KKR Real Estate Overview

Ralph Rosenberg
July 18, 2011

CONFIDENTIAL

KKR Real Estate Today

In 2011, KKR established a real estate platform with the mandate of
leveraging KKRs relationships, sourcing channels and proprietary
access to information to create compelling opportunities to provide
flexible capital to solve real estate problems

KKR has built a team of 9 dedicated real estate professionals supported by a deep
bench of investment professionals in private equity (e.g. retail and healthcare) and
special situations

The team has successfully integrated within KKR and is viewed as a complementary
business to existing KKR industry verticals and strategies

Since launching the effort in the spring and summer of 2011, KKR has committed in
excess of $200 million of equity to four transactions with an active pipeline of new
opportunities

We are beginning to evaluate options for third party capital and have completed
listening tours in Asia and the Middle East to help us refine our strategy

KKR Real Estate 3-Year Vision

Over the next three years, KKR will establish a real estate platform
characterized as

Solutions provider across the capital structure focused on achieving attractive risk-adjusted
returns

Strategic counterparty and partner to institutions, real estate owners, and real estate
intensive companies

Control investors who intend to influence the outcome of transactions through improving
operations, optimizing the capital structure and making accretive capital investments

Identifier of opportunities with favorable process dynamics where our relationships or inhouse expertise create a KKR advantage

Complementary business to existing KKR industry verticals and strategies

Focused yet entrepreneurial culture that enables KKR to react selectively to opportunistic
deal flow

Short-Term Goals

Network

Internal
Investments
US
Europe
Asia
Capital
4

Systematic outreach to RE operators and intermediaries to generate

differentiated deal flow
Franchise enhancing senior advisor relationships

Establish house macro view on specific asset classes, markets or themes

Refine investment committee process
Start developing RE infrastructure (finance, reporting, valuation, etc.)

Deploy $300-500 million of capital across 5-7 investments

Develop expertise across certain asset classes and investment themes
Demonstrate differentiation

Continue building investment track record

Develop capital markets capabilities

Proactive sourcing of new opportunities

Seamless integration with Special Situations and PE teams

Continue evaluating opportunities in China through China Growth Fund

Continue deploying capital from KFN and KKR allocations

Begin introducing platform and strategy to existing LPs and consultants
Evaluate opportunities to develop co-invest or SMA relationships with LPs

3-Year Targeted Real Estate Capabilities

Global
Investment Platform
Equity and high-return
structured investments
Real estate operator /
developer platform
Real estate-intensive
private equity investments
Non-securitizeable credit
and mezzanine

Capital Markets /
Fund Raising
Syndicate equity and debt
Procure best-in-market
deal financing
Understand interests of
key sources of real estate
capital
Captures fees and carry
associated with flow
business

Real Estate
Operating Capability
Network of exclusive
operating partners
Several owned / partnered
operating platforms
In-house Capstone real
estate capabilities
Strong network of senior
advisors in desired asset
classes

Tremendous Debt & Equity Excesses In the U.S. During Bubble

$1.4 trillion in US Commercial Real Estate debt to mature between 2012 to 2015

$bn

Commercial Real Estate Debt Maturities

Source: Trepp (2011).

And in Europe
The banking system has become disproportionately large (compared to GDP), with
significant CRE exposure
Banking System Assets as a Percentage of GDP

Source: Barclays Capital (2012).

Traditional CRE Players Are Gone or Are a Fraction of Their Prior

Size

Fraction of Prior Size

Winding Down / Gone

Equity Funds / Investors

Real Estate Partners

Whitehall Funds

Real Estate Funds

Numerous real estate

opportunity funds

Mezzanine / Special Situations / Senior Lenders

Market Opportunity
We believe interesting opportunities exist in the Real Estate space due to:

Need to recapitalize complex capital structures

created during the 2005-2008 timeframe
Lack of capital from balance sheet lenders and
shadow banking industry
Fewer private dedicated providers of
equity and mezzanine capital
Desire for owners to access
stable, strategic capital
partners with no legacy
portfolios
Favorable supply /
demand dynamics
in private real
estate markets

Compelling Opportunities
9

Note:

Unless indicated, the above reflects the current market views, opinions and expectations of KKR based on its historic experience. Historic market trends are not reliable
indicators of actual future market behavior or future0 performance of any particular investment or any KKR fund, vehicle or account which, may differ materially, and are not
to be relied upon as such. There can be no assurance that investors in any KKR fund, vehicle or account will receive a return of capital.

KKR Investment Strategy - Approach

We believe improving operating fundamentals, a current lack of new supply, and an

improving real estate capital markets landscape should lead to future improvement in real
estate values

The combination of i) overleveraged capital structures and ii) a scarcity of equity capital
necessary to recapitalize these capital structures should create compelling value-driven
investment opportunities where KKR seeks to trade situational complexity for a more
attractive basis and excess risk-adjusted returns

Opportunities to buy into complicated

legacy capital structures providing KKR
with an attractive entry point into the
capital structure. We seek positions
with substantial control rights through
the debt security where we can
influence the outcome or ultimately
convert to a control equity position and
own the asset outright (e.g. European
Corporate: Confidential)

In certain recapitalizations/repositionings,
we believe the best risk-adjusted returns
are in the form of a preferred
equity/mezzanine security where we can
earn an attractive current yield and an
equity-like all-in return

Note:

10

Distressed
for Control

Structured
Credit
Investing

Recaps /
Reposition
-ings

Many overleveraged assets and

portfolios have suffered operationally
from a lack of capital investment or
active management. We believe
there will be attractive opportunities
to invest in assets that require capital
to re-institutionalize them (e.g.
Yorktown)

Corporate
We will seek to leverage KKRs corporate
PE experience to i) execute take private,
corporate carve-out, and PIPE
transactions and ii) execute platform /
build-up opportunities within targeted
sectors

Unless indicated, the above reflects the current market views, opinions and expectations of KKR based on its historic experience. Historic market trends are not reliable
indicators of actual future market behavior or future performance of any particular investment or any KKR fund, vehicle or account which, may differ materially, and are not
to be relied upon as such. There can be no assurance that investors in any KKR fund, vehicle or account will receive a return of capital. The specific companies shown
represent all of KKRs real estate investment since March 2011. The specific investments identified are not representative of all of the investments purchased, sold or
recommended for KKR clients, and it should not be assumed that the investments identified was or will be profitable.

What Is KKRs Edge in Real Estate Investing?

KKR believes its Real Estate Team has a differentiated competitive advantage
and benefits from KKRs global footprint as one of the largest alternative
investment firms in the world
Sourcing
Differentiated
Sourcing

Over 400
executives in 14
offices globally
Oftentimes, use
exclusive
relationships to
seek new
investments

Brand

Ability to
attract top
management
talent
Trusted and
respected
partner and
counterparty

Execution

Senior Advisor /
Platform Capabilities

Access to
senior advisors
(operational
and investment
professionals)
within real
estate and
related sectors
Underwriting
and sourcing
resource

Culture

The KKR OneFirm

approach
Collaborative
effort and
attention
across all
business lines
in executing
investments

Industry
Verticals

Ability to tap
KKR industry
teams as
another
avenue to
source and
evaluate deal
opportunities

Financial
Structuring

Access to KKR
Capital
Markets
Financing
expertise
Special
Situations
execution
expertise(1)

(1) Participation of KKR Private Equity, KKR Capital Markets, and KKR Capstone personnel in the public markets investment process is subject to applicable law and inside information barrier
policies and procedures, which may limit the involvement of such personnel in certain circumstances and KAMs ability to leverage such integration with KKR. Discussions with Senior
Advisors and employees of the Firms managed portfolio companies are also subject to the inside information barrier policies and procedures, which may restrict or limit discussions
and/or collaborations with Public Markets/KAM.

11

Operating
Capabilities

Access to the
KKR value
creation
tools: KKR
Capstone,
Public Affairs,
Stakeholder
Management
Rigorous and
regular
portfolio
management

i. Case Studies Recent Transactions

Note:

The specific companies shown represent all of KKRs real estate investment since March 2011. The specific investments identified are not representative of all of the
investments purchased, sold or recommended for KKR clients, and it should not be assumed that the investments identified was or will be profitable. Past performance is no
guarantee of future results.

Yorktown Center: KKRs Edge

Macro Views

Yorktown
Center

Senior Advisor /
Platform Capabilities

Industry Verticals

Culture

13

Retailer relationships
(senior advisors and PE
retail team) enabled
extensive tenant
outreach and diligence
efforts to prove out
lease-up value-add
opportunity (meaningful
information advantage
in projecting upside
potential of asset)

European Corporate (Confidential): KKRs Edge

Operating Capabilities

Macro Views
European
Corporate
(Confidential)

Senior Advisor / Platform

Capabilities

Industry Verticals

Culture

Differentiated Sourcing

14

KKR macro and

local portfolio
company insights
created conviction in
long-term value and
provided insight into
near-term market
trends
Process dynamic
and relationship
created value on
the buy: Selling
partner needed
reliable / fast
execution with partner
with shared vision
(joint control). Willing
to trade price for
certainty and speed.
Long historical
relationship between
KKR/partner and
KKR/management
Complex capital
structure creates
optionality for patient
and well-capitalized
buyer