Thursday, December 1 2022
The following discussion should be read in conjunction with the unaudited
condensed consolidated financial statements and notes thereto appearing
elsewhere in this Form 10-Q. The historical consolidated financial data below
reflects the historical results and financial position of KREF. In addition,
this discussion and analysis contains forward-looking statements and involves
numerous risks and uncertainties, including those described under Part I, Item
1A. "Risk Factors" in the Form 10-K and under "Cautionary Note Regarding
Forward-Looking Statements." Actual results may differ materially from those
contained in any forward-looking statements.

Insight

Our business and our investment strategy

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

Our manager

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

As a real estate finance company, we believe 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,
                                                                      September 30, 2022           June 30, 2022
Net income attributable to common stockholders                      $           (48,421)         $        19,394
Weighted-average number of shares of common stock
outstanding
Basic                                                                           69,382,730               68,549,049
Diluted                                                                         69,382,730               68,549,049
Net income per share, basic                                         $             (0.70)         $          0.28
Net income per share, diluted                                       $             (0.70)         $          0.28
Dividends declared per share                                        $              0.43          $          0.43



Distributable Earnings

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

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

While Distributable Earnings excludes the impact of our unrealized current
provision for (reversal of) credit losses, any loan losses are charged off and
realized through Distributable Earnings when deemed non-recoverable.
Non-recoverability is generally determined (i) upon the resolution of a loan
(i.e. when the loan is repaid, fully or partially, or, in the case of
foreclosure, when the underlying asset is sold), or (ii) if, in our
determination, it is nearly certain that all amounts due under a loan will not
be collected.

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

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

The table below reconciles the weighted average diluted shares under GAAP with the weighted average diluted shares used for distributable income:

                                                                                        Three Months Ended,
                                                                       September 30, 2022                      June 30, 2022
Diluted weighted average common shares outstanding,                         69,382,730                              68,549,049

GAAP

Less: Dilutive shares under assumed conversion of the                                -                                       -
Convertible Notes (ASU 2020-06)
Less: Anti-dilutive restricted stock units                                           -                                       -
Diluted weighted average common shares outstanding,                         69,382,730                              68,549,049
Distributable Earnings



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

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

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

                                                                                  Three Months Ended,
                                                                      September 30, 2022           June 30, 2022
Net Income (Loss) Attributable to Common Stockholders               $           (48,421)         $        19,394
Adjustments
Non-cash equity compensation expense                                              2,175                    2,040
Unrealized (gains) or losses, net(A)                                                (79)                    (190)
Provision for credit losses, net                                                 80,604                   11,798
Non-cash convertible notes discount amortization                                     91                       90

Distributable Earnings                                              $            34,370          $        33,132
Weighted average number of shares of common stock
outstanding
 Basic                                                                          69,382,730               68,549,049
 Adjusted Diluted Shares Outstanding(B)                                         69,382,730               68,549,049
Distributable Earnings per Diluted Weighted Average                 $              0.50          $          0.48
Share(C)



(A)  Includes ($0.1) million and ($0.2) million of unrealized mark-to-market
adjustment to our RECOP I's underlying CMBS investments for the three months
ended September 30, 2022 and June 30, 2022, respectively.

(B) See reconciliation of GAAP weighted average diluted shares to adjusted weighted average diluted shares used for distributable income above.

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Book Value per Share

We believe that book value per share is helpful to stockholders in evaluating
the growth of our company as we have scaled our equity capital base and continue
to invest in our target assets. The following table calculates our book value
per share of common stock (amounts in thousands, except share and per share
data):
                                                                September 30, 2022           December 31, 2021

KKR Real Estate Financing Trust Inc. equity $1,595,257 $1,361,434
Series A Preferred Shares (Preferred Liquidation of
$25.00 per share)

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

1,267,507 $1,188,934
Common shares issued and outstanding at the end of the period

                                                                    69,338,283                  61,370,732
Book value per share of common stock                          $             18.28          $            19.37



Book value as of September 30, 2022 included the impact of an estimated CECL
credit loss allowance of $114.9 million, or ($1.66) per common share. See Note 2
- Summary of Significant Accounting Policies, to our condensed consolidated
financial statements included in this Form 10-Q for detailed discussion of
allowance for credit losses.
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Our Portfolio

We have established a $7,726.3 million portfolio of diversified investments,
consisting primarily of senior and mezzanine commercial real estate loans as of
September 30, 2022.

During the nine months ended September 30, 2022, we collected 100.0% of interest
payments due on our loan portfolio. As of September 30, 2022, the average risk
rating of our loan portfolio was 3.1, weighted by total loan exposure. As of
September 30, 2022, approximately 5% of our loans, based on total loan exposure,
was risk-rated 5. As of September 30, 2022, the average loan commitment in our
portfolio was $123.8 million and multifamily and industrial loans comprised 56%
of our loan portfolio, while hospitality loans comprised 5% of the portfolio.

In addition to our loan portfolio, since September 30, 2022as a result of taking ownership of collateral for a defaulted senior retail loan, we owned an REO asset with a net book value of $79.7 millioncomposed of the fair value of the commercial property acquired and capitalized transaction and redevelopment costs, at September 30, 2022. This property is held for investment purposes and reflected in our condensed consolidated balance sheets.

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 September 30, 2022, 100.0% of
our loans by total loan exposure earned a floating rate of interest. We expect
the majority of our future investment activity to focus on originating
floating-rate senior loans that we finance with our repurchase and other
financing facilities, with a secondary focus on originating floating-rate loans
for which we syndicate a senior position and retain a subordinated interest for
our portfolio. As of September 30, 2022, all of our investments were located in
the United States.

The following charts illustrate the diversification and composition of our loan
portfolio(A), based on type of investment, interest rate, underlying property
type, geographic location, vintage and LTV as of September 30, 2022:

                    [[Image Removed: kref-20220930_g2.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 $79.7 million as of September 30, 2022, (ii) CMBS B-Piece investments
held through RECOP I, an equity method investment and (iii) one impaired
mezzanine loan with an outstanding principal of $5.5 million that was fully
written off.
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(B)  Senior loans include senior mortgages and similar credit quality loans,
including related contiguous junior participations in senior loans where we have
financed a loan with structural leverage through the non-recourse sale of a
corresponding first mortgage.
(C)  We classify a loan as life science if more than 50% of the gross leasable
area is leased to, or will be converted to, life science-related space.
(D)  "Other" property types include: 3% Condo (Residential), 3% Student Housing,
and <1% Single Family Rental.

(E)  Excludes (i) risk-rated 5 loans and (ii) one real estate corporate loan to
a multifamily operator with an outstanding principal amount of $40.0 million,
representing 0.5% of our commercial real estate loans as of September 30, 2022.
(F)  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 lending activity (in thousands of dollars):

                                                                                        Three Months Ended
                                                       September 30,                                                          December 31,
                                                            2022              June 30, 2022           March 31, 2022              2021
Loan originations                                      $   457,685          $    1,034,191          $       843,624          $  1,804,897
Loan fundings(A)                                       $   224,724         

$1,077,132 $744,192 $1,680,890
Loan repayments/syndications

                              (387,264)               (444,313)                (282,282)             (679,749)
Net fundings                                              (162,540)                632,819                  461,910             1,001,141
PIK interest                                                   470                     479                      464                   418
Write-off                                                        -                       -                        -               (32,905)
Transfer to REO                                                  -                       -                        -               (77,516)
Total activity                                         $  (162,070)         $      633,298          $       462,374          $    891,138

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

The following table details the overall statistics of our loan portfolio in
September 30, 2022 (dollars in thousands):

                                                                                       Total Loan Exposure(A)
                                          Balance Sheet              Total Loan             Floating Rate
                                            Portfolio                Portfolio                  Loans              Fixed Rate Loans
Number of loans                                         76                       75                      75                        -
Principal balance                       $        7,357,481       $        7,610,841       $       7,610,841       $                -
Amortized cost                          $        7,306,565       $        7,565,426       $       7,565,426       $                -
Unfunded loan commitments(B)            $        1,649,112       $        1,649,112       $       1,649,112       $                -
Weighted-average cash coupon(C)                     6.5  %                  +3.3  %                 +3.3  %                     n.a.
Weighted-average all-in yield(C)                    6.8  %                  +3.6  %                 +3.6  %                     n.a.
Weighted-average maximum maturity                      3.4                      3.4                     3.4                     n.a.
(years)(D)
LTV(E)                                               67  %                    67  %                   67  %                     n.a.



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

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

(C)   As of September 30, 2022, 64.1% and 35.9% of floating rate loans by loan
exposure were indexed to one-month USD LIBOR and Term SOFR, respectively. In
addition to cash coupon, all-in yield includes the amortization of deferred
origination fees, loan origination costs and purchase discounts.

(D) Maximum maturity assumes that all extension options are exercised by the borrower; however, our loans can be repaid before this date. Of the
September 30, 2022based on total loan exposure, 65.6% of our loans were subject to yield preservation or other prepayment restrictions and 34.4% were open for 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 risk-rated 5 loans and one real estate corporate
loan to a multifamily operator with an outstanding principal of $40.0 million as
of September 30, 2022.



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

                                                                                                                                            Committed               Current
                                                                                                                      Total Whole           Principal              Principal                                                             Max Remaining Term           Loan Per SF /
           Investment(A)                 Location                  Property Type             Investment Date            Loan(B)             Amount(B)               Amount              Net Equity(C)            Coupon(D)(E)               (Years)(D)(F)             Unit / Key(G)            LTV(D)(H)           Risk Rating
        Senior Loans(J)
      1 Senior Loan                Arlington, VA               Multifamily                           9/30/2021       $    381.0          $       381.0          $      355.0          $         72.4                 + 3.2%                         4.0              $ 319,793 / unit                 69  %             3
      2 Senior Loan                Boston, MA                  Life Science                           8/3/2022            312.5                  312.5                  44.9                     3.7                 + 4.2                          4.9              $ 649 / SF                       56                3
      3 Senior Loan                Bellevue, WA                Office                                9/13/2021            520.8                  260.4                  93.0                    28.3                 + 3.6                          4.5              $ 855 / SF                       63                3
      4 Senior Loan                Los Angeles, CA             Multifamily                           2/19/2021            260.0                  260.0                 250.0                    38.3                 + 3.6                          3.4              $ 466,400 / unit                 68                3
      5 Senior Loan                Various                     Industrial                            4/28/2022            504.5                  252.3                 252.3                    49.0                 + 2.7                          4.6              $ 98 / SF                        64                3
      6 Senior Loan                Mountain View, CA           Office                                7/14/2021            362.8                  250.0                 192.2                    48.0                 + 3.3                          3.9              $ 626 / SF                       73                4
      7 Senior Loan                Bronx, NY                   Industrial                            8/27/2021            381.2                  228.7                 137.5                    36.0                 + 4.1                          3.9              $ 277 / SF                       52                3
      8 Senior Loan                Various                     Multifamily                           5/31/2019            216.5                  216.5                 216.5                    39.2                 + 4.0                          1.7              $ 202,336 / unit                 74                3
      9 Senior Loan(K)             Various                     Industrial                            6/30/2021            425.0                  212.5                  47.0                    45.4                 + 5.5                          3.8              $ 163 / SF                       67                3
     10 Senior Loan                New York, NY                Condo (Residential)                  12/20/2018            211.2                  211.2                 200.1                    60.9                 + 3.6                          1.3              $ 1,388 / SF                     69                3
     11 Senior Loan                Minneapolis, MN             Office                               11/13/2017            194.4                  194.4                 194.4                    33.2                 + 3.8                          0.2              $ 179 / SF                        n.a.             5
     12 Senior Loan                Various                     Industrial                            6/15/2022            375.5                  187.8                 137.5                    30.4                 + 2.9                          4.8              $ 99 / SF                        50                3
     13 Senior Loan                Washington, D.C.            Office                                11/9/2021            187.7                  187.7                 154.8                    41.3                 + 3.3                          4.2              $ 434 / SF                       55                3
     14 Senior Loan                Boston, MA                  Office                                 2/4/2021            375.0                  187.5                 187.5                    37.4                 + 3.3                          3.4              $ 506 / SF                       71                3
     15 Senior Loan                The Woodlands, TX           Hospitality                           9/15/2021            183.3                  183.3                 170.9                    30.4                 + 4.2                          4.0              $ 187,957 / key                  64                3
     16 Senior Loan                Philadelphia, PA            Office                                4/11/2019            182.6                  182.6                 157.3                    25.4                 + 2.6                          1.6              $ 220 / SF                        n.a.             5
     17 Senior Loan                Washington, D.C.            Office                               12/20/2019            175.5                  175.5                 144.2                    37.6                 + 3.4                          2.3              $ 706 / SF                       58                4
     18 Senior Loan                West Palm Beach, FL         Multifamily                          12/29/2021            171.5                  171.5                 169.8                    25.7                 + 2.7                          4.3              $ 209,072 / unit                 73                3
     19 Senior Loan                Boston, MA                  Life Science                          4/27/2021            332.3                  166.2                 135.9                    25.3                 + 3.6                          3.6              $ 564 / SF                       66                3
     20 Senior Loan                Philadelphia, PA            Office                                6/19/2018            161.0                  161.0                 161.0                   160.2                 + 3.5                          0.8              $ 165 / SF                       71                4
     21 Senior Loan                Oakland, CA                 Office                               10/23/2020            509.9                  159.7                 129.1                    20.3                 + 4.3                          3.1              $ 397 / SF                       65                3
     22 Senior Loan                Plano, TX                   Office                                 2/6/2020            153.7                  153.7                 145.3                    22.3                 + 2.7                          2.4              $ 201 / SF                       63                3
     23 Senior Loan                Chicago, IL                 Office                                7/15/2019            150.0                  150.0                 117.6                    20.3                 + 3.3                          1.9              $ 113 / SF                       57                3
     24 Senior Loan                Redwood City, CA            Life Science                          9/30/2022            580.7                  145.2                     -                    (1.5)                + 4.5                          5.0              $ 1,206 / SF                     53                3
     25 Senior Loan                Seattle, WA                 Life Science                          10/1/2021            188.0                  140.3                 103.8                    25.2                 + 3.1                          4.0              $ 662 / SF                       69                3
     26 Senior Loan                Dallas, TX                  Office                               12/10/2021            138.0                  138.0                 135.8                    25.2                 + 3.7                          4.2              $ 432 / SF                       68                3
     27 Senior Loan                Boston, MA                  Multifamily                           3/29/2019            137.0                  137.0                 137.0                    30.8                 + 2.7                          1.5              $ 351,282 / unit                 59                3
     28 Senior Loan                Arlington, VA               Multifamily                           1/20/2022            135.3                  135.3                 130.9                    31.7                 + 2.9                          4.4              $ 436,300 / unit                 65                3
     29 Senior Loan                Fontana, CA                 Industrial                            5/11/2021            132.0                  132.0                  72.6                    43.5                 + 4.7                          3.7              $ 113 / SF                       64                3
     30 Senior Loan                Fort Lauderdale, FL         Hospitality                           11/9/2018            130.0                  130.0                 130.0                    24.3                 + 3.4                          1.2              $ 375,723 / key                  66                3
     31 Senior Loan                San Carlos, CA              Life Science                           2/1/2022            195.9                  125.0                  84.9                    24.0                 + 3.6                          4.4              $ 580 / SF                       68                3
     32 Senior Loan                Irving, TX                  Multifamily                           4/22/2021            117.6                  117.6                 112.2                    17.3                 + 3.3                          3.6              $ 123,586 / unit                 70                3
     33 Senior Loan                Cambridge, MA               Life Science                         12/22/2021            401.3                  115.7                  61.5                    16.7                 + 3.9                          4.3              $ 1,072 / SF                     51                3
     34 Senior Loan                Pittsburgh, PA              Student Housing                        6/8/2021            112.5                  112.5                 112.5                    17.0                 + 2.9                          3.7              $ 155,602 / unit                 74                3
     35 Senior Loan                Las Vegas, NV               Multifamily                          12/28/2021            106.3                  106.3                 102.0                    19.8                 + 2.7                          4.3              $ 193,182 / unit                 61                3
     36 Senior Loan                Doral, FL                   Multifamily                          12/10/2021            212.0                  106.0                 106.0                    21.0                 + 2.8                          4.2              $ 335,975 / unit                 77                3
     37 Senior Loan                San Diego, CA               Multifamily                          10/20/2021            103.5                  103.5                 103.5                    18.5                 + 2.8                          4.1              $ 448,052 / unit                 71                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(G)                  LTV(D)(H)           Risk Rating
    38 Senior Loan                Orlando, FL                  Multifamily                            12/14/2021             102.4                 102.4                 88.9                    21.5                 + 3.0                          4.3              $ 234,565 / unit                       74                3
    39 Senior Loan                West Hollywood, CA           Multifamily                             1/26/2022             102.0                 102.0                102.0                    15.3                 + 3.0                          4.4              $ 2,756,757 / unit                     65                3
    40 Senior Loan                Boston, MA                   Industrial                              6/28/2022             285.5                 100.0                 98.5                    97.7                 + 3.0                          4.8              $ 197 / SF                             52                3
    41 Senior Loan                Washington, D.C.             Office                                  1/13/2022             228.5                 100.0                 58.5                    10.0                 + 3.2                          5.4              $ 214 / SF                             55                3
    42 Senior Loan                Phoenix, AZ                  Industrial                              1/13/2022             195.3                 100.0                 33.3                    22.1                 + 4.0                          4.4              $ 57 / SF                              57                3
    43 Senior Loan                Brisbane, CA                 Life Science                            7/22/2021              95.0                  95.0                 90.8                    22.3                 + 3.1                          3.9              $ 784 / SF                             71                3
    44 Senior Loan                State College, PA            Student Housing                        10/15/2019              93.4                  93.4                 91.5                    23.5                 + 2.7                          2.1              $ 76,614 / SF                          64                2
    45 Senior Loan                Brandon, FL                  Multifamily                             1/13/2022              90.3                  90.3                 63.9                    10.6                 + 3.1                          4.4              $ 194,363 / unit                       75                3
    46 Senior Loan                Dallas, TX                   Multifamily                            12/23/2021              90.0                  90.0                 77.5                    15.0                 + 2.8                          4.3              $ 238,488 / unit                       67                3
    47 Senior Loan                Miami, FL                    Multifamily                            10/14/2021              89.5                  89.5                 89.5                    17.2                 + 2.9                          4.1              $ 304,422 / unit                       76                3
    48 Senior Loan                Dallas, TX                   Office                                  1/22/2021              87.0                  87.0                 87.0                    21.2                 + 3.3                          3.4              $ 288 / SF                             65                3
    49 Senior Loan                Charlotte, NC                Multifamily                            12/14/2021              86.8                  86.8                 76.0                    10.9                 + 3.0                          4.3              $ 206,522 / unit                       74                3
    50 Senior Loan                San Antonio, TX              Multifamily                              6/1/2022             246.5                  86.3                 80.3                    79.9                 + 2.8                          4.7              $ 88,134 / unit                        68                3
    51 Senior Loan                Scottsdale, AZ               Multifamily                              5/9/2022             169.0                  84.5                 84.5                    12.8                 + 2.9                          4.7              $ 457,995 / unit                       64                3
    52 Senior Loan                Raleigh, NC                  Multifamily                             4/27/2022              82.9                  82.9                 77.3                    15.5                 + 3.0                          4.6              $ 241,488 / unit                       68                3
    53 Senior Loan                Hollywood, FL                Multifamily                            12/20/2021              81.0                  81.0                 81.0                    14.8                 + 3.0                          4.3              $ 327,935 / unit                       74                3
    54 Senior Loan                Seattle, WA                  Office                                  3/20/2018              80.7                  80.7                 80.7                    13.2                 + 4.1                          0.5              $ 468 / SF                             56                3
    55 Senior Loan                Phoenix, AZ                  Single Family Rental                    4/22/2021              72.1                  72.1                 32.6                    15.4                 + 4.8                          3.6              $ 157,092 / unit                       50                3
    56 Senior Loan                Arlington, VA                Multifamily                            10/23/2020             141.8                  70.9                 70.9                    11.7                 + 3.8                          3.0              $ 393,858 / unit                       73                3
    57 Senior Loan                Denver, CO                   Multifamily                             9/14/2021              70.3                  70.3                 69.6                    11.4                 + 2.7                          4.0              $ 287,596 / unit                       78                3
    58 Senior Loan                Washington, D.C.             Multifamily                             12/4/2020              69.0                  69.0                 66.4                    10.6                 + 3.5                          3.2              $ 265,617 / unit                       63                3
    59 Senior Loan                Dallas, TX                   Multifamily                             8/18/2021              68.2                  68.2                 68.2                     9.9                 + 3.9                          3.9              $ 189,444 / unit                       70                3
    60 Senior Loan                Manassas Park, VA            Multifamily                             2/25/2022              68.0                  68.0                 68.0                    13.2                 + 2.7                          4.4              $ 223,684 / unit                       73                3
    61 Senior Loan                Plano, TX                    Multifamily                             3/31/2022              67.8                  67.8                 65.0                    17.9                 + 2.8                          4.5              $ 244,451 / unit                       75                3
    62 Senior Loan                Nashville, TN                Hospitality                             12/9/2021              66.0                  66.0                 64.7                    10.3                 + 3.6                          4.3              $ 281,237 / key                        68                3
    63 Senior Loan                Atlanta, GA                  Multifamily                            12/10/2021              61.5                  61.5                 57.3                    15.3                 + 3.0                          4.3              $ 189,893 / unit                       67                3
    64 Senior Loan                Durham, NC                   Multifamily                            12/15/2021              60.0                  60.0                 52.2                    10.4                 + 3.0                          4.3              $ 151,263 / unit                       67                3
    65 Senior Loan                San Antonio, TX              Multifamily                             4/20/2022              57.6                  57.6                 55.8                    10.6                 + 2.7                          4.6              $ 163,277 / unit                       79                3
    66 Senior Loan                Sharon, MA                   Multifamily                             12/1/2021              56.9                  56.9                 56.9                     8.3                 + 2.8                          4.2              $ 296,484 / unit                       70                3
    67 Senior Loan                Queens, NY                   Industrial                              2/22/2022              55.3                  55.3                 52.4                    13.3                 + 4.0                          1.4              $ 85 / SF                              68                3
    68 Senior Loan                Reno, NV                     Industrial                              4/28/2022             140.4                  50.5                 50.5                    11.1                 + 2.7                          4.6              $ 117 / SF                             74                3
    69 Senior Loan                Carrollton, TX               Multifamily                              4/1/2022              48.5                  48.5                 44.9                    13.0                 + 2.9                          4.5              $ 140,288 / unit                       74                3
    70 Senior Loan                Dallas, TX                   Multifamily                              4/1/2022              43.9                  43.9                 39.5                    10.4                 + 2.9                          4.5              $ 110,895 / unit                       73                3
    71 Senior Loan                Georgetown, TX               Multifamily                            12/16/2021              41.8                  41.8                 41.8                    10.1                 + 3.4                          4.3              $ 199,048 / unit                       68                3
    72 Senior Loan                San Diego, CA                Multifamily                             4/29/2022             203.0                  40.0                 38.9                     6.5                 + 2.6                          4.6              $ 446,056 / unit                       63                3
    73 Senior Loan(L)             New York, NY                 Condo (Residential)                      8/4/2017              20.1                  20.1                 20.1                    20.1                 + 4.2                          0.6              $ 942 / SF                             73                3
    74 Senior Loan                Denver, CO                   Industrial                             12/11/2020              15.4                  15.4                  7.3                     3.1                 + 3.8                          3.3              $ 47 / SF                              61                3
       Total/Weighted Average                                                                                          $  13,051.6          $    9,245.8          $   7,570.9          $      1,900.8                 + 3.3%                         3.4                                                     67  %            3.1
       Senior Loans Unlevered


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                                                                                                                                         Committed             Current
                                                                                                                   Total Whole           Principal            Principal                                                            Max Remaining Term           Loan Per SF /
              Investment(A)                  Location              Property Type           Investment Date           Loan(B)             Amount(B)              Amount             Net Equity(C)           Coupon(D)(E)               (Years)(D)(F)             Unit / Key(G)           LTV(D)(H)           Risk Rating
       Non-Senior Loans
     1 Corporate                         n.a.                    Multifamily                      12/11/2020           100.0                  40.0                 40.0                    39.6                 + 12.0                        3.2              n.a.                             n.a.             3
       Total/Weighted Average                                                                                      $   100.0          $       40.0          $      40.0          $         39.6                 + 12.0%                       3.2                                               n.a.            3.0
       Non-Senior Loans Unlevered
       CMBS B-Pieces
     1 RECOP I(I)                        Various                 Various                           2/13/2017               n.a.               40.0                 35.7                    35.7                   4.8                         6.7              n.a.                            58              

n / A

       Total/Weighted Average                                                                                                         $       40.0          $      35.7          $         35.7                   4.8%                        6.7                                              58  %
       CMBS B-Pieces Unlevered
       Real Estate Owned
     1 Real Estate Asset                 Portland, OR            Retail                           12/16/2021               n.a.                  n.a.              79.7                    79.7                   n.a.                              n.a.       n.a.                             n.a.           
n.a.
       Total/Weighted Average                                                                                                                               $      79.7          $         79.7
       Real Estate Owned
       Grand Total / Weighted                                                                                                         $    9,325.8          $   7,726.3          $      2,055.8                   6.5%                        3.5                                              67  %            3.1
       Average


*  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 14, 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 September 30, 2022, at an interest rate of
L+7.9%.

For Senior Loan 21, 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 $20.2 million was funded as of September 30, 2022, at
an interest rate of L+12.9%.

(B) Total Whole Loan represents the total commitment of the entire original loan. The principal amount committed includes the equity interests of KKR affiliates 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 base of our investments in RECOP I and REO.

(D)  Weighted average is weighted by the current principal amount for our
senior, mezzanine and corporate loans and by net equity for our RECOP I CMBS
B-Pieces. Non-Senior Loan 1 and risk-rated 5 loans are excluded from the
weighted average LTV.
(E)  Coupon expressed as spread over the relevant floating benchmark rates,
which include one-month LIBOR and Term SOFR, as applicable to each loan. As of
September 30, 2022, 64.1% and 35.9% of floating rate loans by principal amount
were indexed to one-month LIBOR and Term SOFR, respectively.

(F) Maximum remaining term (years) assumes all extension options are exercised, if any.

(G)  Loan Per SF / Unit / Key is based on the current principal amount divided
by the current SF / Unit / Key. For Senior Loans 2, 3, 7, 9, 24, 29, 33, 42, 55,
and 74, Loan Per SF / Unit / Key is calculated as the total commitment amount of
the loan divided by the proposed SF / Unit / Key.

(H)  For senior loans, LTV is generally based on the initial loan amount divided
by the as-is appraised value as of the date the loan was originated or by the
current principal amount as of the date of the most recent as-is appraised
value; for mezzanine loans, LTV is based on the current balance of the whole
loan divided by the as-is appraised value as of the date the loan was
originated; for RECOP I CMBS B-Pieces, LTV is based on the weighted average LTV
of the underlying loan pool at issuance. Weighted Average LTV excludes one fully
funded corporate loan to a multifamily operator with an outstanding principal
amount of $40.0 million.

For Senior Loans 10 and 73, the LTV is based on the current principal amount divided by the estimated gross redemption value adjusted net of cost of sales.

For Senior Loans 2, 3, 7, 9, 24, 29, 33, 42, 55 and 74, LTV is calculated as the
total commitment amount of the loan divided by the as-stabilized value as of the
date the loan was originated.

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

(J) Senior Loans includes Senior Mortgages and Investments of similar credit quality, including Junior Participations in our Originating Senior Loans for which we have syndicated the Senior Participations and retained the Junior Participations for our portfolio and excludes the participations vertical lending.

(K)  For Senior Loan 9, the total whole loan facility is $425.0 million,
co-originated and co-funded by us and a KKR affiliate. Our interest was 50% of
the facility or $212.5 million. The facility is comprised of individual
cross-collateralized whole loans. As of September 30, 2022, there were eight
underlying senior loans in the facility with a commitment of $98.4 million and
outstanding principal of $47.0 million.

(L)  For Senior Loan 73, Loan per SF of $942 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 $2,061 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 have a strong asset management relationship with our borrowers and have used these relationships to maximize the performance of our portfolio, including during periods of volatility such as the COVID-19 pandemic.

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

2-Low Risk

3-Medium Risk

4-High risk/potential for loss: A loan that presents a risk of realizing a loss on the principal.

5-Impairment/Probable Loss: A loan that has a very high risk of realizing a capital loss or has otherwise suffered a capital loss.

As of September 30, 2022, the average risk rating of our loan portfolio was 3.1,
weighted by total loan exposure, as compared to 2.9 as of December 31, 2021.

                                                  September 30, 2022                                                                                                 December 31, 2021
                                                                                   Total Loan            Total Loan                                                                   Total Loan            Total Loan
       Risk Rating               Number of Loans          Carrying Value           Exposure(A)           Exposure %                 Number of Loans          Carrying Value           Exposure(A)           Exposure %
            1                            -              $             -          $          -                     -  %                      1              $       243,549          $    243,552                   3.6  %
            2                            1                       91,287                91,476                   1.2                         3                      410,293               411,424                   6.2
            3                           69                    6,367,631             6,670,183                  87.6                        54                    5,268,590             5,627,927                  84.3
            4                            3                      496,219               497,466                   6.6                         4                      394,301               394,336                   5.9
            5                            3                      351,428               351,716                   4.6                         1                            -                     -                     -
Total loan receivable                   76              $     7,306,565          $  7,610,841                 100.0  %                     63              $     6,316,733          $  6,677,239                 100.0  %
Allowance for credit losses                                    (110,798)                                                                                           (22,244)
Loan receivable, net                                    $     7,195,767                                                                                    $     6,294,489



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Contents

(A)  In certain instances, we finance our loans through the non-recourse sale of
a senior interest that is not included in our condensed consolidated financial
statements under GAAP. Total loan exposure includes the entire loan we
originated and financed, including $258.9 million and $318.6 million of such
non-consolidated senior interests as of September 30, 2022 and December 31,
2021, respectively.


As of September 30, 2022, we had one risk-rated 4 senior loan secured by office
properties located in Philadelphia, PA that was past its current maturity date
of September 2022. The maximum maturity date of this senior loan, assuming all
extension options are exercised, is July 2023. The loan had an amortized cost of
$161.8 million and was not pledged to any secured financing facility as of
September 30, 2022. The borrower paid its October monthly interest payment
subsequent to quarter end.

CMBS B-Piece Investments

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

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

Portfolio Financing

Our portfolio financing arrangements include Term Loan Financing, Term Loan Agreements, Secured Loan Obligations, Secured Term Loan, Warehouse, Asset Specific Financing, Senior Interest non-consolidated (collectively “non-marked-to-market sources of funding”) and the main takeover agreements.

Our Non-Mark-to-Market Financing Sources, which accounted for 76% of our total
secured financing (excluding our corporate revolver) as of September 30, 2022,
are not subject to credit or capital markets mark-to-market provisions. The
remaining 24% 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
                                                Non-/Mark-to-Market            September 30, 2022          December 31, 2021
Master repurchase agreements                      Mark-to-Credit               $      1,423,355          $        1,554,808
Collateralized loan obligations                 Non-Mark-to-Market                    1,942,750                   1,095,250
Term lending agreements                         Non-Mark-to-Market                    1,342,628                   1,117,627
Term loan financing                             Non-Mark-to-Market                      584,033                     870,458
Secured term loan                               Non-Mark-to-Market                      347,375                     350,000
Asset specific financing                        Non-Mark-to-Market                      138,165                      60,000
Warehouse facility                              Non-Mark-to-Market                            -                           -
Non-consolidated senior interests               Non-Mark-to-Market                      258,861                     318,634
Total portfolio financing                                                      $      6,037,167          $        5,366,777



Financing Agreements

The following table details our funding arrangements (in thousands of dollars):

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                                                                           September 30, 2022
                                       Maximum                Collateral                               Borrowings
                                   Facility Size(A)           Assets(B)           Potential(C)          Outstanding          Available
Master Repurchase
Agreements
Wells Fargo                      $       1,000,000          $   978,669          $    734,002          $   715,981          $  18,021
Morgan Stanley                             600,000              790,539               590,520              583,716              6,804
Goldman Sachs                              240,000              287,517               206,214              123,658             82,556
Term Loan Facility                       1,000,000              719,961               584,033              584,033                  -
Term Lending Agreements
KREF Lending V                             567,115              686,622               540,406              539,050              1,356
KREF Lending IX                          1,000,000              813,181               654,000              642,438             11,562
KREF Lending XII                           350,000              217,395               163,698              161,140              2,558
Warehouse Facility
HSBC                                       500,000                    -                     -                    -                  -
Asset Specific Financing
BMO Facility                               300,000                    -                     -                    -                  -
KREF Lending XI                            100,000              125,000               100,000              100,000                  -
KREF Lending XIII                          265,625               44,900                38,165               38,165                  -
Revolver                                   610,000                    -               610,000                    -            610,000
                                 $       6,532,740          $ 4,663,784          $  4,221,038          $ 3,488,181          $ 732,857


(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 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 September 30, 2022 and
December 31, 2021, the weighted average haircut under our repurchase agreements
was 30.8% and 30.3%, respectively (or 25.5% and 25.9%, respectively, if we had
borrowed the
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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
match-term up to five years and is non-recourse to us. Borrowings under the
facility are collateralized by senior loans, held-for-investment.

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

                                                                                                          September 30, 2022
                                                  Outstanding
Term Loan Facility              Count              Principal             Amortized Cost           Carrying Value          Wtd. Avg. Yield/Cost(A)           Guarantee(B)            Wtd. Avg. Term(C)
Collateral assets                 10            $     719,961          $       716,517          $       688,843                    + 3.4%                       n.a.                  February 2026
Financing provided               n.a.                 584,033                  583,681                  583,681                    + 1.8%                       n.a.                  February 2026

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

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

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

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 June 2022, the current stated maturity was extended to June 2023,
subject to three 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 September 30, 2022, the Initial Buyer held 23.8%
of the total commitment under the facility. Borrowings under the facility are
collateralized by certain loans, held for investment, and bear interest equal to
one-month LIBOR, plus a 1.9% margin.

In July 2021, we entered into a $500.0 million Master Repurchase and Securities
Contract Agreement with a financial institution ("KREF Lending IX Facility"). In
March 2022, we increased the borrowing capacity to $750.0 million. In August
2022, we further increased the borrowing capacity to $1,000.0 million. The
facility, which provides financing on a non-mark-to-market basis with partial
recourse to us, has a three-year draw period and match- term to the underlying
loans.

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

Warehouse

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.

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Asset Specific Financing

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

In April 2022we entered a $100.0 million loan financing facility with a financial institution (“KREF Lending XI Facility”). The facility provides asset-based non-mark-to-market, non-recourse, asset-based financing.

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

Revolving credit agreement

In March 2022, we upsized our corporate revolving credit facility ("Revolver"),
administered by Morgan Stanley Senior Funding, Inc., to $520.0 million and
extended the maturity date to March 2027. In April 2022, we further upsized our
Revolver to $610.0 million. We may use our Revolver as a source of financing,
which is designed to provide short-term liquidity to originate or de-lever
loans, pay operating expenses and borrow amounts for general corporate purposes.
Borrowings under the Revolver bear interest at a per annum rate equal to the sum
of (i) Term SOFR and (ii) a fixed margin. Our Revolver is secured by corporate
level guarantees and includes net equity interests in the investment portfolio.

Secured Loan Obligations

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

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

                                                                                                     September 30, 2022
                                                          Outstanding
                                        Count              Principal            Amortized Cost           Carrying Value          Wtd. Avg. Yield/Cost(A)            Wtd. Avg. Term(B)
KREF 2021-FL2
Collateral assets(C)(D)                  19             $  1,300,000          $     1,300,000          $     1,281,618                    + 3.3%                       January 2026
Financing provided                        1                1,095,250                1,091,258                1,091,258                   L + 1.7%                     February 2039
KREF 2022-FL3
Collateral assets(C)                     15                1,000,000                1,000,000                  995,326                    + 3.0%                      September 2026
Financing provided                        1                  847,500                  842,398                  842,398                   S + 2.1%                     February 2039



(A)Expressed as a spread over the relevant benchmark rates, which include
one-month LIBOR and Term SOFR, as applicable to each loan. As of September 30,
2022, 83.9% and 16.1% of the CLO collateral loan assets by principal balance
earned a floating rate of interest indexed to one-month LIBOR and Term SOFR,
respectively. In addition to cash coupon, yield/cost includes the amortization
of deferred origination/financing costs.
(B)Loan term represents weighted-average final maturity, assuming all extension
options are exercised by the borrower, weighted by outstanding principal.
Repayments of CLO notes are dependent on timing of underlying collateral loan
asset repayments post reinvestment period. The term of the CLO notes represents
the rated final distribution date.
(C)Collateral loan assets represent 30.2% of the principal of our commercial
real estate loans as of September 30, 2022. As of September 30, 2022, 100% of
our loans financed through the CLOs are floating rate loans.
(D)Including $79.0 million cash held in the CLOs as of September 30, 2022.

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
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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 after 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 condensed consolidated
financial statements. These non-consolidated senior interests provide structural
leverage on a non-mark-to-market, match-term basis for our net investments,
which are typically reflected in the form of mezzanine loans or other
subordinate interests on our 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):

                                                                                                           September 30, 2022
                                                                      Principal                                                                                         Wtd. Avg.
Non-Consolidated Senior Interests                    Count             Balance            Carrying Value          Wtd. Avg. Yield/Cost           Guarantee                 Term
Total loan                                             2            $  316,566                 n.a.                     L + 3.7%                    n.a.              December 2025
Senior participation                                   2               258,861                 n.a.                     L + 2.4%                    n.a.              December 2025
Interests retained                                                      57,706                                          L + 9.6%                                       January 2026


Guaranteed term loan

In September 2020, we entered into a $300.0 million secured term loan at a price
of 97.5%. The secured term loan is partially amortizing, with an amount equal to
1.0% per annum of the principal balance due in quarterly installments. In
November 2021, we completed a repricing of a $297.8 million existing secured
term loan and a $52.2 million add-on, for an aggregate principal amount of
$350.0 million, which was issued at par. The new secured term loan bears
interest at LIBOR plus a 3.50% margin, and is subject to a 0.50% LIBOR floor.

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

Convertible Notes

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

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Borrowing Activities

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

Nine month period ended September 30, 2022

                                          Outstanding
                                        Principal as of          Average Daily Amount         Maximum Amount          Weighted Average
                                       September 30, 2022           Outstanding(A)             Outstanding          Daily Interest Rate
Master Repurchase Agreements
Wells Fargo                           $         715,981          $          716,227          $     980,593                        2.4  %
Morgan Stanley                                  583,716                     514,787                583,716                        3.0
Goldman Sachs                                   123,658                     127,517                192,305                        3.2
Term Loan Facility                              584,033                     775,801                918,959                        2.6
Term Lending Agreements
KREF Lending V                                  539,050                     587,020                617,627                        2.9
KREF Lending IX                                 642,438                     510,983                642,438                        2.9
KREF Lending XII                                161,140                     154,736                161,140                        3.5
Asset Specific Financing
BMO Facility                                          -                       2,637                 60,000                        1.8
KREF Lending XI                                 100,000                      97,328                100,000                        4.3
KREF Lending XIII                                38,165                      38,165                 38,165                        5.5
Revolver                                              -                      55,458                395,000                        2.7
Total/Weighted Average                $       3,488,181                                                                           2.9  %



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

                                         Average Daily Amount Outstanding(A)
                                                 Three Months Ended
                                       September 30, 2022               June 30, 2022
Master Repurchase Agreements
Wells Fargo                   $          702,403                       $      671,211
Morgan Stanley                           571,198                              500,877
Goldman Sachs                            123,658                              105,799
Term Loan Facility                       616,291                              812,104
Term Lending Facility
KREF Lending V                           553,304                              598,508
KREF Lending IX                          642,438                              492,795
KREF Lending XII                         161,140                               81,085
Asset Specific Financing
BMO Facility                                   -                                    -
KREF Lending XI                           98,058                               96,278
KREF Lending XIII                         38,165                                    -
Revolver                                       -                              147,253


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

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

•an interest income to interest expense ratio covenant (1.5 to 1.0);
•a minimum consolidated tangible net worth covenant (75.0% of the aggregate net
cash proceeds of any equity issuances made and any capital contributions
received by us and KKR Real Estate Finance Holdings L.P. (our "Operating
Partnership") or up to approximately $1,353.4 million, depending on the
agreement;
•a cash liquidity covenant (the greater of $10.0 million or 5.0% of our recourse
indebtedness);
•a total indebtedness covenant (83.3% of our Total Assets, as defined in the
applicable financing agreements);
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With respect to our secured term loan, we are required to comply with customary
loan covenants and event of default provisions that include, but are not limited
to, negative covenants relating to restrictions on operations with respect to
our status as a REIT, and financial covenants. Such financial covenants include
a minimum consolidated tangible net worth of $650.0 million and a maximum total
debt to total assets ratio of 83.3% (the "Leverage Covenant").

From September 30, 2022we 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 ours. In addition, some guarantees include certain full
recourse insolvency-related trigger events.

With respect to our Revolver, amounts borrowed are full recourse to certain 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 September 30, 2022, the
joint venture held REO assets with a net carrying value of $69.8 million. We
have priority of distributions up to $70.5 million before the JV Partner can
participate in the economics of the joint venture.
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Results of Operations

Three months completed September 30, 2022 Compared to the three months ended June 30, 2022

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

                                                            Three Months Ended,                               Increase (Decrease)
                                                 September 30, 2022           June 30, 2022            Dollars               Percentage
Net Interest Income
Interest income                                $           114,627          $       90,603          $   24,024                       26.5  %
Interest expense                                            67,311                  44,733              22,578                       50.5
Total net interest income                                   47,316                  45,870               1,446                        3.2
Other Income
Revenue from real estate owned
operations                                                   2,092                   1,833                 259                       14.1

Income (loss) from equity method
investments                                                    914                   1,035                (121)                     (11.7)

Other income                                                   840                   1,237                (397)                     (32.1)
Total other income (loss)                                    3,846                   4,105                (259)                      (6.3)
Operating Expenses
General and administrative                                   4,286                   4,308                 (22)                      (0.5)
Provision for (reversal of ) credit
losses, net                                                 80,604                  11,798              68,806                      583.2
Management fee to affiliate                                  6,589                   6,506                  83                        1.3

Expenses from real estate owned
operations                                                   2,598                   2,368                 230                        9.7
Total operating expenses                                    94,077                  24,980              69,097                      276.6
Income (Loss) Before Income Taxes,
Noncontrolling Interests, Preferred
Dividends and Participating Securities'
Share in Earnings                                          (42,915)                 24,995             (67,910)                    (271.7)
Income tax expense                                               -                       -                   -                          -
Net Income (Loss)                                          (42,915)                 24,995             (67,910)                    (271.7)
Noncontrolling interests in (income)
loss of consolidated joint venture                             161                      66                  95                      143.9
Net Income (Loss) Attributable to KKR
Real Estate Finance Trust Inc. and
Subsidiaries                                               (42,754)                 25,061             (67,815)                    (270.6)
Preferred stock dividends                                    5,326                   5,326                   -                          -
Participating securities' share in
earnings                                                       341                     341                   -                          -
Net Income (Loss) Attributable to Common
Stockholders                                   $           (48,421)         $       19,394          $  (67,815)                    (349.7) %

Net Income (Loss) Per Share of Common
Stock
Basic                                          $             (0.70)         $         0.28          $    (0.98)                    (350.0) %
Diluted                                        $             (0.70)         $         0.28          $    (0.98)                    (350.0) %

Weighted Average Number of Shares of
Common Stock Outstanding
Basic                                                   69,382,730              68,549,049             833,681                        1.2  %
Diluted                                                 69,382,730              68,549,049             833,681                        1.2  %

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




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Net Interest Income

Net interest income increased by $1.4 million during the three months ended
September 30, 2022, compared to the three months ended June 30, 2022. This
increase was primarily due to an increase in the weighted-average index rates,
including LIBOR and Term SOFR. Interest income further increased due to a $101.4
million quarter-over-quarter increase in our weighted average loan principal, as
a result of continuing capital deployment from loan repayments. Interest expense
increased accordingly due to an increase in market rates and an $87.6 million
quarter-over-quarter increase in our weighted average portfolio financing.

In addition, interest income included $1.5 million in prepayment penalty income
in connection with loan repayments during the three month ended September 30,
2022, as compared to $4.0 million during the prior quarter. We recognized $7.0
million and $5.9 million of deferred loan fees and origination discounts
accreted into interest income during the three months ended September 30, 2022
and June 30, 2022, respectively. We recorded $6.5 million of deferred financing
costs amortization into interest expense during the three months ended
September 30, 2022, as compared to $5.8 million during the prior quarter.

Other income

Total other income decreased by $0.3 million during the three months ended
September 30, 2022, as compared to the prior quarter. This decrease was
primarily due to a $0.4 million one-time gain from local tax credit received
during the three months ended June 30, 2022. Other income further decreased due
to a $0.1 million decrease in unrealized mark-to-market gain on our RECOP I's
underlying CMBS investments, which was partially offset by a $0.3 million
increase in REO operating revenue.

Functionnary costs

Total operating expenses increased by $69.1 million during the three months
ended September 30, 2022, as compared to the prior quarter. This increase was
primarily due to (i) a net increase of $68.8 million in the provision for credit
losses and (ii) a $0.2 million increase in REO operating expenses.
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Nine months ended September 30, 2022 Compared to Nine months ended September 30,
2021

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

                                                    Nine Months Ended September 30,                       Increase (Decrease)
                                                      2022                    2021                 Dollars                Percentage
Net Interest Income
Interest income                                $        278,460          $    207,235          $     71,225                       34.4  %
Interest expense                                        144,503                84,173                60,330                       71.7
Total net interest income                               133,957               123,062                10,895                        8.9
Other Income
Revenue from real estate owned
operations                                                6,554                     -                 6,554                      100.0

Income (loss) from equity method
investments                                               3,835                 4,508                  (673)                     (14.9)

Other income                                              3,992                   296                 3,696                    1,248.6
Total other income (loss)                                14,381                 4,804                 9,577                      199.4
Operating Expenses
General and administrative                               13,040                10,852                 2,188                       20.2
Provision for (reversal of ) credit
losses, net                                              91,184                  (982)               92,166                    9,385.5
Management fee to affiliate                              19,102                14,089                 5,013                       35.6
Incentive compensation to affiliate                           -                 6,810                (6,810)                    (100.0)
Expenses from real estate owned
operations                                                7,520                     -                 7,520                      100.0
Total operating expenses                                130,846                30,769               100,077                      325.3
Income (Loss) Before Income Taxes,
Noncontrolling Interests, Preferred
Dividends, Redemption Value Adjustment
and Participating Securities' Share in
Earnings                                                 17,492                97,097               (79,605)                     (82.0)
Income tax expense                                            -                   257                  (257)                    (100.0)
Net Income (Loss)                                        17,492                96,840               (79,348)                     (81.9)
Noncontrolling interests in (income)
loss of consolidated joint venture                          283                     -                   283                      100.0
Net Income (Loss) Attributable to KKR
Real Estate Finance Trust Inc. and
Subsidiaries                                             17,775                96,840               (79,065)                     (81.6)
Preferred stock dividends and redemption
value adjustment                                         15,978                 6,403                 9,575                      149.5
Participating securities' share in
earnings                                                  1,028                     -                 1,028                      100.0
Net Income (Loss) Attributable to Common
Stockholders                                   $            769          $     90,437          $    (89,668)                     (99.1) %

Net Income (Loss) Per Share of Common
Stock
Basic                                          $           0.01          $       1.63          $      (1.62)                     (99.4) %
Diluted                                        $           0.01          $       1.62          $      (1.61)                     (99.4) %

Weighted Average Number of Shares of
Common Stock Outstanding
Basic                                                67,029,140            55,629,810            11,399,330                       20.5  %
Diluted                                              67,029,140            55,883,197            11,145,943                       19.9  %

Dividends Declared per Share of Common
Stock                                          $           1.29          $       1.29          $          -                          -  %




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Net Interest Income

Net interest income increased by $10.9 million, during the nine months ended
September 30, 2022, as compared to the corresponding period in the prior year.
This increase was primarily due to an increase in the weighted-average index
rates, including LIBOR and Term SOFR. Interest income further increased due to
an increase in the weighted average principal of our loan portfolio of
$1,798.9 million for the nine months ended September 30, 2022, as compared to
the prior year period, as a result of continuing capital deployment from loan
repayments and deployment of the proceeds from the preferred and common stock
issuances.

The increase in interest expense was primarily due to an increase in market
rates and an increase in the weighted average principal balance of our financing
facilities of $1,537.0 million for the nine months ended September 30, 2022, as
compared to the prior year period. The proceeds from our financing facilities
were used to fund our loan originations and funding on previously closed loans.

In addition, we recognized $18.9 million of deferred loan fees and origination
discounts accreted into interest income during the nine months ended
September 30, 2022, as compared to $20.1 million during the prior year period.
We recorded $17.1 million of deferred financing costs amortization into interest
expense during the nine months ended September 30, 2022, as compared to
$10.5 million during the prior year period.

Other income

Total other income increased by $9.6 million during the nine months ended
September 30, 2022, as compared to the prior year period. This increase was
primarily due to a $6.6 million increase in REO operating revenue and
$1.3 million of profit sharing income in connection with the repayment of an
industrial senior loan. This increase was partially offset by a $0.7 million
decrease in unrealized mark-to-market gain from our RECOP I's underlying CMBS
investments as compared to the prior year period.

Functionnary costs

Total operating expenses increased by $100.1 million during the nine months
ended September 30, 2022, as compared to the prior year period. This increase
was primarily due to a (i) net increase of $92.2 million in the provision for
credit losses, (ii) $7.5 million increase in REO operating expenses and (iii)
$5.0 million increase in management fees resulting from our preferred and common
stock issuances. This increase was partially offset by a $6.8 million decrease
in incentive fee, as compared to the prior year period.

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

                                                                                Three Months Ended
                                     September 30,                                                          December 31,        September 30,
                                          2022              June 30, 2022           March 31, 2022              2021                 2021
Operating expenses                   $     2,111          $        2,268          $         2,320          $     1,970          $     1,632
Stock-based compensation                   2,175                   2,040                    2,126                1,413                2,027
Total general and
administrative expenses                    4,286                   4,308                    4,446                3,383                3,659
Provision for (reversal of)
credit losses, net                        80,604                  11,798                   (1,218)              (3,077)               1,165
Management fee to affiliate                6,589                   6,506                    6,007                5,289                4,964
Incentive compensation to
affiliate                                      -                       -                        -                3,463                2,215
Expenses from real estate
owned operations                           2,598                   2,368                    2,554                    -                    -
Total operating expenses             $    94,077          $       24,980          $        11,789          $     9,058          $    12,003



COVID-19 Impact

Since its onset in 2020, the COVID-19 pandemic has created significant
disruption in global supply chains, increased rates of unemployment and
adversely impacted many industries, including industries related to the
collateral underlying certain of our loans. Moreover, the increase in remote
working arrangements in response to the pandemic may contribute to a decline in
commercial real estate values and reduce demand for commercial real estate
compared to pre-pandemic levels, which may adversely impact certain of our
borrowers and may persist even as the pandemic continues to subside.
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In 2021 and 2022, the global economy has, with certain setbacks, begun reopening
and wider distribution of vaccines will likely encourage greater economic
activity. Although we have observed signs of economic recovery and are generally
encouraged by the response of our borrowers, with the potential for new strains
of COVID-19 to emerge, governments and businesses may re-impose aggressive
measures to help slow its spread in the future, and for this reason, among
others, as the COVID-19 pandemic continues, the potential global impacts remain
uncertain and difficult to assess. In addition, the COVID-19 pandemic continues
to disrupt global supply chains, has caused labor shortages and has added broad
inflationary pressures, which has a potential negative impact on our borrowers'
ability to execute on their business plans and potentially their ability to
perform under the terms of their loan obligations. In response to such
inflationary pressures, the Federal Reserve has begun raising interest rates in
2022 and has indicated that it foresees further interest rate increases
throughout the year and into 2023 and 2024. Higher interest rates imposed by the
Federal Reserve to address inflation may adversely impact real state asset
values and increase our interest expenses, which expenses may not be fully
offset by any resulting increase in interest income, and may lead to decreased
prepayments from our borrowers and an increase in the number of our borrowers
who exercise extension options. Further, declines in economic conditions caused
by the COVID-19 pandemic could negatively impact real estate and real estate
capital markets and result in lower occupancy, lower rental rates and declining
values in our portfolio, which could adversely impact the value of our
investments, making it more difficult for us to make distributions or meet our
financing obligations.

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

Insight

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 76% of our total
secured financing (excluding our corporate Revolver) as of September 30, 2022,
are not subject to credit or capital markets mark-to-market provisions. The
remaining 24% 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 $183.3 million of cash on our
consolidated balance sheet, $610.0 million of available capacity on our
corporate revolver, $122.9 million of available borrowings under our financing
arrangements based on existing collateral and cash flows from operations. In
addition, we had $369.5 million of unencumbered senior loans that can be
financed, as of September 30, 2022. Our corporate revolver and secured term loan
are secured by corporate level guarantees and includes net equity interests in
the investment portfolio. We may seek additional sources of liquidity from
syndicated financing, other borrowings (including borrowings not related to a
specific investment) and future offerings of equity and debt securities.

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

As described in Note 10 to our condensed consolidated financial statements, we
have off-balance sheet arrangements related to VIEs that we account for using
the equity method of accounting and in which we hold an economic interest or
have a capital commitment. Our maximum risk of loss associated with our
interests in these VIEs is limited to the carrying value of our investment in
the entity and any unfunded capital commitments. As of September 30, 2022, we
held $36.9 million of interests in such entities, which does not include a
remaining commitment of $4.3 million to RECOP I that we are required to fund if
called.

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

To facilitate future offerings of equity, debt and other securities, we have in
place an effective shelf registration statement (the "Shelf") with the SEC. The
amount of securities to be issued pursuant to this Shelf was not specified when
it was filed and there is no specific dollar limit on the amount of securities
we may issue. The securities covered by this Shelf include: (i) common stock,
(ii) preferred stock, (iii) depository shares, (iv) debt securities, (v)
warrants, (vi) subscription rights, (vii) purchase contracts, and (viii) units.
The specifics of any future offerings, along with the use of proceeds of any
securities offered, will be described in detail in a prospectus supplement, or
other offering material, at the time of any offering. In January 2022, we issued
6,210,000 shares of 6.50% Series A Preferred Stock under the Shelf, which
included the exercise of the underwriters option to purchase additional shares
of Series A Preferred Stock, and received net proceeds after underwriting
discounts and commissions of $151.2 million. In March and June of 2022, we
issued 6,494,155 and 2,750,000 shares of Common Stock under the Shelf,
respectively, which included the partial exercise of the underwriters' option to
purchase additional shares of Common Stock, and received net proceeds after
underwriting discounts and commissions of $133.8 million and $53.7 million,
respectively.


(1) 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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Contents


We have also entered into an equity distribution agreement with certain sales
agents, pursuant to which we may sell, from time to time, up to an aggregate
sales price of $100.0 million of our common stock, pursuant to a continuous
offering program (the "ATM"), under the Shelf. Sales of our common stock made
pursuant to the ATM may be made in negotiated transactions or transactions that
are deemed to be "at the market" offerings as defined in Rule 415 under the
Securities Act. During the three and nine months ended September 30, 2022, we
issued and sold 271,641 and 340,458 shares of common stock under the ATM,
generating net proceeds totaling $5.3 million and $6.7 million, respectively. As
of September 30, 2022, $93.2 million remained available for issuance under the
ATM.


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

Debt ratio and total leverage ratio

The following table presents our debt-to-equity ratio and total leverage ratio:
                                         September 30, 2022      December 31, 2021
          Debt-to-equity ratio(A)               1.9x                    2.3x
          Total leverage ratio(B)               3.6x                    3.7x



(A)   Represents (i) total outstanding debt agreements (excluding non-recourse
facilities), 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 contracts, secured term loans, convertible notes and secured loan obligations less cash by (ii) total equity, in each case , at the end of the period.

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):
                                                             September 30, 2022           December 31, 2021
Cash and cash equivalents                                   $          183,341          $          271,487
Available borrowings under revolving credit
agreements                                                             610,000                     200,000
Available borrowings under master repurchase
agreements                                                             107,381                      51,601

Available borrowings under term lending agreements                      15,476                       5,826

Available borrowings under asset specific financing                          -                           -

                                                            $          916,198          $          528,914



We also had $369.5 million and $235.3 million of unencumbered senior loans that
can be pledged to financing facilities subject to lender approval, as of
September 30, 2022 and December 31, 2021. In addition to our primary sources of
liquidity, we have the ability to access further liquidity through our ATM
program and public offerings of debt and equity securities. Our existing loan
portfolio also provides us with liquidity as loans are repaid or sold, in whole
or in part, and the proceeds from repayment become available for us to invest.

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