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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| | | | | |
(Mark One) |
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 20232024
OR
| | | | | |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission file number: 001-40923
FRANKLIN BSP REALTY TRUST, INC.
(Exact name of registrant as specified in its charter)
| | | | | | | | |
Maryland | | 46-1406086 |
(State or Other Jurisdiction of Incorporation or Organization) | | (I.R.S. Employer Identification No.) |
| | |
1345 Avenue of the Americas, Suite 32A New York, New York | | 10105 |
(Address of Principal Executive Office) | | (Zip Code) |
(212) 588-6770
(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 | FBRT | New York Stock Exchange |
7.50% Series E Cumulative Redeemable Preferred Stock, par value $0.01 per share | FBRT PRE | 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 x No o
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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).Yes x No o
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 x | Accelerated filer o |
Non-accelerated filer o | Smaller reporting company ☐ |
| Emerging growth filer ☐ |
| |
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. o |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x
The number of shares of the registrant's common stock, $0.01 par value, outstanding as of April 28, 202319, 2024 was 82,280,994.81,870,061.
FRANKLIN BSP REALTY TRUST, INC.
TABLE OF CONTENTS
PART I. Item 1. Consolidated Financial Statements and Notes (unaudited)
FRANKLIN BSP REALTY TRUST, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
(Unaudited)
| | March 31, 2024 | | | March 31, 2024 | | December 31, 2023 |
ASSETS | |
Cash and cash equivalents | |
Cash and cash equivalents | |
Cash and cash equivalents | |
Restricted cash | |
Commercial mortgage loans, held for investment, net of allowance for credit losses of $49,215 and $47,175 as of March 31, 2024 and December 31, 2023, respectively | |
Commercial mortgage loans, held for sale, measured at fair value | |
| Real estate securities, available for sale, measured at fair value, amortized cost of $217,324 and $243,272 as of March 31, 2024 and December 31, 2023, respectively (includes pledged assets of $217,855 and $167,948 as of March 31, 2024 and December 31, 2023, respectively) | |
Real estate securities, available for sale, measured at fair value, amortized cost of $217,324 and $243,272 as of March 31, 2024 and December 31, 2023, respectively (includes pledged assets of $217,855 and $167,948 as of March 31, 2024 and December 31, 2023, respectively) | |
Real estate securities, available for sale, measured at fair value, amortized cost of $217,324 and $243,272 as of March 31, 2024 and December 31, 2023, respectively (includes pledged assets of $217,855 and $167,948 as of March 31, 2024 and December 31, 2023, respectively) | |
| | | March 31, 2023 | | December 31, 2022 |
ASSETS | (Unaudited) | | |
Cash and cash equivalents | $ | 230,405 | | | $ | 179,314 | |
Restricted cash | 6,874 | | | 11,173 | |
Commercial mortgage loans, held for investment, net of allowance for credit losses of $28,751 and $40,848 as of March 31, 2023 and December 31, 2022, respectively | 5,022,750 | | | 5,228,928 | |
Commercial mortgage loans, held for sale, measured at fair value | 15,928 | | | 15,559 | |
Real estate securities, trading, measured at fair value | 133,705 | | | 235,728 | |
Real estate securities, available for sale, measured at fair value, amortized cost of $113,588 and $220,635 as of March 31, 2023 and December 31, 2022, respectively | 112,329 | | | 221,025 | |
Derivative instruments, measured at fair value | 325 | | | 415 | |
Receivable for loan repayment(1) | |
| Receivable for loan repayment(1) | |
| Receivable for loan repayment (1) | Receivable for loan repayment (1) | 18,197 | | | 42,557 | |
Accrued interest receivable | Accrued interest receivable | 36,337 | | | 34,007 | |
Prepaid expenses and other assets | Prepaid expenses and other assets | 19,372 | | | 15,795 | |
Intangible lease asset, net of amortization | Intangible lease asset, net of amortization | 59,022 | | | 54,831 | |
Real estate owned, net of depreciation | Real estate owned, net of depreciation | 148,624 | | | 127,772 | |
Real estate owned, held for sale | Real estate owned, held for sale | 35,158 | | | 36,497 | |
| Total assets | Total assets | $ | 5,839,026 | | | $ | 6,203,601 | |
| Total assets | |
| Total assets | |
LIABILITIES AND STOCKHOLDERS' EQUITY | LIABILITIES AND STOCKHOLDERS' EQUITY | | | |
Collateralized loan obligations | Collateralized loan obligations | $ | 3,052,802 | | | $ | 3,121,983 | |
Repurchase agreements - commercial mortgage loans | 604,421 | | | 680,859 | |
Collateralized loan obligations | |
Collateralized loan obligations | |
Repurchase agreements and revolving credit facilities - commercial mortgage loans | |
Repurchase agreements - real estate securities | Repurchase agreements - real estate securities | 228,934 | | | 440,008 | |
Mortgage note payable | Mortgage note payable | 23,998 | | | 23,998 | |
Other financing and loan participation - commercial mortgage loans | 79,121 | | | 76,301 | |
Other financings | |
Unsecured debt | Unsecured debt | 81,220 | | | 98,695 | |
Derivative instruments, measured at fair value | Derivative instruments, measured at fair value | 294 | | | 64 | |
Interest payable | Interest payable | 12,690 | | | 12,715 | |
Distributions payable | Distributions payable | 36,367 | | | 36,317 | |
Accounts payable and accrued expenses | Accounts payable and accrued expenses | 15,531 | | | 17,668 | |
Due to affiliates | Due to affiliates | 13,856 | | | 15,429 | |
Intangible lease liability, net of depreciation | 9,115 | | | 6,428 | |
Intangible lease liability, held for sale | |
| Total liabilities | Total liabilities | $ | 4,158,349 | | | $ | 4,530,465 | |
Total liabilities | |
Total liabilities | |
Commitments and Contingencies | | Commitments and Contingencies | | | |
Redeemable convertible preferred stock: | |
Redeemable convertible preferred stock Series H, $0.01 par value, 20,000 authorized and 17,950 issued and outstanding as of March 31, 2024 and December 31, 2023 | |
Redeemable convertible preferred stock Series H, $0.01 par value, 20,000 authorized and 17,950 issued and outstanding as of March 31, 2024 and December 31, 2023 | |
Redeemable convertible preferred stock Series H, $0.01 par value, 20,000 authorized and 17,950 issued and outstanding as of March 31, 2024 and December 31, 2023 | |
| Redeemable convertible preferred stock: | | | |
Redeemable convertible preferred stock Series H, $0.01 par value, 20,000 authorized and 17,950 issued and outstanding as of March 31, 2023 and December 31, 2022 | $ | 89,748 | | | $ | 89,748 | |
Redeemable convertible preferred stock Series I, $0.01 par value, none authorized and outstanding as of March 31, 2023, 1,000 authorized and 1,000 issued and outstanding as of December 31, 2022 | — | | | 5,000 | |
Total redeemable convertible preferred stock | |
Total redeemable convertible preferred stock | |
Total redeemable convertible preferred stock | Total redeemable convertible preferred stock | $ | 89,748 | | | $ | 94,748 | |
Equity: | Equity: | | | |
| Preferred stock, $0.01 par value; 100,000,000 shares authorized, 7.5% Cumulative Redeemable Preferred Stock, Series E, 10,329,039 shares issued and outstanding as of March 31, 2023 and December 31, 2022 | $ | 258,742 | | | $ | 258,742 | |
Common stock, $0.01 par value, 900,000,000 shares authorized, 83,363,971 and 82,992,784 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively | 826 | | | 826 | |
Preferred stock, $0.01 par value; 100,000,000 shares authorized, 7.5% Cumulative Redeemable Preferred Stock, Series E, 10,329,039 shares issued and outstanding as of March 31, 2024 and December 31, 2023 | |
| Preferred stock, $0.01 par value; 100,000,000 shares authorized, 7.5% Cumulative Redeemable Preferred Stock, Series E, 10,329,039 shares issued and outstanding as of March 31, 2024 and December 31, 2023 | |
| Preferred stock, $0.01 par value; 100,000,000 shares authorized, 7.5% Cumulative Redeemable Preferred Stock, Series E, 10,329,039 shares issued and outstanding as of March 31, 2024 and December 31, 2023 | |
Common stock, $0.01 par value, 900,000,000 shares authorized, 83,254,483 and 82,751,913 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively | |
Additional paid-in capital | Additional paid-in capital | 1,603,790 | | | 1,602,247 | |
Accumulated other comprehensive income (loss) | Accumulated other comprehensive income (loss) | (1,935) | | | 390 | |
Accumulated deficit | Accumulated deficit | (291,762) | | | (299,225) | |
Total stockholders' equity | Total stockholders' equity | $ | 1,569,661 | | | $ | 1,562,980 | |
Non-controlling interest | Non-controlling interest | 21,268 | | | 15,408 | |
Total equity | Total equity | $ | 1,590,929 | | | $ | 1,578,388 | |
Total liabilities, redeemable convertible preferred stock and equity | Total liabilities, redeemable convertible preferred stock and equity | $ | 5,839,026 | | | $ | 6,203,601 | |
_________________________________________________________(1) Includes $17.9$26.6 million and $42.5$55.1 million of cash held by servicer related to the CLOs as of March 31, 20232024 and December 31, 2022, respectively, as well as $0.3 million and $0.1 million of RMBS principal paydowns receivable as of March 31, 2023, and December 31, 2022, respectively.
The accompanying notes are an integral part of these unaudited consolidated financial statements.
FRANKLIN BSP REALTY TRUST, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share data)
(Unaudited)
| | | Three Months Ended March 31, |
| | 2023 | | 2022 |
Income: | | | | |
| Three Months Ended March 31, | | | Three Months Ended March 31, |
| 2024 | | | 2024 | | 2023 |
Income | |
Interest income | |
Interest income | |
Interest income | Interest income | | $ | 130,536 | | | $ | 75,258 | |
Less: Interest expense | Less: Interest expense | | 71,075 | | | 22,480 | |
Net interest income | Net interest income | | 59,461 | | | 52,778 | |
Revenue from real estate owned | Revenue from real estate owned | | 3,312 | | | 2,312 | |
Total income | Total income | | $ | 62,773 | | | $ | 55,090 | |
Expenses: | | | | |
Expenses | |
Asset management and subordinated performance fee | |
Asset management and subordinated performance fee | |
Asset management and subordinated performance fee | Asset management and subordinated performance fee | | $ | 8,085 | | | $ | 6,745 | |
Acquisition expenses | Acquisition expenses | | 378 | | | 315 | |
Administrative services expenses | Administrative services expenses | | 4,029 | | | 3,353 | |
Professional fees | Professional fees | | 4,814 | | | 6,159 | |
Share-based compensation | Share-based compensation | | 1,022 | | | 500 | |
Depreciation and amortization | Depreciation and amortization | | 1,805 | | | 1,295 | |
Other expenses | Other expenses | | 2,166 | | | 1,762 | |
Total expenses | Total expenses | | $ | 22,299 | | | $ | 20,129 | |
Other (income)/loss: | | | | |
Provision/(benefit) for credit losses | | $ | 4,360 | | | $ | (955) | |
Realized (gain)/loss on extinguishment of debt | | (4,767) | | | — | |
Realized (gain)/loss on sale of available for sale trading securities | | (596) | | | — | |
Other income/(loss) | |
(Provision)/benefit for credit losses | |
(Provision)/benefit for credit losses | |
(Provision)/benefit for credit losses | |
Realized gain/(loss) on extinguishment of debt | |
Realized gain/(loss) on real estate securities, available for sale | |
| Realized (gain)/loss on sale of commercial mortgage loans, held for sale, measured at fair value | | — | | | (1,889) | |
Unrealized (gain)/loss on commercial mortgage loans, held for sale, measured at fair value | | (347) | | | 939 | |
(Gain)/loss on other real estate investments | | 1,339 | | | 29 | |
Trading (gain)/loss | | (2,968) | | | 88,435 | |
Unrealized (gain)/loss on derivatives | | 320 | | | 4,963 | |
Realized (gain)/loss on derivatives | | (44) | | | (34,030) | |
Total other (income)/loss | | $ | (2,703) | | | $ | 57,492 | |
Realized gain/(loss) on sale of commercial mortgage loans, held for sale, measured at fair value | |
Realized gain/(loss) on sale of commercial mortgage loans, held for sale, measured at fair value | |
Realized gain/(loss) on sale of commercial mortgage loans, held for sale, measured at fair value | |
Unrealized gain/(loss) on commercial mortgage loans, held for sale, measured at fair value | |
Gain/(loss) on other real estate investments | |
Trading gain/(loss) | |
Unrealized gain/(loss) on derivatives | |
Realized gain/(loss) on derivatives | |
Total other income/(loss) | |
Income/(loss) before taxes | Income/(loss) before taxes | | 43,177 | | | (22,531) | |
Provision/(benefit) for income tax | | (662) | | | (24) | |
(Provision)/benefit for income tax | |
Net income/(loss) | Net income/(loss) | | $ | 43,839 | | | $ | (22,507) | |
Net (income)/loss attributable to non-controlling interest | Net (income)/loss attributable to non-controlling interest | | (9) | | | — | |
Net income/(loss) attributable to Franklin BSP Realty Trust, Inc. | Net income/(loss) attributable to Franklin BSP Realty Trust, Inc. | | $ | 43,830 | | | $ | (22,507) | |
Less: Preferred stock dividends | Less: Preferred stock dividends | | 6,748 | | | 21,011 | |
| Net income/(loss) applicable to common stock | Net income/(loss) applicable to common stock | | $ | 37,082 | | | $ | (43,518) | |
Net income/(loss) applicable to common stock | |
Net income/(loss) applicable to common stock | |
| Basic earnings per share | |
Basic earnings per share | |
Basic earnings per share | Basic earnings per share | | $ | 0.44 | | | $ | (0.99) | |
Diluted earnings per share | Diluted earnings per share | | $ | 0.44 | | | $ | (0.99) | |
Basic weighted average shares outstanding | Basic weighted average shares outstanding | | 82,774,771 | | | 43,956,965 | |
Diluted weighted average shares outstanding | Diluted weighted average shares outstanding | | 82,774,771 | | | 43,956,965 | |
The accompanying notes are an integral part of these unaudited consolidated financial statements.
FRANKLIN BSP REALTY TRUST, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(Unaudited)
| | Three Months Ended March 31, | | | Three Months Ended March 31, |
| 2024 | | | 2024 | | 2023 |
Net income/(loss) | |
| Amounts related to available for sale real estate securities: | |
Amounts related to available for sale real estate securities: | |
Amounts related to available for sale real estate securities: | |
Change in net unrealized gain/(loss) | |
Change in net unrealized gain/(loss) | |
Change in net unrealized gain/(loss) | |
Reclassification adjustment for amounts included in net income/(loss) | |
| $ | |
| | | | Three months ended March 31, |
| | | 2023 | | 2022 |
Net income/(loss) | | $ | 43,839 | | | $ | (22,507) | |
| Amounts related to available for sale real estate securities: | | |
Change in net unrealized gain/(loss) | | $ | (1,648) | | | $ | — | |
Reclassification adjustment for amounts included in net income/(loss) | | (677) | | | — | |
Comprehensive (income)/loss attributed to non-controlling interest | |
| | | $ | (2,325) | | | $ | — | |
Amounts related to cash flow hedges: | | | | |
Change in net unrealized gain/(loss) | | $ | — | | | $ | (220) | |
Reclassification adjustment for amounts included in net income/(loss) | | — | | | 282 | |
| Comprehensive (income)/loss attributed to non-controlling interest | |
| | | | $ | — | | | $ | 62 | |
Comprehensive (income)/loss attributed to non-controlling interest | Comprehensive (income)/loss attributed to non-controlling interest | | $ | (9) | | | $ | — | |
Comprehensive income/(loss) attributable to Franklin BSP Realty Trust, Inc. | Comprehensive income/(loss) attributable to Franklin BSP Realty Trust, Inc. | | $ | 41,505 | | | $ | (22,445) | |
The accompanying notes are an integral part of these unaudited consolidated financial statements.
FRANKLIN BSP REALTY TRUST, INC.
THE ACCOMPANYING CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(In thousands, except share data)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Common Stock | | Additional Paid-In Capital | | Accumulated Other Comprehensive Income/(Loss) | | Accumulated Deficit | | Preferred E | | Total Stockholders' Equity | | Non-Controlling Interest | | Total Equity |
| Number of Shares | | Par Value | | | | | | | |
Balance, December 31, 2022 | 82,992,784 | | | $ | 826 | | | $ | 1,602,247 | | | $ | 390 | | | $ | (299,225) | | | $ | 258,742 | | | $ | 1,562,980 | | | $ | 15,408 | | | $ | 1,578,388 | |
Issuance of common stock | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Common stock repurchases | (313,411) | | | (3) | | | (3,664) | | | — | | | — | | | — | | | (3,667) | | | — | | | (3,667) | |
Common stock issued through distribution reinvestment plan | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Share-based compensation | 442,419 | | | — | | | 1,022 | | | — | | | — | | | — | | | 1,022 | | | — | | | 1,022 | |
Shares canceled for tax withholding on vested equity rewards | (57,021) | | | — | | | (812) | | | — | | | — | | | — | | | (812) | | | — | | | (812) | |
Series I preferred stock exchanged for common stock | 299,200 | | | 3 | | | 4,997 | | | — | | | — | | | — | | | 5,000 | | | — | | | 5,000 | |
Offering costs | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Net income/(loss) attributable to Franklin BSP Realty Trust, Inc. | — | | | — | | | — | | | — | | | 43,830 | | | — | | | 43,830 | | | — | | | 43,830 | |
Net income/(loss) attributable to non-controlling interest | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 9 | | | 9 | |
Distributions declared | — | | | — | | | — | | | — | | | (36,367) | | | — | | | (36,367) | | | — | | | (36,367) | |
Other comprehensive income/(loss) | — | | | — | | | — | | | (2,325) | | | — | | | — | | | (2,325) | | | — | | | (2,325) | |
Contributions in non-controlling interest, net | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 5,851 | | | 5,851 | |
Balance, March 31, 2023 | 83,363,971 | | | $ | 826 | | | $ | 1,603,790 | | | $ | (1,935) | | | $ | (291,762) | | | $ | 258,742 | | | $ | 1,569,661 | | | $ | 21,268 | | | $ | 1,590,929 | |
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| Common Stock | | Additional Paid-In Capital | | Accumulated Other Comprehensive Income/(Loss) | | Accumulated Deficit | | Preferred E | | Preferred F | | Total Stockholders' Equity | | Non-Controlling Interest | | Total Equity |
| Number of Shares | | Par Value | | | | | | | | |
Balance, December 31, 2021 | 43,965,928 | | | $ | 441 | | | $ | 903,264 | | | $ | (62) | | | $ | (167,179) | | | $ | 258,742 | | | $ | 710,431 | | | $ | 1,705,637 | | | $ | 5,764 | | | $ | 1,711,401 | |
Issuance of common stock | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Common stock repurchases | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Common stock issued through distribution reinvestment plan | 5,982 | | | — | | | 91 | | | — | | | — | | | — | | | — | | | 91 | | | — | | | 91 | |
Share-based compensation | 499,217 | | | — | | | 500 | | | — | | | — | | | — | | | — | | | 500 | | | — | | | 500 | |
Offering costs | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Net income/(loss) | — | | | — | | | — | | | — | | | (22,507) | | | — | | | — | | | (22,507) | | | — | | | (22,507) | |
Distributions declared | — | | | — | | | — | | | — | | | (36,743) | | | — | | | — | | | (36,743) | | | — | | | (36,743) | |
Other comprehensive income/(loss) | — | | | — | | | — | | | 62 | | | — | | | — | | | — | | | 62 | | | — | | | 62 | |
Balance, March 31, 2022 | 44,471,127 | | | $ | 441 | | | $ | 903,855 | | | $ | — | | | $ | (226,429) | | | $ | 258,742 | | | $ | 710,431 | | | $ | 1,647,040 | | | $ | 5,764 | | | $ | 1,652,804 | |
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| Common Stock | | Additional Paid-In Capital | | Accumulated Other Comprehensive Income/(Loss) | | Accumulated Deficit | | Preferred E | | Total Stockholders' Equity | | Non-Controlling Interest | | Total Equity |
| Number of Shares | | Par Value | | | | | | | |
Balance, December 31, 2023 | 82,751,913 | | | $ | 820 | | | $ | 1,599,197 | | | $ | (703) | | | $ | (298,942) | | | $ | 258,742 | | | $ | 1,559,114 | | | $ | 27,095 | | | $ | 1,586,209 | |
| | | | | | | | | | | | | | | | | |
Common stock repurchases | (151,123) | | | (2) | | | (1,875) | | | — | | | — | | | — | | | (1,877) | | | — | | | (1,877) | |
| | | | | | | | | | | | | | | | | |
Share-based compensation | 766,664 | | | 2 | | | 1,797 | | | — | | | — | | | — | | | 1,799 | | | — | | | 1,799 | |
Shares canceled for tax withholding on vested equity rewards | (112,971) | | | — | | | (1,508) | | | — | | | — | | | — | | | (1,508) | | | — | | | (1,508) | |
| | | | | | | | | | | | | | | | | |
Net income/(loss) attributable to Franklin BSP Realty Trust, Inc. | — | | | — | | | — | | | — | | | 35,920 | | | — | | | 35,920 | | | — | | | 35,920 | |
Net income/(loss) attributable to non-controlling interest | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (93) | | | (93) | |
Distributions declared | — | | | — | | | — | | | — | | | (36,304) | | | — | | | (36,304) | | | — | | | (36,304) | |
Other comprehensive income/(loss) | — | | | — | | | — | | | 1,233 | | | — | | | — | | | 1,233 | | | — | | | 1,233 | |
Contributions/(distributions) in non-controlling interest, net | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 4 | | | 4 | |
Balance, March 31, 2024 | 83,254,483 | | | $ | 820 | | | $ | 1,597,611 | | | $ | 530 | | | $ | (299,326) | | | $ | 258,742 | | | $ | 1,558,377 | | | $ | 27,006 | | | $ | 1,585,383 | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Common Stock | | Additional Paid-In Capital | | Accumulated Other Comprehensive Income/(Loss) | | Accumulated Deficit | | Preferred E | | Total Stockholders' Equity | | Non-Controlling Interest | | Total Equity |
| Number of Shares | | Par Value | | | | | | | |
Balance, December 31, 2022 | 82,992,784 | | | $ | 826 | | | $ | 1,602,247 | | | $ | 390 | | | $ | (299,225) | | | $ | 258,742 | | | $ | 1,562,980 | | | $ | 15,408 | | | $ | 1,578,388 | |
| | | | | | | | | | | | | | | | | |
Common stock repurchases | (313,411) | | | (3) | | | (3,664) | | | — | | | — | | | — | | | (3,667) | | | — | | | (3,667) | |
| | | | | | | | | | | | | | | | | |
Share-based compensation | 442,419 | | | — | | | 1,022 | | | — | | | — | | | — | | | 1,022 | | | — | | | 1,022 | |
Shares canceled for tax withholding on vested equity rewards | (57,021) | | | — | | | (812) | | | — | | | — | | | — | | | (812) | | | — | | | (812) | |
Series I Preferred Stock converted into common stock | 299,200 | | | 3 | | | 4,997 | | | — | | | — | | | — | | | 5,000 | | | — | | | 5,000 | |
| | | | | | | | | | | | | | | | | |
Net income/(loss) attributable to Franklin BSP Realty Trust, Inc. | — | | | — | | | — | | | — | | | 43,830 | | | — | | | 43,830 | | | — | | | 43,830 | |
Net income/(loss) attributable to non-controlling interest | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 9 | | | 9 | |
Distributions declared | — | | | — | | | — | | | — | | | (36,367) | | | — | | | (36,367) | | | — | | | (36,367) | |
Other comprehensive income/(loss) | — | | | — | | | — | | | (2,325) | | | — | | | — | | | (2,325) | | | — | | | (2,325) | |
Contributions/(distributions) in non-controlling interest, net | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 5,851 | | | 5,851 | |
Balance, March 31, 2023 | 83,363,971 | | | $ | 826 | | | $ | 1,603,790 | | | $ | (1,935) | | | $ | (291,762) | | | $ | 258,742 | | | $ | 1,569,661 | | | $ | 21,268 | | | $ | 1,590,929 | |
The accompanying notes are an integral part of these unaudited consolidated financial statements.
FRANKLIN BSP REALTY TRUST, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
| | Three Months Ended March 31, |
| 2023 | | 2022 |
| Three Months Ended March 31, | | | Three Months Ended March 31, |
| 2024 | | | 2024 | | 2023 |
Cash flows from operating activities: | Cash flows from operating activities: | | | |
Net income/(loss) | Net income/(loss) | $ | 43,839 | | | $ | (22,507) | |
Net income/(loss) | |
Net income/(loss) | |
Adjustments to reconcile net income to net cash (used in)/provided by operating activities: | Adjustments to reconcile net income to net cash (used in)/provided by operating activities: | |
Premium amortization and (discount accretion), net | |
Premium amortization and (discount accretion), net | |
Premium amortization and (discount accretion), net | Premium amortization and (discount accretion), net | $ | (4,163) | | | $ | (2,542) | |
Accretion of deferred commitment fees | Accretion of deferred commitment fees | (2,869) | | | (2,219) | |
Amortization of deferred financing costs | Amortization of deferred financing costs | 1,837 | | | 1,403 | |
Share-based compensation | Share-based compensation | 1,022 | | | 500 | |
| Realized (gain)/loss from sale of other real estate investments, measured at fair value | (596) | | | 33 | |
| Realized (gain)/loss on extinguishment of debt | Realized (gain)/loss on extinguishment of debt | (4,767) | | | — | |
Realized (gain)/loss on swap terminations | — | | | (34,378) | |
| Realized (gain)/loss on extinguishment of debt | |
| Realized (gain)/loss on extinguishment of debt | |
| Realized (gain)/loss on sale of available for sale securities, measured at fair value | |
Realized (gain)/loss on sale of available for sale securities, measured at fair value | |
Realized (gain)/loss on sale of available for sale securities, measured at fair value | |
Realized (gain)/loss on sale of commercial mortgage loans, held for sale, measured at fair value | |
Unrealized (gain)/loss from commercial mortgage loans, held for sale, measured at fair value | |
Unrealized (gain)/loss from derivative instruments | |
(Gain)/loss from other real estate investments | |
Trading (gain)/loss | Trading (gain)/loss | (2,968) | | | 88,435 | |
Unrealized (gain)/loss from commercial mortgage loans, held for sale, measured at fair value | (347) | | | 939 | |
Unrealized (gain)/loss on derivative instruments | 320 | | | 4,963 | |
Unrealized (gain)/loss from other real estate investments, measured at fair value | 1,339 | | | (4) | |
Depreciation and amortization | Depreciation and amortization | 1,642 | | | 1,295 | |
| Straight lining rents | |
Provision/(benefit) for credit losses | Provision/(benefit) for credit losses | 4,360 | | | (955) | |
| Origination of commercial mortgage loans, held for sale, measured at fair value | Origination of commercial mortgage loans, held for sale, measured at fair value | — | | | (150,300) | |
Origination of commercial mortgage loans, held for sale, measured at fair value | |
Origination of commercial mortgage loans, held for sale, measured at fair value | |
Proceeds from sale or repayment of commercial mortgage loans, held for sale, measured at fair value | Proceeds from sale or repayment of commercial mortgage loans, held for sale, measured at fair value | (22) | | | 76,100 | |
Changes in assets and liabilities: | Changes in assets and liabilities: | |
Accrued interest receivable | |
Accrued interest receivable | |
Accrued interest receivable | Accrued interest receivable | 539 | | | 7,542 | |
Prepaid expenses and other assets | Prepaid expenses and other assets | (1,042) | | | (5,807) | |
Accounts payable and accrued expenses | Accounts payable and accrued expenses | (3,510) | | | 239 | |
Due to affiliates | Due to affiliates | (1,573) | | | 4,360 | |
Interest payable | Interest payable | 217 | | | 617 | |
Net cash (used in)/provided by operating activities | Net cash (used in)/provided by operating activities | $ | 33,258 | | | $ | (32,286) | |
Cash flows from investing activities: | Cash flows from investing activities: | | | |
Origination and purchase of commercial mortgage loans, held for investment | Origination and purchase of commercial mortgage loans, held for investment | $ | (195,617) | | | $ | (636,465) | |
Origination and purchase of commercial mortgage loans, held for investment | |
Origination and purchase of commercial mortgage loans, held for investment | |
Principal repayments received on commercial mortgage loans, held for investment | Principal repayments received on commercial mortgage loans, held for investment | 406,243 | | | 330,130 | |
Proceeds from (purchase)/sale of other real estate investments | — | | | 2,045 | |
Proceeds from sale of real estate owned, held for sale | |
Purchase of real estate owned and capital expenditures | |
Purchase of real estate securities, available for sale | |
Proceeds from sale of real estate securities | |
| Purchase of real estate securities, available for sale | (20,267) | | | — | |
| Proceeds from sale/(repayment) of real estate securities, available for sale, measured at fair value | 127,660 | | | — | |
Proceeds from sale/(repayment) of real estate securities, trading, at fair value | 97,487 | | | 2,190,143 | |
Principal collateral on mortgage investments | |
Principal collateral on mortgage investments | |
Principal collateral on mortgage investments | Principal collateral on mortgage investments | 7,302 | | | 376,857 | |
Proceeds from sale/(purchase) of derivative instruments | Proceeds from sale/(purchase) of derivative instruments | — | | | 148 | |
Net cash (used in)/provided by investing activities | Net cash (used in)/provided by investing activities | $ | 422,808 | | | $ | 2,262,858 | |
Cash flows from financing activities: | Cash flows from financing activities: | | | |
Proceeds from issuances of common stock | $ | 5,000 | | | $ | — | |
Proceeds from issuances of redeemable convertible preferred stock | (5,000) | | | — | |
Payments for common stock repurchases | |
Payments for common stock repurchases | |
Payments for common stock repurchases | Payments for common stock repurchases | (3,666) | | | — | |
Shares cancelled for tax withholding on vested equity rewards | Shares cancelled for tax withholding on vested equity rewards | (812) | | | — | |
Borrowings on collateralized loan obligations | Borrowings on collateralized loan obligations | — | | | 960,000 | |
Repayments of collateralized loan obligations | Repayments of collateralized loan obligations | (69,042) | | | (235,139) | |
Borrowings on repurchase agreements - commercial mortgage loans | 157,862 | | | 474,466 | |
Repayments of repurchase agreements - commercial mortgage loans | (234,300) | | | (971,176) | |
Borrowings on repurchase agreements and revolving credit facilities - commercial mortgage loans | |
Repayments of repurchase agreements and revolving credit facilities - commercial mortgage loans | |
Borrowings on repurchase agreements - real estate securities | Borrowings on repurchase agreements - real estate securities | 258,881 | | | 11,937,334 | |
Repayments of repurchase agreements - real estate securities | |
|
FRANKLIN BSP REALTY TRUST, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
| Repayments of repurchase agreements - real estate securities | (469,955) | | | (14,401,577) | |
Proceeds from other financing and loan participation - commercial mortgage loans | — | | | 2,296 | |
Borrowings on other financings | |
Repayments on other financings | |
| Borrowings on other financing | 43,615 | | | — | |
Repayments on other financing | (40,795) | | | — | |
| Repayments of unsecured debt | |
Repayments of unsecured debt | |
Repayments of unsecured debt | Repayments of unsecured debt | (13,367) | | | (50,000) | |
| Payments of deferred financing costs | Payments of deferred financing costs | (1,377) | | | (3,595) | |
Cash collateral received on interest rate swaps | — | | | 47,661 | |
Proceeds from interest rate swap settlements | — | | | 744 | |
Payments of deferred financing costs | |
Payments of deferred financing costs | |
| Distributions paid | |
| Distributions paid | |
| | Distributions paid | Distributions paid | (36,317) | | | (30,254) | |
Net cash (used in)/provided by financing activities: | Net cash (used in)/provided by financing activities: | $ | (409,273) | | | $ | (2,269,240) | |
Net change in cash, cash equivalents and restricted cash | Net change in cash, cash equivalents and restricted cash | 46,793 | | | (38,668) | |
Cash, cash equivalents and restricted cash, beginning of period | Cash, cash equivalents and restricted cash, beginning of period | 190,487 | | | 168,199 | |
Cash, cash equivalents and restricted cash, end of period | Cash, cash equivalents and restricted cash, end of period | $ | 237,279 | | | $ | 129,531 | |
| Reconciliation of cash, cash equivalents and restricted cash: | Reconciliation of cash, cash equivalents and restricted cash: | |
Reconciliation of cash, cash equivalents and restricted cash: | |
Reconciliation of cash, cash equivalents and restricted cash: | |
Cash and cash equivalents, beginning of period | |
Cash and cash equivalents, beginning of period | |
Cash and cash equivalents, beginning of period | Cash and cash equivalents, beginning of period | 179,314 | | | 154,929 | |
Restricted cash, beginning of period | Restricted cash, beginning of period | 11,173 | | | 13,270 | |
Cash, cash equivalents and restricted cash, beginning of period | Cash, cash equivalents and restricted cash, beginning of period | $ | 190,487 | | | $ | 168,199 | |
| Cash and cash equivalents, end of period | Cash and cash equivalents, end of period | 230,405 | | | 117,064 | |
Cash and cash equivalents, end of period | |
Cash and cash equivalents, end of period | |
Restricted cash, end of period | Restricted cash, end of period | 6,874 | | | 12,467 | |
Cash, cash equivalents and restricted cash, end of period | Cash, cash equivalents and restricted cash, end of period | $ | 237,279 | | | $ | 129,531 | |
| Supplemental disclosures of cash flow information: | Supplemental disclosures of cash flow information: | |
Supplemental disclosures of cash flow information: | |
Supplemental disclosures of cash flow information: | |
Cash payments for income taxes | |
Cash payments for income taxes | |
Cash payments for income taxes | Cash payments for income taxes | $ | (15) | | | $ | — | |
Cash payments for interest | Cash payments for interest | 69,263 | | | 20,460 | |
Pre-close loan fundings held with servicer | Pre-close loan fundings held with servicer | (2,742) | | | — | |
| Supplemental disclosures of non - cash flow information: | Supplemental disclosures of non - cash flow information: | |
Supplemental disclosures of non - cash flow information: | |
Supplemental disclosures of non - cash flow information: | |
Distribution payable | Distribution payable | $ | 36,367 | | | $ | 36,735 | |
Common stock issued through distribution reinvestment plan | — | | | 91 | |
Distribution payable | |
Distribution payable | |
Loans transferred to real estate owned | |
| Real estate owned received in foreclosure | 23,999 | | | — | |
Loans transferred to real estate owned, held for investment | 33,206 | | | — | |
Modification accounted for as repayment and new loan | |
| Modification accounted for as repayment and new loan | |
| Modification accounted for as repayment and new loan | |
Conversion of preferred stock to common stock | |
|
The accompanying notes are an integral part of these unaudited consolidated financial statements.
FRANKLIN BSP REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 20232024
(Unaudited)
Note 1 - Organization and Business Operations
Franklin BSP Realty Trust, Inc., (the "Company") is a real estate finance company that primarily originates, acquires and manages a diversified portfolio of commercial real estate debt investments secured by properties located within and outside the United States. The Company is a Maryland corporation and has made tax elections to be treated as a real estate investment trust (a "REIT") for U.S. federal income tax purposes since 2013.
The Company believes that it has qualified as a REIT and intends to continue to meet the requirements for qualification and taxation as a REIT. Substantially all of the Company's business is conducted through Benefit Street Partners Realty Operating Partnership, L.P. (the “OP”), a Delaware limited partnership. The Company is the sole general partner and directly or indirectly holds all of the units of limited partner interests in the OP. In addition, the Company, through one or more subsidiaries which are treated as a taxable REIT subsidiary (a “TRS”), is indirectly subject to U.S. federal, state and local income taxes.
The Company has no employees. Benefit Street Partners L.L.C. serves as the Company's advisor (the "Advisor") pursuant
to an advisory agreement, as amended on August 18, 2021 (the "Advisory Agreement"). The Advisor, an investment adviser registered with the SEC, is a credit-focused alternative asset management firm.
Established in 2008, the Advisor's credit platform manages funds for institutions and high-net-worth investors across various credit funds and complementary strategies including high yield, levered loans, private/opportunistic debt, liquid credit, structured credit and commercial real estate debt. These strategies complement each other as they all leverage the sourcing, analytical, compliance, and operational capabilities that encompass the platform. The Advisor manages the Company's affairs on a day-to-day basis. The Advisor receives compensation fees and reimbursements for services related to the investment and management of the Company's assets and the operations of the Company. The advisor is a wholly-owned subsidiary of Franklin Resources, Inc., which together with its various subsidiaries operates as "Franklin Templeton”.
The Company invests in commercial real estate debt investments, which may include first mortgage loans, subordinated mortgage loans, mezzanine loans and participations in such loans. The Company also originates conduit loans which the Company intends to sell through its TRS into commercial mortgage-backed securities ("CMBS") securitization transactions. Historically this business has focused primarily on CMBS, commercial real estate collateralized loan obligation bonds ("CRE CLO bonds"), collateralized debt obligations ("CDOs") and other securities. As a result of the October 2021 acquisition of Capstead Mortgage Corporation ("Capstead"), the Company acquired a portfolio of residential mortgage backed securities (“RMBS”) in the form of residential adjustable-rate mortgage pass-through securities ("ARM Agency Securities" or "ARMs") issued and guaranteed by government-sponsored enterprises or by an agency of the federal government. Although the Company continues to hold a small portion of this portfolio it does not intend to do so long-term and intends to reinvest proceeds from this portfolio in its other businesses. The Company also owns real estate that was either acquired by the Company through foreclosure or deed in lieu of foreclosure, or that was purchased for investment, primarily subject to triple net leases.
Note 2 - Summary of Significant Accounting Policies
Basis of Accounting
The Company's unaudited consolidated financial statements and related footnotes have been prepared on the accrual basis of accounting in conformity with accounting principles generally accepted in the United States of America ("GAAP") for interim financial statements and pursuant to the requirements for reporting on Form 10-Q and Regulation S-X, as appropriate. Accordingly, the consolidated financial statements may not include all of the information and notes required by GAAP for annual consolidated financial statements.
These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto as of, and for the year ended December 31, 2022,2023, which are included in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC") on February 26, 2024, as certain disclosures that would substantially duplicate those contained in the audited consolidated financial statements have not been included in this report.
Reclassifications
Certain prior year balances have been reclassified in order to conform to the current period presentation.
For the three months ended March 16, 2023.31, 2023 $0.3 million related to straight lining of rents was reclassified from Prepaid expenses and other assets to Straight lining rents in the consolidated statement of cash flows.
Use of Estimates
GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities as of the date of the financial statements and the reported amounts of income and expenses during the reported periods. Changes in the economic environment, financial markets and any other parameters used in determining these estimates could cause actual results to differ materially. In the opinion of management, the interim data includes all adjustments, of a normal and recurring nature, necessary for a fair statement of the results for the periods presented. The current period’s results of operations will not necessarily be indicative of results that ultimately may be achieved for the entire year or any subsequent interim periods.
FRANKLIN BSP REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 20232024
(Unaudited)
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company, the OP and its subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. In determining whether the Company has a controlling financial interest in a joint venture and the requirement to consolidate the accounts of that entity, management considers factors such as ownership interest, authority to make decisions and contractual and substantive participating rights of the other partners or members, as well as whether the entity is a variable interest entity ("VIE") for which the Company is the primary beneficiary.
The Company has determined the OP is a VIE of which the Company is the primary beneficiary. Substantially all of the Company's assets and liabilities are held by the OP.
The Company consolidates all entities that it controls through either majority ownership or voting rights. In addition, the Company consolidates all VIEs of which the Company is considered the primary beneficiary. VIEs are entities in which equity investors (i) do not have the characteristics of a controlling financial interest and/or (ii) do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. The entity that consolidates a VIE is its primary beneficiary and is generally the entity with (i) the power to direct the activities that most significantly affect the VIE’s economic performance and (ii) the right to receive benefits from the VIE or the obligation to absorb losses of the VIE that could be significant to the VIE. Non-controlling interest represents the equity of consolidated joint ventures that are not owned by the Company.
The accompanying consolidated financial statements include the accounts of collateralized loan obligations ("CLOs") issued and securitized by wholly owned subsidiaries of the Company. The Company has determined the CLOs are VIEs of which the Company's subsidiary is the primary beneficiary. The assets and liabilities of the CLOs are consolidated in the accompanying consolidated balance sheets in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 810, Consolidation.
Certain prior year balances have been reclassified in order to conform to the current period presentation. For the period ended March 31, 2022, Unrealized (gain)/loss on other real estate investments, measured at fair value of ($4.0) thousand, and Realized (gain)/loss on other real estate investments, measured at fair value of $33 thousand was reclassified to (Gain)/loss on other real estate investments on the consolidated statements of operations. In addition, for the three months ended March 31, 2022, $0.5 million was reclassified from ConsolidationProfessional fees. to Share-based compensation on the consolidated statements of operations.
Acquisition Expenses
The Company capitalizes certain direct costs relating to loan origination activities. The cost is amortized over the life of the loan and recognized in interest income in the Company's consolidated statements of operations. Acquisition expenses paid on future funding amounts are expensed within the acquisition expenses line in the Company's consolidated statements of operations.
Cash and Cash Equivalents
Cash consists of amounts deposited with high quality financial institutions. These deposits are guaranteed by the Federal Deposit Insurance Company up to an insurance limit. Cash and cash equivalent balances may, at a limited number of banks and financial institutions, exceed insurable amounts. The Company believes it mitigates risk by investing in or through major financial institutions and primarily in funds that are currently U.S. federal government insured up to applicable account limits. Recoverability of investments is dependent upon the performance of the issuers. Cash equivalents include short-term, liquid investments in money market funds with original maturities of 90 days or less when purchased.
Restricted CashRecently Issued Accounting Pronouncements
Restricted cash primarily consistsIn November 2023, the FASB issued ASU 2023-07 “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures,” or ASU 2023-07. ASU 2023-07 enhances the disclosures required for reportable segments on an annual and interim basis. ASU 2023-07 is effective on a retrospective basis for annual periods beginning after December 15, 2023, for interim periods within fiscal years beginning after December 15, 2024, and early adoption is permitted. The Company is still assessing the impact, if any, to the adoption of cash pledged as marginASU 2023-07 on repurchase agreements and derivative transactions. The duration of this restricted cash generally matchesour consolidated financial statements.
In December 2023, the duration of the related repurchase agreementsFASB issued Accounting Standards Update, or derivative transaction.
Commercial Mortgage Loans
Held for Investment - Commercial mortgage loans that are held for investment purposes and are anticipatedASU, 2023-09 “Income Taxes (Topic 740): Improvements to be held until maturity, are carried at cost, net of unamortized acquisition expenses, discountsIncome Tax Disclosures,” or premiums and unfunded commitments. Commercial mortgage loans, held for investment purposes, are carried at amortized cost less an allowance for credit losses. Interest income is recordedASU 2023-09. ASU 2023-09 requires additional disaggregated disclosures on the accrualentity’s effective tax rate reconciliation and additional details on income taxes paid. ASU 2023-09 is effective on a prospective basis, with the option for retrospective application, for annual periods beginning after December 15, 2024 and related discounts, premiumsearly adoption is permitted. We do not expect the adoption of ASU 2023-09 to have a material impact on our consolidated financial statements.
In March 2024, the FASB issued Accounting Standards Update, or ASU, 2024-01 “Compensation — Stock Compensation (Topic 718): Scope Application of Profits Interest and acquisition expensesSimilar Awards,” or ASU 2024-01. ASU 2024-01 improves clarity and operability without changing the guidance. ASU 2024-01 is effective on investments are amortized overa prospective basis, with the lifeoption for retrospective application, for annual periods beginning after December 15, 2024 and early adoption is permitted. We do not expect the adoption of ASU 2023-09 to have a material impact on our consolidated financial statements.
In March 2024, the investment usingFASB issued Accounting Standards Update, or ASU, 2024-02 “Codification Improvements — Amendments to Remove References to the effective interest method. AmortizationConcepts Statements,” or accretion is reflected as an adjustment to interest incomeASU 2024-02. ASU 2024-02 amended certain definitions in the Company’sguidance. ASU 2024-02 is effective on a prospective basis, with the option for retrospective application, for annual periods beginning after December 15, 2024 and early adoption is permitted. We do not expect the adoption of ASU 2023-09 to have a material impact on our consolidated statements of operations. Guaranteed loan commitment fees payable by the borrower upon maturity are accreted over the life of the investment using the effective interest method. The accretion of guaranteed loan commitment fees is recognized in interest income in the Company's consolidated statements of operations.financial statements.
FRANKLIN BSP REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 20232024
(Unaudited)
Held for Sale - Commercial mortgage loans that are intended to be sold in the foreseeable future are reported as held for sale and are recorded at the lower of cost or fair value with changes recorded through the statements of operations. Unamortized loan origination costs for commercial mortgage loans held for sale that are carried at the lower of cost or fair value are capitalized as part of the carrying value of the loans and recognized upon the sale of such loans. Amortization of origination costs ceases upon transfer of commercial mortgage loans to held for sale.
Held for Sale, Measured at Fair Value -The fair value option provides an option to irrevocably elect fair value as an alternative measurement for selected financial assets, financial liabilities, and written loan commitments. The Company has elected to measure commercial mortgage loans held for sale in the Company's TRS under the fair value option. These commercial mortgage loans are included in the Commercial mortgage loans, held for sale, measured at fair value in the consolidated balance sheets. Interest income received on commercial mortgage loans, held for sale, measured at fair value is recorded on the accrual basis of accounting and is included in interest income in the consolidated statements of operations. Costs to originate these investments are expensed when incurred.
Real estate owned
The Company classifies its real estate owned as long-lived assets held for investment or as long-lived assets held for sale. Held for investment assets are stated at cost, as adjusted for any impairment loss, less accumulated depreciation.
Real estate owned, held for investment - Amounts capitalized to real estate owned, held for investment consist of the cost of acquisition or construction, any tenant improvements or major improvements, betterments that extend the useful life of the related asset, and transaction costs associated with the acquisition of an individual asset that does not qualify as a business combination. All repairs and maintenance are expensed as incurred. Additionally, the Company capitalizes interest while the development, or redevelopment, of a real estate owned asset is in progress. No development or redevelopments of real estate owned assets are in progress as of March 31, 2023.
The Company’s real estate owned, held for investment assets are depreciated or amortized using the straight-line method over the following useful lives:
| | | | | |
Buildings | 40 years |
Furniture, fixtures, and equipment | 15 years |
Site Improvements | 5 - 25 years |
Intangible lease assets | Lease term |
The Company continually monitors events and changes in circumstances that could indicate that the carrying amounts of the real estate and related intangible assets of either operating properties or properties under construction in which the Company has an ownership interest, either directly or through investments in joint ventures, may not be recoverable. When indicators of potential impairment are present, management assesses whether the respective carrying values will be recovered from the undiscounted future operating cash flows expected from the use of the asset and its eventual disposition for assets held for use, or from the estimated fair values, less costs to sell, for assets held for sale. In the event that the expected undiscounted future cash flows for assets held for use or the estimated fair value, less costs to sell, for assets held for sale do not exceed the respective asset carrying value, management adjusts such assets to the respective estimated fair values and recognizes an impairment loss. Estimated fair values are calculated based on the following information, depending upon availability, in order of preference: (i) recently quoted market prices, (ii) market prices for comparable properties, or (iii) the present value of undiscounted cash flows, including estimated sales value (which is based on key assumptions such as estimated market rents, lease-up periods, estimated lease terms, and capitalization and discount rates) less estimated selling costs.
Real estate owned, held for sale - Real estate owned is classified as held for sale in the period in which the six criteria under ASC Topic 360, "Property, Plant, and Equipment" are met: (1) we commit to a plan and have the authority to sell the asset; (2) the asset is available for sale in its current condition; (3) we have initiated an active marketing plan to locate a buyer for the asset; (4) the sale of the asset is both probable and expected to qualify for full sales recognition within a period of 12 months; (5) the asset is being actively marketed for sale at a price that is reflective of its current fair value; and (6) we do not anticipate changes to our plan to sell the asset. Held for sale assets are carried at the lower of depreciated cost or estimated fair value, less estimated costs to sell.
FRANKLIN BSP REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2023
(Unaudited)
Real estate owned assets are not depreciated or amortized while they are classified as held for sale. Interest and other expenses attributable to the liabilities of a disposal group classified as held for sale continue to be accrued. Upon the disposition of a real estate owned asset, the Company calculates gains and losses as net proceeds received less the carrying value of the real estate owned asset. Net proceeds received are net of direct selling costs associated with the disposition of the real estate owned asset. Gains and losses on real estate owned, held for sale are included in (Gain)/loss on other real estate investments on the consolidated statements of operations.
Fair Value of Assets and Liabilities of Acquired Properties
Upon the acquisition of real properties, the Company records the fair value of properties (plus any related acquisition costs) allocated based on relative fair value as tangible assets, consisting of land and building, and identified intangible assets and liabilities, consisting of the value of above-market and below-market leases and the value of in-place leases, based on their estimated fair values. Substantially all of the Company’s property acquisitions qualify as asset acquisitions under ASC 805, Business Combinations.
The estimated fair values of the tangible assets of an acquired property are determined by valuing the property as if it were vacant, and the “as-if-vacant” value is then allocated to land and building based on management’s determination of the estimated fair value of these assets. Management relies on a sales comparison approach using closed land sales and listings in determining the land value and determines the as-if-vacant estimated fair value of a property using methods similar to those used by independent appraisers. Factors considered by management in performing these analyses include an estimate of carrying costs during the expected lease-up periods considering current market conditions and costs to execute similar leases. In estimating carrying costs, management includes real estate taxes, insurance, and other operating expenses and estimates of lost rental revenue during the expected lease-up periods based on current market demand. Management also estimates the cost to execute similar leases including leasing commissions, legal, and other related costs.
The estimated fair values of above-market and below-market in-place leases are recorded based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the in-place leases and (ii) management’s estimate of market rates for the corresponding in-place leases, measured over a period equal to the remaining terms of the leases, taking into consideration the probability of renewals for any below-market leases. The capitalized above-market and below-market lease values are recorded as intangible lease assets or liabilities and amortized as an adjustment to rental revenues over the remaining terms of the respective leases.
The estimated fair values of in-place leases include an estimate of the direct costs associated with obtaining the acquired or "in place" tenant and estimates of opportunity costs associated with lost rentals that are avoided by acquiring an in-place lease. The amount capitalized as direct costs associated with obtaining a tenant include commissions, tenant improvements, and other direct costs and are estimated based on management’s consideration of current market costs to execute a similar lease. These direct lease origination costs are included in deferred lease costs in the accompanying consolidated balance sheets and are amortized to expense over the remaining terms of the respective leases. The value of opportunity costs is calculated using the contractual amounts to be paid pursuant to the in-place leases over a market absorption period for a similar lease. These lease intangibles are included in intangible lease assets in the accompanying consolidated balance sheets and are amortized to expense over the remaining terms of the respective leases.
Credit Losses
The allowance for credit losses required under ASU 2016-13 is deducted from the respective loan's amortized cost basis on the Company’s consolidated balance sheets.
General allowance for credit losses
The general allowance for credit losses for the Company’s financial instruments carried at amortized cost and off-balance sheet credit exposures, such as loans held for investment and unfunded loan commitments represents a lifetime estimate of expected credit losses. Factors considered by the Company when determining the general allowance for credit losses reserve include loan-specific characteristics such as loan-to-value (“LTV”) ratio, vintage year, loan term, property type, occupancy and geographic location, financial performance of the borrower, expected payments of principal and interest, as well as internal or external information relating to past events, current conditions and reasonable and supportable forecasts.
The general allowance for credit losses is measured on a collective (pool) basis when similar risk characteristics exist for multiple financial instruments. If similar risk characteristics do not exist, the Company measures the general allowance for credit losses on an individual instrument basis. The determination of whether a particular financial instrument should be included in a pool can change over time. If a financial asset’s risk characteristics change, the Company evaluates whether it is appropriate to continue to keep the financial instrument in its existing pool or evaluate it individually.
FRANKLIN BSP REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2023
(Unaudited)
In measuring the general allowance for credit losses for financial instruments including our unfunded loan commitments that share similar risk characteristics, the Company primarily applies a probability of default (“PD”)/loss given default (“LGD”) model for instruments that are collectively assessed, whereby the allowance for credit losses is calculated as the product of PD, LGD and exposure at default (“EAD”). The Company’s model principally utilizes historical loss rates derived from a commercial mortgage backed securities database with historical losses from 2001 - 2021 provided by a reputable third party, forecasting the loss parameters using a scenario-based statistical approach over a reasonable and supportable forecast period of twelve months, followed by an immediate reversion to average historical losses.
When a borrower is experiencing financial difficulties and a loan is modified, the effect of the modification will be included in the Company’s assessment of the CECL allowance for loan losses. If the Company provides principal forgiveness, the amortized cost basis of the loan is written off against the allowance for loan losses. Generally, when modifying loans, the Company will seek to protect its position by requiring incremental pay downs, additional collateral or guarantees and, in some cases, lookback features or equity interests to offset the effects of modifications granted should conditions impacting the loan improve.
Specific allowance for credit losses
For financial instruments where the borrower is experiencing financial difficulty based on the Company’s assessment at the reporting date and repayment is expected to be provided substantially through the operation or sale of the collateral, the Company may elect to use as a practical expedient the fair value of the collateral at the reporting date when determining a specific allowance for credit losses.
For financial instruments which the Company identifies reasonable doubt as to whether the collection of contractual components can be satisfied, a loan specific allowance analysis is performed. Determining whether a specific allowance for credit losses for a loan is required entails significant judgment from management and is based on several factors including (i) the underlying collateral performance, (ii) discussions with the borrower, (iii) borrower events of default, and (iv) other facts that impact the borrower’s ability to pay the contractual amounts due under the terms of the loan. If a loan is determined to have a specific allowance for current losses, the specific allowance for current losses is recorded as a component of our Current Expected Credit Loss ("CECL") reserve by applying the practical expedient for collateral dependent loans. The CECL reserve is assessed on an individual basis for such loans by comparing the estimated fair value of the underlying collateral, less costs to sell, to the book value of the respective loan. These valuations require judgments, which include assumptions regarding capitalization rates, discount rates, leasing, creditworthiness of major tenants, occupancy rates, availability and cost of financing, exit plans, loan sponsorship, actions of other lenders, and other factors deemed relevant by the Company. Actual losses, if any, could ultimately differ materially from these estimates. The Company only expects to write-off specific allowances for current losses if and when such amounts are deemed non-recoverable. Non-recoverability is generally determined at the time a loan is settled, or in the case of foreclosure, when the underlying asset is sold. Non-recoverability may also be concluded if, in the Company's determination, it is deemed certain that all amounts due will not be collected. If a loan is determined to be impaired based on the above considerations, management records a write-off through a charge to the "Allowance for credit losses" and the respective loan balance.
Risk Rating
In developing the allowances for credit losses for its loans held for investment, the Company performs a comprehensive analysis of its loan portfolio and assigns risk ratings to loans that incorporate management's current judgments about their credit quality based on all known and relevant internal and external factors that may affect collectability, using similar factors as those in developing the allowance for credit losses. This methodology results in loans being segmented by risk classification into risk rating categories that are associated with estimated probabilities of default and principal loss. Risk rating categories range from "1" to "5" with "1" representing the lowest risk of loss and "5" representing the highest risk of loss with the ratings updated quarterly. At the time of origination or purchase, loans held for investment are ranked as a “2” and will move accordingly going forward based on the ratings which are defined as follows:
FRANKLIN BSP REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2023
(Unaudited)
1.Very Low Risk- Investment exceeding fundamental performance expectations and/or capital gain expected. Trends and risk factors since time of investment are favorable.
2.Low Risk- Performing consistent with expectations and a full return of principal and interest expected. Trends and risk factors are neutral to favorable.
3.Average Risk- Performing investments requiring closer monitoring. Trends and risk factors show some deterioration.
4.High Risk/Delinquent/Defaulted/Potential for Loss- Underperforming investment with the potential of some interest loss but still expecting a positive return on investment. Trends and risk factors are negative.
5.Impaired/Loss Likely- Underperforming investment with expected loss of interest and some principal.
The Company also considers qualitative and environmental factors, including, but not limited to, economic and business conditions, nature and volume of the loan portfolio, lending terms, volume and severity of past due loans, concentration of credit and changes in the level of such concentrations in its determination of the allowance for credit losses.
Changes in the allowances for credit losses for the Company’s financial instruments are recorded in Provision/(benefit) for credit losses on the consolidated statements of operations with a corresponding offset to the financial instrument’s amortized cost recorded on the consolidated balance sheets, or as a component of Accounts payable and accrued expenses for unfunded loan commitments.
The Company has elected to not measure an allowance for credit losses for accrued interest receivable as balances are written off in a timely manner when loans, real estate securities or preferred equity investments are designated as non-performing and placed on non-accrual or cost recovery status within 90 days of becoming past due.
Non-performing status
The Company designates loans as non-performing when (i) full payment of principal and/or coupon interest components become 90-days past due ("non-accrual status"); or (ii) the Company has reasonable doubt as to whether the collection of contractual components can be satisfied ("cost recovery status"). When a loan is designated as non-performing and placed on non-accrual status, interest is only recognized as income when payment has been received. Loans designated as non-performing and placed on non-accrual status are removed from their non-performing designation when collection of principal and coupon interest components have been satisfied. When a loan is designated as non-performing and placed on cost recovery status, the cost-recovery method is applied to which receipt of principal or coupon interest is recorded as a reduction to the amortized cost until collection of all contractual components are reasonably assured.
Real Estate Securities
Available For Sale
The Company’s real estate securities are classified as available for sale ("AFS") and carried at fair value. Changes in fair value of available for sale real estate securities are recognized in the consolidated statements of comprehensive income. Related discounts, premiums and acquisition expenses on investments are amortized or accreted over the life of the investment using the effective interest method. Amortization and accretion are reflected as an adjustment to interest income in the Company’s consolidated statements of operations. The Company uses the specific identification method in determining the cost relief for real estate securities sold. Realized gains and losses from the sale of available for sale trading securities are included in the Company’s consolidated statements of operations.
AFS real estate securities which have experienced a decline in the fair value below their amortized cost basis (i.e., impairment) are evaluated each reporting period to determine whether the decline in fair value is due to credit-related factors. Any impairment that is not credit-related is recognized in accumulated other comprehensive income, while credit-related impairment is recognized as an allowance on the consolidated balance sheets with a corresponding adjustment on the consolidated statements of operations. If the Company intends to sell an impaired real estate security or more likely than not will be required to sell such a security before recovering its amortized cost basis, the entire impairment amount is recognized in the consolidated statements of operations with a corresponding adjustment to the security’s amortized cost basis.
The Company analyzes the AFS real estate securities portfolio on a periodic basis for credit losses at the individual security level using the same criteria described above for those amortized cost financial assets subject to an provision for credit losses including but not limited to; performance of the underlying assets in the security, borrower financial resources and investment in collateral, collateral type, credit ratings, project economics and geographic location as well as national and regional economic factors.
FRANKLIN BSP REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2023
(Unaudited)
The non-credit loss component of the unrealized loss within the Company’s AFS portfolio is recognized as an adjustment to the individual security’s asset balance with an offsetting entry to accumulated other comprehensive income in the consolidated balance sheets.
Trading
ARM Agency Securities are recorded at fair value and are classified as trading on the balance sheet with trading gains and losses due to fair value changes and sales of these securities recorded in the Company's consolidated statements of operations. The Company calculates trading gains and losses on the sales of ARM Agency Securities based on the specific identification method. Fair values fluctuate with current and projected changes in interest rates, prepayment expectations and other factors such as market liquidity conditions and the perceived credit quality of agency securities. Judgment is required to interpret market data and develop estimated fair values, particularly in circumstances of deteriorating credit quality and market liquidity.
Repurchase Agreements
Commercial mortgage loans and real estate securities sold under repurchase agreements have been treated as collateralized financing transactions because the Company maintains effective control over the transferred securities. Commercial mortgage loans and real estate securities financed through a repurchase agreement remain on the Company’s consolidated balance sheets as an asset and cash received from the purchaser is recorded as a liability. Interest paid in accordance with repurchase agreements is recorded in interest expense on the Company's consolidated statements of operations.
Deferred Financing Costs
The deferred financing costs related to the Company's various Master Repurchase Agreements as well as certain prepaid subscription costs are included in Prepaid expenses and other assets on the consolidated balance sheets. Deferred financing cost on the Company's CLOs are netted against the Company's CLO payable in the Collateralized loan obligations on the consolidated balance sheets. Deferred financing costs are amortized over the terms of the respective financing agreement using the effective interest method and included in interest expense on the Company's consolidated statements of operations. Unamortized deferred financing costs are generally expensed when the associated debt is refinanced or repaid before maturity.
Offering and Related Costs
Since 2018, the Company has from time to time offered, shares of the Company’s common stock or one or more series of its preferred stock, including its Series H convertible preferred stock (the “Series H Preferred Stock”) and former Series I convertible preferred stock (the “Series I Preferred Stock”) in private placements exempt from the registration requirements of the Securities Act of 1933, as amended. In connection with these offerings, the Company incurred various offering costs. These offering costs include but are not limited to legal, accounting, printing, mailing and filing fees, and diligence expenses of broker-dealers. Offering costs for the common stock are recorded in the Company’s stockholders’ equity. Offering costs for the Series H Preferred Stock and Series I Preferred Stock were expensed to the Company's consolidated statement of operations.
FRANKLIN BSP REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2023
(Unaudited)
Equity Incentive Plan
The Company maintains the Franklin BSP Realty Trust, Inc. 2021 Equity Incentive Plan (the “2021 Incentive Plan”), pursuant to which the Company has granted and may in the future, from time to time, grant equity awards to the Company’s directors, officers and employees (if it ever has employees), employees of the Advisor and its affiliates, or certain of the Company’s consultants, advisors or other service providers to the Company or an affiliate of the Company. The 2021 Incentive Plan, which is administered by the Compensation Committee of the board of directors, provides for the grant of awards of share options, share appreciation rights, restricted shares, restricted share units, deferred share units, unrestricted shares, dividend equivalent rights, performance shares and other performance-based awards, other equity-based awards, long-term incentive plan units and cash bonus awards.
In January 2022 and 2023, the Company issued under the 2021 Incentive Plan awards of restricted stock units ("RSUs") to its officers and certain other personnel of the Advisor who provide services to the Company. These awards are service-based and vest in equal annual installments beginning on the anniversary of the date of grant over a period of three years, subject to continuing service. One share of the Company’s common stock is issued for each unit that vests. These awards also grant non-forfeitable dividend equivalent rights equal to the cash dividend paid in the ordinary course on a common share to the Company's common shareholders. Upon termination for any reason, all unvested RSUs will be forfeited by the grantee, who will be given no further rights to such RSUs. The fair value of the RSUs is expensed over the vesting period, which are included in share-based compensation expense on the consolidated statements of operations.
Restricted Share Plan
The Company also had an Amended and Restated Employee and Director Incentive Restricted Share Plan (the "RSP"), which provided the Company with the ability to grant awards of restricted shares to the Company’s directors, officers and employees (if the Company ever has employees), employees of the Advisor and its affiliates, employees of entities that provide services to the Company, directors of the Advisor or of entities that provide services to the Company, the Advisor and its affiliates. The RSP expired on February 7, 2023.
Restricted share awards entitle the recipient to receive common shares from the Company under terms that provide for vesting over a specified period of time or upon attainment of pre-established performance objectives. Such awards would typically be forfeited with respect to the unvested shares upon the termination of the recipient’s employment or other relationship with the Company. Restricted shares may not, in general, be sold or otherwise transferred until restrictions are removed and the shares have vested. Holders of restricted shares may receive cash distributions prior to the time that the restrictions on the shares have lapsed. Any distributions payable in common shares shall be subject to the same restrictions as the underlying restricted shares. The fair value of the restricted share awards is expensed over the vesting period, which are included in share-based compensation expense on the consolidated statements of operations.
Distribution Reinvestment Plan
The Company maintains a dividend reinvestment plan ("DRIP") pursuant to which stockholders may reinvest dividends into shares of common stock. Shares of common stock purchased through the DRIP for dividend reinvestments are supplied either directly by the Company as newly issued shares or via purchases by the DRIP administrator of shares of common stock on the open market, at the Company’s option. If the shares are purchased in the open market, the purchase price is the average price per share of shares purchased; if the shares are purchased directly from the Company, the purchase price is generally the average of the daily high and low sales prices for a share of common stock reported by the NYSE on the dividend payment date authorized by the Company’s board of directors. The Company may suspend, modify or terminate the DRIP at any time in its sole discretion.
Income Taxes
The Company has conducted its operations to qualify as a REIT for U.S. federal income tax purposes beginning with its taxable year ended December 31, 2013. As a REIT, if the Company meets certain organizational and operational requirements and distributes at least 90% of its "REIT taxable income" (determined before the deduction of dividends paid and excluding net capital gains) to its stockholders in a year, it will not be subject to U.S. federal income tax to the extent of the income that it distributes. However, even if the Company qualifies for taxation as a REIT, it may be subject to certain state and local taxes on income in addition to U.S. federal income and excise taxes on its undistributed income. The Company, through its TRSs, is indirectly subject to U.S. federal, state and local income taxes. The Company’s TRSs are not consolidated for U.S. federal income tax purposes but are instead taxed as C corporations. For financial reporting purposes, the TRSs are consolidated and a provision for current and deferred taxes is established for the portion of earnings recognized by the Company with respect to its interest in its TRSs. Total Provision/(benefit) for income tax for the three months ended March 31, 2023 and 2022 was $(0.7) million and $(24.0) thousand, respectively.
FRANKLIN BSP REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2023
(Unaudited)
The Company uses a more-likely-than-not threshold for recognition and derecognition of tax positions taken or to be taken in a tax return. The Company has assessed its tax positions for all open tax years beginning with December 31, 2017 and concluded that there were no uncertainties to be recognized. The Company’s accounting policy with respect to interest and penalties related to tax uncertainties is to classify these amounts as provision for income taxes.
The Company utilizes the TRSs to reduce the impact of the prohibited transaction tax and to avoid penalty for the holding of assets not qualifying as real estate assets for purposes of the REIT asset tests. Any income associated with a TRS is fully taxable because the TRS is subject to federal and state income taxes as a domestic C corporation based upon its net income.
Derivatives and Hedging Activities
In the normal course of business, the Company is exposed to the effect of interest rate changes and may undertake a strategy to limit these risks through the use of derivatives. The Company uses derivatives primarily to economically hedge against interest rates, CMBS spreads and macro market risk in order to minimize volatility. The Company may use a variety of derivative instruments that are considered conventional, including but not limited to: Treasury note futures, interest rate swaps, and credit derivatives on various indices including CMBX and CDX.
The Company recognizes all derivatives on the consolidated balance sheets at fair value. The Company does not designate derivatives as hedges to qualify for hedge accounting for financial reporting purposes and therefore any net payments under, or fluctuations in the fair value of these derivatives have been recognized currently in unrealized (gain)/loss on derivative instruments in the accompanying consolidated statements of operations. The Company records derivative asset and liability positions on a gross basis with any collateral posted with or received from counterparties recorded separately within Restricted cash on the Company’s consolidated balance sheets. Certain derivatives that the Company has entered into are subject to master netting agreements with its counterparties, allowing for netting of the same transaction, in the same currency, on the same date.
Per Share Data
The Company’s Series H Preferred Stock and Series I Preferred Stock are each considered a participating security and the Company calculates basic earnings per share using the two-class method. The Company’s dilutive earnings per share calculation is computed using the more dilutive result of the treasury stock method, assuming the participating security is a potential common share, or the two-class method, assuming the participating security is not converted. The Company calculates basic earnings per share by dividing net income applicable to common stock for the period by the weighted-average number of shares of common stock outstanding for that period. Diluted earnings per share reflects the potential dilution that could occur from shares outstanding if potential shares of common stock with a dilutive effect have been issued in connection with the restricted stock plan or upon conversion of the outstanding shares of the Company’s Series H Preferred Stock and Series I Preferred Stock, except when doing so would be anti-dilutive.
Reportable Segments
The Company has determined that it has four reportable segments based on how the chief operating decision maker reviews and manages the business. The four reporting segments are as follows:
•The real estate debt business which is focused on originating, acquiring and asset managing commercial real estate debt investments, including first mortgage loans, subordinate mortgages, mezzanine loans and participations in such loans.
•The real estate securities business focuses on investing in and asset managing real estate securities. Historically this business has focused primarily on CMBS, CRE CLO bonds, CDO notes and other securities. As a result of the October 2021 acquisition of Capstead, the Company acquired and continues to hold a portfolio of RMBS in the form of the ARM Agency Securities. The Company has and intends to reinvest the cash and proceeds from dividends, interest, repayments and sales of these assets into its other segments and does not intend to continue to invest in ARM Agency Securities or RMBS in general.
•The commercial conduit business in the Company's TRS, which is focused on originating and subsequently selling fixed-rate commercial real estate loans into the CMBS securitization market.
•The real estate owned business represents real estate acquired by the Company through foreclosure, deed in lieu of foreclosure, or purchase.
See Note 16 - Segment Reporting for further information regarding the Company's segments.
Redeemable Convertible Preferred Stock
The Company’s outstanding classes of redeemable convertible preferred stock are classified outside of permanent equity in the consolidated balance sheets.
FRANKLIN BSP REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2023
(Unaudited)
Series H Preferred Stock
The Series H Preferred Stock ranks senior to the Common Stock and on parity with the Series I Preferred Stock and the Company’s 7.50% Series E Cumulative Redeemable Preferred Stock ("Series E Preferred Stock") with respect to priority in dividends and in the distribution of assets in the event of the liquidation, dissolution or winding-up of the Company. The liquidation preference of each share of Series H Preferred Stock is the greater of (i) $5,000 plus accrued and unpaid dividends, and (ii) the amount that would be received upon a conversion of the Series H Preferred Stock into the Common Stock.
Dividends on the Series H Preferred Stock, which are typically declared and paid quarterly, accrue at a rate equal to the greater of (i) an annual amount equal to 4.0% of the liquidation preference per share and (ii) the dividends that would have been paid had such share of Series H Preferred Stock been converted into a share of common stock on the first day of such quarter, subject to proration in the event the share of Series H preferred stock is not outstanding for the full quarter. Dividends are paid in arrears. Dividends will accumulate and be cumulative from the most recent date to which dividends had been paid.
On January 19, 2023, the Series H Preferred Stock was amended such that the mandatory conversion date was extended by one year, to January 19, 2024. Unless earlier converted, the Series H Preferred Stock will automatically convert into common stock at a rate of 299.2 shares of common stock per share of Series H Preferred Stock (subject to adjustments as described in the Articles Supplementary for the Series H Preferred Stock) on January 19, 2024. The holder of the Series H Preferred Stock has the right to convert up to 4,487 shares of Series H Preferred Stock one time in each calendar month through December 2023, upon 10 business days’ advance notice to the Company.
Holders of the Series H Preferred Stock (voting as a single class with holders of common stock) are entitled to vote on each matter submitted to a vote of the stockholders of the Company upon which the holders of common stock are entitled to vote. The number of votes applicable to a share of outstanding Series H Preferred Stock will be equal to the number of shares of common stock a share of Series H Preferred Stock could have been converted into as of the record date set for purposes of such stockholder vote (rounded down to the nearest whole number of shares of common stock). In addition, the affirmative vote of the holders of two-thirds of the outstanding shares of Series H Preferred Stock, voting as a single class with other shares of parity preferred stock, is required to approve the issuance of any equity securities senior to the Series H Preferred Stock and to take certain actions materially adverse to the holders of the Series H Preferred Stock.
Series I Preferred Stock
On January 19, 2023, all of the 1,000 outstanding shares of the Series I Preferred Stock converted by their terms into 299.2 shares of common stock per share of Series I Preferred Stock.
The Series I Preferred Stock was on parity with the Series H Preferred Stock and Series E Preferred Stock with respect to preference on liquidation and dividend rights. The terms of the Series I Preferred Stock were substantially the same as the Series H Preferred Stock, except that the holders of the Series I Preferred Stock had the option to accelerate the mandatory conversion date, which was January 19, 2023, upon at least 10 days' written notice.
Perpetual Preferred Stock—Series E Preferred Stock
The Series E Preferred Stock has no stated maturity and is not subject to any sinking fund or mandatory redemption. The Series E Preferred Stock ranks, with respect to rights to the payment of dividends and the distribution of assets upon its liquidation, dissolution or winding up, senior to the common stock and on a parity with the Series I Preferred Stock and Series H Preferred Stock. The liquidation preference is $25.00 per share, plus an amount equal to any accumulated and unpaid dividends.
Holders of shares of the Series E Preferred Stock are entitled to receive, when, as and if authorized by our board of directors and declared by the Company, out of funds legally available for the payment of dividends, cumulative cash dividends at the rate of 7.50% of the $25.00 per share liquidation preference per annum (equivalent to $1.875 per annum per share). Dividends on the Series E Preferred Stock are cumulative and payable quarterly in arrears.
Dividends on the Series E Preferred Stock will accumulate whether or not the Company has earnings, whether or not there are funds legally available for the payment of those dividends and whether or not those dividends are declared.
The Company may, at its option, upon not less than 30 nor more than 60 days’ written notice, redeem the Series E Preferred Stock, in whole or in part, at any time or from time to time, for cash at a redemption price of $25.00 per share, plus any accumulated and unpaid dividends thereon to, but not including, the date fixed for redemption. Upon a change of control of the Company, in the event the Company does not redeem the Series E Preferred Stock, a holder of Series E Preferred Stock will have the right to convert to Common Stock upon the terms set forth in the applicable Articles Supplementary.
The Series E Preferred Stock is listed on the New York Stock Exchange under the symbol “FBRT PRE”.
FRANKLIN BSP REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2023
(Unaudited)
Recently Issued Accounting Pronouncements
In March 2022, the FASB issued ASU 2022-02 "Financial Instruments-Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures," or ASU 2022-02. ASU 2022-02 eliminates the accounting guidance for troubled debt restructurings and requires disclosure of current-period gross write-offs by year of loan origination. Additionally, ASU 2022-02 updates the accounting for credit losses under ASC 326 and adds enhanced disclosures with respect to loan refinancing and restructuring in the form of principal forgiveness, interest rate concessions, other-than-insignificant payment delays, or term extensions when the borrower is experiencing financial difficulties. On January 1, 2023, the Company adopted ASU 2022-02 on a prospective basis and the adoption had no significant impact to the Company's consolidated financial statements.
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 the London interbank offered rate (“LIBOR”) and other interbank offered rates to alternative reference rates. The guidance is effective upon issuance and generally can be elected over time through December 31, 2024, as extended under ASU No. 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848. The Company has not adopted any of the optional expedients or exceptions through March 31, 2023, but will continue to evaluate the possible adoption of any such expedients or exceptions during the effective period as circumstances evolve.
Note 3 - Commercial Mortgage Loans
Commercial Mortgage Loans, Held for Investment
The following table is a summary of the Company's commercial mortgage loans, held for investment, carrying values by class (dollars in thousands):
| | | | | | | | | | | |
| March 31, 2023 | | December 31, 2022 |
Senior loans | $ | 5,025,739 | | | $ | 5,251,464 | |
Mezzanine loans | 25,762 | | | 18,312 | |
Total gross carrying value of loans | 5,051,501 | | | 5,269,776 | |
General allowance for credit losses | 28,751 | | | 26,624 | |
Specific allowance for credit losses (1) | — | | | 14,224 | |
Less: Allowance for credit losses | 28,751 | | | 40,848 | |
Total commercial mortgage loans, held for investment, net | $ | 5,022,750 | | | $ | 5,228,928 | |
_________________________________________________________ | | | | | | | | | | | |
| March 31, 2024 | | December 31, 2023 |
Senior loans | $ | 5,206,011 | | | $ | 5,017,569 | |
Mezzanine loans | 27,409 | | | 19,373 | |
Total gross carrying value of loans | 5,233,420 | | | 5,036,942 | |
General allowance for credit losses | 48,477 | | | 47,175 | |
Specific allowance for credit losses | 738 | | | — | |
Less: Allowance for credit losses | 49,215 | | | 47,175 | |
Total commercial mortgage loans, held for investment, net | $ | 5,184,205 | | | $ | 4,989,767 | |
(1)As ofFor the three months ended March 31, 2024 and year ended December 31, 2022, the Company recorded a specific allowance for credit losses with respect to a retail loan designated as non-performing. As of March 31, 2023, the loanactivity in the Company's commercial mortgage loans, held for investment carrying values, was written down toas follows (dollars in thousands):
| | | | | | | | | | | |
| Three months ended March 31, 2024 | | Year Ended December 31, 2023 |
Amortized cost, beginning of period | $ | 5,036,942 | | | $ | 5,269,776 | |
Acquisitions and originations | 492,800 | | | 941,513 | |
Principal repayments | (251,801) | | | (1,076,532) | |
| | | |
Net fees capitalized into carrying value of loans | (4,736) | | | (5,242) | |
| | | |
Discount accretion/premium amortization | 2,450 | | | 13,016 | |
Transfer to real estate owned(1) | (42,235) | | | (103,863) | |
Cost recovery | — | | | (1,726) | |
Amortized cost, end of period | $ | 5,233,420 | | | $ | 5,036,942 | |
Allowance for credit losses, beginning of period | $ | (47,175) | | | $ | (40,848) | |
General (provision)/benefit for credit losses | (1,302) | | | (20,551) | |
Specific (provision)/benefit for credit losses | (738) | | | (12,334) | |
Write offs from specific allowance for credit losses | — | | | 26,558 | |
Allowance for credit losses, end of period | $ | (49,215) | | | $ | (47,175) | |
Total commercial mortgage loans, held for investment, net | $ | 5,184,205 | | | $ | 4,989,767 | |
________________________(1) In February 2024, the estimated fair valueCompany, through deed-in-lieu of foreclosure, acquired a multifamily property located in San Antonio, TX, and assumed the senior mortgage note which the Company originated in November 2021. At the time of the collateral less estimated costs to sell anddeed-in-lieu of foreclosure, the excess of the carrying valueamortized cost of the loan over fair valuewas $42.2 million and contractual interest was satisfied. Subsequently thereafter, the property was sold to a third party. In connection with the sale, the senior mortgage note which the Company originated in November 2021 was assumed by the buyer and immediately modified, resulting in a $5.9 million principal paydown. As a result, the modification was accounted for as a new loan for GAAP purposes and the sale of the collateral less estimated costs to sell was charged-off againstreal estate owned transaction resulted in a net gain of $6.0 thousand recorded in Gain/(loss) on other real estate investments in the specific allowance for credit losses.consolidated statement of operations.
As of March 31, 20232024 and December 31, 2022,2023, the Company's total commercial mortgage loan, portfolio, held for investment portfolio, was comprised of 157145 and 161144 loans, respectively.
FRANKLIN BSP REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 20232024
(Unaudited)
Allowance for Credit Losses
The following table presents the activity in the Company's allowance for credit losses, excluding the unfunded loan commitments, as of March 31, 2023 (dollars in thousands):
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| | MultiFamily | | Retail | | Office | | Industrial | | Mixed Use | | Hospitality | | Self-Storage | | Manufactured Housing | | Total |
December 31, 2022 | | $ | 21,166 | | | $ | 14,601 | | | $ | 670 | | | $ | 259 | | | $ | 47 | | | $ | 4,064 | | | $ | 10 | | | $ | 31 | | | $ | 40,848 | |
Changes: | | | | | | | | | | | | | | | | | | |
General allowance/(benefit) for credit losses | | (1,759) | | | (343) | | | 2,986 | | | (205) | | | 30 | | | 1,342 | | | 45 | | | 31 | | | 2,127 | |
Specific allowance/(benefit) for credit losses | | — | | | 835 | | | — | | | — | | | — | | | — | | | — | | | — | | | 835 | |
Write offs against specific allowance for credit losses | | — | | | (15,059) | | | — | | | — | | | — | | | — | | | — | | | — | | | (15,059) | |
March 31, 2023 | | $ | 19,407 | | | $ | 34 | | | $ | 3,656 | | | $ | 54 | | | $ | 77 | | | $ | 5,406 | | | $ | 55 | | | $ | 62 | | | $ | 28,751 | |
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The Company recorded an increase in its general provision for credit losses during the three months ended March 31, 2023 of $2.1 million. The primary driver for the higher reserve balance is the change in economic outlook since the end of the prior year offset slightlyLoan Portfolio by the decrease in loan portfolio.
The Company identified a commercial mortgage loan, held for investment secured by a portfolio of 24 retail properties, that was assigned a risk rating of “5” due to certain conditions that negatively impacted the underlying collateral property’s cash flows. As of December 31, 2022, the specific allowance for current losses remaining was $14.2 million. During the three months ended March 31, 2023, the Company recorded an additional $0.8 million to the specific allowance for current lossesCollateral Type and charged off the remaining $15.1 million which directly reduced the amortized cost basis of the loan. The Company's evaluation of the significant unobservable inputs to the discounted cash flow model used to approximate the fair value of the retail properties collateralizing the loan included a capitalization rate, which ranged from 5.00%-6.75%. As of March 31, 2023, the loan has a fully funded outstanding principal balance of $38.4 million and carrying value of $26.4 million which is composed of 9 remaining retail properties.
The following table presents the activity in the Company's allowance for credit losses for the unfunded loan commitments, which is included in accounts payable and accrued expenses in the consolidated balance sheets as of March 31, 2023 (dollars in thousands):
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| | MultiFamily | | Retail | | Office | | Industrial | | Mixed Use | | Hospitality | | Self-Storage | | Manufactured Housing | | Total |
December 31, 2022 | | $ | 165 | | | $ | (36) | | | $ | 86 | | | $ | 3 | | | $ | — | | | $ | 61 | | | $ | — | | | $ | 1 | | | $ | 280 | |
Changes: | | | | | | | | | | | | | | | | | | |
General allowance/(benefit) for credit losses | | 579 | | | 36 | | | 804 | | | — | | | — | | | (21) | | | — | | | — | | | 1,398 | |
March 31, 2023 | | $ | 744 | | | $ | — | | | $ | 890 | | | $ | 3 | | | $ | — | | | $ | 40 | | | $ | — | | | $ | 1 | | | $ | 1,678 | |
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FRANKLIN BSP REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2023
(Unaudited)
Geographic RegionThe following tables represent the composition by loan collateral type and region of the Company's commercial mortgage loans, held for investment portfolio (dollars in thousands):
| | March 31, 2023 | | December 31, 2022 |
| | March 31, 2024 | | | | March 31, 2024 | | December 31, 2023 |
Loan Collateral Type | Loan Collateral Type | | Par Value | | Percentage | | Par Value | | Percentage | Loan Collateral Type | | Par Value | | Percentage | | Par Value | | Percentage |
Multifamily | Multifamily | | $ | 3,851,347 | | | 75.9 | % | | $ | 4,030,975 | | | 76.1 | % | Multifamily | | $ | 3,931,501 | | | 74.9 | | 74.9 | % | | $ | 3,876,108 | | | 76.8 | | 76.8 | % |
Hospitality | Hospitality | | 602,615 | | | 11.9 | % | | 510,566 | | | 9.7 | % | Hospitality | | 721,075 | | | 13.8 | | 13.8 | % | | 670,274 | | | 13.3 | | 13.3 | % |
Office | Office | | 328,454 | | | 6.5 | % | | 405,705 | | | 7.7 | % | Office | | 312,894 | | | 6.0 | | 6.0 | % | | 269,924 | | | 5.4 | | 5.4 | % |
Industrial | | Industrial | | 150,346 | | | 2.9 | % | | 73,724 | | | 1.5 | % |
Retail | Retail | | 87,102 | | | 1.7 | % | | 120,017 | | | 2.3 | % | Retail | | 34,000 | | | 0.6 | | 0.6 | % | | 34,000 | | | 0.7 | | 0.7 | % |
Industrial | | 78,050 | | | 1.5 | % | | 93,035 | | | 1.8 | % |
Other | Other | | 128,642 | | | 2.5 | % | | 128,676 | | | 2.4 | % | Other | | 93,984 | | | 1.8 | | 1.8 | % | | 121,006 | | | 2.3 | | 2.3 | % |
| Total | Total | | $ | 5,076,210 | | | 100.0 | % | | $ | 5,288,974 | | | 100.0 | % |
| Total | |
| Total | | | $ | 5,243,800 | | | 100.0 | % | | $ | 5,045,036 | | | 100.0 | % |
| | March 31, 2023 | | December 31, 2022 |
| | March 31, 2024 | | | | March 31, 2024 | | December 31, 2023 |
Loan Region | Loan Region | | Par Value | | Percentage | | Par Value | | Percentage | Loan Region | | Par Value | | Percentage | | Par Value | | Percentage |
Southeast | Southeast | | $ | 2,029,772 | | | 40.0 | % | | $ | 2,229,756 | | | 42.2 | % | Southeast | | $ | 2,116,439 | | | 40.4 | | 40.4 | % | | $ | 1,989,175 | | | 39.4 | | 39.4 | % |
Southwest | Southwest | | 1,736,116 | | | 34.2 | % | | 1,763,492 | | | 33.3 | % | Southwest | | 2,033,484 | | | 38.8 | | 38.8 | % | | 1,920,491 | | | 38.1 | | 38.1 | % |
Mideast | Mideast | | 524,930 | | | 10.3 | % | | 706,192 | | | 13.4 | % | Mideast | | 385,710 | | | 7.4 | | 7.4 | % | | 455,739 | | | 9.0 | | 9.0 | % |
Great Lakes | | Great Lakes | | 156,627 | | | 3.0 | % | | 161,059 | | | 3.2 | % |
Rocky Mountain | | Rocky Mountain | | 134,535 | | | 2.6 | % | | 74,934 | | | 1.5 | % |
Far West | Far West | | 197,207 | | | 3.9 | % | | 234,891 | | | 4.4 | % | Far West | | 104,321 | | | 2.0 | | 2.0 | % | | 113,554 | | | 2.3 | | 2.3 | % |
Great Lakes | | 162,563 | | | 3.2 | % | | 162,162 | | | 3.1 | % |
Various | | 425,622 | | | 8.4 | % | | 192,481 | | | 3.6 | % |
| New England | | New England | | 62,691 | | | 1.2 | % | | 63,274 | | | 1.3 | % |
Various(1) | | Various(1) | | 249,993 | | | 4.6 | % | | 266,810 | | | 5.2 | % |
| Total | Total | | $ | 5,076,210 | | | 100.0 | % | | $ | 5,288,974 | | | 100.0 | % |
Total | |
Total | | | $ | 5,243,800 | | | 100.0 | % | | $ | 5,045,036 | | | 100.0 | % |
________________________As(1) Represents loans secured by a portfolio of March 31, 2023 and December 31, 2022, the Company's total commercial mortgage loans, held for sale, measured at fair value were each comprised of two loans. As of March 31, 2023 and December 31, 2022, the contractual principal outstanding of commercial mortgage loans, held for sale, measured at fair value was $15.6 million. As of March 31, 2023 and December 31, 2022, noneproperties located in various parts of the Company's commercial mortgage loans, heldUnited States.
Allowance for sale, measured at fair value were in default or greater than ninety days past due.Credit Losses
The following tables representtable presents the composition by loan collateral type and region ofquarterly changes in the Company's commercial mortgage loans, heldallowance for sale, measured at fair valuecredit losses for the three months ended March 31, 2024 (dollars in thousands):
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| | March 31, 2023 | | December 31, 2022 |
Loan Collateral Type | | Par Value | | Percentage | | Par Value | | Percentage |
Retail | | $ | 12,000 | | | 76.8 | % | | $ | 12,000 | | | 76.8 | % |
Office | | 3,625 | | | 23.2 | % | | 3,625 | | | 23.2 | % |
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Total | | $ | 15,625 | | | 100.0 | % | | $ | 15,625 | | | 100.0 | % |
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| | | | General Allowance for Credit Losses | | |
| | Specific Allowance for Credit Losses | | Funded | | Unfunded | | Total | | Total Allowance for Credit Losses |
December 31, 2023 | | $ | — | | | $ | 47,175 | | | $ | 1,133 | | | $ | 48,308 | | | $ | 48,308 | |
Changes: | | | | | | | | | | |
Provision/(Benefit) | | $ | 738 | | | $ | 1,302 | | | $ | 841 | | | $ | 2,143 | | | $ | 2,881 | |
Write offs | | — | | | — | | | — | | | — | | | — | |
March 31, 2024 | | $ | 738 | | | $ | 48,477 | | | $ | 1,974 | | | $ | 50,451 | | | $ | 51,189 | |
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| | March 31, 2023 | | December 31, 2022 |
Loan Region | | Par Value | | Percentage | | Par Value | | Percentage |
Southeast | | $ | 15,625 | | | 100.0 | % | | $ | 15,625 | | | 100.0 | % |
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Specific Allowance for Credit LossesIn June 2022, the Company originated a first mortgage loan with a fully committed principal balance of $58.0 million secured by two multifamily properties in North Carolina. In March 2024, the loan was identified by management as non-performing and placed on non-accrual status. The Company elected to apply a practical expedient for collateral dependent assets in which the allowance for credit losses is calculated as the difference between the estimated fair value of the underlying collateral, less estimated cost to sell, and the amortized cost basis of the loan. The Company estimated the fair value less estimated cost to sell utilizing the market approach with an unobservable input based on a negotiated price noted in a letter of intent from an anticipated buyer. As a result, the Company recorded a specific allowance for credit losses of $0.7 million on this loan.
FRANKLIN BSP REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 20232024
(Unaudited)
LoanGeneral Allowance for Credit QualityLosses
The Company recorded a total increase in its general allowance for credit losses during the three months ended March 31, 2024 of $2.1 million. The primary driver for the higher reserve balance is due to the Company utilizing a pessimistic and Vintage
The following tables presentconservative macro-economic outlook since the amortized costend of ourthe prior quarter along with an increase in size of the overall portfolio of commercial mortgage loans, held for investment as of March 31, 2023 and December 31, 2022, by loan collateral type,2024. Changes in the provision for credit losses for the Company’s internal risk ratingfinancial instruments are recorded in (Provision)/benefit for income tax in the consolidated statements of operations with a corresponding offset to the financial instrument’s amortized cost recorded in the consolidated balance sheets, or as a component of Accounts payable and year of origination. The risk ratings are updated as of March 31, 2023.
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As of March 31, 2023 | | | | | | | | | | | | | | | | |
| | 2023 | | 2022 | | 2021 | | 2020 | | 2019 | | Prior | | | | Total |
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Multifamily: | | | | | | | | | | | | | | | | |
Risk Rating: | | | | | | | | | | | | | | | | |
1-2 internal grade | | $ | — | | | $ | 1,452,965 | | | $ | 1,990,747 | | | $ | 74,521 | | | $ | — | | | $ | — | | | | | $ | 3,518,233 | |
3-4 internal grade | | — | | | — | | | 242,376 | | | 10,761 | | | — | | | 69,742 | | | | | 322,879 | |
Total Multifamily Loans | | $ | — | | | $ | 1,452,965 | | | $ | 2,233,123 | | | $ | 85,282 | | | $ | — | | | $ | 69,742 | | | | | $ | 3,841,112 | |
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Retail: | | | | | | | | | | | | | | | | |
Risk Rating: | | | | | | | | | | | | | | | | |
1-2 internal grade | | $ | — | | | $ | 14,588 | | | $ | 33,897 | | | $ | — | | | $ | — | | | $ | — | | | | | $ | 48,485 | |
3-4 internal grade | | — | | | — | | | — | | | — | | | — | | | — | | | | | — | |
5 internal grade | | — | | | 26,450 | | | — | | | — | | | — | | | — | | | | | 26,450 | |
Total Retail Loans | | $ | — | | | $ | 41,038 | | | $ | 33,897 | | | $ | — | | | $ | — | | | $ | — | | | | | $ | 74,935 | |
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Office: | | | | | | | | | | | | | | | | |
Risk Rating: | | | | | | | | | | | | | | | | |
1-2 internal grade | | $ | — | | | $ | — | | | $ | 50,667 | | | $ | 123,578 | | | $ | 58,890 | | | $ | 18,620 | | | | | $ | 251,755 | |
3-4 internal grade | | 7,439 | | | — | | | — | | | 43,085 | | | 25,761 | | | — | | | | | 76,285 | |
Total Office Loans | | $ | 7,439 | | | $ | — | | | $ | 50,667 | | | $ | 166,663 | | | $ | 84,651 | | | $ | 18,620 | | | | | $ | 328,040 | |
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Industrial: | | | | | | | | | | | | | | | | |
Risk Rating: | | | | | | | | | | | | | | | | |
1-2 internal grade | | $ | — | | | $ | 77,813 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | | | $ | 77,813 | |
3-4 internal grade | | — | | | — | | | — | | | — | | | — | | | — | | | | | — | |
Total Industrial Loans | | $ | — | | | $ | 77,813 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | | | $ | 77,813 | |
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Hospitality: | | | | | | | | | | | | | | | | |
Risk Rating: | | | | | | | | | | | | | | | | |
1-2 internal grade | | $ | 119,423 | | | $ | 139,900 | | | $ | 162,798 | | | $ | — | | | $ | 49,388 | | | $ | 22,036 | | | | | $ | 493,545 | |
3-4 internal grade | | — | | | — | | | — | | | — | | | 28,799 | | | 78,803 | | | | | 107,602 | |
Total Hospitality Loans | | $ | 119,423 | | | $ | 139,900 | | | $ | 162,798 | | | $ | — | | | $ | 78,187 | | | $ | 100,839 | | | | | $ | 601,147 | |
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Other: | | | | | | | | | | | | | | | | |
Risk Rating: | | | | | | | | | | | | | | | | |
1-2 internal grade | | $ | — | | | $ | 30,413 | | | $ | 54,156 | | | $ | 36,210 | | | $ | — | | | $ | — | | | | | $ | 120,779 | |
3-4 internal grade | | — | | | — | | | — | | | 7,675 | | | — | | | — | | | | | 7,675 | |
Total Other Loans | | $ | — | | | $ | 30,413 | | | $ | 54,156 | | | $ | 43,885 | | | $ | — | | | $ | — | | | | | $ | 128,454 | |
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Total | | $ | 126,862 | | | $ | 1,742,129 | | | $ | 2,534,641 | | | $ | 295,830 | | | $ | 162,838 | | | $ | 189,201 | | | | | $ | 5,051,501 | |
accrued expenses
for unfunded loan commitments
FRANKLIN BSP REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2023
(Unaudited)
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As of December 31, 2022 | | | | | | | | | | | | | | | | |
| | 2022 | | 2021 | | 2020 | | 2019 | | 2018 | | 2017 | | | | Total |
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Multifamily: | | | | | | | | | | | | | | | | |
Risk Rating: | | | | | | | | | | | | | | | | |
1-2 internal grade | | $ | 1,511,181 | | | $ | 2,184,362 | | | $ | 74,372 | | | $ | — | | | $ | 34,668 | | | $ | — | | | | | $ | 3,804,583 | |
3-4 internal grade | | — | | | 167,707 | | | 10,807 | | | — | | | 34,731 | | | — | | | | | 213,245 | |
Total Multifamily Loans | | $ | 1,511,181 | | | $ | 2,352,069 | | | $ | 85,179 | | | $ | — | | | $ | 69,399 | | | $ | — | | | | | $ | 4,017,828 | |
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Retail: | | | | | | | | | | | | | | | | |
Risk Rating: | | | | | | | | | | | | | | | | |
1-2 internal grade | | $ | 22,275 | | | $ | 33,884 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | | | $ | 56,159 | |
3-4 internal grade | | — | | | — | | | — | | | — | | | — | | | — | | | | | — | |
5 internal grade | | 60,304 | | | — | | | — | | | — | | | — | | | — | | | | | 60,304 | |
Total Retail Loans | | $ | 82,579 | | | $ | 33,884 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | | | $ | 116,463 | |
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Office: | | | | | | | | | | | | | | | | |
Risk Rating: | | | | | | | | | | | | | | | | |
1-2 internal grade | | $ | — | | | $ | 50,351 | | | $ | 189,740 | | | $ | 66,110 | | | $ | 18,683 | | | $ | — | | | | | $ | 324,884 | |
3-4 internal grade | | — | | | — | | | 54,533 | | | 25,748 | | | — | | | — | | | | | 80,281 | |
Total Office Loans | | $ | — | | | $ | 50,351 | | | $ | 244,273 | | | $ | 91,858 | | | $ | 18,683 | | | $ | — | | | | | $ | 405,165 | |
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Industrial: | | | | | | | | | | | | | | | | |
Risk Rating: | | | | | | | | | | | | | | | | |
1-2 internal grade | | $ | 77,762 | | | $ | — | | | $ | 14,955 | | | $ | — | | | $ | — | | | $ | — | | | | | $ | 92,717 | |
3-4 internal grade | | — | | | — | | | — | | | — | | | — | | | — | | | | | — | |
Total Industrial Loans | | $ | 77,762 | | | $ | — | | | $ | 14,955 | | | $ | — | | | $ | — | | | $ | — | | | | | $ | 92,717 | |
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Hospitality: | | | | | | | | | | | | | | | | |
Risk Rating: | | | | | | | | | | | | | | | | |
1-2 internal grade | | $ | 137,055 | | | $ | 160,397 | | | $ | — | | | $ | 49,564 | | | $ | 22,116 | | | $ | — | | | | | $ | 369,132 | |
3-4 internal grade | | 32,305 | | | — | | | — | | | 28,882 | | | — | | | 78,867 | | | | | 140,054 | |
Total Hospitality Loans | | $ | 169,360 | | | $ | 160,397 | | | $ | — | | | $ | 78,446 | | | $ | 22,116 | | | $ | 78,867 | | | | | $ | 509,186 | |
| | | | | | | | | | | | | | | | |
Other: | | | | | | | | | | | | | | | | |
Risk Rating: | | | | | | | | | | | | | | | | |
1-2 internal grade | | $ | 30,418 | | | $ | 54,126 | | | $ | 36,202 | | | $ | — | | | $ | — | | | $ | — | | | | | $ | 120,746 | |
3-4 internal grade | | — | | | — | | | 7,671 | | | — | | | — | | | — | | | | | 7,671 | |
Total Other Loans | | $ | 30,418 | | | $ | 54,126 | | | $ | 43,873 | | | $ | — | | | $ | — | | | $ | — | | | | | $ | 128,417 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Total | | $ | 1,871,300 | | | $ | 2,650,827 | | | $ | 388,280 | | | $ | 170,304 | | | $ | 110,198 | | | $ | 78,867 | | | | | $ | 5,269,776 | |
FRANKLIN BSP REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2023
(Unaudited)
Past Due Status
The following table presents an aginga summary of the loans amortized cost basis as of March 31, 20232024 (dollars in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Multifamily | | Retail | | Office | | Industrial | | Mixed Use | | Hospitality | | Self-Storage | | Manufactured Housing | | Total |
Status: | | | | | | | | | | | | | | | | | | |
Current | | $ | 3,841,111 | | | $ | 48,485 | | | $ | 328,040 | | | $ | 77,813 | | | $ | 52,432 | | | $ | 544,072 | | | $ | 44,867 | | | $ | 31,181 | | | $ | 4,968,001 | |
1-29 days past due | | — | | | — | | | — | | | — | | | — | | | — | | | | | — | | | — | |
30-59 days past due | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
60-89 days past due | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
90-119 days past due | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
120+ days past due (1) | | — | | | 26,450 | | | — | | | — | | | — | | | 57,075 | | | — | | | — | | | 83,525 | |
Total | | $ | 3,841,111 | | | $ | 74,935 | | | $ | 328,040 | | | $ | 77,813 | | | $ | 52,432 | | | $ | 601,147 | | | $ | 44,867 | | | $ | 31,181 | | | $ | 5,051,526 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Current | | Less than 90 days past due | | 90 or more days past due(1) | | Total |
As of March 31, 2024 | | $ | 4,925,874 | | | $ | 141,806 | | | $ | 165,740 | | | $ | 5,233,420 | |
_________________________________________________________________________________(1) Comprised of two mortgage loans collateralized by multifamily properties, both of which are designated as non-performing and placed on non-accrual status. For the three months ended March 31, 2023, there was no2024, the Company has received and recognized $3.4 million in interest proceeds included in Interest income recognized on these loans.in the consolidated statements of operations.
Non-performing Status
The following table presents the amortized cost basis of theour non-performing loans on nonaccrual status as of March 31, 20232024 and December 31, 20222023 (dollars in thousands):
| | March 31, 2023 | | December 31, 2022 |
| | March 31, 2024 | | | | March 31, 2024 | | December 31, 2023 |
Non-performing loan amortized cost at beginning of year, January 1 | Non-performing loan amortized cost at beginning of year, January 1 | | $ | 117,379 | | | $ | 57,075 | |
Addition of non-performing loan amortized cost | Addition of non-performing loan amortized cost | | — | | | 60,304 | |
Less: Removal of non-performing loan amortized cost | Less: Removal of non-performing loan amortized cost | | 33,854 | | | — | |
Non-performing loan amortized cost at end of period | | $ | 83,525 | | | $ | 117,379 | |
Non-performing loan amortized cost end of period(1) | |
________________________(1) As of March 31, 2024, and December 31, 2023, the Company had four and two loans, with a total amortized cost basis of $83.5 millionrespectively, designated as non-performing. As of March 31, 2024, three of the four non-performing status. One loan is for a hotel property located in New York City which wasloans were placed on non-accrual status and one was placed on cost recovery status. For the loans designated as non-performing and placed on non-accrual status, the Company recognized $3.4 million of interest proceeds included in 2019 and had an amortized cost basisInterest income in the consolidated statements of $57.1 million as of March 31, 2023. No specific allowanceoperations for credit losses has been recorded on the loan. The Company did not recognize any interest income on the non-accrual loan during the three months ended March 31, 2023. In April 2023, the New York Hotel property was sold and as a result of the sale, the Company has recovered the full principal amount of its loan (equal to the carrying cost of the loan as of December 31, 2022) and approximately $20.0 million of additional proceeds after the payment of all related closing expenses.2024. As of DecemberMarch 31, 2022,2024, the hotel property in New York City, had a carrying value of $57.1 million,one loan designated as non-performing and noplaced on cost recovery was determined to have a $0.7 million specific allowance for credit loss was recorded forlosses. As of March 31, 2024, the loan.
The second loan relates to a commercial mortgage loan with a fully funded outstanding principal balance of $38.4 million and an amortized costs basis of $26.4 millionfour designated non-performing loans were all collateralized by a portfolio of retail properties (the "Walgreens Portfolio") in various locations throughout the United States. The loan has been assigned a risk rating of “5”multifamily properties.
Loan Credit Characteristics, Quality and concurrently, the Company elected to apply a practical expedient for collateral dependent assets in which a specific allowance for credit loss was determined. The loan was evaluated in accordance with ASC 310 - Receivables and was determined to be a TDR. During the three months ended March 31, 2023 the Company recorded an additional $0.8 million to the specific allowance for credit losses and charged off the remaining $15.1 million specific allowance which directly reduced the amortized cost basis of the loan. The Company designated the loan as non-performing and placed the loan on cost recovery status during the second quarter of 2022. Upon designation, the Company ceased the recognition of interest income. Any contractual amounts received are accounted for under the cost-recovery method, until the loan qualifies for return to accrual status. As of December 31, 2022, the Company had $2.6 million in cost recovery proceeds. During the three months ended March 31, 2023, the Company received $0.6 million additional cost recovery proceeds and $1.1 million was transferred to real estate owned in connection with the five properties foreclosed upon during the period. Cost recovery proceeds directly reduce the amortized cost of the loan. As of December 31, 2022, the retail portfolio had a carrying value of $46.0 million net of a specific allowance for credit losses of $14.2 million.
FRANKLIN BSP REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2023
(Unaudited)
Credit CharacteristicsVintage
As part of the Company's process for monitoring the credit quality of its commercial mortgage loans, excluding those held for sale, measured at fair value, it performs a quarterly loan portfolio assessment and assigns risk ratings to each of its loans. The loans are scored on a scale of 1 to 5 as follows:
| | | | | | | | |
Investment Rating | | Summary Description |
1 | | Very Low Risk - Investment exceeding fundamental performance expectations and/or capital gain expected. Trends and risk factors since time of investment are favorable. |
2 | | Low Risk - Performing consistent with expectations and a full return of principal and interest expected. Trends and risk factors are neutral to favorable. |
3 | | Average Risk - Performing investments requiring closer monitoring. Trends and risk factors show some deterioration. |
4 | | High Risk/Delinquent/Defaulted/Potential For Loss - Underperforming investment with the potential of some interest loss but still expecting a positive return on investment. Trends and risk factors are negative. |
5 | | Impaired/Defaulted/Loss Likely - Underperforming investment with expected loss of interest and some principal. |
FRANKLIN BSP REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2024
(Unaudited)
All commercial mortgage loans, excluding loans classified as commercial mortgage loans, held for sale, measured at fair value within the consolidated balance sheets, are assigned an initial risk rating of 2. As of March 31, 20232024 and December 31, 2022,2023, the weighted average risk rating of loans was 2.12.3 and 2.2,2.3, respectively.
The following table representstables present the allocationpar value and amortized cost of our commercial mortgage loans, held for investment as of March 31, 2024 and December 31, 2023, by the Company’s internal risk rating and year of origination (dollars in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
March 31, 2024 |
| | | | | | Amortized Cost by Year of Origination | | |
Risk Rating | | Number of Loans | | Total Par Value | | 2024 | | 2023 | | 2022 | | 2021 | | 2020 | | Prior | | Total Amortized Cost | | % of Portfolio |
1 | | — | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | — | % |
2 | | 111 | | 3,858,347 | | 435,557 | | | 659,601 | | | 1,072,104 | | | 1,499,359 | | | 73,004 | | | 109,128 | | | 3,848,753 | | | 73.5 | % |
3 | | 28 | | 1,121,569 | | — | | | 57,981 | | | 459,627 | | | 539,579 | | | 47,189 | | | 16,518 | | | 1,120,894 | | | 21.5 | % |
4 | | 6 | | 263,884 | | — | | | — | | | 141,806 | | | 44,913 | | | — | | | 77,054 | | | 263,773 | | | 5.0 | % |
5 | | — | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | % |
Total | | 145 | | $ | 5,243,800 | | | $ | 435,557 | | | $ | 717,582 | | | $ | 1,673,537 | | | $ | 2,083,851 | | | $ | 120,193 | | | $ | 202,700 | | | $ | 5,233,420 | | | 100.0 | % |
| | | | | | | | | | Allowance for credit losses | | (49,215) | | | |
| | | | | | | | | | | | Total carrying value, net | | $ | 5,184,205 | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
December 31, 2023 |
| | | | | | Amortized Cost by Year of Origination | | |
Risk Rating | | Number of Loans | | Total Par Value | | 2023 | | 2022 | | 2021 | | 2020 | | 2019 | | Prior | | Total Amortized Cost | | % of Portfolio |
1 | | — | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | — | % |
2 | | 111 | | 3,897,680 | | 694,228 | | | 1,256,509 | | | 1,724,734 | | | 105,477 | | | 73,743 | | | 35,734 | | | 3,890,424 | | 77.2 | % |
3 | | 27 | | 875,449 | | 2,379 | | | 273,097 | | | 468,244 | | | 74,729 | | | — | | | 56,362 | | | 874,811 | | 17.4 | % |
4 | | 6 | | 271,907 | | — | | | 141,740 | | | 87,126 | | | — | | | 42,840 | | | — | | | 271,707 | | 5.4 | % |
5 | | — | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | % |
Total | | 144 | | $ | 5,045,036 | | | $ | 696,607 | | | $ | 1,671,346 | | | $ | 2,280,104 | | | $ | 180,206 | | | $ | 116,583 | | | $ | 92,096 | | | $ | 5,036,942 | | | 100.0 | % |
| | | | | | | | | | Allowance for credit losses | | (47,175) | | | |
| | | | | | | | | | | | Total carrying value, net | | $ | 4,989,767 | | | |
Commercial Mortgage Loans, Held for Sale, Measured at Fair Value
As of March 31, 2024 the contractual principal balance outstanding of commercial mortgage loans, held for sale, measured at fair value was $30.0 million, comprised of one loan. As of March 31, 2024, none of the Company's commercial mortgage loans, held for investmentsale, measured at fair value were in default or greater than ninety days past due. As of December 31, 2023, the Company did not hold any commercial mortgage loans, held for sale.
The following tables represent the composition by loan collateral type and region of the Company's commercial mortgage loans, held for sale, measured at fair value as of March 31, 2024 (dollars in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
March 31, 2023 | | December 31, 2022 |
Risk Rating | | Number of Loans | | Par Value | | Risk Rating | | Number of Loans | | Par Value |
1 | | 1 | | | $ | 31,450 | | | 1 | | — | | | $ | — | |
2 | | 133 | | | 4,491,420 | | | 2 | | 141 | | | 4,783,568 | |
3 | | 20 | | | 425,425 | | | 3 | | 15 | | | 281,071 | |
4 | | 2 | | | 89,514 | | | 4 | | 4 | | | 160,695 | |
5 | | 1 | | | 38,426 | | | 5 | | 1 | | | 63,640 | |
| | 157 | | | $ | 5,076,235 | | | | | 161 | | | $ | 5,288,974 | |
| | | | | | | | | | | | | | |
Loan Collateral Type | | Par Value | | Percentage |
| | | | |
| | | | |
Office | | $ | 30,000 | | | 100.0 | % |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | | | | | | | | | | | |
Loan Region | | Par Value | | Percentage |
Southeast | | $ | 30,000 | | | 100.0 | % |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
FRANKLIN BSP REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 20232024
(Unaudited)
For the three months ended March 31, 2023 and year ended December 31, 2022, the activity in the Company's commercial mortgage loans, held for investment portfolio, net of allowance for credit losses, was as follows (dollars in thousands):
| | | | | | | | | | | |
| Three months ended March 31, 2023 | | Year Ended December 31, 2021 |
Amortized cost, Beginning of Period | $ | 5,269,776 | | | $ | 4,226,888 | |
Acquisitions and originations | 193,476 | | | 2,247,613 | |
Principal repayments | (381,033) | | | (1,109,769) | |
Discount accretion/premium amortization | 3,736 | | | 12,614 | |
Loans transferred from/(to) commercial real estate loans, held for sale | — | | | (9,296) | |
Net fees capitalized into carrying value of loans | (601) | | | (13,775) | |
Transfer to real estate owned | (33,206) | | | (80,460) | |
Cost recovery | (648) | | | (4,039) | |
Amortized cost, End of Period | $ | 5,051,500 | | | $ | 5,269,776 | |
Allowance for credit losses, Beginning of Period | $ | (40,848) | | | $ | (15,827) | |
General (provision)/benefit for credit losses | (2,127) | | | (10,797) | |
Specific (provision)/benefit for credit losses | (835) | | | (25,281) | |
Write offs from specific allowance for credit losses | 15,059 | | | 11,057 | |
Allowance for credit losses, End of Period | $ | (28,751) | | | $ | (40,848) | |
Balance, End of Period | $ | 5,022,749 | | | $ | 5,228,928 | |
In February 2020, the Company originated a first mortgage loan secured by an office property in Portland, OR. In February 2023, the fully committed $37.3 million senior loan was restructured as a result of financial difficulty to a $25.0 million committed senior loan. Additionally, the Company committed a $10.1 million mezzanine note. In accordance with the adoption of ASU 2022-02, we have classified the restructuring as a continuation of an existing loan on the senior loan and new loan for the mezzanine note. As of March 31, 2023, the amortized cost basis of the loan was $25.0 million on the senior loan and $7.4 million on the mezzanine note. As of December 31, 2022 and prior to modification, the senior loan had an amortized costs of $36.4 million. The Company internally rated the senior and mezzanine loans as risk rating of 4 as of March 31, 2023, and the senior loan as a 4 as of December 31, 2022.
Note 4 - Real Estate Securities
Real Estate Securities Classified As Trading
The following is a summary of the Company's RMBS classified by collateral type and interest rate characteristics as of March 31, 2023 and December 31, 2022 (dollars in thousands):
| | | | | | | | | | | |
| Carrying Amount | | Average Yield (1) |
March 31, 2023 | | | |
Agency Securities: | | | |
Fannie Mae/Freddie Mac ARMs | $ | 133,705 | | | 2.71 | % |
| | | |
| | | |
| | | |
December 31, 2022 | | | |
Agency Securities: | | | |
Fannie Mae/Freddie Mac ARMs | $ | 235,728 | | | 2.42 | % |
| | | |
| | | |
(1) Average yield is presented for the period then ended and is based on the cash component of interest income expressed as a percentage on average cost basis (the “cash yield”).
The maturity of ARM Agency Securities is directly affected by prepayments of principal on the underlying mortgage loans. Consequently, actual maturities may be significantly shorter than the portfolio’s weighted average contractual maturity of 209 months.
FRANKLIN BSP REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2023
(Unaudited)
The Company's ARM Agency Securities are backed by residential mortgage loans that have coupon interest rates that adjust at least annually to more current interest rates or begin doing so after an initial fixed-rate period. After the initial fixed-rate period, if applicable, mortgage loans underlying ARM securities typically either (i) adjust annually based on specified margins over the one-year LIBOR or the one-year Constant Maturity U.S. Treasury Note Rate (“CMT”), (ii) adjust semiannually based on specified margins over six-month LIBOR or the six-month Secured Overnight Financing Rate (“SOFR”), or (iii) adjust monthly based on specified margins over indices such as one-month LIBOR, the Eleventh District Federal Reserve Bank Cost of Funds Index, or over a rolling twelve month average of the one-year CMT index, usually subject to periodic and lifetime limits, or caps, on the amount of such adjustments during any single interest rate adjustment period and over the contractual term of the underlying loans.
For the three months ended March 31, 2023 and 2022, the Company sold trading securities totaling $95.5 million and $2.2 billion, respectively. For the three months ended March 31, 2023 and 2022, the Company recognized trading gains on ARM Agency Securities of $3.0 million and trading losses of $88.4 million, respectively, due to principal paydowns, changes in market values, and sales of these securities, which were included in Trading (gain)/loss in the Company's consolidated statements of operations.
Real Estate Securities Classified As Available For Sale
The following is a summary of the Company's real estate securities, available for sale, measured at fair value, as of March 31, 20232024 and December 31, 20222023 (dollars in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
March 31, 2023 |
Type | | Interest Rate | | Maturity | | Par Value | | Fair Value |
CRE CLO bond 1 | | 7.5% | | 8/19/2035 | | $ | 40,000 | | | $ | 39,405 | |
CRE CLO bond 2 | | 7.9% | | 8/19/2035 | | 25,000 | | | 24,756 | |
CRE CLO bond 3 | | 7.6% | | 10/19/2039 | | 28,340 | | | 28,123 | |
CRE CLO bond 4 | | 7.5% | | 2/19/2038 | | 5,885 | | | 5,825 | |
CRE CLO bond 5 | | 8.1% | | 2/19/2038 | | 14,382 | | | 14,221 | |
| | | | | | $ | 113,607 | | | $ | 112,330 | |
| | | | | | | | |
December 31, 2022 |
Type | | Interest Rate | | Maturity | | Par Value | | Fair Value |
CRE CLO bond 1 | | 7.1% | | 8/19/2035 | | $ | 40,000 | | | $ | 39,795 | |
CRE CLO bond 2 | | 7.6% | | 8/19/2035 | | 25,000 | | | 25,010 | |
CRE CLO bond 3 | | 8.4% | | 8/19/2035 | | 10,000 | | | 10,056 | |
CRE CLO bond 4 | | 7.4% | | 10/25/2039 | | 36,700 | | | 36,990 | |
CRE CLO bond 5 | | 8.0% | | 10/25/2039 | | 35,000 | | | 35,298 | |
CRE CLO bond 6 | | 8.6% | | 10/25/2039 | | 14,300 | | | 14,221 | |
CRE CLO bond 7 | | 7.3% | | 10/19/2039 | | 60,000 | | | 59,655 | |
| | | | | | $ | 221,000 | | | $ | 221,025 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | CRE CLO Bonds |
| | Number of Bonds | | Benchmark Interest Rate | | Weighted Average Interest Rate | | Weighted Average Contractual Maturity (years) | | Par Value | | Fair Value |
March 31, 2024 | | 7 | | 1 Month SOFR | | 7.93% | | 12.0 | | $ | 217,560 | | | $ | 217,855 | |
| | | | | | | | | | | | |
December 31, 2023 | | 7 | | 1 Month SOFR | | 8.12% | | 12.2 | | $ | 243,340 | | | $ | 242,569 | |
The Company classified its CRE CLO bonds as available for sale and reportedreports them at fair value in the consolidated balance sheets with changes in fair value recorded in accumulatedAccumulated other comprehensive income/(loss). The weighted average contractual maturity for CLO investments included withinin the CRE CLO bonds portfolio as of March 31, 2023 and December 31, 2022 was 13.9 years and 15.4 years, respectively.
FRANKLIN BSP REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2023
(Unaudited)
The following table shows the amortized cost, allowance for expected credit losses, unrealized gain/(loss) and fair value of the Company's CRE CLO bonds by investment type as of March 31, 20232024 and December 31, 20222023 (dollars in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Amortized Cost | | Credit Loss Allowance | | Unrealized Gain | | Unrealized (Loss) | | Fair Value |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
March 31, 2023 | | | | | | | | | | |
CLOs | | $ | 113,588 | | | $ | — | | | $ | — | | | $ | (1,258) | | | $ | 112,330 | |
| | | | | | | | | | |
| | | | | | | | | | |
December 31, 2022 | | | | | | | | | | |
CLOs | | $ | 220,635 | | | $ | — | | | $ | 833 | | | $ | (443) | | | $ | 221,025 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Amortized Cost | | Unrealized Gain | | Unrealized (Loss) | | Fair Value |
March 31, 2024 | | $ | 217,324 | | | $ | 643 | | | $ | (112) | | | $ | 217,855 | |
| | | | | | | | |
December 31, 2023 | | $ | 243,272 | | | $ | 74 | | | $ | (777) | | | $ | 242,569 | |
As of March 31, 2023, the Company held five CRE CLO bonds with an amortized cost basis of $113.6 million and an unrealized loss of $1.3 million. As of December 31, 2022,2024, the Company held seven CRE CLO bonds with an amortized cost basis of $220.6$217.3 million and a net unrealized gain of $0.39$0.5 million, three of which were held in ana gross unrealized loss position of $0.4$0.1 million. As of December 31, 2023, the Company held seven CRE CLO bonds with an amortized cost basis of $243.3 million and a net unrealized loss of $0.7 million, five of which were held in a gross unrealized loss position of $0.8 million. As of March 31, 20232024 and December 31, 2022,2023, zero positions had an unrealized loss for a period greater than twelve months. As of March 31, 20232024 and December 31, 2022,2023, the fair value of the Company's CRE CLO bonds that were in an unrealized loss position for less than twelve months, and for which an allowance for credit loss has not been recorded was $112.3$72.6 million and $113.7$184.2 million, respectively.
FRANKLIN BSP REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 20232024
(Unaudited)
Note 5 - Real Estate Owned
Real Estate Owned, Held for Investment
The following table summarizes the Company's real estate owned, held for investment assets as of March 31, 2024 and December 31, 2023 (dollars in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
As of March 31, 2023 |
Acquisition Date (1) | | Property Type | | Primary Location(s) | | Land | | Building and Improvements | | Furniture, Fixtures and Equipment | | Accumulated Depreciation | | Real Estate Owned, net |
September 2021 | | Industrial | | Jeffersonville, GA | | $ | 3,436 | | | $ | 84,259 | | | $ | 2,928 | | | $ | (3,453) | | | $ | 87,170 | |
Various (2) | | Retail | | Various | | $ | 13,319 | | | $ | 48,509 | | | $ | — | | | $ | (374) | | | $ | 61,454 | |
| | | | | | $ | 16,755 | | | $ | 132,768 | | | $ | 2,928 | | | $ | (3,827) | | | $ | 148,624 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | As of March 31, 2024 |
Acquisition Date | | Property Type | | Primary Location(s) | | Land | | Building and Improvements | | Furniture, Fixtures and Equipment | | Accumulated Depreciation | | Real Estate Owned, net |
September 2021(1) | | Industrial | | Jeffersonville, GA | | $ | 3,436 | | | $ | 84,259 | | | $ | 2,928 | | | $ | (5,755) | | | $ | 84,868 | |
August 2023 | | Office | | Portland, OR | | 16,479 | | | 2,065 | | | — | | | (26) | | | 18,518 | |
October 2023 | | Multifamily | | Lubbock, TX | | 1,618 | | | 10,076 | | | 185 | | | (96) | | | 11,783 | |
| | | | | | $ | 21,533 | | | $ | 96,400 | | | $ | 3,113 | | | $ | (5,877) | | | $ | 115,169 | |
________________________See notesnote below.
The following table summarizes the Company's real estate owned asset as of December 31, 2022 (dollars in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
As of December 31, 2022 |
Acquisition Date (1) | | Property Type | | Primary Location(s) | | Land | | Building and Improvements | | Furniture, Fixtures and Equipment | | Accumulated Depreciation | | Real Estate Owned, net |
September 2021 | | Industrial | | Jeffersonville, GA | | $ | 3,436 | | | $ | 84,259 | | | $ | 2,928 | | | $ | (2,877) | | | $ | 87,746 | |
Various (2) | | Retail | | Various | | $ | 9,105 | | | $ | 31,036 | | | $ | — | | | $ | (115) | | | $ | 40,026 | |
| | | | | | $ | 12,541 | | | $ | 115,295 | | | $ | 2,928 | | | $ | (2,992) | | | $ | 127,772 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | As of December 31, 2023 | |
Acquisition Date | | Property Type | | Primary Location(s) | | Land | | Building and Improvements | | Furniture, Fixtures and Equipment | | Accumulated Depreciation | | Real Estate Owned, net | |
September 2021(1) | | Industrial | | Jeffersonville, GA | | $ | 3,436 | | | $ | 84,259 | | | $ | 2,928 | | | $ | (5,179) | | | $ | 85,444 | | |
August 2023 | | Office | | Portland, OR | | 16,479 | | | 2,065 | | | — | | | (13) | | | 18,531 | | |
October 2023 | | Multifamily | | Lubbock, TX | | 1,618 | | | 10,076 | | | 185 | | | (24) | | | 11,855 | | |
| | | | | | $ | 21,533 | | | $ | 96,400 | | | $ | 3,113 | | | $ | (5,216) | | | $ | 115,830 | | |
________________________(1)Refer to Note 2 for In the useful lifethird quarter of the above assets.
(2) As discussed below, 15 and ten retail properties associated with the loan secured by the Walgreen's Portfolio were foreclosed upon as of March 31, 2023 and December 31, 2022, respectively. The properties are located throughout the United States of America.
Depreciation expense for the three months ended March 31, 2023 and March 31, 2022 totaled $0.8 million and $0.6 million, respectively.
In August 2021, the Company and an investment fund managed byaffiliate of the AdvisorCompany entered into a joint venture agreement and formed a joint venture entity, Jeffersonville Member, LLC (the "Jeffersonville JV"“Jeffersonville JV”) to acquire a $139.5 million triple net lease property in Jeffersonville, GA. The Company has a 79% interest inRefer to Note 11 - Related Party Transactions and Arrangements for details.
Depreciation expense for the Jeffersonville JV, while the affiliated fund has a 21% interest. The Company invested a total of $109.8 million, made up of $88.7 million in debt and $21.1 million in equity, representing 79% of the ownership interest in the Jeffersonville JV. The affiliated fund made up the remaining $29.8 million composed of a $24.0 million mortgage note payable and $5.7 million in non-controlling interest. The Company has control of Jeffersonville JV with 79% ownership and, therefore, consolidates Jeffersonville JV on its consolidated balance sheet. The Company's $88.7 million mortgage note payable to Jeffersonville JV is eliminated in consolidation (see Note 7 - Debt).
FRANKLIN BSP REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
three months ended March 31, 2024 and 2023 totaled $0.7 million and $0.8 million, respectively.
(Unaudited)
Real Estate Owned, Held for SaleAs disclosedThe following table summarizes the Company's Real estate owned, held for sale assets and liabilities as of March 31, 2024 and December 31, 2023 (dollars in Note 3 - Commercial Mortgage Loans in Aprilthousands):
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | As of March 31, 2024 | | | | |
Property Type | | Primary Location(s) | | Assets, Net | | Liabilities, Net | | | | |
Retail | | Various | | $ | 103,657 | | | $ | 12,297 | | | | | |
| | | | | | | | | | |
| | | | As of December 31, 2023 | | | | |
Property Type | | Primary Location(s) | | Assets, Net | | Liabilities, Net | | | | |
Retail | | Various | | $ | 103,657 | | | $ | 12,297 | | | | | |
In November 2022, the Company fully fundedand an affiliate of the Company entered into a $113.2 million first mortgage loan, collateralized byjoint venture agreement and formed a joint venture entity, BSPRT Walgreens Portfolio, LLC (the "Walgreens JV") to assume the retail Walgreens Portfolio consisting of 24 retail properties with various locations throughout the United States. As of December 31, 2022, through foreclosures, the Company acquired ten of the 24 properties,Refer to Note 11 - Related Party Transactions and subsequently acquired an additional five of the properties duringArrangements. During the three months ended March 31, 2023. As a result,September 30, 2023, the Company recorded at fair value $61.8 million and $40.1 million, as of March 31, 2023 and December 31, 2022, respectively, of real estate owned, held for investment. These properties are held through a joint venture entity, BSPRT Walgreens Portfolio, LLC (the "Walgreens JV"), formed by the Company and an affiliate of the Company. The Company has 75.618% ownership interest in the Walgreens JV, while the affiliated fund has 24.242% interest. The Company has control of 15 of the 24 Walgreens properties acquired through foreclosure as the majority owner in the joint venture and, therefore, consolidates these properties on its consolidated balance sheet. As of March 31, 2023 and December 31, 2022, the Company recorded $13.9 million and $10.5 million, respectively, in non-controlling interest related to the Walgreens properties on its consolidated balance sheets. Subsequent to quarter ended March 31, 2023, the Walgreens JV obtained legal ownership of nine additional properties.
We are engaged in ongoing litigation relating to the loan secured by the Walgreens Portfolio, as more fully described in "Part II, Item 1. Legal Proceedings".
Real Estate Owned, Held for Sale
During the fourth quarter of 2022, the Company entered into agreements with two borrowers to voluntarily transfer their assets in exchange for the removal of the borrowers' obligation to repay all of the associated commercial mortgage loans receivable with an amortized cost of $36.9 million, in aggregate, provided by the Company. One of the voluntary transfers collateralized by a multifamily portfolio was the result of the borrower experiencing financial difficulty and the recorded investment in the receivable was more than the fair value, less estimated costs to sell, for the collateral collected. Therefore, the voluntary transfer qualified as a TDR. The Company accounted for both voluntary transfers andclassified the real estate owned acquired as asset acquisitions. The voluntary transfers resulted in a total realized loss of $0.4 million, in aggregate,assets and was recognized in Realized (gain)/loss on sale of commercial mortgage loan, held for sale in the consolidated statements of operations for the year ended December 31, 2022. As of March 31, 2023 and December 31, 2022, the Company has designated the properties included within the real estate owned business segmentliabilities as held for sale in accordance with ASC 360. The360 - Property, Plant, and Equipment. Refer to Note 12 - Fair Value of Financial Instruments for discussion on the properties are currently being marketed and sales are probable to occur within one year. For the three months ended March 31, 2023, the Company recognized an unrealized loss of $1.3 million.fair value measurement. As of March 31, 2023 and December 31, 20222024, the carrying value onCompany's real estate owned held for sale assets amounted to $35.2 million and $36.5 million, respectively, in aggregate.
Note 6 - Leases
Intangible Lease Asset
The following table summarizes the Company's intangible lease asset recognized in the consolidated balance sheets as of March 31, 2023 and December 31, 2022 (dollars in thousands):
| | | | | | | | | | | | | | |
Identified intangible assets: | | March 31, 2023 | | December 31, 2022 |
Gross amount | | $ | 63,704 | | | $ | 58,542 | |
Accumulated amortization | | (4,682) | | | (3,711) | |
Total, net | | $ | 59,022 | | | $ | 54,831 | |
| | | | | | | | | | | | | | |
Identified intangible liabilities: | | | | |
Gross amount | | $ | 9,357 | | | $ | 6,507 | |
Accumulated amortization | | $ | (242) | | | (79) | |
Total, net | | $ | 9,115 | | | $ | 6,428 | |
FRANKLIN BSP REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2023
(Unaudited)
Rental Income
On September 17, 2021, the Company purchased an industrial facility that is subject to an existing triple net lease. The minimum rental amount due under the lease is subject to annual increases of 2.0%. The initial termconsisted of the lease expires in 2038 and contains renewal options for four consecutive five-year terms. The remaining lease term is 15.6 years. Rental income for this operating lease for the three months ended March 31, 2023 and March 31, 2022, totaled $2.3 million in both years. Rental income is included in Revenue from real estate owned in the consolidated statements of operations.
As of March 31, 2023 and December 31, 2022, respectively, 15 and ten23 retail properties in the Walgreens Portfolio were foreclosed upon that were each subject to triple net leases. The initial terms of the leases expire in March 2034 and contain renewal options for 11 consecutive five-year terms. The remaining lease term is 11 years. Rental income for these operating leases for the three months ended March 31, 2023 totaled $1.0 million. This retail portfolio was not owned by the Company as of March 31, 2022.
The following table summarizes the Company's schedule of future minimum rents on its real estate owned, held for investment properties to be contractually received (dollars in thousands):
| | | | | | | | |
Future Minimum Rents | | March 31, 2023 |
2023 (April - December) | | $ | 8,938 | |
2024 | | 12,070 | |
2025 | | 12,234 | |
2026 | | 12,401 | |
2027 and beyond | | 142,984 | |
| | |
Total future minimum rent | | $ | 188,627 | |
AmortizationPortfolio.Expense
Intangible lease assets are amortized using the straight-line method over the shorter of the contractual life of the lease and 20 years. The weighted average life of the intangible asset as of March 31, 2023 is approximately 14.5 years. Amortization expense for the three months ended March 31, 2023 and March 31, 2022 totaled $1.0 million and $0.7 million, respectively.
Amortization of acquired below-market leases, net of acquired above-market leases, resulted in an increase to rental revenues of $0.2 million for the three months ended March 31, 2023. There was no amortization of acquired below-market leases, net of acquired above-market leases, for the three months ended March 31, 2022. The following table summarizes the Company's expected acquired below (above) market leases, net amortization over the next five years, assuming no further acquisitions or dispositions (dollars in thousands):
| | | | | | | | |
Amortization Expense - Acquired below (above) market leases, net | | March 31, 2023 |
2023 (April - December) | | $ | (626) | |
2024 | | (835) | |
2025 | | (835) | |
2026 | | (835) | |
2027 | | (835) | |
The following table summarizes the Company's expected other identified intangible assets, net amortization over the next five years, assuming no further acquisitions or dispositions (dollars in thousands):
| | | | | | | | |
Amortization Expense - Other identified intangible assets | | March 31, 2023 |
2023 (April - December) | | $ | 3,104 | |
2024 | | 4,176 | |
2025 | | 4,176 | |
2026 | | 4,176 | |
2027 | | 4,176 | |
FRANKLIN BSP REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 20232024
(Unaudited)
Note 6 - Leases
Intangible Lease Assets, Held for Investment
The following table summarizes the Company's identified intangible lease assets (primarily in-place leases) recognized in the consolidated balance sheets as of March 31, 2024 and December 31, 2023 (dollars in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Identified intangible assets: | | March 31, 2024 | | December 31, 2023 | | | | |
Gross amount | | $ | 49,285 | | | $ | 49,285 | | | | | |
Less: Accumulated amortization | | 7,248 | | | 6,492 | | | | | |
Total, net | | $ | 42,037 | | | $ | 42,793 | | | | | |
Rental Income
Rental income for the three months ended March 31, 2024 and 2023 totaled $4.7 million and $3.1 million, respectively. Rental income is included in Revenue from real estate ownedin the consolidated statements of operations.
The following table summarizes the Company's schedule of future minimum rents on its real estate owned, held for investment properties, with a remaining lease term of approximately 14.6 years, to be received under the leases (dollars in thousands): | | | | | | | | |
Future Minimum Rents | | March 31, 2024 |
2024 (April - December) | | $ | 6,637 | |
2025 | | 8,425 | |
2026 | | 8,539 | |
2027 | | 8,710 | |
2028 | | 8,884 | |
2029 and beyond | | 97,388 | |
Total future minimum rent | | $ | 138,583 | |
AmortizationExpense
Intangible lease assets are amortized using the straight-line method over the remaining term of the lease. The weighted average life of the intangible assets as of March 31, 2024 is approximately 14.6 years. Amortization expense for the three months ended March 31, 2024 and 2023 totaled $0.8 million and $1.0 million, respectively.
The following table summarizes the Company's expected other identified intangible assets, net amortization over the next five years, exclusive of intangible assets that are held for sale, assuming no further acquisitions or dispositions (dollars in thousands):
| | | | | | | | |
Amortization Expense - Other identified intangible assets | | March 31, 2024 |
2024 (April - December) | | $ | 2,203 | |
2025 | | 2,880 | |
2026 | | 2,880 | |
2027 | | 2,880 | |
2028 | | 2,880 | |
FRANKLIN BSP REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2024
(Unaudited)
Note 7 - Debt
Below is a summary of the Company's Repurchase Agreementsfacilities and revolving credit facilities - Commercial Mortgage Loans
The Company has entered into repurchase facilities with JPMorgan Chase Bank, National Association (the "JPM commercial mortgage loans ("Repo Facility"and Revolving Credit Facilities"), Barclays Bank PLC (the "Barclays Revolver Facility"Mortgage note payable, Other financing and the "Barclays Repo Facility"), Wells Fargo Bank, National Association (the "WF Repo Facility"),Unsecured debt as of March 31, 2024 and Atlas SP Partners (the "Atlas Repo Facility"December 31, 2023 (dollars in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | March 31, 2024 |
| | Capacity | | Amount Outstanding | | Interest Expense(1) | | Ending Weighted Average Interest Rate | | Term Maturity |
Repo and revolving credit facilities - commercial mortgage loans(2): | | | | | | | | | | |
JPM Repo Facility(3) | | $ | 500,000 | | | $ | 113,409 | | | $ | 1,702 | | | 7.84 | % | | 07/2026 |
| | | | | | | | | | |
Atlas Repo Facility(4) | | 350,000 | | | 14,700 | | | 610 | | | 7.83 | % | | 01/2026 |
WF Repo Facility(5) | | 400,000 | | | 79,037 | | | 1,613 | | | 7.80 | % | | 10/2025 |
Barclays Revolver Facility(6) | | 250,000 | | | — | | | 117 | | | N/A | | 09/2024 |
Barclays Repo Facility(5) | | 500,000 | | | 205,410 | | | 2,060 | | | 7.14 | % | | 03/2025 |
Churchill Repo Facility | | 225,000 | | | — | | | 34 | | | N/A | | N/A |
Total/Weighted average | | $ | 2,225,000 | | | $ | 412,556 | | | $ | 6,136 | | | 7.48 | % | | |
Mortgage note payable: | | | | | | | | | | |
Debt related to our REO(7) | | N/A | | $ | 23,998 | | | $ | 512 | | | 8.44 | % | | 10/2024 |
Other financings: | | | | | | | | | | |
Other financings(8) | | N/A | | $ | 12,865 | | | $ | 481 | | | 6.00 | % | | Various(8) |
Unsecured debt(9): | | | | | | | | | | |
Junior Note I | | N/A | | $ | 17,056 | | | $ | 412 | | | 9.15 | % | | 10/2035 |
Junior Note II | | N/A | | 39,560 | | | 913 | | | 8.95 | % | | 12/2035 |
Junior Note III | | N/A | | 24,704 | | | 571 | | | 8.95 | % | | 09/2036 |
Total/Weighted average | | N/A | | $ | 81,320 | | | $ | 1,896 | | | 8.99 | % | | |
________________________See notes below.
FRANKLIN BSP REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2024
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2023 |
| | Capacity | | Amount Outstanding | | Interest Expense(1) | | Ending Weighted Average Interest Rate | | Term Maturity |
Repo and revolving credit facilities - commercial mortgage loans(2): | | | | | | | | | | |
JPM Repo Facility(3) | | $ | 500,000 | | | $ | 108,574 | | | $ | 22,401 | | | 7.90 | % | | 07/2026 |
| | | | | | | | | | |
Atlas Repo Facility(4) | | 600,000 | | | 52,864 | | | 6,603 | | | 7.68 | % | | 03/2024 |
WF Repo Facility(5) | | 400,000 | | | 71,730 | | | 9,580 | | | 7.85 | % | | 10/2025 |
Barclays Revolver Facility(6) | | 250,000 | | | — | | | 940 | | | N/A | | 09/2024 |
Barclays Repo Facility(5) | | 500,000 | | | 66,539 | | | 11,616 | | | 7.22 | % | | 03/2025 |
Churchill Repo Facility | | 225,000 | | | — | | | 30 | | | N/A | | N/A |
Total/Weighted average | | $ | 2,475,000 | | | $ | 299,707 | | | $ | 51,170 | | | 7.70 | % | | |
Mortgage note payable: | | | | | | | | | | |
Debt related to our REO(7) | | N/A | | $ | 23,998 | | | $ | 1,982 | | | 8.48 | % | | 10/2024 |
Other financings: | | | | | | | | | | |
Other financings(8) | | N/A | | $ | 36,534 | | | $ | 5,330 | | | 7.36 | % | | Various(8) |
Unsecured debt(9): | | | | | | | | | | |
Junior Note I | | N/A | | $ | 17,047 | | | $ | 1,940 | | | 9.15 | % | | 10/2035 |
Junior Note II | | N/A | | 39,550 | | | 3,519 | | | 8.95 | % | | 12/2035 |
Junior Note III | | N/A | | 24,698 | | | 2,199 | | | 8.95 | % | | 09/2036 |
Total/Weighted average | | N/A | | $ | 81,295 | | | $ | 7,658 | | | 8.99 | % | | |
________________________(1) Represents year to date expense and together with JPM Repo Facility, WF Repo Facility, Barclays Revolver Facility, and Barclays Repo Facility, collectively, the "Repo Facilities").includes amortization of deferred financing costs.
(2) The Repo Facilities are financing sources through which the Company may pledge one or more mortgage loans to the financing entity in exchange for funds typically at an advance rate of between 65%60% to 75% of the principal amount of the mortgage loan being pledged.
The details of the Company's Repo Facilities as of March 31, 2023 and December 31, 2022 These loans are as follows (dollars in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
As of March 31, 2023 |
Repurchase Facility | | Committed Financing | | Amount Outstanding | | Interest Expense (1) | | Ending Weighted Average Interest Rate | | Term Maturity |
JPM Repo Facility (2) | | $ | 500,000 | | | $ | 261,741 | | | $ | 5,608 | | | 7.95 | % | | 10/6/2024 |
| | | | | | | | | | |
Atlas Repo Facility (3) | | 600,000 | | | 71,896 | | | 2,115 | | | 7.42 | % | | 3/15/2024 |
WF Repo Facility (4) | | 500,000 | | | 100,846 | | | 2,239 | | | 7.68 | % | | 11/21/2023 |
Barclays Revolver Facility (5) | | 250,000 | | | — | | | 215 | | | N/A | | 9/20/2023 |
Barclays Repo Facility (6) | | 500,000 | | | 169,938 | | | 3,528 | | | 7.23 | % | | 3/14/2025 |
Total | | $ | 2,350,000 | | | $ | 604,421 | | | $ | 13,705 | | | | | |
________________________________________________________(1) For the three months ended March 31, 2023. Includes amortization of deferred financing costs.
(2) With one-year extension option availableall floating rate at the Company's discretion. On July 7, 2022,Secured Overnight Financing Rate ("SOFR") plus an applicable spread. Additionally, the committed financing was increased from $400 million to $500 million. Additionally, on December 12, 2022, the Company extended the maturity date to October 6, 2024.
(3) On July 12, 2022, the committed financing was increased from $300 million to $600 million. Additionally, on March 17, 2023, the maturity date was extended to March 15, 2024. During the first quarter of 2023, this repurchase facility was transferred fromRepo and Revolving Credit Suisse to the new company, Atlas SP Partners, which has acquired these assets.
(4) On May 12, 2022, the committed financing amount was increased from $450 million to $500 million. There are three more one-year extension options available at the Company's discretion.
(5)The Company may increase the total commitment amount by an amount between $100 million and $150 million for three month intervals, on an unlimited basis prior to maturity. Subsequent to quarter end, on April 24, 2023, the Company extended the maturity date to September 20, 2024.
(6) There are two one-year extension options available at the Company's discretion.
FRANKLIN BSP REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2023
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
As of December 31, 2022 | | | | | | | | | |
Repurchase Facility | Committed Financing | | Amount Outstanding | | Interest Expense(1) | | Ending Weighted Average Interest Rate | | Term Maturity |
JPM Repo Facility | $ | 500,000 | | | $ | 275,423 | | | $ | 11,773 | | | 7.42 | % | | 10/6/2024 |
| | | | | | | | | |
Credit Suisse Repo Facility | 600,000 | | | 168,046 | | | 8,676 | | | 7.12 | % | | 10/31/2023 |
WF Repo Facility | 500,000 | | | 79,807 | | | 7,492 | | | 7.11 | % | | 11/21/2023 |
Barclays Revolver Facility | 250,000 | | | — | | | 1,267 | | | N/A | | 9/20/2023 |
Barclays Repo Facility | 500,000 | | | 157,583 | | | 8,997 | | | 6.75 | % | | 3/14/2025 |
Total | $ | 2,350,000 | | | $ | 680,859 | | | $ | 38,205 | | | | | |
(1) For the year ended December 31, 2022. Includes amortization of deferred financing costs.
The Repo Facilities generally provide that in the event of a decrease in the value of the Company's collateral, the lenders can demand additional collateral. As of March 31, 20232024 and December 31, 2022,2023, the Company is in compliance with all debt covenants.
Other financing and loan participation - Commercial Mortgage Loans(3) There is a one-year extension option.
(4)On March 23, 2020,January 4, 2024, the Company transferred $15.2extended the maturity date to January 5, 2026 with a one-year extension option. Additionally, the committed financing was decreased from $600 million to $350 million.
(5) There are two one-year extension options.
(6) The Company may increase the total commitment by an amount between $100 million and $150 million for three month intervals, on an unlimited basis prior to maturity.
(7) Relates to a mortgage note payable in Jeffersonville JV, a consolidated joint venture. The loan has a principal amount of $112.7 million of its interestwhich $88.7 million of the loan is owned by the Company and was eliminated in a termour consolidated financial statements (see Note 5 - Real Estate Owned).
(8) Comprised of two note-on-note financings via participation agreements. From inception of the loan, to a regional bank via a participation agreement. Since inception, the Company's outstanding loan increasedloans could increase as a result of future fundings, leading to an increase in amount outstanding via the participation agreement. The Company incurred $1.0 million and $0.2 million of interest expense on the regional bank term loan as of March 31, 2023 and 2022, respectively. As of March 31, 2023 and December 31, 2022 the outstanding participation balance was $58.7 million and $59.2 million, respectively. The loan accrued interest at an annual rate of one-month LIBOR +2.20% and matures on June 9, 2023.
On February 10, 2022, the Company transferred $38.0 million of its interest in a term loan to a regional bank via a participation agreement. Since inception, the Company's outstanding loan could increase as a result of future fundings, which could lead to an increase in amount outstanding via the participation agreement. The Company incurred $0.6 million and $5,000 of interest expense on the regional bank term loan for the three months ended March 31, 2023 and 2022, respectively. As of March 31, 2023 and December 31, 2022, the outstanding participation balance was $20.4 millionand$17.1 million, respectively. The loan accrued interest at an annual rate of one-month SOFR + 4.01% and matures on May 1, 2025.
Mortgage Note Payable
On September 17, 2021, the Company, in connection with the consolidated joint venture (as discussed in Note 5 - Real Estate Owned), originated a $112.7 million mortgage note payable, of which $88.7 million is eliminated in our consolidated financial statements (see Note 5 - Real Estate Owned). As of March 31, 2023 and December 31, 2022, the remaining outstanding mortgage note payable of $24.0 million is included in the consolidated balance sheet. As of March 31, 2023, the loan accrued interest at an annual rate of LIBOR + 3.0%, which is eliminated in our consolidated financial statements, and matures on October 9, 2024.
FRANKLIN BSP REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2023
(Unaudited)
Unsecured Debt
As of March 31, 2023, the Company had outstanding 30-year junior subordinated notes issued in 2005 and 2006 and maturing in 2035 and 2036, respectively, with a total face amount of $82.5 million. Note balances net of deferred issuance costs, and related weighted average interest rates ascontractual maturity date of the indicated dates (calculated including issuance cost amortization and adjusted for the effects of related derivatives held as cash flow hedges prior to termination) were as follows (dollars in thousands):these loans is July 2028.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | As of March 31, 2023 | | As of December 31, 2022 |
| | Borrowings Outstanding | | Weighted Average Rate | | Borrowings Outstanding | | Weighted Average Rate |
Junior subordinated notes maturing in: | | | | | | | | |
October 2035 ($17,500 face amount) | | $ | 17,018 | | | 8.88 | % | | $ | 34,508 | | | 8.25 | % |
December 2035 ($40,000 face amount) | | 39,522 | | | 8.48 | % | | 39,513 | | | 8.39 | % |
September 2036 ($25,000 face amount) | | 24,680 | | | 8.48 | % | | 24,674 | | | 8.39 | % |
| | $ | 81,220 | | | 8.56 | % | | $ | 98,695 | | | 8.34 | % |
(9)The notes are currently redeemable, in whole or in part, without penalty, at the Company’s option. During the three months ended March 31, 2023 the Company recognized a realized gain on extinguishment for debt in the amount of $4.4 million as a result of the repurchase of $17.5 million par value unsecured debt at a price equal to 75% par. Interest paid on unsecured debt including related derivative cash flows, totaled $2.3$2.0 million and $1.8$2.3 million for the three months ended March 31, 2024 and 2023, and 2022, respectively.
Repurchase Agreements - Real Estate Securities
The Company has entered into various Master Repurchase Agreements (the "MRAs") that allow the Company to sell real estate securities while providing a fixed repurchase price for the same real estate securities in the future. The repurchase contracts on each security under an MRA generally mature in 30-90 days and terms are adjusted for current market rates as necessary.
Below is a summary of the Company's MRAs as of March 31, 2023 and December 31, 2022 (dollars in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | Weighted Average |
Counterparty | | Amount Outstanding | | Interest Expense | | Collateral Pledged (1) | | Interest Rate | | Days to Maturity |
As of March 31, 2023 | | | | | | | | | | |
JP Morgan Securities LLC | | $ | 62,980 | | | $ | 1,091 | | | $ | 69,985 | | | 5.80 | % | | 17 |
| | | | | | | | | | |
Barclays Capital Inc. | | 44,954 | | | 622 | | | 56,819 | | | 5.84 | % | | 13 |
| | | | | | | | | | |
Total/Weighted Average | | $ | 107,934 | | | $ | 1,713 | | | $ | 126,804 | | | 5.82 | % | | 15 |
| | | | | | | | | | |
As of December 31, 2022 | | | | | | | | | | |
JP Morgan Securities LLC | | $ | 103,513 | | | $ | 1,281 | | | $ | 120,751 | | | 5.34 | % | | 22 |
| | | | | | | | | | |
| | | | | | | | | | |
Barclays Capital Inc. | | 119,351 | | | 1,646 | | | 144,778 | | | 5.18 | % | | 50 |
| | | | | | | | | | |
| | | | | | | | | | |
Total/Weighted Average | | $ | 222,864 | | | $ | 2,927 | | | $ | 265,529 | | | 5.25 | % | | 37 |
________________________________________________________(1) Includes $42.6 million and $67.1 million of CLO notes, held by the Company, which is eliminated within the Real estate securities, trading, at fair value line of the consolidated balance sheets as of March 31, 2023 and December 31, 2022, respectively.
FRANKLIN BSP REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 20232024
(Unaudited)
Below is a summary of the Company's MRAs which were included inRepurchase Agreementsagreements - Real Estate Securities Classified As Trading
The Company pledges its real estate securities classified in the Company's consolidated balance sheets as trading as collateral for repurchase agreements with commercial banksof March 31, 2024 and other financial institutions. Repurchase arrangements entered intoDecember 31, 2023 (dollars in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | March 31, 2024 |
Counterparty | | Amount Outstanding | | Interest Expense | | Collateral Pledged(1) | | Weighted Average Interest Rate | | Weighted Average Days to Maturity |
JP Morgan Securities LLC | | $ | 85,750 | | | $ | 1,421 | | | $ | 96,819 | | | 6.18 | % | | 17 |
Wells Fargo Securities, LLC | | 8,994 | | | 139 | | | 9,995 | | | 6.12 | % | | 4 |
Barclays Capital Inc. | | 79,414 | | | 924 | | | 89,029 | | | 6.06 | % | | 5 |
Lucid Prime Fund | | 20,611 | | | 114 | | | 23,393 | | | 6.08 | % | | 18 |
Total Weighted Average | | $ | 194,769 | | | $ | 2,598 | | | $ | 219,236 | | | 6.12 | % | | 12 |
________________________See note below
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2023 |
Counterparty | | Amount Outstanding | | Interest Expense | | Collateral Pledged(1) | | Weighted Average Interest Rate | | Weighted Average Days to Maturity |
JP Morgan Securities LLC | | $ | 113,111 | | | $ | 6,717 | | | $ | 127,602 | | | 6.29 | % | | 15 |
Wells Fargo Securities, LLC | | 8,994 | | | 235 | | | 9,975 | | | 6.14 | % | | 5 |
Barclays Capital Inc. | | 51,950 | | | 3,371 | | | 58,250 | | | 6.19 | % | | 5 |
Total Weighted Average | | $ | 174,055 | | | $ | 10,323 | | | $ | 195,827 | | | 6.25 | % | | 11 |
________________________(1) Includes $1.4 million and $27.9 million of CLO notes, held by the Company, involvewhich is eliminated within the Real estate securities, available for sale, and a simultaneous agreement to repurchase the transferred assetsmeasured at a future date and are accounted for as financings. The Company maintains the beneficial interest in the specific securities pledged during the term of each repurchase arrangement and receives the related principal and interest payments.
The terms and conditions of repurchase agreements are negotiated on a transaction-by-transaction basis when each such agreement is initiated or renewed. The amount borrowed is generally equal to the fair value of the securities pledged, as determined by the lending counterparty, less an agreed-upon discount, referred to as a “haircut.” Interest rates are generally fixed based on prevailing rates corresponding to the terms of the borrowings. Interest may be paid monthly or at the termination of an agreement at which time the Company may enter into a new agreement at prevailing haircuts and rates with the same lending counterparty or repay that counterparty and negotiate financing with a different lending counterparty. None of the Company’s lending counterparties are obligated to renew or otherwise enter into new agreements at the conclusion of existing agreements. In response to declines in fair value of pledged securities due to changes in market conditions or the publishing of monthly security pay-down factors, lending counterparties typically require the Company to post additional securities as collateral, pay down borrowings or fund cash margin accounts with the counterparties in order to re-establish the agreed-upon collateral requirements. These actions are referred to as margin calls. Conversely, in response to increases in fair value of pledged securities, the Company routinely margin calls its lending counterparties in order to have previously pledged collateral returned.
Repurchase agreements (and related pledged collateral, including accrued interest receivable), classified by remaining maturities, and related weighted average borrowing ratesconsolidated balance sheets as of the indicated dates were as follows (dollars in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Amount Outstanding | | Accrued Interest Receivable | | Collateral Carrying Amount | | Weighted Average Borrowing Rates |
As of March 31, 2023 | | | | | | | | |
Repurchase arrangements secured by Agency securities with maturities of 30 days or less | | $ | 121,000 | | | $ | 371 | | | $ | 126,749 | | | 4.81 | % |
| | | | | | | | |
As of December 31, 2022 | | | | | | | | |
Repurchase arrangements secured by Agency securities with maturities of 30 days or less | | $ | 172,144 | | | $ | 544 | | | $ | 180,400 | | | 4.25 | % |
Repurchase arrangements secured by Agency securities with maturities of 31 to 90 days | | 45,000 | | | 114 | | | 47,210 | | | 4.51 | % |
| | $ | 217,144 | | | $ | 658 | | | $ | 227,610 | | | 4.30 | % |
Average repurchase agreements outstanding were $149.4 million and $220.1 million during the three months ended March 31, 20232024 and December 31, 2022,2023, respectively. Average repurchase agreements outstanding differed from respective quarter-end balances during the indicated periods primarily due to changes in portfolio levels and differences in the timing of portfolio acquisitions relative to portfolio runoff and asset sales. Interest paid on repurchase agreements, including related derivative payments, totaled $2.0 million and $1.3 million during the three months ended March 31, 2023 and 2022, respectively.
Collateralized Loan Obligation
As of March 31, 2023 and December 31, 2022, the notes issued by BSPRT 2019-FL5 Issuer, Ltd. and BSPRT 2019-FL5 Co-Issuer, LLC, each wholly owned indirect subsidiaries of the Company, are collateralized by interests in a pool of 22 and 25 mortgage assets having a principal balance of $339.0 million and $378.8 million respectively (the "2019-FL5 Mortgage Assets"). The sale of the 2019-FL5 Mortgage Assets to BSPRT 2019-FL5 Issuer, Ltd. is governed by a Mortgage Asset Purchase Agreement dated as of May 30, 2019, between the Company and BSPRT 2019-FL5 Issuer, Ltd.
As of March 31, 2023 and December 31, 2022, the notes issued by BSPRT 2021-FL6 Issuer, Ltd. and BSPRT 2021-FL6 Co-Issuer, LLC, each wholly owned indirect subsidiaries of the Company, are collateralized by interests in a pool of 58 and 58 mortgage assets having a principal balance of $686.1 million and $691.1 million respectively (the "2021-FL6 Mortgage Assets"). The sale of the 2021-FL6 Mortgage Assets to BSPRT 2021-FL6 Issuer, Ltd. is governed by a Collateral Interest Purchase Agreement dated as of March 25, 2021, between the Company and BSPRT 2021-FL6 Issuer, Ltd.
FRANKLIN BSP REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 20232024
(Unaudited)
AsCollateralized Loan Obligation
The following table represents the terms of March 31, 2023 and December 31, 2022, the notes issued by BSPRT2021-FL6 Issuer, 2021-FL7 Issuer, Ltd.2022-FL8 Issuer, 2022-FL9 Issuer and BSPRT 2021-FL7 Co-Issuer, LLC, 2023-FL10 Issuer (collectively the "CLOs"), as of March 31, 2024 and December 31, 2023:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | March 31, 2024 |
CLO Facility | | Number of Loans in pool(1) | | Benchmark Interest Rate | | Weighted Average Spread | | Par Value | | Par Value Outstanding(2) | | Principal Balance of Collateralized Mortgage Assets | | Maturity Dates |
2021-FL6 Issuer | | 50 | | Term SOFR | | 1.44 | % | | $ | 584,500 | | | $ | 536,620 | | | $ | 645,103 | | | 3/15/2036 |
2021-FL7 Issuer | | 39 | | Term SOFR | | 1.66 | % | | 722,250 | | | 674,822 | | | 853,181 | | | 12/21/2038 |
2022-FL8 Issuer | | 45 | | AVG SOFR | | 1.72 | % | | 960,000 | | | 959,943 | | | 1,194,783 | | | 2/15/2037 |
2022-FL9 Issuer | | 49 | | Term SOFR | | 2.80 | % | | 670,637 | | | 670,639 | | | 792,676 | | | 5/15/2039 |
2023-FL10 Issuer(3) | | 27 | | Term SOFR | | 2.59 | % | | 717,243 | | | 717,243 | | | 896,219 | | | 9/15/2035 |
| | | | | | | $ | 3,654,630 | | | $ | 3,559,267 | | | $ | 4,381,962 | | | |
| | | | | | | | | | | | | | |
| | December 31, 2023 |
CLO Facility | | Number of Loans in pool(1) | | Benchmark interest rate | | Weighted Average Spread | | Par Value | | Par Value Outstanding(2) | | Principal Balance of Collateralized Mortgage Assets | | Maturity Dates |
2021-FL6 Issuer | | 54 | | Term SOFR | | 1.43 | % | | $ | 584,500 | | | $ | 558,040 | | | $ | 673,289 | | | 3/15/2036 |
2021-FL7 Issuer | | 40 | | Term SOFR | | 1.64 | % | | 722,250 | | | 720,000 | | | 864,079 | | | 12/21/2038 |
2022-FL8 Issuer | | 46 | | AVG SOFR | | 1.72 | % | | 960,000 | | | 960,000 | | | 1,184,931 | | | 2/15/2037 |
2022-FL9 Issuer | | 51 | | Term SOFR | | 2.80 | % | | 670,637 | | | 670,639 | | | 800,638 | | | 5/15/2039 |
2023-FL10 Issuer | | 27 | | Term SOFR | | 2.57 | % | | 717,243 | | | 689,294 | | | 895,525 | | | 9/15/2035 |
| | | | | | | $ | 3,654,630 | | | $ | 3,597,973 | | | $ | 4,418,462 | | | |
________________________(1)each wholly owned indirect subsidiaries Loan assets may be pledged towards one or multiple CLO pool.
(2) Excludes $467.0 million and $495.0 million, respectively, of CLO notes, held by the Company, which are eliminated in , are collateralized by interests in a pool of 40Collateralized loan obligations in the consolidated balance sheet as of March 31, 2024 and 39 mortgage assets havingDecember 31, 2023.
(3) During the three months endedMarch 31, 2024, the Company sold the BSPRT FL10 AS retained tranche with a principal balance of $899.8 million and $899.7 million respectively (the "2021-FL7 Mortgage Assets"). The sale of the 2021-FL7 Mortgage Assets to BSPRT 2021-FL7 Issuer, Ltd. is governed by a Collateral Interest Purchase Agreement dated as of March 25, 2021, between the Company and BSPRT 2021-FL7 Issuer, Ltd.
As of March 31, 2023 and December 31, 2022, the notes issued by BSPRT 2022-FL8 Issuer, Ltd. and BSPRT 2022-FL8 Co-Issuer, LLC, are collateralized by interests in a pool of 38 and 39 mortgage assets having a principal balance of $1.2 billion and $1.2 billion, respectively(the "2022-FL8 Mortgage Assets"). The sale of the 2022-FL8 Mortgage Assets to BSPRT 2022-FL8 Issuer, Ltd. is governed by a Collateral Interest Purchase Agreement dated as of December 21, 2021, between the Company and BSPRT 2022-FL8 Issuer, Ltd.
As of March 31, 2023 and December 31, 2022, the notes issued by BSPRT 2022-FL9 Issuer, LLC are collateralized by interests in a pool of 50 and 50 mortgage assets having a principal balance of $802.3 million and $797.5 million, respectively (the "2022-FL9 Mortgage Assets"). The sale of the 2022-FL9 Mortgage Assets to BSPRT 2022-FL9 Issuer, LLC is governed by a Collateral Interest Purchase Agreement, dated as of June 29, 2022, by and among FBRT Sub REIT, BSPRT 2022-FL9 Issuer, LLC, the OP, and BSPRT 2022-FL9 Seller, LLC.$27.9 million.
FRANKLIN BSP REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 20232024
(Unaudited)
The Company, through its wholly-owned subsidiaries, holds the preferred equity tranches of the above CLOs of approximately $401.8 million and $401.8 million as of March 31, 2023 and December 31, 2022, respectively. The following table represents the terms of the notes issued by 2019-FL5 Issuer, 2021-FL6 Issuer, 2021-FL7 Issuer, 2022-FL8 Issuer and 2022-FL9 Issuer (collectively the "CLOs"), as of March 31, 2023 (dollars in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
CLO Facility | | Tranche | | Par Value Issued | | Par Value Outstanding (1) | | Interest Rate | | Maturity Date |
2019-FL5 Issuer | | Tranche A | | $ | 407,025 | | | $ | — | | | 1M LIBOR + 115 | | 5/15/2029 |
2019-FL5 Issuer | | Tranche A-S | | 76,950 | | | 12,531 | | | 1M LIBOR + 148 | | 5/15/2029 |
2019-FL5 Issuer | | Tranche B | | 50,000 | | | 50,000 | | | 1M LIBOR + 140 | | 5/15/2029 |
2019-FL5 Issuer | | Tranche C | | 61,374 | | | 61,374 | | | 1M LIBOR + 200 | | 5/15/2029 |
2019-FL5 Issuer | | Tranche D | | 48,600 | | | 5,000 | | | 1M LIBOR + 240 | | 5/15/2029 |
2019-FL5 Issuer | | Tranche E | | 20,250 | | | 12,000 | | | 1M LIBOR + 285 | | 5/15/2029 |
2021-FL6 Issuer | | Tranche A | | 367,500 | | | 367,500 | | | 1M LIBOR + 110 | | 3/15/2036 |
2021-FL6 Issuer | | Tranche A-S | | 86,625 | | | 86,625 | | | 1M LIBOR + 130 | | 3/15/2036 |
2021-FL6 Issuer | | Tranche B | | 33,250 | | | 33,250 | | | 1M LIBOR + 160 | | 3/15/2036 |
2021-FL6 Issuer | | Tranche C | | 41,125 | | | 41,125 | | | 1M LIBOR + 205 | | 3/15/2036 |
2021-FL6 Issuer | | Tranche D | | 44,625 | | | 44,625 | | | 1M LIBOR + 0.03 | | 3/15/2036 |
2021-FL6 Issuer | | Tranche E | | 11,375 | | | 11,375 | | | 1M LIBOR + 350 | | 3/15/2036 |
2021-FL7 Issuer | | Tranche A | | 508,500 | | | 508,500 | | | 1M LIBOR + 132 | | 12/21/2038 |
2021-FL7 Issuer | | Tranche A-S | | 13,500 | | | 13,500 | | | 1M LIBOR + 165 | | 12/21/2038 |
2021-FL7 Issuer | | Tranche B | | 52,875 | | | 52,875 | | | 1M LIBOR + 205 | | 12/21/2038 |
2021-FL7 Issuer | | Tranche C | | 66,375 | | | 66,375 | | | 1M LIBOR + 230 | | 12/21/2038 |
2021-FL7 Issuer | | Tranche D | | 67,500 | | | 67,500 | | | 1M LIBOR + 275 | | 12/21/2038 |
2021-FL7 Issuer | | Tranche E | | 13,500 | | | 13,500 | | | 1M LIBOR + 340 | | 12/21/2038 |
2022-FL8 Issuer | | Tranche A | | 690,000 | | | 690,000 | | | 1M SOFR + 150 | | 2/15/2037 |
2022-FL8 Issuer | | Tranche A-S | | 66,000 | | | 66,000 | | | 1M SOFR + 185 | | 2/15/2037 |
2022-FL8 Issuer | | Tranche B | | 55,500 | | | 55,500 | | | 1M SOFR + 205 | | 2/15/2037 |
2022-FL8 Issuer | | Tranche C | | 67,500 | | | 67,500 | | | 1M SOFR + 230 | | 2/15/2037 |
2022-FL8 Issuer | | Tranche D | | 81,000 | | | 81,000 | | | 1M SOFR + 280 | | 2/15/2037 |
2022-FL9 Issuer | | Tranche A | | 423,667 | | | 423,667 | | | 1M SOFR + 255 | | 5/15/2039 |
2022-FL9 Issuer | | Tranche A-S | | 96,380 | | | 96,380 | | | 1M SOFR + 310 | | 5/15/2039 |
2022-FL9 Issuer | | Tranche B | | 42,166 | | | 42,166 | | | 1M SOFR + 360 | | 5/15/2039 |
2022-FL9 Issuer | | Tranche C | | 48,189 | | | 48,189 | | | 1M SOFR + 415 | | 5/15/2039 |
2022-FL9 Issuer | | Tranche D | | 49,194 | | | 49,194 | | | 1M SOFR + 505 | | 5/15/2039 |
2022-FL9 Issuer | | Tranche E | | 11,043 | | | 11,043 | | | 1M SOFR + 565 | | 5/15/2039 |
| | | | $ | 3,601,588 | | | $ | 3,078,294 | | | | | |
________________________________________________________(1) Excludes $461.6 million of CLO notes, held by the Company, which are eliminated within the collateralized loan obligations line in the consolidated balance sheet as of March 31, 2023.
FRANKLIN BSP REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2023
(Unaudited)
The following table represents the terms of the notes issued by 2019-FL5 Issuer, 2021-FL6 Issuer and 2021-FL7 Issuer, 2022-FL8 Issuer and 2022-FL9 Issuer as of December 31, 2022 (dollars in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
CLO Facility | | Tranche | | Par Value Issued | | Par Value Outstanding (1) | | Interest Rate | | Maturity Date |
2019-FL5 Issuer | | Tranche A | | $ | 407,025 | | | $ | — | | | 1M LIBOR + 115 | | 5/15/2029 |
2019-FL5 Issuer | | Tranche A-S | | 76,950 | | | 73,715 | | | 1M LIBOR + 148 | | 5/15/2029 |
2019-FL5 Issuer | | Tranche B | | 50,000 | | | 50,000 | | | 1M LIBOR + 140 | | 5/15/2029 |
2019-FL5 Issuer | | Tranche C | | 61,374 | | | 61,374 | | | 1M LIBOR + 200 | | 5/15/2029 |
2019-FL5 Issuer | | Tranche D | | 48,600 | | | 5,000 | | | 1M LIBOR + 240 | | 5/15/2029 |
2019-FL5 Issuer | | Tranche E | | 20,250 | | | 20,250 | | | 1M LIBOR + 285 | | 5/15/2029 |
2021-FL6 Issuer | | Tranche A | | 367,500 | | | 367,500 | | | 1M LIBOR + 110 | | 3/15/2036 |
2021-FL6 Issuer | | Tranche A-S | | 86,625 | | | 86,625 | | | 1M LIBOR + 130 | | 3/15/2036 |
2021-FL6 Issuer | | Tranche B | | 33,250 | | | 33,250 | | | 1M LIBOR + 160 | | 3/15/2036 |
2021-FL6 Issuer | | Tranche C | | 41,125 | | | 41,125 | | | 1M LIBOR + 205 | | 3/15/2036 |
2021-FL6 Issuer | | Tranche D | | 44,625 | | | 44,625 | | | 1M LIBOR + 300 | | 3/15/2036 |
2021-FL6 Issuer | | Tranche E | | 11,375 | | | 11,375 | | | 1M LIBOR + 350 | | 3/15/2036 |
2021-FL7 Issuer | | Tranche A | | 508,500 | | | 508,500 | | | 1M LIBOR + 132 | | 12/21/2038 |
2021-FL7 Issuer | | Tranche A-S | | 13,500 | | | 13,500 | | | 1M LIBOR + 165 | | 12/21/2038 |
2021-FL7 Issuer | | Tranche B | | 52,875 | | | 52,875 | | | 1M LIBOR + 205 | | 12/21/2038 |
2021-FL7 Issuer | | Tranche C | | 66,375 | | | 66,375 | | | 1M LIBOR + 230 | | 12/21/2038 |
2021-FL7 Issuer | | Tranche D | | 67,500 | | | 67,500 | | | 1M LIBOR + 275 | | 12/21/2038 |
2021-FL7 Issuer | | Tranche E | | 13,500 | | | 13,500 | | | 1M LIBOR + 340 | | 12/21/2038 |
2022-FL8 Issuer | | Tranche A | | 690,000 | | | 690,000 | | | 1M SOFR + 150 | | 2/15/2037 |
2022-FL8 Issuer | | Tranche A-S | | 66,000 | | | 66,000 | | | 1M SOFR + 185 | | 2/15/2037 |
2022-FL8 Issuer | | Tranche B | | 55,500 | | | 55,500 | | | 1M SOFR + 205 | | 2/15/2037 |
2022-FL8 Issuer | | Tranche C | | 67,500 | | | 67,500 | | | 1M SOFR + 230 | | 2/15/2037 |
2022-FL8 Issuer | | Tranche D | | 81,000 | | | 81,000 | | | 1M SOFR + 280 | | 2/15/2037 |
2022-FL9 Issuer | | Tranche A | | 423,667 | | | 423,667 | | | 1M SOFR + 255 | | 5/15/2039 |
2022-FL9 Issuer | | Tranche A-S | | 96,380 | | | 96,380 | | | 1M SOFR + 310 | | 5/15/2039 |
2022-FL9 Issuer | | Tranche B | | 42,166 | | | 42,166 | | | 1M SOFR + 360 | | 5/15/2039 |
2022-FL9 Issuer | | Tranche C | | 48,189 | | | 48,189 | | | 1M SOFR + 415 | | 5/15/2039 |
2022-FL9 Issuer | | Tranche D | | 49,194 | | | 49,194 | | | 1M SOFR + 505 | | 5/15/2039 |
2022-FL9 Issuer | | Tranche E | | 11,041 | | | 11,043 | | | 1M SOFR + 565 | | 5/15/2039 |
| | | | $ | 3,601,586 | | — | | $ | 3,147,728 | | | | | |
________________________________________________________(1) Excludes $453.4 million of CLO notes, held by the Company, which are eliminated within the collateralized loan obligations line in the consolidated balance sheet as of December 31, 2022.
FRANKLIN BSP REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2023
(Unaudited)
The below table reflects the total assets and liabilities of the Company's outstanding CLOs. The CLOs are considered VIEs and are consolidated into the Company's consolidated financial statements as of March 31, 20232024 and December 31, 20222023 as the Company is the primary beneficiary of the VIE. The Company is the primary beneficiary of the CLOs because (i) the Company has the power to direct the activities that most significantly affect the VIE’s economic performance and (ii) the right to receive benefits from the VIEs or the obligation to absorb losses of the VIEs that could be significant to the VIE. The VIE's are non-recourse to the Company.
| | | March 31, 2024 | | | | March 31, 2024 | | December 31, 2023 |
Assets (dollars in thousands) | Assets (dollars in thousands) | | March 31, 2023 | | December 31, 2022 |
Cash(1) | |
Cash(1) | |
Cash (1) | Cash (1) | | $ | 18,682 | | | $ | 43,246 | |
Commercial mortgage loans, held for investment, net (2) | Commercial mortgage loans, held for investment, net (2) | | 3,904,756 | | | 3,942,918 | |
Accrued interest receivable | Accrued interest receivable | | 16,652 | | | 15,444 | |
Total Assets | Total Assets | | $ | 3,940,090 | | | $ | 4,001,608 | |
| Liabilities (dollars in thousands) | Liabilities (dollars in thousands) | |
Notes payable (3)(4) | | $ | 3,539,918 | | | $ | 3,601,102 | |
Liabilities (dollars in thousands) | |
Liabilities (dollars in thousands) | |
Notes payable, net(3)(4) | |
Notes payable, net(3)(4) | |
Notes payable, net(3)(4) | |
Accrued interest payable | Accrued interest payable | | 14,138 | | | 10,582 | |
Total Liabilities | Total Liabilities | | $ | 3,554,056 | | | $ | 3,611,684 | |
________________________________________________________________________________(1) Includes $17.9$26.6 million and $42.5$55.1 million of cash held by the servicer related to CLO loan payoffs as of March 31, 20232024 and December 31, 2022,2023, respectively.
(2) The balance is presented net of allowance for credit losses of $13.9$31.5 million and $13.2$32.6 million as of March 31, 20232024 and December 31, 2022,2023, respectively.
(3) Includes $461.6$467.0 million and $453.4$495.0 million of CLO notes, held by the Company, which are eliminated within the collateralizedin Collateralized loan obligation line of the consolidated balance sheets as of March 31, 20232024 and December 31, 2022,2023, respectively.
(4) The balance is presented net of deferred financing cost and discount of $19.0$28.5 million and $19.2$30.8 million as of March 31, 20232024 and December 31, 2022,2023, respectively. The deferred financing costs are amortized over the expected lifetime of each CLO.
FRANKLIN BSP REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 20232024
(Unaudited)
Note 8 - Earnings Per Share
The Company uses the two-class method in calculating basic and diluted earnings per share. Net income/(loss) is allocated between our common stock and other participating securities based on their participation rights. Diluted net income per share has been computed using the weighted average number of shares of common stock outstanding and other dilutive securities. The following table presents a reconciliation of the numerators and denominators of the basic and diluted earnings per share computations and the calculation of basic and diluted earnings per share for the three months ended March 31, 20232024 and March 31, 20222023 (in thousands, except share and per share data):
| | Three Months Ended March 31, | |
| 2023 | | 2022 | |
| | Three Months Ended March 31, | | | | Three Months Ended March 31, |
| | 2024 | | | | 2024 | | 2023 |
Numerator | Numerator | | | | | |
Net income/(loss) | Net income/(loss) | | $ | 43,839 | | | $ | (22,507) | | |
Net (income)/loss from noncontrolling interest | | (9) | | | — | | |
Net income/(loss) | |
Net income/(loss) | |
Net (income)/loss from non-controlling interest | |
Less: Preferred stock dividends | Less: Preferred stock dividends | | 6,748 | | | 21,011 | | |
| Net income/(loss) applicable to common stock | Net income/(loss) applicable to common stock | | $ | 37,082 | | | $ | (43,518) | | |
Net income/(loss) applicable to common stock | |
Net income/(loss) applicable to common stock | |
Less: Participating securities' share in earnings | Less: Participating securities' share in earnings | | 797 | | | — | | |
Net income/(loss) applicable to common stockholders (basic & diluted earnings per share) | | $ | 36,285 | | | $ | (43,518) | | |
Net income/(loss) applicable to common stockholders (for basic & diluted earnings per share) | |
| Denominator | Denominator | | |
Denominator | |
Denominator | |
Weighted-average common shares outstanding for basic earnings per share | |
Weighted-average common shares outstanding for basic earnings per share | |
Weighted-average common shares outstanding for basic earnings per share | Weighted-average common shares outstanding for basic earnings per share | | 82,774,771 | | | 43,956,965 | | |
Weighted-average common shares outstanding for diluted earnings per share (1) | Weighted-average common shares outstanding for diluted earnings per share (1) | | 82,774,771 | | | 43,956,965 | | |
| Basic earnings per share | Basic earnings per share | | $ | 0.44 | | | $ | (0.99) | | |
Basic earnings per share | |
Basic earnings per share | |
Diluted earnings per share | Diluted earnings per share | | $ | 0.44 | | | $ | (0.99) | | |
_______________________________________________(1)The effect of the weighted average dilutive shares excluded 711,000 and 368,257 weighted average restricted shares and stock units foras of the three months ended March 31, 2024 and 2023 of 210,665 and March 31, 2022,711,000 respectively, as the effect was anti-dilutive. Additionally, the effect of dilutive shares excluded 5,430,4805,370,498 and 45,522,6765,430,480 weighted average common equivalentshare equivalents of convertible preferred sharesstock for the three months ended March 31, 20232024 and March 31, 2022,2023, respectively, as the effect was anti-dilutive.
FRANKLIN BSP REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 20232024
(Unaudited)
Note 9 - Redeemable Convertible Preferred Stock and Equity Transactions
The following table presents the summary of the Company's outstanding shares of Redeemable Convertible Preferred Stock, Perpetual Preferred Stock, Automatically Convertible Preferred Stockredeemable convertible preferred stock, perpetual preferred stock, and Common Stock and Preferred Stockcommon stock as of March 31, 20232024 and December 31, 2022 (dollars in2023 (in thousands, except share and per share amounts):
| | Balance as of | | Shares Outstanding as of | | First Quarter 2023 Dividend/Distribution Per Share (4) |
| March 31, 2023 | | December 31, 2022 | | March 31, 2023 | | December 31, 2022 | |
| | Balance as of | | | | Balance as of | | Shares Outstanding as of | | First Quarter 2024 Dividend Per Share(1) |
| | March 31, 2024 | |
Redeemable Convertible Preferred Stock: | Redeemable Convertible Preferred Stock: | |
Series H Preferred Stock | | $ | 89,748 | | | $ | 89,748 | | | 17,950 | | | 17,950 | | | $ | 106.22 | |
Series I Preferred Stock (1) | | $ | — | | | $ | 5,000 | | | $ | — | | | 1,000 | | | 106.22 | |
Redeemable Convertible Preferred Stock: | |
Redeemable Convertible Preferred Stock: | |
Series H Preferred Stock(2) | |
Series H Preferred Stock(2) | |
Series H Preferred Stock(2) | |
Perpetual Preferred Stock: | Perpetual Preferred Stock: | |
Series E Preferred Stock | Series E Preferred Stock | | $ | 258,742 | | | $ | 258,742 | | | 10,329,039 | | | 10,329,039 | | | $ | 0.46875 | |
Series E Preferred Stock | |
Series E Preferred Stock | |
Common Stock: | Common Stock: | |
Common Stock - at par value (2)(3) | | $ | 826 | | | $ | 826 | | | 83,363,971 | | | 82,992,784 | | | $ | 0.355 | |
Common Stock - at par value(3)(4) | |
Common Stock - at par value(3)(4) | |
Common Stock - at par value(3)(4) | |
_________________________________________________________________________________(1) On January 19, 2023, all 1,000 outstanding shares of the Company's Series I Preferred Stock each automatically converted into 299.2 shares of Common Stock, pursuant to the terms of the Series I Preferred Stock, resulting in the issuance of 299,200 shares of Common Stock.
(2) Common Stock includes shares issued pursuant to the DRIP and unvested restricted shares.
(3) During the three months ended March 31, 2023, the Company repurchased 313,411 shares of Common Stock at an average price of $11.70 per share, for a total of $3.7 million. All of these shares were retired upon settlement, reducing the total outstanding shares as of March 31, 2023. See discussion in the "Stock Repurchases" section below.
(4) As declared by the Company's board of directors.
Distributions
In order to maintain its election to qualify as a REIT,(2) On January 10, 2024, the Company must currently distribute, at a minimum, an amount equal to 90% of its taxable income, without regard to the deduction for distributions paid and excluding net capital gains. The Company must distribute 100% of its taxable income (including net capital gains) to avoid paying corporate U.S. federal income taxes. Distribution payments are dependent on the availability of funds. The Company's board of directors may reduce the amount of distributions paid or suspend distribution payments at any time, and therefore, distributions payments are not assured.
Distribution payments are dependent on the availability of funds. The board of directors may reduce the amount of distributions paid or suspend distribution payments at any time, and therefore, distribution payments are not assured. Dividends on the Company’s outstanding shares of preferred stock, to the extent not declared by the board of directors quarterly, will accrue, and dividends may not be paid on the Company's common stock to the extent there are accrued and unpaid dividends on the preferred stock. The amount of dividends paid on the Company’s Series H Preferred Stock is generally in an amount equalwas amended such that the mandatory conversion date was extended by one year, to January 21, 2025. Unless earlier converted, the dividends a holder of such preferred stock would have received if the preferred stock had been convertedSeries H Preferred Stock will automatically convert into common stock in accordance with its terms, except when the amountat a rate of 299.2 shares of common stock dividends are below the threshold statedper share of Series H Preferred Stock (subject to adjustments as described in the termsArticles Supplementary for the Series H Preferred Stock) on January 21, 2025. The holder of such preferred stock.the Series H Preferred Stock has the right to convert up to 4,487 shares of Series H Preferred Stock one time in each calendar month through December 2024, upon 10 business days’ advance notice to the Company.
The Company distributed $29.5 million of common stock dividends during(3) Includes shares issued pursuant to the Company's dividend reinvestment plan ("DRIP") and unvested restricted shares.
(4) During the three months ended March 31, 2023, comprised of $29.5 million in cash. The2024, the Company distributed $12.5 millionrepurchased 151,123 shares of common stock dividends duringat an average price of $12.42 per share for a total of $1.9 million. All of these shares were retired upon settlement. See discussion in the "Stock Repurchases" section below.
During the three months ended March 31, 2022, comprised of $12.4 million in cash2024 and $0.1 million in shares of common stock issued under the DRIP.
As of March 31, 2023, and December 31, 2022, the Company had declared but unpaid common stock distributionspaid an aggregate of $29.6$29.4 million and $29.5 million, respectively, declared but unpaid Series E Preferred Stock distributions of $4.8 million and declared but unpaid Series H Preferred Stock distributions of $1.9 million. Additionally, as of December 31, 2022 the Company had declared unpaid Series I Preferredcommon stock distributions comprised of $0.1 million. These amounts are included in Distributions payable on the Company’s consolidated balance sheets.
FRANKLIN BSP REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2023
(Unaudited)
$0.355 per share.
Stock Repurchases
The Company’s board of directors has authorized a $65 million share repurchase program of the Company’s common stock. The Company’s share repurchase program authorizes share repurchases at prices below the most recently reported book value per share as determined in accordance with GAAP. PurchasesRepurchases made under the program may be made through open market, block, and privately negotiated transactions, including Rule 10b5-1 plans, as permitted by securities laws and other legal requirements. The timing, manner, price and amount of any purchases by the Company will be determined by the Company in its reasonable business judgment and consistent with the exercise of its legal duties and will be subject to economic and market conditions, stock price, applicable legal requirements and other factors. The share repurchase program does not obligate the Company to acquire any particular amount of common stock. The Company share repurchase program will remain open until at least December 31, 20232024 or until the capital committed to the applicable repurchase program has been exhausted, whichever is sooner. Repurchases under the Company’s share repurchase program may be suspended from time to time at the Company’s discretion without prior notice. As of March 31, 2024, the Company had $34.0 million remaining under the share repurchase program.
FRANKLIN BSP REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2024
(Unaudited)
The following table is a summary of the Company’s repurchase activity of its common stock during the three months ended March 31, 2023:2024 (in thousands, except share amounts):
| | | | | | | | | | | | | | |
| | For the Three Months Ended March 31, 2023 |
| | Shares | | Amount (2) |
Beginning of period, authorized repurchase amount (1) | | — | | | $ | 48,421 | |
Repurchases paid | | 244,584 | | | (2,867) | |
Repurchases unsettled (3) | | 68,827 | | | (800) | |
Remaining as of March 31, 2023 | | | | $ | 44,754 | |
| | | | | | | | | | | | | | |
| | For the Three Months Ended March 31, 2024 |
| | Shares | | Amount(1)(2) |
Beginning of period, authorized repurchase amount | | | | $ | 35,917 | |
Repurchases | | 151,123 | | | (1,877) | |
| | | | |
Remaining as of March 31, 2024 | | | | $ | 34,040 | |
________________________(1)For the three months ended March 31, 2024, the average purchase price was $12.42 per share.
(2)Amount includes commissions paid associated with share repurchases.
(2) ForDividend Reinvestment and Direct Stock Purchase Plan
The Company has adopted a dividend reinvestment and direct stock purchase plan ("DRIP") under which we registered and reserved for issuance, in the periodaggregate, up to 63,000,000 shares of common stock. Under the dividend reinvestment component of this plan, the Company's common stockholders can designate all or a portion of their cash dividends to be reinvested in additional shares of common stock (which shares, at the Company's option, are either issued directly from the Company or purchased by the administrator on the open market). The direct stock purchase component allows stockholders, subject to the Company's approval, to purchase shares of common stock directly from us. During the three months ended March 31, 2024 and 2023, no shares were issued, and 40,735 shares and 58,310 shares, respectively, of common stock were purchased by the average purchase price was $11.70 per share.
(3) Represents repurchases for which an order had been placed beforeadministrator under the enddividend reinvestment component of the quarter but had not yet settled by March 31, 2023.
As of March 31, 2023, the Company had $44.8 million remaining under the share repurchase program.DRIP.
Accumulated Other Comprehensive Income/(Loss)
The following tables settable sets forth the changes in accumulated other comprehensive income/(loss) by component.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | For the Three Months Ended |
| | March 31, 2023 | | March 31, 2022 |
(dollars in thousands) | | Total | | Available for Sale Real Estate Securities | | Cash Flow Hedges | | Total | | Available for Sale Real Estate Securities | | Cash Flow Hedges |
Balance, Beginning of Period | | $ | 390 | | | $ | 390 | | | $ | — | | | $ | (62) | | | $ | — | | | $ | (62) | |
Other comprehensive income/(loss) | | (1,648) | | | (1,648) | | | — | | | (220) | | | — | | | (220) | |
Reclassification adjustment for amounts included in net income/(loss) | | (677) | | | (677) | | | — | | | 282 | | | — | | | 282 | |
Balance, End of Period | | $ | (1,935) | | | $ | (1,935) | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
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related to the Company's real estate securities, available for sale, measured at fair value for the three months ended March 31, 2024 and 2023 (dollars in thousands): | | | | | | | | | | | | | | |
| | For the Three Months Ended |
| | March 31, 2024 | | March 31, 2023 |
Balance, Beginning of Period | | $ | (703) | | | $ | 390 | |
Other comprehensive income/(loss) | | 927 | | | (1,648) | |
Reclassification adjustment for amounts included in net income/(loss) | | 306 | | | (677) | |
Balance, End of Period | | $ | 530 | | | $ | (1,935) | |
| | | | |
FRANKLIN BSP REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 20232024
(Unaudited)
Note 10 - Commitments and Contingencies
Unfunded Commitments Under Commercial Mortgage Loans
As of March 31, 2023 and December 31, 2022,2024, the Company had the below unfunded commitments to the Company's borrowers (dollars in thousands):
| Funding Expiration | Funding Expiration | | March 31, 2023 | | December 31, 2022 | Funding Expiration | | March 31, 2024 |
2023 | | $ | 45,889 | | | $ | 73,921 | |
2024 | 2024 | | 330,379 | | | 312,009 | |
2025 | 2025 | | 105,538 | | | 70,429 | |
2026 and beyond | | 9,452 | | | 9,629 | |
| $ | 491,258 | | | $ | 465,988 | |
2026 | |
2027 | |
Total | |
The borrowers are generally required to meet or maintain certain metrics in order to qualify for the unfunded commitment amounts.
Litigation and Regulatory Matters
The Company is not presently named as a defendant in any material litigation arising outside the ordinary course of business. However, the Company is involved in routine litigation arising in the ordinary course of business, none of which the Company believes, individually or in the aggregate, will have a material impact on the Company’s financial condition, operating results or cash flows. Please refer to "Part II, Item 1. Legal Proceedings" for more details about the Company's ongoing litigation matters.
Note 11 - Related Party Transactions and Arrangements
Advisory Agreement Fees and Reimbursements
Pursuant to the Advisory Agreement, the Company is required to make the following payments and reimbursements to the Advisor:
•The Company reimburses the Advisor’s costs of providing services pursuant to the Advisory Agreement, except the salaries and benefits paid by the Advisor to the Company’s executive officers.
•The Company pays the Advisor, or its affiliates, a monthly asset management fee equal to one-twelfth of 1.5% of stockholders' equity as calculated pursuant to the Advisory Agreement.
•The Company will pay the Advisor an annual subordinated performance fee calculated on the basis of total return to stockholders, payable monthly in arrears, such that for any year in which total return on stockholders’ capital (as defined in the Advisory Agreement) exceeds 6.0% per annum, our Advisor will be entitled to 15.0% of the excess total return; provided that in no event will the annual subordinated performance fee payable to our Advisor exceed 10.0% of the aggregate total return for such year.
•The Company reimburses the Advisor for insourced expenses incurred by the Advisor on the Company‘s behalf related to selecting, evaluating, originating and acquiring investments in an amount up to 0.5% of the principal amount funded by the Company to originate or acquire commercial mortgage loans and up to 0.5% of the anticipated net equity funded by the Company to acquire real estate securities investments.
FRANKLIN BSP REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 20232024
(Unaudited)
The table below shows the costs incurred due to arrangements with our Advisor and its affiliates during the three months ended March 31, 20232024 and 20222023 and the associated payable as of March 31, 20232024 and December 31, 20222023 (dollars in thousands):
| | Three Months Ended March 31, | | | Payable as of |
| 2023 | | 2022 | | | March 31, 2023 | | December 31, 2022 |
| Three Months Ended March 31, | | | Three Months Ended March 31, | | Payable as of |
| 2024 | | | 2024 | | 2023 | | March 31, 2024 | | December 31, 2023 |
Acquisition expenses (1) | Acquisition expenses (1) | $ | 378 | | | $ | 315 | | | | $ | — | | | $ | — | |
Administrative services expenses | Administrative services expenses | 4,029 | | | 3,353 | | | | 4,029 | | | 3,526 | |
Asset management and subordinated performance fee | Asset management and subordinated performance fee | 8,085 | | | 6,745 | | | | 8,085 | | | 8,843 | |
Other related party expenses (2)(3) | Other related party expenses (2)(3) | 211 | | | 253 | | | | 1,742 | | | 3,060 | |
Total related party fees and reimbursements | Total related party fees and reimbursements | $ | 12,703 | | | $ | 10,666 | | | | $ | 13,856 | | | $ | 15,429 | |
_________________________________________________________________________________(1) Total acquisition expenses paid during the three months ended March 31, 2024 and March 31, 2023 and 2022 were $1.1$2.3 million and $3.2$1.1 million, respectively, of which $0.7$2.1 million and $2.9$0.7 million were capitalized within the commercialCommercial mortgage loans, held for investment and realReal estate securities, available for sale, measured at fair value lines of the consolidated balance sheets.
(2) These are related to reimbursable costs incurred related to the increase in loan origination activities and are included in Other expenses in the Company's consolidated statements of operations.
(3) As of March 31, 20232024 and December 31, 2022,2023, the related party payables include $1.7$1.5 million and $2.9$0.7 million, respectively, of payments made by the Advisor to third party vendors on behalf of the Company.
The payables as of March 31, 20232024 and December 31, 2022,2023, in the table above are included in Due to affiliates on the Company's consolidated balance sheets.
Other Transactions
AsIn the third quarter of March 31, 2023 and December 31, 2022, SBL held 17,950 shares of the Company's outstanding shares of Series H Preferred Stock (see Note 2 - Summary of Significant Accounting Policies).
In August 2021, the Company and an affiliate of the Company entered into a joint venture agreement and formed a joint venture entity,the Jeffersonville Member, LLC (the "Jeffersonville JV")JV to acquire a $139.5 million triple net lease property in Jeffersonville, GA. The Company has a 79% interest in the Jeffersonville JV, while the affiliate has a 21% interest. The Company invested a total of $109.8 million, made up of $88.7 million in debt and $21.1 million in equity, representing 79% of the ownership interest in the Jeffersonville JV. The affiliateaffiliated fund made up the remaining $29.8 million composed of a $24.0 million mortgage note payable and $5.7$5.8 million in equity.non-controlling interest. The Company has majority control of Jeffersonville JV with 79% ownership and, therefore, consolidates the accounts of Jeffersonville JV oninto its consolidated balance sheets.financial statements. The Company's $88.7 million mortgage note payable to Jeffersonville JV is eliminated in consolidation (see Note 7 - Debt).
As discussed below,Pursuant to the Company's 2021 Incentive Plan, in the first quarter of 2023, pursuant to the 2021 Incentive Plan,2024 the Company issued awards of restricted stock units to its officers and certain other personnel of the Advisor who provide services to the Company under the Advisory Agreement (see Note 12 - Share-based Compensation).Agreement.
As of March 31, 20232024 and December 31, 2022,2023, our commercial mortgage loans, held for investment, includes an aggregate of $123.3$123.6 million and $122.9$124.1 million, respectively, carrying value of loans to affiliates of our Advisor. The Company recognized $2.3$2.6 million and $0.7$2.3 million of interest income from these loans for the three months ended March 31, 20232024 and 2022,2023, respectively, in the Company’sCompany's consolidated statementsstatement of operations.
As disclosed in Note 3 - Commercial Mortgage Loans in AprilIn the second quarter of 2022, the Company fully funded a $113.2$149.7 million first mortgage consisting of 24 retail properties with various locations throughout the United States. The Company entered into a joint venture agreement and formed a joint venture entity, BSPRT Walgreens Portfolio, LLC (the "Walgreens Portfolio") to acquire 75.618%76% ownership interest in the loans acquired from the Walgreens Portfolio, while the affiliated fund has 24.242%24% interest (see Note 5 - Real Estate Owned).
FRANKLIN BSP REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2023
(Unaudited)
Note 12 - Share-based Compensation
Share Plans
The Company's 2021 Incentive plan provides the Company with the ability to grant equity-based awards to its directors, officers and employees (if the Company ever has employees), employees of the Advisor and its affiliates, or certain of the Company's consultants, employees of entities that provide services to the Company, directors of the Advisor or of entities that provide services to the Company, the Advisor and its affiliates.
Under the Company's 2021 Incentive Plan, as of March 31, 2023, there were 4,565,474 shares of common stock remaining available for issuance. The Board may amend, suspend or terminate the 2021 Incentive Plan at any time; provided that no amendment, suspension or termination may impair rights or obligations under any outstanding award without the participant’s consent or violate the 2021 Incentive Plan’s prohibition on repricing. The Company's previous plan, the RSP, expired on February 7, 2023.
Service-based Restricted Stock and Restricted Stock Units
In accordance with the 2021 Incentive Plan, the Company issued awards of RSUs to its officers and certain other personnel of the Advisor who provide services to the Company under the Advisory Agreement.
Restricted Stock and RSU activity issued under the RSP and 2021 Incentive Plan for the three months ended March 31, 2023 is summarized below:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Shares Outstanding | | First Quarter 2023 Weighted Average Grant Date Fair Value |
| For the Three Months Ended | |
| March 31, 2023 | | March 31, 2022 | |
| RSP | | 2021 Incentive Plan | | RSP | | 2021 Incentive Plan | |
Unvested equity awards outstanding at beginning of period | 20,934 | | | 492,107 | | | 11,184 | | | — | | | $ | 14.11 | |
Grants | — | | | 442,419 | | | 7,209 | | | 492,107 | | | 14.24 | |
Forfeitures | — | | | — | | | — | | | — | | | — | |
Vested | — | | | (164,039) | | | — | | | — | | | 14.24 | |
Unvested equity awards outstanding at end of period | 20,934 | | | 770,487 | | | 18,393 | | | 492,107 | | | $ | 14.16 | |
During the three months ended March 31, 2023 and March 31, 2022, the Company recognized compensation expense associated with the equity awards of $1.0 million and $0.5 million, respectively, which is included in share-based compensation expense on the consolidated statements of operations. Unrecognized estimated compensation expense for these awards totaled $11.2 million as of March 31, 2023 to be expensed over a weighted average period of 1.7 years. The fair value of equity awards that vested during the three months ended March 31, 2023 was $2.3 million.
Note 1312 - Fair Value of Financial Instruments
GAAP establishes a hierarchy of valuation techniques based on the observability of inputs used in measuring financial instruments at fair values. GAAP establishes market-based or observable inputs as the preferred source of values, followed by valuation models using management assumptions in the absence of market inputs. The three levels of the hierarchy are described below:
•Level I - Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.
FRANKLIN BSP REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2024
(Unaudited)
•Level II - Inputs (other than quoted prices included in Level I) are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date and for the duration of the instrument’s anticipated life.
•Level III - Unobservable inputs that reflect the entity's own assumptions about the assumptions that market participants would use in the pricing of the asset or liability and are consequently not based on market activity, but rather through particular valuation techniques.
FRANKLIN BSP REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2023
(Unaudited)
The determination of where an asset or liability falls in the above hierarchy requires significant judgment and factors specific to the asset or liability. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company evaluates its hierarchy disclosures each quarter and depending on various factors, it is possible that an asset or liability may be classified differently from quarter to quarter.
The Company has implemented valuation control processes to validate the fair value of the Company's financial instruments measured at fair value including those derived from pricing models. These control processes are designed to assure that the values used for financial reporting are based on observable inputs wherever possible. In the event that observable inputs are not available, the control processes are designed to assure that the valuation approach utilized is appropriate and consistently applied and the assumptions are reasonable.
Financial Instruments Measured at Fair Value on a Recurring Basis
CRE CLO bonds, recorded in real estate securities, available for sale, measured at fair value on the consolidated balance
sheets are valued utilizing both observable and unobservable market inputs. These factors include projected future cash flows, ratings, subordination levels, vintage, remaining lives, credit issues, and recent trades of similar real estate securities. Depending upon the significance of the fair value inputs used in determining these fair values, these real estate securities are classified in either Level II or Level III of the fair value hierarchy. The Company obtains third party pricing for determining the fair value of each CRE CLO investment, resulting in a Level II classification.
Real estate securities classified as trading, RMBS, are measured at fair value by utilizing a third party pricing service to obtain a current estimated price of the securities. The third party pricing service utilizes relevant market information and interest rate movements and applies its internal pricing application to the evaluation to test against internal tolerances and parameters. The RMBS are classified in Level III of the fair value hierarchy.
Commercial mortgage loans held for sale, measured at fair value in the Company's TRS are initially recorded at transaction price, which are considered to be the best initial estimate of fair value. The Company engaged the services of a third party independent valuation firm to determine fair value of certain investments held by the Company. Fair value is determined using a discounted cash flow model that primarily considers changes in interest rates and credit spreads, weighted average life and current performance of the underlying collateral. Commercial mortgage loans held for sale, measured at fair value that are originated in the last month of the reporting period are held and marked to the transaction price. The Company classified theits commercial mortgage loans held for sale, measured at fair value as Level III.
Other real estate investments, measured at fair value on the consolidated balance sheets are valued using unobservable inputs. The Company engaged the services of a third party independent valuation firm to determine fair value of certain investments, including preferred equity investments, held by the Company. Fair value is determined using a discounted cash flow model that primarily considers changes in interest rates and credit spreads, weighted average life and current performance of the underlying collateral. The Company classified thegenerally classifies its other real estate investments, measured at fair value as Level III.
TheDerivative instruments, measured at fair value for Treasury note futures is derivedare valued using market prices. Treasury note futures trade on the Chicago Mercantile Exchange (“CME”). The instruments are a variety of recently issued 10-year U.S. Treasury notes. The future contracts are liquid and are centrally cleared through the CME. Treasury note futures are generally categorized as Level I of the fair value hierarchy.I.
The fair value for credit default swaps and interest rate swaps contracts are derived using pricing models that are widely accepted by marketplace participants. Credit default swaps and some interest rate swaps are traded in the over the counter ("OTC") market. The pricing models take into account multiple inputs including specific contract terms, interest rate yield curves, interest rates, credit curves, recovery rates, and/or current credit spreads obtained from swap counterparties and other market participants. Most inputs into the models are not subjective as they are observable in the marketplace or set per the contract. Valuation is primarily determined by the difference between the contract spread and the current market spread. The contract spread (or rate) is generally fixed and the market spread is determined by the credit risk of the underlying debt or reference entity. If the underlying indices are liquid and the OTC market for the current spread is active, credit default swaps and interest rate swaps are categorized in Level II of the fair value hierarchy. If the underlying indices are illiquid and the OTC market for the current spread is not active, credit default swaps are categorized in Level III of the fair value hierarchy. The Company classified its credit default swaps and interest rate swaps are generally categorized as Level II of the fair value hierarchy.II.
FRANKLIN BSP REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 20232024
(Unaudited)
The fair value of exchange-traded swap agreements economically hedging RMBS repurchase agreements are calculated using the net discounted future fixed cash payments and the discounted future variable cash receipts which are based on expected future interest rates derived from observable market interest rate curves. The Company also incorporates both its own nonperformance risk and its counterparties’ nonperformance risk in determining fair value. In considering the effect of nonperformance risk, the Company considered the impact of netting and credit enhancements, such as collateral postings and guarantees, and has concluded that counterparty risk is not significant to the overall valuation. Interest rate swap agreements economically hedging the Company's RMBS repurchase agreements are measured at fair value on a recurring basis primarily using Level II inputs. The fair value of these derivatives is calculated including accrued interest and net of variation margin amounts received or paid through the exchange, resulting in a significantly reduced fair value amount representing the unsettled fair value of these derivatives on the consolidated balance sheets.
A review of the fair value hierarchy classification is conducted on a quarterly basis. Changes in the type of inputs may result in a reclassification for certain assets or liabilities. The Company's policy with respect to transfers between levels of the fair value hierarchy is to recognize transfers into and out of each level as of the beginning of the reporting period. There were no material transfers between levels within the fair value hierarchy for the period ended March 31, 2023. Material transfers between levels within the fair value hierarchy during the period ended2024 and December 31, 2022 were specifically related to the transfer of ARM Agency Securities from Level II to Level III.2023.
The following table presents the Company's financial instruments carried at fair value on a recurring basis in the consolidated balance sheets by its level in the fair value hierarchy as of March 31, 20232024 and December 31, 20222023 (dollars in thousands):. The Company did not have any liabilities carried at fair value as of December 31, 2023.
| | | | | | | | | | | | | | | | | | | | | | | |
| Total | | Level I | | Level II | | Level III |
March 31, 2023 | | | | | | | |
Assets, at fair value | | | | | | | |
Real estate securities, available for sale, measured at fair value | $ | 112,329 | | | $ | — | | | $ | 112,329 | | | $ | — | |
Real estate securities, trading, measured at fair value | 133,705 | | | — | | | $ | — | | | $ | 133,705 | |
Commercial mortgage loans, held for sale, measured at fair value | 15,928 | | | — | | | — | | | 15,928 | |
Interest rate swaps | — | | | — | | | — | | | — | |
Credit default swaps | 325 | | | — | | | 325 | | | — | |
Total assets, at fair value | $ | 262,287 | | | $ | — | | | $ | 112,654 | | | $ | 149,633 | |
| | | | | | | |
Liabilities, at fair value | | | | | | | |
Interest rate swaps | $ | 202 | | | $ | — | | | $ | 202 | | | $ | — | |
Credit default swaps | $ | 92 | | | $ | — | | | $ | 92 | | | $ | — | |
| | | | | | | |
Total liabilities, at fair value | $ | 294 | | | $ | — | | | $ | 294 | | | $ | — | |
| | | | | | | |
December 31, 2022 | | | | | | | |
Assets, at fair value | | | | | | | |
Real estate securities, available for sale, measured at fair value | $ | 221,025 | | | $ | — | | | $ | 221,025 | | | $ | — | |
Real estate securities, trading, measured at fair value | $ | 235,728 | | | $ | — | | | $ | — | | | $ | 235,728 | |
Commercial mortgage loans, held for sale, measured at fair value | 15,559 | | | — | | | — | | | 15,559 | |
Treasury note futures | 91 | | | 91 | | | — | | | — | |
Interest rate swaps | 90 | | | — | | | 90 | | | — | |
Credit default swaps | 234 | | | — | | | 234 | | | — | |
Total assets, at fair value | $ | 472,727 | | | $ | 91 | | | $ | 221,349 | | | $ | 251,287 | |
| | | | | | | |
Liabilities, at fair value | | | | | | | |
| | | | | | | |
| | | | | | | |
Credit default swaps | 64 | | | — | | | 64 | | | — | |
| | | | | | | |
Total liabilities, at fair value | $ | 64 | | | $ | — | | | $ | 64 | | | $ | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | March 31, 2024 |
| | Total | | Level I | | Level II | | Level III |
Assets, at fair value | | | | | | | | |
Real estate securities, available for sale, measured at fair value | | $ | 217,855 | | | $ | — | | | $ | 217,855 | | | $ | — | |
| | | | | | | | |
Commercial mortgage loans, held for sale, measured at fair value | | 30,457 | | | — | | | — | | | 30,457 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Total assets, at fair value | | $ | 248,312 | | | $ | — | | | $ | 217,855 | | | $ | 30,457 | |
| | | | | | | | |
Liabilities, at fair value | | | | | | | | |
| | | | | | | | |
Credit default swaps | | $ | 429 | | | $ | — | | | $ | 429 | | | $ | — | |
Treasury note futures | | 95 | | | 95 | | | — | | | — | |
Total liabilities, at fair value | | $ | 524 | | | $ | 95 | | | $ | 429 | | | $ | — | |
| | | | | | | | |
| | December 31, 2023 |
| | Total | | Level I | | Level II | | Level III |
Assets, at fair value | | | | | | | | |
Real estate securities, available for sale, measured at fair value | | $ | 242,569 | | | $ | — | | | $ | 242,569 | | | $ | — | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Total assets, at fair value | | $ | 242,569 | | | $ | — | | | $ | 242,569 | | | $ | — | |
Both observable and unobservable inputs may be used to determine the fair value of positions that the Company has classified within the Level III category. As a result, the unrealized gains and losses for assets and liabilities within the Level III category may include changes in fair value that were attributable to both observable and unobservable inputs. The following table summarizes the valuation method and significant unobservable inputs used for the Company’s financial instruments that are categorized within Level III of the fair value hierarchy as of March 31, 20232024 and December 31, 20222023 (dollars in thousands).
FRANKLIN BSP REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2023
(Unaudited)
The following table contains the Level III inputs used to value assets and liabilities on a recurring and nonrecurring basis or where the Company discloses fair valuedid not hold any applicable positions as of MarchDecember 31, 2023:2023.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Asset Category | | Fair Value | | Valuation Methodologies | | Unobservable Inputs (1) | | Weighted Average (2) | | Range |
March 31, 2023 | | | | | | | | | | |
Commercial mortgage loans, held for sale, measured at fair value | | $ | 15,928 | | | Discounted Cash Flow | | Yield | | 6.6% | | 6.4% - 6.8% |
Real estate securities, trading, measured at fair value | | 133,705 | | | Discounted Cash Flow | | Yield | | 3.3% | | 2.0% - 6.6% |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
December 31, 2022 | | | | | | | | | | |
Commercial mortgage loans, held for sale, measured at fair value | | $ | 15,559 | | | Discounted Cash Flow | | Yield | | 7.2% | | 6.3% - 7.7% |
Real estate securities, trading, measured at fair value | | 235,728 | | | Discounted Cash Flow | | Yield | | 3.3% | | 2.0% - 6.5% |
| | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | March 31, 2024 |
Asset Category | | Fair Value | | Valuation Methodologies | | Unobservable Inputs(1) | | Yield | | Range |
Commercial mortgage loans, held for sale, measured at fair value | | $ | 30,457 | | | Discounted Cash Flow | | Yield | | 8.2% | | N/A |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
________________________________________________________________________________(1) In determining certain inputs, the Company evaluates a variety of factors including economic conditions, industry and market developments, market valuations of comparable companies and company specific developments including exit strategies and realization opportunities. The Company has determined that market participants would take these inputs into account when valuing the investments.
There were no assets measured at fair value on a nonrecurring basis on our consolidated balance sheets as ofFRANKLIN BSP REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2023.2024
(Unaudited)
Increases or decreases in any of the above unobservable inputs in isolation would result in a lower or higher fair value measurement for such assets. The following table presents additional information about the Company’s financial instruments which are measured at fair value on a recurring basis as of March 31, 20232024 and December 31, 20222023 for which the Company has used Level III inputs to determine fair value (dollars in thousands):
| | | | | | | | | | | | | | | | |
| | March 31, 2023 |
| | Commercial Mortgage Loans, held for sale, measured at fair value | | Real estate securities, trading, measured at fair value | | |
Beginning balance, January 1, 2023 | | $ | 15,559 | | | $ | 235,728 | | | |
Transfers into Level III (1) | | — | | | — | | | |
Total realized and unrealized gain/(loss) included in earnings: | | | | | | |
Realized gain/(loss) on sale of commercial mortgage loans, held for sale | | — | | | — | | | |
Realized gain/(loss) on sale of available for sale trading securities | | — | | | — | | | |
Unrealized gain/(loss) on commercial mortgage loans, held for sale and other real estate investments | | 347 | | | — | | | |
Trading gain/(loss) | | — | | | 2,968 | | | |
Net accretion | | — | | | — | | | |
Purchases | | — | | | — | | | |
Sales / paydowns | | 22 | | | (104,991) | | | |
| | | | | | |
Transfers out of Level III (1) | | — | | | — | | | |
Ending Balance, March 31, 2023 | | $ | 15,928 | | | $ | 133,705 | | | |
| | | | | | | | | | | | | | |
| | March 31, 2024 |
| | Commercial Mortgage Loans, held for sale, measured at fair value | | | | |
Beginning balance, January 1, 2024 | | $ | — | | | | | |
Transfers into Level III(1) | | — | | | | | |
Originations | | 130,700 | | | | | |
Sales/paydowns | | (106,213) | | | | | |
Total realized and unrealized gain/(loss) included in earnings: | | | | | | |
Realized gain/(loss) on sale of commercial mortgage loans, held for sale | | 5,513 | | | | | |
| | | | | | |
Unrealized gain/(loss) on commercial mortgage loans, held for sale and other real estate investments | | 457 | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
Transfers out of Level III(1) | | — | | | | | |
Ending Balance, March 31, 2024 | | $ | 30,457 | | | | | |
________________________(1) There were no transfers in or out of Level III as of March 31, 2023.2024.
| | | | | | | | | | | | | | | | |
| | December 31, 2023 |
| | Real estate securities, trading, measured at fair value | | Commercial Mortgage Loans, held for sale, measured at fair value | | |
Beginning balance, January 1, 2023 | | $ | 235,728 | | | $ | 15,559 | | | |
Transfers into Level III(1) | | — | | | — | | | |
Originations | | — | | | 102,500 | | | |
Sales/paydowns | | (235,123) | | | (121,976) | | | |
Total realized and unrealized gain/(loss) included in earnings: | | | | | | |
Realized gain/(loss) on sale of commercial mortgage loans, held for sale | | — | | | 3,873 | | | |
| | | | | | |
Unrealized gain/(loss) on commercial mortgage loans, held for sale and other real estate investments | | — | | | 44 | | | |
Trading gain/(loss) | | (605) | | | — | | | |
| | | | | | |
| | | | | | |
Transfers out of Level III(1) | | — | | | — | | | |
Ending Balance, December 31, 2023 | | $ | — | | | $ | — | | | |
________________________
FRANKLIN BSP REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2023
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2022 |
| | Commercial Mortgage Loans, held for sale, measured at fair value | | Real estate securities, trading, measured at fair value | | Other real estate investments, measured at fair value | | |
Beginning balance, January 1, 2022 | | $ | 34,718 | | | $ | — | | | $ | 2,074 | | | |
Transfers into Level III (1) | | — | | | 4,566,871 | | | — | | | |
Total realized and unrealized gain/(loss) included in earnings: | | | | | | | | |
Realized gain/(loss) on sale of commercial mortgage loans, held for sale | | 2,358 | | | — | | | — | | | |
Realized gain/(loss) on sale of available for sale trading securities | | — | | | — | | | (33) | | | |
Unrealized gain/(loss) on commercial mortgage loans, held for sale and other real estate investments | | (511) | | | — | | | 4 | | | |
Trading gain/(loss) | | — | | | (119,220) | | | — | | | |
Net accretion | | — | | | — | | | — | | | |
Purchases | | 366,692 | | | — | | | — | | | |
Sales / paydowns | | (387,698) | | | (4,211,923) | | | (2,045) | | | |
| | | | | | | | |
Transfers out of Level III | | — | | | — | | | — | | | |
Ending Balance, December 31, 2022 | | $ | 15,559 | | | $ | 235,728 | | | $ | — | | | |
(1) Transfers intoThere were no transfers in or out of Level III include transfers related to ARM Agency Securities transferred from Level II.as of December 31, 2023.
The fair value of cash and cash equivalents and restricted cash are measured using observable quoted market prices, or Level I inputs and their carrying value approximatesapproximate their fair value. The fair value of borrowings under repurchase agreements approximate their carrying value on the consolidated balance sheets due to their short-term nature and are measured using Level III inputs.
Financial Instruments Measured at Fair Value on a Nonrecurring Basis
Real Estate Owned, held for sale, on the consolidated balance sheets are valued at fair value on a non-recurring basis in accordance with ASC 820 and are classified as Level III investments. In its evaluation of fair value, the Company applied the market approach utilizing an exit capitalization rate range between 5.00%-5.75% as its significant unobservable input. As of March 31, 2024 and December 31, 2023 the Company's Real estate owned, held for sale assets and liabilities, had a fair value of $91.4 million, net, representing 23 retail properties in the Walgreens Portfolio.
FRANKLIN BSP REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2024
(Unaudited)
Financial Instruments Not Measured at Fair Value
The fair values of the Company's commercial mortgage loans, held for investment and collateralized loan obligations, which are not reported at fair value on the consolidated balance sheets are reported below as of March 31, 20232024 and December 31, 20222023 (dollars in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | March 31, 2023 | | December 31, 2022 |
| | | Level | | Carrying Amount (1) | | Fair Value | | Carrying Amount (1) | | Fair Value |
Commercial mortgage loans, held for investment | Asset | | III | | $ | 5,051,501 | | | $ | 5,057,359 | | | $ | 5,269,776 | | | $ | 5,278,495 | |
Collateralized loan obligations | Liability | | III | | 3,052,802 | | | 2,987,015 | | | 3,121,983 | | | 3,055,810 | |
Mortgage note payable | Liability | | III | | 23,998 | | | 23,998 | | | 23,998 | | | 23,998 | |
Other financing and loan participation - commercial mortgage loans | Liability | | III | | 79,121 | | | 79,121 | | | 76,301 | | | 76,301 | |
Unsecured debt | Liability | | III | | 81,220 | | | 58,100 | | | 98,695 | | | 66,300 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | March 31, 2024 | | December 31, 2023 |
| | | Level | | Carrying Amount | | Fair Value | | Level | Carrying Amount | | Fair Value |
Commercial mortgage loans, held for investment(1) | Asset | | III | | $ | 5,233,420 | | | $ | 5,195,238 | | | III | $ | 5,036,942 | | | $ | 5,010,580 | |
Collateralized loan obligations(2) | Liability | | II | | 3,530,740 | | | 3,503,916 | | | II | 3,567,166 | | | 3,521,274 | |
Mortgage note payable | Liability | | III | | 23,998 | | | 23,998 | | | III | 23,998 | | | 23,998 | |
Other financings | Liability | | III | | 12,865 | | | 12,865 | | | III | 36,534 | | | 36,534 | |
Unsecured debt | Liability | | III | | 81,320 | | | 71,500 | | | III | 81,295 | | | 64,900 | |
________________________________________________________________________________(1) The carrying value is gross of $28.8$49.2 million and $40.8$47.2 million of allowance for credit losses as of March 31, 20232024 and December 31, 2022,2023, respectively.
(2)
Table Depending upon the significance of Contentsthe fair value inputs utilized in determining these fair values, our collateralized loan obligations are classified as either Level II or Level III of the fair value hierarchy. Beginning in the third quarter of 2023, the transfers from Level III to Level II were a result of the availability of current and reliable market data provided by third party pricing services or other valuation techniques which utilized observable inputs.FRANKLIN BSP REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2023
(Unaudited)
Repurchase agreements - commercial mortgage loans of $604.4$412.6 million and $680.9$299.7 million as of March 31, 20232024 and December 31, 2022,2023, respectively, and repurchase agreements - real estate securities of $228.9$194.8 million and $440.0$174.1 million as of March 31, 20232024 and December 31, 2022,2023, respectively, are not carried at fair value and does not include accrued interest expense, which are presented in Note 7 – Debt. For these instruments, carrying value generally approximates fair value and are classified as Level III.
The fair value of the commercial mortgage loans, held for investment is estimated using a discounted cash flow analysis, based on the Advisor's experience with similar types of investments. The Company estimates the fair value of the collateralized loan obligations using external broker quotes. The fair value of the other financing and loan participation-commercial mortgage loans is generally estimated using a discounted cash flow analysis. As of March 31, 2023, the Mortgage note payable was recorded at transaction proceeds, which are considered to be the best initial estimate of fair value. The fair value of the unsecuredOther financings is generally estimated using a discounted cash flow analysis. The fair value of the Unsecured debt is based on discounted cash flows using Company estimates for market yields on similarly structured debt instruments.
Note 1413 - Derivative Instruments
The Company uses derivative instruments primarily to manage the fair value variability of fixed rate assets caused by interest rate fluctuations and overall portfolio market risk.
The following derivative instruments were outstanding as of March 31, 2023 and December 31, 20222024 (dollars in thousands):
| | March 31, 2023 | | December 31, 2022 |
| | Fair Value | | | Fair Value |
| | | | Fair Value | |
| | | | Fair Value | |
| | | | Fair Value | |
Contract type | |
Contract type | |
Contract type | Contract type | | Notional | | Assets | | Liabilities | | Notional | | Assets | | Liabilities |
Credit default swaps | Credit default swaps | | $ | 18,000 | | | $ | 325 | | | $ | 92 | | | $ | 18,000 | | | $ | 234 | | | $ | 64 | |
Interest rate swaps (1) | | 12,500 | | | — | | | 202 | | | 9,800 | | | 90 | | | — | |
Credit default swaps | |
Credit default swaps | |
Interest rate swaps | |
Interest rate swaps | |
Interest rate swaps | |
Treasury note futures | |
Treasury note futures | |
Treasury note futures | Treasury note futures | | — | | | — | | | — | | | 3,500 | | | 91 | | | — | |
Total | Total | | $ | 30,500 | | | $ | 325 | | | $ | 294 | | | $ | 31,300 | | | $ | 415 | | | $ | 64 | |
Total | |
Total | |
FRANKLIN BSP REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2024
(Unaudited)
The following table indicates the net realized and unrealized gains and losses on derivatives, by primary underlying risk exposure, as included in loss on derivative instruments in the consolidated statements of operations for the three months ended March 31, 2024 and 2023 and March 31, 2022:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended March 31, 2023 | | Three Months Ended March 31, 2022 | | | | |
Contract type | | Unrealized (Gain)/Loss | | Realized (Gain)/Loss | | Unrealized (Gain)/Loss | | Realized (Gain)/Loss | | | | | | | | |
Credit default swaps | | $ | (63) | | | $ | — | | | $ | 99 | | | $ | (104) | | | | | | | | | |
Interest rate swaps | | 291 | | | — | | | 4,740 | | | (32,987) | | | | | | | | | |
Treasury note futures | | 92 | | | (44) | | | 124 | | | (939) | | | | | | | | | |
Options | | — | | | — | | | — | | | — | | | | | | | | | |
Total | | $ | 320 | | | $ | (44) | | | $ | 4,963 | | | $ | (34,030) | | | | | | | | | |
| | | | | | | | | | | | | | | | |
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| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
(dollars in thousands): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended March 31, 2024 | | Three Months Ended March 31, 2023 | | | | |
Contract type | | Unrealized Gain/(Loss) | | Realized Gain/(Loss) | | Unrealized Gain/(Loss) | | Realized Gain/(Loss) | | | | | | | | |
Credit default swaps | | $ | (43) | | | $ | (96) | | | $ | 63 | | | $ | — | | | | | | | | | |
Interest rate swaps | | — | | | — | | | (291) | | | — | | | | | | | | | |
Treasury note futures | | (95) | | | 386 | | | (92) | | | 44 | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Total | | $ | (138) | | | $ | 290 | | | $ | (320) | | | $ | 44 | | | | | | | | | |
Interest rate swap agreements are measured at fair value on a recurring basis primarily using Level II Inputs in accordance with ASU 2010-06, Fair Value Measurements and Disclosures (Topic 820). In determining fair value estimates for swaps, the Company utilizes the standard methodology of netting the discounted future fixed cash payments and the discounted future variable cash receipts which are based on expected future interest rates derived from observable market interest rate curves. The Company also incorporates both its own nonperformance risk and its counterparties’ nonperformance risk in determining fair value. In considering the effect of nonperformance risk, the Company considered the impact of netting and credit enhancements, such as collateral postings and guarantees, and has concluded that counterparty risk is not significant to the overall valuation.
FRANKLIN BSP REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2023
(Unaudited)
Note 1514 - Offsetting Assets and Liabilities
The Company's consolidated balance sheets used a gross presentation of repurchase agreements and collateral pledged. As of March 31, 2024 and December 31, 2023, there were no assets which were presented gross within the scope of ASC 210-20, Balance Sheet - Offsetting. The table below provides a gross presentation, the effects of offsetting, and a net presentation of the Company's derivative instruments and repurchase agreements within the scope of ASC 210-20, Balance Sheet—Offsetting, as of March 31, 20232024 and December 31, 20222023 (dollars in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | |
| |
| Gross Amounts Not Offset on the Balance Sheet | |
Assets | | Gross Amounts of Recognized Assets | | Gross Amounts Offset on the Balance Sheet | | Net Amount of Assets Presented on the Balance Sheet | | Financial Instruments | | Cash Collateral (1) | | Net Amount |
March 31, 2023 | | | | | | | | | | | | |
Derivative instruments, at fair value
| | $ | 325 | | | $ | — | | | $ | 325 | | | $ | — | | | $ | — | | | $ | 325 | |
December 31, 2022 | | | | | | | | | | | | |
Derivative instruments, at fair value | | $ | 415 | | | $ | — | | | $ | 415 | | | $ | — | | | $ | — | | | $ | 415 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| |
| |
| |
| | Gross Amounts Not Offset on the Balance Sheet | | |
Liabilities | | Gross Amounts of Recognized Liabilities | | Gross Amounts Offset on the Balance Sheet | | Net Amount of Liabilities Presented on the Balance Sheet | | Financial Instruments | | Cash Collateral(1) | | Net Amount |
March 31, 2024 | | | | | | | | | | | | |
Repurchase agreements - commercial mortgage loans | | $ | 412,556 | | | $ | — | | | $ | 412,556 | | | $ | 412,556 | | | $ | — | | | $ | — | |
Repurchase agreements - real estate securities | | 194,769 | | | — | | | 194,769 | | | 194,769 | | | — | | | — | |
Derivative instruments, at fair value | | 524 | | | — | | | 524 | | | — | | | 524 | | | — | |
December 31, 2023 | | | | | | | | | | | | |
Repurchase agreements - commercial mortgage loans | | $ | 299,707 | | | $ | — | | | $ | 299,707 | | | $ | 299,707 | | | $ | — | | | $ | — | |
Repurchase agreements - real estate securities | | 174,055 | | | — | | | 174,055 | | | 174,055 | | | — | | | — | |
Derivative instruments, at fair value | | — | | | — | | | — | | | — | | | — | | | — | |
_________________________________________________________See notes below.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| |
| |
| |
| | Gross Amounts Not Offset on the Balance Sheet | | |
Liabilities | | Gross Amounts of Recognized Liabilities | | Gross Amounts Offset on the Balance Sheet | | Net Amount of Liabilities Presented on the Balance Sheet | | Financial Instruments | | Cash Collateral (1) | | Net Amount |
March 31, 2023 | | | | | | | | | | | | |
Repurchase agreements - commercial mortgage loans | | $ | 604,421 | | | $ | — | | | $ | 604,421 | | | $ | 604,421 | | | $ | — | | | $ | — | |
Repurchase agreements - real estate securities | | 228,934 | | | — | | | 228,934 | | | 228,934 | | | — | | | — | |
Derivative instruments, at fair value | | 294 | | | — | | | 294 | | | — | | | 294 | | | — | |
December 31, 2022 | | | | | | | | | | | | |
Repurchase agreements - commercial mortgage loans | | $ | 680,859 | | | $ | — | | | $ | 680,859 | | | $ | 680,859 | | | $ | — | | | $ | — | |
Repurchase agreements - real estate securities | | 440,008 | | | — | | | 440,008 | | | 440,008 | | | — | | | — | |
Derivative instruments, at fair value | | 64 | | | — | | | 64 | | | — | | | 64 | | | — | |
_________________________________________________________________________________(1) Included in Restricted cash in the Company's consolidated balance sheets.
FRANKLIN BSP REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2024
(Unaudited)
Note 1615 - Segment Reporting
The Company conducts its business through the following segments:
•The real estate debt business focuses on originating, acquiring and asset managing commercial real estate debt investments, including first mortgages, subordinate mortgages, mezzanine loans and participations in such loans.
•The real estate securities business focuses on investing in and asset managing real estate securities. Historically this business has focused primarily on CMBS, CRE CLO bonds, CDO notes, and other securities. As a result of the October 2021 acquisition of Capstead, the Company acquired a portfolio of ARM Agency Securities.
•The commercial real estate conduit business operated through the Company's TRS, which is focused on generating risk-adjusted returns by originating and subsequently selling fixed-rate commercial real estate loans into the CMBS securitization market at a profit. The TRS may also hold certain mezzanine loans that don't qualify as good REIT assets due to any potential loss from foreclosure.
FRANKLIN BSP REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2023
(Unaudited)
•The real estate owned business represents real estate acquired by the Company through foreclosure, deed in lieu of foreclosure, or purchase.
Profit or loss on segment operations is measured by Net income/(loss) included in the consolidated statements of operations. The following table represents the Company's operations by segment for the three months ended March 31, 20232024 and March 31, 20222023 (dollars in thousands):
| | Three Months Ended March 31, 2023 | | Total | | Real Estate Debt and Other Real Estate Investments | | Real Estate Securities | | TRS | | Real Estate Owned |
Interest income | | $ | 130,536 | | | $ | 125,949 | | | $ | 3,568 | | | $ | 322 | | | $ | 697 | |
Revenue from real estate owned | | 3,312 | | | — | | | — | | | — | | | 3,312 | |
Interest expense | | 71,075 | | | 66,958 | | | 3,446 | | | 216 | | | 455 | |
Net income/(loss) | | 43,839 | | | 43,531 | | | 3,295 | | | (3,314) | | | 327 | |
Total assets as of March 31, 2023 | | 5,839,026 | | | 5,242,621 | | | 253,809 | | | 95,490 | | | 247,106 | |
Three Months Ended March 31, 2022 | |
Interest income | | $ | 75,258 | | | $ | 55,687 | | | $ | 18,885 | | | $ | 686 | | | $ | — | |
Revenue from real estate owned | | 2,312 | | | — | | | — | | | — | | | 2,312 | |
Interest expense | | 22,480 | | | 19,464 | | | 2,616 | | | 206 | | | 194 | |
Net income/(loss) | | (22,507) | | | 22,092 | | | (45,311) | | | (107) | | | 819 | |
Total assets as of December 31, 2022 | | 6,203,601 | | | 5,444,152 | | | 474,231 | | | 63,307 | | | 221,911 | |
Three Months Ended March 31, 2024 | |
| Three Months Ended March 31, 2024 | |
| | Three Months Ended March 31, 2024 | | | Total | | Real Estate Debt and Other Real Estate Investments | | Real Estate Securities | | TRS | | Real Estate Owned |
Interest income | |
Revenue from real estate owned | |
Interest expense | |
Net income/(loss) | |
Total assets as of March 31, 2024 | |
| Three Months Ended March 31, 2023 | |
Three Months Ended March 31, 2023 | |
Three Months Ended March 31, 2023 | |
Interest income | |
Interest income | |
Interest income | |
Revenue from real estate owned | |
Interest expense | |
Net income/(loss) | |
Total assets as of December 31, 2023 | |
For the purposes of the table above, management fees have been allocated to the business segments using an agreed upon percentage of each respective segment's prior period equity. Administrative fees have beenare derived from an agreed upon reimbursable amount based on employee time charged and allocated to the business segments using a percentage derived from taking the respective business segment's prior period equity as a percent of consolidated equity and multiplying it by the Company's total administrative fee.segments.
Note 1716 - Subsequent Events
Subsequent toThe Company has evaluated subsequent events through the quarter endedfiling of this Quarterly Report on Form 10-Q. Based on this evaluation, there were no subsequent events from March 31, 2023,2024 through the following events took place:
Williamsburg Hotel Bankruptcy Case - see Part II, Item 1 "Legal Proceedings" for details.
Loan Fraud Lawsuit - see Part II, Item 1 "Legal Proceedings" for details.
date the financial statements were issued.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis should be read in conjunction with the accompanying financial statements of Franklin BSP Realty Trust, Inc. the notes thereto and other financial information included elsewhere in this Quarterly Report on Form 10-Q, as well as our Annual Report on Form 10-K for the fiscal year ended December 31, 20222023 filed with the U.S. Securities and Exchange Commission (the "SEC") on March 16, 2023.February 26, 2024.
As used herein, the terms "the Company," "we," "our" and "us" refer to Franklin BSP Realty Trust, Inc., a Maryland corporation and, as required by context, to Benefit Street Partners Realty Operating Partnership, L.P., a Delaware limited partnership, which we refer to as the "OP," and to its subsidiaries. We are externally managed by Benefit Street Partners L.L.C. (our(the "Advisor").
Certain statements included in this Quarterly Report on Form 10-Q are forward-looking statements. Those statements include statements regarding the intent, belief or current expectations of the Company and members of our management team, as well as the assumptions on which such statements are based, and generally are identified by the use of words such as "may," "will," "seeks," "anticipates," "believes," "estimates," "expects," "plans," "intends," "should" or similar expressions. Actual results may differ materially from those contemplated by such forward-looking statements. Further, forward-looking statements speak only as of the date they are made, and we undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time, unless required by law.
Our forward-looking statements are subject to various risks and uncertainties. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements, and thus our investors should not place undue reliance on these statements. We believe these factors include but are not limited to those described under the section entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022,2023, as such factors may be updated from time to time in our periodic filings with the Securities and Exchange Commission (the “SEC”), which are accessible on the SEC’s website at http://www.sec.gov. These factors include:
•changes in our business and investment strategy;
•our ability to make investments in a timely manner or on acceptable terms;
•the impact of national health crises;
•currentchanges in credit market conditions and our ability to obtain long-term financing for our investments in a timely manner and on terms that are consistent with what we project when we invest;
•the effect of general market, real estate market, economic and political conditions, including changing interest rate environments (and sustained high interest rates) and inflation;
•our ability to make scheduled payments on our debt obligations;
•our ability to generate sufficient cash flows to make distributions to our stockholders;
•our ability to generate sufficient debt and equity capital to fund additional investments;
•our ability to refinance our existing financing arrangements;
•our ability to recover unpaid principal on defaulted loans;
•the degree and nature of our competition;
•the availability of qualified personnel;
•our ability to recover or mitigate estimated losses on non-performing assets;
•we may be deemed to be an investment company under the Investment Company Actimpact of 1940, as amended (the "Investment Company Act"), and thus subject to regulation under the Investment Company Act;national health crises;
•our ability to maintain our qualification as a real estate investment trust ("REIT"); and
•other factors set forth under the caption "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2022.2023.
Overview
The Company is a Maryland corporation and has made tax elections to be treated as a real estate investment trust ("REIT") for U.S. federal income tax purposes since 2013. The Company, through one or more subsidiaries which are each treated as a taxable REIT subsidiary ("TRS"), is indirectly subject to U.S. federal, state and local income taxes. We commenced business in May 2013. We primarily originate, acquire and manage a diversified portfolio of commercial real estate debt investments secured by properties located within and outside of the United States. Substantially all of our business is conducted through the OP, a Delaware limited partnership. We are the sole general partner and directly or indirectly hold all of the units of limited partner interests in the OP.
The Company has no employees. We are managed by ourthe Advisor pursuant to anthe Advisory Agreement (the "Advisory Agreement"). OurThe Advisor manages our affairs on a day-to-day basis. The Advisor receives compensation and fees for services related to the investment and management of our assets and our operations.
The Advisor, an SEC-registered investment adviser, is a credit-focused alternative asset management firm. The Advisor manages funds for institutions and high-net-worth investors across various credit funds and complementary strategies including high yield, levered loans, private / opportunistic debt, liquid credit, structured credit and commercial real estate debt. These strategies complement each other as they all leverage the sourcing, analytical, compliance, and operational capabilities that encompass the Advisor’s robust platform. The Advisor is a wholly-owned subsidiary of Franklin Resources, Inc., which together with its various subsidiaries operates as "Franklin Templeton".
The Company invests in commercial real estate debt investments, which may include first mortgage loans, subordinated mortgage loans, mezzanine loans and participations in such loans. The Company also originates conduit loans which the Company intends to sell through its TRS into commercial mortgage-backed securities ("CMBS") securitization transactions at a profit.transactions. Historically this business has focused primarily on CMBS, commercial real estate collateralized loan obligation bonds ("CRE CLO bonds"), collateralized debt obligations ("CDOs") and other securities. As a result of the October 2021 acquisition of Capstead Mortgage Corporation ("Capstead"), the Company acquired a portfolio of residential mortgage-backed securities ("RMBS") in the form of residential adjustable-rate mortgage pass-through securities ("ARM Agency Securities" or "ARMs") issued and guaranteed by government-sponsored enterprises or by an agency of the federal government. Although the Company continues to hold a small portion of this portfolio it does not intend to do so long-term and intends to reinvest proceeds from the remaining portion of the portfolio in its other businesses. The Company also owns real estate which it acquiresthat was either acquired by the Company through foreclosure andor deed in lieu of foreclosure, and which it purchasesor that was purchased for investment, typicallyprimarily subject to triple net leases.
Book Value Per Share
The following table calculates our book value per share as of March 31, 20232024 and December 31, 2022 ($ in2023 (in thousands, except share and per share data)amounts):
| | March 31, 2023 | | December 31, 2022 |
| | March 31, 2024 | | | | March 31, 2024 | | December 31, 2023 |
Stockholders' equity applicable to common stock | Stockholders' equity applicable to common stock | | $ | 1,310,919 | | | $ | 1,304,238 | |
| Shares: | Shares: | |
Common stock | Common stock | | 82,572,550 | | | 82,479,743 | |
Restricted stock | | 791,421 | | | 513,041 | |
Total outstanding | | 83,363,971 | | | 82,992,784 | |
Common stock | |
Common stock | |
Restricted stock and restricted stock units | |
Total outstanding shares | |
Book value per share | Book value per share | | $ | 15.73 | | | $ | 15.72 | |
The following table calculates our fully-converted book value per share as of March 31, 20232024 and December 31, 2022 ($ in2023 (in thousands, except share and per share data)amounts):
| | March 31, 2023 | | December 31, 2022 |
| | March 31, 2024 | | | | March 31, 2024 | | December 31, 2023 |
Stockholders' equity applicable to convertible common stock | Stockholders' equity applicable to convertible common stock | | $ | 1,400,667 | | | $ | 1,398,986 | |
| Shares: | Shares: | |
Common stock | Common stock | | 82,572,550 | | | 82,479,743 | |
Equity compensation awards (restricted stock and restricted stock units) | | 791,421 | | | 513,041 | |
Common stock | |
Common stock | |
Restricted stock and restricted stock units | |
Series H convertible preferred stock | Series H convertible preferred stock | | 5,370,640 | | | 5,370,640 | |
Series I convertible preferred stock | | — | | | 299,200 | |
Total outstanding | | 88,734,611 | | | 88,662,624 | |
Fully-converted book value per share (1) (2) | | $ | 15.78 | | | $ | 15.78 | |
Total outstanding shares | |
Fully-converted book value per share(1)(2) | |
________________________(1) Fully-converted book value per share reflects full conversion of our outstanding series of our Series H and Series Iconvertible preferred stock and vesting of our outstanding equity compensation awards.
(2) Excluding the amounts for accumulated depreciation and amortization of real property of $6.5$10.4 million and $5.2$9.4 million as of March 31, 20232024 and December 31, 2022,2023, respectively, would result in a fully-converted book value per share of $15.86$15.79 and $15.84$15.88 as of March 31, 20232024 and December 31, 2022,2023, respectively.
Critical Accounting Estimates
Our financial statements are prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP"), which requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Critical accounting estimates are those that require the application of management’s most difficult, subjective or complex judgments on matters that are inherently uncertain and that may change in subsequent periods. In preparing the financial statements, management has made estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. In preparing the financial statements, management has utilized available information, including our past history, industry standards and the current economic environment, among other factors, in forming its estimates and judgments, giving due consideration to materiality. Actual results may differ from these estimates. In addition, other companies may utilize different estimates, which may impact the comparability of our results of operations to those of companies in similar businesses.
During the three months ended March 31, 2023,2024, there were no material changes to our critical accounting estimates as compared to the critical accounting estimates disclosed in Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2022.2023.
Portfolio
As of March 31, 20232024 and December 31, 2022,2023, our portfolio consisted of 157145 and 161144 commercial mortgage loans, respectively, excluding commercial mortgage loans accountedheld for under the fair value option.investment, respectively. The commercial mortgage loans, held for investment, as of March 31, 2023 and December 31, 2022 had a total carrying value, net of allowance for credit losses, as of $5,022.8March 31, 2024 and December 31, 2023 had a total carrying value of $5,184.2 million and $5,228.9$4,989.8 million, respectively. As of March 31, 2023 and December 31, 2022, our total2024 the contractual principal balance outstanding of commercial mortgage loans, held for sale, measured at fair value werewas $30.0 million, comprised of twoone loans, with total fair valuewhich was not in default or greater than ninety days past due. As of $15.9 million and twoDecember 31, 2023 the Company did not hold any commercial mortgage loans, with total fair value of $15.6 million, respectively.held for sale. As of March 31, 20232024 and December 31, 20222023, we had real estate securities, trading, measured at fair values of $133.7$217.9 million and $235.7 million, respectively, due to the Company's progress in selling down the ARM Agency Securities portfolio acquired from Capstead. As of March 31, 2023 and December 31, 2022, we had $112.3 million and $221.0$242.6 million, respectively, of real estate securities, available for sale, measured at fair value. As of March 31, 20232024 and December 31, 2022,2023, our real estate owned, held for investment portfolio was composed of 16 and 11three investments respectively, with carrying values of $148.6$115.2 million and $127.8$115.8 million, respectively. As of March 31, 20232024 and December 31, 2022,2023, we had two23 properties classified as real estate owned, held for sale with a combined fair valuecarrying values of $35.2 million and $36.5 million, respectively.$103.7 million.
As of March 31, 2023,2024, we had two4 loans (all secured by multifamily properties) designated as non-performing status with a total amortized cost basis of $83.5 million$307.5 million. As of March 31, 2024, one loan designated as non-performing status. One loan is forand put on cost recovery method was determined to have a hotel property located in New York City, which was placed on non-accrual status in 2019 and had an amortized cost basis of $57.1$0.7 million as of March 31, 2023 and December 31, 2022. No specific allowance for credit losses has been recorded onlosses. During the loan. The Company did not recognize any interest income on the non-accrual loan during the three monthsquarter ended March 31, 2023. Subsequent to March 31, 2023, in April 2023, the Company received full principal repayment related to the New York City hotel property.
The second2024, one multifamily loan relates to a commercial mortgage loan with a fully funded outstanding principal balance of $38.4 million and an amortized costs basis of $26.4 million collateralized by a portfolio of retail properties in various locations throughout the United States. The loan has been assigned a risk rating of “5” and concurrently, the Company elected to apply a practical expedient for collateral dependent assets in which a specific allowance for credit loss was determined. The loan
was evaluated in accordance with ASC 310 - Receivables and was determined to be a TDR. During the three months ended March 31, 2023 the Company recorded an additional $0.8 million to the specific allowance for credit losses and charged off the remaining $15.1 million specific allowance which directly reduced the amortized cost basis of the loan. The Company designated the loan as non-performing and placed the loan on cost recovery status during the second quarter of 2022. Upon designation, the Company ceased the recognition of interest income. Any contractual amounts received are accounted for under the cost-recovery method, until the loan qualifies for return to accrual status. Asas of December 31, 2022,2023 was assumed by the Company had $2.6 million in cost recovery proceeds. During the three months ended March 31, 2023, $0.6 millionthrough a deed-in-lieu of additional cost recovery proceeds was receivedforeclosure, and $1.1 million was transferred to real estate owned in connection with the five properties foreclosed upon during the period. As of March 31, 2023 the Company had $2.1 million in cost recovery proceeds. Cost recovery proceeds directly reduce the amortized cost of the loan. As of December 31, 2022, the retail portfolio had a carrying value of $46.0 million net of a specific allowance for credit losses of $14.2 million. See "Part II, Item 1. Legal Proceedings" of this Quarterly Report on Form 10-Q for more information about this loan and related litigation. Future developments relating to these legal proceedings could have a material impact on our future results.subsequently sold (see "Note 3 - Commercial Mortgage Loans").
As of March 31, 20232024 and December 31, 20222023 our commercial mortgage loans, held for investment, excluding commercial mortgage loans on non-performing status, had a weighted average coupon of 8.8%9.2% and 8.3%9.2%, respectively, and a weighted average remaining contractual maturity life of 1.21.0 years and 1.40.9 years, respectively.
As of March 31, 2023, the value of the Company’s residential ARM Agency Securities portfolio was $133.7 million, compared to $235.7 million as of December 31, 2022. The reduction in the value of this portfolio during the three months ended March 31, 2023, is due in part to (i) $7.5 million of principal paydowns and (ii) $95.5 million of sales and (iii) $3.0 million of trading gains related to principal paydowns, changes in market values, and sales of these securities.
The following charts summarize our commercial mortgage loans, held for investment, by coupon rate type, collateral type and geographical region and state as of March 31, 20232024 and December 31, 2022:2023:
An investments region classification is defined according to the below map based on the location of investments secured property.
The following charts show the par value by contractual maturity year for the commercial mortgage loans, held for investmentsinvestment (excluding commercial mortgage loans in principal default) in our portfolio as of March 31, 20232024 and December 31, 2022:2023:
The following table shows selected data from our commercial mortgage loans, held for investment in our portfolio as of March 31, 20232024 (dollars in thousands):
| Loan Type | Loan Type | Property Type | Par Value | Interest Rate (1) | Effective Yield (5) | Loan to Value (2) | Loan Type | Risk Rating (1) | Property Type | State | Par Value | Amortized Cost | Origination Date(2) | Fully Extended Maturity(3) | Interest Rate(4)(5) | Effective Yield(6) | Loan to Value(7) |
Senior Debt 1 | Senior Debt 1 | Hospitality | $4,813 | 1 month LIBOR + 4.00% | 8.86% | 77.0% | Senior Debt 1 | 4 | Multifamily | Ohio | $35,212 | 4/23/2018 | 9/9/2025 | 1M SOFR Term + 4.50% | 9.83% | 83.6% |
Senior Debt 2 | Senior Debt 2 | Hospitality | 57,075 | 1 month LIBOR + 5.19% | 10.05% | 51.8% | Senior Debt 2 | 2 | Hospitality | Louisiana | 21,717 | 6/28/2018 | 3/9/2025 | 1M SOFR Term + 4.25% | 9.58% | 68.8% |
Senior Debt 3 | Senior Debt 3 | Multifamily | 34,530 | 1 month SOFR + 3.03% | 7.83% | 63.7% | Senior Debt 3 | 2 | Office | New Jersey | 13,874 | 8/28/2018 | 9/9/2024 | 1M SOFR Term + 5.50% | 10.83% | 70.0% |
Senior Debt 4 | Senior Debt 4 | Multifamily | 35,212 | 1 month SOFR + 4.50% | 9.30% | 83.6% | Senior Debt 4 | 2 | Office | Maryland | 41,085 | 4/30/2019 | 5/9/2025 | 1M SOFR Term + 3.56% | 8.89% | 71.0% |
Senior Debt 5 | Senior Debt 5 | Hospitality | 22,036 | 1 month SOFR + 4.25% | 9.05% | 68.8% | Senior Debt 5 | 4 | Hospitality | Texas | 18,398 | 7/18/2019 | 4/9/2024 | 1M SOFR Term + 3.84% | 9.17% | 62.6% |
Senior Debt 6 | Senior Debt 6 | Office | 18,620 | 1 month SOFR + 4.75% | 9.55% | 70.0% | Senior Debt 6 | 2 | Hospitality | Michigan | 12,879 | 9/17/2019 | 10/9/2025 | 1M SOFR Term + 4.41% | 9.74% | 56.4% |
Senior Debt 7 | Senior Debt 7 | Office | 43,786 | 1 month SOFR + 3.56% | 8.36% | 71.0% | Senior Debt 7 | 2 | Hospitality | New York | 4,805 | 7/9/2019 | 7/9/2025 | 1M SOFR Term + 5.25% | 10.58% | 47.7% |
Senior Debt 8 | Senior Debt 8 | Hospitality | 9,506 | 1 month SOFR + 5.57% | 10.37% | 68.7% | Senior Debt 8 | 2 | Office | Arizona | 14,768 | 11/22/2019 | 12/9/2024 | 1M SOFR Term + 4.00% | 9.33% | 70.9% |
Senior Debt 9 | Senior Debt 9 | Hospitality | 19,293 | 1 month SOFR + 3.84% | 8.64% | 62.6% | Senior Debt 9 | 4 | Office | Georgia | 23,444 | 12/17/2019 | 1/9/2026 | 1M SOFR Term + 2.25% | 7.58% | 64.9% |
Senior Debt 10 | Senior Debt 10 | Hospitality | 12,964 | 1 month SOFR + 3.02% | 7.82% | 56.4% | Senior Debt 10 | 2 | Manufactured Housing | Arkansas | 1,293 | 4/22/2020 | 5/9/2025 | 5.50% | 62.8% |
Senior Debt 11 | Senior Debt 11 | Hospitality | 4,974 | 1 month LIBOR + 4.25% | 9.11% | 47.7% | Senior Debt 11 | 3 | Office | Texas | 17,003 | 10/6/2020 | 10/9/2025 | Adj. 1M SOFR Term + 4.50% | 9.94% | 47.9% |
Senior Debt 12 | Senior Debt 12 | Hospitality | 31,450 | 1 month SOFR + 5.25% | 10.05% | 31.0% | Senior Debt 12 | 2 | Office | Massachusetts | 62,691 | 62,582 | 10/8/2020 | 10/9/2025 | 5.15% | 52.5% |
Senior Debt 13 | Senior Debt 13 | Office | 15,104 | 1 month SOFR + 4.00% | 8.80% | 70.9% | Senior Debt 13 | 3 | Office | Michigan | 30,186 | 10/14/2020 | 7/9/2025 | 1M SOFR Term + 2.81% | 8.14% | 66.0% |
Senior Debt 14 | Senior Debt 14 | Office | 25,802 | 1 month LIBOR + 4.35% | 9.21% | 64.9% | Senior Debt 14 | 2 | Office | Texas | 9,129 | 11/6/2020 | 11/9/2025 | Adj. 1M SOFR Term + 5.00% | 10.44% | 67.8% |
Senior Debt 15 | Senior Debt 15 | Multifamily | 10,761 | 1 month SOFR + 4.25% | 9.05% | 72.4% | Senior Debt 15 | 2 | Multifamily | Texas | 11,536 | 1/22/2021 | 2/9/2026 | Adj. 1M SOFR Term + 4.55% | 9.99% | 73.0% |
Senior Debt 16 (6) | Office | 32,439 | 1 month SOFR + 4.83% | 9.64% | 78.3% |
Senior Debt 16 | | Senior Debt 16 | 4 | Office | Colorado | 44,913 | 3/1/2021 | 3/9/2028 | 5.50% | 53.9% |
Senior Debt 17 | Senior Debt 17 | Manufactured Housing | 1,323 | 5.50% | 62.8% | Senior Debt 17 | 2 | Multifamily | Texas | 34,190 | 3/5/2021 | 3/9/2025 | 1M SOFR Term + 4.10% | 9.43% | 78.2% |
Senior Debt 18 | Senior Debt 18 | Manufactured Housing | 7,680 | 1 month LIBOR + 4.50% | 9.36% | 66.7% | Senior Debt 18 | 3 | Multifamily | Texas | 55,000 | 3/16/2021 | 5/9/2026 | 1M SOFR Term + 4.00% | 9.33% | 71.6% |
Senior Debt 19 | Senior Debt 19 | Self Storage | 29,895 | 1 month LIBOR + 5.00% | 9.86% | 58.8% | Senior Debt 19 | 2 | Multifamily | Texas | 14,700 | 3/15/2021 | 4/9/2026 | Adj. 1M SOFR Term + 3.39% | 8.83% | 70.6% |
Senior Debt 20 | Senior Debt 20 | Multifamily | 14,501 | 1 month SOFR + 4.83% | 9.63% | 70.0% | Senior Debt 20 | 2 | Multifamily | Pennsylvania | 8,898 | 8,897 | 3/23/2021 | 4/9/2026 | Adj. 1M SOFR Term + 3.80% | 9.24% | 69.9% |
Senior Debt 21 | Senior Debt 21 | Manufactured Housing | 5,020 | 1 month LIBOR + 5.25% | 10.11% | 65.9% | Senior Debt 21 | 3 | Multifamily | Texas | 19,804 | 19,803 | 3/25/2021 | 4/9/2026 | Adj. 1M SOFR Term + 3.60% | 9.04% | 70.8% |
Senior Debt 22 | Senior Debt 22 | Office | 18,103 | 1 month LIBOR + 4.50% | 9.36% | 47.9% | Senior Debt 22 | 2 | Multifamily | Texas | 43,246 | 43,238 | 4/1/2021 | 4/9/2026 | Adj. 1M SOFR Term + 2.95% | 8.39% | 71.6% |
Senior Debt 23 | Senior Debt 23 | Office | 64,957 | 5.15% | 52.5% | Senior Debt 23 | 2 | Hospitality | Louisiana | 25,700 | 4/15/2021 | 5/9/2026 | Adj. 1M SOFR Term + 5.60% | 11.04% | 61.0% |
Senior Debt 24 | Senior Debt 24 | Office | 35,000 | 1 month LIBOR + 5.21% | 10.07% | 66.0% | Senior Debt 24 | 2 | Mixed Use | Washington | 32,500 | 6/30/2021 | 1/9/2026 | Adj. 1M SOFR Term + 3.70% | 9.14% | 69.7% |
Senior Debt 25 | Senior Debt 25 | Office | 12,750 | 1 month LIBOR + 5.00% | 9.86% | 67.8% | Senior Debt 25 | 3 | Multifamily | Texas | 75,928 | 75,904 | 3/31/2021 | 4/9/2026 | Adj. 1M SOFR Term + 2.95% | 8.39% | 72.6% |
Senior Debt 26 | Senior Debt 26 | Multifamily | 39,097 | 1 month LIBOR + 4.45% | 9.31% | 66.5% | Senior Debt 26 | 3 | Multifamily | Texas | 20,450 | 20,443 | 4/22/2021 | 5/9/2026 | Adj. 1M SOFR Term + 3.60% | 9.04% | 67.7% |
Senior Debt 27 | Senior Debt 27 | Multifamily | 12,363 | 1 month LIBOR + 4.55% | 9.41% | 73.0% | Senior Debt 27 | 2 | Multifamily | Texas | 30,320 | 30,311 | 3/31/2021 | 4/9/2026 | Adj. 1M SOFR Term + 2.95% | 8.39% | 70.4% |
Senior Debt 28 | Senior Debt 28 | Multifamily | 21,000 | 1 month LIBOR + 4.60% | 9.46% | 66.7% | Senior Debt 28 | 2 | Multifamily | Texas | 35,466 | 35,459 | 4/1/2021 | 4/9/2026 | Adj. 1M SOFR Term + 2.95% | 8.39% | 71.7% |
Senior Debt 29 | Senior Debt 29 | Office | 11,113 | 1 month SOFR + 5.56% | 10.36% | 63.9% | Senior Debt 29 | 2 | Multifamily | Texas | 33,588 | 33,583 | 4/1/2021 | 4/9/2026 | Adj. 1M SOFR Term + 2.95% | 8.39% | 72.2% |
Senior Debt 30 | Senior Debt 30 | Office | 44,058 | 1 month LIBOR + 3.95% | 8.81% | 53.9% | Senior Debt 30 | 2 | Multifamily | Florida | 154,814 | 154,610 | 5/26/2021 | 6/9/2026 | 1M SOFR Term + 4.35% | 9.68% | 47.8% |
Senior Debt 31 (2) | Multifamily | 16,694 | 1 month SOFR + 8.00% | 12.80% | —% |
Senior Debt 31 | | Senior Debt 31 | 2 | Hospitality | Florida | 36,750 | 36,734 | 5/20/2021 | 6/9/2026 | Adj. 1M SOFR Term + 6.25% | 11.69% | 59.2% |
Senior Debt 32 | Senior Debt 32 | Hospitality | 23,000 | 1 month LIBOR + 5.79% | 10.65% | 57.2% | Senior Debt 32 | 2 | Multifamily | North Carolina | 35,116 | 35,015 | 7/22/2021 | 3/9/2027 | Adj. 1M SOFR Term + 8.00% | 13.44% | N/A |
Senior Debt 33 | Senior Debt 33 | Multifamily | 34,750 | 1 month SOFR + 4.10% | 8.90% | 78.2% | Senior Debt 33 | 2 | Multifamily | Texas | 16,395 | 10/6/2021 | 10/9/2026 | Adj. 1M SOFR Term + 3.75% | 9.19% | 76.9% |
Senior Debt 34 | Senior Debt 34 | Multifamily | 12,325 | 1 month LIBOR + 4.50% | 9.36% | 83.3% | Senior Debt 34 | 2 | Multifamily | South Carolina | 41,449 | 9/2/2021 | 9/9/2025 | Adj. 1M SOFR Term + 3.40% | 8.84% | 79.9% |
Senior Debt 35 | Senior Debt 35 | Multifamily | 5,575 | 1 month LIBOR + 4.50% | 9.36% | 83.6% | Senior Debt 35 | 3 | Multifamily | Texas | 34,760 | 34,728 | 9/20/2021 | 10/9/2024 | Adj. 1M SOFR Term + 3.64% | 9.08% | 66.0% |
Senior Debt 36 | Senior Debt 36 | Multifamily | 55,000 | 1 month LIBOR + 3.00% | 7.86% | 71.6% | Senior Debt 36 | 2 | Multifamily | Oregon | 8,500 | 8,493 | 9/8/2021 | 9/9/2026 | Adj. 1M SOFR Term + 3.75% | 9.19% | 79.4% |
Senior Debt 37 | Senior Debt 37 | Multifamily | 14,465 | 1 month LIBOR + 3.39% | 8.25% | 70.6% | Senior Debt 37 | 3 | Multifamily | Texas | 14,890 | 9/9/2021 | 9/9/2026 | Adj. 1M SOFR Term + 3.15% | 8.59% | 79.8% |
Senior Debt 38 | Senior Debt 38 | Multifamily | 8,898 | 1 month LIBOR + 3.80% | 8.66% | 69.9% | Senior Debt 38 | 2 | Multifamily | South Carolina | 69,500 | 69,372 | 9/20/2021 | 10/9/2026 | Adj. 1M SOFR Term + 3.25% | 8.69% | 77.1% |
Senior Debt 39 | Senior Debt 39 | Multifamily | 18,653 | 1 month LIBOR + 6.25% | 11.11% | 67.0% | Senior Debt 39 | 2 | Multifamily | Georgia | 11,325 | 11,312 | 9/22/2021 | 10/9/2026 | Adj. 1M SOFR Term + 3.75% | 9.19% | 70.0% |
Senior Debt 40 | Senior Debt 40 | Multifamily | 19,536 | 1 month LIBOR + 3.60% | 8.46% | 70.8% | Senior Debt 40 | 2 | Multifamily | Texas | 27,199 | 27,172 | 9/30/2021 | 10/9/2026 | Adj. 1M SOFR Term + 3.20% | 8.64% | 77.3% |
Senior Debt 41 | Senior Debt 41 | Multifamily | 43,096 | 1 month LIBOR + 2.95% | 7.81% | 71.6% | Senior Debt 41 | 2 | Hospitality | Texas | 17,122 | 9/30/2021 | 10/9/2026 | Adj. 1M SOFR Term + 5.25% | 10.69% | 61.0% |
Senior Debt 42 | Senior Debt 42 | Hospitality | 25,700 | 1 month LIBOR + 5.60% | 10.46% | 61.0% | Senior Debt 42 | 2 | Multifamily | Texas | 56,150 | 56,097 | 9/30/2021 | 10/9/2026 | Adj. 1M SOFR Term + 3.10% | 8.54% | 78.9% |
Senior Debt 43 | Senior Debt 43 | Mixed Use | 32,500 | 1 month LIBOR + 3.70% | 8.56% | 69.7% | Senior Debt 43 | 2 | Multifamily | Texas | 38,365 | 38,251 | 10/14/2021 | 11/9/2026 | Adj. 1M SOFR Term + 2.90% | 8.34% | 72.2% |
Senior Debt 44 | Senior Debt 44 | Multifamily | 75,768 | 1 month LIBOR + 2.95% | 7.81% | 72.6% | Senior Debt 44 | 2 | Multifamily | Texas | 54,444 | 11/23/2021 | 12/9/2025 | Adj. 1M SOFR Term + 3.10% | 8.54% | 67.2% |
Senior Debt 45 | | Senior Debt 45 | 3 | Multifamily | Arizona | 38,153 | 38,114 | 11/16/2021 | 12/9/2026 | Adj. 1M SOFR Term + 2.90% | 8.34% | 72.0% |
Senior Debt 46 | | Senior Debt 46 | 3 | Multifamily | Texas | 68,165 | 10/29/2021 | 11/9/2026 | Adj. 1M SOFR Term + 2.85% | 8.29% | 70.6% |
Senior Debt 47 | | Senior Debt 47 | 2 | Multifamily | Texas | 32,655 | 32,613 | 11/23/2021 | 12/9/2026 | Adj. 1M SOFR Term + 3.25% | 8.69% | 80.0% |
Senior Debt 48 | | Senior Debt 48 | 2 | Multifamily | South Carolina | 61,600 | 11/10/2021 | 11/9/2026 | Adj. 1M SOFR Term + 3.35% | 8.79% | 78.0% |
Senior Debt 49 | | Senior Debt 49 | 2 | Multifamily | Texas | 45,204 | 11/16/2021 | 12/9/2026 | Adj. 1M SOFR Term + 3.00% | 8.44% | 74.8% |
Senior Debt 50 | | Senior Debt 50 | 2 | Multifamily | Texas | 47,286 | 47,175 | 11/9/2021 | 11/9/2026 | Adj. 1M SOFR Term + 2.75% | 8.19% | 68.1% |
Senior Debt 51 | | Senior Debt 51 | 2 | Multifamily | New Jersey | 86,000 | 2/25/2022 | 3/9/2026 | 1M SOFR Term + 3.24% | 8.56% | 60.0% |
Senior Debt 52 | | Senior Debt 52 | 3 | Manufactured Housing | Georgia | 6,700 | 6,691 | 12/13/2021 | 12/9/2026 | Adj. 1M SOFR Term + 4.50% | 9.94% | 77.9% |
| Loan Type | Loan Type | Property Type | Par Value | Interest Rate (1) | Effective Yield (5) | Loan to Value (2) | Loan Type | Risk Rating (1) | Property Type | State | Par Value | Amortized Cost | Origination Date(2) | Fully Extended Maturity(3) | Interest Rate(4)(5) | Effective Yield(6) | Loan to Value(7) |
Senior Debt 45 | Multifamily | 20,960 | 1 month LIBOR + 3.35% | 8.21% | 67.7% |
Senior Debt 46 | Multifamily | 30,231 | 1 month LIBOR + 2.95% | 7.81% | 70.4% |
Senior Debt 47 | Multifamily | 35,466 | 1 month LIBOR + 2.95% | 7.81% | 71.7% |
Senior Debt 48 | Multifamily | 33,588 | 1 month LIBOR + 2.95% | 7.81% | 72.2% |
Senior Debt 49 | Hospitality | 25,771 | 1 month LIBOR + 9.00% | 13.86% | 74.2% |
Senior Debt 50 | Self Storage | 15,000 | 1 month LIBOR + 4.26% | 9.12% | 74.6% |
Senior Debt 51 | Office | 6,721 | 1 month LIBOR + 5.25% | 10.11% | 67.3% |
Senior Debt 52 (2) | Multifamily | 133,279 | 1 month LIBOR + 4.75% | 9.61% | —% |
Senior Debt 53 | Senior Debt 53 | Multifamily | 11,245 | 1 month LIBOR + 3.15% | 8.01% | 75.6% | Senior Debt 53 | 2 | Multifamily | Texas | 58,680 | 12/10/2021 | 1/9/2027 | Adj. 1M SOFR Term + 3.45% | 8.89% | 74.8% |
Senior Debt 54 | Senior Debt 54 | Hospitality | 22,018 | 1 month LIBOR + 5.35% | 10.21% | 56.8% | Senior Debt 54 | 2 | Multifamily | Kentucky | 14,933 | 14,912 | 11/19/2021 | 12/9/2026 | Adj. 1M SOFR Term + 3.20% | 8.64% | 62.4% |
Senior Debt 55 | Senior Debt 55 | Hospitality | 33,000 | 1 month LIBOR + 6.25% | 11.11% | 59.2% | Senior Debt 55 | 2 | Multifamily | Texas | 38,376 | 38,328 | 11/22/2021 | 12/9/2026 | Adj. 1M SOFR Term + 3.00% | 8.44% | 73.3% |
Senior Debt 56 (2) | Multifamily | 32,933 | 1 month LIBOR + 8.00% | 12.86% | —% |
Senior Debt 56 | | Senior Debt 56 | 3 | Multifamily | Texas | 69,415 | 11/30/2021 | 12/9/2026 | Adj. 1M SOFR Term + 2.88% | 8.32% | 74.8% |
Senior Debt 57 | Senior Debt 57 | Multifamily | 16,219 | 1 month LIBOR + 3.75% | 8.61% | 76.9% | Senior Debt 57 | 3 | Multifamily | Texas | 66,742 | 11/30/2021 | 12/9/2026 | Adj. 1M SOFR Term + 2.88% | 8.32% | 75.5% |
Senior Debt 58 | Senior Debt 58 | Multifamily | 30,420 | 1 month LIBOR + 3.00% | 7.86% | 73.5% | Senior Debt 58 | 2 | Multifamily | Texas | 18,500 | 12/30/2021 | 1/9/2027 | 1M SOFR Term + 3.50% | 8.83% | 71.7% |
Senior Debt 59 | Senior Debt 59 | Multifamily | 42,697 | 1 month LIBOR + 3.15% | 8.01% | 71.0% | Senior Debt 59 | 2 | Multifamily | Michigan | 59,232 | 59,190 | 12/9/2021 | 12/9/2026 | Adj. 1M SOFR Term + 2.75% | 8.19% | 73.9% |
Senior Debt 60 | Senior Debt 60 | Multifamily | 42,850 | 1 month LIBOR + 3.40% | 8.26% | 79.9% | Senior Debt 60 | 3 | Multifamily | Pennsylvania | 22,240 | 12/16/2021 | 1/9/2027 | 1M SOFR Term + 2.96% | 8.29% | 79.4% |
Senior Debt 61 | Senior Debt 61 | Multifamily | 36,760 | 1 month LIBOR + 3.64% | 8.50% | 66.0% | Senior Debt 61 | 2 | Multifamily | Texas | 32,428 | 12/16/2021 | 1/9/2028 | 1M SOFR Term + 3.20% | 8.53% | 74.2% |
Senior Debt 62 | Senior Debt 62 | Multifamily | 8,500 | 1 month LIBOR + 3.75% | 8.61% | 79.4% | Senior Debt 62 | 2 | Multifamily | Florida | 78,416 | 78,186 | 12/21/2021 | 1/9/2027 | 1M SOFR Term + 3.45% | 8.78% | 78.8% |
Senior Debt 63 | Senior Debt 63 | Multifamily | 14,278 | 1 month LIBOR + 3.15% | 8.01% | 79.8% | Senior Debt 63 | 2 | Multifamily | North Carolina | 81,247 | 81,184 | 12/15/2021 | 1/9/2027 | 1M SOFR Term + 3.21% | 8.54% | 76.1% |
Senior Debt 64 | Senior Debt 64 | Multifamily | 13,849 | 1 month LIBOR + 3.75% | 8.61% | 64.2% | Senior Debt 64 | 2 | Multifamily | North Carolina | 24,000 | 12/17/2021 | 1/9/2028 | 1M SOFR Term + 3.10% | 8.43% | 72.7% |
Senior Debt 65 | Senior Debt 65 | Multifamily | 67,138 | 1 month LIBOR + 3.25% | 8.11% | 77.1% | Senior Debt 65 | 2 | Retail | New York | 31,000 | 30,959 | 12/23/2021 | 1/9/2027 | 1M SOFR Term + 3.29% | 8.62% | 42.5% |
Senior Debt 66 | Senior Debt 66 | Multifamily | 10,568 | 1 month LIBOR + 3.75% | 8.61% | 70.0% | Senior Debt 66 | 3 | Multifamily | Texas | 37,605 | 5/12/2022 | 2/9/2027 | 1M SOFR Term + 3.55% | 8.88% | 66.2% |
Senior Debt 67 | Senior Debt 67 | Multifamily | 27,015 | 1 month LIBOR + 3.20% | 8.06% | 77.3% | Senior Debt 67 | 2 | Multifamily | Georgia | 23,855 | 1/28/2022 | 2/9/2027 | 1M SOFR Term + 2.95% | 8.28% | 65.6% |
Senior Debt 68 | Senior Debt 68 | Hospitality | 17,122 | 1 month LIBOR + 5.25% | 10.11% | 61.0% | Senior Debt 68 | 2 | Multifamily | North Carolina | 10,978 | 1/14/2022 | 2/9/2027 | 1M SOFR Term + 3.30% | 8.63% | 75.7% |
Senior Debt 69 | Senior Debt 69 | Hospitality | 16,500 | 1 month LIBOR + 7.10% | 11.96% | 73.0% | Senior Debt 69 | 3 | Multifamily | Texas | 47,444 | 12/21/2021 | 1/9/2027 | 1M SOFR Term + 2.86% | 8.19% | 68.2% |
Senior Debt 70 | Senior Debt 70 | Multifamily | 56,150 | 1 month LIBOR + 3.10% | 7.96% | 78.9% | Senior Debt 70 | 2 | Multifamily | Texas | 36,824 | 12/22/2021 | 1/9/2027 | 1M SOFR Term + 2.86% | 8.19% | 69.7% |
Senior Debt 71 | Senior Debt 71 | Multifamily | 37,882 | 1 month LIBOR + 2.90% | 7.76% | 72.2% | Senior Debt 71 | 2 | Hospitality | North Carolina | 10,800 | 10,783 | 1/19/2022 | 2/9/2027 | 1M SOFR Term + 5.30% | 10.63% | 68.2% |
Senior Debt 72 | Senior Debt 72 | Multifamily | 54,792 | 1 month LIBOR + 3.10% | 7.96% | 67.2% | Senior Debt 72 | 2 | Multifamily | Florida | 82,000 | 2/10/2022 | 2/9/2027 | 1M SOFR Term + 3.20% | 8.53% | 74.5% |
Senior Debt 73 | Senior Debt 73 | Multifamily | 38,039 | 1 month LIBOR + 2.90% | 7.76% | 72.0% | Senior Debt 73 | 2 | Industrial | Arizona | 55,000 | 3/15/2022 | 3/9/2027 | 1M SOFR Term + 3.50% | 8.83% | 70.1% |
Senior Debt 74 | Senior Debt 74 | Multifamily | 66,483 | 1 month LIBOR + 2.85% | 7.71% | 70.6% | Senior Debt 74 | 2 | Multifamily | Texas | 39,375 | 3/14/2022 | 3/9/2027 | 1M SOFR Term + 3.10% | 8.43% | 74.1% |
Senior Debt 75 | Senior Debt 75 | Multifamily | 31,886 | 1 month LIBOR + 3.25% | 8.11% | 80.0% | Senior Debt 75 | 2 | Multifamily | Arizona | 35,220 | 3/2/2022 | 3/9/2027 | 1M SOFR Term + 2.95% | 8.28% | 63.1% |
Senior Debt 76 | Senior Debt 76 | Multifamily | 62,850 | 1 month LIBOR + 3.35% | 8.21% | 78.0% | Senior Debt 76 | 2 | Mixed Use | New York | 19,000 | 3/7/2022 | 3/9/2026 | 1M SOFR Term + 3.42% | 8.75% | 65.1% |
Senior Debt 77 | Senior Debt 77 | Multifamily | 44,243 | 1 month LIBOR + 3.00% | 7.86% | 74.8% | Senior Debt 77 | 2 | Multifamily | North Carolina | 85,500 | 2/24/2022 | 3/9/2027 | 1M SOFR Term + 3.15% | 8.48% | 69.6% |
Senior Debt 78 | Senior Debt 78 | Multifamily | 46,952 | 1 month LIBOR + 2.75% | 7.61% | 68.1% | Senior Debt 78 | 2 | Multifamily | North Carolina | 31,900 | 31,899 | 3/29/2022 | 4/9/2027 | 1M SOFR Term + 3.30% | 8.63% | 76.9% |
Senior Debt 79 | Senior Debt 79 | Multifamily | 86,000 | 1 month SOFR + 3.24% | 8.04% | 60.0% | Senior Debt 79 | 2 | Hospitality | Colorado | 35,210 | 34,976 | 5/20/2022 | 6/9/2027 | 1M SOFR Term + 7.05% | 12.38% | N/A |
Senior Debt 80 | Senior Debt 80 | Multifamily | 30,164 | 1 month LIBOR + 2.90% | 7.76% | 74.2% | Senior Debt 80 | 2 | Multifamily | Texas | 24,229 | 23,521 | 7/20/2022 | 4/9/2027 | 1M SOFR Term + 6.75% | 12.08% | N/A |
Senior Debt 81 | Senior Debt 81 | Manufactured Housing | 6,700 | 1 month LIBOR + 4.50% | 9.36% | 77.9% | Senior Debt 81 | 2 | Hospitality | Georgia | 44,862 | 3/30/2022 | 4/9/2027 | 1M SOFR Term + 4.90% | 10.23% | 61.1% |
Senior Debt 82 | Senior Debt 82 | Multifamily | 58,680 | 1 month LIBOR + 3.45% | 8.31% | 74.8% | Senior Debt 82 | 2 | Hospitality | New York | 15,634 | 15,576 | 11/8/2022 | 11/9/2027 | 1M SOFR Term + 5.34% | 10.67% | 57.7% |
Senior Debt 83 | Senior Debt 83 | Multifamily | 26,966 | 1 month LIBOR + 2.90% | 7.76% | 72.1% | Senior Debt 83 | 3 | Multifamily | Nevada | 35,950 | 6/3/2022 | 6/9/2027 | 1M SOFR Term + 6.05% | 11.38% | 62.4% |
Senior Debt 84 | Senior Debt 84 | Multifamily | 14,185 | 1 month LIBOR + 3.20% | 8.06% | 62.4% | Senior Debt 84 | 3 | Multifamily | Virginia | 56,616 | 56,504 | 4/29/2022 | 5/9/2027 | 1M SOFR Term + 3.95% | 9.28% | 73.2% |
Senior Debt 85 | Senior Debt 85 | Multifamily | 37,494 | 1 month LIBOR + 3.00% | 7.86% | 73.3% | Senior Debt 85 | 3 | Multifamily | Texas | 30,360 | 30,296 | 10/21/2022 | 11/9/2027 | 1M SOFR Term + 4.00% | 9.33% | 70.9% |
Senior Debt 86 | Senior Debt 86 | Multifamily | 33,921 | 1 month LIBOR + 3.20% | 8.06% | 74.5% | Senior Debt 86 | 3 | Multifamily | North Carolina | 56,859 | 8/23/2022 | 10/9/2027 | 1M SOFR Term + 6.70% | 12.03% | 46.5% |
Senior Debt 87 | Senior Debt 87 | Multifamily | 40,320 | 1 month LIBOR + 2.90% | 7.76% | 71.7% | Senior Debt 87 | 2 | Multifamily | Texas | 12,788 | 12,784 | 5/2/2022 | 5/9/2027 | 1M SOFR Term + 3.55% | 8.88% | 67.7% |
Senior Debt 88 | Senior Debt 88 | Multifamily | 66,871 | 1 month LIBOR + 2.88% | 7.74% | 74.8% | Senior Debt 88 | 2 | Industrial | Florida | 18,724 | 18,691 | 9/13/2022 | 9/9/2027 | 1M SOFR Term + 4.90% | 10.23% | 64.6% |
Senior Debt 89 | Senior Debt 89 | Multifamily | 64,074 | 1 month LIBOR + 2.88% | 7.74% | 75.5% | Senior Debt 89 | 2 | Multifamily | Tennessee | 19,899 | 19,889 | 5/18/2022 | 6/9/2027 | 1M SOFR Term + 3.50% | 8.83% | 64.5% |
Senior Debt 90 | | Senior Debt 90 | 3 | Multifamily | Texas | 28,979 | 28,960 | 5/26/2022 | 6/9/2027 | 1M SOFR Term + 3.65% | 8.98% | 71.0% |
Senior Debt 91 | | Senior Debt 91 | 3 | Multifamily | Texas | 17,330 | 17,319 | 5/26/2022 | 6/9/2027 | 1M SOFR Term + 3.65% | 8.98% | 73.9% |
Senior Debt 92 | | Senior Debt 92 | 2 | Multifamily | Georgia | 70,750 | 70,716 | 5/18/2022 | 6/9/2027 | 1M SOFR Term + 3.80% | 9.13% | 77.9% |
Senior Debt 93 | | Senior Debt 93 | 4 | Multifamily | North Carolina | 83,914 | 83,849 | 6/1/2022 | 6/9/2027 | 1M SOFR Term + 3.95% | 9.28% | 71.8% |
Senior Debt 94 | | Senior Debt 94 | 3 | Multifamily | North Carolina | 45,583 | 45,559 | 6/1/2022 | 6/9/2027 | 1M SOFR Term + 3.95% | 9.28% | 75.9% |
Senior Debt 95 | | Senior Debt 95 | 4 | Multifamily | North Carolina | 58,003 | 57,957 | 6/1/2022 | 6/9/2027 | 1M SOFR Term + 3.95% | 9.28% | 73.7% |
Senior Debt 96 | | Senior Debt 96 | 3 | Multifamily | North Carolina | 20,797 | 20,785 | 6/1/2022 | 6/9/2027 | 1M SOFR Term + 3.95% | 9.28% | 75.1% |
Senior Debt 97 | | Senior Debt 97 | 3 | Multifamily | Various | 129,992 | 129,790 | 6/1/2022 | 6/9/2027 | 1M SOFR Term + 3.95% | 9.28% | 67.8% |
Senior Debt 98 | | Senior Debt 98 | 2 | Multifamily | Kentucky | 55,000 | 54,973 | 6/1/2022 | 6/9/2027 | 1M SOFR Term + 3.80% | 9.13% | 73.8% |
Senior Debt 99 | | Senior Debt 99 | 2 | Multifamily | North Carolina | 11,675 | 11,665 | 11/3/2022 | 11/9/2027 | 1M SOFR Term + 4.45% | 9.78% | 74.8% |
Senior Debt 100 | | Senior Debt 100 | 2 | Multifamily | Georgia | 70,750 | 70,672 | 6/14/2022 | 6/9/2027 | 1M SOFR Term + 3.45% | 8.78% | 71.6% |
Senior Debt 101 | | Senior Debt 101 | 2 | Hospitality | District of Columbia | 39,525 | 39,372 | 8/2/2022 | 8/9/2027 | 1M SOFR Term + 6.94% | 12.27% | 71.2% |
Senior Debt 102 | | Senior Debt 102 | 2 | Multifamily | Pennsylvania | 4,663 | 4,301 | 2/17/2023 | 9/9/2026 | 1M SOFR Term + 6.31% | 11.64% | N/A |
Senior Debt 103 | | Senior Debt 103 | 2 | Hospitality | Alabama | 17,847 | 17,845 | 9/20/2022 | 10/9/2027 | 1M SOFR Term + 5.75% | 11.08% | 62.1% |
Senior Debt 104 | | Senior Debt 104 | 2 | Manufactured Housing | Florida | 11,720 | 11,700 | 9/13/2022 | 9/9/2027 | 1M SOFR Term + 4.75% | 10.08% | 53.8% |
Senior Debt 105 | | Senior Debt 105 | 2 | Hospitality | Texas | 6,861 | 6,422 | 1/31/2023 | 11/9/2027 | 1M SOFR Term + 7.50% | 12.83% | 6.2% |
Senior Debt 106 | | Senior Debt 106 | 2 | Multifamily | North Carolina | 49,156 | 49,095 | 12/29/2022 | 1/9/2028 | 1M SOFR Term + 4.20% | 9.53% | 70.1% |
Senior Debt 107 | | Senior Debt 107 | 2 | Multifamily | South Carolina | 51,000 | 50,908 | 12/2/2022 | 12/9/2027 | 1M SOFR Term + 3.75% | 9.08% | 64.6% |
Senior Debt 108 | | Senior Debt 108 | 2 | Multifamily | South Carolina | 14,635 | 14,603 | 12/16/2022 | 1/9/2027 | 1M SOFR Term + 4.25% | 9.58% | 68.1% |
| | | | | | | | | | | | | | | | | |
Loan Type | Property Type | Par Value | Interest Rate (1) | Effective Yield (5) | Loan to Value (2) |
Senior Debt 90 | Multifamily | 16,909 | 1 month SOFR + 3.50% | 8.30% | 71.7% |
Senior Debt 91 | Multifamily | 57,660 | 1 month LIBOR + 2.75% | 7.61% | 73.9% |
Senior Debt 92 | Multifamily | 66,543 | 1 month SOFR + 6.03% | 10.83% | 74.7% |
Senior Debt 93 | Multifamily | 22,240 | 1 month SOFR + 2.96% | 7.76% | 79.4% |
Senior Debt 94 | Multifamily | 25,746 | 1 month SOFR + 2.96% | 7.76% | 72.9% |
Senior Debt 95 | Multifamily | 31,678 | 1 month SOFR + 3.20% | 8.00% | 74.2% |
Senior Debt 96 | Multifamily | 78,050 | 1 month SOFR + 3.45% | 8.25% | 78.8% |
Senior Debt 97 | Multifamily | 81,247 | 1 month SOFR + 3.21% | 8.01% | 76.1% |
Senior Debt 98 | Multifamily | 24,000 | 1 month SOFR + 3.10% | 7.90% | 72.7% |
Senior Debt 99 | Retail | 31,000 | 1 month SOFR + 3.29% | 8.09% | 42.5% |
Senior Debt 100 | Multifamily | 38,234 | 1 month SOFR + 3.55% | 8.35% | 66.2% |
Senior Debt 101 | Multifamily | 23,198 | 1 month SOFR + 2.95% | 7.75% | 65.6% |
Senior Debt 102 | Multifamily | 10,724 | 1 month SOFR + 3.30% | 8.10% | 75.7% |
Senior Debt 103 | Multifamily | 47,444 | 1 month SOFR + 2.86% | 7.66% | 68.2% |
Senior Debt 104 | Multifamily | 36,824 | 1 month SOFR + 2.86% | 7.66% | 69.7% |
Senior Debt 105 | Hospitality | 10,493 | 1 month SOFR + 5.30% | 10.10% | 68.2% |
Senior Debt 106 | Retail | 14,676 | 1 month SOFR + 4.95% | 9.75% | 63.3% |
Senior Debt 107 | Multifamily | 82,000 | 1 month SOFR + 3.20% | 8.00% | 74.5% |
Senior Debt 108 | Industrial | 55,000 | 1 month SOFR + 3.50% | 8.30% | 70.1% |
Senior Debt 109 | Multifamily | 39,325 | 1 month SOFR + 3.10% | 7.90% | 74.1% |
Senior Debt 110 | Multifamily | 35,119 | 1 month SOFR + 2.95% | 7.75% | 63.1% |
Senior Debt 111 | Mixed Use | 18,968 | 1 month SOFR + 3.42% | 8.22% | 65.1% |
Senior Debt 112 | Multifamily | 85,500 | 1 month SOFR + 3.15% | 7.95% | 69.6% |
Senior Debt 113 | Multifamily | 31,282 | 1 month SOFR + 3.30% | 8.10% | 76.9% |
Senior Debt 114 (2) | Hospitality | 2,029 | 1 month SOFR + 7.05% | 11.85% | —% |
Senior Debt 115 (2) (4) | Multifamily | — | 1 month SOFR + 6.75% | 11.55% | —% |
Senior Debt 116 | Hospitality | 43,457 | 1 month SOFR + 4.90% | 9.70% | 61.1% |
Senior Debt 117 | Hospitality | 11,680 | 1 month SOFR + 5.22% | 10.02% | 57.7% |
Senior Debt 118 | Multifamily | 7,286 | 1 month SOFR + 7.02% | 11.82% | 15.9% |
Senior Debt 119 | Multifamily | 32,137 | 1 month SOFR + 6.05% | 10.85% | 62.4% |
Senior Debt 120 | Multifamily | 56,616 | 1 month SOFR + 3.95% | 8.75% | 73.2% |
Senior Debt 121 | Multifamily | 29,091 | 1 month SOFR + 4.00% | 8.80% | 70.9% |
Senior Debt 122 | Multifamily | 52,396 | 1 month SOFR + 6.70% | 11.50% | 46.5% |
Senior Debt 123 | Multifamily | 12,347 | 1 month SOFR + 3.55% | 8.35% | 67.7% |
Senior Debt 124 (3) | Retail | 38,426 | 1 month SOFR + 4.50% | 9.30% | 72.3% |
Senior Debt 125 | Industrial | 23,050 | 1 month SOFR + 4.90% | 9.70% | 64.6% |
Senior Debt 126 | Multifamily | 19,548 | 1 month SOFR + 3.50% | 8.30% | 64.5% |
Senior Debt 127 | Multifamily | 17,600 | 1 month SOFR + 4.55% | 9.35% | 67.2% |
Senior Debt 128 | Multifamily | 28,640 | 1 month SOFR + 3.65% | 8.45% | 71.0% |
Senior Debt 129 | Multifamily | 17,330 | 1 month SOFR + 3.65% | 8.45% | 73.9% |
Senior Debt 130 | Multifamily | 70,750 | 1 month SOFR + 3.80% | 8.60% | 77.9% |
Senior Debt 131 | Multifamily | 82,408 | 1 month SOFR + 3.95% | 8.75% | 71.8% |
Senior Debt 132 | Multifamily | 43,822 | 1 month SOFR + 3.95% | 8.75% | 75.9% |
Senior Debt 133 | Multifamily | 56,694 | 1 month SOFR + 3.95% | 8.75% | 73.7% |
Senior Debt 134 | Multifamily | 20,411 | 1 month SOFR + 3.95% | 8.75% | 75.1% |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Loan Type | Risk Rating (1) | Property Type | State | Par Value | Amortized Cost | Origination Date(2) | Fully Extended Maturity(3) | Interest Rate(4)(5) | Effective Yield(6) | Loan to Value(7) |
Senior Debt 109 | 2 | Hospitality | North Carolina | 28,300 | 28,300 | 12/15/2022 | 1/9/2026 | 1M SOFR Term + 5.25% | 10.58% | 54.9% |
Senior Debt 110 | 3 | Multifamily | Arizona | 55,500 | 55,381 | 4/10/2023 | 4/9/2026 | 1M SOFR Term + 3.85% | 9.18% | 44.7% |
Senior Debt 111 | 2 | Hospitality | Florida | 10,500 | 10,471 | 4/4/2023 | 4/9/2028 | 1M SOFR Term + 5.50% | 10.83% | 39.6% |
Senior Debt 112 | 2 | Hospitality | Various | 120,000 | 119,607 | 2/9/2023 | 2/9/2028 | 1M SOFR Term + 4.90% | 10.23% | 53.6% |
Senior Debt 113 | 2 | Multifamily | Florida | 64,500 | 64,466 | 4/19/2023 | 5/9/2025 | 1M SOFR Term + 5.00% | 10.33% | 62.3% |
Senior Debt 114 | 2 | Hospitality | New York | 40,443 | 40,528 | 4/17/2023 | 12/27/2024 | 1M SOFR Term + 3.75% | 9.08% | 39.1% |
Senior Debt 115 | 2 | Multifamily | District of Columbia | 21,700 | 21,629 | 6/30/2023 | 7/9/2027 | 1M SOFR Term + 3.95% | 9.28% | 29.4% |
Senior Debt 116 | 2 | Manufactured Housing | Florida | 21,771 | 21,640 | 7/28/2023 | 8/9/2028 | 1M SOFR Term + 4.25% | 9.58% | 43.2% |
Senior Debt 117 | 2 | Multifamily | New York | 19,793 | 19,877 | 6/28/2023 | 7/9/2028 | 4.75% | 4.75% | 85.7% |
Senior Debt 118 | 2 | Multifamily | Texas | 78,996 | 78,713 | 8/1/2023 | 8/9/2028 | 1M SOFR Term + 3.20% | 8.53% | 58.7% |
Senior Debt 119 | 2 | Hospitality | Florida | 23,000 | 22,873 | 8/10/2023 | 8/9/2028 | 1M SOFR Term + 5.45% | 10.78% | 72.8% |
Senior Debt 120 | 2 | Office | Texas | 55,800 | 54,967 | 3/27/2024 | 4/9/2026 | 1M SOFR Term + 9.38% | 14.71% | 38.3% |
Senior Debt 121 | 2 | Hospitality | Georgia | 12,420 | 12,330 | 8/17/2023 | 9/9/2028 | 1M SOFR Term + 4.85% | 10.18% | 53.5% |
Senior Debt 122(8) | 2 | Industrial | South Carolina | — | — | 3/21/2024 | 10/9/2027 | 1M SOFR Term + 4.75% | 10.08% | N/A |
Senior Debt 123 | 2 | Multifamily | Texas | 38,750 | 38,594 | 10/18/2023 | 11/9/2026 | 1M SOFR Term + 4.50% | 9.83% | 62.4% |
Senior Debt 124 | 2 | Hospitality | Florida | 31,300 | 31,095 | 10/17/2023 | 11/9/2028 | 1M SOFR Term + 4.25% | 9.58% | 48.9% |
Senior Debt 125 | 2 | Multifamily | Texas | 42,750 | 42,579 | 10/17/2023 | 11/9/2026 | 1M SOFR Term + 3.85% | 9.18% | 61.4% |
Senior Debt 126 | 2 | Multifamily | Texas | 17,119 | 16,978 | 10/12/2023 | 10/9/2028 | 1M SOFR Term + 3.20% | 8.53% | 55.1% |
Senior Debt 127 | 2 | Multifamily | Texas | 21,632 | 21,547 | 12/6/2023 | 12/9/2026 | 1M SOFR Term + 3.75% | 9.08% | 63.6% |
Senior Debt 128 | 2 | Hospitality | Tennessee | 41,071 | 40,871 | 11/14/2023 | 12/9/2028 | 1M SOFR Term + 3.65% | 8.98% | 50.0% |
Senior Debt 129 | 2 | Multifamily | Texas | 36,380 | 36,060 | 2/14/2024 | 2/9/2025 | 9.00% | 9.00% | 84.4% |
Senior Debt 130 | 2 | Hospitality | Colorado | 54,412 | 54,073 | 2/5/2024 | 2/9/2029 | 1M SOFR Term + 4.50% | 9.83% | 41.6% |
Senior Debt 131 | 2 | Hospitality | Nevada | 25,750 | 25,613 | 12/15/2023 | 1/9/2028 | 1M SOFR Term + 3.95% | 9.28% | 42.4% |
Senior Debt 132 | 2 | Industrial | California | 1,622 | 942 | 3/19/2024 | 10/6/2026 | 13.00% | 13.00% | 8.6% |
Senior Debt 133(8) | 2 | Multifamily | Florida | — | — | 2/12/2024 | 8/9/2028 | 1M SOFR Term + 5.50% | 10.83% | N/A |
Senior Debt 134 | 2 | Multifamily | Florida | 50,750 | 50,511 | 2/9/2024 | 8/9/2026 | 1M SOFR Term + 3.75% | 9.08% | 56.7% |
Senior Debt 135 | 2 | Multifamily | Texas | 78,175 | 77,692 | 2/16/2024 | 3/9/2029 | 1M SOFR Term + 3.65% | 8.98% | 53.3% |
Senior Debt 136 | 2 | Multifamily | Florida | 67,000 | 66,677 | 2/29/2024 | 3/9/2029 | 1M SOFR Term + 3.25% | 8.58% | 58.7% |
Senior Debt 137 | 2 | Industrial | North Carolina | 75,000 | 74,815 | 3/7/2024 | 3/9/2029 | 2.70% | 8.03% | 58.6% |
Senior Debt 138 | 2 | Multifamily | Texas | 20,012 | 19,820 | 3/7/2024 | 3/9/2029 | 1M SOFR Term + 3.75% | 9.08% | 57.2% |
Senior Debt 139 | 3 | Hospitality | Illinois | 16,518 | 16,518 | 12/4/2017 | 10/6/2025 | 5.99% | 5.99% | 52.9% |
Mezzanine Loan 1 | 2 | Retail | New York | 3,000 | 2,996 | 12/23/2021 | 1/9/2027 | 1M SOFR Term + 12.00% | 17.33% | 46.6% |
Mezzanine Loan 2 | 2 | Mixed Use | New York | 1,000 | 1,000 | 3/7/2022 | 3/9/2026 | 1M SOFR Term + 11.00% | 16.33% | 68.5% |
Mezzanine Loan 3 | 2 | Hospitality | New York | 1,350 | 1,346 | 11/8/2022 | 11/9/2027 | 1M SOFR Term + 9.25% | 14.58% | 64.6% |
Mezzanine Loan 4 | 2 | Hospitality | Texas | 7,900 | 7,805 | 1/31/2023 | 11/9/2027 | 1M SOFR Term + 10.00% | 15.33% | 6.2% |
Mezzanine Loan 5 | 3 | Multifamily | Ohio | 2,600 | 2,600 | 3/9/2023 | 9/9/2025 | 1M SOFR Term + 4.50% | 9.83% | 58.2% |
Mezzanine Loan 6 | 2 | Multifamily | District of Columbia | 11,700 | 11,662 | 6/30/2023 | 7/9/2027 | 1M SOFR Term + 3.95% | 9.28% | 45.2% |
| | | | $5,243,800 | $5,233,420 | | | Weighted Average: | 9.15% | 64.3% |
Table of Contents | | | | | | | | | | | | | | | | | |
Loan Type | Property Type | Par Value | Interest Rate (1) | Effective Yield (5) | Loan to Value (2) |
Senior Debt 135 | Multifamily | 136,657 | 1 month SOFR + 3.95% | 8.75% | 67.8% |
Senior Debt 136 | Multifamily | 56,000 | 1 month SOFR + 3.80% | 8.60% | 73.8% |
Senior Debt 137 | Multifamily | 11,675 | 1 month SOFR + 4.45% | 9.25% | 74.8% |
Senior Debt 138 | Multifamily | 69,200 | 1 month SOFR + 3.45% | 8.25% | 71.6% |
Senior Debt 139 | Multifamily | 92,923 | 1 month SOFR + 6.52% | 7.57% | 50.1% |
Senior Debt 140 | Hospitality | 29,644 | 1 month SOFR + 6.94% | 11.74% | 71.2% |
Senior Debt 115 (2) (4) | Multifamily | — | 1 month SOFR + 6.31% | 11.11% | —% |
Senior Debt 142 | Hospitality | 13,525 | 1 month SOFR + 5.75% | 10.55% | 62.1% |
Senior Debt 143 | Manufactured Housing | 10,550 | 1 month SOFR + 4.75% | 9.55% | 53.8% |
Senior Debt 144 | Multifamily | 47,293 | 1 month SOFR + 4.20% | 9.00% | 70.1% |
Senior Debt 145 | Multifamily | 51,000 | 1 month SOFR + 3.75% | 8.55% | 64.6% |
Senior Debt 146 | Multifamily | 14,635 | 1 month SOFR + 4.25% | 9.05% | 68.1% |
Senior Debt 147 | Hospitality | 28,300 | 1 month SOFR + 5.25% | 10.05% | 54.9% |
Senior Debt 148 (4) | Hospitality | — | 1 month SOFR + 7.50% | 12.30% | 6.2% |
Senior Debt 149 | Hospitality | 120,000 | 1 month SOFR + 4.90% | 9.70% | 53.6% |
Senior Debt 150 | Hospitality | 16,915 | 5.99% | 5.99% | 52.9% |
Mezzanine Loan 1 | Multifamily | 3,000 | 1 month SOFR + 9.23% | 14.03% | 62.2% |
Mezzanine Loan 2 | Multifamily | 10,000 | 1 month SOFR + 16.29% | 21.09% | 86.2% |
Mezzanine Loan 3 | Retail | 3,000 | 1 month SOFR + 12.00% | 16.80% | 46.6% |
Mezzanine Loan 4 | Mixed Use | 1,000 | 1 month SOFR + 11.00% | 15.80% | 68.5% |
Mezzanine Loan 5 (4) | Hospitality | — | 1 month SOFR + 10.00% | 14.80% | 6.2% |
Mezzanine Loan 6 | Hospitality | 1,350 | 1 month SOFR + 9.25% | 14.05% | 64.6% |
Mezzanine Loan 7 (4) | Multifamily | — | 1 month SOFR + 4.50% | 9.30% | 58.2% |
| | $5,076,210 | | 8.70% | 66.1% |
__________________________________________________________________________________(1)For a discussion of risk ratings, see Note 3 - Commercial Mortgage Loans in our Consolidated Financial Statements included in this Form 10-Q.
(2) Date loan was originated or acquired by us. The origination or acquisition date is not updated for subsequent loan modifications.
(3) Fully extended maturity assumes all extension options are exercised by the borrower; provided, however, that our loans may be repaid prior to such date.
(4) Our floating rate loan agreements generally contain the contractual obligation for the borrower to maintain an interest rate cap to protect against rising interest rates. In a simple interest rate cap, the borrower pays a premium for a notional principal amount based on a capped interest rate (the “cap rate”). When the floating rate exceeds the cap rate, the borrower receives a payment from the cap counterparty equal to the difference between the floating rate and the cap rate on the same notional principal amount for a specified period of time. When interest rates rise, the value of an interest rate cap will increase, thereby reducing the borrower's exposure to rising interest rates.
(2)Table of Contents Loan to value percentage is from metrics at origination. Predevelopment construction loans at origination will not have an LTV and therefore is nil.(3)(5) Loan was designated as non-performing and placed on cost recovery status. In this instance,On March 5, 2021, the assumed collateral value was less than the valueFinancial Conduct Authority of the loan, therefore the LTV at origination is not relevant.
(4) Commitment on the loan was unfunded asU.K. (the “FCA”) announced that LIBOR tenors would cease to be published or no longer be representative. The Alternative Reference Rates Committee (the “ARRC”) interpreted this announcement to constitute a benchmark transition event. The benchmark index of LIBOR interest rate will convert from LIBOR to compounded SOFR, plus a benchmark adjustment of 11.448 basis points. As of March 31, 2023.2024, all of our commercial mortgage loans, held for investment which had been indexed at LIBOR were converted to SOFR utilizing the 11.448 basis points adjustment and the applicable spreads remain unchanged. The loans which have the SOFR adjustment are indicated with "Adj. 1M SOFR Term."
(5)(6) Effective yield is calculated as the spread of the loan plus the highergreater of anythe applicable index or index floor.
(6)(7) Includes $7.4 millionLoan-to-value percentage ("LTV") represents the ratio of amortized costthe loan amount to the appraised value of mezzanine note as a resultthe property at the time of a loan modification accountedorigination. However, for as a continuation of an existing loan for GAAP purposes. Interest Rate, Effective Yield,predevelopment construction loans at origination, LTV is not applicable and Loan to Value are shown blended basedis therefore nil.
(8) Commitment on the weighted average principal balancesloan was unfunded as of the senior and mezzanine notes.March 31, 2024.
The following table shows selected data from our commercial mortgage loans, held for sale, measured at fair value as of March 31, 20232024 (dollars in thousands):
| Loan Type | Loan Type | | Property Type | | Par Value | | Interest Rate | | Effective Yield | | Loan to Value (1) | Loan Type | | Property Type | | State | | Par Value | | Interest Rate | | Effective Yield | | Loan to Value(1) |
TRS Senior Debt 1 | TRS Senior Debt 1 | | Retail | | $ | 12,000 | | | 7.05% | | 7.05% | | 43.48% | TRS Senior Debt 1 | | Office | | Georgia | | $ | 30,000 | | | 7.98% | | 7.98% | | 57.5% |
TRS Senior Debt 2 | | Office | | 3,625 | | | 6.35% | | 6.35% | | 51.42% |
| $ | 15,625 | | | 6.89% | | 45.32% |
__________________________________________________________________________________(1) LoanLoan-to-value percentage (LTV) represents the ratio of the loan amount to the appraised value percentage is from metricsof the property at the time of origination.
The following table shows selected data from our real estate owned, held for investment assets in our portfolio as of March 31, 20232024 (dollars in thousands):
| | | | | | | | | | | | | | |
Type | | Property Type | | Carrying Value |
Real Estate Owned 1 | | Industrial | | $ | 87,170 | |
Real Estate Owned 2 | | Retail | | 61,454 | |
| | | | $ | 148,624 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Type | | Acquisition Date | | Primary Location | | Property Type | | Real Estate Owned, Net | | Intangible Lease Asset, Net | | Total |
Real Estate Owned 1 | | September 2021 | | Jeffersonville, GA | | Industrial | | $ | 84,868 | | | $ | 41,993 | | | $ | 126,861 | |
Real Estate Owned 2 | | August 2023 | | Portland, OR | | Office | | 18,518 | | | — | | | $ | 18,518 | |
Real Estate Owned 3 | | October 2023 | | Lubbock, TX | | Multifamily | | 11,783 | | | 44 | | | $ | 11,827 | |
| | | | | | | | $ | 115,169 | | | $ | 42,037 | | | $ | 157,206 | |
The following table shows selected data from our real estate owned, held for sale assets in our portfolio as of March 31, 20232024 (dollars in thousands):
| | | | | | | | | | | | | | |
Type | | Property Type | | Carrying Value |
Real Estate Owned, held for sale | | Various | | $ | 35,158 | |
The following is a summary of the Company's RMBS, all of which were ARM Agency Securities, classified by collateral type and interest rate characteristics as of March 31, 2023 (dollars in thousands):
| | | | | | | | | | | | | | |
Type | | Carrying Amount | | Average Yield (1) |
Agency Securities: | | | | |
Fannie Mae/Freddie Mac ARMs | | $ | 133,705 | | | 2.71 | % |
| | | | |
| | | | |
(1) Average yield is presented for the period then ended and is based on the cash component of interest income expressed as a percentage on average cost basis (the “cash yield”). | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Type | | Acquisition Date | | Primary Location(s) | | Property Type | | Assets, Net | | Liabilities, Net |
Real Estate Owned, held for sale 1 | | Various | | Various | | Retail | | $ | 103,657 | | | $ | 12,297 | |
The following table shows selected data from our real estate securities, CRE CLO bonds, measured at fair value as of March 31, 20232024 (dollars in thousands):
| | | | | | | | | | | | | | | | | | | | |
Type | | Par Value | | Interest Rate | | Effective Yield |
CRE CLO bond 1 | | $ | 40,000 | | | 1 month SOFR + 2.78% | | 7.5% |
CRE CLO bond 2 | | 25,000 | | | 1 month SOFR + 3.23% | | 7.9% |
CRE CLO bond 3 | | 28,340 | | | 1 month SOFR + 2.90% | | 7.6% |
CRE CLO bond 4 | | 5,885 | | | 1 month SOFR + 2.83% | | 7.5% |
CRE CLO bond 5 | | 14,382 | | | 1 month SOFR + 3.48% | | 8.1% |
| | $ | 113,607 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Type | | Interest Rate | | Maturity | | Par Value | | Fair Value | | Effective Yield |
CRE CLO bond 1 | | 1 month SOFR + 2.27% | | 9/19/2038 | | $ | 53,000 | | | 53,218 | | 7.60% |
CRE CLO bond 2 | | 1 month SOFR + 3.11% | | 9/19/2038 | | 12,000 | | | 11,987 | | 8.43% |
CRE CLO bond 3 | | 1 month SOFR + 2.78% | | 8/19/2035 | | 20,000 | | | 20,051 | | 8.11% |
CRE CLO bond 4 | | 1 month SOFR + 2.90% | | 10/19/2039 | | 28,340 | | | 28,344 | | 8.27% |
CRE CLO bond 5 | | 1 month SOFR + 3.20% | | 5/25/2038 | | 43,333 | | | 43,639 | | 8.53% |
CRE CLO bond 6 | | 1 month SOFR + 2.36% | | 4/16/2028 | | 45,000 | | | 44,976 | | 7.69% |
CRE CLO bond 7 | | 1 month SOFR + 1.36% | | 11/15/2036 | | 15,887 | | | 15,640 | | 6.89% |
| | | | | | $ | 217,560 | | | $ | 217,855 | | | 7.93% |
Results of Operations
The Company conducts its business through the following segments:
•The real estate debt business focuses on originating, acquiring and asset managing commercial real estate debt investments, including first mortgages, subordinate mortgages, mezzanine loans and participations in such loans.
•The real estate securities business focuses on investing in and asset managing real estate securities. Historically this business has focused primarily on CMBS, CRE CLO bonds, CDO notes, and other securities. As a result of the October 2021 acquisition of Capstead, the Company acquired a portfolio of ARM Agency Securities.
•The commercial real estate conduit business operated through the Company's TRS, which is focused on generating risk-adjusted returns by originating and subsequently selling fixed-rate commercial real estate loans into the CMBS securitization market at a profit. The TRS may also hold certain mezzanine loans that don't qualify as good REIT assets due to any potential loss from foreclosure.
•The real estate owned business represents real estate acquired by the Company through foreclosure, deed in lieu of foreclosure, or purchase.
Comparison of the Three Months Ended March 31, 20232024 to the Three Months Ended March 31, 20222023
Net Interest Income
Net interest income is generated on our interest-earning assets less related interest-bearing liabilities and is recorded as part of our real estate debt, real estate securities and TRS segments.
The following table presents the average balance of interest-earning assets less related interest-bearing liabilities, associated interest income and expense and corresponding yield earned and incurred for the three months ended March 31, 20232024 and March 31, 20222023 (dollars in thousands): | | Three Months Ended March 31, |
| 2023 | | 2022 |
| Average Carrying Value (1) | | Interest Income/Expense (2) | | WA Yield/Financing Cost (3)(4) | | Average Carrying Value (1) | | Interest Income/Expense (2) | | WA Yield/Financing Cost (3)(4) |
| | Three Months Ended March 31, | | | | Three Months Ended March 31, |
| | 2024 | | | | 2024 | | 2023 |
| | Average Carrying Value(1) | | | | Average Carrying Value(1) | | Interest Income/Expense(2)(3) | | WA Yield/Financing Cost(4)(5) | | Average Carrying Value(1) | | Interest Income/Expense(2) | | WA Yield/Financing Cost(4)(5) |
Interest-earning assets: | Interest-earning assets: | | | | | | | | | | | | |
Real estate debt | |
Real estate debt | |
Real estate debt | Real estate debt | | $ | 5,127,298 | | $ | 126,646 | | 9.8% | | $ | 4,361,119 | | $ | 55,687 | | 5.1% | | $ | 5,026,589 | | $ | 123,765 | | | 9.8 | | 9.8 | % | | $ | 5,127,298 | | $ | 126,646 | | | 9.9 | | 9.9 | % |
Real estate conduit | Real estate conduit | | 15,625 | | 322 | | 8.2% | | 92,071 | | 686 | | 3.0% | Real estate conduit | | 49,366 | | 1,946 | | | 15.8 | | 15.8 | % | | 15,625 | | 322 | | | 8.2 | | 8.2 | % |
Real estate securities | Real estate securities | | 280,233 | | 3,568 | | 5.1% | | 3,199,826 | | 18,885 | | 2.4% | Real estate securities | | 225,499 | | 4,601 | | | 8.2 | | 8.2 | % | | 280,233 | | 3,568 | | | 5.1 | | 5.1 | % |
| Total | |
Total | |
Total | Total | | $ | 5,423,156 | | $ | 130,536 | | 9.6% | | $ | 7,653,016 | | $ | 75,258 | | 3.9% | | $ | 5,301,454 | | $ | 130,312 | | 9.8 | % | | $ | 5,423,156 | | $ | 130,536 | | 9.6 | % |
Interest-bearing liabilities: | Interest-bearing liabilities: | | | | | | | | | | | | |
Repurchase Agreements - commercial mortgage loans | | $ | 671,580 | | $ | 14,533 | | 8.7% | | $ | 813,144 | | $ | 7,605 | | 3.7% |
Repurchase agreements - commercial mortgage loans | |
Repurchase agreements - commercial mortgage loans | |
Repurchase agreements - commercial mortgage loans | | | $ | 274,750 | | $ | 6,959 | | | 10.1 | % | | $ | 671,580 | | $ | 14,533 | | | 8.7 | % |
Other financing and loan participation - commercial mortgage loans | Other financing and loan participation - commercial mortgage loans | | 72,160 | | 1,440 | | 8.0% | | 38,344 | | 376 | | 3.9% | Other financing and loan participation - commercial mortgage loans | | 26,823 | | 379 | | | 5.7 | | 5.7 | % | | 72,160 | | 1,440 | | | 8.0 | | 8.0 | % |
Repurchase Agreements - real estate securities | | 274,935 | | 3,446 | | 5.0% | | 3,100,157 | | 1,391 | | 0.2% |
Repurchase agreements - real estate securities | | Repurchase agreements - real estate securities | | 166,483 | | 2,589 | | | 6.2 | % | | 274,935 | | 3,446 | | | 5.0 | % |
Collateralized loan obligations | Collateralized loan obligations | | 3,110,153 | | 49,537 | | 6.4% | | 2,513,330 | | 11,774 | | 1.9% | Collateralized loan obligations | | 3,591,621 | | 69,495 | | | 7.7 | | 7.7 | % | | 3,110,153 | | 49,537 | | | 6.4 | | 6.4 | % |
Unsecured debt | Unsecured debt | | 98,708 | | 2,119 | | 8.6% | | 105,829 | | 1,334 | | 5.0% | Unsecured debt | | 81,308 | | 1,896 | | | 9.3 | | 9.3 | % | | 98,708 | | 2,119 | | | 8.6 | | 8.6 | % |
Total | Total | | $ | 4,227,536 | | $ | 71,075 | | 6.7% | | $ | 6,570,804 | | $ | 22,480 | | 1.4% | Total | | $ | 4,140,985 | | $ | 81,318 | | | 7.9 | | 7.9 | % | | $ | 4,227,536 | | $ | 71,075 | | | 6.7 | | 6.7 | % |
Net interest income/spread | Net interest income/spread | | | | $ | 59,461 | | 2.9% | | | | $ | 52,778 | | 2.5% | Net interest income/spread | | | | $ | 48,994 | | | 1.9 | | 1.9 | % | | | | $ | 59,461 | | | 2.9 | | 2.9 | % |
Average leverage % (5) | | 78.0 | % | | | | | | 85.9 | % | | | | |
Weighted average levered yield (6) | | 19.9 | % | | 19.5 | % |
Average leverage %(6) | |
Weighted average levered yield(7) | |
Weighted average levered yield(7) | |
Weighted average levered yield(7) | | | | | | | 16.9 | % | | | | | | 19.9 | % |
_________________________________________________________________________ (1) Based on amortized cost for real estate debt and real estate securities and principal amount for interest-bearing liabilities. Amounts are calculated based on daily averages for the three months ended March 31, 20232024 and March 31, 2022,2023, respectively.
(2) Includes the effect of amortization of premium or accretion of discount and deferred fees.
(3)Excludes other income on the real estate owned business segment.
(4) Calculated as interest income or expense divided by average carrying value.
(4)(5) Annualized.
(5)(6) Calculated by dividing total average interest-bearing liabilities by total average interest-earning assets.
(6)(7) Calculated by dividing net interest income/spread by the average interest-earning assets less average interest-bearing liabilities.
Interest Income
Interest income for the three months ended March 31, 2024 and 2023 totaled $130.6 million and $130.5 million, respectively, remaining relatively constant between periods. The minor increase in interest income during the three months ended March 31, 2022 totaled $130.5 million2024 was due to an approximate 80 basis point increase in daily average SOFR and $75.3 million, respectively,SOFR equivalent rates coupled with an increase of $55.2 million. This was primarily due to an increase$33.7 million in the average carrying value of $766.2our conduit portfolio partially offset by a decrease of $100.7 million in the average carrying value of our real estate debt along with a decrease due to the loans placed on non-accrual status during the three months ended March 31, 2024. As of March 31, 2024, our portfolio consisted of (i) 145 commercial mortgage loans, held for investment, (ii) one commercial mortgage loan, held for sale, measured at fair value and an approximate 440 basis point increase in daily average LIBOR/SOFR rates.(iii) seven real estate securities, available for sale, measured at fair value. As of March 31, 2023, our portfolio consisted of (i) 157 commercial mortgage loans, held for investment, (ii) two commercial mortgage loans, held for sale, measured at fair value and (iii) five real estate securities, available for sale, measured at fair value and (iv) RMBS investments. As of March 31, 2022, our portfolio consisted of 166 commercial mortgage loans, held for investment, nine commercial mortgage loans, held for sale, measured at fair value and RMBS securities.ARMs.
Interest Expense
Interest expense for the three months ended March 31, 2024 and 2023 and March 31, 2022 totaled $71.1$81.3 million and $22.5$71.1 million, respectively, an increase of $48.6$10.2 million. ThisThe increase was primarily due to an approximate 80 basis point increase in daily average SOFR and SOFR equivalent rates coupled with an increase in deferred fee amortization due to the utilization of $596.8expected duration of our CLOs compared to contractual duration partially offset by a decrease of $396.8 million in the average carrying value of our collateralized loan obligations and an approximate 440 basis point increase in daily average LIBOR/SOFR rates.
repurchase agreements - commercial mortgage loans. Revenue from Real Estate Owned
For the three months ended March 31, 20232024 and March 31, 2022, our2023, revenue from real estate owned net was $3.3$4.7 million and $2.3$3.3 million, respectively. The $1.0$1.4 million increase was primarily the result of anrental income obtained from additional retail properties brought on asin our real estate owned held for investment.portfolio.
Provision/(Benefit)(Provision)/Benefit for Credit losses
Our allowanceProvision for credit losses was $2.9 million during the three months ended March 31, 2024 compared to a provision of $4.4 million during the three months ended March 31, 2023 compared to a benefit of $1.0 million during three months ended March 31, 2022.2023. The following paragraphs set forth explanations for changes in the general and specific reserves for the three months ended March 31, 20232024 and 2022.2023.
For the three months ended March 31, 2024 and 2023, the increase in general reserve ofprovision for credit losses was $2.1 million and $3.5 million, is primarily duerespectively, attributable to a more pessimistic view of the macroeconomic scenario utilized for the CECL model offset slightly by a decreasedcompared to preceding periods. For the three months ended March 31, 2024, the increase in general reserve balance was also the result of an increase in the size of our loan portfolio compared to the preceding period of December 31, 2022. Comparatively, for quarterperiod.
For the three months ended March 31, 2022,2024, the benefitincrease in generalspecific reserve of $1.0$0.7 million was drivenrelated to a non-performing multifamily loan secured by a positive economic outlook comparatively to the prior period of December 31, 2021.
two properties in North Carolina placed on cost recovery status. For the three months ended March 31, 2023, the increase in specific reserve of $0.8 million is duewas related to higher capitalization rates on the assumed fair value of the Walgreens properties which was partially offset by the cost recovery proceeds received during the quarter. Comparatively, for the quarter ended March 31, 2022, there had been no specific reserve.
Realized (Gain)/LossGain/(Loss) on Extinguishment of Debt
The Company did not realize a gain or loss on extinguishment of debt for the three months ended March 31, 2024. Realized gain on extinguishment for debt for the three months ended March 31, 2023 was $4.8 million primarily related to the redemption of $17.5 million of our $100 million par value unsecured debt at a price equal to 75% of par. For the quarter ended March 31, 2022, there were no redemptions.
Realized (Gain)/LossGain/(Loss) on Sale ofReal Estate Securities, Available for Sale Trading Securities
Realized gain on sale ofreal estate securities, available for sale tradingfor the three months ended March 31, 2024 of $0.1 million was related to the sale of three CRE CLO bonds. Realized gain on real estate securities, available for sale for the three months ended March 31, 2023 was $0.6 million duerelated to the sale of four CRE CLO bonds. For the quarter ended March 31, 2022, there were no sales of available for sale trading securities.
Realized (Gain)/LossGain/(Loss) on Sale of Commercial Mortgage Loans, Held for Sale, Measured at Fair Value
There were no sales of commercial mortgage loans, held for sale, measured at fair value for three months ended March 31, 2023. Therefore, there was no realized gain. Realized gain on commercial mortgage loans, held for sale, measured at fair value for the three months ended March 31, 20222024 of $1.9$5.5 million was related to the $75.9 million sale of a fixed-rate$100.7 million in principal amount of commercial real estate loanloans into the CMBS securitization market withresulting in proceeds onof $106.2 million. There were no sales of commercial mortgage loans, held for sale, measured at fair value for the sale of $77.8 million.three months ended March 31, 2023.
Unrealized (Gain)/LossGain/(Loss) on Commercial Mortgage Loans, Held for Sale, Measured at Fair Value
Unrealized gain on commercial mortgage loans, held for sale, measured at fair value, at the TRS for the three months ended March 31, 20232024 was $0.3$0.5 million compared to a lossan unrealized gain of $0.9$0.4 million for the three months ended March 31, 2022.2023. The $1.3$0.1 million increase iswas primarily resulting fromthe result of the change in market values of these loans.
(Gain)/LossGain/(Loss) on Other Real Estate Investments
LossGain on other real estate investments for the three months ended March 31, 2023 and2024 was $6.0 thousand related to the sale of one real estate owned, held for sale property located in San Antonio, TX, compared to a loss of $1.3 million for the three months ended March 31, 20222023 which was $1.3 million and $29.0 thousand, respectively. The $1.3 million increased loss is a result ofrelated to additional loss on our real estate owned, held for sale asset.multifamily asset in New Rochelle, NY.
Trading (Gain)/LossGain/(Loss)
The Company did not hold any trading securities as of March 31, 2024. Trading gain for the three months ended March 31, 2023 of $3.0 million was attributable to $7.5 million of principal paydowns, $95.5 million of sales of ARM Agency Securities and changes in market values and gains on sales of ARM Agency Securities.This is compared to trading loss for the three months ended March 31, 2022 of $88.4 million attributable to principal paydowns, changes in market values and losses on sales of ARM Agency Securities.
Net Result from Derivative Transactions
Net result from derivative transactions for the three months ended March 31, 20232024 of a $0.2 million gain was composed of a realized gain of $0.3 million was primarily related to the termination and settlement of credit default swaps and treasury note futures partially offset by an unrealized loss of $0.1 million. This is compared to a net loss on our derivative portfolio of $0.3 million composed of a realized gain of $44.0 thousand offset by an unrealized loss of $0.3 million for the three months ended March 31, 2023 primarily duerelated to the decreasing values on our interest rate swap portfolio. This is compared to a net gain on our derivative portfolio of $29.1 million composed of a realized gain of $34.0 million partially offset by an unrealized loss of $5.0 million for the three months ended March 31, 2022 primarily due to termination and settlement of our interest rate swap positions.
Provision/(Benefit)(Provision)/Benefit for Income Tax
BenefitProvision for income tax for the three months ended March 31, 20232024 was $0.7$0.8 million compared to $24.0 thousanda benefit of $0.7 million for the three months ended March 31, 2022.2023. The difference is duerelated to changechanges in taxable income/(loss) atloss in our TRS.TRS segment.
Net (Income)/Loss Attributable to Non-controlling Interest
Net loss attributable to non-controlling interest in our consolidated joint ventures for the three months ended March 31, 2023 amounted2024 was $0.1 million compared to a net income attributable to non-controlling interest of $9.0 thousand.
Preferred Share Dividends of Franklin BSP Realty Trust, Inc.
Preferred share dividends were $6.7 millionthousand for the three months ended March 31, 2023, compared to $21.0 million for the prior year's quarter, a decrease2023.
Expenses from operations
Expenses from operations for the three months ended March 31, 20232024 and 20222023 consisted of the following (dollars in thousands): | | | Three Months Ended March 31, | | | | Three Months Ended March 31, |
| | 2024 | | | | 2024 | | 2023 |
Asset management and subordinated performance fee | |
Acquisition expenses | |
Administrative services expenses | |
Professional fees | |
Share-based compensation | |
| | Three Months Ended March 31, |
| 2023 | | 2022 |
Asset management and subordinated performance fee | | $ | 8,085 | | | $ | 6,745 | |
Administrative services expenses | | 4,029 | | | 3,353 | |
Acquisition expenses | | 378 | | | 315 | |
Professional fees | | 4,814 | | | 6,159 | |
Share-based compensation expense | | 1,022 | | | 500 | |
| Depreciation and amortization | |
Depreciation and amortization | |
Depreciation and amortization | Depreciation and amortization | | 1,805 | | | 1,295 | |
Other expenses | Other expenses | | 2,166 | | | 1,762 | |
Total expenses from operations | Total expenses from operations | | $ | 22,299 | | | $ | 20,129 | |
The increasedecrease in our operating expenses was primarily related to (i) an increasea decrease in asset management and subordinated performance feesadministrative services expenses due to incentive fees incurred forless time spent on asset workout during the quarterthree months ended March 31, 2023 of $1.9 million, (ii) an increase in shared-based compensation expense of $0.4 million due2024 compared to the equity awards issued under the Company's 2021 Incentive Plan during the quarterthree months ended March 31, 2023, and partially offset by (iii)(ii) a decrease in professional fees is primarily relateddue to the reduction in legal costs associated with our recovery efforts related to a hotel asset and the Walgreens properties.Portfolio partially offset by (iii) an increase in share-based compensation due to equity compensation awards issued to our executive officers and other employees of the Advisor under the Company's 2021 Incentive Plan during the three months ended March 31, 2024.
Comparison of the Three Months Endedmonths ended March 31, 20232024 to the Three Months Endedmonths ended, December 31, 2022
Net Interest Income2023
Net interest income is generated on our interest-earning assets less related interest-bearing liabilities and is recorded as part of our real estate debt, real estate securities and TRS segments.
The following table presents the average balance of interest-earning assets less related interest-bearing liabilities, associated interest income and expense and corresponding yield earned and incurred for the three months ended March 31, 20232024 and December 31, 20222023 (dollars in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended |
| | March 31, 2024 | | December 31, 2023 |
| | Average Carrying Value(1) | | Interest Income/Expense(2)(3) | | WA Yield/Financing Cost(4)(5) | | Average Carrying Value(1) | | Interest Income/Expense(2)(3) | | WA Yield/Financing Cost(4)(5) |
Interest-earning assets: | | | | | | | | | | | | |
Real estate debt | | $ | 5,026,589 | | $ | 123,765 | | 9.8 | % | | $ | 4,778,141 | | $ | 125,816 | | 10.5 | % |
Real estate conduit | | 49,366 | | 1,946 | | 15.8 | % | | 10,826 | | 1,065 | | 39.4 | % |
Real estate securities | | 225,499 | | 4,601 | | 8.2 | % | | 232,430 | | 4,835 | | 8.3 | % |
| | | | | | | | | | | | |
Total | | $ | 5,301,454 | | $ | 130,312 | | 9.8 | % | | $ | 5,021,397 | | $ | 131,716 | | 10.5 | % |
Interest-bearing liabilities: | | | | | | | | | | | | |
Repurchase agreements - commercial mortgage loans | | $ | 274,750 | | $ | 6,959 | | 10.1 | % | | $ | 245,775 | | $ | 8,093 | | 13.2 | % |
Other financing and loan participation - commercial mortgage loans | | 26,823 | | 379 | | 5.7 | % | | 26,051 | | 657 | | 10.1 | % |
Repurchase agreements - real estate securities | | 166,483 | | 2,589 | | 6.2 | % | | 248,456 | | 3,979 | | 6.4 | % |
Collateralized loan obligations | | 3,591,621 | | 69,495 | | 7.7 | % | | 3,508,595 | | 66,579 | | 7.6 | % |
Unsecured debt | | 81,308 | | 1,896 | | 9.3 | % | | 81,283 | | 1,924 | | 9.5 | % |
Total | | $ | 4,140,985 | | $ | 81,318 | | 7.9 | % | | $ | 4,110,160 | | $ | 81,232 | | 7.9 | % |
Net interest income/spread | | | | $ | 48,994 | | 1.9 | % | | | | $ | 50,484 | | 2.6 | % |
Average leverage %(6) | | 78.1 | % | | | | | | 81.9 | % | | | | |
Weighted average levered yield(7) | | | | | | 16.9 | % | | | | | | 22.2 | % |
Table of Contents | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended |
| | March 31, 2023 | | December 31, 2022 |
| | Average Carrying Value (1) | | Interest Income/Expense (2) | | WA Yield/Financing Cost (3)(4) | | Average Carrying Value (1) | | Interest Income/Expense (2) | | WA Yield/Financing Cost (3)(4) |
Interest-earning assets: | | | | | | | | | | | | |
Real estate debt | | $ | 5,127,298 | | $ | 126,646 | | 9.8% | | $ | 5,261,204 | | $ | 110,961 | | 8.4% |
Real estate conduit | | 15,625 | | 322 | | 8.2% | | 46,858 | | 2,363 | | 20.2% |
Real estate securities | | 280,233 | | 3,568 | | 5.1% | | 407,699 | | 4,779 | | 4.7% |
Total | | $ | 5,423,156 | | $ | 130,536 | | 9.6% | | $ | 5,715,761 | | $ | 118,103 | | 8.3% |
Interest-bearing liabilities: | | | | | | | | | | | | |
Repurchase Agreements - commercial mortgage loans | | $ | 671,580 | | $ | 14,533 | | 8.7% | | $ | 729,330 | | $ | 14,120 | | 7.7% |
Other financing and loan participation - commercial mortgage loans | | 72,160 | | 1,440 | | 8.0% | | 59,508 | | 310 | | 2.1% |
Repurchase Agreements - real estate securities | | 274,935 | | 3,446 | | 5.0% | | 394,491 | | 4,350 | | 4.4% |
Collateralized loan obligations | | 3,110,153 | | 49,537 | | 6.4% | | 3,180,163 | | 43,485 | | 5.5% |
Unsecured debt | | 98,708 | | 2,119 | | 8.6% | | 98,683 | | 1,999 | | 8.1% |
Total | | $ | 4,227,536 | | $ | 71,075 | | 6.7% | | $ | 4,462,175 | | $ | 64,264 | | 5.8% |
Net interest income/spread | | | | $ | 59,461 | | 2.9% | | | | $ | 53,839 | | 2.5% |
Average leverage % (5) | | 78.0 | % | | | | | | 78.1 | % | | | | |
Weighted average levered yield (6) | | | | | | 19.9 | % | | | | | | 17.2 | % |
_________________________________________________________________________(1) Based on amortized cost for real estate debt and real estate securities and principal amount for interest-bearing liabilities. Amounts are calculated based on daily averages for the three months ended March 31, 20232024 and December 31, 2022,2023, respectively.
(2) Includes the effect of amortization of premium or accretion of discount and deferred fees.
(3)Excludes other income on the real estate owned business segment.
(4) Calculated as interest income or expense divided by average carrying value.
(4)(5) Annualized.
(5)(6) Calculated by dividing total average interest-bearing liabilities by total average interest-earning assets.
(6)(7) Calculated by dividing net interest income/spread by the average interest-earning assets less average interest-bearing liabilities.
Interest Income
Interest income for the three months ended March 31, 20232024 and December 31, 20222023 totaled $130.5$130.6 million and $118.1$132.0 million, respectively, an increasea decrease of $12.4$1.4 million. ThisThe decrease was primarily due to an approximate 83 basis point increase inthe loans placed on non-accrual status during the three months ended March 31, 2024. Daily average LIBOR/SOFR and SOFR equivalent rates which was partially offset by a decrease of $133.9 million in the average carrying value of our real estate debt.remained relatively constant between periods. As of March 31, 2023,2024, our portfolio consisted of (i) 157145 commercial mortgage loans, held for investment, (ii) twoone commercial mortgage loans,loan, held for sale, measured at fair value and (iii) fiveseven real estate securities, available for sale, measured at fair valuevalue. As of December 31, 2023, our portfolio consisted of (i) 144 commercial mortgage loans, held for investment and (iv) RMBS investments.(ii) seven real estate securities, available for sale, measured at fair value.
Interest Expense
Interest expense for the three months ended March 31, 20232024 and December 31, 2022 totaled $71.12023 was $81.3 million and $64.3$81.2 million, respectively, an increase of $6.8$0.1 million. ThisThe increase was primarily due to an approximate 83 basis point increase in average LIBOR/SOFR rates which was partially offset by a decrease of $127.8$83.0 million in the average carrying balancevalue of our collateralized loan obligations partially offset by lower borrowing rates on our repurchase agreements - commercial mortgage loans and collateralized loan obligations. In addition, interest expense on our repurchase agreements on real estate securities decreased. This is due to a decrease of $119.6 million in the average carrying value due to sales of securities within the ARM Agency Securities portfolio totaling $235.7 million in principal balance during the three months ended December 31, 2022 offset by a 174 basis point increase in average borrowing rates on the ARM Agency Securities portfolio.loans.
Revenue from Real Estate Owned
For the three months ended March 31, 20232024 and December 31, 2022, our2023, revenue from real estate owned net was $3.3$4.7 million and $2.7$4.0 million, respectively. The $0.6$0.7 million increase was primarily the result of the retail properties brought on asrecoveries received from an office tenant who has vacated one of our real estate owned held for investment.
Provision/(Benefit) for Credit losses
Our allowanceProvision for credit losses was $4.4$2.9 million during the three months ended March 31, 20232024 compared to an increasea provision of $5.1$5.4 million during the three months ended December 31, 2022.2023. The following paragraphs set forth explanations for changes in the general and specific reserves for the three months ended March 31, 20232024 and December 31, 2022.2023.
For the three months ended March 31, 20232024 and December 31, 2022, the increase in2023, general reserve of $3.5provision for credit losses was $2.1 million and $7.5$5.4 million, respectively, is primarily dueattributable to a more pessimistic view of the macroeconomic scenario utilized for the CECL model offset slightly by a decreasedcompared to preceding periods. For the three months ended March 31, 2024, the increase in general reserve balance is also the result of an increase in the size of our loan portfolio.portfolio compared to the preceding period.
For the three months ended March 31, 2023,2024, the increase in specific reserve of $0.8$0.7 million is duewas related to higher capitalization ratesa non-performing multifamily loan secured by two properties in North Carolina placed on the assumed fair value of the Walgreens properties which was partially offset by the cost recovery proceeds received during the quarter. Comparatively,status. The Company did not recognize a specific provision/benefit for credit losses for the quarterthree months ended December 31, 2022, the $2.3 million reversal of the specific provision for credit losses was primarily due to cost recovery proceeds related to the Walgreens properties.2023.
Realized (Gain)/LossGain/(Loss) on Extinguishment of DebtReal Estate Securities, Available for Sale
Realized gain on extinguishmentreal estate securities, available for debtsale for the three months ended March 31, 2023 and December 31, 20222024 of $0.1 million was $4.8 million and $15.0 thousand. The $4.8 millionrelated to the sale of three CRE CLO bonds. Realized loss on real estate securities, available for sale for the three months ended March 31, 2023 was primarily the result of the redemption of $17.5 million of our $100 million par value unsecured debt at a price equal to 75% par. For the quarter ended December 31, 2022, there were no redemptions.
Realized (Gain)/Loss on Sale of Available for Sale Trading Securities
Realized gain on sale of available for sale trading securities for the three months ended March 31, 2023 of $0.6 million$30.0 thousand was primarily duerelated to the sale of fourtwo CRE CLO bonds. For the quarter ended December 31, 2022, there were no sales of available for sale trading securities.Bonds.
Realized (Gain)/LossGain/(Loss) on Sale of Commercial Mortgage Loans, Held for Sale, Measured at Fair Value
There were no sales ofRealized gain on commercial mortgage loans, held for sale, measured at fair value for the three months ended March 31, 2023. Therefore, there2024 of $5.5 million was no realized gain.related to the sale of $100.7 million in principal amount of commercial real estate loans into the CMBS securitization market resulting in proceeds of $106.2 million. Realized gain on commercial mortgage loans, held for sale, measured at fair value for the three months ended December 31, 20222023 of $2.5$0.8 million was related to the $52.5 million sale of a fixed-rate$26.3 million in principal amount of commercial real estate loanloans into the CMBS securitization market withresulting in proceeds on the sale of $50.0$27.1 million.
Unrealized (Gain)/Loss on Commercial Mortgage Loans, Held for Sale, Measured at Fair Value
Unrealized gain on commercial mortgage loans, held for sale, measured at fair value, at the TRS for the three months ended March 31, 2023 was $0.3 million compared to $3.2 million for the three months ended December 31, 2022. The $2.9 million decrease is primarily resulting from the reversal of unrealized gain/loss on sale of a fixed-rate commercial real estate loan into the CMBS securitization market.
(Gain)/LossGain/(Loss) on Other Real Estate Investments
LossGain on other real estate investments for the three months ended March 31, 20232024 was $6.0 thousand related to the sale of $1.3 millionone real estate owned, held for sale property located in San Antonio, TX, compared to $0.7a gain of $0.1 million for the three months ended December 31, 2022, an increase in loss of $0.6 million2023 related to our real estate owned, held for sale property.
Trading (Gain)/Loss
Trading gain for the three months ended March 31, 2023 was $3.0 million attributable to principal paydowns, changesamounts recorded on a multifamily property in market values and gains on sales of ARM Agency Securities. This is compared to a trading loss of $5.5 million for the three months ended December 31, 2022 attributable to principal paydowns, changes in market values on ARM Agency Securities.
Net Result from Derivative Transactions
Net result from derivative transactions for the three months ended March 31, 20232024 of a $0.3$0.2 million loss isgain was composed of a realized gain of $44.0 thousand$0.3 million was primarily related to the termination and settlement of credit default swaps and treasury note futures partially offset by an unrealized loss of $0.3 million primarily due to termination and settlement of our interest rate swap positions throughout the quarter.$0.1 million. This is compared to a net resultgain on our derivative portfolio of a $0.6$0.3 million loss composed primarily of an unrealized lossrealized gains related to the termination and settlement of $3.0 million partially offset by a realized gain of $2.4 millioninterest rate swap positions for the three months ended December 31, 2022 primarily due to termination and settlement of our interest rate swap positions despite increasing values on our interest rate swap portfolio.2023.
Provision/(Benefit)(Provision)/Benefit for Income Tax
BenefitProvision for income tax for the three months ended March 31, 20232024 was $0.7$0.8 million compared to a benefit for income tax of $0.7$0.3 million for the three months ended December 31, 2022.2023. The difference is related to changes in taxable income/loss in our TRS segment.
Net (Income)/Loss Attributable to Non-controlling Interest
Net loss attributable to non-controlling interest in our consolidated joint ventures for the three months ended March 31, 20232024 amounted to $9.0 thousand$0.1 million compared to $0.2 milliona net income attributable to non-controlling interest of $16.0 thousand for the three months ended December 31, 2022.
Preferred Share Dividends of Franklin BSP Realty Trust, Inc.
Preferred share dividends were $6.7 million for the three months ended March 31, 2023 compared to $6.9 million for the three months ended December 31, 2022.2023.
Expenses from Operations
Expenses from operations for the three months ended March 31, 20232024 and December 31, 20222023 consisted of the following (dollars in thousands):
| | | Three Months Ended | | | | Three Months Ended |
| | March 31, 2024 | | | | March 31, 2024 | | December 31, 2023 |
Asset management and subordinated performance fee | |
Acquisition expenses | |
Administrative services expenses | |
Professional fees | |
Share-based compensation | |
| | Three Months Ended |
| March 31, 2023 | | December 31, 2022 |
Asset management and subordinated performance fee | | $ | 8,085 | | | $ | 6,381 | |
Administrative services expenses | | 4,029 | | | 3,526 | |
Acquisition expenses | | 378 | | | 364 | |
| Professional fees | | 4,814 | | | 4,278 | |
Share-based compensation expense | | 1,022 | | | 669 | |
Depreciation and amortization | |
Depreciation and amortization | |
Depreciation and amortization | Depreciation and amortization | | 1,805 | | | 1,522 | |
Other expenses | Other expenses | | 2,166 | | | 1,723 | |
Total expenses from operations | Total expenses from operations | | $ | 22,299 | | | $ | 18,463 | |
The increase in ourOverall, operating expenses waswere consistent with prior quarter, with a decrease of $0.2 million primarily related to an increase(i) a decrease in asset management and subordinated performance fees due to a larger amount of incentive fees incurred forduring the quarterthree months ended December 31, 2023 and (ii) a decrease in administrative service expenses due to less time spent on asset workout during the three months ended March 31, 2024 compared to the three months ended December 31, 2023 of $1.9 million coupled with thepartially offset by (iii) an increase in shared-based compensation expense of $0.4 millionprofessional fees due to theincreases in tax consulting fees and broker fees and (iv) an increase in share-based compensation due to equity awards issued under the Company's 2021 Incentive Plan during the quarterthree months ended March 31, 2023.2024.
Liquidity and Capital Resources
Overview
Our expected material cash requirements over the next twelve months and thereafter are composed of (i) contractually obligated expenditures,payments, including payments of principal and interest and contractually-obligated fundings on our loans; (ii) other essential expenditures, including operating and administrative expenses and dividends paid in accordance with REIT distribution requirements; and (iii) opportunistic expenditures,investments, including new loans.
Our contractually obligated expenditurespayments primarily consist of payment obligations under the debt financing arrangements which are set forth below, includingand included in the table under “Contractual Obligations and Commitments.”
We may from time to time purchase or retire outstanding debt securities or repurchase or redeem our equity securities. Such purchases, if any, will depend on prevailing market conditions, liquidity requirements and other factors.
We closely monitor our liquidity position and believe that we have sufficient current liquidity and access to additional liquidity to meet our financial obligations for the next 12 months and beyond.
Debt-to-Equity Ratio and Total Leverage Ratio
The following table presents our debt-to-equity and total leverage ratios:
| | | | | | | | | | | | | | |
| | March 31, 2024 | | December 31, 2023 |
Net debt-to-equity ratio(1) | | 2.4x | | 2.3x |
Total leverage ratio(2) | | 2.5x | | 2.5x |
________________________(1) Represents (i) total outstanding borrowings under secured financing arrangements, including collateralized loan obligations, repurchase agreements - commercial mortgage loans, repurchase agreements - real estate securities, asset-specific financing arrangements, and unsecured debt, less cash and cash equivalents, to (ii) total equity and total redeemable convertible preferred stock, at period end. Recourse net debt-to-equity ratio was 0.3x and 0.2x as of March 31, 2024 and December 31, 2023, respectively.
(2)Represents (i) total outstanding borrowings under secured financing arrangements, including collateralized loan obligations, repurchase agreements - commercial mortgage loans, repurchase agreements - real estate securities, asset-specific financing arrangements, and unsecured debt, to (ii) total equity and total redeemable convertible preferred stock, at period end. Recourse leverage ratio was 0.4x and 0.4x as of March 31, 2024 and December 31, 2023, respectively.
Sources of Liquidity
Our primary sources of liquidity include unrestricted cash, capacity in our collateralized loan obligations available for reinvestment, and financings available and in progress on financing lines.
Our current sources of near-term liquidity as of March 31, 2024 and December 31, 2023 are set forth in the following table (dollars in millions):
| | | | | | | | | | | | | | |
| | March 31, 2024 | | December 31, 2023 |
Unrestricted cash | | $ | 240 | | | $ | 338 | |
CLO reinvestment available(1) | | 11 | | | 55 | |
Financings available & in progress(2) | | 787 | | | 1,131 | |
Total | | $ | 1,038 | | | $ | 1,524 | |
________________________(1) See discussion below for further information on the Company's collateralized loan obligations.
(2) Represents cash available we can invest at a market advance rate utilizing our available capacity on financing lines.
We expect to use additional debt and equity financing as a source of capital. Our board of directors currently intends to operate at a leverage level of between one to three times book value of equity. However, our board of directors may change this target without shareholder approval. We anticipate that our debt and equity financing sources and our anticipated cash generated from operations will be adequate to fund our anticipated uses of capital.
We have an effective shelf registration statement for offerings of equity securities that is not limited on the amount of securities we may issue. We also have authorized an at-the-market sales program ("ATM") pursuant to which we may sell up to
$200 million of shares of our common stock from time to time. We have not sold any shares of common stock under the ATM to date. We also may access liquidity through our dividend reinvestment and direct stock purchase plan ("DRIP").
In addition to our current mix of financing sources, we may also access additional forms of financings, including credit facilities, securitizations, public and private, secured and unsecured debt issuances by usthe Company or ourits subsidiaries, or through capital recycling initiatives whereby we sell certain assets in our portfolio and reinvest the proceeds in assets with more attractive risk-adjusted returns.
CollateralizedCollateralized Loan Obligations
During the three months ended March 31, 2023, the Company raised no capital through and issuances. Additionally, asAs of March 31, 2023,2024, the Company had $15.1$10.8 million of reinvestment capital available across all outstanding collateralized loan obligations. The following table shows the par value outstanding for each CLO and the respective reinvestment end dates (dollars in millions):
| | | | | | | | | | | | | | |
CLO Name | | Debt Amount | | Reinvestment End Date |
BSPRT 2019 FL52021-FL6 Issuer | | $ | $141 million536.62 | | | Ended |
BSPRT 2021 FL62021-FL7 Issuer | | $ | $585 million674.82 | | | 9/15/23Ended |
BSPRT 2021 FL72022-FL8 Issuer | | $ | $722 million959.94 | | | 12/15/23Ended |
BSPRT 2022 FL82022-FL9 Issuer | | $ | $960 million670.64 | | | 2/15/07/08/24 |
BSPRT 2022 FL92023-FL10 Issuer | | $ | $671 million717.24 | | | 7/15/2404/08/25 |
Repurchase Agreements Commercial Mortgage Loansand Revolving Credit Facilities ("Repo and Revolving Credit Facilities")
The Company has entered into repurchase facilities with JPMorgan Chase Bank, National Association (the "JPM Repo Facility"), Barclays Bank PLC (the "Barclays Revolver Facility" and the "Barclays Repo Facility"), Wells Fargo Bank, National Association (the "WF Repo Facility"), and Atlas SP Partners (the "Atlas Repo Facility" and together with JPM Repo Facility, WF Repo Facility, Barclays Revolver Facility, and Barclays Repo Facility, collectively, the "Repo Facilities").
The RepoRevolving Credit Facilities are financing sources through which the Company may pledge one or more mortgage loans to the financing entity in exchange for funds typically at an advance rate ofthat typically ranges between 65%60% to 75% of the principal amount of the mortgage loan being pledged.
We expect to use the advances from these Repo and Revolving Credit Facilities to finance the acquisition or origination of eligible loans, including first mortgage loans, subordinated mortgage loans, mezzanine loans and participation interests therein.
The Repo and Revolving Credit Facilities generally provide that in the event of a decrease in the value of our collateral, the lenders can demand additional collateral. Should the value of our collateral decrease as a result of deteriorating credit quality, resulting margin calls may cause an adverse change in our liquidity position.
The details of our Repo Facilities as of March 31, 2023 and December 31, 2022 are as follows (dollars in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
As of March 31, 2023 |
Repurchase Facility | | Committed Financing | | Amount Outstanding | | Interest Expense (1) | | Ending Weighted Average Interest Rate | | Term Maturity |
JPM Repo Facility (2) | | $ | 500,000 | | | $ | 261,741 | | | $ | 5,608 | | | 7.95 | % | | 10/6/2024 |
| | | | | | | | | | |
Atlas Repo Facility (3) | | 600,000 | | | 71,896 | | | 2,115 | | | 7.42 | % | | 3/15/2024 |
WF Repo Facility (4) | | 500,000 | | | 100,846 | | | 2,239 | | | 7.68 | % | | 11/21/2023 |
Barclays Revolver Facility (5) | | 250,000 | | | — | | | 215 | | | N/A | | 9/20/2023 |
Barclays Repo Facility (6) | | 500,000 | | | 169,938 | | | 3,528 | | | 7.23 | % | | 3/14/2025 |
Total | | $ | 2,350,000 | | | $ | 604,421 | | | $ | 13,705 | | | | | |
________________________________________________________(1) For the three months ended March 31, 2023. Includes amortization of deferred financing costs.
(2) With one-year extension option available at the Company's discretion. On July 7, 2022, the committed financing was increased from $400 million to $500 million. Additionally, on December 12, 2022, the Company extended the maturity date to October 6, 2024.
(3) On July 12, 2022, the committed financing was increased from $300 million to $600 million. Additionally, on March 17, 2023, the maturity date was extended to March 15, 2024. During the first quarter of 2023, this repurchase facility was transferred from Credit Suisse to the new company, Atlas SP Partners, which has acquired these assets.
(4) On May 12, 2022, the committed financing amount was increased from $450 million to $500 million. There are three more one-year extension options available at the Company's discretion.
(5)The Company may increase the total commitment amount by an amount between $100 million and $150 million for three month intervals, on an unlimited basis prior to maturity. Subsequent to quarter end, on April 24, 2023, the Company extended the maturity date to September 20, 2024.
(6) There are two one-year extension options available at the Company's discretion.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
As of December 31, 2022 | | | | | | | | | |
Repurchase Facility | Committed Financing | | Amount Outstanding | | Interest Expense(1) | | Ending Weighted Average Interest Rate | | Term Maturity |
JPM Repo Facility | $ | 500,000 | | | $ | 275,423 | | | $ | 11,773 | | | 7.42 | % | | 10/6/2024 |
| | | | | | | | | |
Credit Suisse Repo Facility | 600,000 | | | 168,046 | | | 8,676 | | | 7.12 | % | | 10/31/2023 |
WF Repo Facility | 500,000 | | | 79,807 | | | 7,492 | | | 7.11 | % | | 11/21/2023 |
Barclays Revolver Facility | 250,000 | | | — | | | 1,267 | | | N/A | | 9/20/2023 |
Barclays Repo Facility | 500,000 | | | 157,583 | | | 8,997 | | | 6.75 | % | | 3/14/2025 |
Total | $ | 2,350,000 | | | $ | 680,859 | | | $ | 38,205 | | | | | |
(1) For the year ended December 31, 2022. Includes amortization of deferred financing costs.
Other financing and loan participation - Commercial Mortgage Loans
On March 23, 2020, the Company transferred $15.2 million of its interest in a term loan to a regional bank via a participation agreement. Since inception, the Company's outstanding loan increased as a result of future fundings, leading to an increase in amount outstanding via the participation agreement. The Company incurred $1.0 million and $0.2 million of interest expense on the regional bank term loan as of March 31, 2023 and 2022, respectively. As of March 31, 2023 and December 31, 2022 the outstanding participation balance was $58.7 million and $59.2 million, respectively. The loan accrued interest at an annual rate of one-month LIBOR +2.20% and matures on June 9, 2023.
On February 10, 2022, the Company transferred $38.0 million of its interest in a term loan to a regional bank via a participation agreement. Since inception, the Company's outstanding loan could increase as a result of future fundings, which could lead to an increase in amount outstanding via the participation agreement. The Company incurred $0.6 millionfollowing tables summarize our Repo and $5.0 thousand of interest expense on the regional bank term loanRevolving Credit Facilities and our master repurchase agreements ("MRAs") for the three months ended March 31, 2024, 2023, and 2022, respectively. As of March 31, 2023 and December 31, 2022, the outstanding participation balance was $20.4 millionand$17.1 million, respectively. The loan accrued interest at an annual rate of one-month SOFR + 4.01% and matures on May 1, 2025.
Mortgage Note Payable
On September 17, 2021, the Company, in connection with the consolidating joint venture (as discussed in Note 5 - Real Estate Owned), originated a $112.7 million mortgage note payable, of which $88.7 million is eliminated in our consolidated financial statements (see Note 5 - Real Estate Owned). As of March 31, 2023 and December 31, 2022, the remaining outstanding mortgage note payable of $24.0 million is included in the consolidated balance sheet. As of March 31, 2023, the loan accrued interest at an annual rate of Libor + 3.0%, of which the interest accrued on the $88.7 million is eliminated in our consolidated financial statements and matures on October 9, 2024.
Unsecured Debt
As of March 31, 2023, the Company held 30-year junior subordinated notes issued in 2005 and 2006 and maturing in 2035 and 2036, respectively, with a total face amount of $82.5 million. Note balances net of deferred issuance costs, and related weighted average interest rates as of the indicated dates (calculated including issuance cost amortization) were as follows (dollars in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | As of March 31, 2023 | | As of December 31, 2022 |
| | Borrowings Outstanding | | Weighted Average Rate | | Borrowings Outstanding | | Weighted Average Rate |
Junior subordinated notes maturing in: | | | | | | | | |
October 2035 ($17,500 face amount) | | $ | 17,018 | | | 8.88 | % | | $ | 34,508 | | | 8.25 | % |
December 2035 ($40,000 face amount) | | 39,522 | | | 8.48 | % | | 39,513 | | | 8.39 | % |
September 2036 ($25,000 face amount) | | 24,680 | | | 8.48 | % | | 24,674 | | | 8.39 | % |
| | $ | 81,220 | | | 8.56 | % | | $ | 98,695 | | | 8.34 | % |
The notes are currently redeemable, in whole or in part, without penalty, at the Company’s option. During the three months ended March 31, 2023 the Company recognized a realized gain on extinguishment of debt in the amount of $4.4 million as a result of the redemption of $17.5 million par value unsecured debt at a price equal to 75% par. Interest paid on unsecured debt, including related derivative cash flows, totaled $2.3 million and $1.8 million for the three months ended March 31, 2023 and 2022, respectively.
Repurchase Agreements - Real Estate Securities
The Company has entered into various Master Repurchase Agreements (the "MRAs") that allow the Company to sell real estate securities while providing a fixed repurchase price for the same real estate securities in the future. The repurchase contracts on each security under an MRA generally mature in 30-90 days and terms are adjusted for current market rates as necessary.
Below is a summary of the Company's MRAs as of March 31, 2023 and December 31, 2022 (dollars in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | Weighted Average |
Counterparty | Amount Outstanding | | Interest Expense | | Collateral Pledged (1) | | Interest Rate | | Days to Maturity |
As of March 31, 2023 | | | | | | | | | |
JP Morgan Securities LLC | $ | 62,980 | | | $ | 1,091 | | | $ | 69,985 | | | 5.80 | % | | 17 |
| | | | | | | | | |
Barclays Capital Inc. | 44,954 | | | 622 | | | 56,819 | | | 5.84 | % | | 13 |
| | | | | | | | | |
Total/Weighted Average | $ | 107,934 | | | $ | 1,713 | | | $ | 126,804 | | | 5.82 | % | | 15 |
| | | | | | | | | |
As of December 31, 2022 | | | | | | | | | |
JP Morgan Securities LLC | $ | 103,513 | | | $ | 1,281 | | | $ | 120,751 | | | 5.34 | % | | 22 |
| | | | | | | | | |
| | | | | | | | | |
Barclays Capital Inc. | 119,351 | | | 1,646 | | | 144,778 | | | 5.18 | % | | 50 |
| | | | | | | | | |
| | | | | | | | | |
Total/Weighted Average | $ | 222,864 | | | $ | 2,927 | | | $ | 265,529 | | | 5.25 | % | | 37 |
________________________________________________________(1) Includes $42.6 million and $67.1 million of CLO notes, held by the Company, which is eliminated within the Real estate securities, trading, at fair value line of the consolidated balance sheets as of March 31, 2023 and December 31, 2022, respectively.
Repurchase Agreements - Real Estate Securities Classified As Trading
The Company pledges its real estate securities classified as trading as collateral for repurchase agreements with commercial banks and other financial institutions. Repurchase arrangements entered into by the Company involve the sale and a simultaneous agreement to repurchase the transferred assets at a future date and are accounted for as financings. The Company maintains the beneficial interest in the specific securities pledged during the term of each repurchase arrangement and receives the related principal and interest payments.
The terms and conditions of repurchase agreements are negotiated on a transaction-by-transaction basis when each such agreement is initiated or renewed. The amount borrowed is generally equal to the fair value of the securities pledged, as determined by the lending counterparty, less an agreed-upon discount, referred to as a “haircut.” Interest rates are generally fixed based on prevailing rates corresponding to the terms of the borrowings. Interest may be paid monthly or at the termination of an agreement at which time the Company may enter into a new agreement at prevailing haircuts and rates with the same lending counterparty or repay that counterparty and negotiate financing with a different lending counterparty. None of the Company’s lending counterparties are obligated to renew or otherwise enter into new agreements at the conclusion of existing agreements. In response to declines in fair value of pledged securities due to changes in market conditions or the publishing of monthly security pay-down factors, lending counterparties typically require the Company to post additional securities as collateral, pay down borrowings or fund cash margin accounts with the counterparties in order to re-establish the agreed-upon collateral requirements. These actions are referred to as margin calls. Conversely, in response to increases in fair value of pledged securities, the Company routinely margin calls its lending counterparties in order to have previously pledged collateral returned.
Repurchase agreements (and related pledged collateral, including accrued interest receivable), classified by collateral type and remaining maturities, and related weighted average borrowing rates as of the indicated dates were as follows (dollars in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Amount Outstanding | | Accrued Interest Receivable | | Collateral Carrying Amount | | Weighted Average Borrowing Rates |
As of March 31, 2023 | | | | | | | | |
Repurchase arrangements secured by Agency securities with maturities of 30 days or less | | $ | 121,000 | | | $ | 371 | | | $ | 126,749 | | | 4.81 | % |
| | | | | | | | |
As of December 31, 2022 | | | | | | | | |
Repurchase arrangements secured by Agency securities with maturities of 30 days or less | | $ | 172,144 | | | $ | 544 | | | $ | 180,400 | | | 4.25 | % |
Repurchase arrangements secured by Agency securities with maturities of 31 to 90 days | | 45,000 | | | 114 | | | 47,210 | | | 4.51 | % |
| | $ | 217,144 | | | $ | 658 | | | $ | 227,610 | | | 4.30 | % |
Average repurchase agreements outstanding were $149.4 million and $220.1 million during the three months ended March 31, 2023 and December 31, 2022, respectively. Average repurchase agreements outstanding differed from respective period-end balances during the indicated periods primarily due to changes in portfolio levels and differences in the timing of portfolio acquisitions relative to portfolio runoff and asset sales. Interest paid on repurchase agreements, including related derivative payments, totaled $2.0 million and $1.26 million during the three months ended March 31, 2023 and 2022, respectively.
The Company finances its residential mortgage investments primarily by borrowing under repurchase arrangements, the terms and conditions of which are negotiated on a transaction-by-transaction basis, when each such agreement is initiated or renewed.
Future agreements are dependent upon the willingness of lenders to participate in the financing of mortgage investments, lender collateral requirements and the lenders’ determination of the fair value of the investments pledged as collateral, which fluctuates with changes in interest rates and liquidity conditions within the commercial banking and mortgage finance industries. None of our repurchase agreement counterparties are obligated to renew or otherwise enter into new agreements at the conclusion of existing borrowings.
To help mitigate exposure to rising short-term interest rates, the Company may economically hedge the portfolio of repurchase agreements using derivatives supplemented with longer-maturity repurchase agreements when available at attractive rates and terms. As of March 31, 2023, the Company did not hold any derivative positions related to the trading securities.
The following tables summarize our Repurchase Agreements, Commercial Mortgage Loans and our MRAs for the three months ended March 31, 2023, 2022, and 2021, respectively:
| | | | | | | | | | | | | | | | | | | | | | | |
| As of March 31, 2023 |
| Amount Outstanding | Average Outstanding Balance | | | | | | | | | |
| Q1 | | | | | Q1 | | | | | | | | | | | |
Repurchase Agreements, Commercial Mortgage Loans | $ | 604,421 | | | | | | $ | 725,300 | | | | | | | | | | | | |
Repurchase Agreements, Real Estate Securities | $ | 107,934 | | | | | | $ | 217,389 | | | | | | | | | | | | |
Repurchase Agreements, Real Estate Securities held as trading | $ | 121,000 | | | | | | $ | 149,387 | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| As of March 31, 2022 |
| Amount Outstanding | Average Outstanding Balance |
| Q1 | | | | | Q1 | | | | | | | | | | | |
Repurchase Agreements, Commercial Mortgage Loans | $ | 522,890 | | | | | | $ | 813,144 | | | | | | | | | | | | |
Repurchase Agreements, Real Estate Securities | $ | 54,610 | | | | | | $ | 44,744 | | | | | | | | | | | | |
Repurchase Agreements, Real Estate Securities held as trading | 1,659,931 | | | | | 3,055,413 | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | |
| | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
| As of March 31, 2024 |
| Amount Outstanding | | Average Outstanding Balance | | | | | | | | | |
| Q1 | | | | Q1 | | | | | | | | | |
Repurchase agreements and revolving credit facilities - commercial mortgage loans | $ | 412,556 | | | | | $ | 382,313 | | | | | | | | | | |
Repurchase agreements, real estate securities | 194,769 | | | | | 217,012 | | | | | | | | | | |
| | | | | | | | | | | | | | |
Total | $ | 607,325 | | | | | $ | 599,325 | | | | | | | | | | |
| | | | | | | | | | | | | | |
| As of March 31, 2023 |
| Amount Outstanding | | Average Outstanding Balance |
| Q1 | | | | Q1 | | | | | | | | | |
Repurchase agreements and revolving credit facilities - commercial mortgage loans | $ | 604,421 | | | | | $ | 725,300 | | | | | | | | | | |
Repurchase agreements - real estate securities | 107,934 | | | | | 217,389 | | | | | | | | | | |
Repurchase agreements - real estate securities, held as trading | 121,000 | | | | | 149,387 | | | | | | | | | | |
Total | $ | 833,355 | | | | | $ | 1,092,076 | | | | | | | | | | |
| | | | | | | | | | | | | | |
| As of March 31, 2022 | | | | | |
| Amount Outstanding | | Average Outstanding Balance |
| Q1 | | | | Q1 | | | | | | | | | |
Repurchase agreements and revolving credit facilities - commercial mortgage loans | $ | 522,890 | | | | | $ | 813,144 | | | | | | | | | | |
Repurchase agreements - real estate securities | 54,610 | | | | | 44,744 | | | | | | | | | | |
Repurchase agreements - real estate securities, held as trading | 1,659,931 | | | | | 3,055,413 | | | | | | | | | | |
Total | $ | 2,237,431 | | | | | $ | 3,913,301 | | | | | | | | | | |
The use of our warehouse lines is dependent upon a number of factors including but not limited to: origination volume, loan repayments and prepayments, our use of other financing sources such as collateralized loan obligations, our liquidity needs and types of loan assets and underlying collateral that we hold.
During the three months ended March 31, 2024, the maximum average outstanding balance was $569.8 million, of which $378.3 million was related to repurchase agreements on our commercial mortgage loans and $191.5 million for repurchase agreements on our real estate securities.
During the three months ended March 31, 2023, the maximum average outstanding balance was $1.1 billion, of which $0.7 billion was related to repurchase agreements on our commercial mortgage loans and $0.4 billion for repurchase agreements on our real estate securities.
During the three months ended March 31, 2022, the maximum average outstanding balance was $5.3 billion, of which $1.1 billion was related to repurchase agreements on our commercial mortgage loans and $4.2 billion for repurchase agreements on our real estate securities.
During the three months ended March 31, 2021, the maximum average outstanding balance was $475.5 million, of which $363.6 million was related to repurchase agreements on our commercial mortgage loans and $111.9 million for repurchase agreements on our real estate securities.
Distributions
In order to maintain our election to qualify as a REIT, we must currently distribute, at a minimum, an amount equal to 90% of our taxable income, without regard to the deduction for distributions paid and excluding net capital gains. The Company must distribute 100% of its taxable income (including net capital gains) to avoid paying corporate U.S. federal income taxes.
Distributions on our common stock are payable when declared by our board of directors.
Dividends payable on each share of Series H convertible preferred stock ("Series H Preferred StockStock") is generally equal to the quarterly dividend that would have been paid had such share of preferred stock been converted to a share of common stock, except to the extent common stock dividends have been reduced below certain specified levels. To the extent dividends on shares of preferred stock are not authorized and declared by our board of directors and paid by the Company monthly, the dividend amounts will accrue.
Holders of shares of the Company's 7.50% Series E Cumulative Redeemable Preferred Stock ("Series E Preferred StockStock") are entitled to receive, when, as and if authorized by our board of directors and declared by the Company, out of funds legally available for the payment of dividends, cumulative cash dividends at the rate of 7.50% of the $25.00 per share liquidation preference per annum (equivalent to $1.875 per annum per share).
In March 2023,2024, the Company's board of directors declared the following: (i) a first quarter 20232024 dividend of $0.355 per share on the Company's common stock (equivalent to $1.42 per annum), (ii) a first quarter 20232024 dividend of $106.22 per share on the Company’s Series H Preferred Stock, and (iii) a first quarter 20232024 dividend of $0.46875 per share on the Company’s Series E Preferred Stock, all of which were paid in April 20232024 to holders of record on March 31, 2023.2024.
Under the Company’s DRIP, the Company may elect to supply shares for reinvestment via newly issued shares of common stock under the DRIP or via shares of common stock purchased by the DRIP administrator on the open market. During the three months ended March 31, 2024 and 2023, no shares were issued, and 40,735 shares and 58,310 shares, respectively, of common stock were purchased by the administrator under the dividend reinvestment component of the DRIP.
During the three months ended March 31, 2024 and 2023, the Company paid an aggregate of $29.4 million and $29.5 million, respectively, of common stock distributions.
Cash Flows
The belowfollowing table showssets forth changes in cash, cash equivalents and restricted cash for the distributions paid on shares outstandingthree months ended March 31, 2024 and 2023:
| | | | | | | | | | | |
| For the Three Months Ended March 31, |
| 2024 | | 2023 |
Cash Flows From Operating Activities | $ | 12,970 | | | $ | 33,258 | |
Cash Flows From Investing Activities | (139,334) | | | 422,808 | |
Cash Flows From Financing Activities | 30,799 | | | (409,273) | |
Net Increase/(Decrease) in Cash, Cash Equivalents and Restricted Cash | $ | (95,565) | | | $ | 46,793 | |
Cash Flows from Operating Activities
During the three months ended March 31, 2024 our cash flows from operating activities were primarily driven by net income of common stock during$35.8 million and net cash outflow of $24.5 million related to originations and sales of commercial mortgage loans, held for sale, measured at fair value.
During the three months ended March 31, 2023 and March 31, 2022 (dollars in thousands):
| | | | | | | | | | | | | | |
| | Three months ended March 31, 2023our cash flows from operating activities were primarily driven by net income of $43.8 million, offset by certain non-cash income. |
Payment Date | | Amount Paid in Cash | | Amount Issued under DRIP |
January 10, 2023 | | $ | 29,462 | | | $ | — | |
| | | | |
| | | | |
| | | | |
| | | | | | | | | | | | | | |
| | Three Months Ended March 31, 2022 |
Payment Date | | Amount Paid in Cash | | Amount Issued under DRIP |
January 7, 2022 | | $ | 12,435 | | | $ | 91 | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
Cash Flows
Cash Flows forfrom Investing Activities
During the Threethree months ended March 31, 20232024 our cash inflows from investing activities were primarily driven by (i) proceeds from principal repayments of $280.3 million received on commercial mortgage loans, held for investment, (ii) proceeds received from the sale of real estate securities of $41.8 million and (iii) proceeds from the sale of real estate owned, held for sale assets of $42.2 million. Inflows were partially offset by (i) the origination and purchase of $488.3 million of commercial mortgage loans, held for investment and (ii) the purchase of real estate securities for $15.7 million.
Net cash provided by operating activities forDuring the three months ended March 31, 2023 was $33.3 million. Cashour cash inflows were primarily driven by net income of $43.8 million, offset by certain non-cash income.
Net cash provided by investing activities for the three months ended March 31, 2023 was $422.8 million. Cash inflows were primarily driven by the sale of real estate securities, trading, at fair value of $97.5 million, sale of real estate securities, available for sale, measured at fair value of $127.7 million,(i) proceeds from principal repayments on commercial mortgage loans, held for investment of $406.2 million, (ii) proceeds fromthe sale of real estate securities of $225.1 million, and (iii) principal collateral received on mortgage investments of $7.3$7.3 million. Inflows were offset by proceeds for(i) originations and purchases of $195.6 million of commercial mortgage loans, held for investment and $20.3(ii) $20.3 million for the purchase of real estate securities.securities, available for sale.
NetCash Flows from Financing Activities
During the three months ended March 31, 2024 our cash used inoutflows from financing activities were primarily driven by (i) net repayments from borrowings on collateralized loan obligations of $38.7 million, (ii) $36.1 million of distributions paid and (iii) repayments on our other financings of $23.7 million. Outflows were partially offset by (i) net borrowings on repurchase agreements and revolving credit facilities for commercial mortgage loans of $112.8 million and (ii) net borrowings on repurchase agreements for real estate securities of $20.7 million.
During the three months ended March 31, 2023 was $409.3 million. Cashour cash outflows were primarily driven by (i) our net repayments on CMBS MRAs of $211.1 million, (ii) net repayments from borrowings on collateralized loan obligations of $69.0 million, (ii) net repayments on repurchase agreements -and revolving credit facilities for commercial mortgage loans of $76.4$76.4 million, (iii) net repayments on repurchase agreements for real estate securities of $211.1 million, (iv) repayments from borrowings on unsecured debt of $13.4 million (iv) net repayments from borrowings on collateralized loan obligations of $69.0 million and (v) the $36.3 million used for cashof distributions to stockholders.
Cash Flows for the Three months ended March 31, 2022
Net cash used in operating activities for the three months ended March 31, 2022 was $32.3 million. Cash outflows were primarily driven by net loss of $22.5 million, coupled with net outflows of $74.2 million related to originations of and proceeds from sales of commercial mortgage loans, measured at fair value and realized gains of $34.4 million on swap terminations. This is partially offset by $88.4 million related to trading losses on real estate securities.
Net cash provided by investing activities for the three months ended March 31, 2022 was $2,262.9 million. Cash inflows were primarily driven by proceeds from the sale of available for sale trading securities of $2,190.1 million, principal repayments on commercial mortgage loans, held for investment of $330.1 million and $376.9 million in principal collateral received on mortgage investments. Inflows were offset by proceeds for origination and purchase of $636.5 million of commercial mortgage loans, held for investment.
Net cash used in financing activities for the three months ended March 31, 2022 was $2,269.2 million. Cash outflows were primarily driven by our net repayments on CMBS MRAs of $2,464.2 million, net repayments from borrowings on repurchase agreements - commercial mortgage loans and unsecured debt of $496.7 million and $50.0 million, respectively, and $30.3 million was used for cash distributions to stockholders. Outflows were offset by net borrowings on CLOs of $724.9 million.paid.
Election as a REIT
We elected to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code commencing with the taxable year ended December 31, 2013. As a REIT, if we meet certain organizational and operational requirements and distribute at least 90% of our "REIT taxable income" (determined before the deduction of dividends paid and excluding net capital gains) to our stockholders in a year, we will not be subject to U.S. federal income tax to the extent of the income that we distribute. Even if we qualify for taxation as a REIT, we may be subject to certain state and local taxes on our income and property, and U.S. federal income and excise taxes on our undistributed income.
Contractual Obligations and Commitments
Our contractual obligations, excluding interest obligations (as amounts are not fixed or determinable), as of March 31, 20232024 are summarized as follows (dollars in thousands):
| | Less than 1 year | | 1 to 3 years | | 3 to 5 years | | More than 5 years | | Total |
| Less than 1 year | | | Less than 1 year | | 1 to 3 years | | 3 to 5 years | | More than 5 years | | Total |
Unfunded loan commitments (1) | Unfunded loan commitments (1) | $ | 45,889 | | | $ | 435,917 | | | $ | 9,452 | | | $ | — | | | $ | 491,258 | |
Repurchase agreements - commercial mortgage loans | Repurchase agreements - commercial mortgage loans | 100,846 | | | 503,575 | | | — | | | — | | | 604,421 | |
Repurchase agreements - real estate securities | Repurchase agreements - real estate securities | 234,683 | | | — | | | — | | | — | | | 234,683 | |
CLOs (2) | CLOs (2) | — | | | — | | | — | | | 3,078,294 | | | 3,078,294 | |
Mortgage Note Payable | Mortgage Note Payable | — | | | — | | | — | | | 23.998 | | | 23.998 | |
Unsecured debt | Unsecured debt | — | | | — | | | — | | | 81,220 | | | 81,220 | |
Other financing and loan participation - commercial mortgage loans | 58,692 | | | — | | | 20,429 | | | — | | | 79,121 | |
Other financings | |
Total | Total | $ | 440,110 | | | $ | 939,492 | | | $ | 29,881 | | | $ | 3,159,538 | | | $ | 4,569,021 | |
________________________________________________________________________________(1) The allocation of our unfunded loan commitments is based on the earlier of the commitment expiration date or the loan maturity date.
(2) Excludes $461.6$467.0 million of CLO notes, held by the Company, which are eliminated within the collateralized loan obligations line of the consolidated balance sheet as of March 31, 2023.2024. This reflects the contractual CLO maturity dates.
In addition to its cash requirements, the Company pays a quarterly dividend and has an existing share repurchase authorization. As of March 31, 2023,2024, the Company’s quarterly cash dividend was $0.355 per$0.355 per share of common stock (which was paid on an as-converted basis on the Company’s shares of Series H convertible preferred stock ("Series H Preferred Stock") and Series I convertible preferred stock ("Series I Preferred Stock")Stock), and $0.46875 per share on the Company’s shares of 7.50% Series E Cumulative Redeemable Preferred Stock ("Series E Preferred Stock").Stock. The payment of future dividends is subject to declaration by the board of directors. The Company’s board of directors also has authorized a $65.0 million share repurchase program, of which $44.8which $34.0 million remained available as of March 31, 2023.2024. The authorization does not obligate thethe Company to acquire any specific number of shares. The Company repurchased 151,123 shares at an average price of $12.42 per share during the three months ended March 31, 2024.
Related Party Arrangements
Refer to “Note 11 - Related Party Transactions and Arrangements” for a summary of the Company’s related party arrangements.
Non-GAAP Financial Measures
Distributable Earnings and Run-Rate Distributable Earnings to Common
Distributable Earnings is a non-GAAP measure, which the Company defines as GAAP net income (loss), adjusted for (i) non-cash CLO amortization acceleration and amortization over the expected useful life of the Company's CLOs, (ii) unrealized gains and losses on loans, derivatives and ARMs, including CECL reserves and impairments, (iii) non-cash equity compensation expense, (iv) depreciation and amortization, (v) non-cash subordinated performance fee accruals,accruals/(reversal), (vi) loan workout charges, (vii) realized gains and losses on debt extinguishment (viii)and CLO calls, and (vii) certain other non-cash items, and (ix) impairments of acquisition assets relateditems. Further, Distributable Earnings to the Capstead merger. Further, Run-Rate Distributable Earnings,Common, a non-GAAP measure, presents Distributable Earnings before tradingnet of (i) perpetual preferred stock dividend payments and derivative gain/loss on ARMs.
(ii) non-controlling interests in joint ventures. The Company believes that Distributable Earnings and Run-Rate Distributable Earnings to Common provide meaningful information to consider in addition to the disclosed GAAP results. The Company believes Distributable Earnings is aand Distributable Earnings to Common are useful financial metricmetrics for existing and potential future holders of its common stock as historically, over time, Distributable Earnings to Common has been an indicator of common dividends per share. As a REIT, the Company generally must distribute annually at least 90% of its taxable income, subject to certain adjustments, and therefore believes dividends are one of the principal reasons stockholders may invest in its common stock. Further, Distributable Earnings to Common helps investors evaluate performance excluding the effects of certain transactions and GAAP adjustments that the Company does not believe are necessarily indicative of current loan portfolio performance and the Company's operations and is one of the performance metrics the Company's board of directors considers when dividends are declared. The Company believes Run-Rate Distributable Earnings is a useful financial metric because it presents the Distributable Earnings
Distributable Earnings and Run-Rate Distributable Earnings to Common do not represent net income (loss) and should not be considered as an alternative to GAAP net income (loss). The methodology for calculating Distributable Earnings and Run-Rate Distributable Earnings to Common may differ from the methodologies employed by other companies and thus may not be comparable to the Distributable Earnings reported by other companies.
The following table provides a reconciliation of GAAP net income to Distributable Earnings and Run-Rate Distributable Earnings to Common as of the three months ended March 31, 20232024 and March 31, 20222023 (amounts in thousands, except share and per share data):
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
| 2023 | | 2022 | | | | |
GAAP Net Income (Loss) | $ | 43,839 | | $ | (22,507) | | | | |
Adjustments: | | | | | | | |
CLO amortization acceleration (1) | (1,468) | | (977) | | | | |
Unrealized (gain)/loss on financial instruments (2) | 1,312 | | 5,898 | | | | |
Unrealized (gain)/loss - ARMs | (734) | | 27,462 | | | | |
Subordinate performance fee | (594) | | — | | | | |
Non-Cash Compensation Expense | 1,022 | | — | | | | |
Depreciation and amortization | 1,805 | | 1,295 | | | | |
Increase/(decrease) in provision for credit losses | 4,360 | | (955) | | | | |
Loan workout charges (3) | — | | 1,900 | | | | |
Realized gain on debt extinguishment | (4,767) | | — | | | | |
Realized trading and derivatives (gain)/loss on ARMs | (2,234) | | 28,029 | | | | |
Run Rate Distributable Earnings (4) | $ | 42,541 | | $ | 40,145 | | | | |
Realized trading and derivatives gain/(loss) on ARMs | 2,234 | | (28,029) | | | | |
Distributable Earnings | $ | 44,775 | | $ | 12,116 | | | | |
7.5% Cumulative Redeemable Preferred Stock, Series E Dividend | 4,842 | | | 4,842 | | | | | |
Noncontrolling interests in joint ventures net income/(loss) | 9 | | | — | | | | | |
Depreciation and amortization attributed to noncontrolling interests of joint ventures | 360 | | | — | | | | | |
Distributable Earnings to Common | $ | 39,564 | | $ | 7,274 | | | | |
Average Common Stock & Common Stock Equivalents | 1,422,565 | | | 1,519,569 | | | | | |
GAAP Net Income (Loss) ROE | 11.0% | | (7.2)% | | | | |
Run-Rate Distributable Earnings ROE | 10.5% | | 9.3% | | | | |
Distributable Earnings ROE | 11.1% | | 1.9% | | | | |
GAAP Net Income/(Loss) Per Share, Diluted | $ | 0.44 | | $ | (0.99) | | | | |
GAAP Net Income/(Loss) Per Share, Fully Converted (5) | $ | 0.44 | | $ | (0.30) | | | | |
Run-Rate Distributable Earnings Per Share, Fully Converted (5) | $ | 0.42 | | $ | 0.39 | | | | |
Distributable Earnings Per Share, Fully Converted (5) | $ | 0.44 | | $ | 0.08 | | | | |
| | | | | | | | | | | |
| Three months ended March 31, |
| 2024 | | 2023 |
GAAP Net Income (Loss) | $ | 35,827 | | $ | 43,839 |
Adjustments: | | | |
CLO amortization acceleration(1) | — | | (1,468) |
Unrealized (gain)/loss on financial instruments(2) | (325) | | 1,312 |
Unrealized (gain)/loss - ARMs | — | | (734) |
(Reversal of)/Provision for credit losses | 2,880 | | 4,360 |
Non-Cash Compensation Expense | 1,799 | | 1,022 |
Depreciation and amortization | 1,417 | | 1,805 |
Subordinated performance fee(3) | (554) | | (594) |
Realized (gain)/loss on debt extinguishment / CLO call | — | | (4,767) |
Distributable Earnings | $ | 41,044 | | $ | 44,775 |
7.5% Series E Cumulative Redeemable Preferred Stock Dividend | (4,842) | | | (4,842) |
Non-controlling interests in joint ventures net income/(loss) | 93 | | | (9) |
Noncontrolling Interests in Joint Ventures Depreciation and Amortization | (276) | | | (360) |
Distributable Earnings to Common | $ | 36,019 | | $ | 39,564 |
Average Common Stock & Common Stock Equivalents(4) | 1,389,912 | | | 1,422,565 | |
GAAP Net Income/(Loss) ROE | 8.9% | | 11.0% |
Distributable Earnings ROE | 10.4% | | 11.1% |
GAAP Net Income/(Loss) Per Share, Diluted | $ | 0.35 | | | $ | 0.44 | |
GAAP Net Income/(Loss) Per Share, Fully Converted(5) | $ | 0.35 | | | $ | 0.44 | |
Distributable Earnings Per Share, Fully Converted(5) | $ | 0.41 | | | $ | 0.44 | |
____________________________________________________________________________________(1) AdjustedBefore Q1 2024, we adjusted GAAP income for non-cash CLO amortization acceleration to effectively amortize the issuance costs of our CLOs over the expected lifetime of the CLOs. We assume our CLOs will be outstanding for approximately four years and amortized the financing costs over approximately four years in our distributable earnings as compared to effective yield methodology in our GAAP earnings. Starting in Q1 2024, we amortized the issuance costs incurred on our CLOs over the expected lifetime of the CLOs in our GAAP presentation, making our previous adjustment no longer necessary.
(2) Represents unrealized gains and losses on (i) commercial mortgage loans, held for sale, measured at fair value, (ii) other real estate investments, measured at fair value and (iii) derivatives.
(3)Represents loan workout expensesaccrued and unpaid subordinated performance fee. In addition, reversal of subordinated performance fee represents cash payment obligations in the Company incurred, which the Company deems likely to be recovered.quarter.
(4) Distributable Earnings before realized trading and derivative gain/loss on residential adjustable-rate mortgage securities (“Run-Rate Distributable Earnings”) (a non-GAAP financial measure).Represents the average of all classes of equity except the Series E Preferred Stock.
(5) Fully Converted assumes conversion of our series of convertible preferred stock and full vesting of our outstanding equity compensation awards.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
Credit Risk
Our investments are subject to a high degree of credit risk. Credit risk is the exposure to loss from loan defaults. Default rates are subject to a wide variety of factors, including, but not limited to, borrower financial condition, property performance, property management, supply/demand factors, construction trends, consumer behavior, regional economics, interest rates, the strength of the U.S. economy, and other factors beyond our control. All loans are subject to a certain probability of default. We manage credit risk through the underwriting process, acquiring our investments at the appropriate discount to face value, if any, and establishing loss assumptions. We also carefully monitor the performance of the loans, as well as external factors that may affect their value.
Capital Market Risk
We are exposed to risks related to the debt capital markets, and our related ability to finance our business through borrowings under repurchase obligations or other debt instruments. As a REIT, we are required to distribute a significant portion of our taxable income annually, which constrains our ability to accumulate operating cash flow and therefore requires us to utilize debt or equity capital to finance our business. We seek to mitigate these risks by monitoring the debt capital markets to inform our decisions on the amount, timing and terms of capital we raise.
Market uncertainty and volatility may cause fluctuation in market value of certain asset classes within our portfolio. We have and may continue to receive margin calls from our lenders as a result of the decline in the market value of the assets pledged by us to our lenders under our repurchase agreements and warehouse credit facilities, and if we fail to resolve such margin calls when due by payment of cash or delivery of additional collateral, the lenders may exercise remedies including demanding payment by us of our aggregate outstanding financing obligations and/or taking ownership of the loans or other assets securing the applicable obligations and liquidating them at inopportune prices.
Market Risk
As a result of the closing of the Capstead merger on October 19, 2021 we hold ARM Agency securities. Changes in the level of interest rates and spreads can significantly impact the value of these assets. We may utilize a variety of financial instruments in order to limit the adverse effects of interest rates on our results. Since the closing of the merger, we have made significant strides in unwinding our ARMs portfolio and expect to reduce this portfolio and thereby further mitigate our market risk.
Interest Rate Risk
Our market risk arises primarily from interest rate risk relating to interest rate fluctuations. Many factors including governmental monetary and tax policies, domestic and international economic and political considerations and other factors that are beyond our control contribute to interest rate risk. To meet our short and long-term liquidity requirements, we may borrow funds at fixed and variable rates. Our interest rate risk management objectives are to limit the impact of interest rate changes in earnings and cash flows and to lower our overall borrowing costs. To achieve these objectives, from time to time, we may enter into interest rate hedge contracts such as swaps, collars and treasury lock agreements in order to mitigate our interest rate risk with respect to various debt instruments. While hedging activities may insulate us against adverse changes in interest rates, they may also limit our ability to participate in benefits of lower interest rates with respect to our portfolio of investments with fixed interest rates. We do not have any foreign denominated investments, and thus, we are not exposed to foreign currency fluctuations.
As of March 31, 20232024 and December 31, 2022,2023, our portfolio included 154145 and 157141 variable rate investments, respectively, based on LIBOR and SOFR (or "indexing rates") for various terms. As of June 2023, the Company has fully transitioned all loans on LIBOR indexing rates to SOFR indexing rates. Borrowings under our financing arrangements are also based on LIBOR and SOFR. The following table quantifies the potential changes in interest income net of interest expense should interest rates increase by 50 or 100 basis points or decrease by 25 basis points, assuming that our current balance sheet was to remain constant, and no actions were taken to alter our existing interest rate sensitivity. The changes in the portfolio for each basis points increase/decrease is a change from the base scenario.
| | | | | | | | | | | | | | |
| | Estimated Percentage Change in Interest Income Net of Interest Expense |
Change in Interest Rates | | March 31, 2024 | | December 31, 2023 |
(-) 25 Basis Points | | (1.42) | % | | (1.49) | % |
Base Interest Rate | | — | % | | — | % |
(+) 50 Basis Points | | 2.88 | % | | 3.01 | % |
(+) 100 Basis Points | | 5.75 | % | | 6.03 | % |
| | | | | | | | | | | | | | |
| | Estimated Percentage Change in Interest Income Net of Interest Expense |
Change in Interest Rates | | March 31, 2023 | | December 31, 2022 |
(-) 25 Basis Points | | (1.54) | % | | (1.78) | % |
Base Interest Rate | | — | % | | — | % |
(+) 50 Basis Points | | 3.03 | % | | 3.49 | % |
(+) 100 Basis Points | | 6.06 | % | | 6.98 | % |
Real Estate Risk
The market values of commercial mortgage assets are subject to volatility and may be affected adversely by a number of factors, including, but not limited to, the impacts of the COVID-19 pandemic, 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; and demographic factors. 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.
Item 4. Controls and Procedures.
Disclosure Controls and Procedures
In accordance with Rules 13a-15(b) and 15d-15(b) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), management with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded, as of the end of such period, that our disclosure controls and procedures are effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by us in our reports that we file or submit under the Exchange Act.
Changes in Internal Control Over Financial Reporting
During the quarter ended March 31, 2023,2024, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II
Item 1. Legal Proceedings.
Please refer to “Litigation and Regulatory Proceedings” in “Note"Note 10 - Commitments and Contingencies”Contingencies" to the consolidated financial statements included in this report. The Company believes that these proceedings, individually or in the aggregate, will not have a material impact on the Company’s financial condition, operating results or cash flows.
Loan Fraud Lawsuit
The Company originated a loan in April 2022 secured by a portfolio of 24 properties net leased to Walgreens (the “Collateral Properties”). As described in more particularly described underdetail in Part I, Item 3. Legal Proceedings3, "Legal Proceedings" in ourthe Company’s Annual Report on Form 10-K for the year ended December 31, 2022, due to the sponsor’s fraud and default under the loan the Company commenced foreclosureforeclosed on all of the Collateral Properties in 2022. To date, the2022 and 2023. The Company has completed foreclosure or received grant deeds from the borrower on all 24 ofis marketing the Collateral Properties.Properties for sale and is actively pursuing its civil remedies. Note that the collectability, if any, of amounts of legal judgments we have achieved to date and that we may achieve in the future is not currently determinable.
Williamsburg Hotel Bankruptcy Case
The sale of the Williamsburg Hotel, the Company’s Brooklyn hotel asset, by a trustee appointed by the United States Bankruptcy Court for the Southern District of New York, was completed on April 18, 2023, pursuant to the Chapter 11 plan in In re 96 Wythe Acquisition LLC, Case No. 21-22108. The purchaser of the hotel was selected after a multi-month marketing process. The sale closed for a total sale price of $96 million, comprising cash and new indebtedness. As a result of the sale, the Company has recovered the full principal amount of its loan (equal to the carrying cost of the loan as of December 31, 2022) and approximately $20 million of additional proceeds after the payment of all related closing expenses. The Company may elect to pursue additional remedies available under the loan documents.
Item 1A. Risk Factors.
Our potential risks and uncertainties are presented in the section entitled "Risk Factors" contained in our Annual Report on Form 10-K for the year ended December 31, 2022.2023. There have been no material changes from these risk factors.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
The Company’s board of directors has authorized a $65 million share repurchase program that permits share repurchases at prices below the most recently reported book value per share as determined in accordance with GAAP. Purchases made under the Company’s program may be made through open market, block, and privately negotiated transactions, including Rule 10b5-1 plans, as permitted by securities laws and other legal requirements. The timing, manner, price and amount of any purchases by the Company are determined by the Company in its reasonable business judgment and consistent with the exercise of its legal duties and are subject to economic and market conditions, stock price, applicable legal requirements and other factors. The Company's share repurchase program does not obligate the Company to acquire any particular amount of common stock. The Company’s share repurchase program will remain open until at least December 31, 20232024 or until the capital committed to the repurchase program has been exhausted, whichever is sooner. Repurchases under the share repurchase program may be suspended from time to time at the Company’s discretion without prior notice.
The following table sets forth purchases of the Company's common stock under the share purchase programsrepurchase program for the quarterthree months ended March 31, 2023:2024 (in thousands, except share and per share data):
| | | | | | | | | | | | | | | | | | | | | | | |
| Total number of shares purchased | | Average price paid per share (2) | | Total number of shares purchased as part of publicly announced plans or programs (1) | | Approximate dollar value of shares that may yet be purchased under the plans or programs (1) |
January 1, 2023 - January 31, 2023 | — | | | $ | — | | | — | | | $ | — | |
February 1, 2023 - February 28, 2023 | — | | | — | | | — | | | — | |
March 1, 2023 - March 31, 2023 | 313,411 | | | 11.70 | | | 313,411 | | | 44,754,508 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Total | 313,411 | | $ | 11.70 | | | 313,411 | | $ | 44,754,508 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Total number of shares purchased | | Average price paid per share(1) | | Total number of shares purchased as part of publicly announced plans or programs(2) | | Approximate dollar value of shares that may yet be purchased under the plans or programs(2) |
January 1, 2024 - January 31, 2024 | — | | | $ | — | | | — | | | $ | 35,917 | |
February 1, 2024 - February 29, 2024 | 151,123 | | | 12.42 | | | — | | | 34,040 | |
March 1, 2024 - March 31, 2024 | — | | | — | | | — | | | 34,040 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Total | 151,123 | | $ | 12.42 | | | — | | $ | 34,040 | |
_______________________
(1)_______________________ The average price paid per share represents the average purchase price per share, inclusive of any broker’s fees or commissions.
(1)(2) All of the purchases listed in the table above were made in the open market under the Company's share purchaserepurchase program announced on July 26, 2021, including under a Rule 10b5-1 plan adopted by the Company.
(2)The average price paid per share represents the average of the gross purchase price per share, inclusive of any broker’s fees or commissions.
Subsequent to March 31, 2023, the Company repurchased 363,422 additional151,123 shares of common stock at an average price of $12.35, inclusive$12.42 per share for a total of any broker's fees or commissions,$1.9 million during the three months ended March 31, 2024. Subsequent to March 31, 2024, the Company repurchased 160,000 shares of common stock at an average price of$12.33 for an aggregatea total of $4.5$2.0 million. As of April 28, 2023, $40.319, 2024,$32.1 million remains available under the Company’s share repurchase program.
Unregistered Sales of Equity Securities
None.
Item 3. Defaults upon Senior Securities.
Not applicable.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.During the quarter ended March 31, 2024, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.
Item 6. Exhibits.
EXHIBITS INDEX
The following exhibits are included in this Quarterly Report on Form 10-Q for the quarter ended March 31, 20232024 (and are numbered in accordance with Item 601 of Regulation S-K).
| | | | | | | | |
Exhibit No. | | Description |
3.1 | | |
3.2 | | |
10.1*† | | |
31.1* | | |
31.2* | | |
32* | | |
101* | | |
104* | | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
____________________________________________________________________*Filed herewith.
† Indicates management contract or compensatory plan or arrangement.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| | | | | | | | | | | |
| | Franklin BSP Realty Trust, Inc. |
| May 3, 2023April 29, 2024 | By | /s/ Richard J. Byrne |
| | | Name: Richard J. Byrne |
| | | Title: Chief Executive Officer and President |
| | | (Principal Executive Officer) |
| | | |
| May 3, 2023April 29, 2024 | By | /s/ Jerome S. Baglien |
| | | Name: Jerome S. Baglien |
| | | Title: Chief Financial Officer, Chief Operating Officer and Treasurer |
| | | (Principal Financial and Accounting Officer) |
| | | |