10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2020

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

For the transition period from ________________ to ________________

Commission File Number: 001-38082

KKR Real Estate Finance Trust Inc.
(Exact name of registrant as specified in its charter)
Maryland	47-2009094
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

9 West 57th Street,	Suite 4200	New York,	NY	10019
(Address of principal executive offices)				(Zip Code)

(212) 750-8300

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, par value $0.01 per share	KREF	New York Stock Exchange

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

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

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

    Large accelerated filer    ☐    Accelerated filer    ☒

    Non-accelerated filer     ☐    Smaller reporting company    ☐

            Emerging growth company    ☒

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

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

The number of shares of the registrant's common stock, par value $0.01 per share, outstanding as of October 21, 2020 was 55,619,428.

KKR REAL ESTATE FINANCE TRUST INC.

FORM 10-Q

FOR THE QUARTER ENDED SEPTEMBER 30, 2020

INDEX

	PAGE
Part I - Financial Information	5
Item 1. Condensed Consolidated Financial Statements (Unaudited)	5
Condensed Consolidated Balance Sheets (Unaudited) as of September 30, 2020 and December 31, 2019	5
Condensed Consolidated Statements of Income (Unaudited) for the Three and Nine Months Ended September 30, 2020 and 2019	6
Condensed Consolidated Statements of Changes in Equity (Unaudited) for the Three and Nine Months Ended September 30, 2020 and 2019	7
Condensed Consolidated Statements of Cash Flows (Unaudited) for the Nine Months Ended September 30, 2020 and 2019	9
Notes to Condensed Consolidated Financial Statements (Unaudited)	10
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	48
Item 3. Quantitative and Qualitative Disclosures about Market Risk	73
Item 4. Controls and Procedures	75
Part II - Other Information	76
Item 1. Legal Proceedings	76
Item 1A. Risk Factors	76
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	78
Item 3. Defaults Upon Senior Securities	78
Item 4. Mine Safety Disclosures	78
Item 5. Other Information	78
Item 6. Exhibits	75
Signatures	76

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which reflect our current views with respect to, among other things, our operations and financial performance. You can identify these forward-looking statements by the use of words such as "outlook," "believe," "expect," "potential," "continue," "may," "should," "seek," "approximately," "predict," "intend," "will," "plan," "estimate," "anticipate," the negative version of these words, other comparable words or other statements that do not relate strictly to historical or factual matters. By their nature, forward-looking statements speak only as of the date they are made, are not statements of historical fact or guarantees of future performance and are subject to risks, uncertainties, assumptions or changes in circumstances that are difficult to predict or quantify, in particular due to the uncertainties created by the COVID-19 pandemic, including the projected impact of COVID-19 on our business, financial performance and operating results. Our expectations, beliefs and projections are expressed in good faith and we believe there is a reasonable basis for them. However, there can be no assurance that management's expectations, beliefs and projections will result or be achieved and actual results may vary materially from what is expressed in or indicated by the forward-looking statements.

There are a number of risks, uncertainties and other important factors that could cause our actual results to differ materially from the forward-looking statements contained in this Quarterly Report on Form 10-Q. Such risks, uncertainties and other important factors include, among others, the risks, uncertainties and factors set forth under Part I, Item 1A. "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 (the "Form 10-K"), and in the section entitled “Risk Factors” in Part II, Item 1A of this Quarterly Report on Form 10-Q. Such risks and uncertainties include, but are not limited to, the following:

•the severity and duration of the COVID-19 pandemic;

•potential risks and uncertainties relating to the ultimate geographic spread of COVID-19;

•actions that may be taken by governmental authorities to contain the COVID-19 outbreak or to treat its impact;

•the potential negative impacts of COVID-19 on the global economy and the impacts of COVID-19 on the Company’s financial condition and business operations;

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

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

•the general political, economic and competitive conditions in the United States and in any foreign jurisdictions in which we invest;

•the level and volatility of prevailing interest rates and credit spreads;

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

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

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

•difficulty in obtaining financing or raising capital;

•adverse legislative or regulatory developments;

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

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

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

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

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

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

•the cost of operating our platform, including, but not limited to, the cost of operating a real estate investment platform and the cost of operating as a publicly traded company;

•the availability of qualified personnel and our relationship with our Manager;

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

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

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

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

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

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

PART I — FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

KKR Real Estate Finance Trust Inc. and Subsidiaries

Condensed Consolidated Balance Sheets (Unaudited)

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

	September 30, 2020		December 31, 2019
Assets
Cash and cash equivalents(A)	$	301,375	$	67,619
Commercial mortgage loans, held-for-investment	4,895,974		4,931,042
Less: Allowance for credit losses	(62,735)		—
Commercial mortgage loans, held-for-investment, net	4,833,239		4,931,042
Equity method investments	33,468		37,469
Accrued interest receivable	15,566		16,305
Other assets(B)	48,217		4,583
Total Assets	$	5,231,865	$	5,057,018
Liabilities and Equity
Liabilities
Secured financing agreements, net	$	2,846,350	$	2,884,887
Collateralized loan obligation, net	808,311		803,376
Secured term loan, net	287,878		—
Convertible notes, net	140,115		139,075
Loan participations sold, net	66,226		64,966
Dividends payable	24,138		25,036
Accrued interest payable	7,586		6,686
Accounts payable, accrued expenses and other liabilities(C)	5,076		3,363
Due to affiliates	5,127		5,917
Total Liabilities	4,190,807		3,933,306
Commitments and Contingencies (Note 11)
Temporary Equity
Redeemable preferred stock	1,951		1,694
Permanent Equity
Preferred stock, 50,000,000 authorized 1 share with par value of $0.01 issued and outstanding as of September 30, 2020 and December 31, 2019)	—		—
Common stock, 300,000,000 authorized (55,491,405 and 57,486,583 shares with par value of $0.01 issued and outstanding as of September 30, 2020 and December 31, 2019, respectively)	555		575
Additional paid-in capital	1,170,110		1,165,995
Accumulated deficit	(70,559)		(8,594)
Repurchased stock, 3,900,326 and 1,862,689 shares repurchased as of September 30, 2020 and December 31, 2019, respectively	(60,999)		(35,958)
Total KKR Real Estate Finance Trust Inc. stockholders’ equity	1,039,107		1,122,018
Total Permanent Equity	1,039,107		1,122,018
Total Liabilities and Equity	$	5,231,865	$	5,057,018

(A)    Includes $12.0 million and $0.0 million held in collateralized loan obligation as of September 30, 2020 and December 31, 2019, respectively.

(B)    Includes $42.0 million and $0.0 million of loan repayment proceeds held by the servicer and receivable by the CLO as of September 30, 2020 and December 31, 2019, respectively.

(C)     Includes $1.4 million and $0.0 million of reserve for unfunded loan commitments as of September 30, 2020 and December 31, 2019, respectively.

See Notes to Condensed Consolidated Financial Statements.

5

KKR Real Estate Finance Trust Inc. and Subsidiaries

Condensed Consolidated Statements of Income (Unaudited)

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

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2020		2019		2020		2019
Net Interest Income
Interest income	$	67,689	$	74,223	$	205,987	$	201,918
Interest expense	28,832		45,596		98,477		117,527
Total net interest income	38,857		28,627		107,510		84,391
Other Income
(Loss) gain on sale of investments	—		(429)		—		(2,759)
Income (loss) from equity method investments	973		1,321		(631)		3,314
Change in net assets related to CMBS consolidated variable interest entities	—		544		—		1,665
Other income	102		853		658		2,006
Total other income (loss)	1,075		2,289		27		4,226
Operating Expenses
General and administrative	3,563		2,704		11,376		7,846
Provision for credit losses, net	(126)		—		53,782		—
Management fees to affiliate	4,223		4,280		12,740		12,855
Incentive compensation to affiliate	990		—		3,845		2,098
Total operating expenses	8,650		6,984		81,743		22,799
Income (Loss) Before Income Taxes, Preferred Dividends and Redemption Value Adjustment	31,282		23,932		25,794		65,818
Income tax expense	96		77		255		366
Net Income (Loss)	31,186		23,855		25,539		65,452
Preferred Stock Dividends and Redemption Value Adjustment	(165)		238		762		(251)
Net Income (Loss) Attributable to Common Stockholders	$	31,351	$	23,617	$	24,777	$	65,703
Net Income (Loss) Per Share of Common Stock
Basic	$	0.56	$	0.41	$	0.44	$	1.14
Diluted	$	0.56	$	0.41	$	0.44	$	1.14
Weighted Average Number of Shares of Common Stock Outstanding
Basic	55,491,405		57,420,140		56,107,765		57,406,802
Diluted	55,632,170		57,549,066		56,187,461		57,511,292
Dividends Declared per Share of Common Stock	$	0.43	$	0.43	$	1.29	$	1.29

See Notes to Condensed Consolidated Financial Statements.

6

KKR Real Estate Finance Trust Inc. and Subsidiaries

Condensed Consolidated Statements of Changes in Equity (Unaudited)

(Amounts in thousands, except share data)

	Permanent Equity														Temporary Equity
	KKR Real Estate Finance Trust Inc.
	Preferred Stock			Common Stock
	Shares	Stated Value		Shares	Par Value		Additional Paid-In Capital		Retained Earnings (Accumulated Deficit)		Repurchased Stock		Total KKR Real Estate Finance Trust Inc. Stockholders' Equity		Redeemable Preferred Stock
Balance at December 31, 2019	1	$	—	57,486,583	$	575	$	1,165,995	$	(8,594)	$	(35,958)	$	1,122,018	$	1,694
Repurchase of common stock	—	—		(1,648,551)	—		—		—		(19,244)		(19,244)		—
Preferred dividends declared, per share	—	—		—	—		—		—		—		—		(178)
Common dividends declared, $0.43 per share	—	—		—	—		—		(24,010)		—		(24,010)		—
Adjustment of redeemable preferred stock to redemption value	—	—		—	—		—		(414)		—		(414)		414
Stock-based compensation	—	—		—	—		1,607		—		—		1,607		—
Cumulative-effect adjustment upon adoption of ASU 2016-13 (Note 2)	—	—		—	—		—		(15,009)		—		(15,009)		—
Net income (loss)	—	—		—	—		—		(34,750)		—		(34,750)		178
Balance at March 31, 2020	1	$	—	55,838,032	$	575	$	1,167,602	$	(82,777)	$	(55,202)	$	1,030,198	$	2,108
Repurchase of common stock	—	—		(389,086)	(20)		—		—		(5,797)		(5,817)		—
Preferred dividends declared, per share	—	—		—	—		—		—		—		—		(168)
Adjustment of redeemable preferred stock to redemption value	—	—		—	—		—		(167)		—		(167)		167
Common dividends declared, $0.43 per share	—	—		—	—		—		(23,861)		—		(23,861)		—
Stock-based compensation	—	—		42,459	*		1,118		—		—		1,118		—
Net income (loss)	—	—		—	—		—		28,757		—		28,757		168
Balance at June 30, 2020	1	$	—	55,491,405	$	555	$	1,168,720	$	(78,048)	$	(60,999)	$	1,030,228	$	2,275
Adjustment of redeemable preferred stock to redemption value	—	—		—	—		—		324		—		324		(324)
Preferred dividends declared, per share	—	—		—	—		—		—		—		—		(159)
Common dividends declared, $0.43 per share	—	—		—	—		—		(23,861)		—		(23,861)		—
Stock-based compensation	—	—		—	—		1,390		—		—		1,390		—
Net income (loss)	—	—		—	—		—		31,026		—		31,026		159
Balance at September 30, 2020	1	$	—	55,491,405	$	555	$	1,170,110	$	(70,559)	$	(60,999)	$	1,039,107	$	1,951

* Rounds to zero.

7

	Permanent Equity														Temporary Equity
	KKR Real Estate Finance Trust Inc.
	Preferred Stock			Common Stock
	Shares	Stated Value		Shares	Par Value		Additional Paid-In Capital		Retained Earnings (Accumulated Deficit)		Repurchased Stock		Total KKR Real Estate Finance Trust Inc. Stockholders' Equity		Redeemable Preferred Stock
Balance at December 31, 2018	1	$	—	57,596,217	$	576	$	1,163,845	$	(225)	$	(31,854)	$	1,132,342	$	2,846
Repurchase of common stock	—	—		(212,809)	(2)		—		—		(4,104)		(4,106)		—
Offering costs	—	—		—	—		(518)		—		—		(518)		—
Preferred dividends declared, per share	—	—		—	—		—		—		—		—		(161)
Common dividends declared, $0.43 per share	—	—		—	—		—		(24,761)		—		(24,761)		—
Adjustment of redeemable preferred stock to redemption value	—	—		—	—		—		618		—		618		(618)
Stock-based compensation	—	—		—	—		991		—		—		991		—
Net income (loss)	—	—		—	—		—		24,087		—		24,087		161
Balance at March 31, 2019	1	$	—	57,383,408	$	574	$	1,164,318	$	(281)	$	(35,958)	$	1,128,653	$	2,228
Preferred dividends declared, per share	—	—		—	—		—		—		—		—		(165)
Common dividends declared, $0.43 per share	—	—		—	—		—		(24,688)		—		(24,688)		—
Adjustment of redeemable preferred stock to redemption value	—	—		—	—		—		197		—		197		(197)
Stock-based compensation	—	—		29,661	*		658		—		—		658		—
Net income (loss)	—	—		—	—		—		17,184		—		17,184		165
Balance at June 30, 2019	1	$	—	57,413,069	$	574	$	1,164,976	$	(7,588)	$	(35,958)	$	1,122,004	$	2,031
Preferred dividends declared, per share	—	—		—	—		—		—		—		—		(167)
Common dividends declared, $0.43 per share	—	—		—	—		—		(24,692)		—		(24,692)		—
Adjustment of redeemable preferred stock to redemption value	—	—		—	—		—		(71)		—		(71)		71
Stock-based compensation	—	—		10,842	*		1,040		—		—		1,040		—
Net income (loss)	—	—		—	—		—		23,688		—		23,688		167
Balance at September 30, 2019	1	$	—	57,423,911	$	574	$	1,166,016	$	(8,663)	$	(35,958)	$	1,121,969	$	2,102

* Rounds to zero.

See Notes to Condensed Consolidated Financial Statements.

8

KKR Real Estate Finance Trust Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows (Unaudited)

(Amounts in thousands)

	For the Nine Months Ended September 30,
	2020		2019
Cash Flows From Operating Activities
Net income (loss)	$	25,539	$	65,452
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Amortization of deferred debt issuance costs and discounts	16,720		12,475
Accretion of net deferred loan fees and discounts	(12,115)		(14,655)
Payment-in-kind interest	(2,360)		—
Loss (Gain) on sale of investment securities	—		2,759
(Income) Loss from equity method investments	3,255		(989)
Provision for credit losses, net	53,782		—
Stock-based compensation expense	4,371		3,075
Changes in operating assets and liabilities:
Accrued interest receivable, net	739		(1,563)
Other assets	(1,210)		233
Accrued interest payable	900		1,931
Accounts payable, accrued expenses and other liabilities	1,546		(456)
Due to affiliates	251		(17)
Net cash provided by (used in) operating activities	91,418		68,245
Cash Flows From Investing Activities
Proceeds from sales of commercial mortgage-backed securities	—		9,784
Proceeds from sale/syndication and principal repayments of commercial mortgage loans, held-for-investment	466,283		1,169,515
Origination of commercial mortgage loans, held-for-investment	(462,142)		(2,250,958)
Investment in commercial mortgage-backed securities, equity method investee	—		(6,245)
Net cash provided by (used in) investing activities	4,141		(1,077,904)
Cash Flows From Financing Activities
Proceeds from borrowings under secured financing agreements	970,580		2,745,759
Net proceeds from issuance of secured term loan	292,500		—
Payments of common stock dividends	(72,590)		(74,261)
Payments of preferred stock dividends	(546)		(499)
Principal repayments on borrowings under secured financing agreements	(1,016,543)		(1,660,814)
Payments of debt and collateralized debt obligation issuance costs	(8,689)		(6,911)
Payments of stock issuance costs	(157)		(1,138)
Payments to reacquire common stock	(25,061)		(4,106)
Tax withholding on stock-based compensation	(1,297)		(385)
Net cash provided by (used in) financing activities	138,197		997,645
Net Increase (Decrease) in Cash, Cash Equivalents	233,756		(12,014)
Cash, Cash Equivalents at Beginning of Period	67,619		86,531
Cash, Cash Equivalents at End of Period	$	301,375	$	74,517
Supplemental Disclosure of Cash Flow Information
Cash paid during the period for interest	$	78,717	$	106,000
Cash paid during the period for income taxes	50		364
Supplemental Schedule of Non-Cash Investing and Financing Activities
Loan principal payments held by servicer	$	42,000	$	—
Dividend declared, not yet paid	24,138		24,972
Loan participations sold, net	—		(86,678)
Repayment of commercial loans, held for investment	—		86,678
Loan participations sold, net	—		65,798
Funding of commercial loans, held for investment	—		(65,798)
Deconsolidation of variable interest entities (assets and liabilities)	—		1,047,346

See Notes to Condensed Consolidated Financial Statements.

9

KKR Real Estate Finance Trust Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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

Note 1. Business and Organization

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

KREF has elected and intends to maintain its qualification to be taxed as a REIT under the requirements of the Internal Revenue Code of 1986, as amended (the "Internal Revenue Code"), for U.S. federal income tax purposes. As such, KREF will generally not be subject to U.S. federal income tax on that portion of its income that it distributes to stockholders if it distributes at least 90% of its REIT taxable income, determined without regard to the deduction for dividends paid and excluding any net capital gains. See Note 15 regarding taxes applicable to KREF.

KREF is externally managed by KKR Real Estate Finance Manager LLC ("Manager"), an indirect subsidiary of KKR & Co. Inc. (together with its subsidiaries, "KKR"), through a management agreement ("Management Agreement") pursuant to which the Manager provides a management team and other professionals who are responsible for implementing KREF’s business strategy, subject to the supervision of KREF’s board of directors. For its services, the Manager is entitled to management fees and incentive compensation, both defined in, and in accordance with the terms of, the Management Agreement (Note 13).

As of September 30, 2020, KKR beneficially owned 21,858,356 shares of KREF's common stock, of which 1,858,356 shares were held by KKR on behalf of a third-party investor.

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

10

Note 2. Summary of Significant Accounting Policies

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

Risks and Uncertainties — The outbreak of the coronavirus pandemic (“COVID-19”) around the globe continues to adversely impact global commercial activity and has contributed to significant volatility in financial markets. The impact of the outbreak has been rapidly evolving around the globe, with several countries taking drastic measures to limit the spread of the virus by instituting quarantines or lockdowns, imposing travel restrictions and limiting operations of non-essential offices and retail centers. Such actions are creating significant disruptions to global supply chains, increasing rates of unemployment and adversely impacting several industries, including but not limited to, airlines, hospitality, retail and the broader real estate industry.

The major disruption caused by COVID-19 significantly reduced economic activity in most of the United States resulting in a significant increase in unemployment claims and a significant decline in the U.S. Gross Domestic Product (“GDP”).

COVID-19 could have a continued and prolonged adverse impact on economic and market conditions and trigger a period of global economic slowdown which could have a material adverse effect on the Company’s results and financial condition.

The full impact of COVID-19 on the real estate industry, the credit markets and consequently on the Company’s financial condition and results of operations is uncertain and cannot be predicted at the current time as it depends on several factors beyond the control of the Company including, but not limited to (i) the uncertainty around the severity and duration of the outbreak, (ii) the effectiveness of the United States public health response, (iii) the pandemic’s impact on the U.S. and global economies, (iv) the timing, scope and effectiveness of additional governmental responses to the pandemic, (v) the timing and speed of economic recovery, including the availability of a treatment or vaccination for COVID-19 and (vi) the negative impact on our borrowers, real estate values and cost of capital.

11

KKR Real Estate Finance Trust Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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

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

Consolidation — KREF consolidates those entities for which (i) it controls through either majority ownership or voting rights

or (ii) management determines that KREF is the primary beneficiary of entities deemed to be variable interest entities ("VIEs").

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

To assess whether KREF has the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance, KREF considers all the facts and circumstances, including its role in establishing the VIE and its ongoing rights and responsibilities. This assessment includes, first, identifying the activities that most significantly impact the VIE’s economic performance; and second, identifying which party, if any, has power to direct those activities. To assess whether KREF has the obligation to absorb losses of, or the right to receive benefits from, the VIE that could potentially be significant to the VIE, KREF considers all of its economic interests and applies judgment in determining whether these interests, in the aggregate, are considered potentially significant to the VIE.

Collateralized Loan Obligation — KREF consolidates a collateralized loan obligation that closed in November 2018 (“KREF 2018-FL1” or “CLO”) (Note 5). Management determined that KREF 2018-FL1 Ltd. and KREF 2018-FL1 LLC (the "CLO Issuers"), wholly-owned subsidiaries of KREF, were VIEs and that KREF was the primary beneficiary. KREF is the primary beneficiary of the VIEs since it has the ability to control the most significant activities of the CLO Issuers through ownership of non-investment grade rated subordinated controlling tranches, has the obligation to absorb losses, and the right to receive benefits, that could potentially be significant to these entities. As a result, KREF consolidates the CLO Issuers.

The collateral assets of the CLO, comprised of a pool of loan participations (Note 5) are included in “Commercial mortgage loans, held-for-investment, net” on the Condensed Consolidated Balance Sheets. The liabilities of KREF's consolidated CLO Issuers consist solely of obligations to the senior CLO noteholders, excluding subordinated CLO tranches held by KREF as such interests are eliminated in consolidation, are presented in “Collateralized loan obligation, net” in the Condensed Consolidated Balance Sheets. The collateral assets of the CLO can only be used to settle the obligations of the consolidated CLO. The interest income from the CLO collateral assets and the interest expense on the CLO liabilities are presented on a gross basis in “Interest income” and “Interest expense”, respectively, in KREF's Condensed Consolidated Statements of Income.

CMBS — KREF consolidates those trusts that issue beneficial ownership interests in mortgage loans secured by CRE (commonly known as CMBS) when KREF holds a variable interest in, and management considers KREF to be the primary beneficiary of, those trusts. Management believes the performance of the assets that underlie CMBS issuances most significantly impacts the economic performance of the trust, and the primary beneficiary is generally the entity that conducts activities that most significantly impact the performance of the underlying assets. In particular, the most subordinate tranches of CMBS expose the holder to the greater variability of economic performance when compared to more senior tranches since the subordinate tranches absorb a disproportionately higher amount of the credit risk related to the underlying assets. Generally, a trust designates the most junior subordinate tranche outstanding as the controlling class, which entitles the holder of the controlling class to unilaterally appoint and remove the special servicer for the trust. The special servicer is responsible for the servicing and administration of delinquent and nonperforming loans as well as real estate owned ("REO") properties held as collateral delivered on foreclosed loans. While the special servicer cannot prevent losses, its services to the trust are designed to mitigate credit losses to holders of the CMBS.

12

KKR Real Estate Finance Trust Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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

For any CMBS trust that KREF consolidates, KREF holds an unrated tranche that represents the most subordinated tranche of the CMBS issued by that trust, which include the controlling class. As the holder of the most subordinate tranche, KREF is in a first loss position and has the right to receive benefits. As the holder of the controlling class, KREF has the ability to unilaterally appoint and remove the special servicer for the trust. In these cases, management considers KREF to be the primary beneficiary and consolidates that CMBS trust.

For VIEs in which management determines KREF is the primary beneficiary, all of the underlying assets, liabilities and equity of the trusts are recorded on KREF's books, and the initial investment, along with any associated unrealized holding gains and losses, are eliminated in consolidation. Similarly, the interest income earned from these trusts is eliminated in consolidation.

Management elected the fair value option for KREF's initial and subsequent recognition of the assets and liabilities of KREF's consolidated CMBS VIEs in order to provide users of the financial statements with better information regarding the effects of credit risk and other market factors on the CMBS beneficially held by KREF's stockholders. Since the changes in fair value include the interest income and interest expense associated with these CMBS VIEs, management does not consider the separate presentation of the components of fair value changes to be relevant. Management has elected to present these items in aggregate as "Other Income — Change in net assets related to CMBS consolidated variable interest entities" in the Condensed Consolidated Statements of Income; the residual difference between the fair value of the trust's assets and liabilities represents KREF's beneficial interest in the CMBS VIEs.

Management separately presents the assets and liabilities of KREF's consolidated VIEs as individual line items on KREF's Condensed Consolidated Balance Sheets for entities in which the VIEs assets can only be used to settle the VIE’s obligations. The liabilities of KREF's consolidated VIEs consist solely of obligations to the CMBS holders of the consolidated trust, excluding CMBS held by KREF as such interests are eliminated in consolidation, and the interest accrued thereon, presented as "Liabilities — Variable interest entity liabilities, at fair value." The assets of KREF's consolidated VIEs consist principally of commercial mortgage loans and the interest accrued thereon, and are likewise presented as a single line item entitled "Assets — Commercial mortgage loans held in variable interest entities, at fair value."

Assets of a CMBS trust, as a whole, can only be used to settle the obligations of the consolidated CMBS VIE. The assets of KREF's CMBS VIEs are not individually accessible by, and obligations of the CMBS VIEs are not recourse to, the bondholders.

KREF derives the fair value of its Level 3 CMBS VIE assets from its Level 3 CMBS VIE liabilities, which management considers to possess more observable market value data than the CMBS VIE assets. See "— Fair Value — Valuation of CMBS Consolidated VIEs" for additional discussion regarding management's valuation of consolidated CMBS VIEs. During the three months ended September 30, 2019, KREF sold the remaining directly held CMBS investments, including an unrated tranche that represented the most subordinated tranche of the CMBS issued by that trust, including the controlling class. Accordingly, KREF deconsolidated the respective CMBS trust (Note 9).

Temporary Equity — KREF's Special Non-Voting Preferred Stock (“SNVPS”) became redeemable in the second quarter of 2018. As a result, starting with the second quarter of 2018, KREF adjusts the carrying value of the SNVPS to its redemption value quarterly. Accordingly, KREF adjusted the carrying value of the SNVPS to its redemption value of $2.0 million as of September 30, 2020, and recorded a ($0.3) million and $0.3 million non-cash redemption value adjustment to the SNVPS (“SNVPS Redemption Value Adjustment”) during the three and nine months ended September 30, 2020, respectively. Such adjustment is treated similar to a dividend on preferred stock for GAAP purposes, accordingly, the SNVPS Redemption Value Adjustment is therefore deducted from (or added back to) “Net Income (Loss)” to arrive at “Net Income (Loss) Attributable to Common Stockholders” on KREF's Condensed Consolidated Statements of Income.

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

Management determined that KREF's investment in the Manager is an interest in a VIE, however KREF is not the primary beneficiary. KREF does not have substantive participating or kick-out rights nor the power to direct activities and the obligation

13

KKR Real Estate Finance Trust Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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

to absorb losses of the Manager that could be significant to the Manager. KREF accounts for its investment in the Manager using the equity method (Note 9).

Management determined that KREF's investment in an aggregator vehicle alongside KKR Real Estate Credit Opportunity Partners L.P. ("RECOP I ") is an interest in a VIE, however KREF is not the primary beneficiary and does not have substantive participating or kick-out rights. KREF records its share of net asset value in RECOP I in “Equity method investments” on its Condensed Consolidated Balance Sheets and its share of unrealized gains or losses in "Income from equity method investments" in its Condensed Consolidated Statements of Income. Management elected the fair value option for KREF's investment in RECOP I.

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

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

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

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

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

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

Valuation Process — The Manager reviews the valuation of Level 3 financial instruments as part of KKR's quarterly process. As of September 30, 2020, KKR’s valuation process for Level 3 measurements, as described below, subjected valuations to the review and oversight of various committees. KKR has a global valuation committee assisted by the asset class-specific valuation committees, including a real estate valuation committee that reviews and approves all preliminary Level 3 valuations for real estate assets, including the financial instruments held by KREF. The global valuation committee is responsible for coordinating and implementing KKR’s valuation process to ensure consistency in the application of valuation principles across portfolio investments and between periods. All Level 3 valuations are also subject to approval by the global valuation committee.

Valuation of Commercial Mortgage Loans and Participation Sold — Management generally considers KREF's commercial mortgage loans Level 3 assets in the fair value hierarchy as such assets are illiquid, structured investments that are specific to the underlying property and its operating performance (Note 14). On a quarterly basis, management engages an independent valuation firm to estimate the fair value of each loan categorized as a Level 3 asset. Management reviews the quarterly loan valuation estimates provided by the independent valuation firm. These loans are generally valued using a discounted cash flow model using discount rates derived from observable market data applied to the capital structure of the respective sponsor and estimated property value. In the event that management's estimate of fair value differs from the fair value estimate provided by the independent valuation firm, KREF ultimately relies solely upon the valuation prepared by the investment personnel of the Manager.

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

14

KKR Real Estate Finance Trust Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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

such evidence supporting a different value. As a result, the independent valuation firm may revise their price accordingly. However, if management continues to disagree with the price from the independent valuation firm, in light of evidence presented that management compiled independently and believes to be compelling, management considers the independent valuation firm's quotation unreliable or inaccurate representation of the fair value of the CLO liabilities.

In the event that the quotation from the independent valuation firm is not available or determined to be unreliable or an inadequate representation of the fair value of the CLO liabilities, valuations are prepared using inputs based on non-binding broker quotes obtained from independent, well-known, major financial brokers that are CLO market makers. In validating any non-binding broker quote used in this circumstance, management compares the non-binding quote to the observable market data points at such time and used to validate prices received from the independent valuation firm in addition to understanding the valuation methodologies used by the market makers. These market participants utilize a similar methodology as the independent valuation firm to value the CLO liabilities, with the key input of expected yield determined independently based on both observable and unobservable factors (as described above). To avoid reliance on any single broker-dealer, management receives a minimum of two non-binding quotes, of which the average is used.

Valuation of CMBS Consolidated VIEs — Management categorizes the financial assets and liabilities of the CMBS trusts that KREF consolidates as Level 3 assets and liabilities in the fair value hierarchy and has elected the fair value option for financial assets and liabilities of each CMBS trust. Management has adopted the measurement alternative included in Accounting Standards Update No. 2014-13, Measuring the Financial Assets and the Financial Liabilities of a Consolidated Collateralized Financing Entity ("ASU 2014-13"). Pursuant to ASU 2014-13, management measures both the financial assets and financial liabilities of the CMBS trusts consolidated by KREF using the fair value of the financial liabilities, which management considers more observable than the fair value of the financial assets. Accordingly, KREF presents the CMBS issued by a consolidated trust, but not beneficially owned by KREF's stockholders, as financial liabilities in KREF's condensed consolidated financial statements, measured at their estimated fair value; KREF measures the financial assets as the total estimated fair value of the CMBS issued by a consolidated trust, regardless of whether such CMBS represent interests beneficially owned by KREF's stockholders. Under the measurement alternative prescribed by ASU 2014-13, KREF's "Net Income (Loss)" reflects the economic interests in the consolidated CMBS beneficially owned by KREF's stockholders, presented as "Change in net assets related to CMBS consolidated variable interest entities" in the Condensed Consolidated Statements of Income, which includes applicable (i) changes in the fair value of CMBS beneficially owned by KREF, (ii) interest and servicing fees earned from the CMBS trust and (iii) other residual returns or losses of the CMBS trust, if any (Note 9).

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

KREF’s determination of fair value is based upon the best information available for a given circumstance and may incorporate assumptions that are management’s best estimates after consideration of a variety of internal and external factors. When an independent valuation firm expresses an opinion on the fair value of a financial instrument in the form of a range, management selects a value within the range provided by the independent valuation firm, generally the midpoint, to assess the reasonableness of management’s estimated fair value for that financial instrument.

See Note 14 for additional information regarding the valuation of KREF's financial assets and liabilities.

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

15

KKR Real Estate Finance Trust Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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

Balance Sheet Measurement

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

KREF must also maintain sufficient cash and cash equivalents to satisfy liquidity covenants related to its secured financing agreements. However, such amounts are not restricted from use in KREF's current operations, and KREF does not present these cash and cash equivalents as restricted. As of September 30, 2020 and December 31, 2019, KREF was required to maintain unrestricted cash and cash equivalents of at least $30.6 million and $33.4 million, respectively, to satisfy its liquidity covenants (Note 4).

Adoption of ASU No. 2016-13, Financial Instruments — Credit Losses — On January 1, 2020, KREF adopted ASU No. 2016-13, Financial Instruments-Credit Losses, and subsequent amendments (“ASU 2016-13”), which replaces the incurred loss methodology with an expected loss model known as the Current Expected Credit Loss ("CECL") model. CECL amends the previous credit loss model to reflect a reporting entity's current estimate of all expected credit losses, not only based on historical experience and current conditions, but also by including reasonable and supportable forecasts incorporating forward-looking information. The measurement of expected credit losses under CECL is applicable to financial assets measured at amortized cost, and off-balance sheet credit exposures such as unfunded loan commitments. The allowance for credit losses required under ASU 2016-13 is deducted from the respective loans’ amortized cost basis on our condensed consolidated balance sheets. The allowance for credit losses attributed to unfunded loan commitments is included in “Accounts payable, accrued expenses and other liabilities” in the condensed consolidated balance sheets. The guidance also requires a cumulative-effect adjustment to retained earnings as of the beginning of the reporting period of adoption.

In connection with KREF’s adoption of ASU 2016-13 on January 1, 2020, KREF implemented new processes including the utilization of loan loss forecasting models, updates to KREF's reserve policy documentation, changes to internal reporting processes and related internal controls. KREF has implemented loan loss forecasting models for estimating expected life-time credit losses, at the individual loan level, for its commercial mortgage loan portfolio. The CECL forecasting methods used by KREF include (i) a probability of default and loss given default method using underlying third-party CMBS/CRE loan database with historical loan losses from 1998 to 2020 and (ii) probability weighted expected cash flow method, depending on the type of loan and the availability of relevant historical market loan loss data. KREF might use other acceptable alternative approaches in the future depending on, among other factors, the type of loan, underlying collateral, and availability of relevant historical market loan loss data.

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

KREF considers loan investments that are both (i) expected to be substantially repaid through the operation or sale of the underlying collateral, and (ii) for which the borrower is experiencing financial difficulty, to be “collateral-dependent” loans. For such loans that KREF determines that foreclosure of the collateral is probable, the Company measures the expected losses based on the difference between the fair value of the collateral and the amortized cost basis of the loan as of the measurement date. For collateral-dependent loans that KREF determines foreclosure is not probable, KREF applies a practical expedient to estimate expected losses using the difference between the collateral’s fair value (less costs to sell the asset if repayment is expected through the sale of the collateral) and the amortized cost basis of the loan.

Based on KREF's loan portfolio at January 1, 2020, the pre COVID-19 economic environment and the respective expectations for future economic conditions at the time, KREF recorded a cumulative-effect adjustment to KREF's accumulated deficit as of January 1, 2020 of $15.0 million, or $0.26 per common share, of which $1.1 million, or $0.02 per common share, is attributable to unfunded loan commitments.

16

KKR Real Estate Finance Trust Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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

The following table illustrates the day-one financial statements impact of the adoption of ASU 2016-13 on January 1, 2020:

	Pre-adoption		Transition Adjustment		Post-adoption
Assets
Commercial mortgage loans, held-for-investment	$	4,931,042	$	—	$	4,931,042
Less: Allowance for credit losses	—		(13,909)		(13,909)
Commercial mortgage loans, held-for-investment, net	$	4,931,042	$	(13,909)	$	4,917,133
Liabilities
Accounts payable, accrued expenses and other liabilities(A)	$	3,363	$	1,100	$	4,463
Permanent Equity
Accumulated deficit	$	(8,594)	$	(15,009)	$	(23,603)

(A)    Includes reserve for unfunded loan commitments.

Commercial Mortgage Loans Held-For-Investment and Allowance for Credit Losses — KREF recognizes its investments in commercial mortgage loans based on management's intent, and KREF's ability, to hold those investments through their contractual maturity. Management classifies those loans that management does not intend to sell in the foreseeable future, and KREF is able to hold until maturity, as held-for-investment. Loans that are held-for-investment are carried at their aggregate outstanding principal, net of applicable (i) unamortized origination or acquisition premiums and discounts, (ii) unamortized deferred nonrefundable fees and other direct loan origination costs, and (iii) allowance for credit losses, net of write-offs of impaired loans. If a loan is determined to be impaired, management writes down the loan through a charge to the "Allowance for credit losses". See "— Expense Recognition — Commercial Mortgage Loans, Held-For-Investment" for additional discussion regarding management’s determination for loan losses. KREF applies the interest method to amortize origination or acquisition premiums and discounts and deferred nonrefundable fees or other direct loan origination costs, or on a straight-line basis when it approximates the interest method. Loans for which management elects the fair value option at the time of origination, or acquisition, are carried at fair value on a recurring basis (Note 3).

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

Secured Financing Agreements — KREF's secured financing agreements, including uncommitted repurchase facilities, Term Lending Agreement, Warehouse Facility, Asset Specific Financings and Term Loan Financings, are treated as floating-rate collateralized financing arrangements carried at their contractual amounts, net of unamortized debt issuance costs (Note 4). Included within KREF's secured financing agreements is KREF's corporate revolving credit facility ("Revolver"), which is full recourse to certain guarantor wholly-owned subsidiaries of KREF.

Secured Term Loan, Net — KREF records its secured term loan at its contractual amount, net of unamortized original issuance discount and deferred financing costs (Note 6) on its condensed consolidated balance sheet. Any original issuance discount or deferred financing costs are amortized through the maturity date of the secured term loan as additional non-cash interest expense.

Convertible Notes, Net — KREF accounts for its convertible debt with a cash conversion feature in accordance with ASC 470-20 “Debt with Conversion and Other Options” which requires the liability and equity components of convertible debt instruments that may be settled in cash upon conversion, including partial cash settlement, to be separately accounted for in a manner that reflects the issuer’s nonconvertible debt borrowing rate. The initial proceeds from the sale of convertible notes are allocated between a liability component and an equity component in a manner that reflects interest expense at the rate of similar nonconvertible debt that could have been issued at such time. The equity component represents the excess initial proceeds received over the fair value of the liability component of the notes as of the date of issuance. KREF measured the estimated fair value of the debt component of the 6.125% convertible senior notes due May 15, 2023 (“Convertible Notes”) as of the issuance date based on KREF’s nonconvertible debt borrowing rate. The equity component of the Convertible Notes is reflected within

17

KKR Real Estate Finance Trust Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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

additional paid-in capital on the Condensed Consolidated Balance Sheets, and the resulting debt discount is amortized over the period during which such Convertible Notes are expected to be outstanding (through the maturity date) as additional non-cash interest expense using the interest method, or on a straight line basis when it approximates the interest method. The additional non-cash interest expense attributable to such convertible notes will increase in subsequent periods through the maturity date as the notes accrete to their par value over the same period (Note 7).

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

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

To the extent that a sale is not recognized under GAAP from the syndication, KREF does not derecognize the participation in the senior/whole loan that it sold. Instead, KREF recognizes a loan participation sold liability in an amount equal to the principal of the loan participation syndicated less any unamortized discounts or financing costs resulting from the syndication. KREF continues to recognize interest income on the entire senior loan, including the interest attributable to the loan participation sold, as well as interest expense on the loan participation sold liability (Note 8).

Other Assets and Accounts Payable, Accrued Expenses and Other Liabilities — As of September 30, 2020, other assets included $42.0 million of loan repayment proceeds held by the servicer and receivable by the CLO, $2.7 million of deferred financing costs related to KREF's Revolver (Note 4) and $0.7 million of prepaid expenses. As of December 31, 2019, other assets primarily included $2.4 million of deferred financing costs related to KREF's Revolver. As of September 30, 2020, accounts payable, accrued expenses and other liabilities consisted of $3.2 million of accrued expenses, $1.4 million of allowance for credit losses related to KREF's unfunded loan commitments and $0.5 million of good faith deposits. As of December 31, 2019, accounts payable, accrued expenses and other liabilities mainly consisted of $2.7 million of accrued expenses and $0.7 million of good faith deposits.

Dividends Payable — KREF accrues for dividends on its common stock and the redeemable preferred stock upon declaration of such dividends. In September 2020, KREF's board of directors declared a dividend of $0.43 per share of common stock to shareholders of record as of September 30, 2020, which was accrued in “Dividends payable” on KREF’s Condensed Consolidated Balance Sheet as of September 30, 2020 and was subsequently paid on October 15, 2020.

Special Non-Voting Preferred Stock — Equity instruments that are redeemable for cash or other assets are classified as temporary equity if the instrument is redeemable, at the option of the holder, at a fixed or determinable price on a fixed or determinable date or upon the occurrence of an event that is not solely within the control of the issuer. Redeemable equity instruments are initially carried at the fair value of the equity instrument at the issuance date, which is subsequently adjusted at each balance sheet date if the instrument is currently redeemable or probable of becoming redeemable. KREF accounted for the SNVPS as redeemable preferred stock since a third party holds a redemption option, exercisable after May 5, 2018, and such redemption is not solely within KREF's control. The SNVPS became redeemable in the second quarter of 2018. As a result, starting with the second quarter of 2018, KREF adjusts the carrying value of the SNVPS to its redemption value quarterly. Accordingly, KREF adjusted the carrying value of the SNVPS to its redemption value of $2.0 million as of September 30, 2020, and recorded a ($0.3) million and $0.3 million non-cash SNVPS Redemption Value Adjustment during the three and nine months ended September 30, 2020, respectively.

Repurchased Stock — KREF accounts for repurchases of its common stock based on the settlement date and presents repurchased stock in “Repurchased stock” on its Condensed Consolidated Balance Sheets (Note 10). Payments for stock repurchases that are not yet settled as of the reporting date are presented within “Other assets” on the Condensed Consolidated Balance Sheets. As of September 30, 2020, KREF did not retire any repurchased stock.

18

KKR Real Estate Finance Trust Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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

Income Recognition

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

Other Income — KREF recognizes interest income earned on its cash balances and miscellaneous fee income in “Other income” on its Condensed Consolidated Statements of Income. Interest income on cash balances totaled $0.5 million and $1.5 million for the nine months ended September 30, 2020 and 2019, respectively.

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

Expense Recognition

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

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

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

Management considers loans to be past due when a monthly payment is due and unpaid for 60 days or more. Loans are placed on nonaccrual status and considered non-performing when full payment of principal and interest is in doubt, which generally occurs when principal or interest is 120 days or more past due unless the loan is both well secured and in the process of collection. Interest received on loans placed on nonaccrual status are accounted for under the cost-recovery method, until qualifying for return to accrual. Management may return a loan to accrual status when repayment of principal and interest is reasonably assured under the terms of the restructured loan. During the three months ended June 30, 2020, management placed one mezzanine loan with an outstanding principal balance of $5.5 million on nonaccrual status and wrote off $4.7 million (the "Write-off") of the loan balance determined uncollectable (Note 3). As of September 30, 2020, no other loan was placed on nonaccrual status or otherwise considered past due.

19

KKR Real Estate Finance Trust Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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

In certain circumstances, KREF may also modify the original terms of a loan agreement by granting a concession to a borrower experiencing financial difficulty. Such modifications are considered troubled debt restructurings (“TDR”) under GAAP and typically include interest rate reductions, payment extension and modification of loan covenants. KREF did not have any loan modifications accounted for as TDRs during the three and nine months ended September 30, 2020.

In conjunction with reviewing commercial mortgage loans held-for-investment for impairment, the Manager evaluates KREF's commercial mortgage loans on a quarterly basis, assesses the risk factors of each loan, and assigns a risk rating based on a variety of factors, including, without limitation, underlying real estate performance and asset value, values of comparable properties, durability and quality of property cash flows, sponsor experience and financial wherewithal, and the existence of a risk-mitigating loan structure. Additional key considerations include loan-to-value ratios, debt service coverage ratios, loan structure, real estate and credit market dynamics, and risk of default or principal loss. Based on a five-point scale, KREF's loans are rated "1" through "5," from less risk to greater risk, which ratings are defined as follows:

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

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

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

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

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

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

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

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

20

KKR Real Estate Finance Trust Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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

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

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

Management and Incentive Compensation to Affiliate — KREF expenses management fees and incentive compensation earned by the Manager on a quarterly basis in accordance with the Management Agreement (Note 13).

Income Taxes — Certain activities of KREF are conducted through joint ventures that are formed as limited liability companies, taxed as partnerships, and consolidated by KREF. Some of these joint ventures are subject to state and local income taxes, based on the tax jurisdictions in which they operate. In addition, certain activities of KREF are conducted through taxable REIT subsidiaries consolidated by KREF. Taxable REIT subsidiaries are subject to federal, state and local income taxes (Note 15).

As of September 30, 2020 and December 31, 2019, KREF did not have any material deferred tax assets or liabilities arising from future tax consequences attributable to differences between the carrying amounts of existing assets and liabilities in accordance with GAAP and their respective tax bases.

KREF recognizes tax benefits for uncertain tax positions only if it is more likely than not that the position is sustainable based on its technical merits. Interest and penalties on uncertain tax positions are included as a component of the provision for income taxes in KREF's Condensed Consolidated Statements of Income. As of September 30, 2020, KREF did not have any material uncertain tax positions.

Stock-Based Compensation

KREF's stock-based compensation consists of awards issued to employees of the Manager or its affiliates that vest over the life of the awards, as well as restricted stock units issued to certain members of KREF's board of directors. The Company recognizes the compensation cost of stock-based awards to its directors and employees of the Manager or its affiliates on a straight-line basis over the awards’ term at their grant date fair value. KREF accounts for forfeitures as they occur. Refer to Note 11 for additional information.

Earnings per Share

KREF presents basic and diluted earnings per share ("EPS"). Basic EPS, or Net Income (Loss) Per Share of Common Stock, Basic, is calculated by dividing Net Income (Loss) Attributable to Common Stockholders by the Basic Weighted Average Number of Shares of Common Stock Outstanding, for the period.

Diluted EPS, or Net Income (Loss) Per Share of Common Stock, Diluted, is calculated by starting with Basic EPS and adding the weighted average dilutive shares issuable from restricted stock units, computed using the treasury stock method, to the weighted average common shares outstanding in the denominator. Refer to Note 10 for additional discussion of earnings per share.

Recent Accounting Pronouncements

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides temporary optional expedients and exceptions to the US GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from LIBOR and other interbank offered rates to alternative reference rates. The guidance is effective upon issuance and generally may be elected over time through December 31, 2022. KREF has not adopted any of the optional expedients or exceptions through September 30, 2020, but will continue to evaluate the possible adoption of any such expedients or exceptions during the effective period as circumstances evolve.

In August 2020, the FASB issued ASU No. 2020-06, Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and

21

KKR Real Estate Finance Trust Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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

Contracts in an Entity’s Own Equity, which simplifies an issuer’s accounting for convertible instruments and its application of the derivatives scope exception for contracts in its own equity. The guidance also addresses how convertible instruments are accounted for in the diluted EPS calculation and requires enhanced disclosures about the terms of convertible instruments and contracts in an entity’s own equity. The guidance is effective for KREF in the first quarter of 2022. The guidance allows the use of a modified or full retrospective transition method. KREF is evaluating the impact of ASU 2020-06.

22

KKR Real Estate Finance Trust Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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

Note 3. Commercial Mortgage Loans

The following table summarizes KREF's investments in commercial mortgage loans as of September 30, 2020 and December 31, 2019:

								Weighted Average
Loan Type	Outstanding Principal		Amortized Cost(A)		Carrying Value(B)		Loan Count	Floating Rate Loan %(C)		Coupon(C)		Life (Years)(D)
September 30, 2020
Loans held-for-investment
Senior loans(E)	$	4,860,072	$	4,839,875	$	4,777,727	34	100.0	%	4.8	%	3.5
Mezzanine loans	61,400		56,099		55,512		3	91.0		10.0		3.8
	$	4,921,472	$	4,895,974	$	4,833,239	37	99.9	%	4.9	%	3.5
December 31, 2019
Loans held-for-investment
Senior loans(E)	$	4,919,298	$	4,890,408	$	4,890,408	37	100.0	%	5.0	%	4.1
Mezzanine loans	41,400		40,634		40,634		2	86.7		9.6		4.6
	$	4,960,698	$	4,931,042	$	4,931,042	39	99.9	%	5.1	%	4.1

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

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

(C)    Average weighted by outstanding principal of loan. Weighted average coupon assumes the greater of applicable one-month LIBOR rates of 0.15% and 1.76% as of September 30, 2020 and December 31, 2019, respectively, or the applicable contractual LIBOR floor.

(D)    The weighted average life of each loan is based on the expected timing of the receipt of contractual principal repayments assuming all extension options are exercised by the borrower.

(E)    Senior loans may include accommodation mezzanine loans in connection with the senior mortgage financing. Also, includes vertical loan participations sold with a principal and a carrying value of $66.2 million as of September 30, 2020 and a principal and a carrying value of $65.0 million as of December 31, 2019, respectively. Includes CLO loan participations of $946.0 million and $1.0 billion as of September 30, 2020 and December 31, 2019, respectively.

Activity — For the nine months ended September 30, 2020, the loan portfolio activity was as follows:

	Amortized Cost		Allowance for Credit Losses		Carrying Amount
Balance at December 31, 2019	$	4,931,042	$	—	$	4,931,042
Originations and future fundings, net(A)	462,142		—		462,142
Proceeds from sales and principal repayments(B)	(507,035)		—		(507,035)
Accretion of loan discount and other amortization, net(C)	12,115		—		12,115
PIK interest	2,360		—		2,360
Cumulative-effect adjustment upon adoption of ASU 2016-13	—		(13,909)		(13,909)
Provision for credit losses, net	—		(53,476)		(53,476)
Loan write-off	(4,650)		4,650		—
Balance at September 30, 2020	$	4,895,974	$	(62,735)	$	4,833,239

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

(B)    Includes $42.0 million of loan repayment proceeds held with the servicer as of September 30, 2020.

(C)    Includes accretion of applicable discounts, certain fees and deferred loan origination costs.

As of September 30, 2020 and December 31, 2019, there was $20.8 million and $29.7 million, respectively, of unamortized deferred loan fees and discounts included in commercial mortgage loans, held-for-investment, net in the Condensed Consolidated Balance Sheets. KREF recognized net accelerated fees expense of $0.4 million and $0.1 million during the three and nine months ended September 30, 2020, respectively. KREF recognized prepayment fee income and net accelerated fees income of $0.0 million and $0.3 million, respectively, during the three months ended September 30, 2019; and $0.2 million and $3.1 million, respectively, during the nine months ended September 30, 2019.

23

KKR Real Estate Finance Trust Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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

During the nine months ended September 30, 2020, KREF entered into loan modifications that include, among other changes, incremental capital contributions from certain borrowers, repurposing of reserves, and a temporary partial deferral for a portion of the coupon as payment-in-kind interest (“PIK Interest”) due, which is capitalized, compounded, and added to the outstanding principal balance of the respective loans. These loan modifications were not considered TDRs under GAAP. As of September 30, 2020, three loan modifications included temporary PIK Interest provisions, with a total outstanding loan principal and net book value of $319.3 million and $309.5 million, respectively. Total PIK Interest of $1.4 million and $2.4 million were deferred and compounded into outstanding loan principal during the three and nine months ended September 30, 2020, respectively.

Loan Risk Ratings — As further described in Note 2, our Manager evaluates KREF's commercial mortgage loan portfolio on a quarterly basis. In conjunction with the quarterly commercial mortgage loan portfolio review, KREF's Manager assesses the risk factors of each loan and assigns a risk rating based on a variety of factors. Loans are rated “1” (very low risk) through “5” Impaired/Loss Likely), which ratings are defined in Note 2. The following table allocates the principal balance and net book value of the loan portfolio based on KREF's internal risk ratings:

September 30, 2020								December 31, 2019
Risk Rating	Number of Loans	Net Book Value		Total Loan Exposure(A)		Total Loan Exposure %		Risk Rating	Number of Loans	Net Book Value		Total Loan Exposure(A)		Total Loan Exposure %
1	—	$	—	$	—	—	%	1	1	$	85,730	$	86,000	1.7	%
2	2	252,692		253,349		5.1		2	5	450,827		451,858		9.0
3	27	3,837,354		3,945,637		78.9		3	33	4,394,485		4,501,440		89.3
4	6	666,405		684,767		13.7		4	—	—		—		—
5	2	76,788		115,071		2.3		5	—	—		—		—
	37	$	4,833,239	$	4,998,824	100.0	%		39	$	4,931,042	$	5,039,298	100.0	%

(A)    In certain instances, KREF finances its loans through the non-recourse sale of a senior interest that is not included in the condensed consolidated financial statements. Total loan exposure includes the entire loan KREF originated and financed, including $143.6 million and $143.6 million of such non-consolidated interests, and excludes $66.2 million and $65.0 million vertical loan participation as of September 30, 2020 and December 31, 2019, respectively.

As of September 30, 2020, the average risk rating of KREF's portfolio was 3.1 (Average Risk), weighted by total loan exposure, as compared to 2.9 (Average Risk) as of December 31, 2019.

Loan Vintage — The following tables present the amortized cost of the loan portfolio at September 30, 2020, by KREF's internal risk rating and year of origination. The risk ratings are updated as of September 30, 2020.

September 30, 2020
				Amortized Cost by Year of Origination
Risk Rating	Number of Loans	Outstanding Principal		2020		2019		2018		2017		2016		2015		Total		Carrying Amount
Commercial Mortgage Loans
1	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
2	2	253,349		—		61,114		—		191,770		—		—		252,884		252,692
3	27	3,868,285		201,314		2,496,189		1,152,974		—		—		—		3,850,477		3,837,354
4	6	684,767		101,497		76,050		336,361		168,318		—		—		682,226		666,405
5	2	115,071		—		—		—		—		—		110,387		110,387		76,788
	37	$	4,921,472	$	302,811	$	2,633,353	$	1,489,335	$	360,088	$	—	$	110,387	$	4,895,974	$	4,833,239

24

KKR Real Estate Finance Trust Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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

Allowance for Credit Losses — For the three months ended March 31, June 30 and September 30, 2020, respectively, the changes to allowance for credit losses were as follows:

	Commercial Mortgage Loans		Unfunded Loan Commitments		Total
Balance at December 31, 2019	$	—	$	—	$	—
Cumulative-effect adjustment upon adoption of ASU 2016-13	13,909		1,100		15,009
Provision for credit losses, net	52,070		3,204		55,274
Balance at March 31, 2020	$	65,979	$	4,304	$	70,283
Provision for credit losses, net	1,070		(2,436)		(1,366)
Write-offs charged	(4,650)		—		(4,650)
Balance at June 30, 2020	$	62,399	$	1,868	$	64,267
Provision for credit losses, net	336		(462)		(126)
Balance at September 30, 2020	$	62,735	$	1,406	$	64,141

The increase in the provision for credit losses during the three months ended March 31, 2020 of $55.3 million, compared to the January 1, 2020 cumulative-effect adjustment upon adoption of ASU 2016-13 of $15.0 million, was primarily attributable to the significant adverse change in the economic outlook due to the COVID-19 pandemic. In addition, the average risk ratings of KREF's loan portfolio increased from 2.9 as of December 31, 2019 to 3.0 as of March 31, 2020.

The decrease of $1.4 million in the provision for credit losses during the three months ended June 30, 2020 compared to the March 31, 2020 provision was primarily attributable to a slightly more stable macro-economic outlook based on improved observed economic data, which was substantially offset by higher credit loss provision on 4 and 5-rated loans.

While the Company observed better economic data and an improved economic outlook during the three months ended September 30, 2020, the provision for credit losses remained substantially consistent with the prior quarter due to higher credit loss provision on 4 and 5-rated loans.

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

	September 30, 2020		December 31, 2019			September 30, 2020		December 31, 2019
Geography					Collateral Property Type
New York	21.9	%	22.5	%	Multifamily	51.8	%	58.3	%
Illinois	10.2		9.7		Office	30.5		25.5
Pennsylvania	9.5		9.2		Condo (Residential)	6.1		3.0
Virginia	8.4		8.2		Retail	4.4		4.7
Massachusetts	7.8		7.7		Hospitality	4.4		4.4
California	7.2		6.9		Industrial	1.4		2.8
Washington	6.9		6.9		Student Housing	1.4		1.3
Texas	6.3		2.5		Total	100.0	%	100.0	%
Florida	5.5		6.9
Minnesota	3.9		3.7
Colorado	3.4		2.8
Georgia	3.0		4.3
Oregon	2.2		2.5
Alabama	1.3		1.2
Washington D.C.	1.2		0.9
New Jersey	0.1		3.1
Other U.S.	1.2		1.0
Total	100.0	%	100.0	%

25

KKR Real Estate Finance Trust Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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

Note 4. Debt Obligations

The following table summarizes KREF's secured master repurchase agreements and other financing arrangements in place as of September 30, 2020 and December 31, 2019:

	September 30, 2020																		December 31, 2019
	Facility											Collateral							Facility
	Month Issued	Outstanding Principal		Carrying Value(A)		Maximum Facility Size		Final Stated Maturity	Weighted Average Funding Cost(B)		Weighted Average Life (Years) (B)	Outstanding Principal		Amortized Cost Basis		Carrying Value		Weighted Average Life (Years)(C)	Carrying Value(A)
Master Repurchase Agreements(D)
Wells Fargo(E)	Oct 2015	$	414,259	$	412,465	$	1,000,000	Nov 2023	1.9	%	2.2	$	653,674	$	650,349	$	614,703	3.4	$	464,933
Morgan Stanley(F)	Dec 2016	418,605		418,130		600,000		Dec 2022	2.7		1.8	568,280		565,407		564,251		4.2	392,279
Goldman Sachs(G)	Sep 2016	77,936		77,263		400,000		Oct 2023	3.1		2.2	161,024		161,020		158,588		2.1	223,867
Term Lending Agreement
KREF Lending V(H)	Jun 2019	900,000		899,031		900,000		Jun 2026	2.2		1.7	1,107,983		1,102,601		1,095,968		3.7	868,816
Warehouse Facility
HSBC Facility(I)	Mar 2020	—		(429)		500,000		Mar 2023	—		2.4	—		—		—		n.a	—
Asset Specific Financing
BMO Facility(J)	Aug 2018	60,000		59,709		300,000		n.a	2.0		3.3	76,000		75,692		73,142		3.4	141,120
Revolving Credit Agreement
Revolver(K)	Dec 2018	—		—		335,000		Dec 2023	—		3.2	n.a		n.a		n.a		n.a	—
Total / Weighted Average		$	1,870,800	$	1,866,169	$	4,035,000		2.3	%	1.9								$	2,091,015

(A)    Net of $4.6 million and $9.5 million unamortized debt issuance costs as of September 30, 2020 and December 31, 2019, respectively.

(B)    Average weighted by the outstanding principal of borrowings. Funding cost includes deferred financing costs.

(C)    Average based on the fully extended loan maturity, weighted by the outstanding principal of the collateral.

(D)    Borrowings under these repurchase agreements are collateralized by senior loans, held-for-investment, and bear interest equal to the sum of (i) a floating rate index, equal to one-month LIBOR, or an index approximating LIBOR, and (ii) a margin, based on the collateral. As of September 30, 2020 and December 31, 2019, the percentage of the outstanding principal of the collateral sold and not borrowed under these repurchase agreements, or average "haircut" weighted by outstanding principal of collateral, was 34.1% and 27.4%, respectively (or 32.6% and 25.7%, respectively, if KREF had borrowed the maximum amount approved by its repurchase agreement counterparties as of such dates).

(E)    The current stated maturity date is November 2021, which does not reflect two, twelve-month facility term extensions available to KREF, which is contingent upon certain covenants and thresholds. As of September 30, 2020, the collateral-based margin was between 1.25% and 2.15%.

(F)    In February 2020, the Morgan Stanley repurchase agreement was amended to change the initial maturity to December 2020, with two one-year extension options upon giving written notice and another two one-year extension periods subject to approval by Morgan Stanley. KREF has the option to increase the facility amount to $750.0 million. As of September 30, 2020, the collateral-based margin was between 1.75% and 1.85%.

(G)    The facility capacity steps down to $240.0 million on October 30, 2020. In May 2020, the facility was amended to extend the current stated maturity date to October 30, 2021. In addition, KREF has the option to extend the maturity date to October 31, 2023 by (i) electing to permanently reduce the maximum advance rate for each pledged loan to the lesser of 65% or the advance rate in effect for such loan at October 30, 2021, and (ii) payment of the applicable contractual fee, subject to the satisfaction of certain conditions. As of September 30, 2020, the collateral-base margin was between 1.85% and 2.00%.

(H)    In June 2019, KREF entered into a Master Repurchase and Securities Contract Agreement (the "Term Lending Agreement") with Morgan Stanley Mortgage Capital Holdings LLC ("Administrative Agent"), as administrative agent on behalf of Morgan Stanley Bank, N.A. ("Initial Buyer"), which provides for current and future financings of up to $900.0 million on a non-mark-to-market basis. The Initial Buyer subsequently syndicated a portion of the facility to multiple financial institutions. As of September 30, 2020, the Initial Buyer held 22.2% of the total commitment under the facility. Borrowings under the Term Lending Agreement are collateralized by certain loans, held for investment, and bear interest equal to one-month LIBOR, plus a 1.9% margin. The Term Lending Agreement has an initial maturity of June 2021, subject to five one-year extension options, which may be exercised by KREF upon the satisfaction of certain customary conditions and thresholds.

(I)    In March 2020, KREF entered into a $500.0 million Loan and Security Agreement with HSBC Bank USA, National Association (“HSBC Facility”). The facility, which matures in March 2023, provides warehouse financing on a non-mark-to-market basis with partial recourse to KREF.

(J)    In August 2018, KREF entered into a $200.0 million loan financing facility with BMO Harris Bank ("BMO Facility"). The facility provides asset-based financing on a non-mark to market basis with matched-term up to five years with partial recourse to KREF. During May 2019, KREF increased the borrowing capacity to $300.0 million. As of September 30, 2020, the collateral-based margin was 1.70%.

(K)    In December 2018, KREF entered into a $100.0 million corporate revolving credit facility (“Revolver”) administered by Morgan Stanley Senior Funding, Inc. Additional lenders were added in 2019 and 2020, further increasing the borrowing capacity under the Revolver to $335.0 million as of September 30, 2020. The current stated maturity of the facility is December 2023. Borrowings under the facility bear interest at a per annum rate equal to the sum of (i) a floating rate index and (ii) a fixed margin. Borrowings under this facility are full recourse to certain guarantor wholly-owned subsidiaries of KREF. As of September 30, 2020, the carrying value excluded $2.7 million unamortized debt issuance costs presented within "Other assets" in KREF's Condensed Consolidated Balance Sheets.

26

KKR Real Estate Finance Trust Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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

The preceding table excludes loan participations sold (Note 8).

As of September 30, 2020 and December 31, 2019, KREF had outstanding repurchase agreements and a Term Lending Agreement where the amount at risk with any individual counterparty, or group of related counterparties, exceeded 10.0% of KREF’s stockholders' equity. The amount at risk under these agreements is the net counterparty exposure, defined as the excess of the carrying amount (or market value, if higher than the carrying amount, for repurchase agreements) of the assets sold under agreement to repurchase, including accrued interest plus any cash or other assets on deposit to secure the repurchase obligation, over the amount of the repurchase liability, adjusted for accrued interest. The following table summarizes certain characteristics of KREF's repurchase agreements where the amount at risk with any individual counterparty, or group of related counterparties, exceeded 10.0% of KREF’s stockholders' equity as of September 30, 2020 and December 31, 2019:

	Outstanding Principal		Net Counterparty Exposure		Percent of Stockholders' Equity		Weighted Average Life (Years)(A)
September 30, 2020
Wells Fargo	$	414,259	$	202,268	19.5	%	2.2
Morgan Stanley	418,605		147,218		14.2		1.8
Term Lending Agreement(B)	900,000		199,099		19.2		1.7
Total / Weighted Average	$	1,732,864	$	548,585	52.9	%	1.9
December 31, 2019
Wells Fargo	$	468,452	$	178,827	15.9	%	2.6
Morgan Stanley	394,499		136,764		12.2		2.5
Term Lending Agreement(B)	870,051		203,800		18.2		2.1
Total / Weighted Average	$	1,733,002	$	519,391	46.3	%	2.4

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

(B)    There were multiple counterparties to the Term Lending Agreement. Morgan Stanley Bank, N.A. represented 4.3% and 8.9% of the net counterparty exposure as a percent of stockholders' equity as of September 30, 2020 and December 31, 2019, respectively.

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

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

Term Loan Financing

In April 2018, KREF, through its consolidated subsidiaries, entered into a term loan financing agreement (“Term Loan Facility”) with third party lenders for an initial borrowing capacity of $200.0 million that was subsequently increased to $1.0 billion in October 2018. The facility provides asset-based financing on a non-mark-to-market basis with matched term up to five years and is non-recourse to KREF. Borrowings under the facility are collateralized by senior loans, held-for-investment, and bear interest equal to one-month LIBOR plus a margin. As of September 30, 2020, the weighted average margin and interest rate on the facility were 1.6% and 1.7%, respectively. As of December 31, 2019, the weighted average margin and interest rate on the facility were 1.5% and 3.2%, respectively. The following tables summarize our borrowings under the Term Loan Facility:

	September 30, 2020
Term Loan Facility	Count	Outstanding Principal		Amortized Cost		Carrying Value		Wtd. Avg. Yield/Cost(A)	Guarantee(B)	Wtd. Avg. Term(C)
Collateral assets	13	$	1,191,725	$	1,186,481	$	1,179,982	L + 3.0%	n.a.	January 2024
Financing provided	n.a.	981,953		980,181		980,181		L + 1.9%	n.a.	January 2024

27

KKR Real Estate Finance Trust Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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

	December 31, 2019
Term Loan Facility	Count	Outstanding Principal		Amortized Cost		Carrying Value		Wtd. Avg. Yield/Cost(A)	Guarantee(B)	Wtd. Avg. Term(C)
Collateral assets	12	$	1,003,995	$	997,081	$	997,081	L + 3.0%	n.a.	November 2023
Financing provided	n.a.	798,180		793,872		793,872		L + 1.9%	n.a.	November 2023

(A)     Floating rate loans and related liabilities are indexed to one-month LIBOR. KREF's net interest rate exposure is in direct proportion to its interest in the net assets indexed to that rate. In addition to cash coupon, yield/cost includes the amortization of deferred origination/financing costs.

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

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

Activity — For the nine months ended September 30, 2020, the activity related to the carrying value of KREF’s secured financing agreements were as follows:

	Secured Financing Agreements, Net
Balance as of December 31, 2019	$	2,884,887
Principal borrowings	970,580
Principal repayments/sales/deconsolidation	(1,016,543)
Deferred debt issuance costs	(2,515)
Amortization of deferred debt issuance costs	9,941
Balance as of September 30, 2020	$	2,846,350

Maturities — KREF’s secured financing agreements, term loan financing and other consolidated debt obligations in place as of September 30, 2020 had current contractual maturities as follows:

Year	Nonrecourse		Recourse(A)		Total
2020	$	106,909	$	35,636	$	142,545
2021	734,051		64,306		798,357
2022	1,005,456		295,186		1,300,642
2023	356,741		32,142		388,883
2024	181,896		40,430		222,326
	$	2,385,053	$	467,700	$	2,852,753

(A)    Except for the Revolver, which is full recourse, amounts borrowed subject to a maximum 25.0% recourse limit. The Revolver expires in December 2023.

Covenants — KREF is required to comply with customary loan covenants and event of default provisions related to its secured financing agreements and Revolver, including, but not limited to, negative covenants relating to restrictions on operations with respect to KREF’s status as a REIT, and financial covenants. Such financial covenants include 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 cash proceeds of any equity issuances made and any capital contributions received by KREF and certain subsidiaries or up to approximately $880.2 million depending upon the facility); a cash liquidity covenant (the greater of $10.0 million or 5.0% of KREF's recourse indebtedness); and a total indebtedness covenant⁽¹⁾ (75.0% of KREF's total assets, net of VIE liabilities and non-recourse indebtedness). As of September 30, 2020 and December 31, 2019, KREF was in compliance with its financial debt covenants.

(1)    In July 2020, the Revolver credit agreement was amended to allow for incremental senior borrowings subject to a Senior Indebtedness covenant of 80% of KREF's total asset, net of Non-Recourse Indebtedness, as defined, and a Total Debt Incurrence covenant of 82% (ratio of KREF's Recourse Indebtedness, as defined, to KREF's total asset, net of Non-Recourse Indebtedness, as defined).

28

KKR Real Estate Finance Trust Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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

Note 5. Collateralized Loan Obligation

In November 2018, KREF financed a pool of loan participations from our existing loan portfolio through a managed CLO. KREF 2018-FL1 provides KREF with match-term financing on a non-mark-to-market and non-recourse basis. KREF 2018-FL1 has a two-year reinvestment feature that allows principal proceeds of the collateral assets to be reinvested in qualifying replacement assets, subject to the satisfaction of certain conditions set forth in the indenture.

The following tables outline KREF 2018-FL1 collateral assets and respective borrowing as of September 30, 2020 and December 31, 2019:

	September 30, 2020
Collateralized Loan Obligation	Count	Outstanding Principal		Amortized Cost		Carrying Value		Wtd. Avg. Yield/Cost(B)	Wtd. Avg. Term(C)
Collateral assets(A)	19	$	1,000,000	$	1,000,000	$	996,039	L + 2.8%	February 2024
Financing provided	1	810,000		808,311		808,311		L + 2.2%	June 2036

	December 31, 2019
Collateralized Loan Obligation	Count	Outstanding Principal		Amortized Cost		Carrying Value		Wtd. Avg. Yield/Cost(B)	Wtd. Avg. Term(C)
Collateral assets(A)	22	$	1,000,000	$	1,000,000	$	1,000,000	L +2.8%	November 2023
Financing provided	1	810,000		803,376		803,376		L + 1.8%	June 2036

(A)Including $12.0 million cash held in CLO, and $42.0 million of loan repayment proceeds held by the servicer and receivable by the CLO as of September 30, 2020. Collateral loan assets represent 19.2% and 20.2% of the principal of KREF's commercial mortgage loans as of September 30, 2020 and December 31, 2019, respectively. As of September 30, 2020 and December 31, 2019, 100% of KREF loans financed through the CLO are floating rate loans.

(B)Yield on collateral assets is based on cash coupon. Financing cost includes amortization of deferred financing costs incurred in connection with the CLO.

(C)Loan term represents weighted-average final maturity, assuming extension options are exercised by the borrower. Repayments of CLO notes are dependent on timing of related collateral loan asset repayments post reinvestment period. The term of the CLO notes represents the rated final distribution date.

The following table presents the KREF 2018-FL1 Assets and Liabilities included in KREF’s Condensed Consolidated Balance Sheets:

Assets	September 30, 2020		December 31, 2019
Cash	$	12,000	$	—
Commercial mortgage loans, held-for-investment	946,350		1,000,000
Less: Allowance for credit losses	(3,972)		—
Commercial mortgage loans, held-for-investment, net	942,378		1,000,000
Accrued interest receivable	2,803		3,280
Other assets(A)	42,168		5
Total	$	999,349	$	1,003,285
Liabilities
Collateralized loan obligation, net	$	808,311	$	803,376
Accrued interest payable	621		1,254
Accounts payable, accrued expenses and other liabilities	71		72
Total	$	809,003	$	804,702

(A)Includes $42.0 million of loan repayment proceeds held with the servicer and receivable by the CLO as of September 30, 2020.

29

KKR Real Estate Finance Trust Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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

The following table presents the components of net interest income of KREF 2018-FL1 included in KREF’s Condensed Consolidated Statements of Income:

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2020		2019		2020		2019
Net Interest Income
Interest income	$	11,427	$	12,908	$	34,692	$	41,496
Interest expense(A)	5,806		9,681		20,960		29,648
Net interest income	$	5,621	$	3,227	$	13,732	$	11,848

(A)Includes $1.7 million and $0.9 million of deferred financing costs amortization for the three months ended September 30, 2020 and 2019, respectively; and $5.0 million and $2.5 million of deferred financing costs amortization for the nine months ended September 30, 2020 and 2019, respectively. KREF's unamortized deferred financing costs related to KREF 2018-FL1 were $1.7 million, $6.6 million and $7.3 million, as of September 30, 2020, December 31, 2019 and September 30, 2019, respectively.

30

KKR Real Estate Finance Trust Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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

Note 6. Secured Term Loan, Net

In September 2020, KREF entered into a $300.0 million secured term loan at a price of 97.5%, which bears interest at a per annum rate equal to one-month LIBOR plus a 4.75% margin, subject to a 1.0% LIBOR floor, payable quarterly beginning in December 2020. The secured term loan is partially amortizing, with an amount equal to 1.0% per annum of the principal balance due in quarterly installments starting March 31, 2021. The secured term loan matures on September 1, 2027 and contains restrictions relating to liens, asset sales, indebtedness, investments and transactions with affiliates. The secured term loan is secured by corporate level guarantees and does not include asset-based collateral.

Upon the execution of the secured term loan, KREF recorded a $7.5 million issuance discount and $4.8 million in issuance costs, inclusive of $1.1 million in arrangement and structuring fees paid to KKR Capital Markets ("KCM"), an affiliate of KREF.

The following table summarizes KREF’s secured term loan at September 30, 2020:

	September 30, 2020
Principal amount	$	300,000
Unamortized discount	(7,415)
Deferred financing costs	(4,707)
Carrying amount	$	287,878

Covenants — KREF is required to comply with customary loan covenants and event of default provisions related to its secured term loan that include, but are not limited to, negative covenants relating to restrictions on operations with respect to KREF’s status as a REIT, and financial covenants. Such financial covenants include a minimum consolidated tangible net worth of $650.0 million and a maximum Total Debt to Total Assets ratio, as defined, of 83.3% (the “Leverage Covenant”). The tangible net worth and Leverage Covenants are effective as of the last day of each fiscal quarter commencing with the fiscal quarter ending March 31, 2021. KREF was in compliance with such covenants as of September 30, 2020.

31

KKR Real Estate Finance Trust Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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

Note 7. Convertible Notes, Net

In May 2018, the Company issued $143.75 million of Convertible Notes, which 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. The Convertible Notes’ issuance costs of $5.1 million are amortized through interest expense over the life of the Convertible Notes.

The initial conversion rate for the Convertible Notes is 43.9386 shares of KREF’s common stock per $1,000 principal amount of Notes, which is equivalent to an initial conversion price of approximately $22.76 per share of KREF’s common stock, which represents a 10% conversion premium over the last reported sale price of $20.69 per share of KREF’s common stock on the New York Stock Exchange on May 15, 2018. The conversion rate is subject to adjustment under certain circumstances. In addition, upon a make-whole fundamental change as defined within the indenture governing the Convertible Notes, the Company will, under certain circumstances, increase the applicable conversion rate for a holder that elects to convert its Notes in connection with such make-whole fundamental change. Prior to February 15, 2023, the Convertible Notes will be convertible only upon satisfaction of certain conditions and during certain periods, and thereafter, at any time until the close of business on the second scheduled trading day immediately preceding the maturity date. KREF will satisfy any conversion elections by paying or delivering, as the case may be, cash, shares of KREF’s common stock or a combination of cash and shares of KREF’s common stock, at its election. KREF has the intent and ability to settle the Convertible Notes in cash and, as a result, the Convertible Notes did not have an impact on our diluted earnings per share.

Upon the issuance of the Convertible Notes, KREF recorded a $1.8 million discount based on the implied value of the conversion option and an assumed effective interest rate of 6.50%, as well as $5.1 million of initial issuance costs, inclusive of $0.8 million paid to an affiliate of KREF. Inclusive of the amortization of this discount and the issuance costs, KREF’s total cost of the May 2018 Convertible Notes issuance is 6.92% per annum.

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

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2020		2019		2020		2019
Cash coupon	$	2,201	$	2,201	$	6,604	$	6,603
Discount and issuance cost amortization	349		349		1,041		1,037
Total interest expense	$	2,550	$	2,550	$	7,645	$	7,640

The following table details the net book value of our Convertible Notes on our Condensed Consolidated Balance Sheets:

	September 30, 2020		December 31, 2019
Principal	$	143,750	$	143,750
Deferred financing costs	(2,690)		(3,460)
Unamortized discount	(945)		(1,215)
Net book value	$	140,115	$	139,075

Accrued interest payable for the Convertible Notes was $3.3 million and $1.1 million as of September 30, 2020 and December 31, 2019, respectively. Refer to Note 2 for additional discussion of our accounting policies for the Convertible Notes.

32

KKR Real Estate Finance Trust Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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

Note 8. Loan Participations Sold

KREF finances certain loan investments through the syndication of a non-recourse, or limited-recourse, loan participation to unaffiliated third parties. In October 2019, KREF syndicated a $65.0 million vertical participation in one of its loan investments with a principal balance of $328.5 million to an unaffiliated third party, at par value. Such syndications did not qualify for "sale" accounting under GAAP and therefore are consolidated in KREF's condensed consolidated financial statements as of September 30, 2020 and December 31, 2019.

The following tables summarize the loan participation sold liabilities that KREF recognized since the corresponding syndications of the respective loan participations were not treated as "sales" as of September 30, 2020 and December 31, 2019:

	September 30, 2020
Loan Participations Sold	Count	Principal Balance		Amortized Cost		Carrying Value		Yield/Cost(A)	Guarantee	Term
Total loan	1	$	336,753	$	335,589	$	334,312	L + 2.6%	n.a.	July 2024
Vertical loan participation(B)	1	66,248		66,226		66,226		L + 2.6%	n.a.	July 2024

	December 31, 2019
Loan Participations Sold	Count	Principal Balance		Amortized Cost		Carrying Value		Yield/Cost(A)	Guarantee	Term
Total loan	1	$	328,500	$	326,881	$	326,881	L + 2.5%	n.a.	July 2024
Vertical loan participation(B)	1	65,000		64,966		64,966		L + 2.5%	n.a.	July 2024

(A)     Floating rate loans and related liabilities are indexed to one-month LIBOR. KREF's net interest rate exposure is in direct proportion to its interest in the net assets of the senior loan.

(B)    During the three months ended September 30, 2020 and 2019, KREF recorded $0.7 million and $0.0 million of interest income and $0.7 million and $0.0 million of interest expense, respectively; and during the nine months ended September 30, 2020 and 2019, KREF recorded $2.1 million and $0.0 million of interest income and $2.1 million and $0.0 million of interest expense, respectively, related to the vertical loan participation sold.

33

KKR Real Estate Finance Trust Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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

Note 9. Variable Interest Entities

Collateralized Loan Obligation — KREF is the primary beneficiary of a collateralized loan obligation consolidated as a VIE that closed in November 2018 (Note 5). Management considers the CLO Issuers, wholly-owned subsidiaries of KREF, to be the primary beneficiary as the CLO Issuers have the ability to control the most significant activities of the CLO, the obligation to absorb losses, and the right to receive benefits of the CLO through the subordinate interests the CLO Issuers own.

Equity method investments — KREF holds two investments in entities that it records using the equity method.

As of September 30, 2020, KREF held a 3.5% interest in RECOP I, an unconsolidated VIE of which KREF is not the primary beneficiary, at its fair value of $33.2 million. The aggregator vehicle in which KREF invests is controlled and advised by affiliates of the Manager. RECOP I primarily acquired junior tranches of CMBS newly issued by third parties. KREF will not pay any fees to RECOP I, but KREF bears its pro rata share of RECOP I's expenses. KREF reported its share of the net asset value of RECOP I in its Condensed Consolidated Balance Sheets, presented as “Equity method investments” and its share of net income, presented as “Income from equity method investments” in the Condensed Consolidated Statements of Income.

As of September 30, 2020, the non-voting limited liability company interests issued by the Manager, a VIE, and held by a Taxable REIT Subsidiary ("TRS") of KREF for the benefit of the holder of the SNVPS represented 4.7% of the Manager’s outstanding limited liability company interests (Note 10). KREF reported its interest in the Manager in its Condensed Consolidated Balance Sheets, presented as “Equity method investments” and its share of net income, presented as “Income from equity method investments” in the Condensed Consolidated Statements of Income.

CMBS — KREF beneficially owned and directly held CMBS with an unpaid principal balance and fair value of $34.9 million and $12.5 million, respectively, as of December 31, 2018. During the three months ended September 30, 2019, KREF sold its remaining directly held CMBS investments, comprised of (i) a controlling beneficial interest in a CMBS trust held and (ii) interest-only bonds, for $9.8 million, resulting in a net loss of $2.7 million, which is included in "Other Income - (Loss) gain on sale of investments" in the Condensed Consolidated Statements of Income. Consequently, KREF deconsolidated the respective CMBS trust upon sale.

34

KKR Real Estate Finance Trust Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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

Note 10. Equity

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

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

Pricing Date	Shares Issued	Net Proceeds
As of December 31, 2015	13,636,416	$	272,728
February 2016	2,000,000	40,000
May 2016	3,000,138	57,130
June 2016(A)	21,838	—
August 2016	5,500,000	109,875
As of December 31, 2016	24,158,392	479,733
February 2017	7,386,208	147,662
April 2017	10,379,738	207,595
May 2017- Initial Public Offering	11,787,500	219,356
As of December 31, 2017	53,711,838	1,054,346
August 2018	5,000,000	98,326
November 2018	500,000	9,351
As of December 31, 2018	59,211,838	1,162,023

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

KREF did not issue additional common stock between January 1, 2019 and September 30, 2020 other than related to the vesting of restricted stock units discussed below.

In March 2016, KREF obtained $277.4 million of capital commitments in connection with the completion of a private placement priced at $20.00 per share. Of these capital commitments, $190.1 million consisted of approximately $178.4 million from third parties and approximately $11.8 million from certain current and former employees of, and non-employee consultants to, KKR. KKR committed a total of $400.0 million and third parties committed a total of $248.0 million subsequent to the private placement completion. In connection with the completion of the private placement, KREF formed an advisory board consisting of certain third-party investors. The advisory board possessed certain protective approval rights over KREF's activities outside its ordinary course of business, including certain business combinations and equity issuances. The advisory board dissolved upon KREF's public listing on May 5, 2017.

In February 2017 and April 2017, KREF called a portion of capital from investors in the private placements closed during the year ended December 31, 2016 and issued 7,386,208 and 10,379,738 common shares, at $20.00 per share, for net proceeds of $147.7 million and $207.6 million, respectively.

In connection with the capital commitments described above, third-party investors and certain current and former employees of, and non-employee consultants to, KKR were allocated non-voting limited liability company interests of the Manager. For each $100.0 million of KREF’s common stock acquired by investors through the private placement, the investors were allocated non-voting limited liability company interests, representing 6.67% of the Manager’s then-outstanding total limited liability company interests. Each investor was allocated its pro rata share of the non-voting limited liability company interests of the Manager based on the investor’s shares of KREF’s common stock.

35

KKR Real Estate Finance Trust Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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

In May 2017, KREF completed its initial public offering of 11,787,500 shares of its common stock at a price to the public of $20.50 per share, which included 1,537,500 shares of common stock issued in connection with the underwriters' exercise in full of their option to purchase additional shares. The value of KREF's common stock prior to its listing on the New York Stock Exchange was based upon its equity value using a combination of net asset value (market) and discounted cash flow (income) approaches.

In August 2018, KREF completed an underwritten public offering of 5,000,000 shares of its common stock at $19.90 per share, less applicable transaction costs, resulting in $98.3 million in net proceeds.

In November 2018, KREF completed an underwritten offering of 4,500,000 shares of its common stock at $20.00 per share, consisting of 500,000 shares issued and sold by KREF and 4,000,000 shares sold by pre-initial public offering third-party investors, resulting in $9.4 million in net proceeds to KREF.

As of September 30, 2020 and December 31, 2019, KKR beneficially owned 21,858,356 and 22,008,616 shares of KREF's common stock, of which 1,858,356 and 2,008,616 shares were held by KKR on behalf of a third-party investor (Note 1).

During the nine months ended September 30, 2020 and 2019, 42,459 and 40,503 shares of common stock were issued related to the vesting of restricted stock units. Upon any payment of shares as a result of restricted stock unit vesting, the related tax withholding obligation will generally be satisfied by KREF, reducing the number of shares to be delivered by a number of shares necessary to satisfy the related applicable tax withholding obligation. Refer to Note 11 for further detail.

Of the 59,391,731 common shares KREF issued, there were 55,491,405 common shares outstanding as of September 30, 2020, which includes 179,893 net shares of common stock issued in connection with vested restricted stock units and is net of 3,900,326 common shares repurchased as of September 30, 2020.

Share Repurchase Program — On June 15, 2020, KREF’s board of directors authorized an extension of the Company’s share repurchase program, which was scheduled to expire on June 30, 2020. Under the extended program, which has no expiration date, the Company may repurchase up to $100.0 million of its common stock beginning July 1, 2020, of which up to $50.0 million may be repurchased under a pre-set trading plan meeting the requirements of Rule 10b5-1 under the Exchange Act, and provide for repurchases of common stock when the market price per share is below book value per share (calculated in accordance with GAAP as of the end of the most recent quarterly period for which financial statements are available), and the remaining $50.0 million may be used for repurchases in the open market, pursuant to pre-set trading plans meeting the requirements of Rule 10b5-1 under the Exchange Act, in privately negotiated transactions or otherwise. The timing, manner, price and amount of any common stock repurchases will be determined by the Company in its discretion and will depend on a variety of factors, including legal requirements, price and economic and market conditions. The program does not require the Company to repurchase any specific number of shares of common stock, and the program may be suspended, extended, modified or discontinued at any time.

During the nine months ended September 30, 2020, KREF repurchased 2,037,637 shares of common stock at an average price per share of $12.27, for a total of $25.0 million. Payments for these shares are presented within “Payments to reacquire common stock” on the Condensed Consolidated Statements of Cash Flows.

At the Market Stock Offering Program — On February 22, 2019, KREF entered into an equity distribution agreement with certain sales agents, pursuant to which KREF may sell, from time to time, up to an aggregate sales price of $100.0 million of its common stock pursuant to a continuous offering program (the “ATM”). Sales of KREF’s common stock made pursuant to the ATM may be made in negotiated transactions or transactions that are deemed to be “at the market” offerings as defined in Rule 415 under the Securities Act of 1933, as amended. The timing and amount of actual sales will depend on a variety of factors including market conditions, the trading price of KREF’s common stock, KREF’s capital needs, and KREF’s determination of the appropriate sources of funding to meet such needs. KREF did not sell any shares of its common stock under the ATM during the nine months ended September 30, 2020.

36

KKR Real Estate Finance Trust Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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

Dividends — During the nine months ended September 30, 2020 and 2019, KREF's board of directors declared the following dividends on shares of its common stock and special voting preferred stock:

			Amount
Declaration Date	Record Date	Payment Date	Per Share		Total
2020
March 16, 2020	March 31, 2020	April 15, 2020	$	0.43	$	24,010
June 15, 2020	June 30, 2020	July 15, 2020	$	0.43	$	23,861
September 15, 2020	September 30, 2020	October 15, 2020	$	0.43	$	23,861
					$	71,732
2019
March 18, 2019	March 29, 2019	April 12, 2019	$	0.43	$	24,761
June 14, 2019	June 28, 2019	July 15, 2019	$	0.43	$	24,688
September 13, 2019	September 30, 2019	October 16, 2019	$	0.43	$	24,692
					$	74,141

Special Voting Preferred Stock — In March 2016, KREF issued one share of special voting preferred stock to KKR Fund Holdings L.P. ("KKR Fund Holdings") for $20.00 per share, which KKR Fund Holdings transferred to its subsidiary, KKR REFT Asset Holdings LLC. The holder of the special voting preferred stock has special voting rights related to the election of members to KREF's board of directors until KKR and its affiliates cease to own at least 25.0% of KREF's issued and outstanding common stock. KKR and its affiliates beneficially owned 21,858,356 and 22,008,616 shares of KREF's common stock, of which 1,858,356 and 2,008,616 shares were held on behalf of a third-party investor, representing 39.4% and 38.3% of KREF’s issued and outstanding common stock as of September 30, 2020 and December 31, 2019, respectively.

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

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

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

37

KKR Real Estate Finance Trust Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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

Earnings (Loss) per Share — The following table illustrates the computation of basic and diluted earnings (loss) per share for the three and nine months ended September 30, 2020 and 2019:

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2020		2019		2020		2019
Numerator
Net income (loss) attributable to common stockholders	$	31,351	$	23,617	$	24,777	$	65,703
Denominator
Basic weighted average common shares outstanding	55,491,405		57,420,140		56,107,765		57,406,802
Dilutive restricted stock units	140,765		128,926		79,696		104,490
Diluted weighted average common shares outstanding	55,632,170		57,549,066		56,187,461		57,511,292
Net income (loss) attributable to common stockholders, per:
Basic common share	$	0.56	$	0.41	$	0.44	$	1.14
Diluted common share	$	0.56	$	0.41	$	0.44	$	1.14

38

KKR Real Estate Finance Trust Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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

Note 11. Stock-based Compensation

KREF is externally managed by the Manager and does not currently have any employees. However, as of September 30, 2020, certain individuals employed by the Manager and affiliates of the Manager, and certain members of KREF's board of directors were compensated, in part, through the issuance of stock-based awards.

As of September 30, 2020, KREF had restricted stock unit (“RSU”) awards outstanding under the KKR Real Estate Finance Trust Inc. 2016 Omnibus Incentive Plan that was adopted on February 12, 2016 and amended and restated on November 17, 2016 (the "Incentive Plan") to certain members of KREF’s board of directors and employees of the Manager or its affiliates, none of whom are KREF employees. RSUs awarded to employees of the Manager or its affiliates, generally vest over three consecutive one-year periods and awards to certain members of KREF's board of directors vest over a one-year period, pursuant to the terms of the respective award agreements and the terms of the Incentive Plan. RSU awards are not entitled to dividends until KREF issues shares of its common stock, which are issuable on a one-to-one basis upon the RSU award vesting.

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

	Restricted Stock Units	Weighted Average Grant Date Fair Value Per RSU(A)
Unvested as of December 31, 2019	641,214	$	20.02
Granted	18,052	14.40
Vested	(59,551)	20.42
Forfeited/ cancelled	(1,239)	19.26
Unvested as of September 30, 2020	598,476	$	19.81

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

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

Year	Restricted Stock Units
2020	231,875
2021	249,935
2022	116,666
Total	598,476

Upon adoption of ASU No. 2018-07 in June 2018, KREF recognizes the compensation cost of RSUs awarded to employees of the Manager, or one or more of its affiliates, on a straight-line basis over the awards’ term at their grant date fair value, consistent with the RSUs awarded to certain members of KREF's board of directors.

During the three and nine months ended September 30, 2020, KREF recognized $1.4 million and $4.4 million, respectively, of stock-based compensation expense included in “General and administrative” expense in the Condensed Consolidated Statements of Income. During the three and nine months ended September 30, 2019, KREF recognized $1.0 million and $3.1 million, respectively, of stock-based compensation expense. As of September 30, 2020, there was $7.2 million of total unrecognized stock-based compensation expense related to unvested share-based compensation arrangements. This cost is expected to be recognized over a weighted average period of 0.8 years.

Upon any payment of shares as a result of restricted stock unit vesting, the related tax withholding obligation will generally be satisfied by KREF, reducing the number of shares to be delivered by a number of shares necessary to satisfy the related applicable tax withholding obligation. The amount results in a cash payment related to this tax liability and a corresponding adjustment to additional paid-in capital in the Condensed Consolidated Statement of Changes in Stockholders' Equity. The adjustment was $0.3 million for the nine months ended September 30, 2020, and is included as a reduction of capital related to the KREF's equity incentive plan in the Condensed Consolidated Statement of Changes in Stockholders' Equity. KREF delivered 42,459 shares of common stock for 59,551 vested RSUs during the nine months ended September 30, 2020.

Refer to Note 13 for additional information regarding the Incentive Plan.

39

KKR Real Estate Finance Trust Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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

Note 12. Commitments and Contingencies

As of September 30, 2020, KREF was subject to the following commitments and contingencies:

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

As of September 30, 2020, KREF was not involved in any material legal proceedings regarding claims or legal actions against KREF.

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

Capital Commitments — As of September 30, 2020, KREF had future funding requirements of $462.3 million related to its investments in commercial mortgage loans. These future funding commitments primarily relate to construction projects, capital improvements, tenant improvements and leasing commissions. Generally, funding commitments are subject to certain conditions that must be met, such as customary construction draw certifications, minimum credit metrics or executions of new leases before advances are made to the borrower.

In January 2017, KREF committed $40.0 million to invest in an aggregator vehicle alongside RECOP I. The two-year investment period for RECOP I ended in April 2019. As of September 30, 2020, KREF had a remaining commitment of $4.3 million to RECOP I.

Impact of the COVID-19 Pandemic — Due to the current COVID-19 pandemic in the United States and globally, KREF's operating partners, borrowers and their tenants, the properties securing our investments, and the economy as a whole have been, and will continue to be, adversely impacted. The magnitude and duration of the COVID-19 pandemic and its impact on KREF's borrowers and their tenants, cash flows and future results of operations could be significant and will largely depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the COVID-19 pandemic, the success of actions taken to contain or treat the pandemic, and reactions by consumers, companies, governmental entities and capital markets. The prolonged duration and impact of the COVID-19 pandemic could materially disrupt KREF's business operations and adversely impact its financial condition, results of operations, and cash flows. Refer to Note 2 for further discussion of COVID-19.

40

KKR Real Estate Finance Trust Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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

Note 13. Related Party Transactions

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

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

For its services to KREF, the Manager is entitled to a quarterly management fee equal to the greater of $62,500 or 0.375% of a weighted average adjusted equity and quarterly incentive compensation equal to 20.0% of the excess of (a) the trailing 12-month adjusted earnings over (b) 7.0% of the trailing 12-month weighted average adjusted equity (“Hurdle Rate”), less incentive compensation KREF already paid to the Manager with respect to the first three calendar quarters of such trailing 12-month period. The quarterly incentive compensation is calculated and paid in arrears with a three months lag.

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

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

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

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

41

KKR Real Estate Finance Trust Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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

No awards may be granted under the Incentive Plan on and after February 12, 2026. The Incentive Plan will continue to apply to awards granted prior to such date. During the nine months ended September 30, 2020, KREF granted 18,052 RSUs to KREF's directors. During the year ended December 31, 2019, KREF granted 362,832 RSUs to KREF's directors and employees of the Manager. As of September 30, 2020, 3,250,018 shares of common stock remained available for awards under the Incentive Plan.

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

	September 30, 2020		December 31, 2019
Management fees	$	4,223	$	4,280
Expense reimbursements and other	904		1,637
	$	5,127	$	5,917

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

	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Management fees	$	4,223	$	4,280	$	12,740	$	12,855
Incentive compensation	990		—		3,845		2,098
Expense reimbursements and other(A)	481		275		1,166		1,060
	$	5,694	$	4,555	$	17,751	$	16,013

(A)    KREF presents these amounts in "Operating Expenses — General and administrative" in its Condensed Consolidated Statements of Income. Affiliate expense reimbursements presented in the table above exclude the out-of-pocket amounts paid by the Manager to parties unaffiliated with the Manager on behalf of KREF, and for which KREF reimburses the Manager in cash. For the three and nine months ended September 30, 2020, these cash reimbursements totaled $0.8 million and $2.9 million, respectively; and for the three and nine months ended September 30, 2019, these cash reimbursements totaled $0.4 million and $1.5 million, respectively.

In connection with the Term Loan Facility (Note 4), KREF paid KKR Capital Markets or KCM, an affiliate of the Manager, a structuring fee equal to 0.75% of the respective committed loan advances, as defined. Such fees are capitalized as deferred financing cost and amortized to interest expense over the life of the facility. During the three and nine months ended September 30, 2020, KREF incurred $0.0 million, and during the three and nine months ended September 30, 2019, KREF incurred $0.0 million and $1.5 million, respectively; in structuring fees in connection with the facility.

In connection with the BMO Facility, and in consideration for structuring and sourcing this arrangement, KREF is obligated to pay KCM a structuring fee equal to 0.35% of the respective committed loan advances under the agreement. Such fees are capitalized as deferred financing cost and amortized to interest expense over the life of the facility. During the three and nine months ended September 30, 2020, KREF incurred $0.0 million; and during the three and nine months ended September 30, 2019, KREF incurred $0.0 million and $0.2 million, respectively, in structuring fees in connection with the facility.

In connection with the CLO issuance, and in consideration for its services as the co-placement agent, KREF incurred and paid KCM a $0.9 million placement agent fee equal to 0.105% of the CLO proceeds in the fourth quarter of 2018. The fee was capitalized as deferred financing cost and amortized to interest expense over the estimated life of the CLO.

In connection with the Revolver, and in consideration for structuring and sourcing this arrangement, KREF paid KCM a structuring fee equal to 0.75% of the aggregate amount of commitments first made available. The structuring fees are capitalized as deferred financing cost included within Other Assets in the Condensed Consolidated Balance Sheet and amortized to interest expense over the life of the Revolver. During the three and nine months ended September 30, 2020, KREF incurred $0.0 million and $0.6 million, respectively; and during the three and nine months ended September 30, 2019, KREF incurred $0.0 million and $1.1 million, respectively, in structuring fees in connection with the Revolver.

In connection with the ATM, KCM, in its capacity as one of the sales agents, will receive commissions for the shares of KREF’s common stock it sells. This amount is not to exceed, but may be less than, 2.0% of the gross sales price per share. KREF did not sell any shares under the ATM during the nine months ended September 30, 2020.

42

KKR Real Estate Finance Trust Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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

In connection with the HSBC Facility, and in consideration for structuring and sourcing this arrangement, KREF is obligated to pay KCM a structuring fee equal to 0.25% of the respective committed loan advances under the agreement. Such fees are capitalized as deferred financing cost and amortized to interest expense over the lesser of the initial term of the loan or the facility. During the three and nine months ended September 30, 2020, KREF incurred and paid KCM $0.0 million and $0.1 million, respectively, in structuring fees in connection with the facility.

In connection with the secured term loan entered into in September 2020, and in consideration for structuring and arranging the loan, KREF paid KCM an arrangement and structuring fee equal to 0.37% of the principal amount of the secured term loan, which totaled $1.1 million. Such fee was capitalized as deferred financing cost and amortized to interest expense over the life of the secured term loan.

43

KKR Real Estate Finance Trust Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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

Note 14. Fair Value of Financial Instruments

The carrying values and fair values of KREF’s financial assets and liabilities recorded at fair value on a recurring basis, as well as other financial instruments not carried at fair value, as of September 30, 2020 were as follows:

							Fair Value
	Principal Balance(A)		Amortized Cost(B)		Carrying Value(C)		Level 1		Level 2		Level 3		Total
Assets
Cash and cash equivalents	$	301,375	$	301,375	$	301,375	$	301,375	$	—	$	—	$	301,375
Commercial mortgage loans, held-for-investment, net(D)	4,921,472		4,895,974		4,833,239		—		—		4,791,247		4,791,247
Equity method investments	33,468		33,468		33,468		—		—		33,468		33,468
	$	5,256,315	$	5,230,817	$	5,168,082	$	301,375	$	—	$	4,824,715	$	5,126,090
Liabilities
Secured financing agreements, net	$	2,852,753	$	2,846,350	$	2,846,350	$	—	$	—	$	2,852,753	$	2,852,753
Collateralized loan obligation, net	810,000		808,311		808,311		—		—		801,392		801,392
Secured term loan, net	300,000		287,878		287,878		—		297,939		—		297,939
Convertible notes, net	143,750		140,115		140,115		—		141,735		—		141,735
Loan participations sold, net	66,248		66,226		66,226		—		—		66,226		66,226
	$	4,172,751	$	4,148,880	$	4,148,880	$	—	$	439,674	$	3,720,371	$	4,160,045

(A)    The principal balance of commercial mortgage loans excludes premiums and unamortized discounts.

(B)    The amortized cost of commercial mortgage loans is net of $4.7 million write-off on a mezzanine loan and $20.8 million unamortized origination discounts and deferred nonrefundable fees. The amortized cost of secured financing agreements is net of $6.4 million unamortized debt issuance costs. The amortized cost of collateralized loan obligations is net of $1.7 million unamortized debt issuance costs.

(C)    The carrying value of commercial mortgage loans is net of $62.7 million allowance for credit losses.

(D)    Includes $946.0 million of CLO loan participations as of September 30, 2020. Includes senior loans for which KREF syndicated a vertical loan participation that did not qualify for sale accounting under GAAP, with a carrying value and a fair value of $66.2 million as of September 30, 2020.

The carrying values and fair values of KREF’s financial assets recorded at fair value on a recurring basis, as well as other financial instruments for which fair value is disclosed, as of December 31, 2019 were as follows:

							Fair Value
	Principal Balance(A)		Amortized Cost(B)		Carrying Value		Level 1		Level 2		Level 3		Total
Assets
Cash and cash equivalents	$	67,619	$	67,619	$	67,619	$	67,619	$	—	$	—	$	67,619
Commercial mortgage loans, held-for-investment, net(C)	4,960,698		4,931,042		4,931,042		—		—		4,937,808		4,937,808
Equity method investments	37,469		37,469		37,469		—		—		37,469		37,469
	$	5,065,786	$	5,036,130	$	5,036,130	$	67,619	$	—	$	4,975,277	$	5,042,896
Liabilities
Secured financing agreements, net	$	2,898,716	$	2,884,887	$	2,884,887	$	—	$	—	$	2,898,716	$	2,898,716
Collateralized loan obligation, net	810,000		803,376		803,376		—		—		810,867		810,867
Convertible notes, net	143,750		139,075		139,075		150,719		—		—		150,719
Loan participations sold, net	65,000		64,966		64,966		—		—		64,966		64,966
	$	3,917,466	$	3,892,304	$	3,892,304	$	150,719	$	—	$	3,774,549	$	3,925,268

(A)    The principal balance of commercial mortgage loans excludes premiums and unamortized discounts.

(B)    The amortized cost of commercial mortgage loans is presented net of $29.7 million unamortized origination discounts and deferred nonrefundable fees. The amortized cost of secured financing agreements is presented net of $13.8 million unamortized debt issuance costs. The amortized cost of collateralized loan obligations is presented net of $6.6 million unamortized debt issuance costs.

(C)    Includes $1.0 billion of CLO loan participations as of December 31, 2019. Includes senior loans for which KREF syndicated a vertical loan participation that did not qualify for sale accounting under GAAP, with a carrying value and a fair value of $65.0 million as of December 31, 2019.

During the nine months ended September 30, 2020, KREF received a distribution of $2.6 million and recorded a loss of $1.4

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KKR Real Estate Finance Trust Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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

million related to its investment in RECOP I.

The following table contains the Level 3 inputs used to value assets and liabilities on a recurring and nonrecurring basis or where KREF discloses fair value as of September 30, 2020:

	Fair Value		Valuation Methodologies	Unobservable Inputs(A)	Weighted Average(B)	Range
Assets(C)
Commercial mortgage loans, held-for-investment(D)	$	4,791,247	Discounted cash flow	Discount rate	4.6%	2.9% - 19.1%
	$	4,791,247
Liabilities(E)
Collateralized loan obligation, net	$	801,392	Discounted cash flow	Yield	2.1%	1.7% - 4.2%
	$	801,392

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

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

(C)    KREF carries a $33.2 million investment in an aggregator vehicle alongside RECOP I (Note 9) at its pro rata share of the aggregator's net asset value, which management believes approximates fair value.

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

(E)    Does not include $66.2 million of vertical loan syndication which was syndicated at par value and included in “Loan participation sold, net” on the Condensed Consolidated Balance Sheet.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Certain assets not measured at fair value on an ongoing basis but subject to fair value adjustments only in certain circumstances, such as when there is evidence of impairment, are measured at fair value on a nonrecurring basis. For commercial mortgage loans held-for-sale, KREF applies the lower of cost or fair value accounting and may be required, from time to time, to record a nonrecurring fair value adjustment. For commercial mortgage loans held-for-investment and preferred interest in joint venture held-to-maturity, KREF applies the amortized cost method of accounting, but may be required, from time to time, to record a nonrecurring fair value adjustment in the form of a valuation provision or impairment. KREF did not report any significant financial assets or liabilities at fair value on a nonrecurring basis as of September 30, 2020 or December 31, 2019.

Assets and Liabilities for Which Fair Value is Only Disclosed

KREF does not carry its secured financing agreements at fair value as management did not elect the fair value option for these liabilities. As of September 30, 2020, the fair value of KREF's financing facilities approximated their respective outstanding principal balances.

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KKR Real Estate Finance Trust Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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

Note 15. Income Taxes

KREF has elected to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code commencing with its taxable year ended December 31, 2014. A REIT is generally not subject to U.S. federal and state income tax on that portion of its income that is distributed to stockholders if it distributes at least 90% of its REIT taxable income, determined without regard to the deduction for dividends paid and excluding any net capital gains. A REIT will also be subject to a nondeductible excise tax to the extent certain percentages of its taxable income are not distributed within specified dates. While KREF currently expects to distribute at least 90% of its net taxable income for the taxable year ending December 31, 2020, KREF will continue to evaluate its capital and liquidity needs in light of the significant uncertainties created by the COVID-19 pandemic, including the potential for a continued and prolonged adverse impact on economic and market conditions.

KREF consolidates subsidiaries that incur U.S. federal, state and local income taxes, based on the tax jurisdiction in which each subsidiary operates. During the nine months ended September 30, 2020 and 2019, KREF recorded a current income tax provision of $0.3 million and $0.4 million respectively, related to operations of its taxable REIT subsidiaries and various other state and local taxes. There were no deferred tax assets or liabilities as of September 30, 2020 and December 31, 2019.

As of September 30, 2020, tax years 2016 through 2019 remain subject to examination by taxing authorities.

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KKR Real Estate Finance Trust Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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

Note 16. Subsequent Events

The following events occurred subsequent to September 30, 2020:

Investing Activities

KREF originated the following loans:

Description/ Location	Property Type	Month Originated	Maximum Face Amount		Initial Face Amount Funded		Interest Rate (A)	Maturity Date(B)	LTV
Senior Loan, Arlington VA(C)	Multifamily	October 2020	$	70,895	$	68,000	L + 3.8%	October 2025	73%
Senior Loan, Denver CO(D)	Multifamily	October 2020	40,000		38,500		L + 3.6%	October 2024	49
Senior Loan, Oakland CA(E)	Office	October 2020	159,690		94,720		L + 4.3%	October 2025	65
Total/ Weighted Average			$	270,585	$	201,220	L + 4.1%		65%

(A)    Floating rate based on one-month USD LIBOR.

(B)    Maturity date assumes all extension options are exercised, if applicable.

(C)    The total whole loan maximum face amount is $141.8 million, co-originated and co-funded by KREF and a KKR fund on a pari passu basis. KREF's interest is 50% of the loan.

(D)    The total whole loan maximum face amount is $80.0 million, co-originated and co-funded by KREF and a KKR fund on a pari passu basis. KREF's interest is 50% of the loan.

(E)    The total whole loan maximum face amount is $509.9 million, co-originated and co-funded by KREF and a KKR fund, of which $280.0 million senior notes were concurrently syndicated to third party lenders. KREF's interest is 31% of the non-syndicated loan.

Funding of Previously Closed Loans

KREF funded approximately $14.4 million for previously closed loans.

Loan Repayments

KREF received approximately $64.7 million from loan repayments.

Corporate Activities

Dividends

In October 2020, KREF paid $23.9 million in dividends on its common stock, or $0.43 per share, with respect to the third quarter of 2020, to stockholders of record on September 30, 2020.

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

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

Overview

Our Company and Our Investment Strategy

We are a real estate finance company that focuses primarily on originating and acquiring 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 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 40-year history of leadership, innovation, and investment excellence and has committed $400.0 million in equity capital to us. 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 13 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 the key financial measures and indicators for our business are earnings per share, dividends declared, Core 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, 2020		June 30, 2020
Net income(A)	$	31,351	$	28,590
Weighted-average number of shares of common stock outstanding
Basic	55,491,405		55,491,937
Diluted	55,632,170		55,504,077
Net income per share, basic	$	0.56	$	0.52
Net income per share, diluted	$	0.56	$	0.52
Dividends declared per share	$	0.43	$	0.43

(A)     Represents net income attributable to common stockholders.

Core Earnings

We use Core Earnings to evaluate our performance excluding the effects of certain transactions and GAAP adjustments we believe are not necessarily indicative of our current loan activity and operations. Core Earnings is a measure that is not prepared in accordance with GAAP. We define Core Earnings for reporting purposes 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 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 Core Earnings only applies to debt investments related to real estate to the extent we foreclose upon the property or properties underlying such debt investments.

We believe providing Core Earnings on a supplemental basis to our net income as determined in accordance with GAAP is helpful to stockholders in assessing the overall performance of our business. Although pursuant to the Management Agreement with our Manager, we calculate the incentive compensation and base management fees due to our Manager using Core Earnings before incentive compensation, beginning with the first quarter of 2020, we revised our definition of Core Earnings for reporting purposes to be net of incentive compensation.

In addition, beginning with the fourth quarter of 2020, based on guidance from the SEC, we will no longer exclude the provision for credit losses from Core Earnings for reporting purposes. This reporting change will be reflected in our Annual Report on Form 10-K for the fiscal year ending December 31, 2020 and in all subsequent reporting periods.

Core Earnings should not be considered as a substitute for GAAP net income. We caution readers that our methodology for calculating Core 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 Core Earnings may not be comparable to similar measures presented by other REITs.

We also use Core 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 Core Earnings over (b) 7.0% of the trailing 12-month weighted average adjusted equity (“Hurdle Rate”), less incentive compensation KREF already paid to the Manager with respect to the first three calendar quarters of such trailing 12-month period. The quarterly incentive compensation is calculated and paid in arrears with a three-month lag.

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

	Three Months Ended
	September 30, 2020		June 30, 2020
Net Income (Loss) Attributable to Common Stockholders	$	31,351	$	28,590
Adjustments
Non-cash equity compensation expense	1,390		1,374
Unrealized (gains) or losses(A)	(178)		973
Provision for credit losses, net	(126)		(1,366)
Mezzanine loan write-off	—		(4,650)
Non-cash convertible notes discount amortization	91		90
Core Earnings	$	32,528	$	25,011
Weighted average number of shares of common stock outstanding
Basic	55,491,405		55,491,937
Diluted(B)	55,632,170		55,504,077
Core Earnings per Diluted Weighted Average Share	$	0.58	$	0.45

(A)    Includes ($0.3) million non-cash redemption value adjustment of our Special Non-Voting Preferred Stock, and $0.1 million of unrealized mark-to-market adjustment to our RECOP I's underlying CMBS investments for the three months ended September 30, 2020. Includes $0.2 million non-cash redemption value adjustment of our Special Non-Voting Preferred Stock and $0.8 million of unrealized mark-to-market adjustment to our RECOP I's underlying CMBS investments for the three months ended June 30, 2020.

(B)    Includes 140,765 and 12,140 dilutive restricted stock units for the three months ended September 30, 2020 and June 30, 2020, respectively.

Book Value per Share

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

	September 30, 2020		December 31, 2019
KKR Real Estate Finance Trust Inc. stockholders' equity	$	1,039,107	$	1,122,018
Shares of common stock issued and outstanding at period end	55,491,405		57,486,583
Book value per share of common stock	$	18.73	$	19.52

Book value per share as of September 30, 2020 includes the impact of an estimated CECL credit loss allowance of $64.1 million, or ($1.16) per common share, and a $4.7 million, or ($0.08) per common share, write-off on a $5.5 million mezzanine loan. See Note 2 — Summary of Significant Accounting Policies, to our condensed consolidated financial statements for the period ended September 30, 2020 for detailed discussion of allowance for credit losses.

In addition, book value per share includes the impact of a ($0.3) million, or $0.01 per common share, non-cash redemption value adjustment to our redeemable Special Non-Voting Preferred Stock (“SNVPS”) for the three months ended September 30, 2020, resulting in a cumulative (since issuance of the SNVPS) decrease of $2.0 million, or ($0.04) per common share to our book value (“SNVPS Cumulative Impact”) as of September 30, 2020. Upon redemption of the SNVPS, our book value will increase as a result of a one-time gain, thus substantially eliminating the SNVPS Cumulative Impact on our book value. See Note 10 — Equity, to our condensed consolidated financial statements, for detailed discussion of the SNVPS.

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Our Portfolio

We have established a $5,034.5 million portfolio of diversified investments, consisting primarily of performing senior loans as of September 30, 2020.

Our loan portfolio is 99.9% performing as of September 30, 2020. During the three months ended September 30, 2020 and the month ending October 31, 2020, we collected 99.8% and 99.7% of interest payments due on our loan portfolio, respectively. During the nine months ended September 30, 2020, we wrote off $4.7 million on a $5.5 million mezzanine loan against the allowance for credit losses. As of September 30, 2020, the average risk rating of our loan portfolio was 3.1 (Average Risk), weighted by total loan exposure. As of September 30, 2020, 84% of our loans, based on total loan exposure, was risk-rated 3 or lower. As of September 30, 2020, the average loan size in our loan portfolio was $135.1 million and multifamily and office loans comprised 83% of our loan portfolio, while hospitality and retail loans comprised 8% of the portfolio.

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, 2020, 99.9% of our loans by total loan exposure earned a floating rate of interest and 98% of our portfolio is subject to a LIBOR floor of 0.95% or higher and 79% of our portfolio is subject to a LIBOR floor of 1.5% or higher. 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, 2020, our portfolio did not contain any legacy assets that were originated prior to October 2014. As of September 30, 2020, all of our investments were located in the United States. The following charts illustrate the diversification and composition of our loan portfolio, based on type of investment, interest rate, underlying property type, geographic location, vintage and LTV as of September 30, 2020^(A):

The charts above are based on total assets. Total assets reflect the principal amount of our senior and mezzanine loans.

(A)    Excludes CMBS B-Piece investments held through RECOP I, an equity method investment.

(B)    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.

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

	Three Months Ended
	September 30, 2020		June 30, 2020		March 31, 2020		December 31, 2019
Loan originations	$	—	$	—	$	352,500	$	764,089
Loan fundings(A)	$	50,577	$	77,818	$	337,055	$	619,748
Loan repayments/syndications(B)	(274,311)		(54,419)		(179,553)		(765,418)
Net fundings	(223,734)		23,399		157,502		(145,670)
PIK interest	1,433		926		—		—
Total activity	$	(222,301)	$	24,325	$	157,502	$	(145,670)

(A)    Includes initial funding of new loans and additional fundings made under existing loans. Excludes fundings on loan participations sold.

(B)    Includes $1.2 million and $65.0 million of proceeds from syndication of vertical participation during the three months ended September 30, 2020 and December 31, 2019, respectively, which did not qualify for sale accounting for GAAP purposes.

The following table details overall statistics for our loan portfolio as of September 30, 2020 (dollars in thousands):

				Total Loan Exposure(A)
	Balance Sheet Portfolio			Total Loan Portfolio			Floating Rate Loans			Fixed Rate Loans
Number of loans	37			37			36			1
Principal balance	$	4,921,472		$	4,998,824		$	4,993,324		$	5,500
Amortized cost	$	4,895,974		$	4,973,326		$	4,972,476		$	850
Unfunded loan commitments(B)	$	462,282		$	462,282		$	462,282		$	—
Weighted-average cash coupon(C)	4.9		%	4.8		%	L + 3.0		%	11.0		%
Weighted-average all-in yield(C)	5.1		%	5.1		%	L + 3.2		%	11.0		%
Weighted-average maximum maturity (years)(D)	3.5			3.5			3.5			4.8
LTV(E)	66		%	66		%	66		%	71		%

(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.

(B)     Unfunded commitments will primarily be funded to finance property improvements 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, 2020, 100.0% of floating rate loans by principal balance are indexed to one-month USD LIBOR. In addition to cash coupon, all-in yield includes the amortization of deferred origination fees, loan origination costs and purchase discounts. Cash coupon and all-in yield for the total portfolio assume applicable floating benchmark rates as of September 30, 2020. L = the greater of one-month USD LIBOR; spot rate of 0.15%, and the applicable contractual LIBOR floor, included in portfolio-wide averages represented as fixed rates. Does not factor in prepayment fee income that might be earned upon prepayment.

(D)     Maximum maturity assumes all extension options are exercised by the borrower; however, our loans may be repaid prior to such date. As of September 30, 2020, based on total loan exposure, 48.4% of our loans were subject to yield maintenance or other prepayment restrictions and 51.6% were open to repayment by the borrower without penalty.

(E)     Loan-to-value ratio ("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.

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The table below sets forth additional information relating to our portfolio as of September 30, 2020 (dollars in millions):

	Investment(H)	Investment Date	Committed Principal Amount		Current Principal Amount		Net Equity(B)		Location	Property Type	Coupon(C)(D)	Max Remaining Term (Years)(C)(E)	Loan Per SF / Unit / Key	LTV(C)(F)		Risk Rating
	Senior Loans(A)
1	Senior Loan	5/22/2019	$	386.0	$	379.0	$	96.1	Brooklyn, NY	Multifamily	L + 2.7%	3.7	$442,278 / unit	51	%	3
2	Senior Loan	6/28/2019	340.0		334.6		73.4		Chicago, IL	Multifamily	L + 2.8	5.8	$418,289 / unit	75		3
3	Senior Loan	6/28/2019	278.8		270.5		70.9		Arlington, VA	Multifamily	L + 2.6	3.8	$243,698 / unit	70		3
4	Senior Loan	12/20/2018	234.5		196.5		39.3		New York, NY	Condo (Residential)	L + 3.6	3.3	$1,227 / SF	71		4
5	Senior Loan	5/23/2018	227.3		207.3		37.2		Boston, MA	Office	L + 2.4	2.7	$447 / SF	68		3
6	Senior Loan	2/6/2020	226.5		182.8		31.6		Plano, TX	Office	L + 2.7	4.4	$197 / SF	64		3
7	Senior Loan	5/31/2019	216.5		208.5		35.3		Various	Multifamily	L + 3.5	3.7	$194,882 / unit	74		3
8	Senior Loan	11/13/2017	194.4		191.8		35.2		Minneapolis, MN	Office	L + 3.8	2.2	$180 / SF	63		2
9	Senior Loan	6/6/2019	186.0		179.5		35.4		Chicago, IL	Multifamily	L + 2.7	3.7	$364,837 / unit	74		3
10	Senior Loan	8/13/2019	185.0		169.4		48.1		Denver, CO	Multifamily	L + 2.8	3.9	$285,202 / unit	64		3
11	Senior Loan	11/15/2019	183.3		161.1		44.7		Irvine, CA	Office	L + 2.9	4.1	$264 / SF	66		3
12	Senior Loan	4/11/2019	182.6		154.4		24.9		Philadelphia, PA	Office	L + 2.6	3.6	$219 / SF	65		3
13	Senior Loan	12/20/2019	175.5		59.2		18.2		Washington, D.C.	Office	L + 3.4	4.3	$290 / SF	58		3
14	Senior Loan	9/13/2018	172.0		168.0		30.0		Seattle, WA	Office	L + 3.8	3.0	$490 / SF	62		3
15	Senior Loan	7/15/2019	170.0		131.2		21.9		Chicago, IL	Office	L + 3.3	3.9	$126 / SF	59		3
16	Senior Loan	6/19/2018	165.0		164.1		36.4		Philadelphia, PA	Office	L + 2.5	2.8	$169 / SF	71		3
17	Senior Loan	12/5/2018	163.0		148.0		23.2		New York, NY	Multifamily	L + 2.6	3.2	$556,391 / unit	67		3
18	Senior Loan	11/9/2018	151.2		141.2		28.5		Fort Lauderdale, FL	Hospitality	L + 2.9	3.2	$407,993 / key	62		4
19	Senior Loan	12/19/2019	147.0		102.2		25.1		Various	Retail	L + 2.6	4.9	$76 / SF	55		3
20	Senior Loan	3/29/2019	138.0		137.0		22.2		Boston, MA	Multifamily	L + 2.7	3.5	$351,282 / unit	63		3
21	Senior Loan	11/7/2018	135.0		131.6		21.0		West Palm Beach, FL	Multifamily	L + 2.9	3.1	$162,108 / unit	73		3
22	Senior Loan	10/26/2015	109.6		109.6		89.5		Portland, OR	Retail	L + 5.5	0.1	$101 / SF	61		5
23	Senior Loan	2/3/2020	102.3		102.3		20.8		San Diego, CA	Multifamily	L + 3.3	4.4	$442,965 / unit	71		4
24	Senior Loan	8/4/2017	101.7		101.7		67.8		New York, NY	Condo (Residential)	L + 4.7	1.0	$1,720/SF (I)	53		4
25	Senior Loan	10/15/2019	93.4		69.6		17.2		State College, PA	Student Housing	L + 2.7	4.1	$54,762 / bed	64		3
26	Senior Loan	9/7/2018	92.3		92.3		16.8		Seattle, WA	Multifamily	L + 2.6	2.9	$515,571 / unit	76		3
27	Senior Loan	12/11/2019	91.0		91.0		19.0		Los Angeles, CA	Multifamily	L + 2.8	2.3	$421,296 / unit	72		3
28	Senior Loan	3/29/2018	86.0		86.0		14.5		New York, NY	Multifamily	L + 2.6	2.5	$462,366 / unit	48		3
29	Senior Loan	3/20/2018	80.7		80.7		14.6		Seattle, WA	Office	L + 3.6	2.5	$473 / SF	61		3
30	Senior Loan	10/30/2018	77.0		77.0		13.0		Philadelphia, PA	Multifamily	L + 2.7	3.1	$150,980 / unit	73		3
31	Senior Loan	1/18/2019	76.4		76.4		16.0		Brooklyn, NY	Hospitality	L + 2.9	3.4	$389,578 / key	69		4
32	Senior Loan	12/23/2019	73.9		73.0		11.9		Herndon, VA	Multifamily	L + 2.5	4.3	$248,395 / unit	72		3
33	Senior Loan	7/21/2017	70.1		66.7		66.6		Queens, NY	Industrial	L + 3.0	1.8	$117 / SF	64		4
34	Senior Loan	9/12/2019	67.5		67.5		12.4		Austin, TX	Multifamily	L + 2.5	4.0	$190,678 / unit	75		3
35	Senior Loan	8/9/2019	61.5		61.5		11.3		Atlanta, GA	Multifamily	L + 3.0	3.9	$170,833 / unit	74		2
	Total/Weighted Average Senior Loans Unlevered		$	5,441.0	$	4,973.2	$	1,190.0			L + 3.0%	3.5		66	%	3.1
	Mezzanine Loans
1	Mezzanine	1/27/2020	20.0		20.0		19.9		Westbury, NY	Multifamily	L + 9.0	3.8	$464,135 / unit	66		3
2	Mezzanine(J)	6/19/2015	5.5		5.5		0.9		Various	Retail	11.0%	4.8	$45 / SF	71		5
	Total/Weighted Average Mezzanine Loans Unlevered		$	25.5	$	25.5	$	20.8			11.0	4.0		67	%	3.4
	CMBS B-Pieces
1	RECOP I(G)	2/13/2017	40.0		35.7		35.7		Various	Various	4.8	8.7		58
	Total/Weighted Average CMBS B-Pieces Unlevered		$	40.0	$	35.7	$	35.7			4.8%	8.7		58	%

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*    Numbers presented may not foot due to rounding.

(A)    Our total portfolio represents the current principal amount on senior and mezzanine loans and net equity in RECOP I, which holds CMBS B-Piece investments.    

(B)    Net equity reflects (i) the amortized cost basis of our loans, net of borrowings; and (ii) the cost basis of our investment in RECOP I.

(C)    Weighted average is weighted by current principal amount for our senior and mezzanine loans and by net equity for our RECOP I CMBS B-Pieces.

(D)    L = the greater of one-month USD LIBOR; spot rate of 0.15%, and the applicable contractual LIBOR floor, included in portfolio-wide averages represented as fixed rates.

(E)    Max remaining term (years) assumes all extension options are exercised, if applicable. 

(F)    For senior loans, LTV is 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 Senior Loan 4, LTV is based on the initial loan amount divided by the appraised bulk sale value assuming a condo-conversion and no renovation; for Senior Loan 24, LTV is based on the current principal amount divided by the adjusted appraised gross sellout value net of sales cost; for mezzanine loans, LTV is based on the current balance of the whole loan dividend 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.

(G)    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.

(H)    Senior loans include senior mortgages and similar credit quality investments, including junior participations in our originated senior loans for which we have syndicated the senior participations and retained the junior participations for our portfolio and excludes vertical loan participations.

(I)    For Senior Loan 24, Loan per SF of $1,720 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 $2,018 based on allocating the full amount of the loan to only the residential units.

(J)    For Mezzanine Loan 2, Current Principal Amount is gross of $4.7 million write-off (of amortized cost).

Portfolio Surveillance and Credit Quality

Senior and Mezzanine Loans

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

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

During the nine months ended September 30, 2020, we entered into loan modifications that include, among other changes, incremental capital contributions from certain borrowers, repurposing of reserves, and a temporary partial deferral for a portion of the coupon as payment-in-kind interest (“PIK Interest”) due, which is capitalized, compounded, and added to the outstanding principal balance of the respective loans. These loan modifications were not considered TDRs under GAAP. As of September 30, 2020, three loan modifications included temporary PIK Interest provisions, with a total outstanding loan principal and net book value of $319.3 million and $309.5 million, respectively. Total PIK Interests of $1.4 million and $2.4 million were deferred and compounded into outstanding loan principals during the three and nine months ended September 30, 2020, respectively.

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

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default or principal loss. Based on a five-point scale, our loans are rated "1" through "5," from less risk to greater risk, which ratings are defined as follows:

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

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

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

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

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

As of September 30, 2020, the average risk rating of KREF's portfolio was 3.1 (Average Risk), weighted by total loan exposure, as compared to 3.1 (Average Risk) as of June 30, 2020.

September 30, 2020								June 30, 2020
Risk Rating	Number of Loans	Net Book Value		Total Loan Exposure(A)(B)		Total Loan Exposure %		Risk Rating	Number of Loans	Net Book Value		Total Loan Exposure(A)(B)		Total Loan Exposure %
1	—	$	—	$	—	—	%	1	2	$	159,131	$	159,348	3.1	%
2	2	252,692		253,349		5.1		2	2	249,816		250,695		4.8
3	27	3,837,354		3,945,637		78.9		3	27	3,845,141		3,966,103		76.0
4	6	666,405		684,767		13.7		4	7	796,194		839,479		16.0
5	2	76,788		115,071		2.3		5	1	850		5,500		0.1
	37	$	4,833,239	$	4,998,824	100.0	%		39	$	5,051,132	$	5,221,125	100.0	%

(A)    Excludes $66.2 million and $65.0 million vertical loan syndication as of September 30, 2020 and June 30, 2020, respectively.

(B)    In certain instances, we finance our loans through the non-recourse sale of a senior interest that is not included in our condensed consolidated financial statements. Total loan exposure includes the entire loan we originated and financed, including $143.6 million of such non-consolidated interests as of September 30, 2020 and June 30, 2020, respectively.

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CMBS B-Piece Investments

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

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

During the three months ended September 30, 2019, we sold our remaining directly held CMBS investments. Consequently, we deconsolidated the respective CMBS trust. Our current CMBS exposure is through RECOP I, an equity method investment.

Portfolio Financing

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

Our Non-Mark-to-Market Financing Sources, which accounted for 78% of our total secured financing (excluding our corporate revolver) as of September 30, 2020, are not subject to credit or capital markets mark-to-market provisions. The remaining 22% of our secured borrowings, which is primarily comprised of three master repurchase agreements, are only subject to credit marks.

The Company continues to expand and diversify its financing sources, especially those sources that provide non-mark-to-market financing, reducing our exposure to market volatility. Our Non-Mark-to-Market Financing Sources as of September 30, 2020 represented 78% of our portfolio financing based on outstanding principal balance, primarily as a result of our term lending agreement, warehouse facility, asset based financing, term loan facility, collateralized loan obligations and secured term loan.

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

	Portfolio Financing Outstanding Principal Balance(A)
	September 30, 2020		December 31, 2019
Master repurchase agreements	$	910,800	$	1,088,217
Term loan financing	981,953		798,180
Term lending agreement	900,000		870,051
Collateralized loan obligations	810,000		810,000
Secured term loan	300,000		—
Asset specific financing	60,000		142,268
Non-consolidated senior interests	143,600		143,600
Total portfolio financing	$	4,106,353	$	3,852,316

(A)    Excludes $66.2 million and $65.0 million of vertical loan participations sold as of September 30, 2020 and December 31, 2019, respectively. Such participations did not qualify for sale accounting under GAAP and therefore were consolidated in our Condensed Consolidated Balance Sheets as of September 30, 2020 and December 31, 2019, respectively.

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Financing Agreements

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

	September 30, 2020
	Maximum		Collateral		Borrowings
	Facility Size(A)		Assets(B)		Potential(C)		Outstanding		Available
Master Repurchase Agreements
Wells Fargo	$	1,000,000	$	653,674	$	428,077	$	414,259	$	13,818
Morgan Stanley	600,000		568,280		426,210		418,605		7,605
Goldman Sachs	400,000		161,024		77,936		77,936		—
Term Loan Facility	1,000,000		1,191,725		981,953		981,953		—
Term Lending Agreement
KREF Lending V	900,000		1,107,983		900,000		900,000		—
Warehouse Facility
HSBC	500,000		—		—		—		—
Asset Specific Financing
BMO Facility	300,000		76,000		60,800		60,000		800
Revolver	335,000		—		335,000		—		335,000
	$	5,035,000	$	3,758,686	$	3,209,976	$	2,852,753	$	357,223

(A)     Maximum facility size represents the largest amount of borrowings available under a given facility once sufficient collateral assets have been approved by the lender and pledged by us.

(B)     Represents the principal balance of the collateral assets.

(C)     Potential borrowings represents the total amount we could draw under each facility based on collateral already approved and pledged. When undrawn, these amounts are available to us under the terms of each credit facility.

Master Repurchase Agreements

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

Repurchase agreements effectively allow us to borrow against loans, participations and securities that we own in an amount generally equal to (i) the market value of such loans, participations and/or securities multiplied by (ii) the applicable advance rate. Under these agreements, we sell our loans, participations and securities to a counterparty and agree to repurchase the same loans and securities 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, participations and securities 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, 2020 and December 31, 2019, the weighted average haircut under our

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repurchase agreements was 34.1% and 27.4%, respectively (or 32.6% and 25.7%, respectively, if we had borrowed the maximum amount approved by its repurchase agreement counterparties as of such dates). In addition, our existing master repurchase facilities are not entirely term-matched financings and may mature before our CRE debt investments that represent underlying collateral to those financings. As we negotiate renewals and extensions of these liabilities, we may experience lower advance rates and higher pricing under the renewed or extended agreements.

Term Loan Financing

In connection with our efforts to diversify our financing sources, further expand our non-mark-to-market borrowing base and reduce our exposure to market volatility, we entered into a term loan financing agreement in April 2018 with third party lenders for an initial borrowing capacity of $200.0 million that was increased to $1.0 billion in October 2018 (“Term Loan Facility”). The facility provides us with asset-based financing on a non-mark-to-market basis with matched term up to five years and is non-recourse to the Company. Borrowings under the facility are collateralized by senior loans, held-for-investment, and bear interest equal to one-month LIBOR plus a margin. As of September 30, 2020, the weighted average margin and interest rate on the facility were 1.6% and 1.7%, respectively.

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

	September 30, 2020
Term Loan Facility	Count	Outstanding Principal		Amortized Cost		Carrying Value		Wtd. Avg. Yield/Cost(A)	Guarantee(B)	Wtd. Avg. Term(C)
Collateral assets	13	$	1,191,725	$	1,186,481	$	1,179,982	L + 3.0%	n.a.	January 2024
Financing provided	n.a.	981,953		980,181		980,181		L + 1.9%	n.a.	January 2024

(A)     Floating rate loans and related liabilities are indexed to one-month LIBOR. The Company's net interest rate exposure is in direct proportion to its interest in the net assets indexed to that rate. In addition to cash coupon, yield/cost includes the amortization of deferred origination/financing costs.

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

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

Term Lending Agreement

In June 2019, we entered into a Master Repurchase and Securities Contract Agreement (the "Term Lending Agreement") with Morgan Stanley Mortgage Capital Holdings LLC ("Administrative Agent"), as administrative agent on behalf of Morgan Stanley Bank, N.A. ("Initial Buyer"), which provides for current and future financings of up to $900.0 million on a non-mark-to-market basis. The Term Lending Agreement has an initial maturity of June 2021, subject to five 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, 2020, the Initial Buyer held 22.2% of the total commitment under the facility. Borrowings under the Term Lending Agreement are collateralized by certain loans, held for investment, and bear interest equal to one-month LIBOR, plus a 1.9% margin. Total outstanding borrowings under the Term Lending Agreement as of September 30, 2020 totaled $900.0 million.

Warehouse Facility

In March 2020, we entered into a $500.0 million Loan and Security Agreement with HSBC Bank USA, National Association (“HSBC Facility”). The facility, which matures in March 2023, provides warehouse financing on a non-mark-to-market basis with partial recourse to us. Borrowings under the facility are collateralized by certain loans, held for investment, and bear interest equal to one-month LIBOR, plus a margin. As of September 30, 2020, there was no balance outstanding on this facility.

Asset Specific Financing

In August 2018, we entered into a $200.0 million loan financing facility with BMO Harris Bank (the "BMO Facility”). In May 2019, we increased the borrowing capacity to $300.0 million. The facility provides asset-based financing on a non-mark-to-market basis with matched-term up to five years with partial recourse to us. As of September 30, 2020, there was $60.0 million outstanding on this facility.

Revolving Credit Agreement

We have a $335.0 million corporate revolving credit facility (“Revolver”) administered by Morgan Stanley Senior Funding, Inc. We may use our Revolver as a source of financing, which is designed to provide short-term liquidity to purchase or de-

58

lever loans, pay operating expenses and borrow amounts for general corporate purposes. Borrowings under the Revolver bear interest at a per annum rate equal to the sum of (i) a floating rate index and (ii) a fixed margin. Our Revolver is secured by corporate level guarantees and does not include asset-based collateral. As of September 30, 2020, there was no balance outstanding on this facility.

Collateralized Loan Obligations

In November 2018, we financed a pool of loan participations from our existing loan portfolio through a managed collateralized loan obligation ("CLO" or "KREF 2018-FL1"). The CLO provides us with match-term financing on a non-mark-to-market and non-recourse basis. The CLO has a two-year reinvestment feature that allows principal proceeds of the collateral assets to be reinvested in qualifying replacement assets, subject to the satisfaction of certain conditions set forth in the indenture.

The following table outlines KREF 2018-FL1 collateral assets and respective borrowing (dollars in thousands):

	September 30, 2020
Collateralized Loan Obligation	Count	Outstanding Principal		Amortized Cost		Carrying Value		Wtd. Avg. Yield/Cost(B)	Wtd. Avg. Term(C)
Collateral assets(A)	19	$	1,000,000	$	1,000,000	$	996,039	L + 2.8%	February 2024
Financing provided	1	810,000		808,311		808,311		L + 2.2%	June 2036

(A)Including $12.0 million cash held in collateralized loan obligation, and $42.0 million loan repayment proceeds held by the servicer and receivable by our CLO as of September 30, 2020. Collateral loan assets represent 19.2% of the principal of our senior loans as of September 30, 2020. As of September 30, 2020, 100% of our loans financed through the CLO are floating rate loans.

(B)Yield on collateral assets is based on cash coupon. Financing cost includes amortization of deferred financing costs incurred in connection with the CLO.

(C)Loan term represents weighted-average final maturity, assuming extension options are exercised by the borrower. Repayments of CLO notes are dependent on timing of related collateral loan asset repayments post reinvestment period. The term of the CLO notes represents the rated final distribution date.

Loan Participations Sold

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

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

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

The following table details our loan participations sold (dollars in thousands):

	September 30, 2020
Loan Participations Sold	Count	Principal Balance		Amortized Cost		Carrying Value		Yield/Cost(A)	Guarantee	Term
Total loan	1	$	336,753	$	335,589	$	334,312	L + 2.6%	n.a.	July 2024
Vertical loan participation(B)	1	66,248		66,226		66,226		L + 2.6%	n.a.	July 2024

(A)     Our floating rate loans and related liabilities were indexed to one-month LIBOR. Our net interest rate exposure is in direct proportion to our net assets.

(B)    During the nine months ended September 30, 2020, we recorded $2.1 million of interest income and $2.1 million of interest expense, respectively, related to the total loan participations sold.

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Non-Consolidated Senior Interests

In certain instances, we finance our loans through the non-recourse sale of a senior loan interest that is not included in our condensed consolidated financial statements. These non-consolidated senior interests provide structural leverage for our net investments on a non-mark-to-market, matched-term basis, which are 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, 2020
Non-Consolidated Senior Interests	Count	Principal Balance		Carrying Value	Yield/Cost(A)	Guarantee	Term
Total loan	1	$	179,500	n.a.	L + 2.7%	n.a.	June 2024
Senior participation	1	143,600		n.a.	L + 1.6%	n.a.	June 2024
Subordinate interests retained		35,900

(A)     Our floating rate loans and related liabilities were indexed to one-month LIBOR. Our net interest rate exposure is in direct proportion to our net assets.

Secured Term Loan

In September 2020, we entered into a $300.0 million secured term loan at a price of 97.5%, which bears interest at a per annum rate equal to one-month LIBOR plus a 4.75% margin, subject to a 1.0% LIBOR floor, payable quarterly beginning in December 2020. The secured term loan is partially amortizing, with an amount equal to 1.0% per annum of the principal balance due in quarterly installments starting March 31, 2021. The secured term loan matures on September 1, 2027 and contains restrictions relating to liens, asset sales, indebtedness, investments and transactions with affiliates. Our secured term loan is secured by corporate level guarantees and does not include asset-based collateral. Refer to Notes 2 and 6 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 7 to our condensed consolidated financial statements for additional discussion of our Convertible Notes.

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Borrowing Activities

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

			Nine Months Ended September 30, 2020
	Outstanding Principal at September 30, 2020		Average Daily Amount Outstanding(A)		Maximum Amount Outstanding		Weighted Average Daily Interest Rate
Wells Fargo	$	414,259	$	461,585	$	469,259	2.2	%
Morgan Stanley	418,605		411,449		418,605		2.5
Goldman Sachs	77,936		205,051		225,266		3.1
Term Loan Facility	981,953		936,595		984,851		2.2
KREF Lending V	900,000		895,746		900,000		2.6
Warehouse Facility	—		44,847		57,616		1.9
BMO Facility	60,000		85,430		142,267		2.5
Revolver	—		112,682		335,000		2.6
Total/Weighted Average	$	2,852,753					2.4	%

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

	Average Daily Amount Outstanding(A)
	Three Months Ended
	September 30, 2020		June 30, 2020
Wells Fargo	$	447,992	$	468,461
Morgan Stanley	418,605		413,207
Goldman Sachs	184,190		208,057
Term Loan Facility	983,434		967,050
KREF Lending V	900,000		899,195
Warehouse Facility	39,454		50,156
BMO Facility	70,166		82,267
Revolver	42,935		195,769

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

Covenants—Each of our repurchase facilities, Term Lending Agreement, 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 $880.2 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⁽¹⁾ (75.0% of our total assets, net of VIE liabilities);

As of September 30, 2020, we were in compliance with the covenants of our financing facilities.

With respect to our secured term loan, we are required to comply with customary loan covenants and event of default provisions that include, but not limited to, negative covenants relating to restrictions on operations with respect to our status as a REIT, and financial covenants. Such financial covenants include a minimum consolidated tangible net worth of $650.0 million and a maximum total debt to total assets ratio of 83.3% (the “Leverage Covenant”). The tangible net worth and Leverage covenants are effective as of the last day of each fiscal quarter commencing with the fiscal quarter ending March 31, 2021. We were in compliance with such covenants as of September 30, 2020.

(1)     In July 2020, the Revolver credit agreement was amended to allow for incremental senior borrowings subject to a Senior Indebtedness covenant of 80% of KREF's total asset, net of Non-Recourse Indebtedness, as defined, and a Total Debt Incurrence covenant of 82% (ratio of KREF's Recourse Indebtedness, as defined, to KREF's total asset, net of Non-Recourse Indebtedness, as defined).

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Guarantees—In connection with each master repurchase agreement, 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 master repurchase 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 the Company.

In connection with our Term Lending Agreement, our Operating Partnership entered into a guarantee in favor of Morgan Stanley Mortgage Capital Holdings LLC, in its capacity as the Administrative Agent, under which our Operating Partnership guarantees the obligations of KREF Lending V LLC under the agreement. The guarantee includes; in the case of certain defaults, up to a maximum liability of 25.0% of the then outstanding aggregate repurchase price under the agreement, and liability to indemnify the Administrative Agent against losses related to "bad boy" acts. In addition, the guarantee includes certain full recourses in the case of bankruptcy of KREF Lending V LLC.

In connection with our BMO Facility, our Operating Partnership entered into a guarantee in favor of BMO Harris Bank, N.A., in its capacity as the Administrative Agent and Lender, under which our Operating Partnership guarantees the obligations of the Company's borrower entity, under the agreement. The guarantee includes; in the case of certain defaults, up to a maximum liability of 25.0% of the then current outstanding payment obligations under the agreement, and liability to indemnify the Administrative Agent and Lender against losses related to "bad boy" acts. In addition, the guarantee includes certain full recourse insolvency-related trigger events.

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

In connection with our HSBC Warehouse Facility, our Operating Partnership entered into a guarantee in favor of HSBC Bank USA, National Association, in its capacity as the Administrative Agent and Lender, under which our Operating Partnership guarantees the obligations of the Company's borrower entity, under the agreement. The guarantee includes; in the case of certain defaults, up to a maximum liability of 25.0% of the then current outstanding payment obligations under the agreement, and liability to indemnify the Administrative Agent and Lender against losses related to "bad boy" acts. In addition, the guarantee includes certain full recourse insolvency-related trigger events.

In connection with our secured term loan, our Operating Partnership and certain of its subsidiaries entered into a guarantee in favor of JPMorgan Chase Bank, N.A., in its capacity as the Administrative Agent and collateral agent for the lenders under which they provide a payment guaranty of the secured term loan.

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Results of Operations

The following table summarizes the changes in our results of operations for the three and nine months ended September 30, 2020 and 2019 (dollars in thousands, except per share data):

	For the Three Months Ended September 30,				Increase (Decrease)				For the Nine Months Ended September 30,				Increase (Decrease)
	2020		2019		Dollars		Percentage		2020		2019		Dollars		Percentage
Net Interest Income
Interest income	$	67,689	$	74,223	$	(6,534)	(8.8)	%	$	205,987	$	201,918	$	4,069	2.0	%
Interest expense	28,832		45,596		(16,764)		(36.8)		98,477		117,527		(19,050)		(16.2)
Total net interest income	38,857		28,627		10,230		35.7		107,510		84,391		23,119		27.4
Other Income
(Loss) gain on sale of investments	—		(429)		429		100.0		—		(2,759)		2,759		100.0
Income (loss) from equity method investments	973		1,321		(348)		(26.3)		(631)		3,314		(3,945)		(119.0)
Change in net assets related to CMBS consolidated variable interest entities	—		544		(544)		(100.0)		—		1,665		(1,665)		(100.0)
Other income	102		853		(751)		(88.0)		658		2,006		(1,348)		(67.2)
Total other income (loss)	1,075		2,289		(1,214)		(53.0)		27		4,226		(4,199)		(99.4)
Operating Expenses
General and administrative	3,563		2,704		859		31.8		11,376		7,846		3,530		45.0
Provision for credit losses, net	(126)		—		(126)		(100.0)		53,782		—		53,782		100.0
Management fees to affiliate	4,223		4,280		(57)		(1.3)		12,740		12,855		(115)		(0.9)
Incentive compensation to affiliate	990		—		990		100.0		3,845		2,098		1,747		83.3
Total operating expenses	8,650		6,984		1,666		23.9		81,743		22,799		58,944		258.5
Income (Loss) Before Income Taxes, Preferred Dividends and Redemption Value Adjustment	31,282		23,932		7,350		30.7		25,794		65,818		(40,024)		(60.8)
Income tax expense	96		77		19		24.7		255		366		(111)		(30.3)
Net Income (Loss)	31,186		23,855		7,331		30.7		25,539		65,452		(39,913)		(61.0)
Preferred Stock Dividends and Redemption Value Adjustment	(165)		238		(403)		(169.3)		762		(251)		1,013		403.6
Net Income (Loss) Attributable to Common Stockholders	$	31,351	$	23,617	$	7,734	32.7	%	$	24,777	$	65,703	$	(40,926)	(62.3)	%
Net Income (Loss) Per Share of Common Stock
Basic	$	0.56	$	0.41	$	0.15	36.6	%	$	0.44	$	1.14	$	(0.70)	(61.4)	%
Diluted	$	0.56	$	0.41	$	0.15	36.6	%	$	0.44	$	1.14	$	(0.70)	(61.4)	%
Dividends Declared per Share of Common Stock	$	0.43	$	0.43	$	—	—	%	$	1.29	$	1.29	$	—	—	%

Net Interest Income

Net interest income increased by $10.2 million and $23.1 million, respectively, during the three and nine months ended September 30, 2020, compared to the three and nine months ended September 30, 2019. This increase was primarily due to the increase in our interest income as a result of continuing capital deployment and the benefit from attractive in-the-money LIBOR floors (98% of our loan portfolio is subject to a LIBOR floor of 0.95% or higher) during the nine months ended September 30, 2020. In addition, the weighted-average principal balance of our loan portfolio increased by $114.1 million and $808.1 million, respectively, for the three and nine months ended September 30, 2020, compared to the corresponding periods in 2019.

Although the weighted-average principal balance of our borrowings increased by $38.3 million and $769.3 million, respectively, for the three and nine months ended September 30, 2020, compared to the corresponding periods in 2019, interest expense decreased for both periods due to a decrease in spot LIBOR as only 9% of total outstanding financing is subject to a LIBOR floor greater than 0.0%.

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In addition, we recognized $4.0 million and $13.0 million of deferred loan fees and origination discounts accreted into interest income, respectively, during the three and nine months ended September 30, 2020, as compared to $4.1 million and $14.6 million during the corresponding periods in 2019. During the nine months ended September 30, 2020, we also recognized a non-recurring exit fee income of $2.8 million.

We also recorded $5.9 million and $16.7 million of deferred financing costs amortization into interest expense, respectively, during the three and nine months ended September 30, 2020, as compared to $4.0 million and $12.1 million during the corresponding periods in 2019.

Other Income

Total other income decreased by $4.2 million during the nine months ended September 30, 2020, as compared to the nine months ended September 30, 2019. This decrease was primarily due to a $4.0 million unrealized mark-to-market loss from our RECOP I equity method investment during the nine months ended September 30, 2020.

Operating Expenses

Total operating expenses increased by $58.9 million during the nine months ended September 30, 2020, as compared to the nine months ended September 30, 2019. This increase was primarily due to (i) a $53.8 million provision for credit losses in connection with adopting ASU 2016-03 on January 1, 2020, (ii) a $1.3 million increase in non-cash stock-based compensation expense, (iii) a $1.7 million increase in Manager incentive compensation, and (iv) $1.5 million in non-recurring dead deal costs for the nine months ended September 30, 2020.

We did not have a provision for loan credit losses prior to January 1, 2020. Upon the adoption of ASU 2016-13 on January 1, 2020, we recorded a $15.0 million cumulative-effect adjustment to our accumulated deficit. During the nine months ended September 30, 2020, we recorded an incremental $53.8 million in credit loss provision due to the adverse change in the economic outlook as a result of the COVID-19 pandemic.

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

	Three Months Ended
	September 30, 2020		June 30, 2020		March 31, 2020		December 31, 2019		September 30, 2019
Professional services	$	362	$	566	$	764	$	765	$	711
Operating and other costs	1,811		2,106		1,396		894		953
Stock-based compensation	1,390		1,374		1,607		1,017		1,040
Total general and administrative expenses	3,563		4,046		3,767		2,676		2,704
Provision for credit losses, net	(126)		(1,366)		55,274		—		—
Management fees to affiliate	4,223		4,218		4,299		4,280		4,280
Incentive compensation to affiliate	990		1,249		1,606		1,174		—
Total operating expenses	$	8,650	$	8,147	$	64,946	$	8,130	$	6,984

COVID-19 Impact

The significant and wide-ranging response of international, federal, state and local public health and governmental authorities to the COVID-19 pandemic in regions across the United States and the world, including the imposition of quarantines or lockdowns, “stay-at-home” orders, travel restrictions and similar mandates for many individuals to substantially restrict daily activities and for many businesses to curtail or cease normal operations, and the volatile economic, business and financial market conditions resulting therefrom, are expected to continue to negatively impact our business, financial performance and operating results for the remainder of 2020 and potentially longer. Although we are uncertain of the potential full magnitude or duration of the business and economic impacts from the unprecedented public health efforts to contain and combat the spread of COVID-19, we will likely experience material deterioration in our financial performance and operating results, revenues, cash flow and/or profitability for the remainder of 2020 and potentially longer compared to the corresponding prior-year periods and compared to our expectations at the beginning of our 2020 fiscal year. Further discussion of the potential impacts on our business from the COVID-19 pandemic is provided below in the section entitled “Risk Factors” in Part II, Item 1A of this Quarterly Report on Form 10-Q.

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Liquidity and Capital Resources

Overview

We have capitalized our business to date primarily through the issuance and sale of our common stock, 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 78% of our total secured financing (excluding our corporate Revolver, convertible notes and secured term loan) as of September 30, 2020, are not subject to credit or capital markets mark-to-market provisions. The remaining 22% of our secured borrowings, which are comprised of three master repurchase agreements, are only subject to credit marks. We did not receive any margin calls on our master repurchase agreements to date, nor do we expect any at this time.

Our primary sources of liquidity include $301.4 million of cash on our consolidated balance sheet, $42.0 million of loan repayment proceeds held by the servicer and receivable by our CLO, $22.2 million of available borrowings under our financing arrangements using existing collateral, $335.0 million of available capacity on our corporate revolver, net proceeds from our secured term loan and cash flows from operations. Our corporate revolver and secured term loan are secured by corporate level guarantees and do not include asset-based collateral. We may seek additional sources of liquidity from syndicated financing, other borrowings (including borrowings not related to a specific investment) and future offerings of equity and debt securities.

Our primary liquidity needs include our ongoing commitments to repay the principal and interest on our borrowings and pay other financing costs, financing our assets, meeting future funding obligations, making distributions to our stockholders, funding our operations that includes making payments to our Manager in accordance with the management agreement, and other general business needs.

We 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. The magnitude and duration of the COVID-19 pandemic, and its impact on our operations and liquidity, are uncertain and continue to evolve in the United States and globally. 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 that may be issued pursuant to this Shelf is not to exceed $750.0 million. The securities covered by this Shelf include: (i) common stock, (ii) preferred stock, (iii) depository shares, (iv) debt securities, (v) warrants, (vi) subscription rights, (vii) and purchase contracts, and (viii) units. The specifics of any future offerings, along with the use of proceeds of any securities offered, will be described in detail in a prospectus supplement, or other offering material, at the time of any offering. In February 2019, we entered into an equity distribution agreement with certain sales agents, pursuant to which we may sell, from time to time, up to an aggregate sales price of $100.0 million of our common stock, pursuant to a continuous offering program (the “ATM”), under the shelf. Sales of our common stock made pursuant to the ATM may be made in negotiated transactions or transactions that are deemed to be “at the market” offerings as defined in Rule 415 under the Securities Act. We did not sell any shares of our common stock under the ATM to date.

See Notes 4, 5, 6, 7 and 10 to our condensed consolidated financial statements for additional details regarding our secured financing agreements, collateralized loan obligations, secured term loan, convertible notes and stock activity.

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

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Debt-to-Equity Ratio and Total Leverage Ratio

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

	September 30, 2020	December 31, 2019
Debt-to-equity ratio(A)	1.9x	1.9x
Total leverage ratio(B)	3.8x	3.5x

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

(B)    Represents (i) total outstanding debt agreements, secured term loan, convertible notes, loan participations sold (excluding vertical loan syndications), non-consolidated senior interests and collateralized loan obligation, less cash to (ii) total stockholders’ equity, in each case, at period end.

Sources of Liquidity

Our primary sources of liquidity include cash and cash equivalents and available borrowings under our secured financing agreements, inclusive of our Revolver. Amounts available under these sources as of the date presented are summarized in the following table (dollars in thousands):

	September 30, 2020		December 31, 2019
Cash and cash equivalents(A)	$	301,375	$	67,619
Available borrowings under master repurchase agreements	21,423		6,174
Available borrowings under term loan financing facility	—		41,364
Available borrowings under term lending agreement	—		15,922
Available borrowings under warehouse facility	—		—
Available borrowings under asset specific financing	800		2,592
Available borrowings under revolving credit agreements	335,000		250,000
Loan principal payments receivable, net(B)	42,000		—
	$	700,598	$	383,671

(A)    Includes $12.0 million held in collateralized loan obligation as of September 30, 2020.

(B)    Includes $42.0 million of loan repayment proceeds held by the servicer and receivable by our CLO as of September 30, 2020.

In addition to our primary sources of liquidity, we have access to further liquidity through our ATM program and public offerings of debt and equity securities. Our existing loan portfolio also provides us with liquidity as loans are repaid or sold, in whole or in part, and the proceeds from repayment become available for us to invest.

Cash Flows

The following table sets forth changes in cash and cash equivalents for the nine months ended September 30, 2020 and 2019 (dollars in thousands):

	For the Nine Months Ended September 30,
	2020		2019
Cash Flows From Operating Activities	$	91,418	$	68,245
Cash Flows From Investing Activities	4,141		(1,077,904)
Cash Flows From Financing Activities	138,197		997,645
Net Increase in Cash, Cash Equivalents, and Restricted Cash	$	233,756	$	(12,014)

Cash Flows from Operating Activities

Our cash flows from operating activities were primarily driven by our net interest income, which is driven by the income generated by our investments less financing costs. In addition, we received a $2.8 million non-recurring exit fee during the nine months ended September 30, 2020. The following table sets forth interest received by, and paid for, our investments for the nine months ended September 30, 2020 and 2019 (dollars in thousands):

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	For the Nine Months Ended September 30,
	2020		2019
Interest Received:
Senior and mezzanine loans	$	186,559	$	184,511
CMBS B-Pieces	—		1,715
	186,559		186,226
Interest Paid:
Interest expense	78,717		106,000
Net interest collections	$	107,842	$	80,226

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

	For the Nine Months Ended September 30,
	2020		2019
Management Fees to affiliate	$	12,798	$	12,905
Incentive Fees to affiliate	3,845		2,098
Net decrease in cash and cash equivalents	$	16,643	$	15,003

Cash Flows from Investing Activities

Our cash flows from investing activities consisted of cash outflows to fund new loan originations and our commitments under existing loan investments, partially offset by cash inflows from the sale/syndication and principal repayments on our loan investments. During the nine months ended September 30, 2020, we funded $462.1 million of CRE loans and received $466.3 million from the repayments of CRE loans.

During the nine months ended September 30, 2019, we funded $2,251.0 million of CRE loans and received $1,169.5 million of principal repayments on certain loans. We also made a net investment in CMBS, held through an equity method investment, of $6.2 million. During the three months ended September 30, 2019, we sold our remaining direct CMBS investments for net proceeds of $9.8 million.

Cash Flows from Financing Activities

Our cash flows from financing activities were primarily driven by proceeds from borrowings under our financing agreements of $970.6 million and net proceeds from our secured term loan of $292.5 million during the nine months ended September 30, 2020, which were partially offset by (i) principal repayments of $1,016.5 million on borrowings under our financing agreements, (ii) the payment of $73.1 million in dividends, and (iii) the payment of $25.1 million in share repurchases.

During the nine months ended September 30, 2019, our cash flows from financing activities were primarily driven by proceeds from borrowings under our financing agreements of $2,745.8 million, which were partially offset by principal repayments of $1,660.8 million on borrowings under our financing agreements and the payment of $74.8 million in dividends.

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Contractual Obligations and Commitments

The following table presents our contractual obligations and commitments (including interest payments) as of September 30, 2020 (dollars in thousands):

	Total		Less than 1 year		1 to 3 years		3 to 5 years		Thereafter
Recourse Obligations:
Master Repurchase Facilities(A)
Wells Fargo	$	421,918	$	6,593	$	415,325	$	—	$	—
Morgan Stanley	420,094		420,094		—		—		—
Goldman Sachs	80,453		2,326		78,127		—		—
Term Lending Agreement(A)
KREF Lending V	913,751		913,751		—		—		—
Warehouse Facility
HSBC	—		—		—		—		—
Asset Specific Financing
BMO Facility	61,534		1,131		60,403		—		—
Total secured financing agreements	1,897,750		1,343,895		553,855		—		—
Convertible Notes	167,156		8,927		14,479		143,750		—
Secured Term Loan	421,085		17,490		34,931		34,979		333,685
Future funding obligations(B)	462,282		225,602		212,159		24,521		—
RECOP I commitment(C)	4,324		4,324		—		—		—
Revolver(D)	—		—		—		—		—
Total recourse obligations	2,952,597		1,600,238		815,424		203,250		333,685
Non-Recourse Obligations:
Collateralized Loan Obligations	872,092		12,412		24,789		834,891		—
Term Loan Financing	1,038,478		284,023		689,114		65,341		—
Total	$	4,863,167	$	1,896,673	$	1,529,327	$	1,103,482	$	333,685

(A)    The allocation of repurchase facilities and Term Lending Agreement is based on the current maturity date of each individual borrowing under these facilities. The amounts include the related future interest payment obligations, which are estimated by assuming the amounts outstanding under these facilities and the interest rates in effect as of September 30, 2020 will remain constant into the future. This is only an estimate, as actual amounts borrowed and rates may vary over time. Amounts borrowed are subject to a maximum 25.0% recourse limit.

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

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

(D)    Any amounts borrowed are full recourse to certain subsidiaries of KREF. Includes principal and assumes interest outstanding over a one-year period. Amounts are estimated based on the amount outstanding under the Revolver and the interest rate in effect as of September 30, 2020. This is only an estimate as actual amounts borrowed, the timing of repayments and interest rates may vary over time. The Revolver matures in December 2023.

We are required to pay our Manager a base management fee, an incentive fee and reimbursements for certain expenses pursuant to our management agreement. The table above does not include the amounts payable to our Manager under our management agreement as they are not fixed and determinable. See Note 13 to our condensed consolidated financial statements included in this Form 10-Q for additional terms and details of the fees payable under our management agreement.

As a REIT, we generally must distribute substantially all of our REIT taxable income, determined without regard to the deduction for dividends paid and excluding net capital gains, to stockholders in the form of dividends to comply with the REIT provisions of the Code. Our taxable income does not necessarily equal our net income as calculated in accordance with GAAP, or our Core Earnings as described above under "Key Financial Measures and Indicators — Core Earnings."

Recent Market Conditions

Due to the current COVID-19 pandemic in the United States and globally, our operating partners, borrowers and their tenants, the properties securing our investments, and the economy as a whole have been, and will continue to be, adversely impacted.

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The magnitude and duration of the COVID-19 pandemic and its impact on our borrowers and their tenants, cash flows and future results of operations has been significant, and its continued impact will largely depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the COVID-19 pandemic, the success of actions taken to contain or treat the pandemic, and reactions by consumers, companies, governmental entities and capital markets. The prolonged duration and impact of the COVID-19 pandemic could materially disrupt our business operations and impact our financial performance.

The COVID-19 pandemic has resulted in significant disruptions in financial markets, business shutdowns and uncertainty about how the U.S. and global economy will perform over the next several months. Possible future declines in rental rates and expectations of future rental concessions, including free rent to renew tenants early, to retain tenants who are up for renewal or to attract new tenants, or rent abatements for tenants severely impacted by the COVID-19 pandemic may result in decreases in cash flows to our borrowers and potentially in defaults in paying debt service on outstanding indebtedness, which could adversely impact our results of operations and financial performance. Impending declines in economic conditions could negatively impact real estate and real estate capital markets and result in lower occupancy, lower rental rates and declining values in our portfolio, which could adversely impact the value of our investments, making it more difficult for us to make distributions or meet our financing obligations.

Subsequent Events

Our subsequent events are detailed in Note 16 to our condensed consolidated financial statements

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Off-Balance Sheet Arrangements

As described in Note 9 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, 2020, we held $33.5 million of interests in such entities, which does not include a remaining commitment of $4.3 million to RECOP I that we are required to fund if called.

Critical Accounting Policies

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

Allowance for Credit Losses

We originate and purchase CRE debt and related instruments generally to be held as long-term investments at amortized cost. We adopted ASU No. 2016-13, Financial Instruments—Credit Losses, and subsequent amendments (“ASU 2016-13”), which replaces the incurred loss methodology with an expected loss model known as the Current Expected Credit Loss or CECL model. CECL amends the previous credit loss model to reflect our current estimate of all expected credit losses, not only based on historical experience and current conditions, but also by including reasonable and supportable forecasts incorporating forward-looking information.

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

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

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

We consider the individual loan internal risk rating as the primary credit quality indicator underlying the CECL assessment. We perform a quarterly review of our loan portfolio at the individual loan level to determine the internal risk rating for each of our loans by assessing the risk factors of each loan, including, without limitation, LTV, debt yield, property type, geographic and local market dynamics, physical condition, cash flow volatility, leasing and tenant profile, loan structure and exit plan, and

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project sponsorship. Considering these factors, we rate our loans based on a five-point scale, "1" though "5", from less risk to greater risk, which ratings are defined as follows:

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

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

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

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

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

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

Recently Adopted Accounting Standard

Credit Losses

On January 1, 2020, we adopted ASU No. 2016-13, Financial Instruments-Credit Losses, and subsequent amendments, which replaces the incurred loss methodology with an expected loss model known as the Current Expected Credit Loss or CECL model. CECL amends the previous credit loss model to reflect a reporting entity's current estimate of all expected credit losses, not only based on historical experience and current conditions, but also by including reasonable and supportable forecasts incorporating forward-looking information. The measurement of expected credit losses under CECL is applicable to financial assets measured at amortized cost, and off-balance sheet credit exposures such as unfunded loan commitments. The allowance for credit losses required under ASU 2016-13 is deducted from the respective loans’ amortized cost basis on our condensed consolidated balance sheets. The allowance for credit losses attributed to unfunded loan commitments is included in “Accounts payable, accrued expenses and other liabilities” in our condensed consolidated balance sheets. The guidance also requires a cumulative-effect adjustment to retained earnings as of the beginning of the reporting period of adoption.

Based on our loan portfolio at January 1, 2020, the pre COVID-19 economic environment and the respective expectations for future economic conditions at the time, we recorded a cumulative-effect adjustment to our accumulated deficit as of January 1,

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2020 of $15.0 million, or $0.26 per common share, of which $1.1 million, or $0.02 per common share, is attributable to unfunded loan commitments. In addition, we recorded an incremental CECL allowance for credit losses for the nine months ended September 30, 2020 of $53.8 million, or $0.96 per common share.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

Credit Risk

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

The COVID-19 pandemic has adversely impacted the commercial real estate markets, causing reduced occupancy, requests from tenants for rent deferral or abatement, and delays in property renovations currently planned or underway. These negative conditions may persist into the future and impair borrower’s ability to pay principal and interest due under our loan agreements. We maintain robust asset management relationships with our borrowers and have leveraged these relationships to address the potential impact of the COVID-19 pandemic on our loans secured by properties experiencing cash flow pressure, most significantly hospitality and retail assets. Some of our borrowers have indicated that due to the impact of the COVID-19 pandemic, they will be unable to timely execute their business plans, have had to temporarily close their businesses, or have experienced other negative business consequences and have requested temporary interest deferral or forbearance, or other modifications of their loans. Accordingly, we have discussed with our borrowers potential near-term defensive loan modifications, which could include repurposing of reserves, temporary deferrals of interest, or performance test or covenant waivers on loans collateralized by assets directly impacted by the COVID-19 pandemic, and which would typically be coupled with an additional equity commitment and/or guaranty from sponsors.

Based on the limited loan modifications completed to date, we are encouraged by the tone of these conversations and our borrowers’ initial response to the COVID-19 pandemic’s impacts on their properties. We believe our loan sponsors are generally committed to supporting assets collateralizing our loans through additional equity investments. While we believe the principal amounts of our loans are generally adequately protected by underlying collateral value, there is a risk that we will not realize the entire principal value of certain investments.

Credit Yield Risk

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

Interest Rate Risk

Generally, the composition of our investments is such that rising interest rates will increase our net income, while declining interest rates will decrease our net income. Our net interest income currently benefits from in-the-money LIBOR floors in our loan portfolio, which benefit is expected to initially decrease as LIBOR increases. There can be no assurance that we will continue to utilize LIBOR floors. As of September 30, 2020, one-month USD LIBOR was 0.15%, as compared to 1.76% as of December 31, 2019. There can be no assurance of how our net income may be affected in future quarters, which will depend on, among other things, the interest rate environment and our then-current portfolio. As of September 30, 2020, 99.2% of our investments by total assets earned a floating rate of interest indexed to one-month USD LIBOR. The remaining 0.8% of our investments earned a fixed rate of interest. If interest rates were to decline, the value of these fixed-rate investments may increase and if interest rates were to increase, the value of these fixed-rate investments may fall; however, the interest income generated by these fixed-rate investments would not be affected by market interest rates. The interest rates we pay under our current financing facilities are floating rate. Accordingly, our interest expense will generally increase as interest rates increase and decrease as interest rates decrease.

As noted above, our interest income generally decreases as LIBOR decreases; in certain circumstances, however, LIBOR floors relating to our loan portfolio may offset some of the impact from declining rates. As of September 30, 2020, 98% of our loan portfolio is subject to a LIBOR floor of 0.95% or higher and 79% of our loan portfolio is subject to a LIBOR floor of 1.5% or higher. Due to these LIBOR floors, a 15 basis point or greater decrease in LIBOR would increase our expected cash flows by approximately $5.3 million, or $0.10 per common share, for the twelve months following September 30, 2020. Conversely, a 25

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basis point and 50 basis point increase in LIBOR would decrease our expected cash flows by approximately $8.9 million and $17.8 million, or $0.16 and $0.32 per common share, for the same period, respectively.

LIBOR Transition

LIBOR is expected to be discontinued after 2021. As of September 30, 2020, 99.9% of our loans by principal balance earned a floating rate of interest indexed to LIBOR, and 100.0% of our outstanding financing arrangements (excluding convertible notes) bear interest indexed to LIBOR. All of these arrangements provide procedures for determining an alternative base rate in the event that LIBOR is discontinued. Regardless, there can be no assurances as to what alternative base rates may be and whether such base rate will be more or less favorable than LIBOR and any other unforeseen impacts of the potential discontinuation of LIBOR. We are monitoring the developments with respect to the potential phasing out of LIBOR and are working with our lenders and borrowers to minimize the impact of any LIBOR transition on our financial condition and results of operations, but can provide no assurances regarding the impact of the discontinuation of LIBOR.

Prepayment Risk

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

Financing Risk

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

Real Estate Risk

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

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ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

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

Our management, with the participation of our Chief Executive Officer and the Chief Financial Officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2020. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of September 30, 2020, the design and operation of our disclosure controls and procedures were effective to accomplish their objectives at the reasonable assurance level.

Changes in Internal Control over Financial Reporting

No changes in our internal control over financial reporting (as such term is defined in Rule 13a-15(f) of the Exchange Act) occurred during the quarter ended September 30, 2020 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The section entitled “Litigation” appearing in Note 12 of our condensed consolidated financial statements included in this Form 10-Q is incorporated herein by reference.

ITEM 1A. RISK FACTORS

For information regarding factors that could affect the Company’s business, results of operations, financial condition and liquidity, see the information under Part I, Item 1A. “Risk Factors” in the Form 10-K, which is accessible on the SEC’s website at www.sec.gov.

In light of the rapid, worldwide spread of a novel strain of coronavirus (“COVID-19”) and the resulting global economic disruption and uncertainty which occurred subsequent to the filing of our Form 10-K, the Company is supplementing the risk factors discussed in our Form 10-K with the following risk factors, which should be read in conjunction with the risk factors contained in our Form 10-K.

Risks Related to COVID-19

In December 2019, a novel coronavirus disease was reported and in January 2020, the World Health Organization (“WHO”) declared COVID-19 a Public Health Emergency of International Concern. On February 28, 2020, the WHO raised its assessment of the COVID-19 threat from high to very high at a global level due to the continued increase in the number of cases and affected countries, and on March 11, 2020, the WHO characterized COVID-19 as a pandemic.

The scale and scope of the COVID-19 pandemic may heighten the potential adverse effects on our business, financial performance, operating results, cash flows and/or financial condition described in the risk factors in our Form 10-K for the quarterly periods and full fiscal year of 2020, which may be material and affect us in ways we cannot foresee at this time. Although it is impossible to predict with certainty the potential full magnitude of the business and economic ramifications, COVID-19 has impacted, and may further impact, our business in various ways, including but not limited to:

•the inability of our borrowers’ tenants to pay rent on their leases or our borrowers’ inability to re-lease space that becomes vacant, which inability, if extreme, could cause our borrowers to default on their loans and could cause us to: (i) no longer be able to pay dividends at our current rates or at all in order to preserve liquidity and (ii) be unable to meet our debt obligations to lenders or satisfy our debt covenants, which could cause us to have to sell our investments or refinance debt on unattractive terms;

•a severe disruption and instability in the global financial markets or deteriorations in credit and financing conditions may affect our ability to access capital necessary to fund our investments at attractive interest rates, or at all, and may adversely affect the valuation of financial assets and liabilities, any of which could affect have a material adverse effect on our business, financial condition, results of operations and cash flows;

•uncertainties created by the COVID-19 pandemic may make it difficult to estimate provisions for loan losses;

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

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

•provisions in our current and future financing agreements may require us to provide additional collateral or pay down debt;

•economic and market conditions affecting the value of our financial instruments and the value of particular assets and liabilities; and

•fluctuations in equity market prices, interest rates and credit spreads limiting our ability to raise or deploy capital on a timely basis and affecting our overall liquidity.

In addition, the COVID-19 pandemic may adversely impact our business and financial condition in other areas, including:

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•an inability to operate or review potential investments in affected areas as a result of quarantines, restrictions on travel, “shelter in place” rules, restrictions on types of businesses that may continue to operate and/or restrictions on types of construction projects that may continue;

•delays in responsiveness by borrowers and other third parties in other matters arising in the ordinary course of business due to their prioritization of matters relating to COVID-19;

•some of our borrowers and/or their tenants operate in industries that are materially impacted by COVID-19, including but not limited to healthcare, travel, entertainment, hospitality, senior living and retail industries. Such persons are facing operational and financial hardships resulting from the spread of COVID-19 and related governmental measures, such as the closure of stores, restrictions on travel, quarantines or stay-at-home orders. If the disruptions caused by COVID-19 continue and the restrictions put in place are not lifted, the businesses of borrowers and/or their tenants could continue to suffer materially or become insolvent, which would adversely affect our business;

•the long-term impact on the market for office properties in the event a significant number of businesses determine to continue to utilize large-scale work-from-home policies as the COVID-19 pandemic continues and thereafter;

•an extended period of remote working by our Manager’s and/or its affiliate’s employees could strain our technology resources and introduce operational risks, including heightened cybersecurity risk. Remote working environments may be less secure and more susceptible to hacking attacks, including phishing and social engineering attempts that seek to exploit the COVID-19 pandemic; and

•COVID-19 presents a significant threat to our Manager’s and/or its affiliate’s employees’ well-being and morale, and we may experience potential loss of productivity or a delay in the roll out of certain strategic plans.

Because the properties securing our loan portfolio are located in the United States, COVID-19 will impact such loans and operating results of our borrowers to the extent that its continued spread within the United States reduces occupancy, increases the cost of operation, results in limited hours or necessitates the closure of such properties. In addition, governmental measures, such as quarantines, states of emergencies, restrictions on travel, stay-at-home orders, and other measures taken to curb the spread of the COVID-19 may negatively impact the ability of our borrowers to continue to obtain necessary goods and services or provide adequate staffing, which may also adversely affect our loans and operating results.

Some of our borrowers operate in industries that are being adversely affected by the disruption to business caused by this global outbreak. Our borrowers’ tenants have been, and may in the future be, required to suspend operations at the properties securing our loan portfolio for what could be an extended period of time. For example, with respect to retail properties in our loan portfolio, individual non-essential stores have been, and may continue to be, closed for an extended period of time or only open certain hours of the day. Certain office and industrial properties in our loan portfolio have been negatively impacted by similar impacts on the businesses of our borrowers and their tenants and may continue to be impacted by tenant bankruptcies and defaults. Multifamily properties in our loan portfolio have been impacted by declining household incomes and wealth, which may result in delinquencies or vacancies.

We have been engaged in discussions with our borrowers, some of whom have indicated that, due to the impact of COVID- 19, they have been unable to timely execute their business plans, they have experienced other negative business consequences and have requested or indicated that they will be requesting interest or principal deferral or other modifications of their loans. We therefore anticipate more frequent modifications of our loans and potentially instances of default or foreclosure on assets underlying our loans.

Given the ongoing nature of the outbreak, at this time we cannot reasonably estimate the magnitude of the ultimate impact that COVID-19 will have on our business, financial performance and operating results. We believe COVID-19’s adverse impact on our business, financial performance and operating results will in part be significantly driven by a number of factors that we are unable to predict or control, including, for example: the severity and duration of the pandemic; the 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; the timing and speed of economic recovery, including the availability of a treatment or vaccination for COVID-19; and the negative impact on our financing sources, vendors and other business partners that may indirectly adversely affect us.

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

Issuer Purchases of Equity Securities

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

We did not repurchase any shares of our common stock during the three months ended September 30, 2020.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

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ITEM 6. EXHIBITS

Exhibit Number		Exhibit Description
	31.1	Certificate of Matthew A. Salem, Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	31.2	Certificate of Mostafa Nagaty, Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	32.1	Certificate of Matthew A. Salem, Chief Executive Officer, pursuant to Section 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).
	32.2	Certificate of Mostafa Nagaty, Chief Financial Officer, pursuant to Section 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).
	101.INS	Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
	101.SCH	Inline XBRL Taxonomy Extension Schema Document.
	101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document.
	101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document.
	101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document.
	101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document.
	104	Cover Page Interactive Data File, formatted in Inline XBRL and contained in Exhibit 101.

_______________________

    Certain agreements and other documents filed as exhibits to this Form 10-Q contain representations and warranties that the parties thereto made to each other. These representations and warranties have been made solely for the benefit of the other parties to such agreements and may have been qualified by certain information that has been disclosed to the other parties to such agreements and other documents and that may not be reflected in such agreements and other documents. In addition, these representations and warranties may be intended as a way of allocating risks among parties if the statements contained therein prove to be incorrect, rather than as actual statements of fact. Accordingly, there can be no reliance on any such representations and warranties as characterizations of the actual state of facts. Moreover, information concerning the subject matter of any such representations and warranties may have changed since the date of such agreements and other documents.

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SIGNATURES

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

		KKR REAL ESTATE FINANCE TRUST INC.
Date:	October 26, 2020	By:	/s/ Matthew A. Salem
			Name:    Matthew A. Salem
			Title:    Chief Executive Officer
			(Principal Executive Officer)
Date:	October 26, 2020	By:	/s/ Mostafa Nagaty
			Name:    Mostafa Nagaty
			Title:    Chief Financial Officer and Treasurer
			(Principal Financial and Accounting Officer)

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EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, Matthew A. Salem, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2020 of KKR Real Estate Finance Trust Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financing reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.Designed such internal control over financing reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

By:	/s/ Matthew A. Salem
	Matthew A. Salem
	Chief Executive Officer
	(Principal Executive Officer)
	October 26, 2020

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, Mostafa Nagaty, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2020 of KKR Real Estate Finance Trust Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.Designed such internal control over financing reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

By:	/s/ Mostafa Nagaty
	Mostafa Nagaty
	Chief Financial Officer
	(Principal Financial Officer)
	October 26, 2020

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY

ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of KKR Real Estate Finance Trust Inc. (the “Company”) for the quarterly period ended September 30, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Matthew A. Salem, Co-Chief Executive Officer and Co-President of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

By:	/s/ Matthew A. Salem
	Matthew A. Salem
	Chief Executive Officer
	(Principal Executive Officer)

October 26, 2020

*    The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Report or as a separate disclosure document.

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY

ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of KKR Real Estate Finance Trust Inc. (the “Company”) for the quarterly period ended September 30, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Mostafa Nagaty, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

By:	/s/ Mostafa Nagaty
	Mostafa Nagaty
	Chief Financial Officer
	(Principal Financial Officer)

October 26, 2020

*    The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Report or as a separate disclosure document.

XML

Cover Page - shares	9 Months Ended
	Sep. 30, 2020	Oct. 21, 2020
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Sep. 30, 2020
Document Transition Report	false
Entity File Number	001-38082
Entity Registrant Name	KKR Real Estate Finance Trust Inc.
Entity Incorporation, State or Country Code	MD
Entity Tax Identification Number	47-2009094
Entity Address, Address Line One	9 West 57th Street,
Entity Address, Address Line Two	Suite 4200
Entity Address, City or Town	New York,
Entity Address, State or Province	NY
Entity Address, Postal Zip Code	10019
City Area Code	212
Local Phone Number	750-8300
Title of 12(b) Security	Common stock, par value $0.01 per share
Trading Symbol	KREF
Security Exchange Name	NYSE
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	true
Entity Ex Transition Period	true
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		55,619,428
Entity Central Index Key	0001631596
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q3

XML

Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands		Sep. 30, 2020	Dec. 31, 2019
Assets
Cash and cash equivalents	[1]	$ 301,375	$ 67,619
Commercial mortgage loans, held-for-investment		4,895,974	4,931,042
Less: Allowance for credit losses		(62,735)	0
Commercial mortgage loans, held-for-investment, net		4,833,239	4,931,042
Equity method investments		33,468	37,469
Accrued interest receivable		15,566	16,305
Other assets	[2]	48,217	4,583
Total Assets		5,231,865	5,057,018
Liabilities
Secured financing agreements, net		2,846,350	2,884,887
Collateralized loan obligation, net		808,311	803,376
Secured term loan, net		287,878	0
Convertible notes, net		140,115	139,075
Loan participations sold, net		66,226	64,966
Dividends payable		24,138	25,036
Accrued interest payable		7,586	6,686
Accounts payable, accrued expenses and other liabilities	[3]	5,076	3,363
Due to affiliates		5,127	5,917
Total Liabilities		4,190,807	3,933,306
Commitments and Contingencies
Temporary Equity
Redeemable preferred stock		1,951	1,694
Permanent Equity
Preferred stock, 50,000,000 authorized 1 share with par value of $0.01 issued and outstanding as of September 30, 2020 and December 31, 2019)		0	0
Common stock, 300,000,000 authorized (55,491,405 and 57,486,583 shares with par value of $0.01 issued and outstanding as of September 30, 2020 and December 31, 2019, respectively)		555	575
Additional paid-in capital		1,170,110	1,165,995
Accumulated deficit		(70,559)	(8,594)
Repurchased stock, 3,900,326 and 1,862,689 shares repurchased as of September 30, 2020 and December 31, 2019, respectively		(60,999)	(35,958)
Total KKR Real Estate Finance Trust Inc. stockholders’ equity		1,039,107	1,122,018
Total Permanent Equity		1,039,107	1,122,018
Total Liabilities and Equity		$ 5,231,865	$ 5,057,018

[1] Includes $12.0 million and $0.0 million held in collateralized loan obligation as of September 30, 2020 and December 31, 2019, respectively.

[2] Includes $42.0 million and $0.0 million of loan repayment proceeds held by the servicer and receivable by the CLO as of September 30, 2020 and December 31, 2019, respectively.

[3] Includes $1.4 million and $0.0 million of reserve for unfunded loan commitments as of September 30, 2020 and December 31, 2019, respectively.

XML

Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($) $ in Thousands		Sep. 30, 2020	Dec. 31, 2019
Preferred stock authorized (shares)		50,000,000	50,000,000
Preferred stock issued (shares)		1	1
Preferred stock outstanding (shares)		1	1
Preferred stock par value (usd per share)		$ 0.01	$ 0.01
Common stock authorized (shares)		300,000,000	300,000,000
Common stock issued (shares)		55,491,405	57,486,583
Common stock outstanding (shares)		55,491,405	57,486,583
Common stock par value (usd per share)		$ 0.01	$ 0.01
Treasury stock, held (shares)		3,900,326	1,862,689
Loan repayment proceeds		$ 42,000	$ 0
Accounts payable, accrued expenses and other liabilities	[1]	5,076	3,363
Unfunded Loan Commitments
Accounts payable, accrued expenses and other liabilities		1,400	0
Collateralized Loan Obligations | Cash
Carrying value, collateral assets		$ 12,000	$ 0

[1] Includes $1.4 million and $0.0 million of reserve for unfunded loan commitments as of September 30, 2020 and December 31, 2019, respectively.

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Condensed Consolidated Statements of Income (Unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Net Interest Income
Interest income	$ 67,689	$ 74,223	$ 205,987	$ 201,918
Interest expense	28,832	45,596	98,477	117,527
Total net interest income	38,857	28,627	107,510	84,391
Other Income
(Loss) gain on sale of investments	0	(429)	0	(2,759)
Income (loss) from equity method investments	973	1,321	(631)	3,314
Change in net assets related to CMBS consolidated variable interest entities	0	544	0	1,665
Other income	102	853	658	2,006
Total other income (loss)	1,075	2,289	27	4,226
Operating Expenses
General and administrative	3,563	2,704	11,376	7,846
Provision for credit losses, net	(126)	0	53,782	0
Management fees to affiliate	4,223	4,280	12,740	12,855
Incentive compensation to affiliate	990	0	3,845	2,098
Total operating expenses	8,650	6,984	81,743	22,799
Income (Loss) Before Income Taxes, Preferred Dividends and Redemption Value Adjustment	31,282	23,932	25,794	65,818
Income tax expense	96	77	255	366
Net Income (Loss)	31,186	23,855	25,539	65,452
Preferred Stock Dividends and Redemption Value Adjustment	(165)	238	762	(251)
Net Income (Loss) Attributable to Common Stockholders	$ 31,351	$ 23,617	$ 24,777	$ 65,703
Net Income (Loss) Per Share of Common Stock
Basic (usd per share)	$ 0.56	$ 0.41	$ 0.44	$ 1.14
Diluted (usd per share)	$ 0.56	$ 0.41	$ 0.44	$ 1.14
Weighted Average Number of Shares of Common Stock Outstanding
Basic (shares)	55,491,405	57,420,140	56,107,765	57,406,802
Diluted (shares)	55,632,170	57,549,066	56,187,461	57,511,292
Dividends declared per share of common stock (usd per share)	$ 0.43	$ 0.43	$ 1.29	$ 1.29

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Condensed Consolidated Statements of Changes in Equity (Unaudited) - USD ($) $ in Thousands	Total	Redeemable Preferred Stock	Preferred Stock	Common Stock	Additional Paid-In Capital	Retained Earnings (Accumulated Deficit)	Retained Earnings (Accumulated Deficit) Cumulative-effect adjustment upon adoption of ASU 2016-13	Repurchased Stock	Total KKR Real Estate Finance Trust Inc. Stockholders' Equity	Total KKR Real Estate Finance Trust Inc. Stockholders' Equity Cumulative-effect adjustment upon adoption of ASU 2016-13
Beginning balance (shares) at Dec. 31, 2018			1	57,596,217
Beginning balance at Dec. 31, 2018			$ 0	$ 576	$ 1,163,845	$ (225)		$ (31,854)	$ 1,132,342
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Repurchase of common stock (shares)				(212,809)
Repurchase of common stock				$ (2)				(4,104)	(4,106)
Offering costs					(518)				(518)
Common dividends declared						(24,761)			(24,761)
Adjustment of redeemable preferred stock to redemption value		$ (618)				618			618
Stock-based compensation					991				991
Net income (loss)						24,087			24,087
Ending balance (shares) at Mar. 31, 2019			1	57,383,408
Ending balance at Mar. 31, 2019			$ 0	$ 574	1,164,318	(281)		(35,958)	1,128,653
Beginning balance at Dec. 31, 2018		2,846
Increase (Decrease) in Temporary Equity [Roll Forward]
Preferred dividends declared, per share		(161)
Adjustment of redeemable preferred stock to redemption value		(618)				618			618
Net income (loss)		161
Ending balance at Mar. 31, 2019		2,228
Increase (Decrease) in Temporary Equity [Roll Forward]
Dividends declared per share of common stock (usd per share)	$ 0.43
Beginning balance (shares) at Dec. 31, 2018			1	57,596,217
Beginning balance at Dec. 31, 2018			$ 0	$ 576	1,163,845	(225)		(31,854)	1,132,342
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Common dividends declared	$ (74,141)
Ending balance (shares) at Sep. 30, 2019			1	57,423,911
Ending balance at Sep. 30, 2019			$ 0	$ 574	1,166,016	(8,663)		(35,958)	1,121,969
Beginning balance at Dec. 31, 2018		2,846
Ending balance at Sep. 30, 2019		2,102
Increase (Decrease) in Temporary Equity [Roll Forward]
Dividends declared per share of common stock (usd per share)	$ 1.29
Beginning balance (shares) at Mar. 31, 2019			1	57,383,408
Beginning balance at Mar. 31, 2019			$ 0	$ 574	1,164,318	(281)		(35,958)	1,128,653
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Common dividends declared						(24,688)			(24,688)
Adjustment of redeemable preferred stock to redemption value		(197)				197			197
Stock-based compensation (in shares)				29,661
Stock-based compensation					658				658
Net income (loss)						17,184			17,184
Ending balance (shares) at Jun. 30, 2019			1	57,413,069
Ending balance at Jun. 30, 2019			$ 0	$ 574	1,164,976	(7,588)		(35,958)	1,122,004
Beginning balance at Mar. 31, 2019		2,228
Increase (Decrease) in Temporary Equity [Roll Forward]
Preferred dividends declared, per share		(165)
Adjustment of redeemable preferred stock to redemption value		(197)				197			197
Net income (loss)		165
Ending balance at Jun. 30, 2019		2,031
Increase (Decrease) in Temporary Equity [Roll Forward]
Dividends declared per share of common stock (usd per share)	0.43
Common dividends declared						(24,692)			(24,692)
Adjustment of redeemable preferred stock to redemption value		71				(71)			(71)
Stock-based compensation (in shares)				10,842
Stock-based compensation					1,040				1,040
Net income (loss)						23,688			23,688
Ending balance (shares) at Sep. 30, 2019			1	57,423,911
Ending balance at Sep. 30, 2019			$ 0	$ 574	1,166,016	(8,663)		(35,958)	1,121,969
Increase (Decrease) in Temporary Equity [Roll Forward]
Preferred dividends declared, per share		(167)
Adjustment of redeemable preferred stock to redemption value		71				(71)			(71)
Net income (loss)		167
Ending balance at Sep. 30, 2019		2,102
Increase (Decrease) in Temporary Equity [Roll Forward]
Dividends declared per share of common stock (usd per share)	$ 0.43
Beginning balance (shares) at Dec. 31, 2019			1	57,486,583
Beginning balance at Dec. 31, 2019	$ 1,122,018		$ 0	$ 575	1,165,995	(8,594)	$ (15,009)	(35,958)	1,122,018	$ (15,009)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Repurchase of common stock (shares)				(1,648,551)
Repurchase of common stock								(19,244)	(19,244)
Common dividends declared						(24,010)			(24,010)
Adjustment of redeemable preferred stock to redemption value		414				(414)			(414)
Stock-based compensation					1,607				1,607
Net income (loss)						(34,750)			(34,750)
Ending balance (shares) at Mar. 31, 2020			1	55,838,032
Ending balance at Mar. 31, 2020			$ 0	$ 575	1,167,602	(82,777)		(55,202)	1,030,198
Beginning balance at Dec. 31, 2019	$ 1,694	1,694
Increase (Decrease) in Temporary Equity [Roll Forward]
Preferred dividends declared, per share		(178)
Adjustment of redeemable preferred stock to redemption value		414				(414)			(414)
Net income (loss)		178
Ending balance at Mar. 31, 2020		2,108
Increase (Decrease) in Temporary Equity [Roll Forward]
Dividends declared per share of common stock (usd per share)	$ 0.43
Beginning balance (shares) at Dec. 31, 2019			1	57,486,583
Beginning balance at Dec. 31, 2019	$ 1,122,018		$ 0	$ 575	1,165,995	(8,594)	$ (15,009)	(35,958)	1,122,018	$ (15,009)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Repurchase of common stock (shares)	(2,037,637)
Repurchase of common stock	$ (25,000)
Common dividends declared	(71,732)
Ending balance (shares) at Sep. 30, 2020			1	55,491,405
Ending balance at Sep. 30, 2020	1,039,107		$ 0	$ 555	1,170,110	(70,559)		(60,999)	1,039,107
Beginning balance at Dec. 31, 2019	1,694	1,694
Ending balance at Sep. 30, 2020	$ 1,951	1,951
Increase (Decrease) in Temporary Equity [Roll Forward]
Dividends declared per share of common stock (usd per share)	$ 1.29
Beginning balance (shares) at Mar. 31, 2020			1	55,838,032
Beginning balance at Mar. 31, 2020			$ 0	$ 575	1,167,602	(82,777)		(55,202)	1,030,198
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Repurchase of common stock (shares)				(389,086)
Repurchase of common stock				$ (20)				(5,797)	(5,817)
Common dividends declared						(23,861)			(23,861)
Adjustment of redeemable preferred stock to redemption value		167				(167)			(167)
Stock-based compensation (in shares)				42,459
Stock-based compensation					1,118				1,118
Net income (loss)						28,757			28,757
Ending balance (shares) at Jun. 30, 2020			1	55,491,405
Ending balance at Jun. 30, 2020			$ 0	$ 555	1,168,720	(78,048)		(60,999)	1,030,228
Beginning balance at Mar. 31, 2020		2,108
Increase (Decrease) in Temporary Equity [Roll Forward]
Preferred dividends declared, per share		(168)
Adjustment of redeemable preferred stock to redemption value		167				(167)			(167)
Net income (loss)		168
Ending balance at Jun. 30, 2020		2,275
Increase (Decrease) in Temporary Equity [Roll Forward]
Dividends declared per share of common stock (usd per share)	$ 0.43
Common dividends declared						(23,861)			(23,861)
Adjustment of redeemable preferred stock to redemption value		(324)				324			324
Stock-based compensation					1,390				1,390
Net income (loss)						31,026			31,026
Ending balance (shares) at Sep. 30, 2020			1	55,491,405
Ending balance at Sep. 30, 2020	$ 1,039,107		$ 0	$ 555	$ 1,170,110	(70,559)		$ (60,999)	1,039,107
Increase (Decrease) in Temporary Equity [Roll Forward]
Preferred dividends declared, per share		(159)
Adjustment of redeemable preferred stock to redemption value		(324)				$ 324			$ 324
Net income (loss)		159
Ending balance at Sep. 30, 2020	$ 1,951	$ 1,951
Increase (Decrease) in Temporary Equity [Roll Forward]
Dividends declared per share of common stock (usd per share)	$ 0.43

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Condensed Consolidated Statements of Changes in Equity (Unaudited) (Parenthetical) - $ / shares							1 Months Ended	3 Months Ended						9 Months Ended		12 Months Ended
	Sep. 30, 2020	Jun. 30, 2020	Mar. 31, 2020	Sep. 30, 2019	Jun. 28, 2019	Mar. 29, 2019	Sep. 30, 2020	Sep. 30, 2020	Jun. 30, 2020	Mar. 31, 2020	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Sep. 30, 2020	Sep. 30, 2019	Dec. 31, 2019
Statement of Stockholders' Equity [Abstract]
Dividends declared per share of common stock (usd per share)	$ 0.43	$ 0.43	$ 0.43	$ 0.43	$ 0.43	$ 0.43	$ 0.43	$ 0.43	$ 0.43	$ 0.43	$ 0.43	$ 0.43	$ 0.43	$ 1.29	$ 1.29
Accounting Standards Update [Extensible List]										us-gaap:AccountingStandardsUpdate201613Member						us-gaap:AccountingStandardsUpdate201613Member

XML

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019
Cash Flows From Operating Activities
Net income (loss)	$ 25,539	$ 65,452
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Amortization of deferred debt issuance costs and discounts	16,720	12,475
Accretion of net deferred loan fees and discounts	(12,115)	(14,655)
Payment-in-kind interest	(2,360)	0
(Loss) gain on sale of investments	0	2,759
(Income) Loss from equity method investments	3,255	(989)
Provision for credit losses, net	53,782	0
Stock-based compensation expense	4,371	3,075
Changes in operating assets and liabilities:
Accrued interest receivable, net	739	(1,563)
Other assets	(1,210)	233
Accrued interest payable	900	1,931
Accounts payable, accrued expenses and other liabilities	1,546	(456)
Due to affiliates	251	(17)
Net cash provided by (used in) operating activities	91,418	68,245
Cash Flows From Investing Activities
Proceeds from sales of commercial mortgage-backed securities	0	9,784
Proceeds from sale/syndication and principal repayments of commercial mortgage loans, held-for-investment	466,283	1,169,515
Origination of commercial mortgage loans, held-for-investment	(462,142)	(2,250,958)
Investment in commercial mortgage-backed securities, equity method investee	0	(6,245)
Net cash provided by (used in) investing activities	4,141	(1,077,904)
Cash Flows From Financing Activities
Proceeds from borrowings under secured financing agreements	970,580	2,745,759
Net proceeds from issuance of secured term loan	292,500	0
Payments of common stock dividends	(72,590)	(74,261)
Payments of preferred stock dividends	(546)	(499)
Principal repayments on borrowings under secured financing agreements	(1,016,543)	(1,660,814)
Payments of debt and collateralized debt obligation issuance costs	(8,689)	(6,911)
Payments of stock issuance costs	(157)	(1,138)
Payments to reacquire common stock	(25,061)	(4,106)
Tax withholding on stock-based compensation	(1,297)	(385)
Net cash provided by (used in) financing activities	138,197	997,645
Net Increase (Decrease) in Cash, Cash Equivalents	233,756	(12,014)
Cash, Cash Equivalents at Beginning of Period	67,619	86,531
Cash, Cash Equivalents at End of Period	301,375	74,517
Supplemental Disclosure of Cash Flow Information
Cash paid during the period for interest	78,717	106,000
Cash paid during the period for income taxes	50	364
Supplemental Schedule of Non-Cash Investing and Financing Activities
Loan principal payments held by servicer	42,000	0
Dividend declared, not yet paid	24,138	24,972
Loan participations sold, net	0	(86,678)
Repayment of commercial loans, held for investment	0	86,678
Loan participations sold, net	0	65,798
Funding of commercial loans, held for investment	0	(65,798)
Deconsolidation of variable interest entities (assets and liabilities)	$ 0	$ 1,047,346

XML

Business and Organization

9 Months Ended

Sep. 30, 2020

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Business and Organization

Business and Organization

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

KREF has elected and intends to maintain its qualification to be taxed as a REIT under the requirements of the Internal Revenue Code of 1986, as amended (the "Internal Revenue Code"), for U.S. federal income tax purposes. As such, KREF will generally not be subject to U.S. federal income tax on that portion of its income that it distributes to stockholders if it distributes at least 90% of its REIT taxable income, determined without regard to the deduction for dividends paid and excluding any net capital gains. See Note 15 regarding taxes applicable to KREF.

KREF is externally managed by KKR Real Estate Finance Manager LLC ("Manager"), an indirect subsidiary of KKR & Co. Inc. (together with its subsidiaries, "KKR"), through a management agreement ("Management Agreement") pursuant to which the Manager provides a management team and other professionals who are responsible for implementing KREF’s business strategy, subject to the supervision of KREF’s board of directors. For its services, the Manager is entitled to management fees and incentive compensation, both defined in, and in accordance with the terms of, the Management Agreement (Note 13).

As of September 30, 2020, KKR beneficially owned 21,858,356 shares of KREF's common stock, of which 1,858,356 shares were held by KKR on behalf of a third-party investor.

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

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Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2020

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

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

Risks and Uncertainties — The outbreak of the coronavirus pandemic (“COVID-19”) around the globe continues to adversely impact global commercial activity and has contributed to significant volatility in financial markets. The impact of the outbreak has been rapidly evolving around the globe, with several countries taking drastic measures to limit the spread of the virus by instituting quarantines or lockdowns, imposing travel restrictions and limiting operations of non-essential offices and retail centers. Such actions are creating significant disruptions to global supply chains, increasing rates of unemployment and adversely impacting several industries, including but not limited to, airlines, hospitality, retail and the broader real estate industry.

The major disruption caused by COVID-19 significantly reduced economic activity in most of the United States resulting in a significant increase in unemployment claims and a significant decline in the U.S. Gross Domestic Product (“GDP”).

COVID-19 could have a continued and prolonged adverse impact on economic and market conditions and trigger a period of global economic slowdown which could have a material adverse effect on the Company’s results and financial condition.

The full impact of COVID-19 on the real estate industry, the credit markets and consequently on the Company’s financial condition and results of operations is uncertain and cannot be predicted at the current time as it depends on several factors beyond the control of the Company including, but not limited to (i) the uncertainty around the severity and duration of the outbreak, (ii) the effectiveness of the United States public health response, (iii) the pandemic’s impact on the U.S. and global economies, (iv) the timing, scope and effectiveness of additional governmental responses to the pandemic, (v) the timing and speed of economic recovery, including the availability of a treatment or vaccination for COVID-19 and (vi) the negative impact on our borrowers, real estate values and cost of capital.

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

Consolidation — KREF consolidates those entities for which (i) it controls through either majority ownership or voting rights

or (ii) management determines that KREF is the primary beneficiary of entities deemed to be variable interest entities ("VIEs").

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

To assess whether KREF has the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance, KREF considers all the facts and circumstances, including its role in establishing the VIE and its ongoing rights and responsibilities. This assessment includes, first, identifying the activities that most significantly impact the VIE’s economic performance; and second, identifying which party, if any, has power to direct those activities. To assess whether KREF has the obligation to absorb losses of, or the right to receive benefits from, the VIE that could potentially be significant to the VIE, KREF considers all of its economic interests and applies judgment in determining whether these interests, in the aggregate, are considered potentially significant to the VIE.

Collateralized Loan Obligation — KREF consolidates a collateralized loan obligation that closed in November 2018 (“KREF 2018-FL1” or “CLO”) (Note 5). Management determined that KREF 2018-FL1 Ltd. and KREF 2018-FL1 LLC (the "CLO Issuers"), wholly-owned subsidiaries of KREF, were VIEs and that KREF was the primary beneficiary. KREF is the primary beneficiary of the VIEs since it has the ability to control the most significant activities of the CLO Issuers through ownership of non-investment grade rated subordinated controlling tranches, has the obligation to absorb losses, and the right to receive benefits, that could potentially be significant to these entities. As a result, KREF consolidates the CLO Issuers.

The collateral assets of the CLO, comprised of a pool of loan participations (Note 5) are included in “Commercial mortgage loans, held-for-investment, net” on the Condensed Consolidated Balance Sheets. The liabilities of KREF's consolidated CLO Issuers consist solely of obligations to the senior CLO noteholders, excluding subordinated CLO tranches held by KREF as such interests are eliminated in consolidation, are presented in “Collateralized loan obligation, net” in the Condensed Consolidated Balance Sheets. The collateral assets of the CLO can only be used to settle the obligations of the consolidated CLO. The interest income from the CLO collateral assets and the interest expense on the CLO liabilities are presented on a gross basis in “Interest income” and “Interest expense”, respectively, in KREF's Condensed Consolidated Statements of Income.

CMBS — KREF consolidates those trusts that issue beneficial ownership interests in mortgage loans secured by CRE (commonly known as CMBS) when KREF holds a variable interest in, and management considers KREF to be the primary beneficiary of, those trusts. Management believes the performance of the assets that underlie CMBS issuances most significantly impacts the economic performance of the trust, and the primary beneficiary is generally the entity that conducts activities that most significantly impact the performance of the underlying assets. In particular, the most subordinate tranches of CMBS expose the holder to the greater variability of economic performance when compared to more senior tranches since the subordinate tranches absorb a disproportionately higher amount of the credit risk related to the underlying assets. Generally, a trust designates the most junior subordinate tranche outstanding as the controlling class, which entitles the holder of the controlling class to unilaterally appoint and remove the special servicer for the trust. The special servicer is responsible for the servicing and administration of delinquent and nonperforming loans as well as real estate owned ("REO") properties held as collateral delivered on foreclosed loans. While the special servicer cannot prevent losses, its services to the trust are designed to mitigate credit losses to holders of the CMBS.

For any CMBS trust that KREF consolidates, KREF holds an unrated tranche that represents the most subordinated tranche of the CMBS issued by that trust, which include the controlling class. As the holder of the most subordinate tranche, KREF is in a first loss position and has the right to receive benefits. As the holder of the controlling class, KREF has the ability to unilaterally appoint and remove the special servicer for the trust. In these cases, management considers KREF to be the primary beneficiary and consolidates that CMBS trust.

For VIEs in which management determines KREF is the primary beneficiary, all of the underlying assets, liabilities and equity of the trusts are recorded on KREF's books, and the initial investment, along with any associated unrealized holding gains and losses, are eliminated in consolidation. Similarly, the interest income earned from these trusts is eliminated in consolidation.

Management elected the fair value option for KREF's initial and subsequent recognition of the assets and liabilities of KREF's consolidated CMBS VIEs in order to provide users of the financial statements with better information regarding the effects of credit risk and other market factors on the CMBS beneficially held by KREF's stockholders. Since the changes in fair value include the interest income and interest expense associated with these CMBS VIEs, management does not consider the separate presentation of the components of fair value changes to be relevant. Management has elected to present these items in aggregate as "Other Income — Change in net assets related to CMBS consolidated variable interest entities" in the Condensed Consolidated Statements of Income; the residual difference between the fair value of the trust's assets and liabilities represents KREF's beneficial interest in the CMBS VIEs.

Management separately presents the assets and liabilities of KREF's consolidated VIEs as individual line items on KREF's Condensed Consolidated Balance Sheets for entities in which the VIEs assets can only be used to settle the VIE’s obligations. The liabilities of KREF's consolidated VIEs consist solely of obligations to the CMBS holders of the consolidated trust, excluding CMBS held by KREF as such interests are eliminated in consolidation, and the interest accrued thereon, presented as "Liabilities — Variable interest entity liabilities, at fair value." The assets of KREF's consolidated VIEs consist principally of commercial mortgage loans and the interest accrued thereon, and are likewise presented as a single line item entitled "Assets — Commercial mortgage loans held in variable interest entities, at fair value."

Assets of a CMBS trust, as a whole, can only be used to settle the obligations of the consolidated CMBS VIE. The assets of KREF's CMBS VIEs are not individually accessible by, and obligations of the CMBS VIEs are not recourse to, the bondholders.

KREF derives the fair value of its Level 3 CMBS VIE assets from its Level 3 CMBS VIE liabilities, which management considers to possess more observable market value data than the CMBS VIE assets. See "— Fair Value — Valuation of CMBS Consolidated VIEs" for additional discussion regarding management's valuation of consolidated CMBS VIEs. During the three months ended September 30, 2019, KREF sold the remaining directly held CMBS investments, including an unrated tranche that represented the most subordinated tranche of the CMBS issued by that trust, including the controlling class. Accordingly, KREF deconsolidated the respective CMBS trust (Note 9).

Temporary Equity — KREF's Special Non-Voting Preferred Stock (“SNVPS”) became redeemable in the second quarter of 2018. As a result, starting with the second quarter of 2018, KREF adjusts the carrying value of the SNVPS to its redemption value quarterly. Accordingly, KREF adjusted the carrying value of the SNVPS to its redemption value of $2.0 million as of September 30, 2020, and recorded a ($0.3) million and $0.3 million non-cash redemption value adjustment to the SNVPS (“SNVPS Redemption Value Adjustment”) during the three and nine months ended September 30, 2020, respectively. Such adjustment is treated similar to a dividend on preferred stock for GAAP purposes, accordingly, the SNVPS Redemption Value Adjustment is therefore deducted from (or added back to) “Net Income (Loss)” to arrive at “Net Income (Loss) Attributable to Common Stockholders” on KREF's Condensed Consolidated Statements of Income.

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

Management determined that KREF's investment in the Manager is an interest in a VIE, however KREF is not the primary beneficiary. KREF does not have substantive participating or kick-out rights nor the power to direct activities and the obligation

to absorb losses of the Manager that could be significant to the Manager. KREF accounts for its investment in the Manager using the equity method (Note 9).

Management determined that KREF's investment in an aggregator vehicle alongside KKR Real Estate Credit Opportunity Partners L.P. ("RECOP I ") is an interest in a VIE, however KREF is not the primary beneficiary and does not have substantive participating or kick-out rights. KREF records its share of net asset value in RECOP I in “Equity method investments” on its Condensed Consolidated Balance Sheets and its share of unrealized gains or losses in "Income from equity method investments" in its Condensed Consolidated Statements of Income. Management elected the fair value option for KREF's investment in RECOP I.

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

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

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

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

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

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

Valuation Process — The Manager reviews the valuation of Level 3 financial instruments as part of KKR's quarterly process. As of September 30, 2020, KKR’s valuation process for Level 3 measurements, as described below, subjected valuations to the review and oversight of various committees. KKR has a global valuation committee assisted by the asset class-specific valuation committees, including a real estate valuation committee that reviews and approves all preliminary Level 3 valuations for real estate assets, including the financial instruments held by KREF. The global valuation committee is responsible for coordinating and implementing KKR’s valuation process to ensure consistency in the application of valuation principles across portfolio investments and between periods. All Level 3 valuations are also subject to approval by the global valuation committee.

Valuation of Commercial Mortgage Loans and Participation Sold — Management generally considers KREF's commercial mortgage loans Level 3 assets in the fair value hierarchy as such assets are illiquid, structured investments that are specific to the underlying property and its operating performance (Note 14). On a quarterly basis, management engages an independent valuation firm to estimate the fair value of each loan categorized as a Level 3 asset. Management reviews the quarterly loan valuation estimates provided by the independent valuation firm. These loans are generally valued using a discounted cash flow model using discount rates derived from observable market data applied to the capital structure of the respective sponsor and estimated property value. In the event that management's estimate of fair value differs from the fair value estimate provided by the independent valuation firm, KREF ultimately relies solely upon the valuation prepared by the investment personnel of the Manager.

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

such evidence supporting a different value. As a result, the independent valuation firm may revise their price accordingly. However, if management continues to disagree with the price from the independent valuation firm, in light of evidence presented that management compiled independently and believes to be compelling, management considers the independent valuation firm's quotation unreliable or inaccurate representation of the fair value of the CLO liabilities.

In the event that the quotation from the independent valuation firm is not available or determined to be unreliable or an inadequate representation of the fair value of the CLO liabilities, valuations are prepared using inputs based on non-binding broker quotes obtained from independent, well-known, major financial brokers that are CLO market makers. In validating any non-binding broker quote used in this circumstance, management compares the non-binding quote to the observable market data points at such time and used to validate prices received from the independent valuation firm in addition to understanding the valuation methodologies used by the market makers. These market participants utilize a similar methodology as the independent valuation firm to value the CLO liabilities, with the key input of expected yield determined independently based on both observable and unobservable factors (as described above). To avoid reliance on any single broker-dealer, management receives a minimum of two non-binding quotes, of which the average is used.

Valuation of CMBS Consolidated VIEs — Management categorizes the financial assets and liabilities of the CMBS trusts that KREF consolidates as Level 3 assets and liabilities in the fair value hierarchy and has elected the fair value option for financial assets and liabilities of each CMBS trust. Management has adopted the measurement alternative included in Accounting Standards Update No. 2014-13, Measuring the Financial Assets and the Financial Liabilities of a Consolidated Collateralized Financing Entity ("ASU 2014-13"). Pursuant to ASU 2014-13, management measures both the financial assets and financial liabilities of the CMBS trusts consolidated by KREF using the fair value of the financial liabilities, which management considers more observable than the fair value of the financial assets. Accordingly, KREF presents the CMBS issued by a consolidated trust, but not beneficially owned by KREF's stockholders, as financial liabilities in KREF's condensed consolidated financial statements, measured at their estimated fair value; KREF measures the financial assets as the total estimated fair value of the CMBS issued by a consolidated trust, regardless of whether such CMBS represent interests beneficially owned by KREF's stockholders. Under the measurement alternative prescribed by ASU 2014-13, KREF's "Net Income (Loss)" reflects the economic interests in the consolidated CMBS beneficially owned by KREF's stockholders, presented as "Change in net assets related to CMBS consolidated variable interest entities" in the Condensed Consolidated Statements of Income, which includes applicable (i) changes in the fair value of CMBS beneficially owned by KREF, (ii) interest and servicing fees earned from the CMBS trust and (iii) other residual returns or losses of the CMBS trust, if any (Note 9).

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

KREF’s determination of fair value is based upon the best information available for a given circumstance and may incorporate assumptions that are management’s best estimates after consideration of a variety of internal and external factors. When an independent valuation firm expresses an opinion on the fair value of a financial instrument in the form of a range, management selects a value within the range provided by the independent valuation firm, generally the midpoint, to assess the reasonableness of management’s estimated fair value for that financial instrument.

See Note 14 for additional information regarding the valuation of KREF's financial assets and liabilities.

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

Balance Sheet Measurement

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

KREF must also maintain sufficient cash and cash equivalents to satisfy liquidity covenants related to its secured financing agreements. However, such amounts are not restricted from use in KREF's current operations, and KREF does not present these cash and cash equivalents as restricted. As of September 30, 2020 and December 31, 2019, KREF was required to maintain unrestricted cash and cash equivalents of at least $30.6 million and $33.4 million, respectively, to satisfy its liquidity covenants (Note 4).

Adoption of ASU No. 2016-13, Financial Instruments — Credit Losses — On January 1, 2020, KREF adopted ASU No. 2016-13, Financial Instruments-Credit Losses, and subsequent amendments (“ASU 2016-13”), which replaces the incurred loss methodology with an expected loss model known as the Current Expected Credit Loss ("CECL") model. CECL amends the previous credit loss model to reflect a reporting entity's current estimate of all expected credit losses, not only based on historical experience and current conditions, but also by including reasonable and supportable forecasts incorporating forward-looking information. The measurement of expected credit losses under CECL is applicable to financial assets measured at amortized cost, and off-balance sheet credit exposures such as unfunded loan commitments. The allowance for credit losses required under ASU 2016-13 is deducted from the respective loans’ amortized cost basis on our condensed consolidated balance sheets. The allowance for credit losses attributed to unfunded loan commitments is included in “Accounts payable, accrued expenses and other liabilities” in the condensed consolidated balance sheets. The guidance also requires a cumulative-effect adjustment to retained earnings as of the beginning of the reporting period of adoption.

In connection with KREF’s adoption of ASU 2016-13 on January 1, 2020, KREF implemented new processes including the utilization of loan loss forecasting models, updates to KREF's reserve policy documentation, changes to internal reporting processes and related internal controls. KREF has implemented loan loss forecasting models for estimating expected life-time credit losses, at the individual loan level, for its commercial mortgage loan portfolio. The CECL forecasting methods used by KREF include (i) a probability of default and loss given default method using underlying third-party CMBS/CRE loan database with historical loan losses from 1998 to 2020 and (ii) probability weighted expected cash flow method, depending on the type of loan and the availability of relevant historical market loan loss data. KREF might use other acceptable alternative approaches in the future depending on, among other factors, the type of loan, underlying collateral, and availability of relevant historical market loan loss data.

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

KREF considers loan investments that are both (i) expected to be substantially repaid through the operation or sale of the underlying collateral, and (ii) for which the borrower is experiencing financial difficulty, to be “collateral-dependent” loans. For such loans that KREF determines that foreclosure of the collateral is probable, the Company measures the expected losses based on the difference between the fair value of the collateral and the amortized cost basis of the loan as of the measurement date. For collateral-dependent loans that KREF determines foreclosure is not probable, KREF applies a practical expedient to estimate expected losses using the difference between the collateral’s fair value (less costs to sell the asset if repayment is expected through the sale of the collateral) and the amortized cost basis of the loan.

Based on KREF's loan portfolio at January 1, 2020, the pre COVID-19 economic environment and the respective expectations for future economic conditions at the time, KREF recorded a cumulative-effect adjustment to KREF's accumulated deficit as of January 1, 2020 of $15.0 million, or $0.26 per common share, of which $1.1 million, or $0.02 per common share, is attributable to unfunded loan commitments.

The following table illustrates the day-one financial statements impact of the adoption of ASU 2016-13 on January 1, 2020:

	Pre-adoption		Transition Adjustment		Post-adoption
Assets
Commercial mortgage loans, held-for-investment	$	4,931,042	$	—	$	4,931,042
Less: Allowance for credit losses	—		(13,909)		(13,909)
Commercial mortgage loans, held-for-investment, net	$	4,931,042	$	(13,909)	$	4,917,133
Liabilities
Accounts payable, accrued expenses and other liabilities(A)	$	3,363	$	1,100	$	4,463
Permanent Equity
Accumulated deficit	$	(8,594)	$	(15,009)	$	(23,603)

(A)    Includes reserve for unfunded loan commitments.

Commercial Mortgage Loans Held-For-Investment and Allowance for Credit Losses — KREF recognizes its investments in commercial mortgage loans based on management's intent, and KREF's ability, to hold those investments through their contractual maturity. Management classifies those loans that management does not intend to sell in the foreseeable future, and KREF is able to hold until maturity, as held-for-investment. Loans that are held-for-investment are carried at their aggregate outstanding principal, net of applicable (i) unamortized origination or acquisition premiums and discounts, (ii) unamortized deferred nonrefundable fees and other direct loan origination costs, and (iii) allowance for credit losses, net of write-offs of impaired loans. If a loan is determined to be impaired, management writes down the loan through a charge to the "Allowance for credit losses". See "— Expense Recognition — Commercial Mortgage Loans, Held-For-Investment" for additional discussion regarding management’s determination for loan losses. KREF applies the interest method to amortize origination or acquisition premiums and discounts and deferred nonrefundable fees or other direct loan origination costs, or on a straight-line basis when it approximates the interest method. Loans for which management elects the fair value option at the time of origination, or acquisition, are carried at fair value on a recurring basis (Note 3).

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

Secured Financing Agreements — KREF's secured financing agreements, including uncommitted repurchase facilities, Term Lending Agreement, Warehouse Facility, Asset Specific Financings and Term Loan Financings, are treated as floating-rate collateralized financing arrangements carried at their contractual amounts, net of unamortized debt issuance costs (Note 4). Included within KREF's secured financing agreements is KREF's corporate revolving credit facility ("Revolver"), which is full recourse to certain guarantor wholly-owned subsidiaries of KREF.

Secured Term Loan, Net — KREF records its secured term loan at its contractual amount, net of unamortized original issuance discount and deferred financing costs (Note 6) on its condensed consolidated balance sheet. Any original issuance discount or deferred financing costs are amortized through the maturity date of the secured term loan as additional non-cash interest expense.

Convertible Notes, Net — KREF accounts for its convertible debt with a cash conversion feature in accordance with ASC 470-20 “Debt with Conversion and Other Options” which requires the liability and equity components of convertible debt instruments that may be settled in cash upon conversion, including partial cash settlement, to be separately accounted for in a manner that reflects the issuer’s nonconvertible debt borrowing rate. The initial proceeds from the sale of convertible notes are allocated between a liability component and an equity component in a manner that reflects interest expense at the rate of similar nonconvertible debt that could have been issued at such time. The equity component represents the excess initial proceeds received over the fair value of the liability component of the notes as of the date of issuance. KREF measured the estimated fair value of the debt component of the 6.125% convertible senior notes due May 15, 2023 (“Convertible Notes”) as of the issuance date based on KREF’s nonconvertible debt borrowing rate. The equity component of the Convertible Notes is reflected within

additional paid-in capital on the Condensed Consolidated Balance Sheets, and the resulting debt discount is amortized over the period during which such Convertible Notes are expected to be outstanding (through the maturity date) as additional non-cash interest expense using the interest method, or on a straight line basis when it approximates the interest method. The additional non-cash interest expense attributable to such convertible notes will increase in subsequent periods through the maturity date as the notes accrete to their par value over the same period (Note 7).

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

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

To the extent that a sale is not recognized under GAAP from the syndication, KREF does not derecognize the participation in the senior/whole loan that it sold. Instead, KREF recognizes a loan participation sold liability in an amount equal to the principal of the loan participation syndicated less any unamortized discounts or financing costs resulting from the syndication. KREF continues to recognize interest income on the entire senior loan, including the interest attributable to the loan participation sold, as well as interest expense on the loan participation sold liability (Note 8).

Other Assets and Accounts Payable, Accrued Expenses and Other Liabilities — As of September 30, 2020, other assets included $42.0 million of loan repayment proceeds held by the servicer and receivable by the CLO, $2.7 million of deferred financing costs related to KREF's Revolver (Note 4) and $0.7 million of prepaid expenses. As of December 31, 2019, other assets primarily included $2.4 million of deferred financing costs related to KREF's Revolver. As of September 30, 2020, accounts payable, accrued expenses and other liabilities consisted of $3.2 million of accrued expenses, $1.4 million of allowance for credit losses related to KREF's unfunded loan commitments and $0.5 million of good faith deposits. As of December 31, 2019, accounts payable, accrued expenses and other liabilities mainly consisted of $2.7 million of accrued expenses and $0.7 million of good faith deposits.

Dividends Payable — KREF accrues for dividends on its common stock and the redeemable preferred stock upon declaration of such dividends. In September 2020, KREF's board of directors declared a dividend of $0.43 per share of common stock to shareholders of record as of September 30, 2020, which was accrued in “Dividends payable” on KREF’s Condensed Consolidated Balance Sheet as of September 30, 2020 and was subsequently paid on October 15, 2020.

Special Non-Voting Preferred Stock — Equity instruments that are redeemable for cash or other assets are classified as temporary equity if the instrument is redeemable, at the option of the holder, at a fixed or determinable price on a fixed or determinable date or upon the occurrence of an event that is not solely within the control of the issuer. Redeemable equity instruments are initially carried at the fair value of the equity instrument at the issuance date, which is subsequently adjusted at each balance sheet date if the instrument is currently redeemable or probable of becoming redeemable. KREF accounted for the SNVPS as redeemable preferred stock since a third party holds a redemption option, exercisable after May 5, 2018, and such redemption is not solely within KREF's control. The SNVPS became redeemable in the second quarter of 2018. As a result, starting with the second quarter of 2018, KREF adjusts the carrying value of the SNVPS to its redemption value quarterly. Accordingly, KREF adjusted the carrying value of the SNVPS to its redemption value of $2.0 million as of September 30, 2020, and recorded a ($0.3) million and $0.3 million non-cash SNVPS Redemption Value Adjustment during the three and nine months ended September 30, 2020, respectively.

Repurchased Stock — KREF accounts for repurchases of its common stock based on the settlement date and presents repurchased stock in “Repurchased stock” on its Condensed Consolidated Balance Sheets (Note 10). Payments for stock repurchases that are not yet settled as of the reporting date are presented within “Other assets” on the Condensed Consolidated Balance Sheets. As of September 30, 2020, KREF did not retire any repurchased stock.

Income Recognition

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

Other Income — KREF recognizes interest income earned on its cash balances and miscellaneous fee income in “Other income” on its Condensed Consolidated Statements of Income. Interest income on cash balances totaled $0.5 million and $1.5 million for the nine months ended September 30, 2020 and 2019, respectively.

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

Expense Recognition

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

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

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

Management considers loans to be past due when a monthly payment is due and unpaid for 60 days or more. Loans are placed on nonaccrual status and considered non-performing when full payment of principal and interest is in doubt, which generally occurs when principal or interest is 120 days or more past due unless the loan is both well secured and in the process of collection. Interest received on loans placed on nonaccrual status are accounted for under the cost-recovery method, until qualifying for return to accrual. Management may return a loan to accrual status when repayment of principal and interest is reasonably assured under the terms of the restructured loan. During the three months ended June 30, 2020, management placed one mezzanine loan with an outstanding principal balance of $5.5 million on nonaccrual status and wrote off $4.7 million (the "Write-off") of the loan balance determined uncollectable (Note 3). As of September 30, 2020, no other loan was placed on nonaccrual status or otherwise considered past due.

In certain circumstances, KREF may also modify the original terms of a loan agreement by granting a concession to a borrower experiencing financial difficulty. Such modifications are considered troubled debt restructurings (“TDR”) under GAAP and typically include interest rate reductions, payment extension and modification of loan covenants. KREF did not have any loan modifications accounted for as TDRs during the three and nine months ended September 30, 2020.

In conjunction with reviewing commercial mortgage loans held-for-investment for impairment, the Manager evaluates KREF's commercial mortgage loans on a quarterly basis, assesses the risk factors of each loan, and assigns a risk rating based on a variety of factors, including, without limitation, underlying real estate performance and asset value, values of comparable properties, durability and quality of property cash flows, sponsor experience and financial wherewithal, and the existence of a risk-mitigating loan structure. Additional key considerations include loan-to-value ratios, debt service coverage ratios, loan structure, real estate and credit market dynamics, and risk of default or principal loss. Based on a five-point scale, KREF's loans are rated "1" through "5," from less risk to greater risk, which ratings are defined as follows:

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

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

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

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

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

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

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

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

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

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

Management and Incentive Compensation to Affiliate — KREF expenses management fees and incentive compensation earned by the Manager on a quarterly basis in accordance with the Management Agreement (Note 13).

Income Taxes — Certain activities of KREF are conducted through joint ventures that are formed as limited liability companies, taxed as partnerships, and consolidated by KREF. Some of these joint ventures are subject to state and local income taxes, based on the tax jurisdictions in which they operate. In addition, certain activities of KREF are conducted through taxable REIT subsidiaries consolidated by KREF. Taxable REIT subsidiaries are subject to federal, state and local income taxes (Note 15).

As of September 30, 2020 and December 31, 2019, KREF did not have any material deferred tax assets or liabilities arising from future tax consequences attributable to differences between the carrying amounts of existing assets and liabilities in accordance with GAAP and their respective tax bases.

KREF recognizes tax benefits for uncertain tax positions only if it is more likely than not that the position is sustainable based on its technical merits. Interest and penalties on uncertain tax positions are included as a component of the provision for income taxes in KREF's Condensed Consolidated Statements of Income. As of September 30, 2020, KREF did not have any material uncertain tax positions.

Stock-Based Compensation

KREF's stock-based compensation consists of awards issued to employees of the Manager or its affiliates that vest over the life of the awards, as well as restricted stock units issued to certain members of KREF's board of directors. The Company recognizes the compensation cost of stock-based awards to its directors and employees of the Manager or its affiliates on a straight-line basis over the awards’ term at their grant date fair value. KREF accounts for forfeitures as they occur. Refer to Note 11 for additional information.

Earnings per Share

KREF presents basic and diluted earnings per share ("EPS"). Basic EPS, or Net Income (Loss) Per Share of Common Stock, Basic, is calculated by dividing Net Income (Loss) Attributable to Common Stockholders by the Basic Weighted Average Number of Shares of Common Stock Outstanding, for the period.

Diluted EPS, or Net Income (Loss) Per Share of Common Stock, Diluted, is calculated by starting with Basic EPS and adding the weighted average dilutive shares issuable from restricted stock units, computed using the treasury stock method, to the weighted average common shares outstanding in the denominator. Refer to Note 10 for additional discussion of earnings per share.

Recent Accounting Pronouncements

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides temporary optional expedients and exceptions to the US GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from LIBOR and other interbank offered rates to alternative reference rates. The guidance is effective upon issuance and generally may be elected over time through December 31, 2022. KREF has not adopted any of the optional expedients or exceptions through September 30, 2020, but will continue to evaluate the possible adoption of any such expedients or exceptions during the effective period as circumstances evolve.

In August 2020, the FASB issued ASU No. 2020-06, Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and

Contracts in an Entity’s Own Equity, which simplifies an issuer’s accounting for convertible instruments and its application of the derivatives scope exception for contracts in its own equity. The guidance also addresses how convertible instruments are accounted for in the diluted EPS calculation and requires enhanced disclosures about the terms of convertible instruments and contracts in an entity’s own equity. The guidance is effective for KREF in the first quarter of 2022. The guidance allows the use of a modified or full retrospective transition method. KREF is evaluating the impact of ASU 2020-06.

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Commercial Mortgage Loans

9 Months Ended

Sep. 30, 2020

SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Abstract]

Commercial Mortgage Loans

Commercial Mortgage Loans

The following table summarizes KREF's investments in commercial mortgage loans as of September 30, 2020 and December 31, 2019:

								Weighted Average
Loan Type	Outstanding Principal		Amortized Cost(A)		Carrying Value(B)		Loan Count	Floating Rate Loan %(C)		Coupon(C)		Life (Years)(D)
September 30, 2020
Loans held-for-investment
Senior loans(E)	$	4,860,072	$	4,839,875	$	4,777,727	34	100.0	%	4.8	%	3.5
Mezzanine loans	61,400		56,099		55,512		3	91.0		10.0		3.8
	$	4,921,472	$	4,895,974	$	4,833,239	37	99.9	%	4.9	%	3.5
December 31, 2019
Loans held-for-investment
Senior loans(E)	$	4,919,298	$	4,890,408	$	4,890,408	37	100.0	%	5.0	%	4.1
Mezzanine loans	41,400		40,634		40,634		2	86.7		9.6		4.6
	$	4,960,698	$	4,931,042	$	4,931,042	39	99.9	%	5.1	%	4.1

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

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

(C)    Average weighted by outstanding principal of loan. Weighted average coupon assumes the greater of applicable one-month LIBOR rates of 0.15% and 1.76% as of September 30, 2020 and December 31, 2019, respectively, or the applicable contractual LIBOR floor.

(D)    The weighted average life of each loan is based on the expected timing of the receipt of contractual principal repayments assuming all extension options are exercised by the borrower.

(E)    Senior loans may include accommodation mezzanine loans in connection with the senior mortgage financing. Also, includes vertical loan participations sold with a principal and a carrying value of $66.2 million as of September 30, 2020 and a principal and a carrying value of $65.0 million as of December 31, 2019, respectively. Includes CLO loan participations of $946.0 million and $1.0 billion as of September 30, 2020 and December 31, 2019, respectively.

Activity — For the nine months ended September 30, 2020, the loan portfolio activity was as follows:

	Amortized Cost		Allowance for Credit Losses		Carrying Amount
Balance at December 31, 2019	$	4,931,042	$	—	$	4,931,042
Originations and future fundings, net(A)	462,142		—		462,142
Proceeds from sales and principal repayments(B)	(507,035)		—		(507,035)
Accretion of loan discount and other amortization, net(C)	12,115		—		12,115
PIK interest	2,360		—		2,360
Cumulative-effect adjustment upon adoption of ASU 2016-13	—		(13,909)		(13,909)
Provision for credit losses, net	—		(53,476)		(53,476)
Loan write-off	(4,650)		4,650		—
Balance at September 30, 2020	$	4,895,974	$	(62,735)	$	4,833,239

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

(B)    Includes $42.0 million of loan repayment proceeds held with the servicer as of September 30, 2020.

(C)    Includes accretion of applicable discounts, certain fees and deferred loan origination costs.

As of September 30, 2020 and December 31, 2019, there was $20.8 million and $29.7 million, respectively, of unamortized deferred loan fees and discounts included in commercial mortgage loans, held-for-investment, net in the Condensed Consolidated Balance Sheets. KREF recognized net accelerated fees expense of $0.4 million and $0.1 million during the three and nine months ended September 30, 2020, respectively. KREF recognized prepayment fee income and net accelerated fees income of $0.0 million and $0.3 million, respectively, during the three months ended September 30, 2019; and $0.2 million and $3.1 million, respectively, during the nine months ended September 30, 2019.

During the nine months ended September 30, 2020, KREF entered into loan modifications that include, among other changes, incremental capital contributions from certain borrowers, repurposing of reserves, and a temporary partial deferral for a portion of the coupon as payment-in-kind interest (“PIK Interest”) due, which is capitalized, compounded, and added to the outstanding principal balance of the respective loans. These loan modifications were not considered TDRs under GAAP. As of September 30, 2020, three loan modifications included temporary PIK Interest provisions, with a total outstanding loan principal and net book value of $319.3 million and $309.5 million, respectively. Total PIK Interest of $1.4 million and $2.4 million were deferred and compounded into outstanding loan principal during the three and nine months ended September 30, 2020, respectively.

Loan Risk Ratings — As further described in Note 2, our Manager evaluates KREF's commercial mortgage loan portfolio on a quarterly basis. In conjunction with the quarterly commercial mortgage loan portfolio review, KREF's Manager assesses the risk factors of each loan and assigns a risk rating based on a variety of factors. Loans are rated “1” (very low risk) through “5” Impaired/Loss Likely), which ratings are defined in Note 2. The following table allocates the principal balance and net book value of the loan portfolio based on KREF's internal risk ratings:

September 30, 2020								December 31, 2019
Risk Rating	Number of Loans	Net Book Value		Total Loan Exposure(A)		Total Loan Exposure %		Risk Rating	Number of Loans	Net Book Value		Total Loan Exposure(A)		Total Loan Exposure %
1	—	$	—	$	—	—	%	1	1	$	85,730	$	86,000	1.7	%
2	2	252,692		253,349		5.1		2	5	450,827		451,858		9.0
3	27	3,837,354		3,945,637		78.9		3	33	4,394,485		4,501,440		89.3
4	6	666,405		684,767		13.7		4	—	—		—		—
5	2	76,788		115,071		2.3		5	—	—		—		—
	37	$	4,833,239	$	4,998,824	100.0	%		39	$	4,931,042	$	5,039,298	100.0	%

(A)    In certain instances, KREF finances its loans through the non-recourse sale of a senior interest that is not included in the condensed consolidated financial statements. Total loan exposure includes the entire loan KREF originated and financed, including $143.6 million and $143.6 million of such non-consolidated interests, and excludes $66.2 million and $65.0 million vertical loan participation as of September 30, 2020 and December 31, 2019, respectively.

As of September 30, 2020, the average risk rating of KREF's portfolio was 3.1 (Average Risk), weighted by total loan exposure, as compared to 2.9 (Average Risk) as of December 31, 2019.

Loan Vintage — The following tables present the amortized cost of the loan portfolio at September 30, 2020, by KREF's internal risk rating and year of origination. The risk ratings are updated as of September 30, 2020.

September 30, 2020
				Amortized Cost by Year of Origination
Risk Rating	Number of Loans	Outstanding Principal		2020		2019		2018		2017		2016		2015		Total		Carrying Amount
Commercial Mortgage Loans
1	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
2	2	253,349		—		61,114		—		191,770		—		—		252,884		252,692
3	27	3,868,285		201,314		2,496,189		1,152,974		—		—		—		3,850,477		3,837,354
4	6	684,767		101,497		76,050		336,361		168,318		—		—		682,226		666,405
5	2	115,071		—		—		—		—		—		110,387		110,387		76,788
	37	$	4,921,472	$	302,811	$	2,633,353	$	1,489,335	$	360,088	$	—	$	110,387	$	4,895,974	$	4,833,239

Allowance for Credit Losses — For the three months ended March 31, June 30 and September 30, 2020, respectively, the changes to allowance for credit losses were as follows:

	Commercial Mortgage Loans		Unfunded Loan Commitments		Total
Balance at December 31, 2019	$	—	$	—	$	—
Cumulative-effect adjustment upon adoption of ASU 2016-13	13,909		1,100		15,009
Provision for credit losses, net	52,070		3,204		55,274
Balance at March 31, 2020	$	65,979	$	4,304	$	70,283
Provision for credit losses, net	1,070		(2,436)		(1,366)
Write-offs charged	(4,650)		—		(4,650)
Balance at June 30, 2020	$	62,399	$	1,868	$	64,267
Provision for credit losses, net	336		(462)		(126)
Balance at September 30, 2020	$	62,735	$	1,406	$	64,141

The increase in the provision for credit losses during the three months ended March 31, 2020 of $55.3 million, compared to the January 1, 2020 cumulative-effect adjustment upon adoption of ASU 2016-13 of $15.0 million, was primarily attributable to the significant adverse change in the economic outlook due to the COVID-19 pandemic. In addition, the average risk ratings of KREF's loan portfolio increased from 2.9 as of December 31, 2019 to 3.0 as of March 31, 2020.

The decrease of $1.4 million in the provision for credit losses during the three months ended June 30, 2020 compared to the March 31, 2020 provision was primarily attributable to a slightly more stable macro-economic outlook based on improved observed economic data, which was substantially offset by higher credit loss provision on 4 and 5-rated loans.

While the Company observed better economic data and an improved economic outlook during the three months ended September 30, 2020, the provision for credit losses remained substantially consistent with the prior quarter due to higher credit loss provision on 4 and 5-rated loans.

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

	September 30, 2020		December 31, 2019			September 30, 2020		December 31, 2019
Geography					Collateral Property Type
New York	21.9	%	22.5	%	Multifamily	51.8	%	58.3	%
Illinois	10.2		9.7		Office	30.5		25.5
Pennsylvania	9.5		9.2		Condo (Residential)	6.1		3.0
Virginia	8.4		8.2		Retail	4.4		4.7
Massachusetts	7.8		7.7		Hospitality	4.4		4.4
California	7.2		6.9		Industrial	1.4		2.8
Washington	6.9		6.9		Student Housing	1.4		1.3
Texas	6.3		2.5		Total	100.0	%	100.0	%
Florida	5.5		6.9
Minnesota	3.9		3.7
Colorado	3.4		2.8
Georgia	3.0		4.3
Oregon	2.2		2.5
Alabama	1.3		1.2
Washington D.C.	1.2		0.9
New Jersey	0.1		3.1
Other U.S.	1.2		1.0
Total	100.0	%	100.0	%

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Debt Obligations

9 Months Ended

Sep. 30, 2020

Debt Disclosure [Abstract]

Debt Obligations

Debt Obligations

The following table summarizes KREF's secured master repurchase agreements and other financing arrangements in place as of September 30, 2020 and December 31, 2019:

	September 30, 2020																		December 31, 2019
	Facility											Collateral							Facility
	Month Issued	Outstanding Principal		Carrying Value(A)		Maximum Facility Size		Final Stated Maturity	Weighted Average Funding Cost(B)		Weighted Average Life (Years) (B)	Outstanding Principal		Amortized Cost Basis		Carrying Value		Weighted Average Life (Years)(C)	Carrying Value(A)
Master Repurchase Agreements(D)
Wells Fargo(E)	Oct 2015	$	414,259	$	412,465	$	1,000,000	Nov 2023	1.9	%	2.2	$	653,674	$	650,349	$	614,703	3.4	$	464,933
Morgan Stanley(F)	Dec 2016	418,605		418,130		600,000		Dec 2022	2.7		1.8	568,280		565,407		564,251		4.2	392,279
Goldman Sachs(G)	Sep 2016	77,936		77,263		400,000		Oct 2023	3.1		2.2	161,024		161,020		158,588		2.1	223,867
Term Lending Agreement
KREF Lending V(H)	Jun 2019	900,000		899,031		900,000		Jun 2026	2.2		1.7	1,107,983		1,102,601		1,095,968		3.7	868,816
Warehouse Facility
HSBC Facility(I)	Mar 2020	—		(429)		500,000		Mar 2023	—		2.4	—		—		—		n.a	—
Asset Specific Financing
BMO Facility(J)	Aug 2018	60,000		59,709		300,000		n.a	2.0		3.3	76,000		75,692		73,142		3.4	141,120
Revolving Credit Agreement
Revolver(K)	Dec 2018	—		—		335,000		Dec 2023	—		3.2	n.a		n.a		n.a		n.a	—
Total / Weighted Average		$	1,870,800	$	1,866,169	$	4,035,000		2.3	%	1.9								$	2,091,015

(A)    Net of $4.6 million and $9.5 million unamortized debt issuance costs as of September 30, 2020 and December 31, 2019, respectively.

(B)    Average weighted by the outstanding principal of borrowings. Funding cost includes deferred financing costs.

(C)    Average based on the fully extended loan maturity, weighted by the outstanding principal of the collateral.

(D)    Borrowings under these repurchase agreements are collateralized by senior loans, held-for-investment, and bear interest equal to the sum of (i) a floating rate index, equal to one-month LIBOR, or an index approximating LIBOR, and (ii) a margin, based on the collateral. As of September 30, 2020 and December 31, 2019, the percentage of the outstanding principal of the collateral sold and not borrowed under these repurchase agreements, or average "haircut" weighted by outstanding principal of collateral, was 34.1% and 27.4%, respectively (or 32.6% and 25.7%, respectively, if KREF had borrowed the maximum amount approved by its repurchase agreement counterparties as of such dates).

(E)    The current stated maturity date is November 2021, which does not reflect two, twelve-month facility term extensions available to KREF, which is contingent upon certain covenants and thresholds. As of September 30, 2020, the collateral-based margin was between 1.25% and 2.15%.

(F)    In February 2020, the Morgan Stanley repurchase agreement was amended to change the initial maturity to December 2020, with two one-year extension options upon giving written notice and another two one-year extension periods subject to approval by Morgan Stanley. KREF has the option to increase the facility amount to $750.0 million. As of September 30, 2020, the collateral-based margin was between 1.75% and 1.85%.

(G)    The facility capacity steps down to $240.0 million on October 30, 2020. In May 2020, the facility was amended to extend the current stated maturity date to October 30, 2021. In addition, KREF has the option to extend the maturity date to October 31, 2023 by (i) electing to permanently reduce the maximum advance rate for each pledged loan to the lesser of 65% or the advance rate in effect for such loan at October 30, 2021, and (ii) payment of the applicable contractual fee, subject to the satisfaction of certain conditions. As of September 30, 2020, the collateral-base margin was between 1.85% and 2.00%.

(H)    In June 2019, KREF entered into a Master Repurchase and Securities Contract Agreement (the "Term Lending Agreement") with Morgan Stanley Mortgage Capital Holdings LLC ("Administrative Agent"), as administrative agent on behalf of Morgan Stanley Bank, N.A. ("Initial Buyer"), which provides for current and future financings of up to $900.0 million on a non-mark-to-market basis. The Initial Buyer subsequently syndicated a portion of the facility to multiple financial institutions. As of September 30, 2020, the Initial Buyer held 22.2% of the total commitment under the facility. Borrowings under the Term Lending Agreement are collateralized by certain loans, held for investment, and bear interest equal to one-month LIBOR, plus a 1.9% margin. The Term Lending Agreement has an initial maturity of June 2021, subject to five one-year extension options, which may be exercised by KREF upon the satisfaction of certain customary conditions and thresholds.

(I)    In March 2020, KREF entered into a $500.0 million Loan and Security Agreement with HSBC Bank USA, National Association (“HSBC Facility”). The facility, which matures in March 2023, provides warehouse financing on a non-mark-to-market basis with partial recourse to KREF.

(J)    In August 2018, KREF entered into a $200.0 million loan financing facility with BMO Harris Bank ("BMO Facility"). The facility provides asset-based financing on a non-mark to market basis with matched-term up to five years with partial recourse to KREF. During May 2019, KREF increased the borrowing capacity to $300.0 million. As of September 30, 2020, the collateral-based margin was 1.70%.

(K)    In December 2018, KREF entered into a $100.0 million corporate revolving credit facility (“Revolver”) administered by Morgan Stanley Senior Funding, Inc. Additional lenders were added in 2019 and 2020, further increasing the borrowing capacity under the Revolver to $335.0 million as of September 30, 2020. The current stated maturity of the facility is December 2023. Borrowings under the facility bear interest at a per annum rate equal to the sum of (i) a floating rate index and (ii) a fixed margin. Borrowings under this facility are full recourse to certain guarantor wholly-owned subsidiaries of KREF. As of September 30, 2020, the carrying value excluded $2.7 million unamortized debt issuance costs presented within "Other assets" in KREF's Condensed Consolidated Balance Sheets.

The preceding table excludes loan participations sold (Note 8).

As of September 30, 2020 and December 31, 2019, KREF had outstanding repurchase agreements and a Term Lending Agreement where the amount at risk with any individual counterparty, or group of related counterparties, exceeded 10.0% of KREF’s stockholders' equity. The amount at risk under these agreements is the net counterparty exposure, defined as the excess of the carrying amount (or market value, if higher than the carrying amount, for repurchase agreements) of the assets sold under agreement to repurchase, including accrued interest plus any cash or other assets on deposit to secure the repurchase obligation, over the amount of the repurchase liability, adjusted for accrued interest. The following table summarizes certain characteristics of KREF's repurchase agreements where the amount at risk with any individual counterparty, or group of related counterparties, exceeded 10.0% of KREF’s stockholders' equity as of September 30, 2020 and December 31, 2019:

	Outstanding Principal		Net Counterparty Exposure		Percent of Stockholders' Equity		Weighted Average Life (Years)(A)
September 30, 2020
Wells Fargo	$	414,259	$	202,268	19.5	%	2.2
Morgan Stanley	418,605		147,218		14.2		1.8
Term Lending Agreement(B)	900,000		199,099		19.2		1.7
Total / Weighted Average	$	1,732,864	$	548,585	52.9	%	1.9
December 31, 2019
Wells Fargo	$	468,452	$	178,827	15.9	%	2.6
Morgan Stanley	394,499		136,764		12.2		2.5
Term Lending Agreement(B)	870,051		203,800		18.2		2.1
Total / Weighted Average	$	1,733,002	$	519,391	46.3	%	2.4

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

(B)    There were multiple counterparties to the Term Lending Agreement. Morgan Stanley Bank, N.A. represented 4.3% and 8.9% of the net counterparty exposure as a percent of stockholders' equity as of September 30, 2020 and December 31, 2019, respectively.

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

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

Term Loan Financing

In April 2018, KREF, through its consolidated subsidiaries, entered into a term loan financing agreement (“Term Loan Facility”) with third party lenders for an initial borrowing capacity of $200.0 million that was subsequently increased to $1.0 billion in October 2018. The facility provides asset-based financing on a non-mark-to-market basis with matched term up to five years and is non-recourse to KREF. Borrowings under the facility are collateralized by senior loans, held-for-investment, and bear interest equal to one-month LIBOR plus a margin. As of September 30, 2020, the weighted average margin and interest rate on the facility were 1.6% and 1.7%, respectively. As of December 31, 2019, the weighted average margin and interest rate on the facility were 1.5% and 3.2%, respectively. The following tables summarize our borrowings under the Term Loan Facility:

	September 30, 2020
Term Loan Facility	Count	Outstanding Principal		Amortized Cost		Carrying Value		Wtd. Avg. Yield/Cost(A)	Guarantee(B)	Wtd. Avg. Term(C)
Collateral assets	13	$	1,191,725	$	1,186,481	$	1,179,982	L + 3.0%	n.a.	January 2024
Financing provided	n.a.	981,953		980,181		980,181		L + 1.9%	n.a.	January 2024

	December 31, 2019
Term Loan Facility	Count	Outstanding Principal		Amortized Cost		Carrying Value		Wtd. Avg. Yield/Cost(A)	Guarantee(B)	Wtd. Avg. Term(C)
Collateral assets	12	$	1,003,995	$	997,081	$	997,081	L + 3.0%	n.a.	November 2023
Financing provided	n.a.	798,180		793,872		793,872		L + 1.9%	n.a.	November 2023

(A)     Floating rate loans and related liabilities are indexed to one-month LIBOR. KREF's net interest rate exposure is in direct proportion to its interest in the net assets indexed to that rate. In addition to cash coupon, yield/cost includes the amortization of deferred origination/financing costs.

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

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

Activity — For the nine months ended September 30, 2020, the activity related to the carrying value of KREF’s secured financing agreements were as follows:

	Secured Financing Agreements, Net
Balance as of December 31, 2019	$	2,884,887
Principal borrowings	970,580
Principal repayments/sales/deconsolidation	(1,016,543)
Deferred debt issuance costs	(2,515)
Amortization of deferred debt issuance costs	9,941
Balance as of September 30, 2020	$	2,846,350

Maturities — KREF’s secured financing agreements, term loan financing and other consolidated debt obligations in place as of September 30, 2020 had current contractual maturities as follows:

Year	Nonrecourse		Recourse(A)		Total
2020	$	106,909	$	35,636	$	142,545
2021	734,051		64,306		798,357
2022	1,005,456		295,186		1,300,642
2023	356,741		32,142		388,883
2024	181,896		40,430		222,326
	$	2,385,053	$	467,700	$	2,852,753

(A)    Except for the Revolver, which is full recourse, amounts borrowed subject to a maximum 25.0% recourse limit. The Revolver expires in December 2023.

Covenants — KREF is required to comply with customary loan covenants and event of default provisions related to its secured financing agreements and Revolver, including, but not limited to, negative covenants relating to restrictions on operations with respect to KREF’s status as a REIT, and financial covenants. Such financial covenants include 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 cash proceeds of any equity issuances made and any capital contributions received by KREF and certain subsidiaries or up to approximately $880.2 million depending upon the facility); a cash liquidity covenant (the greater of $10.0 million or 5.0% of KREF's recourse indebtedness); and a total indebtedness covenant⁽¹⁾ (75.0% of KREF's total assets, net of VIE liabilities and non-recourse indebtedness). As of September 30, 2020 and December 31, 2019, KREF was in compliance with its financial debt covenants.

(1)    In July 2020, the Revolver credit agreement was amended to allow for incremental senior borrowings subject to a Senior Indebtedness covenant of 80% of KREF's total asset, net of Non-Recourse Indebtedness, as defined, and a Total Debt Incurrence covenant of 82% (ratio of KREF's Recourse Indebtedness, as defined, to KREF's total asset, net of Non-Recourse Indebtedness, as defined).

Secured Term Loan, Net

In September 2020, KREF entered into a $300.0 million secured term loan at a price of 97.5%, which bears interest at a per annum rate equal to one-month LIBOR plus a 4.75% margin, subject to a 1.0% LIBOR floor, payable quarterly beginning in December 2020. The secured term loan is partially amortizing, with an amount equal to 1.0% per annum of the principal balance due in quarterly installments starting March 31, 2021. The secured term loan matures on September 1, 2027 and contains restrictions relating to liens, asset sales, indebtedness, investments and transactions with affiliates. The secured term loan is secured by corporate level guarantees and does not include asset-based collateral.

Upon the execution of the secured term loan, KREF recorded a $7.5 million issuance discount and $4.8 million in issuance costs, inclusive of $1.1 million in arrangement and structuring fees paid to KKR Capital Markets ("KCM"), an affiliate of KREF.

The following table summarizes KREF’s secured term loan at September 30, 2020:

	September 30, 2020
Principal amount	$	300,000
Unamortized discount	(7,415)
Deferred financing costs	(4,707)
Carrying amount	$	287,878

Covenants — KREF is required to comply with customary loan covenants and event of default provisions related to its secured term loan that include, but are not limited to, negative covenants relating to restrictions on operations with respect to KREF’s status as a REIT, and financial covenants. Such financial covenants include a minimum consolidated tangible net worth of $650.0 million and a maximum Total Debt to Total Assets ratio, as defined, of 83.3% (the “Leverage Covenant”). The tangible net worth and Leverage Covenants are effective as of the last day of each fiscal quarter commencing with the fiscal quarter ending March 31, 2021. KREF was in compliance with such covenants as of September 30, 2020.

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Collateralized Loan Obligation

9 Months Ended

Sep. 30, 2020

Transfers and Servicing [Abstract]

Collateralized Loan Obligation

Collateralized Loan Obligation

In November 2018, KREF financed a pool of loan participations from our existing loan portfolio through a managed CLO. KREF 2018-FL1 provides KREF with match-term financing on a non-mark-to-market and non-recourse basis. KREF 2018-FL1 has a two-year reinvestment feature that allows principal proceeds of the collateral assets to be reinvested in qualifying replacement assets, subject to the satisfaction of certain conditions set forth in the indenture.

The following tables outline KREF 2018-FL1 collateral assets and respective borrowing as of September 30, 2020 and December 31, 2019:

	September 30, 2020
Collateralized Loan Obligation	Count	Outstanding Principal		Amortized Cost		Carrying Value		Wtd. Avg. Yield/Cost(B)	Wtd. Avg. Term(C)
Collateral assets(A)	19	$	1,000,000	$	1,000,000	$	996,039	L + 2.8%	February 2024
Financing provided	1	810,000		808,311		808,311		L + 2.2%	June 2036

	December 31, 2019
Collateralized Loan Obligation	Count	Outstanding Principal		Amortized Cost		Carrying Value		Wtd. Avg. Yield/Cost(B)	Wtd. Avg. Term(C)
Collateral assets(A)	22	$	1,000,000	$	1,000,000	$	1,000,000	L +2.8%	November 2023
Financing provided	1	810,000		803,376		803,376		L + 1.8%	June 2036

(A)Including $12.0 million cash held in CLO, and $42.0 million of loan repayment proceeds held by the servicer and receivable by the CLO as of September 30, 2020. Collateral loan assets represent 19.2% and 20.2% of the principal of KREF's commercial mortgage loans as of September 30, 2020 and December 31, 2019, respectively. As of September 30, 2020 and December 31, 2019, 100% of KREF loans financed through the CLO are floating rate loans.

(B)Yield on collateral assets is based on cash coupon. Financing cost includes amortization of deferred financing costs incurred in connection with the CLO.

(C)Loan term represents weighted-average final maturity, assuming extension options are exercised by the borrower. Repayments of CLO notes are dependent on timing of related collateral loan asset repayments post reinvestment period. The term of the CLO notes represents the rated final distribution date.

The following table presents the KREF 2018-FL1 Assets and Liabilities included in KREF’s Condensed Consolidated Balance Sheets:

Assets	September 30, 2020		December 31, 2019
Cash	$	12,000	$	—
Commercial mortgage loans, held-for-investment	946,350		1,000,000
Less: Allowance for credit losses	(3,972)		—
Commercial mortgage loans, held-for-investment, net	942,378		1,000,000
Accrued interest receivable	2,803		3,280
Other assets(A)	42,168		5
Total	$	999,349	$	1,003,285
Liabilities
Collateralized loan obligation, net	$	808,311	$	803,376
Accrued interest payable	621		1,254
Accounts payable, accrued expenses and other liabilities	71		72
Total	$	809,003	$	804,702

(A)Includes $42.0 million of loan repayment proceeds held with the servicer and receivable by the CLO as of September 30, 2020.

The following table presents the components of net interest income of KREF 2018-FL1 included in KREF’s Condensed Consolidated Statements of Income:

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2020		2019		2020		2019
Net Interest Income
Interest income	$	11,427	$	12,908	$	34,692	$	41,496
Interest expense(A)	5,806		9,681		20,960		29,648
Net interest income	$	5,621	$	3,227	$	13,732	$	11,848

(A)Includes $1.7 million and $0.9 million of deferred financing costs amortization for the three months ended September 30, 2020 and 2019, respectively; and $5.0 million and $2.5 million of deferred financing costs amortization for the nine months ended September 30, 2020 and 2019, respectively. KREF's unamortized deferred financing costs related to KREF 2018-FL1 were $1.7 million, $6.6 million and $7.3 million, as of September 30, 2020, December 31, 2019 and September 30, 2019, respectively.

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Secured Term Loan, Net

9 Months Ended

Sep. 30, 2020

Secured Term Loan, Net [Abstract]

Secured Term Loan, Net

Debt Obligations

The following table summarizes KREF's secured master repurchase agreements and other financing arrangements in place as of September 30, 2020 and December 31, 2019:

	September 30, 2020																		December 31, 2019
	Facility											Collateral							Facility
	Month Issued	Outstanding Principal		Carrying Value(A)		Maximum Facility Size		Final Stated Maturity	Weighted Average Funding Cost(B)		Weighted Average Life (Years) (B)	Outstanding Principal		Amortized Cost Basis		Carrying Value		Weighted Average Life (Years)(C)	Carrying Value(A)
Master Repurchase Agreements(D)
Wells Fargo(E)	Oct 2015	$	414,259	$	412,465	$	1,000,000	Nov 2023	1.9	%	2.2	$	653,674	$	650,349	$	614,703	3.4	$	464,933
Morgan Stanley(F)	Dec 2016	418,605		418,130		600,000		Dec 2022	2.7		1.8	568,280		565,407		564,251		4.2	392,279
Goldman Sachs(G)	Sep 2016	77,936		77,263		400,000		Oct 2023	3.1		2.2	161,024		161,020		158,588		2.1	223,867
Term Lending Agreement
KREF Lending V(H)	Jun 2019	900,000		899,031		900,000		Jun 2026	2.2		1.7	1,107,983		1,102,601		1,095,968		3.7	868,816
Warehouse Facility
HSBC Facility(I)	Mar 2020	—		(429)		500,000		Mar 2023	—		2.4	—		—		—		n.a	—
Asset Specific Financing
BMO Facility(J)	Aug 2018	60,000		59,709		300,000		n.a	2.0		3.3	76,000		75,692		73,142		3.4	141,120
Revolving Credit Agreement
Revolver(K)	Dec 2018	—		—		335,000		Dec 2023	—		3.2	n.a		n.a		n.a		n.a	—
Total / Weighted Average		$	1,870,800	$	1,866,169	$	4,035,000		2.3	%	1.9								$	2,091,015

(A)    Net of $4.6 million and $9.5 million unamortized debt issuance costs as of September 30, 2020 and December 31, 2019, respectively.

(B)    Average weighted by the outstanding principal of borrowings. Funding cost includes deferred financing costs.

(C)    Average based on the fully extended loan maturity, weighted by the outstanding principal of the collateral.

(D)    Borrowings under these repurchase agreements are collateralized by senior loans, held-for-investment, and bear interest equal to the sum of (i) a floating rate index, equal to one-month LIBOR, or an index approximating LIBOR, and (ii) a margin, based on the collateral. As of September 30, 2020 and December 31, 2019, the percentage of the outstanding principal of the collateral sold and not borrowed under these repurchase agreements, or average "haircut" weighted by outstanding principal of collateral, was 34.1% and 27.4%, respectively (or 32.6% and 25.7%, respectively, if KREF had borrowed the maximum amount approved by its repurchase agreement counterparties as of such dates).

(E)    The current stated maturity date is November 2021, which does not reflect two, twelve-month facility term extensions available to KREF, which is contingent upon certain covenants and thresholds. As of September 30, 2020, the collateral-based margin was between 1.25% and 2.15%.

(F)    In February 2020, the Morgan Stanley repurchase agreement was amended to change the initial maturity to December 2020, with two one-year extension options upon giving written notice and another two one-year extension periods subject to approval by Morgan Stanley. KREF has the option to increase the facility amount to $750.0 million. As of September 30, 2020, the collateral-based margin was between 1.75% and 1.85%.

(G)    The facility capacity steps down to $240.0 million on October 30, 2020. In May 2020, the facility was amended to extend the current stated maturity date to October 30, 2021. In addition, KREF has the option to extend the maturity date to October 31, 2023 by (i) electing to permanently reduce the maximum advance rate for each pledged loan to the lesser of 65% or the advance rate in effect for such loan at October 30, 2021, and (ii) payment of the applicable contractual fee, subject to the satisfaction of certain conditions. As of September 30, 2020, the collateral-base margin was between 1.85% and 2.00%.

(H)    In June 2019, KREF entered into a Master Repurchase and Securities Contract Agreement (the "Term Lending Agreement") with Morgan Stanley Mortgage Capital Holdings LLC ("Administrative Agent"), as administrative agent on behalf of Morgan Stanley Bank, N.A. ("Initial Buyer"), which provides for current and future financings of up to $900.0 million on a non-mark-to-market basis. The Initial Buyer subsequently syndicated a portion of the facility to multiple financial institutions. As of September 30, 2020, the Initial Buyer held 22.2% of the total commitment under the facility. Borrowings under the Term Lending Agreement are collateralized by certain loans, held for investment, and bear interest equal to one-month LIBOR, plus a 1.9% margin. The Term Lending Agreement has an initial maturity of June 2021, subject to five one-year extension options, which may be exercised by KREF upon the satisfaction of certain customary conditions and thresholds.

(I)    In March 2020, KREF entered into a $500.0 million Loan and Security Agreement with HSBC Bank USA, National Association (“HSBC Facility”). The facility, which matures in March 2023, provides warehouse financing on a non-mark-to-market basis with partial recourse to KREF.

(J)    In August 2018, KREF entered into a $200.0 million loan financing facility with BMO Harris Bank ("BMO Facility"). The facility provides asset-based financing on a non-mark to market basis with matched-term up to five years with partial recourse to KREF. During May 2019, KREF increased the borrowing capacity to $300.0 million. As of September 30, 2020, the collateral-based margin was 1.70%.

(K)    In December 2018, KREF entered into a $100.0 million corporate revolving credit facility (“Revolver”) administered by Morgan Stanley Senior Funding, Inc. Additional lenders were added in 2019 and 2020, further increasing the borrowing capacity under the Revolver to $335.0 million as of September 30, 2020. The current stated maturity of the facility is December 2023. Borrowings under the facility bear interest at a per annum rate equal to the sum of (i) a floating rate index and (ii) a fixed margin. Borrowings under this facility are full recourse to certain guarantor wholly-owned subsidiaries of KREF. As of September 30, 2020, the carrying value excluded $2.7 million unamortized debt issuance costs presented within "Other assets" in KREF's Condensed Consolidated Balance Sheets.

The preceding table excludes loan participations sold (Note 8).

As of September 30, 2020 and December 31, 2019, KREF had outstanding repurchase agreements and a Term Lending Agreement where the amount at risk with any individual counterparty, or group of related counterparties, exceeded 10.0% of KREF’s stockholders' equity. The amount at risk under these agreements is the net counterparty exposure, defined as the excess of the carrying amount (or market value, if higher than the carrying amount, for repurchase agreements) of the assets sold under agreement to repurchase, including accrued interest plus any cash or other assets on deposit to secure the repurchase obligation, over the amount of the repurchase liability, adjusted for accrued interest. The following table summarizes certain characteristics of KREF's repurchase agreements where the amount at risk with any individual counterparty, or group of related counterparties, exceeded 10.0% of KREF’s stockholders' equity as of September 30, 2020 and December 31, 2019:

	Outstanding Principal		Net Counterparty Exposure		Percent of Stockholders' Equity		Weighted Average Life (Years)(A)
September 30, 2020
Wells Fargo	$	414,259	$	202,268	19.5	%	2.2
Morgan Stanley	418,605		147,218		14.2		1.8
Term Lending Agreement(B)	900,000		199,099		19.2		1.7
Total / Weighted Average	$	1,732,864	$	548,585	52.9	%	1.9
December 31, 2019
Wells Fargo	$	468,452	$	178,827	15.9	%	2.6
Morgan Stanley	394,499		136,764		12.2		2.5
Term Lending Agreement(B)	870,051		203,800		18.2		2.1
Total / Weighted Average	$	1,733,002	$	519,391	46.3	%	2.4

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

(B)    There were multiple counterparties to the Term Lending Agreement. Morgan Stanley Bank, N.A. represented 4.3% and 8.9% of the net counterparty exposure as a percent of stockholders' equity as of September 30, 2020 and December 31, 2019, respectively.

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

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

Term Loan Financing

In April 2018, KREF, through its consolidated subsidiaries, entered into a term loan financing agreement (“Term Loan Facility”) with third party lenders for an initial borrowing capacity of $200.0 million that was subsequently increased to $1.0 billion in October 2018. The facility provides asset-based financing on a non-mark-to-market basis with matched term up to five years and is non-recourse to KREF. Borrowings under the facility are collateralized by senior loans, held-for-investment, and bear interest equal to one-month LIBOR plus a margin. As of September 30, 2020, the weighted average margin and interest rate on the facility were 1.6% and 1.7%, respectively. As of December 31, 2019, the weighted average margin and interest rate on the facility were 1.5% and 3.2%, respectively. The following tables summarize our borrowings under the Term Loan Facility:

	September 30, 2020
Term Loan Facility	Count	Outstanding Principal		Amortized Cost		Carrying Value		Wtd. Avg. Yield/Cost(A)	Guarantee(B)	Wtd. Avg. Term(C)
Collateral assets	13	$	1,191,725	$	1,186,481	$	1,179,982	L + 3.0%	n.a.	January 2024
Financing provided	n.a.	981,953		980,181		980,181		L + 1.9%	n.a.	January 2024

	December 31, 2019
Term Loan Facility	Count	Outstanding Principal		Amortized Cost		Carrying Value		Wtd. Avg. Yield/Cost(A)	Guarantee(B)	Wtd. Avg. Term(C)
Collateral assets	12	$	1,003,995	$	997,081	$	997,081	L + 3.0%	n.a.	November 2023
Financing provided	n.a.	798,180		793,872		793,872		L + 1.9%	n.a.	November 2023

(A)     Floating rate loans and related liabilities are indexed to one-month LIBOR. KREF's net interest rate exposure is in direct proportion to its interest in the net assets indexed to that rate. In addition to cash coupon, yield/cost includes the amortization of deferred origination/financing costs.

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

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

Activity — For the nine months ended September 30, 2020, the activity related to the carrying value of KREF’s secured financing agreements were as follows:

	Secured Financing Agreements, Net
Balance as of December 31, 2019	$	2,884,887
Principal borrowings	970,580
Principal repayments/sales/deconsolidation	(1,016,543)
Deferred debt issuance costs	(2,515)
Amortization of deferred debt issuance costs	9,941
Balance as of September 30, 2020	$	2,846,350

Maturities — KREF’s secured financing agreements, term loan financing and other consolidated debt obligations in place as of September 30, 2020 had current contractual maturities as follows:

Year	Nonrecourse		Recourse(A)		Total
2020	$	106,909	$	35,636	$	142,545
2021	734,051		64,306		798,357
2022	1,005,456		295,186		1,300,642
2023	356,741		32,142		388,883
2024	181,896		40,430		222,326
	$	2,385,053	$	467,700	$	2,852,753

(A)    Except for the Revolver, which is full recourse, amounts borrowed subject to a maximum 25.0% recourse limit. The Revolver expires in December 2023.

Covenants — KREF is required to comply with customary loan covenants and event of default provisions related to its secured financing agreements and Revolver, including, but not limited to, negative covenants relating to restrictions on operations with respect to KREF’s status as a REIT, and financial covenants. Such financial covenants include 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 cash proceeds of any equity issuances made and any capital contributions received by KREF and certain subsidiaries or up to approximately $880.2 million depending upon the facility); a cash liquidity covenant (the greater of $10.0 million or 5.0% of KREF's recourse indebtedness); and a total indebtedness covenant⁽¹⁾ (75.0% of KREF's total assets, net of VIE liabilities and non-recourse indebtedness). As of September 30, 2020 and December 31, 2019, KREF was in compliance with its financial debt covenants.

(1)    In July 2020, the Revolver credit agreement was amended to allow for incremental senior borrowings subject to a Senior Indebtedness covenant of 80% of KREF's total asset, net of Non-Recourse Indebtedness, as defined, and a Total Debt Incurrence covenant of 82% (ratio of KREF's Recourse Indebtedness, as defined, to KREF's total asset, net of Non-Recourse Indebtedness, as defined).

Secured Term Loan, Net

In September 2020, KREF entered into a $300.0 million secured term loan at a price of 97.5%, which bears interest at a per annum rate equal to one-month LIBOR plus a 4.75% margin, subject to a 1.0% LIBOR floor, payable quarterly beginning in December 2020. The secured term loan is partially amortizing, with an amount equal to 1.0% per annum of the principal balance due in quarterly installments starting March 31, 2021. The secured term loan matures on September 1, 2027 and contains restrictions relating to liens, asset sales, indebtedness, investments and transactions with affiliates. The secured term loan is secured by corporate level guarantees and does not include asset-based collateral.

Upon the execution of the secured term loan, KREF recorded a $7.5 million issuance discount and $4.8 million in issuance costs, inclusive of $1.1 million in arrangement and structuring fees paid to KKR Capital Markets ("KCM"), an affiliate of KREF.

The following table summarizes KREF’s secured term loan at September 30, 2020:

	September 30, 2020
Principal amount	$	300,000
Unamortized discount	(7,415)
Deferred financing costs	(4,707)
Carrying amount	$	287,878

Covenants — KREF is required to comply with customary loan covenants and event of default provisions related to its secured term loan that include, but are not limited to, negative covenants relating to restrictions on operations with respect to KREF’s status as a REIT, and financial covenants. Such financial covenants include a minimum consolidated tangible net worth of $650.0 million and a maximum Total Debt to Total Assets ratio, as defined, of 83.3% (the “Leverage Covenant”). The tangible net worth and Leverage Covenants are effective as of the last day of each fiscal quarter commencing with the fiscal quarter ending March 31, 2021. KREF was in compliance with such covenants as of September 30, 2020.

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Convertible Notes, Net

9 Months Ended

Sep. 30, 2020

Debt Disclosure [Abstract]

Convertible Notes, Net

Convertible Notes, Net

In May 2018, the Company issued $143.75 million of Convertible Notes, which 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. The Convertible Notes’ issuance costs of $5.1 million are amortized through interest expense over the life of the Convertible Notes.

The initial conversion rate for the Convertible Notes is 43.9386 shares of KREF’s common stock per $1,000 principal amount of Notes, which is equivalent to an initial conversion price of approximately $22.76 per share of KREF’s common stock, which represents a 10% conversion premium over the last reported sale price of $20.69 per share of KREF’s common stock on the New York Stock Exchange on May 15, 2018. The conversion rate is subject to adjustment under certain circumstances. In addition, upon a make-whole fundamental change as defined within the indenture governing the Convertible Notes, the Company will, under certain circumstances, increase the applicable conversion rate for a holder that elects to convert its Notes in connection with such make-whole fundamental change. Prior to February 15, 2023, the Convertible Notes will be convertible only upon satisfaction of certain conditions and during certain periods, and thereafter, at any time until the close of business on the second scheduled trading day immediately preceding the maturity date. KREF will satisfy any conversion elections by paying or delivering, as the case may be, cash, shares of KREF’s common stock or a combination of cash and shares of KREF’s common stock, at its election. KREF has the intent and ability to settle the Convertible Notes in cash and, as a result, the Convertible Notes did not have an impact on our diluted earnings per share.

Upon the issuance of the Convertible Notes, KREF recorded a $1.8 million discount based on the implied value of the conversion option and an assumed effective interest rate of 6.50%, as well as $5.1 million of initial issuance costs, inclusive of $0.8 million paid to an affiliate of KREF. Inclusive of the amortization of this discount and the issuance costs, KREF’s total cost of the May 2018 Convertible Notes issuance is 6.92% per annum.

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

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2020		2019		2020		2019
Cash coupon	$	2,201	$	2,201	$	6,604	$	6,603
Discount and issuance cost amortization	349		349		1,041		1,037
Total interest expense	$	2,550	$	2,550	$	7,645	$	7,640

The following table details the net book value of our Convertible Notes on our Condensed Consolidated Balance Sheets:

	September 30, 2020		December 31, 2019
Principal	$	143,750	$	143,750
Deferred financing costs	(2,690)		(3,460)
Unamortized discount	(945)		(1,215)
Net book value	$	140,115	$	139,075

Accrued interest payable for the Convertible Notes was $3.3 million and $1.1 million as of September 30, 2020 and December 31, 2019, respectively. Refer to Note 2 for additional discussion of our accounting policies for the Convertible Notes.

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Loan Participations Sold

9 Months Ended

Sep. 30, 2020

SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Abstract]

Loan Participations Sold

Loan Participations Sold

KREF finances certain loan investments through the syndication of a non-recourse, or limited-recourse, loan participation to unaffiliated third parties. In October 2019, KREF syndicated a $65.0 million vertical participation in one of its loan investments with a principal balance of $328.5 million to an unaffiliated third party, at par value. Such syndications did not qualify for "sale" accounting under GAAP and therefore are consolidated in KREF's condensed consolidated financial statements as of September 30, 2020 and December 31, 2019.

The following tables summarize the loan participation sold liabilities that KREF recognized since the corresponding syndications of the respective loan participations were not treated as "sales" as of September 30, 2020 and December 31, 2019:

	September 30, 2020
Loan Participations Sold	Count	Principal Balance		Amortized Cost		Carrying Value		Yield/Cost(A)	Guarantee	Term
Total loan	1	$	336,753	$	335,589	$	334,312	L + 2.6%	n.a.	July 2024
Vertical loan participation(B)	1	66,248		66,226		66,226		L + 2.6%	n.a.	July 2024

	December 31, 2019
Loan Participations Sold	Count	Principal Balance		Amortized Cost		Carrying Value		Yield/Cost(A)	Guarantee	Term
Total loan	1	$	328,500	$	326,881	$	326,881	L + 2.5%	n.a.	July 2024
Vertical loan participation(B)	1	65,000		64,966		64,966		L + 2.5%	n.a.	July 2024

(A)     Floating rate loans and related liabilities are indexed to one-month LIBOR. KREF's net interest rate exposure is in direct proportion to its interest in the net assets of the senior loan.

(B)    During the three months ended September 30, 2020 and 2019, KREF recorded $0.7 million and $0.0 million of interest income and $0.7 million and $0.0 million of interest expense, respectively; and during the nine months ended September 30, 2020 and 2019, KREF recorded $2.1 million and $0.0 million of interest income and $2.1 million and $0.0 million of interest expense, respectively, related to the vertical loan participation sold.

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Variable Interest Entities

9 Months Ended

Sep. 30, 2020

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Variable Interest Entities

Variable Interest Entities

Collateralized Loan Obligation — KREF is the primary beneficiary of a collateralized loan obligation consolidated as a VIE that closed in November 2018 (Note 5). Management considers the CLO Issuers, wholly-owned subsidiaries of KREF, to be the primary beneficiary as the CLO Issuers have the ability to control the most significant activities of the CLO, the obligation to absorb losses, and the right to receive benefits of the CLO through the subordinate interests the CLO Issuers own.

Equity method investments — KREF holds two investments in entities that it records using the equity method.

As of September 30, 2020, KREF held a 3.5% interest in RECOP I, an unconsolidated VIE of which KREF is not the primary beneficiary, at its fair value of $33.2 million. The aggregator vehicle in which KREF invests is controlled and advised by affiliates of the Manager. RECOP I primarily acquired junior tranches of CMBS newly issued by third parties. KREF will not pay any fees to RECOP I, but KREF bears its pro rata share of RECOP I's expenses. KREF reported its share of the net asset value of RECOP I in its Condensed Consolidated Balance Sheets, presented as “Equity method investments” and its share of net income, presented as “Income from equity method investments” in the Condensed Consolidated Statements of Income.

As of September 30, 2020, the non-voting limited liability company interests issued by the Manager, a VIE, and held by a Taxable REIT Subsidiary ("TRS") of KREF for the benefit of the holder of the SNVPS represented 4.7% of the Manager’s outstanding limited liability company interests (Note 10). KREF reported its interest in the Manager in its Condensed Consolidated Balance Sheets, presented as “Equity method investments” and its share of net income, presented as “Income from equity method investments” in the Condensed Consolidated Statements of Income.

CMBS — KREF beneficially owned and directly held CMBS with an unpaid principal balance and fair value of $34.9 million and $12.5 million, respectively, as of December 31, 2018. During the three months ended September 30, 2019, KREF sold its remaining directly held CMBS investments, comprised of (i) a controlling beneficial interest in a CMBS trust held and (ii) interest-only bonds, for $9.8 million, resulting in a net loss of $2.7 million, which is included in "Other Income - (Loss) gain on sale of investments" in the Condensed Consolidated Statements of Income. Consequently, KREF deconsolidated the respective CMBS trust upon sale.

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Equity

9 Months Ended

Sep. 30, 2020

Equity [Abstract]

Equity

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

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

Pricing Date	Shares Issued	Net Proceeds
As of December 31, 2015	13,636,416	$	272,728
February 2016	2,000,000	40,000
May 2016	3,000,138	57,130
June 2016(A)	21,838	—
August 2016	5,500,000	109,875
As of December 31, 2016	24,158,392	479,733
February 2017	7,386,208	147,662
April 2017	10,379,738	207,595
May 2017- Initial Public Offering	11,787,500	219,356
As of December 31, 2017	53,711,838	1,054,346
August 2018	5,000,000	98,326
November 2018	500,000	9,351
As of December 31, 2018	59,211,838	1,162,023

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

KREF did not issue additional common stock between January 1, 2019 and September 30, 2020 other than related to the vesting of restricted stock units discussed below.

In March 2016, KREF obtained $277.4 million of capital commitments in connection with the completion of a private placement priced at $20.00 per share. Of these capital commitments, $190.1 million consisted of approximately $178.4 million from third parties and approximately $11.8 million from certain current and former employees of, and non-employee consultants to, KKR. KKR committed a total of $400.0 million and third parties committed a total of $248.0 million subsequent to the private placement completion. In connection with the completion of the private placement, KREF formed an advisory board consisting of certain third-party investors. The advisory board possessed certain protective approval rights over KREF's activities outside its ordinary course of business, including certain business combinations and equity issuances. The advisory board dissolved upon KREF's public listing on May 5, 2017.

In February 2017 and April 2017, KREF called a portion of capital from investors in the private placements closed during the year ended December 31, 2016 and issued 7,386,208 and 10,379,738 common shares, at $20.00 per share, for net proceeds of $147.7 million and $207.6 million, respectively.

In connection with the capital commitments described above, third-party investors and certain current and former employees of, and non-employee consultants to, KKR were allocated non-voting limited liability company interests of the Manager. For each $100.0 million of KREF’s common stock acquired by investors through the private placement, the investors were allocated non-voting limited liability company interests, representing 6.67% of the Manager’s then-outstanding total limited liability company interests. Each investor was allocated its pro rata share of the non-voting limited liability company interests of the Manager based on the investor’s shares of KREF’s common stock.

In May 2017, KREF completed its initial public offering of 11,787,500 shares of its common stock at a price to the public of $20.50 per share, which included 1,537,500 shares of common stock issued in connection with the underwriters' exercise in full of their option to purchase additional shares. The value of KREF's common stock prior to its listing on the New York Stock Exchange was based upon its equity value using a combination of net asset value (market) and discounted cash flow (income) approaches.

In August 2018, KREF completed an underwritten public offering of 5,000,000 shares of its common stock at $19.90 per share, less applicable transaction costs, resulting in $98.3 million in net proceeds.

In November 2018, KREF completed an underwritten offering of 4,500,000 shares of its common stock at $20.00 per share, consisting of 500,000 shares issued and sold by KREF and 4,000,000 shares sold by pre-initial public offering third-party investors, resulting in $9.4 million in net proceeds to KREF.

As of September 30, 2020 and December 31, 2019, KKR beneficially owned 21,858,356 and 22,008,616 shares of KREF's common stock, of which 1,858,356 and 2,008,616 shares were held by KKR on behalf of a third-party investor (Note 1).

During the nine months ended September 30, 2020 and 2019, 42,459 and 40,503 shares of common stock were issued related to the vesting of restricted stock units. Upon any payment of shares as a result of restricted stock unit vesting, the related tax withholding obligation will generally be satisfied by KREF, reducing the number of shares to be delivered by a number of shares necessary to satisfy the related applicable tax withholding obligation. Refer to Note 11 for further detail.

Of the 59,391,731 common shares KREF issued, there were 55,491,405 common shares outstanding as of September 30, 2020, which includes 179,893 net shares of common stock issued in connection with vested restricted stock units and is net of 3,900,326 common shares repurchased as of September 30, 2020.

Share Repurchase Program — On June 15, 2020, KREF’s board of directors authorized an extension of the Company’s share repurchase program, which was scheduled to expire on June 30, 2020. Under the extended program, which has no expiration date, the Company may repurchase up to $100.0 million of its common stock beginning July 1, 2020, of which up to $50.0 million may be repurchased under a pre-set trading plan meeting the requirements of Rule 10b5-1 under the Exchange Act, and provide for repurchases of common stock when the market price per share is below book value per share (calculated in accordance with GAAP as of the end of the most recent quarterly period for which financial statements are available), and the remaining $50.0 million may be used for repurchases in the open market, pursuant to pre-set trading plans meeting the requirements of Rule 10b5-1 under the Exchange Act, in privately negotiated transactions or otherwise. The timing, manner, price and amount of any common stock repurchases will be determined by the Company in its discretion and will depend on a variety of factors, including legal requirements, price and economic and market conditions. The program does not require the Company to repurchase any specific number of shares of common stock, and the program may be suspended, extended, modified or discontinued at any time.

During the nine months ended September 30, 2020, KREF repurchased 2,037,637 shares of common stock at an average price per share of $12.27, for a total of $25.0 million. Payments for these shares are presented within “Payments to reacquire common stock” on the Condensed Consolidated Statements of Cash Flows.

At the Market Stock Offering Program — On February 22, 2019, KREF entered into an equity distribution agreement with certain sales agents, pursuant to which KREF may sell, from time to time, up to an aggregate sales price of $100.0 million of its common stock pursuant to a continuous offering program (the “ATM”). Sales of KREF’s common stock made pursuant to the ATM may be made in negotiated transactions or transactions that are deemed to be “at the market” offerings as defined in Rule 415 under the Securities Act of 1933, as amended. The timing and amount of actual sales will depend on a variety of factors including market conditions, the trading price of KREF’s common stock, KREF’s capital needs, and KREF’s determination of the appropriate sources of funding to meet such needs. KREF did not sell any shares of its common stock under the ATM during the nine months ended September 30, 2020.

Dividends — During the nine months ended September 30, 2020 and 2019, KREF's board of directors declared the following dividends on shares of its common stock and special voting preferred stock:

			Amount
Declaration Date	Record Date	Payment Date	Per Share		Total
2020
March 16, 2020	March 31, 2020	April 15, 2020	$	0.43	$	24,010
June 15, 2020	June 30, 2020	July 15, 2020	$	0.43	$	23,861
September 15, 2020	September 30, 2020	October 15, 2020	$	0.43	$	23,861
					$	71,732
2019
March 18, 2019	March 29, 2019	April 12, 2019	$	0.43	$	24,761
June 14, 2019	June 28, 2019	July 15, 2019	$	0.43	$	24,688
September 13, 2019	September 30, 2019	October 16, 2019	$	0.43	$	24,692
					$	74,141

Special Voting Preferred Stock — In March 2016, KREF issued one share of special voting preferred stock to KKR Fund Holdings L.P. ("KKR Fund Holdings") for $20.00 per share, which KKR Fund Holdings transferred to its subsidiary, KKR REFT Asset Holdings LLC. The holder of the special voting preferred stock has special voting rights related to the election of members to KREF's board of directors until KKR and its affiliates cease to own at least 25.0% of KREF's issued and outstanding common stock. KKR and its affiliates beneficially owned 21,858,356 and 22,008,616 shares of KREF's common stock, of which 1,858,356 and 2,008,616 shares were held on behalf of a third-party investor, representing 39.4% and 38.3% of KREF’s issued and outstanding common stock as of September 30, 2020 and December 31, 2019, respectively.

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

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

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

Earnings (Loss) per Share — The following table illustrates the computation of basic and diluted earnings (loss) per share for the three and nine months ended September 30, 2020 and 2019:

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2020		2019		2020		2019
Numerator
Net income (loss) attributable to common stockholders	$	31,351	$	23,617	$	24,777	$	65,703
Denominator
Basic weighted average common shares outstanding	55,491,405		57,420,140		56,107,765		57,406,802
Dilutive restricted stock units	140,765		128,926		79,696		104,490
Diluted weighted average common shares outstanding	55,632,170		57,549,066		56,187,461		57,511,292
Net income (loss) attributable to common stockholders, per:
Basic common share	$	0.56	$	0.41	$	0.44	$	1.14
Diluted common share	$	0.56	$	0.41	$	0.44	$	1.14

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Stock-based Compensation

9 Months Ended

Sep. 30, 2020

Share-based Payment Arrangement [Abstract]

Stock-based Compensation

Stock-based Compensation

KREF is externally managed by the Manager and does not currently have any employees. However, as of September 30, 2020, certain individuals employed by the Manager and affiliates of the Manager, and certain members of KREF's board of directors were compensated, in part, through the issuance of stock-based awards.

As of September 30, 2020, KREF had restricted stock unit (“RSU”) awards outstanding under the KKR Real Estate Finance Trust Inc. 2016 Omnibus Incentive Plan that was adopted on February 12, 2016 and amended and restated on November 17, 2016 (the "Incentive Plan") to certain members of KREF’s board of directors and employees of the Manager or its affiliates, none of whom are KREF employees. RSUs awarded to employees of the Manager or its affiliates, generally vest over three consecutive one-year periods and awards to certain members of KREF's board of directors vest over a one-year period, pursuant to the terms of the respective award agreements and the terms of the Incentive Plan. RSU awards are not entitled to dividends until KREF issues shares of its common stock, which are issuable on a one-to-one basis upon the RSU award vesting.

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

	Restricted Stock Units	Weighted Average Grant Date Fair Value Per RSU(A)
Unvested as of December 31, 2019	641,214	$	20.02
Granted	18,052	14.40
Vested	(59,551)	20.42
Forfeited/ cancelled	(1,239)	19.26
Unvested as of September 30, 2020	598,476	$	19.81

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

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

Year	Restricted Stock Units
2020	231,875
2021	249,935
2022	116,666
Total	598,476

Upon adoption of ASU No. 2018-07 in June 2018, KREF recognizes the compensation cost of RSUs awarded to employees of the Manager, or one or more of its affiliates, on a straight-line basis over the awards’ term at their grant date fair value, consistent with the RSUs awarded to certain members of KREF's board of directors.

During the three and nine months ended September 30, 2020, KREF recognized $1.4 million and $4.4 million, respectively, of stock-based compensation expense included in “General and administrative” expense in the Condensed Consolidated Statements of Income. During the three and nine months ended September 30, 2019, KREF recognized $1.0 million and $3.1 million, respectively, of stock-based compensation expense. As of September 30, 2020, there was $7.2 million of total unrecognized stock-based compensation expense related to unvested share-based compensation arrangements. This cost is expected to be recognized over a weighted average period of 0.8 years.

Upon any payment of shares as a result of restricted stock unit vesting, the related tax withholding obligation will generally be satisfied by KREF, reducing the number of shares to be delivered by a number of shares necessary to satisfy the related applicable tax withholding obligation. The amount results in a cash payment related to this tax liability and a corresponding adjustment to additional paid-in capital in the Condensed Consolidated Statement of Changes in Stockholders' Equity. The adjustment was $0.3 million for the nine months ended September 30, 2020, and is included as a reduction of capital related to the KREF's equity incentive plan in the Condensed Consolidated Statement of Changes in Stockholders' Equity. KREF delivered 42,459 shares of common stock for 59,551 vested RSUs during the nine months ended September 30, 2020.

Refer to Note 13 for additional information regarding the Incentive Plan.

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2020

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

As of September 30, 2020, KREF was subject to the following commitments and contingencies:

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

As of September 30, 2020, KREF was not involved in any material legal proceedings regarding claims or legal actions against KREF.

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

Capital Commitments — As of September 30, 2020, KREF had future funding requirements of $462.3 million related to its investments in commercial mortgage loans. These future funding commitments primarily relate to construction projects, capital improvements, tenant improvements and leasing commissions. Generally, funding commitments are subject to certain conditions that must be met, such as customary construction draw certifications, minimum credit metrics or executions of new leases before advances are made to the borrower.

In January 2017, KREF committed $40.0 million to invest in an aggregator vehicle alongside RECOP I. The two-year investment period for RECOP I ended in April 2019. As of September 30, 2020, KREF had a remaining commitment of $4.3 million to RECOP I.

Impact of the COVID-19 Pandemic — Due to the current COVID-19 pandemic in the United States and globally, KREF's operating partners, borrowers and their tenants, the properties securing our investments, and the economy as a whole have been, and will continue to be, adversely impacted. The magnitude and duration of the COVID-19 pandemic and its impact on KREF's borrowers and their tenants, cash flows and future results of operations could be significant and will largely depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the COVID-19 pandemic, the success of actions taken to contain or treat the pandemic, and reactions by consumers, companies, governmental entities and capital markets. The prolonged duration and impact of the COVID-19 pandemic could materially disrupt KREF's business operations and adversely impact its financial condition, results of operations, and cash flows. Refer to Note 2 for further discussion of COVID-19.

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Related Party Transactions

9 Months Ended

Sep. 30, 2020

Related Party Transactions [Abstract]

Related Party Transactions

Related Party Transactions

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

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

For its services to KREF, the Manager is entitled to a quarterly management fee equal to the greater of $62,500 or 0.375% of a weighted average adjusted equity and quarterly incentive compensation equal to 20.0% of the excess of (a) the trailing 12-month adjusted earnings over (b) 7.0% of the trailing 12-month weighted average adjusted equity (“Hurdle Rate”), less incentive compensation KREF already paid to the Manager with respect to the first three calendar quarters of such trailing 12-month period. The quarterly incentive compensation is calculated and paid in arrears with a three months lag.

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

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

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

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

No awards may be granted under the Incentive Plan on and after February 12, 2026. The Incentive Plan will continue to apply to awards granted prior to such date. During the nine months ended September 30, 2020, KREF granted 18,052 RSUs to KREF's directors. During the year ended December 31, 2019, KREF granted 362,832 RSUs to KREF's directors and employees of the Manager. As of September 30, 2020, 3,250,018 shares of common stock remained available for awards under the Incentive Plan.

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

	September 30, 2020		December 31, 2019
Management fees	$	4,223	$	4,280
Expense reimbursements and other	904		1,637
	$	5,127	$	5,917

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

	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Management fees	$	4,223	$	4,280	$	12,740	$	12,855
Incentive compensation	990		—		3,845		2,098
Expense reimbursements and other(A)	481		275		1,166		1,060
	$	5,694	$	4,555	$	17,751	$	16,013

(A)    KREF presents these amounts in "Operating Expenses — General and administrative" in its Condensed Consolidated Statements of Income. Affiliate expense reimbursements presented in the table above exclude the out-of-pocket amounts paid by the Manager to parties unaffiliated with the Manager on behalf of KREF, and for which KREF reimburses the Manager in cash. For the three and nine months ended September 30, 2020, these cash reimbursements totaled $0.8 million and $2.9 million, respectively; and for the three and nine months ended September 30, 2019, these cash reimbursements totaled $0.4 million and $1.5 million, respectively.

In connection with the Term Loan Facility (Note 4), KREF paid KKR Capital Markets or KCM, an affiliate of the Manager, a structuring fee equal to 0.75% of the respective committed loan advances, as defined. Such fees are capitalized as deferred financing cost and amortized to interest expense over the life of the facility. During the three and nine months ended September 30, 2020, KREF incurred $0.0 million, and during the three and nine months ended September 30, 2019, KREF incurred $0.0 million and $1.5 million, respectively; in structuring fees in connection with the facility.

In connection with the BMO Facility, and in consideration for structuring and sourcing this arrangement, KREF is obligated to pay KCM a structuring fee equal to 0.35% of the respective committed loan advances under the agreement. Such fees are capitalized as deferred financing cost and amortized to interest expense over the life of the facility. During the three and nine months ended September 30, 2020, KREF incurred $0.0 million; and during the three and nine months ended September 30, 2019, KREF incurred $0.0 million and $0.2 million, respectively, in structuring fees in connection with the facility.

In connection with the CLO issuance, and in consideration for its services as the co-placement agent, KREF incurred and paid KCM a $0.9 million placement agent fee equal to 0.105% of the CLO proceeds in the fourth quarter of 2018. The fee was capitalized as deferred financing cost and amortized to interest expense over the estimated life of the CLO.

In connection with the Revolver, and in consideration for structuring and sourcing this arrangement, KREF paid KCM a structuring fee equal to 0.75% of the aggregate amount of commitments first made available. The structuring fees are capitalized as deferred financing cost included within Other Assets in the Condensed Consolidated Balance Sheet and amortized to interest expense over the life of the Revolver. During the three and nine months ended September 30, 2020, KREF incurred $0.0 million and $0.6 million, respectively; and during the three and nine months ended September 30, 2019, KREF incurred $0.0 million and $1.1 million, respectively, in structuring fees in connection with the Revolver.

In connection with the ATM, KCM, in its capacity as one of the sales agents, will receive commissions for the shares of KREF’s common stock it sells. This amount is not to exceed, but may be less than, 2.0% of the gross sales price per share. KREF did not sell any shares under the ATM during the nine months ended September 30, 2020.

In connection with the HSBC Facility, and in consideration for structuring and sourcing this arrangement, KREF is obligated to pay KCM a structuring fee equal to 0.25% of the respective committed loan advances under the agreement. Such fees are capitalized as deferred financing cost and amortized to interest expense over the lesser of the initial term of the loan or the facility. During the three and nine months ended September 30, 2020, KREF incurred and paid KCM $0.0 million and $0.1 million, respectively, in structuring fees in connection with the facility.In connection with the secured term loan entered into in September 2020, and in consideration for structuring and arranging the loan, KREF paid KCM an arrangement and structuring fee equal to 0.37% of the principal amount of the secured term loan, which totaled $1.1 million. Such fee was capitalized as deferred financing cost and amortized to interest expense over the life of the secured term loan.

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Fair Value of Financial Instruments

9 Months Ended

Sep. 30, 2020

Fair Value Disclosures [Abstract]

Fair Value of Financial Instruments

Fair Value of Financial Instruments

The carrying values and fair values of KREF’s financial assets and liabilities recorded at fair value on a recurring basis, as well as other financial instruments not carried at fair value, as of September 30, 2020 were as follows:

							Fair Value
	Principal Balance(A)		Amortized Cost(B)		Carrying Value(C)		Level 1		Level 2		Level 3		Total
Assets
Cash and cash equivalents	$	301,375	$	301,375	$	301,375	$	301,375	$	—	$	—	$	301,375
Commercial mortgage loans, held-for-investment, net(D)	4,921,472		4,895,974		4,833,239		—		—		4,791,247		4,791,247
Equity method investments	33,468		33,468		33,468		—		—		33,468		33,468
	$	5,256,315	$	5,230,817	$	5,168,082	$	301,375	$	—	$	4,824,715	$	5,126,090
Liabilities
Secured financing agreements, net	$	2,852,753	$	2,846,350	$	2,846,350	$	—	$	—	$	2,852,753	$	2,852,753
Collateralized loan obligation, net	810,000		808,311		808,311		—		—		801,392		801,392
Secured term loan, net	300,000		287,878		287,878		—		297,939		—		297,939
Convertible notes, net	143,750		140,115		140,115		—		141,735		—		141,735
Loan participations sold, net	66,248		66,226		66,226		—		—		66,226		66,226
	$	4,172,751	$	4,148,880	$	4,148,880	$	—	$	439,674	$	3,720,371	$	4,160,045

(A)    The principal balance of commercial mortgage loans excludes premiums and unamortized discounts.

(B)    The amortized cost of commercial mortgage loans is net of $4.7 million write-off on a mezzanine loan and $20.8 million unamortized origination discounts and deferred nonrefundable fees. The amortized cost of secured financing agreements is net of $6.4 million unamortized debt issuance costs. The amortized cost of collateralized loan obligations is net of $1.7 million unamortized debt issuance costs.

(C)    The carrying value of commercial mortgage loans is net of $62.7 million allowance for credit losses.

(D)    Includes $946.0 million of CLO loan participations as of September 30, 2020. Includes senior loans for which KREF syndicated a vertical loan participation that did not qualify for sale accounting under GAAP, with a carrying value and a fair value of $66.2 million as of September 30, 2020.

The carrying values and fair values of KREF’s financial assets recorded at fair value on a recurring basis, as well as other financial instruments for which fair value is disclosed, as of December 31, 2019 were as follows:

							Fair Value
	Principal Balance(A)		Amortized Cost(B)		Carrying Value		Level 1		Level 2		Level 3		Total
Assets
Cash and cash equivalents	$	67,619	$	67,619	$	67,619	$	67,619	$	—	$	—	$	67,619
Commercial mortgage loans, held-for-investment, net(C)	4,960,698		4,931,042		4,931,042		—		—		4,937,808		4,937,808
Equity method investments	37,469		37,469		37,469		—		—		37,469		37,469
	$	5,065,786	$	5,036,130	$	5,036,130	$	67,619	$	—	$	4,975,277	$	5,042,896
Liabilities
Secured financing agreements, net	$	2,898,716	$	2,884,887	$	2,884,887	$	—	$	—	$	2,898,716	$	2,898,716
Collateralized loan obligation, net	810,000		803,376		803,376		—		—		810,867		810,867
Convertible notes, net	143,750		139,075		139,075		150,719		—		—		150,719
Loan participations sold, net	65,000		64,966		64,966		—		—		64,966		64,966
	$	3,917,466	$	3,892,304	$	3,892,304	$	150,719	$	—	$	3,774,549	$	3,925,268

(A)    The principal balance of commercial mortgage loans excludes premiums and unamortized discounts.

(B)    The amortized cost of commercial mortgage loans is presented net of $29.7 million unamortized origination discounts and deferred nonrefundable fees. The amortized cost of secured financing agreements is presented net of $13.8 million unamortized debt issuance costs. The amortized cost of collateralized loan obligations is presented net of $6.6 million unamortized debt issuance costs.

(C)    Includes $1.0 billion of CLO loan participations as of December 31, 2019. Includes senior loans for which KREF syndicated a vertical loan participation that did not qualify for sale accounting under GAAP, with a carrying value and a fair value of $65.0 million as of December 31, 2019.

During the nine months ended September 30, 2020, KREF received a distribution of $2.6 million and recorded a loss of $1.4

million related to its investment in RECOP I.

The following table contains the Level 3 inputs used to value assets and liabilities on a recurring and nonrecurring basis or where KREF discloses fair value as of September 30, 2020:

	Fair Value		Valuation Methodologies	Unobservable Inputs(A)	Weighted Average(B)	Range
Assets(C)
Commercial mortgage loans, held-for-investment(D)	$	4,791,247	Discounted cash flow	Discount rate	4.6%	2.9% - 19.1%
	$	4,791,247
Liabilities(E)
Collateralized loan obligation, net	$	801,392	Discounted cash flow	Yield	2.1%	1.7% - 4.2%
	$	801,392

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

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

(C)    KREF carries a $33.2 million investment in an aggregator vehicle alongside RECOP I (Note 9) at its pro rata share of the aggregator's net asset value, which management believes approximates fair value.

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

(E)    Does not include $66.2 million of vertical loan syndication which was syndicated at par value and included in “Loan participation sold, net” on the Condensed Consolidated Balance Sheet.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Certain assets not measured at fair value on an ongoing basis but subject to fair value adjustments only in certain circumstances, such as when there is evidence of impairment, are measured at fair value on a nonrecurring basis. For commercial mortgage loans held-for-sale, KREF applies the lower of cost or fair value accounting and may be required, from time to time, to record a nonrecurring fair value adjustment. For commercial mortgage loans held-for-investment and preferred interest in joint venture held-to-maturity, KREF applies the amortized cost method of accounting, but may be required, from time to time, to record a nonrecurring fair value adjustment in the form of a valuation provision or impairment. KREF did not report any significant financial assets or liabilities at fair value on a nonrecurring basis as of September 30, 2020 or December 31, 2019.

Assets and Liabilities for Which Fair Value is Only Disclosed

KREF does not carry its secured financing agreements at fair value as management did not elect the fair value option for these liabilities. As of September 30, 2020, the fair value of KREF's financing facilities approximated their respective outstanding principal balances.

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Income Taxes

9 Months Ended

Sep. 30, 2020

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

KREF has elected to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code commencing with its taxable year ended December 31, 2014. A REIT is generally not subject to U.S. federal and state income tax on that portion of its income that is distributed to stockholders if it distributes at least 90% of its REIT taxable income, determined without regard to the deduction for dividends paid and excluding any net capital gains. A REIT will also be subject to a nondeductible excise tax to the extent certain percentages of its taxable income are not distributed within specified dates. While KREF currently expects to distribute at least 90% of its net taxable income for the taxable year ending December 31, 2020, KREF will continue to evaluate its capital and liquidity needs in light of the significant uncertainties created by the COVID-19 pandemic, including the potential for a continued and prolonged adverse impact on economic and market conditions.

KREF consolidates subsidiaries that incur U.S. federal, state and local income taxes, based on the tax jurisdiction in which each subsidiary operates. During the nine months ended September 30, 2020 and 2019, KREF recorded a current income tax provision of $0.3 million and $0.4 million respectively, related to operations of its taxable REIT subsidiaries and various other state and local taxes. There were no deferred tax assets or liabilities as of September 30, 2020 and December 31, 2019.

As of September 30, 2020, tax years 2016 through 2019 remain subject to examination by taxing authorities.

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Subsequent Events

9 Months Ended

Sep. 30, 2020

Subsequent Events [Abstract]

Subsequent Events

Subsequent Events

The following events occurred subsequent to September 30, 2020:

Investing Activities

KREF originated the following loans:

Description/ Location	Property Type	Month Originated	Maximum Face Amount		Initial Face Amount Funded		Interest Rate (A)	Maturity Date(B)	LTV
Senior Loan, Arlington VA(C)	Multifamily	October 2020	$	70,895	$	68,000	L + 3.8%	October 2025	73%
Senior Loan, Denver CO(D)	Multifamily	October 2020	40,000		38,500		L + 3.6%	October 2024	49
Senior Loan, Oakland CA(E)	Office	October 2020	159,690		94,720		L + 4.3%	October 2025	65
Total/ Weighted Average			$	270,585	$	201,220	L + 4.1%		65%

(A)    Floating rate based on one-month USD LIBOR.

(B)    Maturity date assumes all extension options are exercised, if applicable.

(C)    The total whole loan maximum face amount is $141.8 million, co-originated and co-funded by KREF and a KKR fund on a pari passu basis. KREF's interest is 50% of the loan.

(D)    The total whole loan maximum face amount is $80.0 million, co-originated and co-funded by KREF and a KKR fund on a pari passu basis. KREF's interest is 50% of the loan.

(E)    The total whole loan maximum face amount is $509.9 million, co-originated and co-funded by KREF and a KKR fund, of which $280.0 million senior notes were concurrently syndicated to third party lenders. KREF's interest is 31% of the non-syndicated loan.

Funding of Previously Closed Loans

KREF funded approximately $14.4 million for previously closed loans.

Loan Repayments

KREF received approximately $64.7 million from loan repayments.

Corporate Activities

Dividends

In October 2020, KREF paid $23.9 million in dividends on its common stock, or $0.43 per share, with respect to the third quarter of 2020, to stockholders of record on September 30, 2020.

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Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2020

Accounting Policies [Abstract]

Basis of Presentation

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

Risks and Uncertainties

Risks and Uncertainties — The outbreak of the coronavirus pandemic (“COVID-19”) around the globe continues to adversely impact global commercial activity and has contributed to significant volatility in financial markets. The impact of the outbreak has been rapidly evolving around the globe, with several countries taking drastic measures to limit the spread of the virus by instituting quarantines or lockdowns, imposing travel restrictions and limiting operations of non-essential offices and retail centers. Such actions are creating significant disruptions to global supply chains, increasing rates of unemployment and adversely impacting several industries, including but not limited to, airlines, hospitality, retail and the broader real estate industry.

The major disruption caused by COVID-19 significantly reduced economic activity in most of the United States resulting in a significant increase in unemployment claims and a significant decline in the U.S. Gross Domestic Product (“GDP”).

COVID-19 could have a continued and prolonged adverse impact on economic and market conditions and trigger a period of global economic slowdown which could have a material adverse effect on the Company’s results and financial condition.

The full impact of COVID-19 on the real estate industry, the credit markets and consequently on the Company’s financial condition and results of operations is uncertain and cannot be predicted at the current time as it depends on several factors beyond the control of the Company including, but not limited to (i) the uncertainty around the severity and duration of the outbreak, (ii) the effectiveness of the United States public health response, (iii) the pandemic’s impact on the U.S. and global economies, (iv) the timing, scope and effectiveness of additional governmental responses to the pandemic, (v) the timing and speed of economic recovery, including the availability of a treatment or vaccination for COVID-19 and (vi) the negative impact on our borrowers, real estate values and cost of capital.

Use of Estimates

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

Consolidation

Consolidation — KREF consolidates those entities for which (i) it controls through either majority ownership or voting rights

or (ii) management determines that KREF is the primary beneficiary of entities deemed to be variable interest entities ("VIEs").

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

To assess whether KREF has the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance, KREF considers all the facts and circumstances, including its role in establishing the VIE and its ongoing rights and responsibilities. This assessment includes, first, identifying the activities that most significantly impact the VIE’s economic performance; and second, identifying which party, if any, has power to direct those activities. To assess whether KREF has the obligation to absorb losses of, or the right to receive benefits from, the VIE that could potentially be significant to the VIE, KREF considers all of its economic interests and applies judgment in determining whether these interests, in the aggregate, are considered potentially significant to the VIE.

Collateralized Loan Obligation — KREF consolidates a collateralized loan obligation that closed in November 2018 (“KREF 2018-FL1” or “CLO”) (Note 5). Management determined that KREF 2018-FL1 Ltd. and KREF 2018-FL1 LLC (the "CLO Issuers"), wholly-owned subsidiaries of KREF, were VIEs and that KREF was the primary beneficiary. KREF is the primary beneficiary of the VIEs since it has the ability to control the most significant activities of the CLO Issuers through ownership of non-investment grade rated subordinated controlling tranches, has the obligation to absorb losses, and the right to receive benefits, that could potentially be significant to these entities. As a result, KREF consolidates the CLO Issuers.

The collateral assets of the CLO, comprised of a pool of loan participations (Note 5) are included in “Commercial mortgage loans, held-for-investment, net” on the Condensed Consolidated Balance Sheets. The liabilities of KREF's consolidated CLO Issuers consist solely of obligations to the senior CLO noteholders, excluding subordinated CLO tranches held by KREF as such interests are eliminated in consolidation, are presented in “Collateralized loan obligation, net” in the Condensed Consolidated Balance Sheets. The collateral assets of the CLO can only be used to settle the obligations of the consolidated CLO. The interest income from the CLO collateral assets and the interest expense on the CLO liabilities are presented on a gross basis in “Interest income” and “Interest expense”, respectively, in KREF's Condensed Consolidated Statements of Income.

CMBS — KREF consolidates those trusts that issue beneficial ownership interests in mortgage loans secured by CRE (commonly known as CMBS) when KREF holds a variable interest in, and management considers KREF to be the primary beneficiary of, those trusts. Management believes the performance of the assets that underlie CMBS issuances most significantly impacts the economic performance of the trust, and the primary beneficiary is generally the entity that conducts activities that most significantly impact the performance of the underlying assets. In particular, the most subordinate tranches of CMBS expose the holder to the greater variability of economic performance when compared to more senior tranches since the subordinate tranches absorb a disproportionately higher amount of the credit risk related to the underlying assets. Generally, a trust designates the most junior subordinate tranche outstanding as the controlling class, which entitles the holder of the controlling class to unilaterally appoint and remove the special servicer for the trust. The special servicer is responsible for the servicing and administration of delinquent and nonperforming loans as well as real estate owned ("REO") properties held as collateral delivered on foreclosed loans. While the special servicer cannot prevent losses, its services to the trust are designed to mitigate credit losses to holders of the CMBS.

For any CMBS trust that KREF consolidates, KREF holds an unrated tranche that represents the most subordinated tranche of the CMBS issued by that trust, which include the controlling class. As the holder of the most subordinate tranche, KREF is in a first loss position and has the right to receive benefits. As the holder of the controlling class, KREF has the ability to unilaterally appoint and remove the special servicer for the trust. In these cases, management considers KREF to be the primary beneficiary and consolidates that CMBS trust.

For VIEs in which management determines KREF is the primary beneficiary, all of the underlying assets, liabilities and equity of the trusts are recorded on KREF's books, and the initial investment, along with any associated unrealized holding gains and losses, are eliminated in consolidation. Similarly, the interest income earned from these trusts is eliminated in consolidation.

Management elected the fair value option for KREF's initial and subsequent recognition of the assets and liabilities of KREF's consolidated CMBS VIEs in order to provide users of the financial statements with better information regarding the effects of credit risk and other market factors on the CMBS beneficially held by KREF's stockholders. Since the changes in fair value include the interest income and interest expense associated with these CMBS VIEs, management does not consider the separate presentation of the components of fair value changes to be relevant. Management has elected to present these items in aggregate as "Other Income — Change in net assets related to CMBS consolidated variable interest entities" in the Condensed Consolidated Statements of Income; the residual difference between the fair value of the trust's assets and liabilities represents KREF's beneficial interest in the CMBS VIEs.

Management separately presents the assets and liabilities of KREF's consolidated VIEs as individual line items on KREF's Condensed Consolidated Balance Sheets for entities in which the VIEs assets can only be used to settle the VIE’s obligations. The liabilities of KREF's consolidated VIEs consist solely of obligations to the CMBS holders of the consolidated trust, excluding CMBS held by KREF as such interests are eliminated in consolidation, and the interest accrued thereon, presented as "Liabilities — Variable interest entity liabilities, at fair value." The assets of KREF's consolidated VIEs consist principally of commercial mortgage loans and the interest accrued thereon, and are likewise presented as a single line item entitled "Assets — Commercial mortgage loans held in variable interest entities, at fair value."

Assets of a CMBS trust, as a whole, can only be used to settle the obligations of the consolidated CMBS VIE. The assets of KREF's CMBS VIEs are not individually accessible by, and obligations of the CMBS VIEs are not recourse to, the bondholders.

KREF derives the fair value of its Level 3 CMBS VIE assets from its Level 3 CMBS VIE liabilities, which management considers to possess more observable market value data than the CMBS VIE assets. See "— Fair Value — Valuation of CMBS Consolidated VIEs" for additional discussion regarding management's valuation of consolidated CMBS VIEs. During the three months ended September 30, 2019, KREF sold the remaining directly held CMBS investments, including an unrated tranche that represented the most subordinated tranche of the CMBS issued by that trust, including the controlling class. Accordingly, KREF deconsolidated the respective CMBS trust (Note 9).

Temporary Equity

Temporary Equity — KREF's Special Non-Voting Preferred Stock (“SNVPS”) became redeemable in the second quarter of 2018. As a result, starting with the second quarter of 2018, KREF adjusts the carrying value of the SNVPS to its redemption value quarterly. Accordingly, KREF adjusted the carrying value of the SNVPS to its redemption value of $2.0 million as of September 30, 2020, and recorded a ($0.3) million and $0.3 million non-cash redemption value adjustment to the SNVPS (“SNVPS Redemption Value Adjustment”) during the three and nine months ended September 30, 2020, respectively. Such adjustment is treated similar to a dividend on preferred stock for GAAP purposes, accordingly, the SNVPS Redemption Value Adjustment is therefore deducted from (or added back to) “Net Income (Loss)” to arrive at “Net Income (Loss) Attributable to Common Stockholders” on KREF's Condensed Consolidated Statements of Income.

Equity method investments

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

Management determined that KREF's investment in the Manager is an interest in a VIE, however KREF is not the primary beneficiary. KREF does not have substantive participating or kick-out rights nor the power to direct activities and the obligation

to absorb losses of the Manager that could be significant to the Manager. KREF accounts for its investment in the Manager using the equity method (Note 9).

Management determined that KREF's investment in an aggregator vehicle alongside KKR Real Estate Credit Opportunity Partners L.P. ("RECOP I ") is an interest in a VIE, however KREF is not the primary beneficiary and does not have substantive participating or kick-out rights. KREF records its share of net asset value in RECOP I in “Equity method investments” on its Condensed Consolidated Balance Sheets and its share of unrealized gains or losses in "Income from equity method investments" in its Condensed Consolidated Statements of Income. Management elected the fair value option for KREF's investment in RECOP I.

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

Fair Value

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

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

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

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

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

Valuation Process — The Manager reviews the valuation of Level 3 financial instruments as part of KKR's quarterly process. As of September 30, 2020, KKR’s valuation process for Level 3 measurements, as described below, subjected valuations to the review and oversight of various committees. KKR has a global valuation committee assisted by the asset class-specific valuation committees, including a real estate valuation committee that reviews and approves all preliminary Level 3 valuations for real estate assets, including the financial instruments held by KREF. The global valuation committee is responsible for coordinating and implementing KKR’s valuation process to ensure consistency in the application of valuation principles across portfolio investments and between periods. All Level 3 valuations are also subject to approval by the global valuation committee.

Valuation of Commercial Mortgage Loans and Participation Sold — Management generally considers KREF's commercial mortgage loans Level 3 assets in the fair value hierarchy as such assets are illiquid, structured investments that are specific to the underlying property and its operating performance (Note 14). On a quarterly basis, management engages an independent valuation firm to estimate the fair value of each loan categorized as a Level 3 asset. Management reviews the quarterly loan valuation estimates provided by the independent valuation firm. These loans are generally valued using a discounted cash flow model using discount rates derived from observable market data applied to the capital structure of the respective sponsor and estimated property value. In the event that management's estimate of fair value differs from the fair value estimate provided by the independent valuation firm, KREF ultimately relies solely upon the valuation prepared by the investment personnel of the Manager.

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

such evidence supporting a different value. As a result, the independent valuation firm may revise their price accordingly. However, if management continues to disagree with the price from the independent valuation firm, in light of evidence presented that management compiled independently and believes to be compelling, management considers the independent valuation firm's quotation unreliable or inaccurate representation of the fair value of the CLO liabilities.

In the event that the quotation from the independent valuation firm is not available or determined to be unreliable or an inadequate representation of the fair value of the CLO liabilities, valuations are prepared using inputs based on non-binding broker quotes obtained from independent, well-known, major financial brokers that are CLO market makers. In validating any non-binding broker quote used in this circumstance, management compares the non-binding quote to the observable market data points at such time and used to validate prices received from the independent valuation firm in addition to understanding the valuation methodologies used by the market makers. These market participants utilize a similar methodology as the independent valuation firm to value the CLO liabilities, with the key input of expected yield determined independently based on both observable and unobservable factors (as described above). To avoid reliance on any single broker-dealer, management receives a minimum of two non-binding quotes, of which the average is used.

Valuation of CMBS Consolidated VIEs — Management categorizes the financial assets and liabilities of the CMBS trusts that KREF consolidates as Level 3 assets and liabilities in the fair value hierarchy and has elected the fair value option for financial assets and liabilities of each CMBS trust. Management has adopted the measurement alternative included in Accounting Standards Update No. 2014-13, Measuring the Financial Assets and the Financial Liabilities of a Consolidated Collateralized Financing Entity ("ASU 2014-13"). Pursuant to ASU 2014-13, management measures both the financial assets and financial liabilities of the CMBS trusts consolidated by KREF using the fair value of the financial liabilities, which management considers more observable than the fair value of the financial assets. Accordingly, KREF presents the CMBS issued by a consolidated trust, but not beneficially owned by KREF's stockholders, as financial liabilities in KREF's condensed consolidated financial statements, measured at their estimated fair value; KREF measures the financial assets as the total estimated fair value of the CMBS issued by a consolidated trust, regardless of whether such CMBS represent interests beneficially owned by KREF's stockholders. Under the measurement alternative prescribed by ASU 2014-13, KREF's "Net Income (Loss)" reflects the economic interests in the consolidated CMBS beneficially owned by KREF's stockholders, presented as "Change in net assets related to CMBS consolidated variable interest entities" in the Condensed Consolidated Statements of Income, which includes applicable (i) changes in the fair value of CMBS beneficially owned by KREF, (ii) interest and servicing fees earned from the CMBS trust and (iii) other residual returns or losses of the CMBS trust, if any (Note 9).

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

KREF’s determination of fair value is based upon the best information available for a given circumstance and may incorporate assumptions that are management’s best estimates after consideration of a variety of internal and external factors. When an independent valuation firm expresses an opinion on the fair value of a financial instrument in the form of a range, management selects a value within the range provided by the independent valuation firm, generally the midpoint, to assess the reasonableness of management’s estimated fair value for that financial instrument.

Sales of Financial Assets and Financing Agreements

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

Cash and Cash Equivalents and Restricted Cash

Cash and Cash Equivalents and Restricted Cash — KREF considers cash equivalents as highly liquid short-term investments with maturities of 90 days or less when purchased. Substantially all amounts on deposit with major financial institutions exceed insured limits. KREF must also maintain sufficient cash and cash equivalents to satisfy liquidity covenants related to its secured financing agreements. However, such amounts are not restricted from use in KREF's current operations, and KREF does not present these cash and cash equivalents as restricted.

Commercial Mortgage Loans Held-For-Investment and Allowance for Credit Losses

Commercial Mortgage Loans Held-For-Investment and Allowance for Credit Losses — KREF recognizes its investments in commercial mortgage loans based on management's intent, and KREF's ability, to hold those investments through their contractual maturity. Management classifies those loans that management does not intend to sell in the foreseeable future, and KREF is able to hold until maturity, as held-for-investment. Loans that are held-for-investment are carried at their aggregate outstanding principal, net of applicable (i) unamortized origination or acquisition premiums and discounts, (ii) unamortized deferred nonrefundable fees and other direct loan origination costs, and (iii) allowance for credit losses, net of write-offs of impaired loans. If a loan is determined to be impaired, management writes down the loan through a charge to the "Allowance for credit losses". See "— Expense Recognition — Commercial Mortgage Loans, Held-For-Investment" for additional discussion regarding management’s determination for loan losses. KREF applies the interest method to amortize origination or acquisition premiums and discounts and deferred nonrefundable fees or other direct loan origination costs, or on a straight-line basis when it approximates the interest method. Loans for which management elects the fair value option at the time of origination, or acquisition, are carried at fair value on a recurring basis (Note 3).

Commercial Mortgage Loans Held-For-Sale

Commercial Mortgage Loans Held-For-Sale — Loans that KREF originates or acquires, which KREF is unable to hold, or management intends to sell or otherwise dispose of, in the foreseeable future are classified as held-for-sale and are carried at the lower of amortized cost or fair value.Commercial Mortgage Loans, Held-For-Sale — For commercial mortgage loans held-for-sale, KREF applies the lower of cost or fair value accounting and may be required, from time to time, to record a nonrecurring fair value adjustment.

Secured Financing Agreements, Secured Term Loan, Net and Convertible Notes, Net

Secured Financing Agreements — KREF's secured financing agreements, including uncommitted repurchase facilities, Term Lending Agreement, Warehouse Facility, Asset Specific Financings and Term Loan Financings, are treated as floating-rate collateralized financing arrangements carried at their contractual amounts, net of unamortized debt issuance costs (Note 4). Included within KREF's secured financing agreements is KREF's corporate revolving credit facility ("Revolver"), which is full recourse to certain guarantor wholly-owned subsidiaries of KREF.

Secured Term Loan, Net — KREF records its secured term loan at its contractual amount, net of unamortized original issuance discount and deferred financing costs (Note 6) on its condensed consolidated balance sheet. Any original issuance discount or deferred financing costs are amortized through the maturity date of the secured term loan as additional non-cash interest expense.

Convertible Notes, Net — KREF accounts for its convertible debt with a cash conversion feature in accordance with ASC 470-20 “Debt with Conversion and Other Options” which requires the liability and equity components of convertible debt instruments that may be settled in cash upon conversion, including partial cash settlement, to be separately accounted for in a manner that reflects the issuer’s nonconvertible debt borrowing rate. The initial proceeds from the sale of convertible notes are allocated between a liability component and an equity component in a manner that reflects interest expense at the rate of similar nonconvertible debt that could have been issued at such time. The equity component represents the excess initial proceeds received over the fair value of the liability component of the notes as of the date of issuance. KREF measured the estimated fair value of the debt component of the 6.125% convertible senior notes due May 15, 2023 (“Convertible Notes”) as of the issuance date based on KREF’s nonconvertible debt borrowing rate. The equity component of the Convertible Notes is reflected within

additional paid-in capital on the Condensed Consolidated Balance Sheets, and the resulting debt discount is amortized over the period during which such Convertible Notes are expected to be outstanding (through the maturity date) as additional non-cash interest expense using the interest method, or on a straight line basis when it approximates the interest method. The additional non-cash interest expense attributable to such convertible notes will increase in subsequent periods through the maturity date as the notes accrete to their par value over the same period (Note 7).

Loan Participations Sold, Net

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

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

To the extent that a sale is not recognized under GAAP from the syndication, KREF does not derecognize the participation in the senior/whole loan that it sold. Instead, KREF recognizes a loan participation sold liability in an amount equal to the principal of the loan participation syndicated less any unamortized discounts or financing costs resulting from the syndication. KREF continues to recognize interest income on the entire senior loan, including the interest attributable to the loan participation sold, as well as interest expense on the loan participation sold liability (Note 8).

Dividends Payable

Dividends Payable — KREF accrues for dividends on its common stock and the redeemable preferred stock upon declaration of such dividends.

Special Non-Voting Preferred Stock

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

Repurchased Stock

Repurchased Stock — KREF accounts for repurchases of its common stock based on the settlement date and presents repurchased stock in “Repurchased stock” on its Condensed Consolidated Balance Sheets (Note 10). Payments for stock repurchases that are not yet settled as of the reporting date are presented within “Other assets” on the Condensed Consolidated Balance Sheets. As of September 30, 2020, KREF did not retire any repurchased stock.

Income Recognition

Income Recognition

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

Other Income — KREF recognizes interest income earned on its cash balances and miscellaneous fee income in “Other income” on its Condensed Consolidated Statements of Income. Interest income on cash balances totaled $0.5 million and $1.5 million for the nine months ended September 30, 2020 and 2019, respectively.

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

Commercial Mortgage Loans, Held-For-Investment

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

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

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

Management considers loans to be past due when a monthly payment is due and unpaid for 60 days or more. Loans are placed on nonaccrual status and considered non-performing when full payment of principal and interest is in doubt, which generally occurs when principal or interest is 120 days or more past due unless the loan is both well secured and in the process of collection. Interest received on loans placed on nonaccrual status are accounted for under the cost-recovery method, until qualifying for return to accrual. Management may return a loan to accrual status when repayment of principal and interest is reasonably assured under the terms of the restructured loan. During the three months ended June 30, 2020, management placed one mezzanine loan with an outstanding principal balance of $5.5 million on nonaccrual status and wrote off $4.7 million (the "Write-off") of the loan balance determined uncollectable (Note 3). As of September 30, 2020, no other loan was placed on nonaccrual status or otherwise considered past due.

In certain circumstances, KREF may also modify the original terms of a loan agreement by granting a concession to a borrower experiencing financial difficulty. Such modifications are considered troubled debt restructurings (“TDR”) under GAAP and typically include interest rate reductions, payment extension and modification of loan covenants. KREF did not have any loan modifications accounted for as TDRs during the three and nine months ended September 30, 2020.

In conjunction with reviewing commercial mortgage loans held-for-investment for impairment, the Manager evaluates KREF's commercial mortgage loans on a quarterly basis, assesses the risk factors of each loan, and assigns a risk rating based on a variety of factors, including, without limitation, underlying real estate performance and asset value, values of comparable properties, durability and quality of property cash flows, sponsor experience and financial wherewithal, and the existence of a risk-mitigating loan structure. Additional key considerations include loan-to-value ratios, debt service coverage ratios, loan structure, real estate and credit market dynamics, and risk of default or principal loss. Based on a five-point scale, KREF's loans are rated "1" through "5," from less risk to greater risk, which ratings are defined as follows:

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

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

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

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

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

Accrued Interest Receivables

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

Interest Expense

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

Deferred Debt Issuance Costs

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

General and Administrative Expenses

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

Management and Incentive Compensation to Affiliate

Management and Incentive Compensation to Affiliate — KREF expenses management fees and incentive compensation earned by the Manager on a quarterly basis in accordance with the Management Agreement (Note 13).

Income Taxes

Income Taxes — Certain activities of KREF are conducted through joint ventures that are formed as limited liability companies, taxed as partnerships, and consolidated by KREF. Some of these joint ventures are subject to state and local income taxes, based on the tax jurisdictions in which they operate. In addition, certain activities of KREF are conducted through taxable REIT subsidiaries consolidated by KREF. Taxable REIT subsidiaries are subject to federal, state and local income taxes (Note 15).

As of September 30, 2020 and December 31, 2019, KREF did not have any material deferred tax assets or liabilities arising from future tax consequences attributable to differences between the carrying amounts of existing assets and liabilities in accordance with GAAP and their respective tax bases.

KREF recognizes tax benefits for uncertain tax positions only if it is more likely than not that the position is sustainable based on its technical merits. Interest and penalties on uncertain tax positions are included as a component of the provision for income taxes in KREF's Condensed Consolidated Statements of Income. As of September 30, 2020, KREF did not have any material uncertain tax positions.

Stock-Based Compensation

Stock-Based CompensationKREF's stock-based compensation consists of awards issued to employees of the Manager or its affiliates that vest over the life of the awards, as well as restricted stock units issued to certain members of KREF's board of directors. The Company recognizes the compensation cost of stock-based awards to its directors and employees of the Manager or its affiliates on a straight-line basis over the awards’ term at their grant date fair value. KREF accounts for forfeitures as they occur.

Earnings per Share

Earnings per Share

KREF presents basic and diluted earnings per share ("EPS"). Basic EPS, or Net Income (Loss) Per Share of Common Stock, Basic, is calculated by dividing Net Income (Loss) Attributable to Common Stockholders by the Basic Weighted Average Number of Shares of Common Stock Outstanding, for the period.

Diluted EPS, or Net Income (Loss) Per Share of Common Stock, Diluted, is calculated by starting with Basic EPS and adding the weighted average dilutive shares issuable from restricted stock units, computed using the treasury stock method, to the weighted average common shares outstanding in the denominator.

Recent Accounting Pronouncements

Adoption of ASU No. 2016-13, Financial Instruments — Credit Losses — On January 1, 2020, KREF adopted ASU No. 2016-13, Financial Instruments-Credit Losses, and subsequent amendments (“ASU 2016-13”), which replaces the incurred loss methodology with an expected loss model known as the Current Expected Credit Loss ("CECL") model. CECL amends the previous credit loss model to reflect a reporting entity's current estimate of all expected credit losses, not only based on historical experience and current conditions, but also by including reasonable and supportable forecasts incorporating forward-looking information. The measurement of expected credit losses under CECL is applicable to financial assets measured at amortized cost, and off-balance sheet credit exposures such as unfunded loan commitments. The allowance for credit losses required under ASU 2016-13 is deducted from the respective loans’ amortized cost basis on our condensed consolidated balance sheets. The allowance for credit losses attributed to unfunded loan commitments is included in “Accounts payable, accrued expenses and other liabilities” in the condensed consolidated balance sheets. The guidance also requires a cumulative-effect adjustment to retained earnings as of the beginning of the reporting period of adoption.

In connection with KREF’s adoption of ASU 2016-13 on January 1, 2020, KREF implemented new processes including the utilization of loan loss forecasting models, updates to KREF's reserve policy documentation, changes to internal reporting processes and related internal controls. KREF has implemented loan loss forecasting models for estimating expected life-time credit losses, at the individual loan level, for its commercial mortgage loan portfolio. The CECL forecasting methods used by KREF include (i) a probability of default and loss given default method using underlying third-party CMBS/CRE loan database with historical loan losses from 1998 to 2020 and (ii) probability weighted expected cash flow method, depending on the type of loan and the availability of relevant historical market loan loss data. KREF might use other acceptable alternative approaches in the future depending on, among other factors, the type of loan, underlying collateral, and availability of relevant historical market loan loss data.

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

KREF considers loan investments that are both (i) expected to be substantially repaid through the operation or sale of the underlying collateral, and (ii) for which the borrower is experiencing financial difficulty, to be “collateral-dependent” loans. For such loans that KREF determines that foreclosure of the collateral is probable, the Company measures the expected losses based on the difference between the fair value of the collateral and the amortized cost basis of the loan as of the measurement date. For collateral-dependent loans that KREF determines foreclosure is not probable, KREF applies a practical expedient to estimate expected losses using the difference between the collateral’s fair value (less costs to sell the asset if repayment is expected through the sale of the collateral) and the amortized cost basis of the loan.

Based on KREF's loan portfolio at January 1, 2020, the pre COVID-19 economic environment and the respective expectations for future economic conditions at the time, KREF recorded a cumulative-effect adjustment to KREF's accumulated deficit as of January 1, 2020 of $15.0 million, or $0.26 per common share, of which $1.1 million, or $0.02 per common share, is attributable to unfunded loan commitments.

The following table illustrates the day-one financial statements impact of the adoption of ASU 2016-13 on January 1, 2020:

	Pre-adoption		Transition Adjustment		Post-adoption
Assets
Commercial mortgage loans, held-for-investment	$	4,931,042	$	—	$	4,931,042
Less: Allowance for credit losses	—		(13,909)		(13,909)
Commercial mortgage loans, held-for-investment, net	$	4,931,042	$	(13,909)	$	4,917,133
Liabilities
Accounts payable, accrued expenses and other liabilities(A)	$	3,363	$	1,100	$	4,463
Permanent Equity
Accumulated deficit	$	(8,594)	$	(15,009)	$	(23,603)

(A)    Includes reserve for unfunded loan commitments.

Recent Accounting Pronouncements

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides temporary optional expedients and exceptions to the US GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from LIBOR and other interbank offered rates to alternative reference rates. The guidance is effective upon issuance and generally may be elected over time through December 31, 2022. KREF has not adopted any of the optional expedients or exceptions through September 30, 2020, but will continue to evaluate the possible adoption of any such expedients or exceptions during the effective period as circumstances evolve.

In August 2020, the FASB issued ASU No. 2020-06, Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and

Contracts in an Entity’s Own Equity, which simplifies an issuer’s accounting for convertible instruments and its application of the derivatives scope exception for contracts in its own equity. The guidance also addresses how convertible instruments are accounted for in the diluted EPS calculation and requires enhanced disclosures about the terms of convertible instruments and contracts in an entity’s own equity. The guidance is effective for KREF in the first quarter of 2022. The guidance allows the use of a modified or full retrospective transition method. KREF is evaluating the impact of ASU 2020-06.

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Summary of Significant Accounting Policies (Tables)

9 Months Ended

Sep. 30, 2020

Accounting Policies [Abstract]

Schedule of Impact of Adoption of ASU 2016-13

The following table illustrates the day-one financial statements impact of the adoption of ASU 2016-13 on January 1, 2020:

	Pre-adoption		Transition Adjustment		Post-adoption
Assets
Commercial mortgage loans, held-for-investment	$	4,931,042	$	—	$	4,931,042
Less: Allowance for credit losses	—		(13,909)		(13,909)
Commercial mortgage loans, held-for-investment, net	$	4,931,042	$	(13,909)	$	4,917,133
Liabilities
Accounts payable, accrued expenses and other liabilities(A)	$	3,363	$	1,100	$	4,463
Permanent Equity
Accumulated deficit	$	(8,594)	$	(15,009)	$	(23,603)

(A)    Includes reserve for unfunded loan commitments.

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Commercial Mortgage Loans (Tables)

9 Months Ended

Sep. 30, 2020

SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Abstract]

Summary and Activity of Loans Held-for-investment and Held-for-sale

The following table summarizes KREF's investments in commercial mortgage loans as of September 30, 2020 and December 31, 2019:

								Weighted Average
Loan Type	Outstanding Principal		Amortized Cost(A)		Carrying Value(B)		Loan Count	Floating Rate Loan %(C)		Coupon(C)		Life (Years)(D)
September 30, 2020
Loans held-for-investment
Senior loans(E)	$	4,860,072	$	4,839,875	$	4,777,727	34	100.0	%	4.8	%	3.5
Mezzanine loans	61,400		56,099		55,512		3	91.0		10.0		3.8
	$	4,921,472	$	4,895,974	$	4,833,239	37	99.9	%	4.9	%	3.5
December 31, 2019
Loans held-for-investment
Senior loans(E)	$	4,919,298	$	4,890,408	$	4,890,408	37	100.0	%	5.0	%	4.1
Mezzanine loans	41,400		40,634		40,634		2	86.7		9.6		4.6
	$	4,960,698	$	4,931,042	$	4,931,042	39	99.9	%	5.1	%	4.1

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

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

(C)    Average weighted by outstanding principal of loan. Weighted average coupon assumes the greater of applicable one-month LIBOR rates of 0.15% and 1.76% as of September 30, 2020 and December 31, 2019, respectively, or the applicable contractual LIBOR floor.

(D)    The weighted average life of each loan is based on the expected timing of the receipt of contractual principal repayments assuming all extension options are exercised by the borrower.

(E)    Senior loans may include accommodation mezzanine loans in connection with the senior mortgage financing. Also, includes vertical loan participations sold with a principal and a carrying value of $66.2 million as of September 30, 2020 and a principal and a carrying value of $65.0 million as of December 31, 2019, respectively. Includes CLO loan participations of $946.0 million and $1.0 billion as of September 30, 2020 and December 31, 2019, respectively.

For the nine months ended September 30, 2020, the loan portfolio activity was as follows:

	Amortized Cost		Allowance for Credit Losses		Carrying Amount
Balance at December 31, 2019	$	4,931,042	$	—	$	4,931,042
Originations and future fundings, net(A)	462,142		—		462,142
Proceeds from sales and principal repayments(B)	(507,035)		—		(507,035)
Accretion of loan discount and other amortization, net(C)	12,115		—		12,115
PIK interest	2,360		—		2,360
Cumulative-effect adjustment upon adoption of ASU 2016-13	—		(13,909)		(13,909)
Provision for credit losses, net	—		(53,476)		(53,476)
Loan write-off	(4,650)		4,650		—
Balance at September 30, 2020	$	4,895,974	$	(62,735)	$	4,833,239

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

(B)    Includes $42.0 million of loan repayment proceeds held with the servicer as of September 30, 2020.

(C)    Includes accretion of applicable discounts, certain fees and deferred loan origination costs.

The following table allocates the principal balance and net book value of the loan portfolio based on KREF's internal risk ratings:

September 30, 2020								December 31, 2019
Risk Rating	Number of Loans	Net Book Value		Total Loan Exposure(A)		Total Loan Exposure %		Risk Rating	Number of Loans	Net Book Value		Total Loan Exposure(A)		Total Loan Exposure %
1	—	$	—	$	—	—	%	1	1	$	85,730	$	86,000	1.7	%
2	2	252,692		253,349		5.1		2	5	450,827		451,858		9.0
3	27	3,837,354		3,945,637		78.9		3	33	4,394,485		4,501,440		89.3
4	6	666,405		684,767		13.7		4	—	—		—		—
5	2	76,788		115,071		2.3		5	—	—		—		—
	37	$	4,833,239	$	4,998,824	100.0	%		39	$	4,931,042	$	5,039,298	100.0	%

(A)    In certain instances, KREF finances its loans through the non-recourse sale of a senior interest that is not included in the condensed consolidated financial statements. Total loan exposure includes the entire loan KREF originated and financed, including $143.6 million and $143.6 million of such non-consolidated interests, and excludes $66.2 million and $65.0 million vertical loan participation as of September 30, 2020 and December 31, 2019, respectively.

Amortized Cost of Loan Portfolio

The following tables present the amortized cost of the loan portfolio at September 30, 2020, by KREF's internal risk rating and year of origination. The risk ratings are updated as of September 30, 2020.

September 30, 2020
				Amortized Cost by Year of Origination
Risk Rating	Number of Loans	Outstanding Principal		2020		2019		2018		2017		2016		2015		Total		Carrying Amount
Commercial Mortgage Loans
1	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
2	2	253,349		—		61,114		—		191,770		—		—		252,884		252,692
3	27	3,868,285		201,314		2,496,189		1,152,974		—		—		—		3,850,477		3,837,354
4	6	684,767		101,497		76,050		336,361		168,318		—		—		682,226		666,405
5	2	115,071		—		—		—		—		—		110,387		110,387		76,788
	37	$	4,921,472	$	302,811	$	2,633,353	$	1,489,335	$	360,088	$	—	$	110,387	$	4,895,974	$	4,833,239

Allowance for Credit Losses

For the three months ended March 31, June 30 and September 30, 2020, respectively, the changes to allowance for credit losses were as follows:

	Commercial Mortgage Loans		Unfunded Loan Commitments		Total
Balance at December 31, 2019	$	—	$	—	$	—
Cumulative-effect adjustment upon adoption of ASU 2016-13	13,909		1,100		15,009
Provision for credit losses, net	52,070		3,204		55,274
Balance at March 31, 2020	$	65,979	$	4,304	$	70,283
Provision for credit losses, net	1,070		(2,436)		(1,366)
Write-offs charged	(4,650)		—		(4,650)
Balance at June 30, 2020	$	62,399	$	1,868	$	64,267
Provision for credit losses, net	336		(462)		(126)
Balance at September 30, 2020	$	62,735	$	1,406	$	64,141

Concentration of Risk, by Risk Factor

The following tables present the geographies and property types of collateral underlying KREF's commercial mortgage loans as a percentage of the loans' principal amounts:

	September 30, 2020		December 31, 2019			September 30, 2020		December 31, 2019
Geography					Collateral Property Type
New York	21.9	%	22.5	%	Multifamily	51.8	%	58.3	%
Illinois	10.2		9.7		Office	30.5		25.5
Pennsylvania	9.5		9.2		Condo (Residential)	6.1		3.0
Virginia	8.4		8.2		Retail	4.4		4.7
Massachusetts	7.8		7.7		Hospitality	4.4		4.4
California	7.2		6.9		Industrial	1.4		2.8
Washington	6.9		6.9		Student Housing	1.4		1.3
Texas	6.3		2.5		Total	100.0	%	100.0	%
Florida	5.5		6.9
Minnesota	3.9		3.7
Colorado	3.4		2.8
Georgia	3.0		4.3
Oregon	2.2		2.5
Alabama	1.3		1.2
Washington D.C.	1.2		0.9
New Jersey	0.1		3.1
Other U.S.	1.2		1.0
Total	100.0	%	100.0	%

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Debt Obligations (Tables)

9 Months Ended

Sep. 30, 2020

Debt Disclosure [Abstract]

Schedule of Debt Instruments

The following table summarizes KREF's secured master repurchase agreements and other financing arrangements in place as of September 30, 2020 and December 31, 2019:

	September 30, 2020																		December 31, 2019
	Facility											Collateral							Facility
	Month Issued	Outstanding Principal		Carrying Value(A)		Maximum Facility Size		Final Stated Maturity	Weighted Average Funding Cost(B)		Weighted Average Life (Years) (B)	Outstanding Principal		Amortized Cost Basis		Carrying Value		Weighted Average Life (Years)(C)	Carrying Value(A)
Master Repurchase Agreements(D)
Wells Fargo(E)	Oct 2015	$	414,259	$	412,465	$	1,000,000	Nov 2023	1.9	%	2.2	$	653,674	$	650,349	$	614,703	3.4	$	464,933
Morgan Stanley(F)	Dec 2016	418,605		418,130		600,000		Dec 2022	2.7		1.8	568,280		565,407		564,251		4.2	392,279
Goldman Sachs(G)	Sep 2016	77,936		77,263		400,000		Oct 2023	3.1		2.2	161,024		161,020		158,588		2.1	223,867
Term Lending Agreement
KREF Lending V(H)	Jun 2019	900,000		899,031		900,000		Jun 2026	2.2		1.7	1,107,983		1,102,601		1,095,968		3.7	868,816
Warehouse Facility
HSBC Facility(I)	Mar 2020	—		(429)		500,000		Mar 2023	—		2.4	—		—		—		n.a	—
Asset Specific Financing
BMO Facility(J)	Aug 2018	60,000		59,709		300,000		n.a	2.0		3.3	76,000		75,692		73,142		3.4	141,120
Revolving Credit Agreement
Revolver(K)	Dec 2018	—		—		335,000		Dec 2023	—		3.2	n.a		n.a		n.a		n.a	—
Total / Weighted Average		$	1,870,800	$	1,866,169	$	4,035,000		2.3	%	1.9								$	2,091,015

(A)    Net of $4.6 million and $9.5 million unamortized debt issuance costs as of September 30, 2020 and December 31, 2019, respectively.

(B)    Average weighted by the outstanding principal of borrowings. Funding cost includes deferred financing costs.

(C)    Average based on the fully extended loan maturity, weighted by the outstanding principal of the collateral.

(D)    Borrowings under these repurchase agreements are collateralized by senior loans, held-for-investment, and bear interest equal to the sum of (i) a floating rate index, equal to one-month LIBOR, or an index approximating LIBOR, and (ii) a margin, based on the collateral. As of September 30, 2020 and December 31, 2019, the percentage of the outstanding principal of the collateral sold and not borrowed under these repurchase agreements, or average "haircut" weighted by outstanding principal of collateral, was 34.1% and 27.4%, respectively (or 32.6% and 25.7%, respectively, if KREF had borrowed the maximum amount approved by its repurchase agreement counterparties as of such dates).

(E)    The current stated maturity date is November 2021, which does not reflect two, twelve-month facility term extensions available to KREF, which is contingent upon certain covenants and thresholds. As of September 30, 2020, the collateral-based margin was between 1.25% and 2.15%.

(F)    In February 2020, the Morgan Stanley repurchase agreement was amended to change the initial maturity to December 2020, with two one-year extension options upon giving written notice and another two one-year extension periods subject to approval by Morgan Stanley. KREF has the option to increase the facility amount to $750.0 million. As of September 30, 2020, the collateral-based margin was between 1.75% and 1.85%.

(G)    The facility capacity steps down to $240.0 million on October 30, 2020. In May 2020, the facility was amended to extend the current stated maturity date to October 30, 2021. In addition, KREF has the option to extend the maturity date to October 31, 2023 by (i) electing to permanently reduce the maximum advance rate for each pledged loan to the lesser of 65% or the advance rate in effect for such loan at October 30, 2021, and (ii) payment of the applicable contractual fee, subject to the satisfaction of certain conditions. As of September 30, 2020, the collateral-base margin was between 1.85% and 2.00%.

(H)    In June 2019, KREF entered into a Master Repurchase and Securities Contract Agreement (the "Term Lending Agreement") with Morgan Stanley Mortgage Capital Holdings LLC ("Administrative Agent"), as administrative agent on behalf of Morgan Stanley Bank, N.A. ("Initial Buyer"), which provides for current and future financings of up to $900.0 million on a non-mark-to-market basis. The Initial Buyer subsequently syndicated a portion of the facility to multiple financial institutions. As of September 30, 2020, the Initial Buyer held 22.2% of the total commitment under the facility. Borrowings under the Term Lending Agreement are collateralized by certain loans, held for investment, and bear interest equal to one-month LIBOR, plus a 1.9% margin. The Term Lending Agreement has an initial maturity of June 2021, subject to five one-year extension options, which may be exercised by KREF upon the satisfaction of certain customary conditions and thresholds.

(I)    In March 2020, KREF entered into a $500.0 million Loan and Security Agreement with HSBC Bank USA, National Association (“HSBC Facility”). The facility, which matures in March 2023, provides warehouse financing on a non-mark-to-market basis with partial recourse to KREF.

(J)    In August 2018, KREF entered into a $200.0 million loan financing facility with BMO Harris Bank ("BMO Facility"). The facility provides asset-based financing on a non-mark to market basis with matched-term up to five years with partial recourse to KREF. During May 2019, KREF increased the borrowing capacity to $300.0 million. As of September 30, 2020, the collateral-based margin was 1.70%.

(K)    In December 2018, KREF entered into a $100.0 million corporate revolving credit facility (“Revolver”) administered by Morgan Stanley Senior Funding, Inc. Additional lenders were added in 2019 and 2020, further increasing the borrowing capacity under the Revolver to $335.0 million as of September 30, 2020. The current stated maturity of the facility is December 2023. Borrowings under the facility bear interest at a per annum rate equal to the sum of (i) a floating rate index and (ii) a fixed margin. Borrowings under this facility are full recourse to certain guarantor wholly-owned subsidiaries of KREF. As of September 30, 2020, the carrying value excluded $2.7 million unamortized debt issuance costs presented within "Other assets" in KREF's Condensed Consolidated Balance Sheets.

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

	September 30, 2020
Term Loan Facility	Count	Outstanding Principal		Amortized Cost		Carrying Value		Wtd. Avg. Yield/Cost(A)	Guarantee(B)	Wtd. Avg. Term(C)
Collateral assets	13	$	1,191,725	$	1,186,481	$	1,179,982	L + 3.0%	n.a.	January 2024
Financing provided	n.a.	981,953		980,181		980,181		L + 1.9%	n.a.	January 2024

	December 31, 2019
Term Loan Facility	Count	Outstanding Principal		Amortized Cost		Carrying Value		Wtd. Avg. Yield/Cost(A)	Guarantee(B)	Wtd. Avg. Term(C)
Collateral assets	12	$	1,003,995	$	997,081	$	997,081	L + 3.0%	n.a.	November 2023
Financing provided	n.a.	798,180		793,872		793,872		L + 1.9%	n.a.	November 2023

(A)     Floating rate loans and related liabilities are indexed to one-month LIBOR. KREF's net interest rate exposure is in direct proportion to its interest in the net assets indexed to that rate. In addition to cash coupon, yield/cost includes the amortization of deferred origination/financing costs.

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

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

For the nine months ended September 30, 2020, the activity related to the carrying value of KREF’s secured financing agreements were as follows:

	Secured Financing Agreements, Net
Balance as of December 31, 2019	$	2,884,887
Principal borrowings	970,580
Principal repayments/sales/deconsolidation	(1,016,543)
Deferred debt issuance costs	(2,515)
Amortization of deferred debt issuance costs	9,941
Balance as of September 30, 2020	$	2,846,350

Schedule of Repurchase Agreements

The following table summarizes certain characteristics of KREF's repurchase agreements where the amount at risk with any individual counterparty, or group of related counterparties, exceeded 10.0% of KREF’s stockholders' equity as of September 30, 2020 and December 31, 2019:

	Outstanding Principal		Net Counterparty Exposure		Percent of Stockholders' Equity		Weighted Average Life (Years)(A)
September 30, 2020
Wells Fargo	$	414,259	$	202,268	19.5	%	2.2
Morgan Stanley	418,605		147,218		14.2		1.8
Term Lending Agreement(B)	900,000		199,099		19.2		1.7
Total / Weighted Average	$	1,732,864	$	548,585	52.9	%	1.9
December 31, 2019
Wells Fargo	$	468,452	$	178,827	15.9	%	2.6
Morgan Stanley	394,499		136,764		12.2		2.5
Term Lending Agreement(B)	870,051		203,800		18.2		2.1
Total / Weighted Average	$	1,733,002	$	519,391	46.3	%	2.4

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

(B)    There were multiple counterparties to the Term Lending Agreement. Morgan Stanley Bank, N.A. represented 4.3% and 8.9% of the net counterparty exposure as a percent of stockholders' equity as of September 30, 2020 and December 31, 2019, respectively.

Schedule of Maturities of Debt Obligations

KREF’s secured financing agreements, term loan financing and other consolidated debt obligations in place as of September 30, 2020 had current contractual maturities as follows:

Year	Nonrecourse		Recourse(A)		Total
2020	$	106,909	$	35,636	$	142,545
2021	734,051		64,306		798,357
2022	1,005,456		295,186		1,300,642
2023	356,741		32,142		388,883
2024	181,896		40,430		222,326
	$	2,385,053	$	467,700	$	2,852,753

(A)    Except for the Revolver, which is full recourse, amounts borrowed subject to a maximum 25.0% recourse limit. The Revolver expires in December 2023.

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Collateralized Loan Obligation (Tables)

9 Months Ended

Sep. 30, 2020

Transfers and Servicing [Abstract]

Schedule of Collateral Assets and Respective Borrowings

The following tables outline KREF 2018-FL1 collateral assets and respective borrowing as of September 30, 2020 and December 31, 2019:

	September 30, 2020
Collateralized Loan Obligation	Count	Outstanding Principal		Amortized Cost		Carrying Value		Wtd. Avg. Yield/Cost(B)	Wtd. Avg. Term(C)
Collateral assets(A)	19	$	1,000,000	$	1,000,000	$	996,039	L + 2.8%	February 2024
Financing provided	1	810,000		808,311		808,311		L + 2.2%	June 2036

	December 31, 2019
Collateralized Loan Obligation	Count	Outstanding Principal		Amortized Cost		Carrying Value		Wtd. Avg. Yield/Cost(B)	Wtd. Avg. Term(C)
Collateral assets(A)	22	$	1,000,000	$	1,000,000	$	1,000,000	L +2.8%	November 2023
Financing provided	1	810,000		803,376		803,376		L + 1.8%	June 2036

(A)Including $12.0 million cash held in CLO, and $42.0 million of loan repayment proceeds held by the servicer and receivable by the CLO as of September 30, 2020. Collateral loan assets represent 19.2% and 20.2% of the principal of KREF's commercial mortgage loans as of September 30, 2020 and December 31, 2019, respectively. As of September 30, 2020 and December 31, 2019, 100% of KREF loans financed through the CLO are floating rate loans.

(B)Yield on collateral assets is based on cash coupon. Financing cost includes amortization of deferred financing costs incurred in connection with the CLO.

(C)Loan term represents weighted-average final maturity, assuming extension options are exercised by the borrower. Repayments of CLO notes are dependent on timing of related collateral loan asset repayments post reinvestment period. The term of the CLO notes represents the rated final distribution date.

Schedule of Assets and Liabilities Included in Consolidated Balance Sheet

The following table presents the KREF 2018-FL1 Assets and Liabilities included in KREF’s Condensed Consolidated Balance Sheets:

Assets	September 30, 2020		December 31, 2019
Cash	$	12,000	$	—
Commercial mortgage loans, held-for-investment	946,350		1,000,000
Less: Allowance for credit losses	(3,972)		—
Commercial mortgage loans, held-for-investment, net	942,378		1,000,000
Accrued interest receivable	2,803		3,280
Other assets(A)	42,168		5
Total	$	999,349	$	1,003,285
Liabilities
Collateralized loan obligation, net	$	808,311	$	803,376
Accrued interest payable	621		1,254
Accounts payable, accrued expenses and other liabilities	71		72
Total	$	809,003	$	804,702

Schedule of Net Interest Income Included in Consolidated Statement of Income

The following table presents the components of net interest income of KREF 2018-FL1 included in KREF’s Condensed Consolidated Statements of Income:

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2020		2019		2020		2019
Net Interest Income
Interest income	$	11,427	$	12,908	$	34,692	$	41,496
Interest expense(A)	5,806		9,681		20,960		29,648
Net interest income	$	5,621	$	3,227	$	13,732	$	11,848

(A)Includes $1.7 million and $0.9 million of deferred financing costs amortization for the three months ended September 30, 2020 and 2019, respectively; and $5.0 million and $2.5 million of deferred financing costs amortization for the nine months ended September 30, 2020 and 2019, respectively. KREF's unamortized deferred financing costs related to KREF 2018-FL1 were $1.7 million, $6.6 million and $7.3 million, as of September 30, 2020, December 31, 2019 and September 30, 2019, respectively.

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Secured Term Loan, Net (Tables)

9 Months Ended

Sep. 30, 2020

Secured Term Loan, Net [Abstract]

Summary of Secured Term Loan

The following table summarizes KREF’s secured term loan at September 30, 2020:

	September 30, 2020
Principal amount	$	300,000
Unamortized discount	(7,415)
Deferred financing costs	(4,707)
Carrying amount	$	287,878

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Convertible Notes, Net (Tables)

9 Months Ended

Sep. 30, 2020

Debt Disclosure [Abstract]

Interest Expense, Debt

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

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2020		2019		2020		2019
Cash coupon	$	2,201	$	2,201	$	6,604	$	6,603
Discount and issuance cost amortization	349		349		1,041		1,037
Total interest expense	$	2,550	$	2,550	$	7,645	$	7,640

Net Book Value

The following table details the net book value of our Convertible Notes on our Condensed Consolidated Balance Sheets:

	September 30, 2020		December 31, 2019
Principal	$	143,750	$	143,750
Deferred financing costs	(2,690)		(3,460)
Unamortized discount	(945)		(1,215)
Net book value	$	140,115	$	139,075

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Loan Participations Sold (Tables)

9 Months Ended

Sep. 30, 2020

SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Abstract]

Schedule of Participating Mortgage Loans

The following tables summarize the loan participation sold liabilities that KREF recognized since the corresponding syndications of the respective loan participations were not treated as "sales" as of September 30, 2020 and December 31, 2019:

	September 30, 2020
Loan Participations Sold	Count	Principal Balance		Amortized Cost		Carrying Value		Yield/Cost(A)	Guarantee	Term
Total loan	1	$	336,753	$	335,589	$	334,312	L + 2.6%	n.a.	July 2024
Vertical loan participation(B)	1	66,248		66,226		66,226		L + 2.6%	n.a.	July 2024

	December 31, 2019
Loan Participations Sold	Count	Principal Balance		Amortized Cost		Carrying Value		Yield/Cost(A)	Guarantee	Term
Total loan	1	$	328,500	$	326,881	$	326,881	L + 2.5%	n.a.	July 2024
Vertical loan participation(B)	1	65,000		64,966		64,966		L + 2.5%	n.a.	July 2024

(A)     Floating rate loans and related liabilities are indexed to one-month LIBOR. KREF's net interest rate exposure is in direct proportion to its interest in the net assets of the senior loan.

(B)    During the three months ended September 30, 2020 and 2019, KREF recorded $0.7 million and $0.0 million of interest income and $0.7 million and $0.0 million of interest expense, respectively; and during the nine months ended September 30, 2020 and 2019, KREF recorded $2.1 million and $0.0 million of interest income and $2.1 million and $0.0 million of interest expense, respectively, related to the vertical loan participation sold.

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Equity (Tables)

9 Months Ended

Sep. 30, 2020

Equity [Abstract]

Schedule of Common Stock Issued

As further described below, since December 2015, KREF issued the following shares of common stock:

Pricing Date	Shares Issued	Net Proceeds
As of December 31, 2015	13,636,416	$	272,728
February 2016	2,000,000	40,000
May 2016	3,000,138	57,130
June 2016(A)	21,838	—
August 2016	5,500,000	109,875
As of December 31, 2016	24,158,392	479,733
February 2017	7,386,208	147,662
April 2017	10,379,738	207,595
May 2017- Initial Public Offering	11,787,500	219,356
As of December 31, 2017	53,711,838	1,054,346
August 2018	5,000,000	98,326
November 2018	500,000	9,351
As of December 31, 2018	59,211,838	1,162,023

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

Dividends Declared

During the nine months ended September 30, 2020 and 2019, KREF's board of directors declared the following dividends on shares of its common stock and special voting preferred stock:

			Amount
Declaration Date	Record Date	Payment Date	Per Share		Total
2020
March 16, 2020	March 31, 2020	April 15, 2020	$	0.43	$	24,010
June 15, 2020	June 30, 2020	July 15, 2020	$	0.43	$	23,861
September 15, 2020	September 30, 2020	October 15, 2020	$	0.43	$	23,861
					$	71,732
2019
March 18, 2019	March 29, 2019	April 12, 2019	$	0.43	$	24,761
June 14, 2019	June 28, 2019	July 15, 2019	$	0.43	$	24,688
September 13, 2019	September 30, 2019	October 16, 2019	$	0.43	$	24,692
					$	74,141

Schedule of Earnings Per Share, Basic and Diluted

The following table illustrates the computation of basic and diluted earnings (loss) per share for the three and nine months ended September 30, 2020 and 2019:

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2020		2019		2020		2019
Numerator
Net income (loss) attributable to common stockholders	$	31,351	$	23,617	$	24,777	$	65,703
Denominator
Basic weighted average common shares outstanding	55,491,405		57,420,140		56,107,765		57,406,802
Dilutive restricted stock units	140,765		128,926		79,696		104,490
Diluted weighted average common shares outstanding	55,632,170		57,549,066		56,187,461		57,511,292
Net income (loss) attributable to common stockholders, per:
Basic common share	$	0.56	$	0.41	$	0.44	$	1.14
Diluted common share	$	0.56	$	0.41	$	0.44	$	1.14

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Stock-based Compensation (Tables)

9 Months Ended

Sep. 30, 2020

Share-based Payment Arrangement [Abstract]

Schedule of Restricted Stock Unit Activity

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

	Restricted Stock Units	Weighted Average Grant Date Fair Value Per RSU(A)
Unvested as of December 31, 2019	641,214	$	20.02
Granted	18,052	14.40
Vested	(59,551)	20.42
Forfeited/ cancelled	(1,239)	19.26
Unvested as of September 30, 2020	598,476	$	19.81

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

Schedule of RSUs Outstanding to Vest

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

Year	Restricted Stock Units
2020	231,875
2021	249,935
2022	116,666
Total	598,476

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Related Party Transactions (Tables)

9 Months Ended

Sep. 30, 2020

Related Party Transactions [Abstract]

Amounts Due to Affiliates

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

	September 30, 2020		December 31, 2019
Management fees	$	4,223	$	4,280
Expense reimbursements and other	904		1,637
	$	5,127	$	5,917

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

	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Management fees	$	4,223	$	4,280	$	12,740	$	12,855
Incentive compensation	990		—		3,845		2,098
Expense reimbursements and other(A)	481		275		1,166		1,060
	$	5,694	$	4,555	$	17,751	$	16,013

(A)    KREF presents these amounts in "Operating Expenses — General and administrative" in its Condensed Consolidated Statements of Income. Affiliate expense reimbursements presented in the table above exclude the out-of-pocket amounts paid by the Manager to parties unaffiliated with the Manager on behalf of KREF, and for which KREF reimburses the Manager in cash. For the three and nine months ended September 30, 2020, these cash reimbursements totaled $0.8 million and $2.9 million, respectively; and for the three and nine months ended September 30, 2019, these cash reimbursements totaled $0.4 million and $1.5 million, respectively.

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Fair Value of Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2020

Fair Value Disclosures [Abstract]

Assets and Liabilities Recorded at Fair Value on Recurring Basis

The carrying values and fair values of KREF’s financial assets and liabilities recorded at fair value on a recurring basis, as well as other financial instruments not carried at fair value, as of September 30, 2020 were as follows:

							Fair Value
	Principal Balance(A)		Amortized Cost(B)		Carrying Value(C)		Level 1		Level 2		Level 3		Total
Assets
Cash and cash equivalents	$	301,375	$	301,375	$	301,375	$	301,375	$	—	$	—	$	301,375
Commercial mortgage loans, held-for-investment, net(D)	4,921,472		4,895,974		4,833,239		—		—		4,791,247		4,791,247
Equity method investments	33,468		33,468		33,468		—		—		33,468		33,468
	$	5,256,315	$	5,230,817	$	5,168,082	$	301,375	$	—	$	4,824,715	$	5,126,090
Liabilities
Secured financing agreements, net	$	2,852,753	$	2,846,350	$	2,846,350	$	—	$	—	$	2,852,753	$	2,852,753
Collateralized loan obligation, net	810,000		808,311		808,311		—		—		801,392		801,392
Secured term loan, net	300,000		287,878		287,878		—		297,939		—		297,939
Convertible notes, net	143,750		140,115		140,115		—		141,735		—		141,735
Loan participations sold, net	66,248		66,226		66,226		—		—		66,226		66,226
	$	4,172,751	$	4,148,880	$	4,148,880	$	—	$	439,674	$	3,720,371	$	4,160,045

(A)    The principal balance of commercial mortgage loans excludes premiums and unamortized discounts.

(B)    The amortized cost of commercial mortgage loans is net of $4.7 million write-off on a mezzanine loan and $20.8 million unamortized origination discounts and deferred nonrefundable fees. The amortized cost of secured financing agreements is net of $6.4 million unamortized debt issuance costs. The amortized cost of collateralized loan obligations is net of $1.7 million unamortized debt issuance costs.

(C)    The carrying value of commercial mortgage loans is net of $62.7 million allowance for credit losses.

(D)    Includes $946.0 million of CLO loan participations as of September 30, 2020. Includes senior loans for which KREF syndicated a vertical loan participation that did not qualify for sale accounting under GAAP, with a carrying value and a fair value of $66.2 million as of September 30, 2020.

The carrying values and fair values of KREF’s financial assets recorded at fair value on a recurring basis, as well as other financial instruments for which fair value is disclosed, as of December 31, 2019 were as follows:

							Fair Value
	Principal Balance(A)		Amortized Cost(B)		Carrying Value		Level 1		Level 2		Level 3		Total
Assets
Cash and cash equivalents	$	67,619	$	67,619	$	67,619	$	67,619	$	—	$	—	$	67,619
Commercial mortgage loans, held-for-investment, net(C)	4,960,698		4,931,042		4,931,042		—		—		4,937,808		4,937,808
Equity method investments	37,469		37,469		37,469		—		—		37,469		37,469
	$	5,065,786	$	5,036,130	$	5,036,130	$	67,619	$	—	$	4,975,277	$	5,042,896
Liabilities
Secured financing agreements, net	$	2,898,716	$	2,884,887	$	2,884,887	$	—	$	—	$	2,898,716	$	2,898,716
Collateralized loan obligation, net	810,000		803,376		803,376		—		—		810,867		810,867
Convertible notes, net	143,750		139,075		139,075		150,719		—		—		150,719
Loan participations sold, net	65,000		64,966		64,966		—		—		64,966		64,966
	$	3,917,466	$	3,892,304	$	3,892,304	$	150,719	$	—	$	3,774,549	$	3,925,268

(A)    The principal balance of commercial mortgage loans excludes premiums and unamortized discounts.

(B)    The amortized cost of commercial mortgage loans is presented net of $29.7 million unamortized origination discounts and deferred nonrefundable fees. The amortized cost of secured financing agreements is presented net of $13.8 million unamortized debt issuance costs. The amortized cost of collateralized loan obligations is presented net of $6.6 million unamortized debt issuance costs.

(C)    Includes $1.0 billion of CLO loan participations as of December 31, 2019. Includes senior loans for which KREF syndicated a vertical loan participation that did not qualify for sale accounting under GAAP, with a carrying value and a fair value of $65.0 million as of December 31, 2019.

Fair Value Level 3 Inputs, Liabilities

The following table contains the Level 3 inputs used to value assets and liabilities on a recurring and nonrecurring basis or where KREF discloses fair value as of September 30, 2020:

	Fair Value		Valuation Methodologies	Unobservable Inputs(A)	Weighted Average(B)	Range
Assets(C)
Commercial mortgage loans, held-for-investment(D)	$	4,791,247	Discounted cash flow	Discount rate	4.6%	2.9% - 19.1%
	$	4,791,247
Liabilities(E)
Collateralized loan obligation, net	$	801,392	Discounted cash flow	Yield	2.1%	1.7% - 4.2%
	$	801,392

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

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

(C)    KREF carries a $33.2 million investment in an aggregator vehicle alongside RECOP I (Note 9) at its pro rata share of the aggregator's net asset value, which management believes approximates fair value.

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

(E)    Does not include $66.2 million of vertical loan syndication which was syndicated at par value and included in “Loan participation sold, net” on the Condensed Consolidated Balance Sheet.

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Subsequent Events (Tables)

9 Months Ended

Sep. 30, 2020

Subsequent Events [Abstract]

Schedule of Senior Notes

KREF originated the following loans:

Description/ Location	Property Type	Month Originated	Maximum Face Amount		Initial Face Amount Funded		Interest Rate (A)	Maturity Date(B)	LTV
Senior Loan, Arlington VA(C)	Multifamily	October 2020	$	70,895	$	68,000	L + 3.8%	October 2025	73%
Senior Loan, Denver CO(D)	Multifamily	October 2020	40,000		38,500		L + 3.6%	October 2024	49
Senior Loan, Oakland CA(E)	Office	October 2020	159,690		94,720		L + 4.3%	October 2025	65
Total/ Weighted Average			$	270,585	$	201,220	L + 4.1%		65%

(A)    Floating rate based on one-month USD LIBOR.

(B)    Maturity date assumes all extension options are exercised, if applicable.

(C)    The total whole loan maximum face amount is $141.8 million, co-originated and co-funded by KREF and a KKR fund on a pari passu basis. KREF's interest is 50% of the loan.

(D)    The total whole loan maximum face amount is $80.0 million, co-originated and co-funded by KREF and a KKR fund on a pari passu basis. KREF's interest is 50% of the loan.

(E)    The total whole loan maximum face amount is $509.9 million, co-originated and co-funded by KREF and a KKR fund, of which $280.0 million senior notes were concurrently syndicated to third party lenders. KREF's interest is 31% of the non-syndicated loan.

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Business and Organization (Details) - KKR - shares	Sep. 30, 2020	Dec. 31, 2019
KREF
Related Party Transaction [Line Items]
Common stock (shares)	21,858,356	22,008,616
KKR Real Estate FInance Trust Inc. on Behalf of Third Party
Related Party Transaction [Line Items]
Common stock (shares)	1,858,356	2,008,616

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Summary of Significant Accounting Policies (Details) $ / shares in Units, $ in Thousands								1 Months Ended	3 Months Ended						9 Months Ended
	Sep. 30, 2020 USD ($) $ / shares	Jun. 30, 2020 USD ($) $ / shares	Mar. 31, 2020 USD ($) $ / shares	Jan. 01, 2020 USD ($) $ / shares	Sep. 30, 2019 USD ($) $ / shares	Jun. 28, 2019 $ / shares	Mar. 29, 2019 $ / shares	Sep. 30, 2020 USD ($) $ / shares	Sep. 30, 2020 USD ($) $ / shares	Jun. 30, 2020 USD ($) loan $ / shares	Mar. 31, 2020 USD ($) $ / shares	Sep. 30, 2019 USD ($) $ / shares	Jun. 30, 2019 USD ($) $ / shares	Mar. 31, 2019 USD ($) $ / shares	Sep. 30, 2020 USD ($) $ / shares	Sep. 30, 2019 USD ($) $ / shares	Dec. 31, 2019 USD ($)	Dec. 31, 2018 USD ($)	May 31, 2018
Related Party Transaction [Line Items]
Redeemable preferred stock	$ 1,951							$ 1,951	$ 1,951						$ 1,951		$ 1,694
Unrestricted cash and cash equivalents balance to satisfy liquidity covenants	30,600							30,600	30,600						30,600		33,400
Loan repayment proceeds	42,000							42,000	42,000						42,000		0
Accrued expenses	3,200							3,200	3,200						3,200		2,700
Good faith deposits	$ 500							$ 500	$ 500						$ 500		700
Dividends declared per share of common stock (usd per share) | $ / shares	$ 0.43	$ 0.43	$ 0.43		$ 0.43	$ 0.43	$ 0.43	$ 0.43	$ 0.43	$ 0.43	$ 0.43	$ 0.43	$ 0.43	$ 0.43	$ 1.29	$ 1.29
Financing receivable, after allowance for credit loss	$ 4,833,239			$ 4,931,042				$ 4,833,239	$ 4,833,239						$ 4,833,239		4,931,042
Prepaids	700							700	700						700
Revolving Credit Facility
Related Party Transaction [Line Items]
Deferred financing/debt issuance costs	2,700							2,700	2,700						2,700		2,400
Redeemable Preferred Stock
Related Party Transaction [Line Items]
Redeemable preferred stock	$ 1,951	$ 2,275	$ 2,108		$ 2,102			$ 1,951	1,951	$ 2,275	$ 2,108	$ 2,102	$ 2,031	$ 2,228	1,951	$ 2,102	$ 1,694	$ 2,846
Adjustment of redeemable preferred stock to redemption value									$ (300)						300
Cash
Related Party Transaction [Line Items]
Interest and other income															$ 500	$ 1,500
Convertible Notes Payable | Notes Due in 2023
Related Party Transaction [Line Items]
Debt instrument, interest rate, stated percentage	6.125%							6.125%	6.125%						6.125%				6.125%
Accounting Standards Update 2016-13
Related Party Transaction [Line Items]
Cumulative-effect adjustment upon adoption of ASU 2016-13				$ 15,000
Cumulative-effect adjustment upon adoption of ASU 2016-13 (in USD per share) | $ / shares				$ 0.26
Unfunded Loan Commitments
Related Party Transaction [Line Items]
Allowance for credit losses	$ 1,400							$ 1,400	$ 1,400						$ 1,400
Write-offs charged										$ 0
Unfunded Loan Commitments | Accounting Standards Update 2016-13
Related Party Transaction [Line Items]
Cumulative-effect adjustment upon adoption of ASU 2016-13				$ 1,100
Cumulative-effect adjustment upon adoption of ASU 2016-13 (in USD per share) | $ / shares				$ 0.02
Mezzanine Loan
Related Party Transaction [Line Items]
Number of mezzanine loans written off (in loans) | loan										1
Outstanding loan balance		$ 5,500								$ 5,500
Write-offs charged									$ 4,700	$ 4,700

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Summary of Significant Accounting Policies - Impact of Adoption of ASU 2016-13 (Details) - USD ($) $ in Thousands	Sep. 30, 2020		Jan. 01, 2020	Dec. 31, 2019
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Commercial mortgage loans, held-for-investment	$ 4,895,974		$ 4,931,042	$ 4,931,042
Less: Allowance for credit losses	(62,735)		0	0
Commercial mortgage loans, held-for-investment, net	4,833,239		4,931,042	4,931,042
Accounts payable, accrued expenses and other liabilities	5,076	[1]	3,363	3,363	[1]
Accumulated deficit	$ (70,559)		(8,594)	$ (8,594)
Cumulative-effect adjustment upon adoption of ASU 2016-13
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Commercial mortgage loans, held-for-investment			0
Less: Allowance for credit losses			(13,909)
Commercial mortgage loans, held-for-investment, net			(13,909)
Accounts payable, accrued expenses and other liabilities			1,100
Accumulated deficit			(15,009)
Cumulative-effect, adjusted balance for ASU 2016-13
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Commercial mortgage loans, held-for-investment			4,931,042
Less: Allowance for credit losses			(13,909)
Commercial mortgage loans, held-for-investment, net			4,917,133
Accounts payable, accrued expenses and other liabilities			4,463
Accumulated deficit			$ (23,603)

[1] Includes $1.4 million and $0.0 million of reserve for unfunded loan commitments as of September 30, 2020 and December 31, 2019, respectively.

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Commercial Mortgage Loans - Loans Held-for-investment and Loans Held-for-sale (Details) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2020 USD ($) loan	Dec. 31, 2019 USD ($) loan	Jan. 01, 2020 USD ($)
Investment Holdings [Line Items]
Amortized Cost	$ 4,895,974	$ 4,931,042	$ 4,931,042
Carrying Value	4,833,239	4,931,042	$ 4,931,042
Loans held-for-investment
Investment Holdings [Line Items]
Outstanding Principal	4,921,472	4,960,698
Amortized Cost	4,895,974	4,931,042
Carrying Value	$ 4,833,239	$ 4,931,042
Loan Count (in loans) | loan	37	39
Floating Rate Loan %	99.90%	99.90%
Coupon	4.90%	5.10%
Life (Years)	3 years 6 months	4 years 1 month 6 days
Loans held-for-investment | Senior loans
Investment Holdings [Line Items]
Outstanding Principal	$ 4,860,072	$ 4,919,298
Amortized Cost	4,839,875	4,890,408
Carrying Value	$ 4,777,727	$ 4,890,408
Loan Count (in loans) | loan	34	37
Floating Rate Loan %	100.00%	100.00%
Coupon	4.80%	5.00%
Life (Years)	3 years 6 months	4 years 1 month 6 days
Loans held-for-investment | Mezzanine loans
Investment Holdings [Line Items]
Outstanding Principal	$ 61,400	$ 41,400
Amortized Cost	56,099	40,634
Carrying Value	$ 55,512	$ 40,634
Loan Count (in loans) | loan	3	2
Floating Rate Loan %	91.00%	86.70%
Coupon	10.00%	9.60%
Life (Years)	3 years 9 months 18 days	4 years 7 months 6 days
Vertical loan participation
Investment Holdings [Line Items]
Carrying Value		$ 65,000
Vertical loan participation | Loans held-for-investment | Senior loans
Investment Holdings [Line Items]
Outstanding Principal	$ 66,200	65,000
Amortized Cost	66,200	65,000
Collateralized Loan Obligations | Loans held-for-investment | Senior loans
Investment Holdings [Line Items]
Outstanding Principal	$ 946,000	$ 1,000,000
LIBOR
Investment Holdings [Line Items]
Interest rate	0.15%	1.76%

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Commercial Mortgage Loans - Activities Related to Carrying Value of Mortgage Loans (Details) - USD ($) $ in Thousands		3 Months Ended			9 Months Ended		12 Months Ended
	Jan. 01, 2020	Sep. 30, 2020	Mar. 31, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019	Dec. 31, 2019
SEC Schedule, 12-29, Real Estate Companies, Investment in Movement in Mortgage Loans on Real Estate [Roll Forward]
Beginning balance	$ 4,931,042		$ 4,931,042		$ 4,931,042
Beginning balance	0		0		0
Beginning balance	4,931,042		$ 4,931,042		4,931,042
Paid-in-kind interest					(2,360)	$ 0
Provision for credit losses, net		$ 126		$ 0	(53,782)	$ 0
Ending balance	4,931,042	4,895,974			4,895,974		$ 4,931,042
Ending balance	0	(62,735)			(62,735)		0
Ending balance	4,931,042	4,833,239			4,833,239		$ 4,931,042
Accounting Standards Update [Extensible List]			us-gaap:AccountingStandardsUpdate201613Member				us-gaap:AccountingStandardsUpdate201613Member
Cumulative-effect adjustment upon adoption of ASU 2016-13
SEC Schedule, 12-29, Real Estate Companies, Investment in Movement in Mortgage Loans on Real Estate [Roll Forward]
Ending balance	0
Ending balance	(13,909)
Ending balance	(13,909)
CRE Loans
SEC Schedule, 12-29, Real Estate Companies, Investment in Movement in Mortgage Loans on Real Estate [Roll Forward]
Beginning balance	4,931,042		$ 4,931,042		4,931,042
Beginning balance	0		0		0
Beginning balance	4,931,042		$ 4,931,042		4,931,042
Purchases and originations, net					462,142
Proceeds from sales and principal payments					(507,035)
Accretion of loan discount and other amortization, net					12,115
Paid-in-kind interest		1,400			2,360
Provision for credit losses, net					(53,476)
Loan write-off					4,650
Ending balance		4,895,974			4,895,974		$ 4,931,042
Ending balance		(62,735)			(62,735)		0
Ending balance		$ 4,833,239			$ 4,833,239		$ 4,931,042
CRE Loans | Cumulative-effect adjustment upon adoption of ASU 2016-13
SEC Schedule, 12-29, Real Estate Companies, Investment in Movement in Mortgage Loans on Real Estate [Roll Forward]
Provision for credit losses, net	$ (13,909)

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Commercial Mortgage Loans - Narrative (Details) $ in Thousands	3 Months Ended				9 Months Ended
	Sep. 30, 2020 USD ($)	Jun. 30, 2020 USD ($)	Mar. 31, 2020 USD ($)	Sep. 30, 2019 USD ($)	Sep. 30, 2020 USD ($)	Sep. 30, 2019 USD ($)	Dec. 31, 2019 USD ($)
Investment Holdings [Line Items]
Unamortized origination discounts and deferred nonrefundable fees							$ 29,700
Net accelerated fees	$ 400			$ 300	$ 100	$ 3,100
Prepayment penalties				$ 0		200
Payment-in-kind interest					$ (2,360)	$ 0
Weighted average loan risk rating	3.1		3.0		3.1		2.9
Loan with PIK term
Investment Holdings [Line Items]
Outstanding principal amount, loan modifications					$ 319,300
Net book value, loan modifications					309,500
Total
Investment Holdings [Line Items]
Increase (Decrease) in allowance for credit losses	$ (126)	$ (1,366)	$ 55,274
Loans held-for-investment
Investment Holdings [Line Items]
Unamortized origination discounts and deferred nonrefundable fees	$ 20,800				$ 20,800		$ 29,700

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Commercial Mortgage Loans - Loan Risk Ratings (Details) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2020 USD ($) loan	Dec. 31, 2019 USD ($) loan	Jan. 01, 2020 USD ($)
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Carrying Value	$ 4,833,239	$ 4,931,042	$ 4,931,042
Commercial Mortgage Loans
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Number of Loans (in loans) | loan	37	39
Carrying Value	$ 4,833,239	$ 4,931,042
Total Loan Exposure	$ 4,998,824	$ 5,039,298
Total Loan Exposure %	100.00%	100.00%
Vertical loan participation
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Total loan exposure, excluding vertical loan participation	$ 66,200	$ 65,000
Non-consolidated senior interest
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Total Loan Exposure	$ 143,600	$ 143,600
Very Low Risk | Commercial Mortgage Loans
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Number of Loans (in loans) | loan	0	1
Carrying Value	$ 0	$ 85,730
Total Loan Exposure	$ 0	$ 86,000
Total Loan Exposure %	0.00%	1.70%
Low Risk | Commercial Mortgage Loans
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Number of Loans (in loans) | loan	2	5
Carrying Value	$ 252,692	$ 450,827
Total Loan Exposure	$ 253,349	$ 451,858
Total Loan Exposure %	5.10%	9.00%
Average Risk | Commercial Mortgage Loans
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Number of Loans (in loans) | loan	27	33
Carrying Value	$ 3,837,354	$ 4,394,485
Total Loan Exposure	$ 3,945,637	$ 4,501,440
Total Loan Exposure %	78.90%	89.30%
High Risk/Potential for Loss | Commercial Mortgage Loans
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Number of Loans (in loans) | loan	6	0
Carrying Value	$ 666,405	$ 0
Total Loan Exposure	$ 684,767	$ 0
Total Loan Exposure %	13.70%	0.00%
Impaired/Loss Likely | Commercial Mortgage Loans
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Number of Loans (in loans) | loan	2	0
Carrying Value	$ 76,788	$ 0
Total Loan Exposure	$ 115,071	$ 0
Total Loan Exposure %	2.30%	0.00%

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Commercial Mortgage Loans - Amortized Cost of Loan Portfolio (Details) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2020 USD ($) loan	Dec. 31, 2019 USD ($) loan	Jan. 01, 2020 USD ($)
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Total	$ 4,895,974	$ 4,931,042	$ 4,931,042
Carrying Amount	$ 4,833,239	$ 4,931,042	$ 4,931,042
Commercial Mortgage Loans
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Number of Loans (in loans) | loan	37	39
Outstanding Principal	$ 4,921,472
2020	302,811
2019	2,633,353
2018	1,489,335
2017	360,088
2016	0
2015	110,387
Total	4,895,974
Carrying Amount	$ 4,833,239	$ 4,931,042
Very Low Risk | Commercial Mortgage Loans
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Number of Loans (in loans) | loan	0	1
Outstanding Principal	$ 0
2020	0
2019	0
2018	0
2017	0
2016	0
2015	0
Total	0
Carrying Amount	$ 0	$ 85,730
Low Risk | Commercial Mortgage Loans
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Number of Loans (in loans) | loan	2	5
Outstanding Principal	$ 253,349
2020	0
2019	61,114
2018	0
2017	191,770
2016	0
2015	0
Total	252,884
Carrying Amount	$ 252,692	$ 450,827
Average Risk | Commercial Mortgage Loans
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Number of Loans (in loans) | loan	27	33
Outstanding Principal	$ 3,868,285
2020	201,314
2019	2,496,189
2018	1,152,974
2017	0
2016	0
2015	0
Total	3,850,477
Carrying Amount	$ 3,837,354	$ 4,394,485
High Risk/Potential for Loss | Commercial Mortgage Loans
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Number of Loans (in loans) | loan	6	0
Outstanding Principal	$ 684,767
2020	101,497
2019	76,050
2018	336,361
2017	168,318
2016	0
2015	0
Total	682,226
Carrying Amount	$ 666,405	$ 0
Impaired/Loss Likely | Commercial Mortgage Loans
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Number of Loans (in loans) | loan	2	0
Outstanding Principal	$ 115,071
2020	0
2019	0
2018	0
2017	0
2016	0
2015	110,387
Total	110,387
Carrying Amount	$ 76,788	$ 0

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Commercial Mortgage Loans - Allowance for Credit Losses (Details) - USD ($) $ in Thousands	3 Months Ended			9 Months Ended
	Sep. 30, 2020	Jun. 30, 2020	Mar. 31, 2020	Sep. 30, 2020
Financing Receivable, Allowance for Credit Loss [Roll Forward]
Beginning balance			$ 0	$ 0
Ending balance	$ 62,735			62,735
Commercial Mortgage Loans
Financing Receivable, Allowance for Credit Loss [Roll Forward]
Beginning balance	62,399	$ 65,979	0	0
Provision for credit losses, net	336	1,070	52,070
Write-offs charged		(4,650)
Ending balance	62,735	62,399	65,979	62,735
Unfunded Loan Commitments
Financing Receivable, Allowance for Credit Loss [Roll Forward]
Beginning balance	1,868	4,304	0	0
Provision for credit losses, net	(462)	(2,436)	3,204
Write-offs charged		0
Ending balance	1,406	1,868	4,304	1,406
Total
Financing Receivable, Allowance for Credit Loss [Roll Forward]
Beginning balance	64,267	70,283	0	0
Provision for credit losses, net	(126)	(1,366)	55,274
Write-offs charged		(4,650)
Ending balance	$ 64,141	$ 64,267	70,283	64,141
Cumulative-effect adjustment upon adoption of ASU 2016-13 | Commercial Mortgage Loans
Financing Receivable, Allowance for Credit Loss [Roll Forward]
Beginning balance			13,909	13,909
Cumulative-effect adjustment upon adoption of ASU 2016-13 | Unfunded Loan Commitments
Financing Receivable, Allowance for Credit Loss [Roll Forward]
Beginning balance			1,100	1,100
Cumulative-effect adjustment upon adoption of ASU 2016-13 | Total
Financing Receivable, Allowance for Credit Loss [Roll Forward]
Beginning balance			$ 15,009	$ 15,009

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Commercial Mortgage Loans - Concentration of Credit Risk (Details) - Loans held-for-investment	9 Months Ended	12 Months Ended
	Sep. 30, 2020	Dec. 31, 2019
Geography
Concentration Risk [Line Items]
Concentration of credit risk	100.00%	100.00%
Geography | New York
Concentration Risk [Line Items]
Concentration of credit risk	21.90%	22.50%
Geography | Illinois
Concentration Risk [Line Items]
Concentration of credit risk	10.20%	9.70%
Geography | Pennsylvania
Concentration Risk [Line Items]
Concentration of credit risk	9.50%	9.20%
Geography | Virginia
Concentration Risk [Line Items]
Concentration of credit risk	8.40%	8.20%
Geography | Massachusetts
Concentration Risk [Line Items]
Concentration of credit risk	7.80%	7.70%
Geography | California
Concentration Risk [Line Items]
Concentration of credit risk	7.20%	6.90%
Geography | Washington
Concentration Risk [Line Items]
Concentration of credit risk	6.90%	6.90%
Geography | Texas
Concentration Risk [Line Items]
Concentration of credit risk	6.30%	2.50%
Geography | Florida
Concentration Risk [Line Items]
Concentration of credit risk	5.50%	6.90%
Geography | Minnesota
Concentration Risk [Line Items]
Concentration of credit risk	3.90%	3.70%
Geography | Colorado
Concentration Risk [Line Items]
Concentration of credit risk	3.40%	2.80%
Geography | Georgia
Concentration Risk [Line Items]
Concentration of credit risk	3.00%	4.30%
Geography | Oregon
Concentration Risk [Line Items]
Concentration of credit risk	2.20%	2.50%
Geography | Alabama
Concentration Risk [Line Items]
Concentration of credit risk	1.30%	1.20%
Geography | Washington D.C.
Concentration Risk [Line Items]
Concentration of credit risk	1.20%	0.90%
Geography | New Jersey
Concentration Risk [Line Items]
Concentration of credit risk	0.10%	3.10%
Geography | Other U.S.
Concentration Risk [Line Items]
Concentration of credit risk	1.20%	1.00%
Collateral Property Type
Concentration Risk [Line Items]
Concentration of credit risk	100.00%	100.00%
Collateral Property Type | Multifamily
Concentration Risk [Line Items]
Concentration of credit risk	51.80%	58.30%
Collateral Property Type | Office
Concentration Risk [Line Items]
Concentration of credit risk	30.50%	25.50%
Collateral Property Type | Condo (Residential)
Concentration Risk [Line Items]
Concentration of credit risk	6.10%	3.00%
Collateral Property Type | Retail
Concentration Risk [Line Items]
Concentration of credit risk	4.40%	4.70%
Collateral Property Type | Hospitality
Concentration Risk [Line Items]
Concentration of credit risk	4.40%	4.40%
Collateral Property Type | Industrial
Concentration Risk [Line Items]
Concentration of credit risk	1.40%	2.80%
Collateral Property Type | Student Housing
Concentration Risk [Line Items]
Concentration of credit risk	1.40%	1.30%

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Debt Obligations - Summary of Debt (Details)	1 Months Ended		9 Months Ended	12 Months Ended
	Feb. 29, 2020 extension	Jun. 30, 2019 USD ($) extension	Sep. 30, 2020 USD ($) extension	Dec. 31, 2019 USD ($)	Oct. 30, 2021	Oct. 30, 2020 USD ($)	Mar. 31, 2020 USD ($)	May 31, 2019 USD ($)	Dec. 31, 2018 USD ($)	Aug. 31, 2018 USD ($)
Debt Instrument [Line Items]
Outstanding Principal			$ 2,852,753,000
Unamortized debt issuance costs			$ 4,600,000	$ 9,500,000
Average haircut weighted by outstanding face amount of collateral			34.10%	27.40%
Average haircut weighted by outstanding face amount of collateral if maximum amount is borrowed			32.60%	25.70%
Morgan Stanley | Facility
Debt Instrument [Line Items]
Maximum Facility Size			$ 750,000,000.0
Number of extensions (in extensions) | extension	2
Extension term	1 year
Goldman Sachs | Facility | Forecast [Member]
Debt Instrument [Line Items]
Maximum Facility Size						$ 240,000,000.0
BMO
Debt Instrument [Line Items]
Collateral based margin			1.70%
Secured Financing Agreements | Facility
Debt Instrument [Line Items]
Carrying Value			$ 2,846,350,000	$ 2,884,887,000
Secured Financing Agreements | Wells Fargo | Facility
Debt Instrument [Line Items]
Outstanding Principal			414,259,000
Carrying Value			412,465,000	464,933,000
Maximum Facility Size			$ 1,000,000,000
Weighted Average Funding Cost			1.90%
Weighted Average Life			2 years 2 months 12 days
Outstanding Principal			$ 653,674,000
Amortized Cost Basis			650,349,000
Carrying Value			$ 614,703,000
Weighted Average Life			3 years 4 months 24 days
Number of extensions (in extensions) | extension			2
Extension term			12 months
Secured Financing Agreements | Wells Fargo | Facility | Minimum
Debt Instrument [Line Items]
Collateral based margin			1.25%
Secured Financing Agreements | Wells Fargo | Facility | Maximum
Debt Instrument [Line Items]
Collateral based margin			2.15%
Secured Financing Agreements | Morgan Stanley | Facility
Debt Instrument [Line Items]
Outstanding Principal			$ 418,605,000
Carrying Value			418,130,000	392,279,000
Maximum Facility Size			$ 600,000,000
Weighted Average Funding Cost			2.70%
Weighted Average Life			1 year 9 months 18 days
Outstanding Principal			$ 568,280,000
Amortized Cost Basis			565,407,000
Carrying Value			$ 564,251,000
Weighted Average Life			4 years 2 months 12 days
Secured Financing Agreements | Morgan Stanley | Facility | Minimum
Debt Instrument [Line Items]
Collateral based margin			1.75%
Secured Financing Agreements | Morgan Stanley | Facility | Maximum
Debt Instrument [Line Items]
Collateral based margin			1.85%
Secured Financing Agreements | Goldman Sachs | Facility
Debt Instrument [Line Items]
Outstanding Principal			$ 77,936,000
Carrying Value			77,263,000	223,867,000
Maximum Facility Size			$ 400,000,000
Weighted Average Funding Cost			3.10%
Weighted Average Life			2 years 2 months 12 days
Outstanding Principal			$ 161,024,000
Amortized Cost Basis			161,020,000
Carrying Value			$ 158,588,000
Weighted Average Life			2 years 1 month 6 days
Secured Financing Agreements | Goldman Sachs | Facility | Forecast [Member]
Debt Instrument [Line Items]
Maximum advance rate					65.00%
Secured Financing Agreements | Goldman Sachs | Facility | Minimum
Debt Instrument [Line Items]
Collateral based margin			1.85%
Secured Financing Agreements | Goldman Sachs | Facility | Maximum
Debt Instrument [Line Items]
Collateral based margin			2.00%
Secured Financing Agreements | HSBC | Facility
Debt Instrument [Line Items]
Weighted Average Funding Cost			0.00%
Weighted Average Life			2 years 4 months 24 days
Outstanding Principal			$ 0
Amortized Cost Basis			0
Carrying Value			0
Secured Financing Agreements | BMO | Facility
Debt Instrument [Line Items]
Outstanding Principal			60,000,000
Carrying Value			59,709,000	141,120,000
Maximum Facility Size			$ 300,000,000
Weighted Average Funding Cost			2.00%
Weighted Average Life			3 years 3 months 18 days
Outstanding Principal			$ 76,000,000
Amortized Cost Basis			75,692,000
Carrying Value			$ 73,142,000
Weighted Average Life			3 years 4 months 24 days
Loan Facility | HSBC | Facility
Debt Instrument [Line Items]
Maximum Facility Size							$ 500,000,000.0
Loan Facility | BMO | Facility
Debt Instrument [Line Items]
Maximum Facility Size								$ 300,000,000.0		$ 200,000,000.0
Revolving Credit Facility
Debt Instrument [Line Items]
Deferred financing/debt issuance costs			$ 2,700,000	2,400,000
Revolving Credit Facility | Facility
Debt Instrument [Line Items]
Outstanding Principal			0
Carrying Value			0	0
Maximum Facility Size			$ 335,000,000
Weighted Average Funding Cost			0.00%
Weighted Average Life			3 years 2 months 12 days
Revolving Credit Facility | Morgan Stanley | Facility
Debt Instrument [Line Items]
Outstanding Principal			$ 335,000,000.0
Maximum Facility Size									$ 100,000,000.0
Deferred financing/debt issuance costs			2,700,000
Total Debt
Debt Instrument [Line Items]
Outstanding Principal			1,870,800,000
Carrying Value			1,866,169,000	2,091,015,000
Maximum Facility Size			$ 4,035,000,000
Weighted Average Funding Cost			2.30%
Weighted Average Life			1 year 10 months 24 days
KREF Lending V LLC | Secured Financing Agreements | Facility
Debt Instrument [Line Items]
Outstanding Principal			$ 900,000,000
Carrying Value			899,031,000	868,816,000
Maximum Facility Size		$ 900,000,000.0	$ 900,000,000
Weighted Average Funding Cost			2.20%
Weighted Average Life			1 year 8 months 12 days
Outstanding Principal			$ 1,107,983,000
Amortized Cost Basis			1,102,601,000
Carrying Value			$ 1,095,968,000
Weighted Average Life			3 years 8 months 12 days
Number of extensions (in extensions) | extension		5
Extension term		1 year
KREF Lending V LLC | Secured Financing Agreements | Initial Buyer | Facility
Debt Instrument [Line Items]
Percentage of total commitment			22.20%
HSBC | Secured Financing Agreements | Facility
Debt Instrument [Line Items]
Outstanding Principal			$ 0
Carrying Value			(429,000)	$ 0
Maximum Facility Size			$ 500,000,000
LIBOR
Debt Instrument [Line Items]
Interest rate			0.15%	1.76%
Term Lending | LIBOR | KREF Lending V LLC | Secured Financing Agreements | Facility
Debt Instrument [Line Items]
Interest rate			1.90%

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Debt Obligations - Repurchase Agreement (Details) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2020	Dec. 31, 2019
Repurchase Agreement Counterparty [Line Items]
Outstanding Principal	$ 2,852,753
Wells Fargo
Repurchase Agreement Counterparty [Line Items]
Outstanding Principal	414,259	$ 468,452
Net Counterparty Exposure	$ 202,268	$ 178,827
Percent of Stockholders' Equity	19.50%	15.90%
Weighted Average Life (Years)	2 years 2 months 12 days	2 years 7 months 6 days
Morgan Stanley
Repurchase Agreement Counterparty [Line Items]
Outstanding Principal	$ 418,605	$ 394,499
Net Counterparty Exposure	$ 147,218	$ 136,764
Percent of Stockholders' Equity	14.20%	12.20%
Weighted Average Life (Years)	1 year 9 months 18 days	2 years 6 months
Term Lending Agreement
Repurchase Agreement Counterparty [Line Items]
Outstanding Principal		$ 870,051
Net Counterparty Exposure		$ 203,800
Percent of Stockholders' Equity		18.20%
Weighted Average Life (Years)		2 years 1 month 6 days
Total
Repurchase Agreement Counterparty [Line Items]
Outstanding Principal	$ 1,732,864	$ 1,733,002
Net Counterparty Exposure	$ 548,585	$ 519,391
Percent of Stockholders' Equity	52.90%	46.30%
Weighted Average Life (Years)	1 year 10 months 24 days	2 years 4 months 24 days
KREF Lending V LLC | Morgan Stanley
Repurchase Agreement Counterparty [Line Items]
Percent of Stockholders' Equity	4.30%	8.90%
KREF Lending V LLC | Term Lending Agreement
Repurchase Agreement Counterparty [Line Items]
Outstanding Principal	$ 900,000
Net Counterparty Exposure	$ 199,099
Percent of Stockholders' Equity	19.20%
Weighted Average Life (Years)	1 year 8 months 12 days

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Debt Obligations - Term Loan Facility (Details)	9 Months Ended	12 Months Ended
	Sep. 30, 2020 USD ($) loan	Dec. 31, 2019 USD ($) loan	Oct. 31, 2018 USD ($)	Apr. 30, 2018 USD ($)
Debt Instrument [Line Items]
Carrying value	$ 2,846,350,000	$ 2,884,887,000
Facility | Term Loan Facility
Debt Instrument [Line Items]
Borrowing capacity			$ 1,000,000,000.0	$ 200,000,000.0
Term (in years)	5 years
Number of collateralized loans (in loans) | loan	13	12
Outstanding face amount	$ 1,191,725,000	$ 1,003,995,000
Amortized Cost	1,186,481,000	997,081,000
Carrying Value	1,179,982,000	997,081,000
Principal	981,953,000	798,180,000
Carrying value	$ 980,181,000	$ 793,872,000
Interest rate	1.90%	1.90%
Collateralized Assets | Facility | Term Loan Facility
Debt Instrument [Line Items]
Basis spread on variable rate	3.00%	3.00%
Minimum | Facility | Term Loan Facility
Debt Instrument [Line Items]
Collateral based margin	1.60%	1.50%
Maximum | Facility | Term Loan Facility
Debt Instrument [Line Items]
Debt instrument, interest rate, stated percentage	1.70%	3.20%

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Debt Obligations - Debt Activity (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019
Debt Instrument, Increase (Decrease), Net [Roll Forward]
Deferred debt issuance costs	$ (8,689)	$ (6,911)
Facility | Secured Financing Agreements
Debt Instrument, Increase (Decrease), Net [Roll Forward]
Beginning balance	2,884,887
Principal borrowings	970,580
Principal repayments/sales/deconsolidation	(1,016,543)
Deferred debt issuance costs	(2,515)
Amortization of deferred debt issuance costs	9,941
Ending balance	$ 2,846,350

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Debt Obligations - Maturities (Details) $ in Thousands	Sep. 30, 2020 USD ($)
Debt Instrument [Line Items]
2020	$ 142,545
2021	798,357
2022	1,300,642
2023	388,883
2024	222,326
Total	2,852,753
Nonrecourse
Debt Instrument [Line Items]
2020	106,909
2021	734,051
2022	1,005,456
2023	356,741
2024	181,896
Total	2,385,053
Recourse
Debt Instrument [Line Items]
2020	35,636
2021	64,306
2022	295,186
2023	32,142
2024	40,430
Total	$ 467,700
Maximum
Debt Instrument [Line Items]
Recourse limit	25.00%

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Debt Obligations - Covenants (Details)	9 Months Ended
	Sep. 30, 2020 USD ($)	Jul. 31, 2020
Debt Disclosure [Abstract]
Interest income to interest expense ratio	1.5
Percent of aggregate cash proceeds and any capital contributions	75.00%
Amount of aggregate cash proceeds and any capital contributions	$ 880,200,000
Cash liquidity covenant amount (greater of)	$ 10,000,000.0
Cash liquidity covenant, percent of recourse indebtedness (greater of)	5.00%
Total indebtedness covenant, percent of total assets, net of VIE liabilities	75.00%
Total indebtedness, percent of total assets, net of non-recourse indebtedness		80.00%
Total indebtedness, percent of total assets		82.00%

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Collateralized Loan Obligation - Schedule of Collateral Assets and Respective Borrowings (Details)	1 Months Ended
	Nov. 30, 2018	Sep. 30, 2020 USD ($) collateral_asset borrowing	Dec. 31, 2019 USD ($) collateral_asset borrowing
Assets and Associated Liabilities of Transfers Accounted for as Secured Borrowings [Line Items]
Term of reinvestment feature	2 years
Loan repayment proceeds		$ 42,000,000.0	$ 0.0
Percentage of commercial mortgage loans		19.20%	20.20%
Percentage of collateralized loan obligations under floating rate loans		100.00%	100.00%
Collateralized loan obligation, net | Variable Interest Entity, Primary Beneficiary
Assets and Associated Liabilities of Transfers Accounted for as Secured Borrowings [Line Items]
Financing provided, count (in borrowings) | borrowing		1	1
Principal amount		$ 810,000,000	$ 810,000,000
Carrying value, financing provided		$ 808,311,000	$ 803,376,000
Weighted average yield, financing provided		220.00%	1.80%
Collateralized Loan Obligations | Variable Interest Entity, Primary Beneficiary
Assets and Associated Liabilities of Transfers Accounted for as Secured Borrowings [Line Items]
Collateral assets, count (in collateral assets) | collateral_asset		19	22
Face amount, Collateral assets		$ 1,000,000,000	$ 1,000,000,000
Carrying value, collateral assets		$ 999,349,000	$ 1,003,285,000
Weighted average yield, collateral assets		280.00%	280.00%
Commercial Mortgage Loans, Held-For-Investment and Cash | Collateralized Loan Obligations | Variable Interest Entity, Primary Beneficiary
Assets and Associated Liabilities of Transfers Accounted for as Secured Borrowings [Line Items]
Amortized cost, collateral assets		$ 1,000,000,000	$ 1,000,000,000
Carrying value, collateral assets		996,039,000	$ 1,000,000,000
Cash		12,000,000.0
Loan repayment proceeds		$ 42,000,000.0

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Collateralized Loan Obligation - Schedule of Assets and Liabilities Included in Consolidated Balance Sheet (Details) - Collateralized Loan Obligations - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Cash
Assets and Associated Liabilities of Transfers Accounted for as Secured Borrowings [Line Items]
Assets	$ 12,000	$ 0
Variable Interest Entity, Primary Beneficiary
Assets and Associated Liabilities of Transfers Accounted for as Secured Borrowings [Line Items]
Assets	999,349	1,003,285
Liabilities	809,003	804,702
Variable Interest Entity, Primary Beneficiary | Cash
Assets and Associated Liabilities of Transfers Accounted for as Secured Borrowings [Line Items]
Assets	12,000	0
Variable Interest Entity, Primary Beneficiary | Commercial mortgage loans, held-for-investment, net
Assets and Associated Liabilities of Transfers Accounted for as Secured Borrowings [Line Items]
Assets	942,378	1,000,000
Commercial mortgage loans, held-for-investment	946,350	1,000,000
Less: Allowance for credit losses	(3,972)	0
Variable Interest Entity, Primary Beneficiary | Accrued interest receivable
Assets and Associated Liabilities of Transfers Accounted for as Secured Borrowings [Line Items]
Assets	2,803	3,280
Variable Interest Entity, Primary Beneficiary | Other assets(A)
Assets and Associated Liabilities of Transfers Accounted for as Secured Borrowings [Line Items]
Assets	42,168	5
Variable Interest Entity, Primary Beneficiary | Collateralized loan obligation, net
Assets and Associated Liabilities of Transfers Accounted for as Secured Borrowings [Line Items]
Liabilities	808,311	803,376
Variable Interest Entity, Primary Beneficiary | Accrued interest payable
Assets and Associated Liabilities of Transfers Accounted for as Secured Borrowings [Line Items]
Liabilities	621	1,254
Variable Interest Entity, Primary Beneficiary | Accounts payable, accrued expenses and other liabilities
Assets and Associated Liabilities of Transfers Accounted for as Secured Borrowings [Line Items]
Liabilities	$ 71	$ 72

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Collateralized Loan Obligation - Schedule of Net Interest Income Included in Consolidated Statement of Income (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019	Dec. 31, 2019
Variable Interest Entity [Line Items]
Interest income	$ 67,689	$ 74,223	$ 205,987	$ 201,918
Interest expense	28,832	45,596	98,477	117,527
Total net interest income	38,857	28,627	107,510	84,391
Unamortized debt issuance costs	4,600		4,600		$ 9,500
Collateralized Loan Obligations
Variable Interest Entity [Line Items]
Unamortized debt issuance costs	1,700		1,700		6,600
Variable Interest Entity, Primary Beneficiary | Collateralized Loan Obligations
Variable Interest Entity [Line Items]
Interest income	11,427	12,908	34,692	41,496
Interest expense	5,806	9,681	20,960	29,648
Total net interest income	5,621	3,227	13,732	11,848
Deferred financing costs amortization	1,700	900	5,000	2,500
Unamortized debt issuance costs	$ 1,700	$ 7,300	$ 1,700	$ 7,300	$ 6,600

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Secured Term Loan, Net - Narrative (Details) - USD ($)	1 Months Ended	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2020	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019	Dec. 31, 2019	Sep. 01, 2020
Debt Instrument [Line Items]
Affiliate expenses		$ 5,694,000	$ 4,555,000	$ 17,751,000	$ 16,013,000
Total indebtedness covenant, percent of total assets				75.00%
Structuring fees | KKR Credit & Markets
Debt Instrument [Line Items]
Affiliate expenses		0.0	$ 0.0	$ 600,000	$ 1,100,000
LIBOR
Debt Instrument [Line Items]
Interest rate				0.15%		1.76%
Secured term loan | Structuring fees | Affiliated Entity | KKR Credit & Markets
Debt Instrument [Line Items]
Affiliate expenses		1,100,000
Secured term loan | Secured debt
Debt Instrument [Line Items]
Principal amount	$ 300,000,000.0	300,000,000.0		$ 300,000,000.0
Issuance price	97.50%
Variable rate floor	1.00%
Amortization rate	1.00%
Unamortized discount	$ 7,415,000	7,415,000		7,415,000			$ 7,500,000
Deferred financing costs							$ 4,800,000
Minimum net worth required for compliance	$ 650,000,000.0	$ 650,000,000.0		$ 650,000,000.0
Total indebtedness covenant, percent of total assets	83.30%
Secured term loan | Secured debt | LIBOR
Debt Instrument [Line Items]
Interest rate	4.75%

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Secured Term Loan, Net - Summary of Secured Term Loan (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Sep. 01, 2020	Dec. 31, 2019
Debt Instrument [Line Items]
Principal amount	$ 2,852,753
Deferred financing costs	(4,600)		$ (9,500)
Secured term loan | Secured debt
Debt Instrument [Line Items]
Principal amount	300,000
Unamortized discount	(7,415)	$ (7,500)
Deferred financing costs	(4,707)
Carrying Value	$ 287,878

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Convertible Notes, Net - Narrative (Details)	1 Months Ended	3 Months Ended		9 Months Ended
	May 31, 2018 USD ($) $ / shares	Sep. 30, 2020 USD ($)	Sep. 30, 2019 USD ($)	Sep. 30, 2020 USD ($)	Sep. 30, 2019 USD ($)	Dec. 31, 2019 USD ($)	May 15, 2018 $ / shares
Debt Instrument [Line Items]
Affiliate expenses		$ 5,694,000	$ 4,555,000	$ 17,751,000	$ 16,013,000
Accrued interest payable		$ 7,586,000		$ 7,586,000		$ 6,686,000
Notes Due in 2023
Debt Instrument [Line Items]
Debt instrument, interest rate, effective percentage		6.92%		6.92%
Convertible Notes Payable
Debt Instrument [Line Items]
Principal		$ 143,750,000		$ 143,750,000		143,750,000
Deferred financing costs		$ 2,690,000		$ 2,690,000		3,460,000
Convertible Notes Payable | Notes Due in 2023
Debt Instrument [Line Items]
Principal	$ 143,750,000
Debt instrument, interest rate, stated percentage	6.125%	6.125%		6.125%
Deferred financing costs	$ 5,100,000
Debt instrument, conversion ratio	0.0439386
Debt Instrument, convertible, conversion price (usd per share) | $ / shares	$ 22.76
Debt instrument, convertible, conversion premium	10.00%
Debt instrument, convertible, conversion price less premium (usd per share) | $ / shares							$ 20.69
Amortization of debt discount	$ 1,800,000
Debt instrument, interest rate, effective percentage	6.50%
Accrued interest payable		$ 3,300,000		$ 3,300,000		$ 1,100,000
KKR Credit & Markets | Convertible debt
Debt Instrument [Line Items]
Affiliate expenses	$ 800,000

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Convertible Notes, Net - Interest Expense, Debt (Details) - Convertible Notes Payable - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Debt Instrument [Line Items]
Cash coupon	$ 2,201	$ 2,201	$ 6,604	$ 6,603
Discount and issuance cost amortization	349	349	1,041	1,037
Total interest expense	$ 2,550	$ 2,550	$ 7,645	$ 7,640

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Convertible Notes, Net - Net Book Value (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Debt Instrument [Line Items]
Net book value	$ 140,115	$ 139,075
Convertible Notes Payable
Debt Instrument [Line Items]
Principal	143,750	143,750
Deferred financing costs	(2,690)	(3,460)
Unamortized discount	(945)	(1,215)
Net book value	$ 140,115	$ 139,075

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Loan Participations Sold - Narrative (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019	Oct. 31, 2019
Participating Mortgage Loans [Line Items]
Carrying Value	$ 66,226	$ 64,966
Vertical loan participation
Participating Mortgage Loans [Line Items]
Carrying Value	66,226	64,966	$ 65,000
Principal balance	66,248	65,000
Total loan
Participating Mortgage Loans [Line Items]
Carrying Value	334,312	326,881
Principal balance	$ 336,753	$ 328,500	$ 328,500

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Loan Participations Sold (Details) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020 USD ($) loan	Sep. 30, 2019 USD ($)	Sep. 30, 2020 USD ($) loan	Sep. 30, 2019 USD ($)	Dec. 31, 2019 USD ($) loan	Oct. 31, 2019 USD ($)
Participating Mortgage Loans [Line Items]
Carrying Value	$ 66,226		$ 66,226		$ 64,966
Interest income	$ 38,857	$ 28,627	$ 107,510	$ 84,391
Total loan
Participating Mortgage Loans [Line Items]
Number of loans sold (in loans) | loan	1		1		1
Principal Balance	$ 336,753		$ 336,753		$ 328,500	$ 328,500
Amortized Cost	335,589		335,589		326,881
Carrying Value	$ 334,312		$ 334,312		$ 326,881
Basis spread on variable rate	260.00%		260.00%		250.00%
Vertical loan participation
Participating Mortgage Loans [Line Items]
Number of loans sold (in loans) | loan	1		1		1
Principal Balance	$ 66,248		$ 66,248		$ 65,000
Amortized Cost	66,226		66,226		64,966
Carrying Value	$ 66,226		$ 66,226		$ 64,966	$ 65,000
Yield/cost	260.00%		260.00%		250.00%
Interest income	$ 700	0	$ 2,100	0
Interest expense	$ 700	$ 0	$ 2,100	$ 0

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Variable Interest Entities - Narrative (Details) $ in Thousands	3 Months Ended	9 Months Ended
	Sep. 30, 2019 USD ($)	Sep. 30, 2020 USD ($) investments	Dec. 31, 2019 USD ($)	Dec. 31, 2018 USD ($)
Variable Interest Entity [Line Items]
Number of equity method investments (in investments) | investments		2
Equity method investments		$ 33,468	$ 37,469
CMBS
Variable Interest Entity [Line Items]
Unpaid principal balance				$ 34,900
Fair value				$ 12,500
Fair value of sold investment	$ 9,800
Loss on sale of CMBS	$ 2,700
RECOP
Variable Interest Entity [Line Items]
Ownership percentage in VIE		3.50%
Nonconsolidated | KKR Manager
Variable Interest Entity [Line Items]
Ownership percentage in VIE		4.70%

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Equity - Narrative (Details) - USD ($)	1 Months Ended						3 Months Ended			9 Months Ended
	Nov. 30, 2018	Aug. 31, 2018	May 31, 2017	Apr. 30, 2017	Feb. 28, 2017	Mar. 31, 2016	Jun. 30, 2020	Mar. 31, 2020	Mar. 31, 2019	Sep. 30, 2020	Sep. 30, 2019	Jun. 15, 2020	Dec. 31, 2019	Feb. 22, 2019	Oct. 02, 2014
Subsidiary, Sale of Stock [Line Items]
Common stock and preferred stock, shares authorized (shares)															350,000,000
Common stock par value (usd per share)										$ 0.01			$ 0.01		$ 0.01
Common stock authorized (shares)										300,000,000			300,000,000		300,000,000
Preferred stock authorized (shares)										50,000,000			50,000,000		50,000,000
Value of stock acquired per transaction for LLC interest allocation						$ 100,000,000.0
Common stock issued (shares)										55,491,405			57,486,583
Common stock outstanding (shares)										55,491,405			57,486,583
Accumulated shares repurchased (shares)										3,900,326
Repurchase of common stock (shares)										2,037,637
Treasury stock acquired, average cost per share (dollars per share)										$ 12.27
Repurchase of common stock										$ 25,000,000.0
Repurchased under pre-set trading plan
Subsidiary, Sale of Stock [Line Items]
Stock repurchase program, authorized amount (up to)												$ 50,000,000.0
ATM
Subsidiary, Sale of Stock [Line Items]
Stock repurchase program, authorized amount (up to)												$ 100,000,000.0
Common Stock
Subsidiary, Sale of Stock [Line Items]
Share price (usd per share)		$ 19.90
Sale of stock, number of shares issued in transaction (shares)		5,000,000
Voting Preferred Stock
Subsidiary, Sale of Stock [Line Items]
Issuance of stock (shares)						1
Preferred stock share price (usd per share)						$ 20.00
Ownership percentage to retain voting rights						25.00%
Redeemable Preferred Stock
Subsidiary, Sale of Stock [Line Items]
Issuance of stock (shares)					1
Preferred stock share price (usd per share)					$ 0.01
Liquidation preference (usd per share)										$ 0.01
Redemption price (usd per share)										$ 0.01
Common Stock
Subsidiary, Sale of Stock [Line Items]
Common stock issued related to vesting RSUs (shares)										179,893
Repurchase of common stock (shares)							389,086	1,648,551	212,809
Repurchase of common stock							$ 20,000		$ 2,000
Common Stock | Restricted Stock Units
Subsidiary, Sale of Stock [Line Items]
Restricted stock issued during the period (in shares)										42,459	40,503
KKR Real Estate FInance Manager L.L.C
Subsidiary, Sale of Stock [Line Items]
Common stock, percent of limited liability company interest						6.67%
KREF | Common Stock
Subsidiary, Sale of Stock [Line Items]
Common stock issued related to vesting of restricted stock units (shares)										59,391,731
KREF | KKR
Subsidiary, Sale of Stock [Line Items]
Common stock (shares)										21,858,356			22,008,616
Issued and outstanding common stock owned, percentage										39.40%			38.30%
KKR Real Estate FInance Trust Inc. on Behalf of Third Party | KKR
Subsidiary, Sale of Stock [Line Items]
Common stock (shares)										1,858,356			2,008,616
Private Placement
Subsidiary, Sale of Stock [Line Items]
Capital commitment						$ 277,400,000
Share price (usd per share)						$ 20.00
Common stock issued (shares)						21,838
Private Placement | Common Stock
Subsidiary, Sale of Stock [Line Items]
Share price (usd per share)				$ 20.00	$ 20.00
Sale of stock, number of shares issued in transaction (shares)				10,379,738	7,386,208
Sale of stock, consideration received on transaction				$ 207,600,000	$ 147,700,000
Private Placement, Third-parties and Current and Former Employees of, and Consultants to, KKR
Subsidiary, Sale of Stock [Line Items]
Capital commitment						$ 190,100,000
Private Placement, Third-parties
Subsidiary, Sale of Stock [Line Items]
Capital commitment						178,400,000
Private Placement, Current and Former Employees of, and Consultants to, KKR
Subsidiary, Sale of Stock [Line Items]
Capital commitment						11,800,000
Private Placement, KKR Fund Holdings
Subsidiary, Sale of Stock [Line Items]
Capital commitment						400,000,000.0
Private Placement, Third-parties Subsequent to Private Placement Completion
Subsidiary, Sale of Stock [Line Items]
Capital commitment						$ 248,000,000.0
IPO | Common Stock
Subsidiary, Sale of Stock [Line Items]
Share price (usd per share)			$ 20.50
Sale of stock, number of shares issued in transaction (shares)			11,787,500
Underwritten offering | Common Stock
Subsidiary, Sale of Stock [Line Items]
Share price (usd per share)	$ 20.00
Sale of stock, number of shares issued in transaction (shares)	4,500,000		1,537,500
Sale of stock, consideration received on transaction	$ 9,400,000	$ 98,300,000
ATM
Subsidiary, Sale of Stock [Line Items]
Stock repurchase program, authorized amount (up to)														$ 100,000,000.0
Over-allotment option - third-party investors | Common Stock
Subsidiary, Sale of Stock [Line Items]
Sale of stock, number of shares issued in transaction (shares)	4,000,000
Over-allotment option - company | Common Stock
Subsidiary, Sale of Stock [Line Items]
Sale of stock, number of shares issued in transaction (shares)	500,000

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Equity - Schedule of Common Stock Issued (Details) - USD ($) $ in Thousands	1 Months Ended	12 Months Ended
	Mar. 31, 2016	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Common Stock, Net
Common Stock Issuance [Roll Forward]
Beginning balance (shares)		53,711,838	24,158,392	13,636,416
Ending balance (shares)		59,211,838	53,711,838	24,158,392
Common Stock Including Additional Paid in Capital & Offering Costs
Common Stock Issuance [Roll Forward]
Beginning balance		$ 1,054,346	$ 479,733	$ 272,728
Ending balance		$ 1,162,023	$ 1,054,346	$ 479,733
Private Placement
Common Stock Issuance [Roll Forward]
Ending balance (shares)	21,838
February 2016 | Common Stock, Net
Common Stock Issuance [Roll Forward]
Issuance of stock (shares)				2,000,000
February 2016 | Common Stock Including Additional Paid in Capital & Offering Costs
Common Stock Issuance [Roll Forward]
Issuance of stock				$ 40,000
May 2016 | Common Stock, Net
Common Stock Issuance [Roll Forward]
Issuance of stock (shares)				3,000,138
May 2016 | Common Stock Including Additional Paid in Capital & Offering Costs
Common Stock Issuance [Roll Forward]
Issuance of stock				$ 57,130
June 2016 | Common Stock, Net
Common Stock Issuance [Roll Forward]
Issuance of stock (shares)				21,838
June 2016 | Common Stock Including Additional Paid in Capital & Offering Costs
Common Stock Issuance [Roll Forward]
Issuance of stock				$ 0
August 2016 | Common Stock, Net
Common Stock Issuance [Roll Forward]
Issuance of stock (shares)				5,500,000
August 2016 | Common Stock Including Additional Paid in Capital & Offering Costs
Common Stock Issuance [Roll Forward]
Issuance of stock				$ 109,875
February 2017 | Common Stock, Net
Common Stock Issuance [Roll Forward]
Issuance of stock (shares)			7,386,208
February 2017 | Common Stock Including Additional Paid in Capital & Offering Costs
Common Stock Issuance [Roll Forward]
Issuance of stock			$ 147,662
April 2017 | Common Stock, Net
Common Stock Issuance [Roll Forward]
Issuance of stock (shares)			10,379,738
April 2017 | Common Stock Including Additional Paid in Capital & Offering Costs
Common Stock Issuance [Roll Forward]
Issuance of stock			$ 207,595
May 2017- Initial Public Offering | Common Stock, Net
Common Stock Issuance [Roll Forward]
Issuance of stock (shares)			11,787,500
May 2017- Initial Public Offering | Common Stock Including Additional Paid in Capital & Offering Costs
Common Stock Issuance [Roll Forward]
Issuance of stock			$ 219,356
August 2018 | Common Stock, Net
Common Stock Issuance [Roll Forward]
Issuance of stock (shares)		5,000,000
August 2018 | Common Stock Including Additional Paid in Capital & Offering Costs
Common Stock Issuance [Roll Forward]
Issuance of stock		$ 98,326
November 2018 | Common Stock, Net
Common Stock Issuance [Roll Forward]
Issuance of stock (shares)		500,000
November 2018 | Common Stock Including Additional Paid in Capital & Offering Costs
Common Stock Issuance [Roll Forward]
Issuance of stock		$ 9,351

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Equity - Schedule of Dividends Declared (Details) - USD ($) $ / shares in Units, $ in Thousands							1 Months Ended	3 Months Ended						9 Months Ended
	Sep. 30, 2020	Jun. 30, 2020	Mar. 31, 2020	Sep. 30, 2019	Jun. 28, 2019	Mar. 29, 2019	Sep. 30, 2020	Sep. 30, 2020	Jun. 30, 2020	Mar. 31, 2020	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Sep. 30, 2020	Sep. 30, 2019
Equity [Abstract]
Dividends declared per share of common stock (usd per share)	$ 0.43	$ 0.43	$ 0.43	$ 0.43	$ 0.43	$ 0.43	$ 0.43	$ 0.43	$ 0.43	$ 0.43	$ 0.43	$ 0.43	$ 0.43	$ 1.29	$ 1.29
Dividends paid	$ 23,861	$ 23,861	$ 24,010	$ 24,692	$ 24,688	$ 24,761								$ 71,732	$ 74,141

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Equity - Earnings Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Numerator
Net income (loss) attributable to common stockholders	$ 31,351	$ 23,617	$ 24,777	$ 65,703
Denominator
Basic weighted average common shares outstanding (shares)	55,491,405	57,420,140	56,107,765	57,406,802
Dilutive restricted stock units (shares)	140,765	128,926	79,696	104,490
Diluted weighted average common shares outstanding (shares)	55,632,170	57,549,066	56,187,461	57,511,292
Net income (loss) attributable to common stockholders, per:
Basic common share (usd per share)	$ 0.56	$ 0.41	$ 0.44	$ 1.14
Diluted common share (usd per share)	$ 0.56	$ 0.41	$ 0.44	$ 1.14

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Stock-based Compensation - Narrative (Details) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2020 USD ($)	Sep. 30, 2019 USD ($)	Sep. 30, 2020 USD ($) periods shares	Sep. 30, 2019 USD ($)
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Issuance ratio	1		1
Weighted average period			9 months 18 days
Adjustment to additional paid in capital			$ 0.3
Common Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common shares issued related to the vesting of restricted stock units (shares) | shares			42,459
Restricted Stock Units (RSUs)
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of consecutive vesting periods (in periods) | periods			3
Vesting period			1 year
Units granted (in shares) | shares			59,551
Common Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized stock based compensation expense	$ 7.2		$ 7.2
General and Administrative Expense
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation expense	$ 1.4	$ 1.0	$ 4.4	$ 3.1
Director | Restricted Stock Units (RSUs)
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period			1 year

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Stock-based Compensation - Restricted Stock Unit Activity (Details) - $ / shares	9 Months Ended	12 Months Ended
	Sep. 30, 2020	Dec. 31, 2019
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward]
Units granted (in shares)	18,052	362,832
Restricted Stock Units
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward]
Unvested, beginning balance (in shares)	641,214
Units granted (in shares)	18,052
Units vested (in shares)	(59,551)
Units Forfeited/ cancelled (in shares)	(1,239)
Unvested, ending balance (in shares)	598,476	641,214
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Weighted Average Grant Date Fair Value [Abstract]
Unvested, beginning balance, weighted average grant date fair value (usd per share)	$ 20.02
Units granted, weighted average grant date fair value (usd per share)	14.40
Units vested, weighted average grant date fair value (usd per share)	20.42
Units Forfeited/ cancelled, weighted average grant date fair value (usd per share)	19.26
Unvested. ending balance, weighted average grant date fair value (usd per share)	$ 19.81	$ 20.02

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Stock-based Compensation - RSU Vesting (Details) - Restricted Stock Units - shares	Sep. 30, 2020	Dec. 31, 2019
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
2020 (in shares)	231,875
2021 (in shares)	249,935
2022 (in shares)	116,666
Total (in shares)	598,476	641,214

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Commitments and Contingencies (Details) - USD ($) $ in Millions	1 Months Ended	9 Months Ended
	Jan. 31, 2017	Sep. 30, 2020
Future Funding Commitment Related to Commercial Mortgage Loan Investments
Long-term Purchase Commitment [Line Items]
Capital commitment		$ 462.3
Nonconsolidated | RECOP I | Commitment to Invest in Aggregator Vehicle
Long-term Purchase Commitment [Line Items]
Capital commitment	$ 40.0	$ 4.3
Long-term purchase commitment period	2 years

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Related Party Transactions - Narrative (Details)	1 Months Ended	3 Months Ended			9 Months Ended		12 Months Ended
	May 31, 2018 USD ($)	Sep. 30, 2020 USD ($) shares	Sep. 30, 2019 USD ($)	Dec. 31, 2018 USD ($)	Sep. 30, 2020 USD ($) quarter shares	Sep. 30, 2019 USD ($)	Dec. 31, 2019 shares
Related Party Transaction [Line Items]
Affiliate fee		$ 5,694,000	$ 4,555,000		$ 17,751,000	$ 16,013,000
Units granted (in shares) | shares					18,052		362,832
Management Incentive Plan
Related Party Transaction [Line Items]
Percent of issued and outstanding shares of common stock available for awards (no more than)					7.50%
Number of shares available for awards (shares) | shares		4,028,387			4,028,387
Non-Employee Director | Management Incentive Plan
Related Party Transaction [Line Items]
Maximum number of shares subject to award grants together with cash fees paid					$ 1,000,000.0
Maximum amount that can be paid to any participant pursuant to a performance compensation award					$ 10,000,000.0
Management Agreement
Related Party Transaction [Line Items]
Management agreement term					3 years
Period of automatic renewal under management agreement					1 year
Minimum voting percentage for renewal of agreement term					66.67%
Termination fee					3
Trailing average period applied to termination fee multiple under management agreement					24 months
Quarterly Management Fee
Related Party Transaction [Line Items]
Affiliate fee					$ 62,500
Management fee as a percent of weighted average adjusted equity (greater of)					0.375%
Quarterly Incentive Compensation
Related Party Transaction [Line Items]
Incentive compensation fee percent					20.00%
Period of adjusted earnings					12 months
Percent of trailing 12 month weighted average adjusted equity					7.00%
Period of weighted average adjusted equity					12 months
Number of quarters worth of compensation already paid (calendar quarters) | quarter					3
Structuring fees
Related Party Transaction [Line Items]
Structuring fee			0.0			1,500,000
KKR Credit & Markets | Structuring fees
Related Party Transaction [Line Items]
Affiliate fee		$ 0.0	0.0		$ 600,000	1,100,000
Structuring fee, percent					0.75%
Term Loan Facility | Structuring fees
Related Party Transaction [Line Items]
Affiliate fee		0.0			$ 0.0
Term Loan Facility | KKR Credit & Markets
Related Party Transaction [Line Items]
Structuring fee, percent					0.75%
Convertible Debt | KKR Credit & Markets
Related Party Transaction [Line Items]
Affiliate fee	$ 800,000
Maximum commissions to be paid to sales agent as a percentage of gross sales price					2.00%
HSBC Facility | KKR Credit & Markets
Related Party Transaction [Line Items]
Structuring fee, percent					0.25%
HSBC Facility | KKR Credit & Markets | Structuring fees
Related Party Transaction [Line Items]
Affiliate fee		0.0			$ 100,000
Secured term loan | Affiliated Entity | Structuring fees | KKR Credit & Markets
Related Party Transaction [Line Items]
Affiliate fee		$ 1,100,000
Structuring fee, percent		0.37%
BMO
Related Party Transaction [Line Items]
Structuring fee, percent					0.35%
BMO | Structuring fees
Related Party Transaction [Line Items]
Affiliate fee		$ 0.0	$ 0.0		$ 0.0	$ 200,000
Collateralized Loan Obligations
Related Party Transaction [Line Items]
Placement agent fee				$ 900,000
Placement agent fee, percent				0.105%
Common Stock | Management Incentive Plan
Related Party Transaction [Line Items]
Number of shares available for awards (shares) | shares		3,250,018			3,250,018

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Related Party Transactions - Expenses Incurred and Amounts Owed to Affiliates (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019	Dec. 31, 2019
Related Party Transaction [Line Items]
Due to affiliate	$ 5,127		$ 5,127		$ 5,917
Affiliate expenses	5,694	$ 4,555	17,751	$ 16,013
Management fees
Related Party Transaction [Line Items]
Due to affiliate	4,223		4,223		4,280
Affiliate expenses	4,223	4,280	12,740	12,855
Incentive compensation
Related Party Transaction [Line Items]
Affiliate expenses	990	0	3,845	2,098
Expense reimbursements and other
Related Party Transaction [Line Items]
Due to affiliate	904		904		$ 1,637
Affiliate expenses	481	275	1,166	1,060
Out-of-pocket costs reimbursed
Related Party Transaction [Line Items]
Affiliate expenses	$ 800	$ 400	$ 2,900	$ 1,500

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Fair Value of Financial Instruments - Assets and Liabilities Recorded at Fair Value on Recurring Basis (Details) - USD ($) $ in Thousands		3 Months Ended
		Sep. 30, 2020	Jun. 30, 2020	Jan. 01, 2020	Dec. 31, 2019	Oct. 31, 2019
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and cash equivalents	[1]	$ 301,375			$ 67,619
Commercial mortgage loans, held-for-investment		4,895,974		$ 4,931,042	4,931,042
Financing receivable, after allowance for credit loss		4,833,239		4,931,042	4,931,042
Equity method investments, fair value		33,468			37,469
Total Assets		5,231,865			5,057,018
Outstanding Principal		2,852,753
Loan participations sold, net, carrying value		66,226			64,966
Total Liabilities		4,190,807			3,933,306
Liabilities, fair value		801,392
Unamortized origination discounts and deferred nonrefundable fees					29,700
Mezzanine loan write-off		20,800
Unamortized debt issuance costs		4,600			9,500
Carrying amount		62,735		$ 0	0
Mezzanine Loan
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Write-offs charged		4,700	$ 4,700
Fair Value, Measurements, Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and cash equivalents		301,375			67,619
Cash and cash equivalents, fair value		301,375			67,619
Commercial mortgage loans, held-for-investment		4,921,472			4,960,698
Commercial mortgage loans, held-for-investment		4,895,974			4,931,042
Financing receivable, after allowance for credit loss		4,833,239			4,931,042
Commercial mortgage loans, held-for-investment, net, fair value		4,791,247			4,937,808
Equity method investments		33,468			37,469
Equity method investments, fair value		33,468			37,469
Assets, principal balance		5,256,315			5,065,786
Net Assets		5,230,817			5,036,130
Total Assets		5,168,082			5,036,130
Assets, fair value		5,126,090			5,042,896
Loan participations sold, net, principal balance		66,248			65,000
Loan participations sold, net, carrying value		66,226			64,966
Loan participations sold, net, fair value		66,226			64,966
Liabilities, principal balance		4,172,751			3,917,466
Total Liabilities		4,148,880			3,892,304
Liabilities, fair value		4,160,045			3,925,268
Fair Value, Measurements, Recurring | Facility
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Outstanding Principal		2,852,753			2,898,716
Carrying value, financing provided		2,846,350			2,884,887
Secured financing agreements, net, fair value		2,852,753			2,898,716
Fair Value, Measurements, Recurring | Collateralized loan obligation, net
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Outstanding Principal		810,000			810,000
Carrying value, financing provided		808,311			803,376
Secured financing agreements, net, fair value		801,392			810,867
Fair Value, Measurements, Recurring | Secured debt
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Outstanding Principal		300,000
Carrying value, financing provided		287,878
Secured financing agreements, net, fair value		297,939
Fair Value, Measurements, Recurring | Convertible debt
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Outstanding Principal		143,750			143,750
Carrying value, financing provided		140,115			139,075
Secured financing agreements, net, fair value		141,735			150,719
Fair Value, Measurements, Recurring | Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and cash equivalents, fair value		301,375			67,619
Commercial mortgage loans, held-for-investment, net, fair value		0			0
Equity method investments, fair value		0			0
Assets, fair value		301,375			67,619
Loan participations sold, net, fair value		0			0
Liabilities, fair value		0			150,719
Fair Value, Measurements, Recurring | Level 1 | Facility
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Secured financing agreements, net, fair value		0			0
Fair Value, Measurements, Recurring | Level 1 | Collateralized loan obligation, net
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Secured financing agreements, net, fair value		0			0
Fair Value, Measurements, Recurring | Level 1 | Secured debt
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Secured financing agreements, net, fair value		0
Fair Value, Measurements, Recurring | Level 1 | Convertible debt
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Secured financing agreements, net, fair value		0			150,719
Fair Value, Measurements, Recurring | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and cash equivalents, fair value		0			0
Commercial mortgage loans, held-for-investment, net, fair value		0			0
Equity method investments, fair value		0			0
Assets, fair value		0			0
Loan participations sold, net, fair value		0			0
Liabilities, fair value		439,674			0
Fair Value, Measurements, Recurring | Level 2 | Facility
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Secured financing agreements, net, fair value		0			0
Fair Value, Measurements, Recurring | Level 2 | Collateralized loan obligation, net
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Secured financing agreements, net, fair value		0			0
Fair Value, Measurements, Recurring | Level 2 | Secured debt
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Secured financing agreements, net, fair value		297,939
Fair Value, Measurements, Recurring | Level 2 | Convertible debt
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Secured financing agreements, net, fair value		141,735			0
Fair Value, Measurements, Recurring | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and cash equivalents, fair value		0			0
Commercial mortgage loans, held-for-investment, net, fair value		4,791,247			4,937,808
Equity method investments, fair value		33,468			37,469
Assets, fair value		4,824,715			4,975,277
Loan participations sold, net, fair value		66,226			64,966
Liabilities, fair value		3,720,371			3,774,549
Fair Value, Measurements, Recurring | Level 3 | Facility
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Secured financing agreements, net, fair value		2,852,753			2,898,716
Fair Value, Measurements, Recurring | Level 3 | Collateralized loan obligation, net
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Secured financing agreements, net, fair value		801,392			810,867
Fair Value, Measurements, Recurring | Level 3 | Secured debt
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Secured financing agreements, net, fair value		0
Fair Value, Measurements, Recurring | Level 3 | Convertible debt
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Secured financing agreements, net, fair value		0			0
Commercial Mortgage Loans
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Unamortized debt issuance costs		6,400			13,800
Collateralized Loan Obligations
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Unamortized debt issuance costs		1,700			6,600
Commercial mortgage loans, held-for-investment, net, carrying value		946,000			1,000,000
Vertical loan participation
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financing receivable, after allowance for credit loss		66,200
Commercial mortgage loans, held-for-investment, net, fair value		66,200
Senior Participation Loan
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Carrying amount		62,700
Vertical loan participation
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financing receivable, after allowance for credit loss					65,000
Commercial mortgage loans, held-for-investment, net, fair value					65,000
Loan participations sold, net, carrying value		$ 66,226			$ 64,966	$ 65,000

[1] Includes $12.0 million and $0.0 million held in collateralized loan obligation as of September 30, 2020 and December 31, 2019, respectively.

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Fair Value of Financial Instruments - Narrative (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Schedule of Equity Method Investments [Line Items]
Income (loss) from equity method investments	$ (973)	$ (1,321)	$ 631	$ (3,314)
RECOP I
Schedule of Equity Method Investments [Line Items]
Distribution from equity method investments			2,600
Income (loss) from equity method investments			$ 1,400

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Fair Value of Financial Instruments - Unobservable Inputs (Details) $ in Thousands	Sep. 30, 2020 USD ($)	Dec. 31, 2019 USD ($)
Fair Value Inputs, Assets, Quantitative Information [Line Items] (Deprecated 2018-01-31)
Liabilities, fair value	$ 801,392
Equity method investments	33,468	$ 37,469
Carrying Value	66,226	$ 64,966
CMBS
Fair Value Inputs, Assets, Quantitative Information [Line Items] (Deprecated 2018-01-31)
Assets, fair value	4,791,247
CMBS | Loans held-for-investment
Fair Value Inputs, Assets, Quantitative Information [Line Items] (Deprecated 2018-01-31)
Commercial mortgage loans, held-for-investment, net	$ 4,791,247
CMBS | Discount Rate | Level 3 | Minimum | Discounted Cash Flow | Loans held-for-investment
Fair Value Inputs, Assets, Quantitative Information [Line Items] (Deprecated 2018-01-31)
Weighted average, measurement	0.029
CMBS | Discount Rate | Level 3 | Maximum | Discounted Cash Flow | Loans held-for-investment
Fair Value Inputs, Assets, Quantitative Information [Line Items] (Deprecated 2018-01-31)
Weighted average, measurement	0.191
CMBS | Discount Rate | Level 3 | Weighted Average | Discounted Cash Flow | Loans held-for-investment
Fair Value Inputs, Assets, Quantitative Information [Line Items] (Deprecated 2018-01-31)
Weighted average, measurement	0.046
Collateralized Loan Obligation, Net | Long-term Debt
Fair Value Inputs, Assets, Quantitative Information [Line Items] (Deprecated 2018-01-31)
Collateralized loan obligation, net, fair value	$ 801,392
Collateralized Loan Obligation, Net | Yield | Level 3 | Minimum | Discounted Cash Flow | Long-term Debt
Fair Value Inputs, Assets, Quantitative Information [Line Items] (Deprecated 2018-01-31)
Weighted average, measurement	0.017
Collateralized Loan Obligation, Net | Yield | Level 3 | Maximum | Discounted Cash Flow | Long-term Debt
Fair Value Inputs, Assets, Quantitative Information [Line Items] (Deprecated 2018-01-31)
Weighted average, measurement	0.042
Collateralized Loan Obligation, Net | Yield | Level 3 | Weighted Average | Discounted Cash Flow | Long-term Debt
Fair Value Inputs, Assets, Quantitative Information [Line Items] (Deprecated 2018-01-31)
Weighted average, measurement	0.021
Vertical Loan Syndication
Fair Value Inputs, Assets, Quantitative Information [Line Items] (Deprecated 2018-01-31)
Carrying Value	$ 66,200
RECOP I | Level 3 | Discounted Cash Flow
Fair Value Inputs, Assets, Quantitative Information [Line Items] (Deprecated 2018-01-31)
Equity method investments	$ 33,200

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Income Taxes (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019	Dec. 31, 2019
Income Tax Disclosure [Abstract]
Income tax expense	$ 96,000	$ 77,000	$ 255,000	$ 366,000
Deferred tax assets, net	$ 0		$ 0		$ 0

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Subsequent Events - Schedule of Senior Notes (Details) - USD ($) $ in Thousands	1 Months Ended	9 Months Ended	12 Months Ended
	Oct. 26, 2020	Sep. 30, 2020	Dec. 31, 2019
LIBOR
Subsequent Event [Line Items]
Interest rate		0.15%	1.76%
Senior loans | Subsequent Event
Subsequent Event [Line Items]
Maximum Face Amount	$ 270,585
Net Book Value	$ 201,220
LTV	65.00%
Senior loans | Subsequent Event | LIBOR
Subsequent Event [Line Items]
Interest rate	4.10%
Senior Loan, Arlington, VA | Senior loans | Subsequent Event
Subsequent Event [Line Items]
Maximum Face Amount	$ 70,895
Net Book Value	$ 68,000
LTV	73.00%
Total Loan Exposure %	50.00%
Senior Loan, Arlington, VA | Senior loans | Subsequent Event | KREF and KKR
Subsequent Event [Line Items]
Maximum Face Amount	$ 141,800
Senior Loan, Arlington, VA | Senior loans | Subsequent Event | LIBOR
Subsequent Event [Line Items]
Interest rate	3.80%
Senior Loan, Denver, CO | Senior loans | Subsequent Event
Subsequent Event [Line Items]
Maximum Face Amount	$ 40,000
Net Book Value	$ 38,500
LTV	49.00%
Total Loan Exposure %	50.00%
Senior Loan, Denver, CO | Senior loans | Subsequent Event | KREF and KKR
Subsequent Event [Line Items]
Maximum Face Amount	$ 80,000
Senior Loan, Denver, CO | Senior loans | Subsequent Event | LIBOR
Subsequent Event [Line Items]
Interest rate	3.60%
Senior Loan, Oakland, CA | Senior loans | Subsequent Event
Subsequent Event [Line Items]
Maximum Face Amount	$ 159,690
Net Book Value	$ 94,720
LTV	65.00%
Total Loan Exposure %	31.00%
Senior Loan, Oakland, CA | Senior loans | Subsequent Event | KREF and KKR
Subsequent Event [Line Items]
Maximum Face Amount	$ 509,900
Senior Loan, Oakland, CA | Senior loans | Subsequent Event | Third party lenders
Subsequent Event [Line Items]
Maximum Face Amount	$ 280,000
Senior Loan, Oakland, CA | Senior loans | Subsequent Event | LIBOR
Subsequent Event [Line Items]
Interest rate	4.30%

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Subsequent Events - Narrative (Details) - USD ($) $ / shares in Units, $ in Thousands							1 Months Ended	9 Months Ended
	Sep. 30, 2020	Jun. 30, 2020	Mar. 31, 2020	Sep. 30, 2019	Jun. 28, 2019	Mar. 29, 2019	Oct. 26, 2020	Sep. 30, 2020	Sep. 30, 2019
Subsequent Event [Line Items]
Funding for loans								$ 462,142	$ 2,250,958
Proceeds from loan paydowns								466,283	1,169,515
Dividends paid	$ 23,861	$ 23,861	$ 24,010	$ 24,692	$ 24,688	$ 24,761		$ 71,732	$ 74,141
Subsequent Event
Subsequent Event [Line Items]
Proceeds from loan paydowns							$ 64,700
Dividends paid							$ 23,900
Dividend paid (usd per share)							$ 0.43
Senior loans | Subsequent Event
Subsequent Event [Line Items]
Funding for loans							$ 14,400

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Label	Element	Value
Commercial Mortgage Loans And Unfunded Loan Commitments [Member] | Cumulative Effect, Period of Adoption, Adjustment [Member]
Financing Receivable, Allowance for Credit Loss	us-gaap_FinancingReceivableAllowanceForCreditLosses	$ 15,000,000.0