KKR Real Estate Finance Trust Results Presentation Deck
Key Definitions
"Distributable Earnings": Commencing for all periods ending on or after December 31, 2020, the Company has elected to present Distributable Earnings, a measure
that is not prepared in accordance with GAAP, as a supplemental basis to KREF's net income as determined in accordance with GAAP as the Company believes it would
be useful to investors in evaluating the Company's operating performance and its ability to pay its dividends. Distributable Earnings replaces the Company's prior
presentation of Core Earnings, and Core Earnings presentations from prior reporting periods have been recast as Distributable Earnings.
The Company defines Distributable Earnings as net income (loss) attributable to stockholders or, without duplication, owners of the Company's subsidiaries, computed
in accordance with GAAP, including realized losses not otherwise included in GAAP net income (loss) and excluding (i) non-cash equity compensation expense,
(ii) depreciation and amortization, (iii) any unrealized gains or losses or other similar non-cash items that are included in net income for the applicable reporting
period, regardless of whether such items are included in other comprehensive income or loss, or in net income, and (iv) one-time events pursuant to changes in GAAP
and certain material non-cash income or expense items agreed upon after discussions between the Company's Manager and board of directors and after approval by a
majority of the independent directors. The exclusion of depreciation and amortization from the calculation of Distributable Earnings only applies to debt investments
related to real estate to the extent the Company forecloses upon the property or properties underlying such debt investments.
While Distributable Earnings excludes the impact of the unrealized current provision for credit losses, any loan losses are charged off and realized through
Distributable Earnings when deemed non-recoverable. Non-recoverability is determined (i) upon the resolution of a loan (i.e. when the loan is repaid, fully or partially,
or in the case of foreclosure, when the underlying asset is sold), or (ii) with respect to any amounts due under any loan, when such amount is determined to be non-
collectible.
Distributable Earnings should not be considered as a substitute for GAAP net income. The Company cautions readers that its methodology for calculating Distributable
Earnings may differ from the methodologies employed by other REITs to calculate the same or similar supplemental performance measures, and as a result, the
Company's reported Distributable Earnings may not be comparable to similar measures presented by other REITS.
The weighted average diluted shares outstanding used for purposes of calculating Distributable Earnings per diluted weighted average share has been adjusted from
the weighted average diluted shares outstanding under GAAP to exclude potential shares that may be issued upon the conversion of the Convertible Notes. Consistent
with the treatment of other unrealized adjustments to Distributable Earnings, these potentially issuable shares are excluded until a conversion occurs, which we
believe is a useful presentation for investors. We believe that excluding shares issued in connection with a potential conversion of the Convertible Notes from our
computation of Distributable Earnings per diluted weighted average share is useful to investors for various reasons, including: (i) conversion of Convertible Notes to
shares would require the holder of a note to elect to convert the Convertible Note and for us to elect to settle the conversion in the form of shares, and we currently
intend to settle the Convertible Notes in cash; (ii) future conversion decisions by note holders will be based on our stock price in the future, which is presently not
determinable; and (iii) we believe that when evaluating our operating performance, investors and potential investors consider our Distributable Earnings relative to
our actual distributions, which are based on shares outstanding and not shares that might be issued in the future.
LEED: LEED is the most widely used green building rating system in the world. LEED certification provides independent verification of a building or neighborhood's
green features, allowing for the design, construction, operations and maintenance of resource-efficient, high-performing, healthy, cost-effective buildings.
KREF
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