes all extension options are exercised, if
applicable.
(G)  For senior loans, LTV is generally based on the initial loan amount divided
by the as-is appraised value as of the date the loan was originated or by the
current principal amount as of the date of the most recent as-is appraised
value; for mezzanine loans, LTV is based on the current balance of the whole
loan divided by the as-is appraised value as of the date the loan was
originated; for RECOP I CMBS B-Pieces, LTV is based on the weighted average LTV
of the underlying loan pool at issuance. Weighted Average LTV excludes one fully
funded corporate loan to a multifamily operator with an outstanding principal
amount of $41.1 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 60, LTV is based on the current principal amount divided by the
adjusted appraised gross sellout value net of sales cost.
For Senior Loans 2, 7, 9, 28, 30, 44, 48 and 61, 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.
(H)  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.
(I)  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.
(J)  For Senior Loan 9, the total whole loan facility is $425.0 million,
co-originated and co-funded by us and a KKR affiliate. Our interest was 50% of
the facility or $212.5 million. The facility is comprised of individual
cross-collateralized whole loans. As of December 31, 2021, there were three
underlying senior loan in the facility with a commitment of $31.6 million and
outstanding principal of $3.7 million.
(K)  For Senior Loan 60, Loan per SF of $1,333 is based on the allocated loan
amount of the residential units. Excluding the value of the retail and parking
components of the collateral, the Loan per SF is $1,926 based on allocating the
full amount of the loan to only the residential units.
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Portfolio Surveillance and Credit Quality

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

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

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

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

1-Very Low Risk-The underlying property performance has surpassed underwritten
expectations, and the sponsor's business plan is generally complete. The
property demonstrates stabilized occupancy and/or rental rates resulting in
strong current cash flow and/or a very low LTV (<65%). At the level of
performance, it is very likely that the underlying loan can be refinanced easily
in the period's prevailing capital market conditions.

2-Low Risk-The underlying property performance has matched or exceeded
underwritten expectations, and the sponsor's business plan may be ahead of
schedule or has achieved some or many of the major milestones from a risk
mitigation perspective. The property has achieved improving occupancy at market
rents, resulting in sufficient current cash flow and/or a low LTV (65%-70%).
Operating trends are favorable, and the underlying loan can be refinanced in
today's prevailing capital market conditions. The sponsor/manager is well
capitalized or has demonstrated a history of success in owning or operating
similar real estate.

3-Average Risk-The underlying property performance is in-line with underwritten
expectations, or the sponsor may be in the early stages of executing its
business plan. Current cash flow supports debt service payments, or there is an
ample interest reserve or loan structure in place to provide the sponsor time to
execute the value-improvement plan. The property exhibits a moderate LTV (<75%).
Loan structure appropriately mitigates additional risks. The sponsor/manager has
a stable credit history and experience owning or operating similar real estate.


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4-High Risk/Potential for Loss-A loan that has a risk of realizing a principal
loss. The underlying property performance is behind underwritten expectations,
or the sponsor is behind schedule in executing its business plan. The underlying
market fundamentals may have deteriorated, comparable property valuations may be
declining or property occupancy has been volatile, resulting in current cash
flow that may not support debt service payments. The loan exhibits a high LTV
(>80%), and the loan covenants are unlikely to fully mitigate some risks.
Interest payments may come from an interest reserve or sponsor equity.

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

During the fourth quarter of 2021, we took title to one defaulted senior retail
loan with an outstanding principal balance and net carrying value of
$109.6 million and $69.3 million, respectively, as of September 30, 2021; 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. Accordingly, in the fourth quarter we recognized
an $8.2 million GAAP gain from the reversal of the allowance for credit losses
and recognized a $32.1 million write-off through distributable earnings. In
addition, in the fourth quarter of 2021, we wrote off $0.9 million remaining
outstanding balance of an impaired loan and recognized the write off in GAAP
earnings and through distributable earnings.

As of December 31, 2021, the average risk rating of our loan portfolio was 2.9
(Average Risk), weighted by total loan exposure, as compared to 3.0 (Average
Risk) as of September 30, 2021.

                                             December 31, 2021                                                                                          

September 30, 2021

                                                                        Total Loan            Total Loan                                                                                  Total Loan            Total Loan
 Risk Rating          Number of Loans          Net Book Value           Exposure(A)           Exposure %           Risk Rating          Number of Loans          Net Book Value           Exposure(A)           Exposure %
      1                       1              $       243,544          $    243,552                   3.6  %             1                       -              $             -          $          -                     -  %
      2                       3                      409,812               411,424                   6.2                2                       3                      517,168               517,434                   8.9
      3                      54                    5,256,052             5,627,927                  84.3                3                      43                    4,415,030             4,764,745                  82.3
      4                       4                      385,081               394,336                   5.9                4                       4                      381,608               393,501                   6.8
      5                       1                            -                     -                     -                5                       2                       70,121               115,071                   2.0
                             63              $     6,294,489          $  6,677,239                 100.0  %                                    52              $     5,383,927          $  5,790,751                 100.0  %


(A)  In certain instances, we finance our loans through the non-recourse sale of
a senior interest that is not included in our consolidated financial statements
under GAAP. Total loan exposure includes the entire loan we originated and
financed, including $318.6 million and $312.7 million of such non-consolidated
senior interests as of December 31, 2021 and September 30, 2021, respectively.

CMBS B-Piece Investments


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

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

Portfolio financing

Our portfolio financing arrangements include term loan financing, term loan agreements, secured loan obligations, secured term loan, warehousing facility, asset specific financing, prime interest rank unconsolidated (collectively “non-marked-to-market funding sources”) and one principal buyout agreements.


Our Non-Mark-to-Market Financing Sources, which accounted for 71% of our total
secured financing (excluding our corporate revolver) as of December 31, 2021,
are not subject to credit or capital markets mark-to-market provisions. The
remaining 29% of our secured borrowings, which is primarily comprised of three
master repurchase agreements, are only subject to credit marks.

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

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

                                                                                  Portfolio Financing Outstanding Principal
                                                                                                 Balance(A)
                                                Non-/Mark-to-Market             December 31, 2021          December 31, 2020
Master repurchase agreements                      Mark-to-Credit               $      1,554,808          $          673,120
Term lending agreements                         Non-Mark-to-Market                    1,117,627                     900,000
Collateralized loan obligations                 Non-Mark-to-Market                    1,095,250                     810,000
Term loan financing                             Non-Mark-to-Market                      870,458                     948,204
Secured term loan                               Non-Mark-to-Market                      350,000                     300,000
Asset specific financing                        Non-Mark-to-Market                       60,000                      60,000
Warehouse facility                              Non-Mark-to-Market                            -                           -
Non-consolidated senior interests               Non-Mark-to-Market                      318,634                     158,672
Total portfolio financing                                                      $      5,366,777          $        3,849,996


(A)  Excludes $66.2 million of vertical loan participations sold as of
December 31, 2020. Such participations did not qualify for sale accounting under
GAAP and therefore were consolidated in our Consolidated Balance Sheets as of
December 31, 2020.

Financing Agreements

The following table details our financing agreements (dollars in thousands):
                                                                            December 31, 2021
                                       Maximum                Collateral                               Borrowings
                                   Facility Size(A)           Assets(B)           Potential(C)          Outstanding          Available
Master Repurchase
Agreements
Wells Fargo                      $       1,000,000          $ 1,395,703          $  1,000,000          $   980,593          $  19,407
Morgan Stanley                             600,000              552,313               409,498              383,592             25,906
Goldman Sachs                              240,000              282,026               196,911              190,623              6,288
Term Loan Facility                       1,000,000            1,078,795               870,458              870,458                  -
Term Lending Agreements
KREF Lending V                             671,625              755,701               623,453              617,627              5,826
KREF Lending IX                            500,000              621,573               500,000              500,000                  -
Warehouse Facility
HSBC                                       500,000                    -                     -                    -                  -
Asset Specific Financing
BMO Facility                               300,000               76,000                60,000               60,000                  -
Revolver                                   335,000                    -               335,000              135,000            200,000
                                 $       5,146,625          $ 4,762,111          $  3,995,320          $ 3,737,893          $ 257,427


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(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 takeover agreements


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

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

Each of our existing master repurchase facilities includes "credit
mark-to-market" features. "Credit mark-to-market" provisions in repurchase
facilities are designed to keep the lenders' credit exposure generally constant
as a percentage of the underlying collateral value of the assets pledged as
security to them. If the credit underlying collateral value decreases, the gross
amount of leverage available to us will be reduced as our assets are
marked-to-market, which would reduce our liquidity. The lender under the
applicable repurchase facility sets the valuation and any revaluation of the
collateral assets in its sole, good faith discretion. As a contractual matter,
the lender has the right to reset the value of the assets at any time based on
then-current market conditions, but the market convention is to reassess
valuations on a monthly, quarterly and annual basis using the financial
information delivered pursuant to the facility documentation regarding the real
property, borrower and guarantor under such underlying loans. Generally, if the
lender determines (subject to certain conditions) that the market value of the
collateral in a repurchase transaction has decreased by more than a defined
minimum amount, the lender may require us to provide additional collateral or
lead to margin calls that may require us to repay all or a portion of the funds
advanced. We closely monitor our liquidity and intend to maintain sufficient
liquidity on our balance sheet in order to meet any margin calls in the event of
any significant decreases in asset values. As of December 31, 2021 and 2020, the
weighted average haircut under our repurchase agreements was 30.3% and 36.7%,
respectively (or 25.9% and 34.8%, respectively, if we had borrowed the maximum
amount approved by its repurchase agreement counterparties as of such dates). In
addition, our existing master repurchase facilities are not entirely
term-matched financings and may mature before our CRE debt investments that
represent underlying collateral to those financings. As we negotiate renewals
and extensions of these liabilities, we may experience lower advance rates and
higher pricing under the renewed or extended agreements.

Term loan financing


In connection with our efforts to diversify our financing sources, further
expand our non-mark-to-market borrowing base and reduce our exposure to market
volatility, we entered into a term loan financing agreement in April 2018 with
third party lenders for an initial borrowing capacity of $200.0 million that was
increased to $1.0 billion in October 2018 ("Term Loan Facility"). The facility
provides us with asset-based financing on a non-mark-to-market basis with
matched term up to five years and is non-recourse to us. Borrowings under the
facility are collateralized by senior loans, held-for-investment, and bear
interest equal to one-month LIBOR plus a margin. As of December 31, 2021, the
weighted average margin on the facility was 1.6%.

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The following table summarizes our borrowings under the Term Loan Facility
(dollars in thousands):
                                                                                                           December 31, 2021
                                                   Outstanding
Term Loan Facility               Count              Principal            Amortized Cost           Carrying Value          Wtd. Avg. Yield/Cost(A)           Guarantee(B)             Wtd. Avg. Term(C)
Collateral assets                  12            $  1,078,795          $     1,076,241          $     1,074,116                   L + 3.4%                      n.a.                    August 2024
Financing provided                n.a.                870,458                  870,458                  870,458                   L + 1.6%                      n.a.                    August 2024


(A)   Floating rate loans and related liabilities are indexed to one-month
LIBOR. Our net interest rate exposure is in direct proportion to our 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 us.
(C)  The weighted-average term is determined using the maximum maturity date of
the corresponding loans, assuming all extension options are exercised by the
borrower.

Term Lending Agreements

In June 2019, we entered into a Master Repurchase and Securities Contract
Agreement ("KREF Lending V Facility") with Morgan Stanley Mortgage Capital
Holdings LLC ("Administrative Agent"), as administrative agent on behalf of
Morgan Stanley Bank, N.A. ("Initial Buyer"), which provides non-mark-to-market
financing. In March 2021, the current stated maturity was extended to June 2022,
subject to four additional one-year extension options, which may be exercised by
us upon the satisfaction of certain customary conditions and thresholds. The
Initial Buyer subsequently syndicated a portion of the facility to multiple
financial institutions. As of December 31, 2021, the Initial Buyer held 24.4% 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. Total outstanding borrowings under the
facility as of December 31, 2021 was $617.6 million.

In July 2021, we entered into a $500.0 million Master Repurchase and Securities
Contract Agreement with a financial institution ("KREF Lending IX Facility").
The facility, which provides financing on a non-mark-to-market basis with
partial recourse to us, has a three-year draw period and matched term to the
underlying loans. As of December 31, 2021, there was $500.0 million outstanding
on this facility.

Warehouse Facility

In March 2020, we entered into a $500.0 million Loan and Security Agreement with
HSBC Bank USA, National Association ("HSBC Facility"). The facility, which
matures in March 2023, provides warehouse financing on a non-mark-to-market
basis with partial recourse to us. Borrowings under the facility are
collateralized by certain loans, held for investment, and bear interest equal to
one-month LIBOR, plus a margin. As of December 31, 2021, there was no balance
outstanding on this facility.

Asset Specific Financing

In August 2018, we entered into a $200.0 million loan financing facility with
BMO Harris Bank (the "BMO Facility"). In May 2019, we increased the borrowing
capacity to $300.0 million. The facility provides asset-based financing on a
non-mark-to-market basis with matched-term up to five years with partial
recourse to us. As of December 31, 2021, there was $60.0 million outstanding on
this facility.

Revolving Credit Agreement

We have a $335.0 million corporate revolving credit facility ("Revolver")
administered by Morgan Stanley Senior Funding, Inc. We may use our Revolver as a
source of financing, which is designed to provide short-term liquidity to
purchase 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) a floating rate index and (ii) a fixed
margin. Our Revolver is secured by corporate level guarantees and does not
include asset-based collateral. As of December 31, 2021, there was $135.0
million outstanding on this facility.

Secured Loan Obligations

In August 2021, we have funded a pool of loan participations from our existing loan portfolio through a Managed Secured Loan Obligation (“CLO” or “KREF 2021-FL2”). The CLO provides us with term funding on a non-mark-to-market basis and

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non-recourse basis. The CLO 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. In connection with the closing of KREF 2021-FL2, we fully
repaid the outstanding notes under our previous CLO, KREF 2018-FL1.

The following table presents the KREF 2021-FL2 collateral assets and the respective borrowings (in thousands of dollars):

                                                                                                December 31, 2021
Collateralized Loan                                   Outstanding
Obligation 2021-FL2                 Count              Principal            Amortized Cost           Carrying Value          Wtd. Avg. Yield/Cost            Wtd. Avg. Term(B)
Collateral assets(A)                 20             $  1,300,000          $     1,300,000          $     1,296,745                 L + 3.4%                      June 2025
Financing provided                    1                1,095,250                1,087,976                1,087,976                 L + 1.7%                    February 2039


(A)Including $54.0 million cash held in CLO as of December 31, 2021.Collateral
loan assets represent 19.6% of the principal of our commercial real estate loans
as of December 31, 2021. As of December 31, 2021, 100% of our loans financed
through the CLO are floating rate loans.
(B)Loan term represents weighted-average final maturity, assuming extension
options are exercised by the borrower. Repayments of CLO notes are dependent on
timing of related collateral loan asset repayments post reinvestment period. The
term of the CLO notes represents the rated final distribution date.

Loan participations sold


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

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

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

Non-consolidated first-tier holdings


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

The following table details the subordinate interests retained on our balance
sheet and the related non-consolidated senior interests (dollars in thousands):
                                                                                                           December 31, 2021
                                                                      Principal                                                                                         Wtd. Avg.
Non-Consolidated Senior Interests                    Count             Balance            Carrying Value          Wtd. Avg. Yield/Cost           Guarantee                 Term
Total loan                                             3            $  473,531                 n.a.                      L + 3.6%                   n.a.                 May 2025
Senior participation                                   3               318,634                 n.a.                     L + 2.3%                    n.a.               August 2025
Interests retained                                                     154,897                                          L + 6.4%                                      December 2024




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Secured Term Loan

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

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

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

Convertible Notes

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

Borrowing Activities

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

Year ended December 31, 2021

                                          Outstanding
                                        Principal as of          Average Daily Amount        Maximum Amount          Weighted Average
                                       December 31, 2021            Outstanding(A)            Outstanding          Daily Interest Rate
Wells Fargo                           $         980,593          $         547,166          $     980,593                        1.6  %
Morgan Stanley                                  383,592                    368,089                473,902                        2.1
Goldman Sachs                                   190,623                     91,217                190,623                        3.0
Term Loan Facility                              870,458                    926,978                992,777                        1.7
KREF Lending V                                  617,627                    816,719                900,000                        2.0
KREF Lending IX                                 500,000                    242,786                500,000                        1.8
BMO Facility                                     60,000                     60,000                 60,000                        1.8
Revolver                                        135,000                     43,507                335,000                        2.1
Total/Weighted Average                $       3,737,893                                                                          1.9  %


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

                                                               Average Daily Amount Outstanding(A)
                                                                        Three Months Ended
                                  December 31, 2021          September 30, 2021           June 30, 2021           March 31, 2021
Wells Fargo                     $          566,984          $          598,729          $      529,169          $       492,395
Morgan Stanley                             326,625                     366,046                 429,449                  350,519
Goldman Sachs                               99,140                      97,574                  91,075                   76,762
Term Loan Facility                         933,928                     953,283                 878,021                  942,484
KREF Lending V                             638,958                     830,634                 900,000                  900,000
KREF Lending IX                            422,974                      62,598                       -                        -
BMO Facility                                60,000                      60,000                  60,000                   60,000
Revolver                                   119,837                      32,609                       -                   20,611

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

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Contents


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

•an interest income to interest expense ratio covenant (1.5 to 1.0);
•a minimum consolidated tangible net worth covenant (75.0% of the aggregate net
cash proceeds of any equity issuances made and any capital contributions
received by us and KKR Real Estate Finance Holdings L.P. (our "Operating
Partnership") or up to approximately $1,095.4 million, depending on the
agreement;
•a cash liquidity covenant (the greater of $10.0 million or 5.0% of our recourse
indebtedness);
•a total indebtedness covenant (83.3% of our Total Assets, as defined in the
applicable financing agreements);

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

From December 31, 2021we complied with the covenants of our financing lines.


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

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

Real estate ownership and joint venture


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

Concurrently with taking the title of our sole REO asset, we contributed the
majority of the REO's net assets to a joint venture with a third party local
development operator ("JV Partner"), whereby we have a 90% interest in the joint
venture and the JV Partner has a 10% interest. As of December 31, 2021, the
joint venture held REO assets with a net carrying value of $68.9 million, of
which $0.1 million represented non-controlling interests.
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Results of Operations

The following table summarizes the changes in our results of operations for the years ended December 31, 20212020 and 2019 (in thousands of dollars, except per share data):

                                          For the Year Ended December 31,                Increase (Decrease)                For the Year Ended December 31,                 Increase (Decrease)
                                               2021              2020                Dollars        Percentage                   2020              2019                 Dollars         Percentage
Net Interest Income
Interest income                         $        279,950    $    269,188          $   10,762                 4.0  %       $        269,188    $    274,335          $     (5,147)               (1.9) %
Interest expense                                 114,439         127,312             (12,873)              (10.1)                  127,312         158,860               (31,548)              (19.9)
Total net interest income                        165,511         141,876              23,635                16.7                   141,876         115,475                26,401                22.9
Other Income
Income (loss) from equity method
investments                                        6,371             537               5,834             1,086.4                       537           4,568                (4,031)              (88.2)
Gain (loss) on sale of
investments                                        5,126               -               5,126               100.0                         -          (2,688)                2,688               100.0
Change in net assets related to
CMBS consolidated variable
interest entities                                      -               -                   -                   -                         -           1,665                (1,665)             (100.0)
Other income                                         686             744                 (58)               (7.8)                      744           2,453                (1,709)              (69.7)
Total other income (loss)                         12,183           1,281              10,902               851.1                     1,281           5,998                (4,717)              (78.6)
Operating Expenses
General and administrative                        14,235          14,238                  (3)                  -                    14,238          10,522                 3,716                35.3
Provision for (reversal of )
credit losses, net                                (4,059)         50,344             (54,403)             (108.1)                   50,344               -                50,344               100.0
Management fees to affiliate                      19,378          16,992               2,386                14.0                    16,992          17,135                  (143)               (0.8)
Incentive compensation to
affiliate                                         10,273           6,774               3,499                51.7                     6,774           3,272                 3,502               107.0
Total operating expenses                          39,827          88,348             (48,521)              (54.9)                   88,348          30,929                57,419               185.6
Income (Loss) Before Income
Taxes, Preferred Dividends,
Redemption Value Adjustment and
Participating Securities' Share
in Earnings                                      137,867          54,809              83,058               151.5                    54,809          90,544               (35,735)              (39.5)
Income tax expense                                   684             412                 272                66.0                       412             579                  (167)              (28.8)
Net Income (Loss)                                137,183          54,397              82,786               152.2                    54,397          89,965               (35,568)              (39.5)

Preferred stock dividends and
redemption value adjustment                       11,369             844              10,525             1,247.0                       844            (527)                1,371               260.2
Participating securities' share
in earnings                                          179               -                 179               100.0                         -               -                     -                   -
Net Income (Loss) Attributable to
Common Stockholders                     $        125,635    $     53,553          $   72,082               134.6  %       $         53,553    $     90,492          $    (36,939)              (40.8) %

Net Income (Loss) Per Share of
Common Stock
Basic                                   $           2.22    $       0.96          $     1.26               131.3  %       $           0.96    $       1.58          $      (0.62)              (39.2) %
Diluted                                 $           2.21    $       0.96          $     1.25               130.2  %       $           0.96    $       1.57          $      (0.61)              (38.9) %

Weighted Average Number of Shares
of Common Stock Outstanding
Basic                                         56,571,200      55,985,014             586,186                 1.0  %             55,985,014      57,426,912            (1,441,898)               (2.5) %
Diluted                                       56,783,388      56,057,237             726,151                 1.3  %             56,057,237      57,532,490            (1,475,253)               (2.6) %

Dividends Declared per Share of
Common Stock                            $           1.72    $       1.72          $        -                   -  %       $           1.72    $       1.72          $          -                   -  %




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Year Ended December 31, 2021 Compared to Year Ended December 31, 2020

Net interest income


Net interest income increased by $23.6 million, or 16.7%, during the year ended
December 31, 2021, as compared to the year ended December 31, 2020, primarily
due to a $10.8 million, or 4.0%, increase in our interest income and a $12.9
million, or 10.1%, decrease in our interest expense.

The increase in interest income was primarily attributable to a decrease in the
weighted average principal of our loan portfolio of $401.1 million for the year
ended December 31, 2021, as compared to the year ended December 31, 2020, as a
result of continuing capital deployment from loan repayments and deployment of
the proceeds from the issuance of 6.5% Series A Preferred Stock in April 2021
and issuance of common stock in November 2021. In addition, we recognized net
accelerated deferred loan fees and prepayment fee income of $11.3 million during
the year ended December 31, 2021, as compared to $1.8 million during the year
ended December 31, 2020.

The decrease in interest expense was primarily due to a decrease in spot LIBOR,
partially offset by an increase in the weighted average principal balance of our
financing facilities of $253.5 million for the year ended December 31, 2021, as
compared to the year ended December 31, 2020.

In addition, our loans continued to benefit from in-the-money LIBOR floors
during the year ended December 31, 2021. As of December 31, 2021, 54% of our
loan portfolio was subject to a LIBOR floor of at least 0.25%, with a weighted
average floor of 0.74%; by contrast, only 9% of total outstanding financing
(inclusive of the secured term loan) is subject to a LIBOR floor greater than
0.0%.

Other Income

Total other income increased by $10.9 million during the year ended December 31,
2021, as compared to the year ended December 31, 2020. This increase was due to
a $2.2 million unrealized mark-to-market gain on our RECOP I's underlying CMBS
investments during the year ended December 31, 2021, as compared to a $3.9
million unrealized loss during the year ended December 31, 2020. In addition, we
recognized a $5.1 million gain from the redemption of non-voting manager units
during the year ended December 31, 2021.

Functionnary costs


Total operating expenses decreased by $48.5 million during the year ended
December 31, 2021, as compared to the year ended December 31, 2020. This
decrease was primarily due to a net decrease of $54.4 million in the provision
for credit losses resulting from the reversal of $32.1 million in allowance for
credit losses for one senior retail loan where we took title of the underlying
collateral and a more stable macro-economic outlook based on improved observed
economic data, partially offset by an increase to the allowance related to newly
originated loans during the year ended December 31, 2021.

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

                                                                              Three Months Ended
                                                                                          September 30,
                                          March 31, 2021           June 30, 2021               2021               December 31, 2021
Professional services                    $          567          $          527          $         610          $              673
Operating and other costs                           946                   1,167                  1,022                       1,297
Stock-based compensation                          1,992                   1,994                  2,027                       1,413
Total general and administrative
expenses                                          3,505                   3,688                  3,659                       3,383
Provision for (reversal of) credit
losses, net                                      (1,588)                   (559)                 1,165                      (3,077)
Management fees to affiliate                      4,290                   4,835                  4,964                       5,289
Incentive compensation to
affiliate                                         2,192                   2,403                  2,215                       3,463
Total operating expenses                 $        8,399          $       10,367          $      12,003          $            9,058




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Year Ended December 31, 2020 Compared to Year Ended December 31, 2019

Net interest income


Net interest income increased by $26.4 million during the year ended December
31, 2020, compared to the year ended December 31, 2019. This increase was
primarily due to a decrease in the weighted-average LIBOR which decreased our
interest expense compared to prior year as substantially all of our secured
financing facilities are not subject to LIBOR floors, while the interest income
earned on our loans from rate floors above LIBOR increased (85% of our portfolio
was subject to a LIBOR floor of 1.0% or higher as of December 31, 2020).

In addition, we recognized $18.1 million of deferred loan fees and origination
discounts accreted into interest income during the year ended December 31, 2020,
as compared to $20.2 million during the year ended December 31, 2019. We also
recognized a non-recurring exit fee income of $2.8 million during the year ended
December 31, 2020. We recorded $22.3 million of deferred financing costs
amortization into interest expense during the year ended December 31, 2020, as
compared to $16.3 million during the year ended December 31, 2019.

Other income


Total other income decreased by $4.7 million during the year ended December 31,
2020, as compared to the year ended December 31, 2019. This decrease was
primarily due to a $3.9 million unrealized mark-to-market loss from our RECOP I
equity method investment during the year ended December 31, 2020.

Functionnary costs


Total operating expenses increased by $57.4 million during the year ended
December 31, 2020, as compared to the year ended December 31, 2019. This
increase was primarily due to (i) a $50.3 million provision for credit losses in
connection with the adoption of ASU 2016-03, (ii) a $3.5 million increase in
Manager incentive compensation, (iii) a $1.6 million increase in noncash
stock-based compensation expense, and (iv) $2.0 million in non-recurring dead
deal costs for the year ended December 31, 2020.

We did not have a provision for loan credit losses prior to January 1, 2020.
Upon the adoption of ASU 2016-13 on January 1, 2020, we recorded a $15.0 million
cumulative-effect adjustment to our accumulated deficit. During the year ended
December 31, 2020, we recorded an incremental $50.3 million in credit loss
provision primarily due to the adverse change in the economic outlook as a
result of the COVID-19 pandemic and incremental reserves for our 4- and 5-risk
rated loans.

COVID-19 Impact

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 the outbreak has been rapidly evolving around the globe, with
several countries taking 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, the global economy has, with certain setbacks, begun reopening and
wider distribution of vaccines will likely encourage greater economic activity.
However, wide disparities in vaccination rates and continued vaccine hesitancy,
combined with the emergence of COVID-19 variants and surges in COVID-19 cases,
could trigger the reinstatement of 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 our results and financial condition.
Although we have observed signs of economic recovery and is generally encouraged
by the response of its borrowers, we cannot predict the time required for a
widespread sustainable economic recovery to take hold.

While the economy has improved significantly since the initial outbreak of the
COVID-19 pandemic, the pandemic has resulted in, and may continue to result in,
declines in rental rates and increases in rental concessions, including free
rent to renew tenants early, to retain tenants who are up for renewal or to
attract new tenants, or rent abatements for tenants severely impacted by the
COVID-19 pandemic. Such responses have resulted in, and may continue to result
in, decreases in cash flows to certain of our borrowers and potentially in
defaults in paying debt service on outstanding indebtedness, which could
adversely impact our
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results of operations and financial performance. 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. In addition, 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 COVID-19's adverse impact 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. The prolonged duration and impact of
the COVID-19 pandemic could materially disrupt our business operations and
negatively impact our business, financial performance and operating results for
the year ending December 31, 2021 and potentially longer.
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Liquidity and Capital Resources

Overview


We have capitalized our business to date primarily through the issuance and sale
of our common stock and preferred stock, borrowings from Non-Mark-to-Market
Financing Sources(1), borrowings from three master repurchase agreements, the
issuance and sale of convertible notes and our secured term loan. Our
Non-Mark-to-Market Financing Sources, which accounted for 71% of our total
secured financing (excluding our corporate Revolver) as of December 31, 2021,
are not subject to credit or capital markets mark-to-market provisions. The
remaining 29% of our secured borrowings, which are comprised of three master
repurchase agreements, are only subject to credit marks. We have not received
any margin calls on our master repurchase agreements to date, nor do we expect
any at this time.

Our primary sources of liquidity include $271.5 million of cash on our
consolidated balance sheet, $200.0 million of available capacity on our
corporate revolver, $57.4 million of available borrowings under our financing
arrangements based on existing collateral and cash flows from operations. In
addition, we had $235.3 million of unencumbered senior loans that can be
financed, as of December 31, 2021. Our corporate revolver and secured term loan
are secured by corporate level guarantees and do not include asset-based
collateral. We may seek additional sources of liquidity from syndicated
financing, other borrowings (including borrowings not related to a specific
investment) and future offerings of equity and debt securities.

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

As described in Note 10 to our 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 December 31, 2021, we held $35.5 million
of interests in such entities, which does not include a remaining commitment of
$4.3 million to RECOP I that we are required to fund if called.

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

To facilitate future offerings of equity, debt and other securities, we have in
place an effective shelf registration statement (the "Shelf") with the SEC. The
amount of securities that may be issued pursuant to this Shelf is not to exceed
$750.0 million. The securities covered by this Shelf include: (i) common stock,
(ii) preferred stock, (iii) depository shares, (iv) debt securities, (v)
warrants, (vi) subscription rights, (vii) and purchase contracts, and (viii)
units. The specifics of any future offerings, along with the use of proceeds of
any securities offered, will be described in detail in a prospectus supplement,
or other offering material, at the time of any offering. In February 2019, we
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. We have
not sold any shares of our common stock under the ATM to date.

See Notes 5, 6, 7, 8 and 11 to our Consolidated Financial Statements for details regarding our secured financing arrangements, loan-secured obligations, secured term loans, convertible notes and equity operations.

(1) Consisting of Term Loan Financing, Term Loan Agreements, Secured Loan Obligations, Secured Term Loan, Warehouse, Asset Specific Financing and unconsolidated first-tier holdings.

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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:
                                         December 31, 2021       December 31, 2020
          Debt-to-equity ratio(A)               2.3x                    1.9x
          Total leverage ratio(B)               3.7x                    3.6x



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

Sources of liquidity


Our primary sources of liquidity include cash and cash equivalents and available
borrowings under our secured financing agreements, inclusive of our Revolver.
Amounts available under these sources as of the date presented are summarized in
the following table (dollars in thousands):
                                                              December 31, 2021           December 31, 2020
Cash and cash equivalents                                   $          271,487          $          110,832
Available borrowings under revolving credit
agreements                                                             200,000                     335,000
Available borrowings under master repurchase
agreements                                                              51,601                      19,319

Available borrowings under term lending agreement                        5,826                           -

Available borrowings under asset specific financing                          -                         800
Loan principal payments receivable                                           -                      15,850
                                                            $          528,914          $          481,801



We also had $235.3 million and $274.7 million of unencumbered senior loans that
can be pledged to financing facilities subject to lender approval, as of
December 31, 2021 and 2020. 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 flow

The following table shows the changes in cash and cash equivalents for the years ended December 31, 20212020 and 2019 (in thousands of dollars):

                                                               For the Year 

Ended the 31st of December,

                                                    2021                      2020                    2019
Cash Flows From Operating Activities        $       124,793             $      115,062          $       91,713
Cash Flows From Investing Activities             (1,540,836)                    88,709                (926,314)
Cash Flows From Financing Activities              1,578,981                   (160,558)                815,689
Net Increase (Decrease) in Cash, Cash
Equivalents, and Restricted Cash            $       162,938             $   

43,213 ($18,912)

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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, and paid
for, our investments for the years ended December 31, 2021, 2020 and 2019
(dollars in thousands):
                                                    For the Year Ended December 31,
                                                   2021              2020           2019
        Interest Received:
        Commercial real estate loans        $    249,564          $ 242,313      $ 251,062
        CMBS B-Pieces                                  -                  -          1,715
                                                 249,564            242,313        252,777
        Interest Paid:
        Interest expense                    $     95,256            103,405        146,156
        Net interest collections            $    154,308          $ 138,908      $ 106,621


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

                                                          For the Year 

Ended the 31st of December,

                                                         2021               

2020 2019

 Management Fees to affiliate                    $     18,341             $ 

17,020 $17,185

 Incentive Fees to affiliate                           10,273               

6,774 3,272

 Net decrease in cash and cash equivalents       $     28,614             $ 

23,794 $20,457

Cash flow 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 year ended December 31, 2021, we funded
$3,904.6 million of CRE loans and received $2,362.4 million from the repayments
and sales/syndications of CRE loans.

During the year ended December 31, 2020, we funded $966.2 million of CRE loans
and received $1,054.9 million from the sale/syndication and repayments of CRE
loans.

Cash flow from financing activities


Our cash flows from financing activities were primarily driven by proceeds from
borrowings under our financing agreements of $3,642.0 million, proceeds from CLO
KREF 2021-FL2 issuance of $1,095.3 million, net proceeds from Series A preferred
stock issuance of $167.1 million, and net proceeds from common stock issuance of
$120.7 million during the year ended December 31, 2021, which were partially
offset by (i) repayments of $2,487.7 million on borrowings under our financing
agreements, (ii) principal repayment of $810.0 million under CLO KREF 2018-FL1,
and (iii) payment of $103.9 million in dividends.

During the year ended December 31, 2020, our cash flows from financing
activities were primarily driven by proceeds from borrowings under our financing
agreements of $1,015.4 million and net proceeds from our secured term loan of
$292.5 million, which were partially offset by (i) principal repayments of
$1,332.8 million on borrowings under our financing agreements, (ii) payment of
$97.1 million in dividends, and (iii) payment of $25.1 million for our share
repurchases.

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Contractual Obligations and Commitments

The following table presents our contractual obligations and commitments (including interest payments) as of December 31, 2021 (dollars in thousands):

                                         Total              Less than 1 year          1 to 3 years           3 to 5 years           Thereafter
Recourse Obligations:
Master Repurchase Facilities(A)
Wells Fargo(B)                       $ 1,021,558          $          14,997          $  1,006,561          $           -          $         -
Morgan Stanley(C)                        390,826                    390,826                     -                      -                    -
Goldman Sachs(D)                         194,177                    194,177                     -                      -                    -
Term Lending Agreements(A)
KREF Lending V(E)                        623,696                    623,696                     -                      -                    -
KREF Lending IX                          529,332                      9,031               391,379                128,922                    -
Warehouse Facility
HSBC                                           -                          -                     -                      -                    -
Asset Specific Financing
BMO Facility(A)                           60,114                     60,114                     -                      -                    -
Total secured financing agreements     2,819,703                  1,292,841             1,397,940                128,922                    -
Convertible Notes                        155,979                      8,927               147,052                      -                    -
Secured Term Loan                        428,277                     17,602                34,894                 34,288              341,493
Future funding obligations(F)          1,367,880                    554,118               738,948                 74,814                    -
RECOP I commitment(G)                      4,324                      4,324                     -                      -                    -
Revolver(H)                              137,840                    137,840                     -                      -                    -
Total recourse obligations             4,914,003                  2,015,652             2,318,834                238,024              341,493
Non-Recourse Obligations:
Collateralized Loan Obligations        1,173,598                     15,661                31,322                 31,365            1,095,250
Term Loan Financing                      887,323                    535,842               314,708                 36,773                    -
Total                                $ 6,974,924          $       2,567,155          $  2,664,864          $     306,162          $ 1,436,743



(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 December 31, 2021 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)  In September 2021, the current stated maturity was amended to September
2024, subject to two, twelve-month facility term extensions available to us,
which is contingent upon certain covenants and thresholds.
(C)  In December 2021, the current stated maturity was extended to December
2022, with one-year extension option upon KREF giving written notice and another
two one-year extension periods subject to approval by Morgan Stanley.
(D)  In October 2021, the current stated maturity was amended to October 2022,
subject to a twelve-month extension option available to us, subject to the
satisfaction of certain conditions.
(E)  In March 2021, the current stated maturity was extended to June 2022,
subject to four additional one-year extension options, which may be exercised by
us upon the satisfaction of certain customary conditions and thresholds.
(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 December 31, 2021. This is only an estimate as
actual amounts borrowed, the timing of repayments and interest rates may vary
over time. The Revolver matures in December 2023.

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 15 to our
consolidated financial statements included in this Form 10-Q for additional
terms and details of the fees payable under our management agreement.

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."

Recent market conditions


Due to the ongoing COVID-19 pandemic in the United States and globally, our
operating partners, borrowers and their tenants, the properties securing our
investments, and the economy as a whole have been, and will continue to be,
adversely impacted. The magnitude and duration of the COVID-19 pandemic and its
impact on our borrowers and their tenants, cash flows and future results of
operations has been significant, and its continued impact will largely depend on
future developments, which are highly uncertain and cannot be predicted.

Although there are effective vaccines for COVID-19 that have been approved for
use and are widely available to the majority of the public, vaccination rates
across populations varies and the effectiveness of such vaccines against future
strains of COVID-19 is uncertain. Accordingly, given the ongoing nature of the
outbreak, at this time we cannot reasonably estimate the magnitude of the
ultimate impact that COVID-19 will have on our business, financial performance
and operating results. We believe COVID-19's adverse impact 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. The
prolonged duration and impact of the COVID-19 pandemic could materially disrupt
our business operations and impact our financial performance.

While the economy has improved significantly since the initial outbreak of the
COVID-19 pandemic, the pandemic has resulted in and may continue to result in
declines in rental rates and increases in rental concessions, including free
rent to renew tenants early, to retain tenants who are up for renewal or to
attract new tenants, or rent abatements for tenants severely impacted by the
COVID-19 pandemic. Such responses have resulted in and may continue to result in
decreases in cash flows to certain of our borrowers and potentially in defaults
in paying debt service on outstanding indebtedness, which could adversely impact
our results of operations and financial performance. 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. In addition,
declines in economic conditions 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.

Subsequent Events

Our subsequent events are detailed in note 18 to our consolidated financial statements.

Significant Accounting Policies and Use of Estimates


Our consolidated financial statements are prepared in accordance with GAAP,
which requires the use of estimates and assumptions that involve the exercise of
judgment and use of assumptions as to future uncertainties. Accounting estimates
and assumptions discussed in this section are those that we consider to be the
most critical to understanding our financial statements because they involve
significant judgments and uncertainties that could affect our reported assets
and liabilities, as well as our reported revenue and expenses. All of these
estimates reflect our best judgment about current, and for some estimates,
future economic and market conditions and their effects based on information
available as of the date of the financial statements. If conditions change from
those expected, it is possible that the judgments and estimates described below
could change, which may result in a change in our allowance for credit losses,
future write-off of our investments, and valuation of our investment portfolio,
among other effects. We believe that the following accounting policies are among
the most important to the portrayal of our financial condition and results of
operations and require the most difficult, subjective or complex judgments:

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Allowance for Loan 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 model. CECL amends 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.

In connection with our adoption of ASU No. 2016-13 on January 1, 2020, we
implemented new processes including the utilization of loan loss forecasting
models, updates to our reserve policy documentation, changes to our internal
reporting processes and related internal controls. We have implemented loan loss
forecasting models for estimating expected life-time credit losses, at the
individual loan level, for our commercial mortgage loan portfolio. The CECL
forecasting methods used by us include (i) a probability of default and loss
given default method using underlying third-party CMBS/CRE loan database with
historical loan losses from 1998 to 2020, and (ii) 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 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 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 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 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.

We consider the individual loan internal risk rating as the primary credit
quality indicator underlying the CECL assessment. We perform a 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:

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.
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Table of Contents The property has a moderate loan-to-value ratio (


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.

Recently adopted accounting standard

Nothing.

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