# Dear Fellow Shareholders

_Source: `DeepSeekOCR_Ardian_pruned_1k/real-estate-reit-mortgage/NYSE_KREF_2020/NYSE_KREF_2020.mmd` · pages 3-9_

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Dear Fellow Shareholders

MATT SALEM

As I write this letter, we are still in the midst of a global pandemic with the initial rollout of vaccines providing a glimmer of hope. Above all else, we hope you and your loved ones remain safe and healthy.

In the fall of 2020, KKR Real Estate Finance Trust Inc. ("KREF" or the "Company") commenced our seventh year of operations. In a year defined by the global pandemic and the resulting health and economic consequences, 2020 was truly a milestone year for our business as KREF successfully navigated unprecedented financial headwinds to deliver its strongest performance to date resulting in record distributable earnings. Although interest rates decreased significantly throughout the year, we maintained our dividend delivering a 9.2% annualized yield based on year-end book value. The strong performance of our portfolio combined with the LIBOR floors on our assets produced distributable earnings which covered our dividend by 1.13x. The volatility throughout the year put a spotlight on the industry, allowing us to showcase our defensive investing strategy focused on capital preservation targeting loans on institutional quality real estate owned by the highest quality sponsors. While we could not have predicted a pandemic, we have been positioning the Company towards a more conservative posture since our IPO in 2017, and our assets, with an emphasis on property types less sensitive to economic cycles, performed well in this new environment. Our liability structure, with 83% fully non-mark to market, demonstrated its resilience. This best in class liability structure, which was years in the making, demonstrates the tremendous effort across the KKR platform to differentiate KREF. We are proud of the business we have created. KREF excelled through the COVID-19 stress test and we are well positioned to capitalize on this strength and continue to grow as we move forward.

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## CYCLE TESTED PORTFOLIO WITH FOCUS ON CAPITAL PRESERVATION

Since inception, we have originated over \(9 billion of loans. Although the market for real estate loans was effectively shut for much of the year, KREF's funded portfolio of \)5.0 billion remained largely unchanged, with originations over \(900 million in the year offsetting repayment activity. Demonstrating the value of the franchise and the strength of our relationships, approximately 40% of our 2020 origination volume came from repeat clients.

With the sudden impact of COVID-19, we immediately shifted our focus to asset management and liquidity preservation. However, by the early summer, it was clear that KREF was in a strong position and we returned to offense. Notably, KREF was the first of our peers to capitalize on the lending market, leading to \(565 million of originations during the fourth quarter of 2020, with continued focus on the same high quality assets and sponsors.

Our portfolio continues to perform well and remains defensively positioned. Our two largest property-type exposures are multifamily and office which collectively represent 81% of the portfolio, and 90% of 2020 originations. The credit quality of our assets remains solid with a weighted average loan-to-value of 67%.

In September 2020, we further diversified our financing sources with the closing of our inaugural $300 million Term Loan B. This significant milestone in our expansion of non-mark-to-market, term financing further reduced our mark-to-credit financings while strengthening our liquidity position.

## INTEGRATED KKR REAL ESTATE PLATFORM DRIVES OUTCOMES

As we have discussed since inception, our integration within the broader KKR platform creates differentiated outcomes for both our assets and liabilities. We are seeing enhanced benefits as KKR continues to scale its significant real estate platform. KKR's global real estate assets under management increased fivefold from \(5 billion as of December 31, 2016 to over \)25 billion as of December 31, 2020 pro forma for KKR's recent acquisition of Global Atlantic, a leading provider of life and annuity products. Today, the KKR platform manages capital ranging from stabilized credit to opportunistic equity, core+ equity and net lease.

As capital has scaled, so has the broader Real Estate team, which now totals over 100 professionals globally. KKR controls approximately \(13 billion of real estate and the controlling classes of \)37 billion of securities in the United States. This integrated real estate platform, including a shared investment committee across credit and equity strategies, and KKR's "one firm" culture provide KREF with an advantage at sourcing, evaluating, structuring and managing our investments. The addition of Global Atlantic broadens the lending products KKR's Real Estate Credit business can offer clients, creating more opportunities to connect with borrowers and intermediaries, which will increase KREF's investment opportunities.

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 a coordinated view of where we see the best opportunities and investment themes and can proactively pursue opportunities with the best risk-adjusted returns and, as importantly, avoid opportunities where we see 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. We believe that as KKR's broader real estate business continues to scale, it will drive further differentiation for the Company that can translate into incremental value for shareholders.

## SHARE REPURCHASE ACTIVITY

The volatility last spring created many opportunities. With the real estate markets effectively shut down, we utilized KREF's strong liquidity position to take advantage of the significant sell-off in the equity markets and repurchased over two million shares at an average price of \(12.27 per share. The stock ended the year with an over 100% total return from its March 2020 low and KREF was among the best returning stocks for the year within its peer set.

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## LOOKING AHEAD

We believe the outlook for KREF remains strong. Despite the challenges faced in 2020 and the broader real estate market's stress test, KREF is well positioned to remain in an offensive posture and capitalize on the opportunities in the current market. We are encouraged by our robust pipeline and the opportunity to invest at attractive risk-adjusted returns.

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 the possibility of seeing you in person in 2021.

![](images/5_0.jpg)

Matt Salem
Chief Executive Officer

![](images/5_1.jpg)

2020 was truly a milestone year for our business as KREF successfully navigated unprecedented financial headwinds to deliver its strongest performance to date resulting in record distributable earnings