# Dear Fellow Shareholders

_Source: `DeepSeekOCR_Ardian_pruned_1k/real-estate-reit-mortgage/NYSE_KREF_2021/NYSE_KREF_2021.mmd` · pages 3-9_

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Dear Fellow Shareholders

MATT SALEM

In May 2022, KKR Real Estate Finance Trust Inc. ("KREF" or the "Company") will celebrate its 5th anniversary as a public company. KREF has delivered strong performance over this period with a focus on lending to institutional real estate owned by the highest quality sponsors. This performance has led to growth and 2021 marked a record year for KREF on a number of fronts. Our portfolio has increased from \(5.0 billion at the start of the 2021 to \)6.8 billion at year-end, driven by a record $4.8 billion in senior commercial mortgage loan originations. This larger portfolio size is supported by KKR's real estate credit team of 53 investment professionals, which has more than doubled since the onset of the COVID-19 pandemic. In today's active origination environment, we continue to differentiate ourselves through strong relationships by delivering speed, certainty and creativity to our institutional client base. One of the statistics I like the most is how many of our clients conduct repeat business with us and I'm proud to report that in 2021, approximately two-thirds of our 37 loans were made to repeat borrowers. This is a testament to our team, client service, and deep relationships.

We also had strong financial results and made significant progress in our capital structure. In 2021, KREF's book value per share ("BVPS") increased by approximately 3.3%, with the fourth quarter marking the Company's seventh consecutive quarter of BVPS growth. We have meaningfully increased our trading liquidity in KREF common shares, and averaged $10 million in daily trading liquidity year to date.

Of course, we haven't accomplished this alone. Our affiliation within KKR and our integration within the broader KKR real estate platform has been critical to our success as we leverage the platform to create differentiated outcomes in our sourcing, evaluation, financing, and asset management. Working closely with our KKR Capital Markets team has led to market leading non-mark-to-market financing facilities.

Despite our record growth in 2021, our portfolio remains defensive from a credit perspective. The portfolio is 100% performing, 100% floating rate, with a weighted average LTV of 68%. As we shift our paradigm to a more hawkish Federal Reserve, we expect our portfolio to become positively correlated to increases in short term interest rates in the coming quarters.

We are proud of the growth in our portfolio, the continued build-out and diversification of our best-in-class capital structure and our strong credit results in 2021. We feel well positioned to capitalize on our current strength and continue to grow as we move forward.

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## Cycle-Tested Portfolio with Proven Ability to Grow

KREF originates large loans (the portfolio's average loan size is \(131 million) secured by institutional real estate located in the most liquid markets and owned by the highest quality sponsors. 89% of our loans as of year-end were made on properties located in the top 20 MSAs. We've conservatively positioned the portfolio with a focus on defensive property types such as multifamily and office, which represented 46% and 28% of our portfolio, respectively. Quality is more important than ever and 91% of our office portfolio is Class-A. The portfolio's weighted average loan-to-value ratio ("LTV") is 68%. This conservative lending profile across quality of sponsorship, geography, property types, and LTV allowed KREF to excel through the stress test caused by COVID-19 and positioned us to be the first of our peers to re-enter the commercial mortgage lending markets in the fourth quarter of 2020.

## Diversified Capital Base, with Emphasis on Non-Mark-to-Market Financing

In 2021, we leveraged the KKR Capital Markets team across a host of transactions to expand and diversify our capital base. Since the beginning of 2021, we've raised approximately \(325M in fixed-for-life, Series A preferred shares, and coupled with accretive common equity raises in October of 2021 and March of 2022, have grown our permanent equity base by over 55%. We continue to focus on the safest liabilities with an emphasis on non-mark-to-market liabilities. We have a strong brand in the CLO market and priced \)2.3 billion across two CRE CLOs over the last twelve months. In the fourth quarter of 2021, we executed on a $350 million repricing and add-on to our Term Loan B, reducing our cost of capital relative to our inaugural issuance by 175 basis points. These achievements in the debt capital markets front have allowed us to maintain a fully non-mark-to-market financing ratio in excess of 70%.

## Integrated KKR Real Estate Platform Drives Outcomes

In 2021, KKR's broader Real Estate Credit platform originated over \(14 billion across a suite of CRE lending solutions ranging from fixed-rate, to floating-rate, to core and value-add loans. This broad array of products has made KKR one of just a few commercial real estate lenders with the ability to serve as a "one stop" solution for borrowers, and our relevance in the market has grown significantly over the last few years. KREF benefits from the broader KKR real estate platform's origination volumes due to its first priority position in the allocation waterfall for senior, floating-rate, commercial real-estate loans. This first priority position helped KREF generate \)4.8 billion in 2021 originations across 37 senior loans.

KREF's integration within the broader KKR platform creates differentiated outcomes for us as we invest, manage our assets, and grow and diversify our sources of financing. KKR's global real estate business has grown in relevance as assets under management increased by 8x from \(5 billion as of December 31, 2016 to approximately \)41 billion as of December 31, 2021. The broader Real Estate team, across our private equity, debt, and asset management verticals now totals over 135 professionals globally and KKR owns, or lends on, approximately $146 billion of real estate assets as of December 31, 2021. Furthermore, KKR is KREF's largest shareholder, and owns approximately 21% today.

Our extensive portfolio across real estate equity and credit gives us a differentiated view of real estate fundamentals across a broad range of markets and business plans. We have access to unique, real-time macroeconomic perspectives from our economic strategists, and access to real-time MSA and property level views from our partners on the real estate equity team. This allows us to proactively target opportunities where we can achieve the best risk-adjusted returns and, as importantly, avoid opportunities where we identify a weaker outlook. Additionally, the scale of the platform allows KREF to pursue the largest transactions in the market with less competition and a focus on higher quality real estate and sponsorship.

Our broad array of products has made KKR one of just a few commercial real estate lenders with the ability to serve as a "one stop" solution for borrowers and our relevance in the market has grown significantly over the last few years.

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## Looking Ahead

As I write this letter, the investing environment feels very different than last year with a tragic war in the Ukraine, high levels of inflation, and a more hawkish Federal Reserve. We are investing with a measured approach, balancing the opportunities the market is presenting with the appropriate conservatism and deference to broader market volatility. KREF has navigated choppy waters in the past and we feel well-positioned to execute on defensive investments with attractive, risk-adjusted returns. As our Real Estate Credit platform has grown, we have developed deep relationships with a host of high-quality, institutional borrowers and we are expanding into Europe to widen our aperture of opportunity.

We are excited about the opportunity to build upon our success in 2021 in the quarters ahead of us.

We are proud of our performance and the quality of our team. On behalf of the management team, the Board of Directors and the entire real estate business at KKR, thank you for your continued support. We look forward to seeing many of you in 2022.

Sincerely,

![](images/5_0.jpg)

Matt Salem

Chief Executive Officer