FS Credit Real Estate Income Trust (FSREI) 10-Q 2021 Q1 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2021

OR

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

FOR THE TRANSITION PERIOD FROM                TO                

COMMISSION FILE NUMBER: 333-216037

FS Credit Real Estate Income Trust, Inc.

(Exact name of registrant as specified in its charter)

Maryland	81-4446064
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
201 Rouse Boulevard Philadelphia, Pennsylvania	19112
(Address of principal executive offices)	(Zip Code)

(215) 495-1150

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Exchange Act: None.

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
N/A	N/A	N/A

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§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  ☒    No  ☐

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

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☒

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

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date.

As of May 10, 2021 there were 906,230 outstanding shares of Class F common stock, 906,648 outstanding shares of Class Y common stock, 1,311,270 outstanding shares of Class T common stock, 8,591,106 outstanding shares of Class S common stock, 600,497 outstanding shares of Class D common stock, 2,291,536 outstanding shares of Class M common stock and 3,571,089 outstanding shares of Class I common stock.

TABLE OF CONTENTS

		Page
PART I—FINANCIAL INFORMATION
ITEM 1.	FINANCIAL STATEMENTS
	Consolidated Balance Sheets as of March 31, 2021 (Unaudited) and December 31, 2020		3
	Unaudited Consolidated Statements of Operations for the three months ended March 31, 2021 and 2020		4
	Unaudited Consolidated Statements of Comprehensive Income for the three months ended March 31, 2021 and 2020		5
	Unaudited Consolidated Statements of Changes in Equity for the three months ended March 31, 2021 and 2020		6
	Unaudited Consolidated Statements of Cash Flows for the three months ended March 31, 2021 and 2020		7
	Notes to Unaudited Consolidated Financial Statements		8
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		34
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		46
ITEM 4.	CONTROLS AND PROCEDURES		47
PART II—OTHER INFORMATION
ITEM 1.	LEGAL PROCEEDINGS		47
ITEM 1A.	RISK FACTORS		47
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS		47
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES		49
ITEM 4.	MINE SAFETY DISCLOSURES		49
ITEM 5.	OTHER INFORMATION		49
ITEM 6.	EXHIBITS		50
	SIGNATURES		51

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

FS Credit Real Estate Income Trust, Inc.

Consolidated Balance Sheets

(in thousands, except share amounts)

	March 31, 2021 (Unaudited)		December 31, 2020
Assets
Cash and cash equivalents	$	17,662	$	15,707
Restricted cash		10,898		2,167
Loans receivable		900,978		700,149
Mortgage-backed securities held-to-maturity		37,448		37,314
Mortgage-backed securities available-for-sale, at fair value		13,325		—
Reimbursement due from sponsor		56		444
Interest receivable		4,047		3,170
Deferred financing costs		203		152
Other assets		4		15,876
Total assets(1)	$	984,621	$	774,979
Liabilities
Collateralized loan obligation (net of deferred financing costs of $4,294 and $4,556, respectively)	$	323,371	$	323,109
Repurchase agreements payable (net of deferred financing costs of $879 and $194, respectively)		247,746		125,266
Credit facility payable		25,000		—
Due to related party		18,363		15,481
Interest payable		460		344
Payable for shares repurchased		950		1,530
Other liabilities		5,396		3,537
Total liabilities(1)		621,286		469,267
Commitments and contingencies (See Note 10)
Stockholders’ equity
Preferred stock, $0.01 par value, 50,000,000 shares authorized, 125 and 0 issued and outstanding, respectively		—		—
Class F common stock, $0.01 par value, 125,000,000 shares authorized, 913,919 and 912,469 issued and outstanding, respectively		9		9
Class Y common stock, $0.01 par value, 125,000,000 shares authorized, 71,904 and 137,116 issued and outstanding, respectively		1		1
Class T common stock, $0.01 par value, 125,000,000 shares authorized, 1,296,603 and 1,245,658 issued and outstanding, respectively		13		12
Class S common stock, $0.01 par value, 125,000,000 shares authorized, 7,219,425 and 5,778,640 issued and outstanding, respectively		72		58
Class D common stock, $0.01 par value, 125,000,000 shares authorized, 548,007 and 546,298 issued and outstanding, respectively		5		5
Class M common stock, $0.01 par value, 125,000,000 shares authorized, 2,163,864 and 1,971,039 issued and outstanding, respectively		22		20
Class I common stock, $0.01 par value, 300,000,000 shares authorized, 2,988,540 and 2,171,528 issued and outstanding, respectively		30		22
Additional paid-in capital		361,358		303,783
Accumulated other comprehensive income (loss)		—		—
Retained earnings		1,825		1,802
Total stockholders’ equity		363,335		305,712
Total liabilities and stockholders’ equity	$	984,621	$	774,979

(1) The March 31, 2021 and December 31, 2020 consolidated balance sheets include assets of a consolidated variable interest entity, or VIE, that can only be used to settle obligations of the VIE, and liabilities of the consolidated VIE for which creditors do not have recourse to the Company. As of March 31, 2021 and December 31, 2020, assets of the VIE totaled $430,078 and $429,771, respectively, and liabilities of the VIE totaled $323,591 and $323,336, respectively. See Note 9 to the unaudited consolidated financial statements for further details.

See notes to unaudited consolidated financial statements.

3

FS Credit Real Estate Income Trust, Inc.

Unaudited Consolidated Statements of Operations

(in thousands, except share and per share amounts)

	Three Months Ended March 31,
	2021			2020
Net interest income
Interest income	$	11,716		$	8,128
Less: Interest expense		(2,829	)		(3,207	)
Net interest income		8,887			4,921
Other expenses
Management and performance fees		1,573			595
General and administrative expenses		1,405			718
Less: Expense limitation		(56	)		—
Net other expenses		2,922			1,313
Net income		5,965			3,608
Preferred stock dividends		(4	)		(3	)
Net income attributable to FS Credit Real Estate Income Trust, Inc.	$	5,961		$	3,605
Per share information—basic and diluted
Net income per share of common stock (earnings per share)	$	0.41		$	0.40
Weighted average common stock outstanding		14,599,443			8,977,762

See notes to unaudited consolidated financial statements.

4

FS Credit Real Estate Income Trust, Inc.

Unaudited Consolidated Statements of Comprehensive Income

(in thousands)

	Three Months Ended March 31,
	2021		2020
Net income	$	5,965	$	3,608
Other comprehensive income
Net change in unrealized gain (loss) on mortgage-backed securities available-for-sale		—		(1,872	)
Total other comprehensive income (loss)		—		(1,872	)
Comprehensive income	$	5,965	$	1,736

See notes to unaudited consolidated financial statements.

5

FS Credit Real Estate Income Trust, Inc.

Unaudited Consolidated Statements of Changes in Equity

(in thousands)

	Par Value
	Common Stock Class F			Common Stock Class Y		Common Stock Class T		Common Stock Class S			Common Stock Class D		Common Stock Class M			Common Stock Class I		Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)			Retained Earnings (Accumulated Deficit)			Total Stockholders’ Equity
Three Months Ended March 31, 2021
Balance as of December 31, 2020	$	9		$	1	$	12	$	58		$	5	$	20		$	22	$	303,783		$	—		$	1,802		$	305,712
Common stock issued		—			—		1		14			—		2			8		62,420			—			—			62,445
Distributions declared		—			—		—		—			—		—			—		—			—			(5,938	)		(5,938	)
Proceeds from distribution reinvestment plan		—			—		—		—			—		—			—		2,242			—			—			2,242
Redemptions of common stock		—			—		—		—			—		—			—		(3,441	)		—			—			(3,441	)
Stockholder servicing fees		—			—		—		—			—		—			—		(3,330	)		—			—			(3,330	)
Offering costs		—			—		—		—			—		—			—		(316	)		—			—			(316	)
Net income		—			—		—		—			—		—			—		—			—			5,965			5,965
Dividends on preferred stock		—			—		—		—			—		—			—		—			—			(4	)		(4	)
Balance as of March 31, 2021	$	9		$	1	$	13	$	72		$	5	$	22		$	30	$	361,358		$	—		$	1,825		$	363,335
Three Months Ended March 31, 2020
Balance as of December 31, 2019	$	15		$	1	$	10	$	14		$	3	$	14		$	12	$	165,082		$	17		$	619		$	165,787
Common stock issued		—			—		2		25			2		3			5		94,698			—			—			94,735
Preferred stock issued		—			—		—		—			—		—			—		125			—			—			125
Distributions declared		—			—		—		—			—		—			—		—			—			(3,481	)		(3,481	)
Proceeds from distribution reinvestment plan		—			—		—		—			—		—			—		1,105			—			—			1,105
Redemptions of common stock		(6	)		—		—		(1	)		—		(1	)		—		(19,878	)		—			—			(19,886	)
Stockholder servicing fees		—			—		—		—			—		—			—		(5,813	)		—			—			(5,813	)
Net income		—			—		—		—			—		—			—		—			—			3,608			3,608
Dividends on preferred stock		—			—		—		—			—		—			—		—			—			(3	)		(3	)
Other comprehensive income		—			—		—		—			—		—			—		—			(1,872	)		—			(1,872	)
Balance as of March 31, 2020	$	9		$	1	$	12	$	38		$	5	$	16		$	17	$	235,319		$	(1,855	)	$	743		$	234,305

See notes to unaudited consolidated financial statements.

6

FS Credit Real Estate Income Trust, Inc.

Unaudited Consolidated Statements of Cash Flows

(in thousands)

	Three Months Ended March 31,
	2021			2020
Cash flows from operating activities
Net income	$	5,965		$	3,608
Adjustments to reconcile net income to net cash provided by (used in) operating activities
Amortization of deferred fees on loans and debt securities		(343	)		(199	)
Amortization of deferred financing costs		597			550
Changes in assets and liabilities
Reimbursement due from sponsor		388			500
Interest receivable		(877	)		(984	)
Other assets		15,872			5,254
Due to related party		2,882			5,601
Interest payable		116			(311	)
Other liabilities		(1,181	)		(5,142	)
Net cash provided by (used in) operating activities		23,419			8,877
Cash flows used in investing activities
Origination and fundings of loans receivable		(224,530	)		(207,466	)
Principal collections from loans receivable		23,885			87
Exit and extension fees received on loans receivable		25			—
Purchases of mortgage-backed securities		(13,325	)		(25,555	)
Principal repayments of mortgage-backed securities		—			15,554
Net cash used in investing activities		(213,945	)		(217,380	)
Cash flows from financing activities
Issuance of common stock		62,445			94,735
Redemptions of common stock		(4,021	)		(15,416	)
Stockholder distributions paid		(3,542	)		(2,181	)
Stockholder servicing fees		(448	)		(212	)
Offering costs paid		(316	)		—
Borrowings under repurchase agreements		143,091			104,890
Repayments under repurchase agreements		(19,926	)		—
Borrowings under credit facility		56,000			6,000
Repayments under credit facility		(31,000	)		—
Payment of deferred financing costs		(1,071	)		(937	)
Proceeds from issuance of preferred stock		—			125
Net cash provided by (used in) financing activities		201,212			187,004
Total increase (decrease) in cash, cash equivalents and restricted cash		10,686			(21,499	)
Cash, cash equivalents and restricted cash at beginning of period		17,874			78,155
Cash, cash equivalents and restricted cash at end of period	$	28,560		$	56,656
Supplemental disclosure of cash flow information and non-cash financial activities
Payments of interest	$	2,116		$	2,968
Accrued stockholder servicing fee	$	2,882		$	5,601
Distributions payable	$	1,276		$	864
Reinvestment of stockholder distributions	$	2,242		$	1,105
Payable for shares repurchased	$	950		$	4,532

See notes to unaudited consolidated financial statements.

7

FS Credit Real Estate Income Trust, Inc.

Notes to Unaudited Consolidated Financial Statements

(in thousands, except share and per share amounts)

Note 1. Principal Business and Organization

FS Credit Real Estate Income Trust, Inc., or the Company, was incorporated under the general corporation laws of the State of Maryland on November 7, 2016 and formally commenced investment operations on September 13, 2017. The Company is currently conducting a public offering of up to $2,750,000 of its Class T, Class S, Class D, Class M and Class I shares of common stock pursuant to a registration statement on Form S-11 filed with the Securities and Exchange Commission, or SEC, consisting of up to $2,500,000 in shares in its primary offering and up to $250,000 in shares pursuant to its distribution reinvestment plan. The Company is also conducting a private offering of shares of its Class Y common stock and previously conducted a private offering of its Class F common stock. The Company is managed by FS Real Estate Advisor, LLC, or FS Real Estate Advisor, a subsidiary of the Company’s sponsor, Franklin Square Holdings, L.P., which does business as FS Investments, or FS Investments, a national sponsor of alternative investment funds designed for the individual investor. FS Real Estate Advisor has engaged Rialto Capital Management, LLC, or Rialto, to act as its sub-adviser.

The Company has elected to be taxed as a real estate investment trust, or REIT, for U.S. federal income tax purposes commencing with its taxable year ended December 31, 2017. The Company intends to be an investment vehicle of indefinite duration focused on real estate debt investments and other real estate-related assets. The shares of common stock are generally intended to be sold and repurchased by the Company on a continuous basis. The Company intends to conduct its operations so that it is not required to register under the Investment Company Act of 1940, as amended, or the 1940 Act.

The Company’s primary investment objectives are to: provide current income in the form of regular, stable cash distributions to achieve an attractive dividend yield; preserve and protect invested capital; realize appreciation in net asset value, or NAV, from proactive investment management and asset management; and provide an investment alternative for stockholders seeking to allocate a portion of their long-term investment portfolios to commercial real estate debt with lower volatility than public real estate companies.

Note 2. Summary of Significant Accounting Policies

Basis of Presentation: The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles, or GAAP. The unaudited consolidated financial statements include both the Company’s accounts and the accounts of its wholly owned subsidiaries and a variable interest entity, or VIE, of which the Company is the primary beneficiary. All significant intercompany transactions have been eliminated in consolidation. In the opinion of management, the accompanying unaudited consolidated financial statements reflect all adjustments, which are normal and recurring in nature, necessary for fair financial statement presentation. The operating results presented for interim periods are not necessarily indicative of the results that may be expected for any other interim period or for the entire year. The Company has evaluated the impact of subsequent events through the date the unaudited consolidated financial statements were issued.

Use of Estimates: The preparation of the unaudited consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

8

FS Credit Real Estate Income Trust, Inc.

Notes to Unaudited Consolidated Financial Statements (continued)

(in thousands, except share and per share amounts)

Note 2. Summary of Significant Accounting Policies (continued)

Principles of Consolidation: Financial Accounting Standards Board, or FASB, Accounting Standards Codification Topic 810—Consolidation, or ASC Topic 810, provides guidance on the identification of a VIE (a variable interest entity for which control is achieved through means other than voting rights) and the determination of which business enterprise, if any, should consolidate the VIE. An entity is considered a VIE if any of the following applies: (1) the equity investors (if any) lack one or more of the essential characteristics of a controlling financial interest; (2) the equity investment at risk is insufficient to finance that entity’s activities without additional subordinated financial support; or (3) the equity investors have voting rights that are not proportionate to their economic interests and the activities of the entity involve or are conducted on behalf of an investor with a disproportionately small voting interest.

The Company consolidates VIEs in which it is considered to be the primary beneficiary. The primary beneficiary is defined as the entity having both of the following characteristics: (1) the power to direct the activities that, when taken together, most significantly impact the VIE’s performance; and (2) the obligation to absorb losses and right to receive the returns from the VIE that would be significant to the VIE. The Company determines whether it is the primary beneficiary of an entity subject to consolidation based on a qualitative assessment of the VIE’s capital structure, contractual terms, nature of the VIE’s operations and purpose and the Company’s relative exposure to the related risks of the VIE on the date it becomes initially involved in the VIE. The Company reassesses its VIE determination with respect to an entity on an ongoing basis.

Cash, Cash Equivalents and Restricted Cash: The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. The Company invests its cash in overnight institutional money market funds. As of March 31, 2021 and December 31, 2020, the Company’s investment in overnight institutional money market funds was $17,434 and $1,000, respectively. The Company’s uninvested cash is maintained with high credit quality financial institutions, which are members of the Federal Deposit Insurance Corporation. Restricted cash primarily represents cash held in an account to fund additional collateral interests within the Company’s collateralized loan obligation.

The following table provides a reconciliation of cash, cash equivalents and restricted cash in the Company’s consolidated balance sheets to the total amount shown in the Company’s unaudited consolidated statements of cash flows:

	March 31,
	2021		2020
Cash and cash equivalents	$	17,662	$	35,106
Restricted cash		10,898		21,550
Total cash, cash equivalents and restricted cash	$	28,560	$	56,656

Loans Receivable and Provision for Loan Losses: The Company originates and purchases commercial real estate debt and related instruments generally to be held as long-term investments at amortized cost. The Company is required to periodically evaluate each of these loans for possible impairment. Impairment is indicated when it is deemed probable that the Company will not be able to collect all amounts due to it pursuant to the contractual terms of the loan. If a loan is determined to be impaired, the Company writes down the loan through a charge to the provision for loan losses. Impairment of these loans, which are collateral dependent, is measured 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 significant judgments, which include assumptions regarding

9

FS Credit Real Estate Income Trust, Inc.

Notes to Unaudited Consolidated Financial Statements (continued)

(in thousands, except share and per share amounts)

Note 2. Summary of Significant Accounting Policies (continued)

capitalization rates, leasing, creditworthiness of major tenants, occupancy rates, availability of financing, exit plan, loan sponsorship, actions of other lenders, and other factors deemed necessary by FS Real Estate Advisor and Rialto. Actual losses, if any, could ultimately differ from these estimates. FS Real Estate Advisor and Rialto perform a quarterly review of the Company’s portfolio of loans.

In connection with this review, FS Real Estate Advisor and Rialto assess the risk factors of each loan and assign a risk rating based on a variety of factors, including, without limitation, loan-to-value ratio, or LTV, debt yield, property type, geographic and local market dynamics, physical condition, cash flow volatility, leasing and tenant profile, loan structure and exit plan, and project sponsorship. Based on a 5-point scale, the Company’s loans are rated “1” through “5”, from less risk to greater risk, which ratings are defined as follows:

Loan Risk Rating	Summary Description
1	Very Low Risk
2	Low Risk
3	Medium Risk
4	High Risk/Potential for Loss: A loan that has a risk of realizing a principal loss
5	Impaired/Loss Likely: A loan that has a very high risk of realizing a principal loss or has otherwise incurred a principal loss

Mortgage-backed Securities: The Company designates its mortgage-backed securities as held-to-maturity or available-for-sale depending on the investment strategy and ability to hold such securities to maturity. Mortgage-backed securities are classified as held-to-maturity when the Company intends and has the ability to hold until maturity. Held-to-maturity securities are stated at amortized cost on the consolidated balance sheets. Mortgage-backed securities the Company does not hold for the purpose of selling in the near-term or may dispose of prior to maturity, are classified as available-for sale and are reported at fair value on the consolidated balance sheets with changes in fair value recorded in other comprehensive income.

The Company regularly monitors its mortgage-backed securities to ensure investments that may be other-than-temporarily impaired are timely identified, properly valued and charged against earnings in the proper period. The determination that a security has incurred an other-than-temporary decline in value requires the judgment of management. Assessment factors include, but are not limited to, the length of time and the extent to which the market value has been less than amortized cost, the financial condition and rating of the issuer, and the intent to sell or whether it is more likely than not that the Company will be required to sell.

Fair Value of Financial Instruments: Accounting Standards Codification Topic 820, Fair Value Measurements and Disclosures, or ASC Topic 820, defines fair value, establishes a framework for measuring fair value, and requires certain disclosures about fair value measurements under GAAP. Specifically, this guidance defines fair value based on exit price, or the price that would be received upon the sale of an asset or the transfer of a liability in an orderly transaction between market participants at the measurement date.

ASC Topic 820 also establishes a fair value hierarchy that prioritizes and ranks the level of market price observability used in measuring financial instruments. Market price observability is affected by a number of factors, including the type of financial instrument, the characteristics specific to the financial instrument, and the state of the marketplace, including the existence and transparency of transactions between market participants. Financial instruments with readily available quoted prices in active markets generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value.

10

FS Credit Real Estate Income Trust, Inc.

Notes to Unaudited Consolidated Financial Statements (continued)

(in thousands, except share and per share amounts)

Note 2. Summary of Significant Accounting Policies (continued)

Financial instruments measured and reported at fair value are classified and disclosed based on the observability of inputs used in the determination, as follows:

Level 1: Generally includes only unadjusted quoted prices that are available in active markets for identical financial instruments as of the reporting date.

Level 2: Pricing inputs include quoted prices in active markets for similar instruments, quoted prices in less active or inactive markets for identical or similar instruments where multiple price quotes can be obtained, and other observable inputs, such as interest rates, yield curves, credit risks, and default rates.

Level 3: Pricing inputs are unobservable for the financial instruments and include situations where there is little, if any, market activity for the financial instrument. These inputs require significant judgment or estimation by management or third parties when determining fair value and generally represent anything that does not meet the criteria of Levels 1 and 2.

The estimated value of each asset reported at fair value using Level 3 inputs is determined by an internal committee composed of members of senior management of FS Real Estate Advisor.

Certain of the Company’s assets are reported at fair value either (i) on a recurring basis, as of each quarter-end, or (ii) on a nonrecurring basis, as a result of impairment or other events. The Company generally values its assets recorded at fair value by either (i) discounting expected cash flows based on assumptions regarding the collection of principal and interest and estimated market rates, or (ii) obtaining assessments from third-party dealers. For collateral-dependent loans that are identified as impaired, the Company measures impairment by comparing FS Real Estate Advisor’s estimation of fair value of the underlying collateral, less costs to sell, to the book value of the respective loan. These valuations may require significant judgments, which include assumptions regarding capitalization rates, leasing, creditworthiness of major tenants, occupancy rates, availability of financing, exit plan, loan sponsorship, actions of other lenders, and other factors deemed necessary by FS Real Estate Advisor and Rialto.

The Company is also required by GAAP to disclose fair value information about financial instruments that are not otherwise reported at fair value in the Company’s consolidated balance sheets, to the extent it is practicable to estimate a fair value for those instruments. These disclosure requirements exclude certain financial instruments and all non-financial instruments.

The following methods and assumptions are used to estimate the fair value of each class of financial instruments, for which it is practicable to estimate that value:

• Cash and cash equivalents: The carrying amount of cash on deposit and in money market funds approximates fair value.

• Restricted cash: The carrying amount of restricted cash approximates fair value.

• Loans receivable, net: The fair values for these loans were estimated by FS Real Estate Advisor based on discounted cash flow methodology taking into consideration factors, including capitalization rates, discount rates, leasing, occupancy rates, availability and cost of financing, exit plan, sponsorship, actions of other lenders, and indications of market value from other market participants.

• Mortgage-backed securities available-for-sale: The fair values for these investments were based on indicative deal quotes.

11

FS Credit Real Estate Income Trust, Inc.

Notes to Unaudited Consolidated Financial Statements (continued)

(in thousands, except share and per share amounts)

Note 2. Summary of Significant Accounting Policies (continued)

• Mortgage-backed securities held-to-maturity: The fair values for these investments were estimated by FS Real Estate Advisor based on a discounted cash flow methodology pursuant to which a discount rate or market yield is used to discount the estimated future cash flows expected to be received from the underlying investment, which include both future principal and interest payments. Significant increases or decreases in the discount rate or market yield would result in a decrease or increase in the fair value measurement.

• Collateralized loan obligation, repurchase obligations and credit facility: The fair values for these instruments were estimated based on the rate at which similar credit facilities would have currently been priced.

Deferred Financing Costs: Deferred financing costs include issuance and other costs related to the Company’s debt obligations. The deferred financing costs related to the Company’s collateralized loan obligation and repurchase agreements are recorded as a reduction in the net book value of the related liability on the Company’s consolidated balance sheets. Deferred financing costs related to the Company’s revolving credit facility and facilities that are undrawn as of the reporting date are recorded as an asset on the Company’s consolidated balance sheets. These costs are amortized as interest expense using the straight-line method over the term of the related obligation, which approximates the effective interest method.

Revenue Recognition: Security transactions are accounted for on the trade date. The Company records interest income from our loans receivable portfolio on an accrual basis to the extent that the Company expects to collect such amounts. Discounts or premiums associated with the investment securities are amortized or accreted into interest income as a yield adjustment on the effective interest method, based on expected cash flows through the expected maturity date of the investment. On at least a quarterly basis, the Company reviews and, if appropriate, makes adjustments to its cash flow projections. The Company records dividend income on the ex-dividend date. The Company does not accrue as a receivable interest or dividends on loans and securities if there is reason to doubt the collectability of such income. Any loan origination fees to which the Company is entitled, loan exit fees, original issue discount and market discount are capitalized and such amounts are amortized as interest income over the respective term of the investment. Upon the prepayment of a loan or security, any unamortized loan origination fees to which the Company is entitled are recorded as fee income. The Company records prepayment premiums on loans and securities as fee income when it receives such amounts.

Organization Costs: Organization costs include, among other things, the cost of incorporating, including the cost of legal services and other fees pertaining to the Company’s organization. These costs are expensed as incurred and recorded as a component of general and administrative expenses on the Company’s consolidated statements of operations. During the period from November 7, 2016 (Inception) to September 13, 2017 (Commencement of Operations), the Company incurred organization costs of $243, which were paid on its behalf by FS Investments (see Note 6).

Offering Costs: Offering costs primarily include, among other things, marketing expenses and printing, legal and due diligence fees and other costs pertaining to the Company’s continuous public offering of shares of its common stock, including the preparation of the registration statement and salaries and direct expenses of FS Real Estate Advisor’s personnel, employees of its respective affiliates and others while engaged in such activities. The Company charges offering costs against additional paid-in capital on the consolidated balance sheets as it raises proceeds in its continuous public offering in excess of $250,000. In April 2020, FS Real Estate Advisor agreed not to seek reimbursement of offering costs previously incurred until such time as it determined that the

12

FS Credit Real Estate Income Trust, Inc.

Notes to Unaudited Consolidated Financial Statements (continued)

(in thousands, except share and per share amounts)

Note 2. Summary of Significant Accounting Policies (continued)

Company had achieved economies of scale sufficient to ensure that it could bear a reasonable level of expenses in relation to its income. The Company began reimbursing FS Real Estate Advisor in September 2020 and, as such, FS Real Estate Advisor may be reimbursed for any organization and offering expenses that it or Rialto has incurred on the Company’s behalf, up to a cap of 0.75% of gross proceeds raised after such time. During the period from November 7, 2016 (Inception) to March 31, 2021, the Company incurred offering costs of $13,624, which were paid on its behalf by FS Investments (see Note 6).

Income Taxes: The Company elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended, or the Code, commencing with its taxable year ended December 31, 2017. In order to maintain its status as a REIT, the Company must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of its annual REIT taxable income to its stockholders. As a REIT, the Company generally will not be subject to federal income tax on income that it distributes to stockholders. If the Company fails to qualify as a REIT in any taxable year, it will be subject to federal income tax on its taxable income at regular corporate income tax rates and generally will not be permitted to qualify for treatment as a REIT for federal income tax purposes for the four taxable years following the year during which qualification is lost unless the Internal Revenue Service grants the Company relief under certain statutory provisions.

Uncertainty in Income Taxes: The Company evaluates each of its tax positions to determine if they meet the minimum recognition threshold in connection with accounting for uncertainties in income tax positions taken or expected to be taken for the purposes of measuring and recognizing tax benefits or liabilities in the unaudited consolidated financial statements. Recognition of a tax benefit or liability with respect to an uncertain tax position is required only when the position is “more likely than not” to be sustained assuming examination by taxing authorities. The Company recognizes interest and penalties, if any, related to unrecognized tax liabilities as income tax expense in the unaudited consolidated statements of operations. During the three months ended March 31, 2021 and 2020, the Company did not incur any interest or penalties and none are accrued at March 31, 2021.

Stockholder Servicing Fees: The Company follows the guidance in Accounting Standards Codification Topic 405, Liabilities, when accounting for stockholder servicing fees. The Company will pay stockholder servicing fees over time on its shares of Class T, Class S, Class D and Class M common stock as described in Note 6. The Company records stockholder servicing fees as a reduction to additional paid-in capital and records the related liability in an amount equal to its best estimate of the fees payable in relation to the shares of Class T, Class S, Class D and Class M common stock on the date such shares are issued. The liability will be reduced over time, as the fees are paid to the dealer manager, or adjusted if the fees are no longer payable.

Recent Accounting Pronouncements: In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses: Measurement of Credit Losses on Financial Instruments (Topic 326), or ASU 2016-13. ASU 2016-13 significantly changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. ASU 2016-13 will replace the “incurred loss” model under existing guidance with an “expected loss” model for instruments measured at amortized cost and require entities to record allowances for available-for-sale debt securities rather than reduce the carrying amount, as they do today under the other than-temporary impairment model. It also simplifies the accounting model for purchased credit-impaired debt securities and loans. For public entities, the new standard is effective during the interim and annual periods beginning after December 15, 2019, with early adoption permitted. In November 2019, the FASB issued ASU 2019-10, Financial Instruments—Credit Losses: Measurement of Credit Losses on

13

FS Credit Real Estate Income Trust, Inc.

Notes to Unaudited Consolidated Financial Statements (continued)

(in thousands, except share and per share amounts)

Note 2. Summary of Significant Accounting Policies (continued)

Financial Instrument (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842) Effective Dates, which deferred the effective date of ASU 2016-13 for smaller reporting companies until fiscal years beginning after December 15, 2022. The Company, as a smaller reporting company, continues to evaluate the impact of this update on its unaudited consolidated financial statements.

Note 3. Loans Receivable

The following table details overall statistics for the Company’s loans receivable portfolio as of March 31, 2021 and December 31, 2020:

	March 31, 2021 (Unaudited)			December 31, 2020
Number of loans		45			35
Principal balance	$	900,056		$	699,250
Net book value	$	900,978		$	700,149
Unfunded loan commitments(1)	$	106,676		$	100,389
Weighted-average cash coupon(2)		L+4.22	%		L+4.25	%
Weighted-average all-in yield(2)		L+4.31	%		L+4.35	%
Weighted-average maximum maturity (years)(3)		3.8			3.7

(1) The Company may be required to provide funding when requested by the borrower in accordance with the terms of the underlying agreements.

(2) The Company’s floating rate loans are indexed to the London Interbank Offered Rate, or LIBOR. In addition to cash coupon, all-in yield includes accretion of discount (amortization of premium) and accrual of exit fees.

(3) Maximum maturity assumes all extension options are exercised by the borrower; however, loans may be repaid prior to such date.

For the three months ended March 31, 2021 and 2020, the activity in the Company’s loan portfolio was as follows:

	For the Three Months Ended March 31,
	2021			2020
Balance at beginning of period	$	700,149		$	406,645
Loan fundings		224,530			207,466
Loan repayments		(23,885	)		(87	)
Amortization of deferred fees on loans		209			199
Exit and extension fees received on loans receivable		(25	)		—
Balance at end of period	$	900,978		$	614,223

14

FS Credit Real Estate Income Trust, Inc.

Notes to Unaudited Consolidated Financial Statements (continued)

(in thousands, except share and per share amounts)

Note 3. Loans Receivable (continued)

The following tables detail the property type and geographic location of the properties securing the loans in the Company’s portfolio as of March 31, 2021 and December 31, 2020:

	March 31, 2021 (Unaudited)					December 31, 2020
Property Type	Net Book Value		Percentage			Net Book Value		Percentage
Office	$	221,142		24	%	$	174,483		25	%
Industrial		143,725		16	%		168,876		24	%
Multifamily		225,608		25	%		130,648		19	%
Mixed Use		133,827		15	%		91,556		13	%
Hospitality		63,465		7	%		62,759		9	%
Retail		78,286		9	%		52,128		7	%
Self Storage		34,925		4	%		19,699		3	%
Total	$	900,978		100	%	$	700,149		100	%

	March 31, 2021 (Unaudited)					December 31, 2020
Geographic Location(1)	Net Book Value		Percentage			Net Book Value		Percentage
South	$	381,387		42	%	$	311,123		44	%
West		273,912		31	%		201,318		29	%
Northeast		225,980		25	%		168,009		24	%
Various		19,699		2	%		19,699		3	%
Total	$	900,978		100	%	$	700,149		100	%

(1) As defined by the United States Department of Commerce, Bureau of the Census.

Loan Risk Rating

As further described in Note 2, FS Real Estate Advisor and Rialto assess the risk factors of each loan and assign a risk rating based on a variety of factors, including, without limitation, loan-to-value ratio, or LTV, debt yield, property type, geographic and local market dynamics, physical condition, cash flow volatility, leasing and tenant profile, loan structure and exit plan, and project sponsorship. Based on a 5-point scale, the Company’s loans are rated “1” through “5”, from less risk to greater risk, which ratings are defined in Note 2.

The following table allocates the net book value of the Company’s loans receivable portfolio based on the Company’s internal risk ratings:

	March 31, 2021 (Unaudited)							December 31, 2020
Risk Rating	Number of Loans		Net Book Value		Percentage			Number of Loans		Net Book Value		Percentage
1		—	$	—		—			—	$	—		—
2		—		—		—			—		—		—
3		44		876,603		97	%		34		689,104		98	%
4		1		24,375		3	%		1		11,045		2	%
5		—		—		—			—		—		—
Total		45	$	900,978		100	%		35	$	700,149		100	%

15

FS Credit Real Estate Income Trust, Inc.

Notes to Unaudited Consolidated Financial Statements (continued)

(in thousands, except share and per share amounts)

Note 3. Loans Receivable (continued)

The Company did not have any impaired loans, non-accrual loans, or loans in maturity default as of March 31, 2021 or December 31, 2020.

Note 4. Mortgage Backed Securities

Mortgage-backed securities, available-for-sale

Commercial mortgage-backed securities, or CMBS, classified as available-for-sale are reported at fair value on the consolidated balance sheets with changes in fair value recorded in other comprehensive income.

The table below summarizes various attributes of the Company’s investments in available-for-sale CMBS as of March 31, 2021 and December 31, 2020, respectively.

					Gross Unrealized						Weighted Average
	Outstanding Face Amount		Amortized Cost Basis		Gains		Losses		Fair Value		Coupon			Remaining Duration (years)
March 31, 2021 (Unaudited)
CMBS, available-for-sale	$	13,325	$	13,325	$	—	$	—	$	13,325		6.25	%		13.0
December 31, 2020
CMBS, available-for-sale	$	—	$	—	$	—	$	—	$	—		—	%		—

Mortgage-backed securities, held-to-maturity

The table below summarizes various attributes of the Company’s investments in held-to-maturity CMBS as of March 31, 2021 and December 31, 2020, respectively.

	Net Carrying Amount (Amortized Cost)		Gross Unrecognized Holding Gains		Gross Unrecognized Holding Losses		Fair Value
March 31, 2021 (Unaudited)
CMBS, held-to-maturity	$	37,448		—		—	$	37,448
December 31, 2020
CMBS, held-to-maturity	$	37,314		—		—	$	37,314

The table below summarizes the maturities of the Company’s investments in held-to-maturity CMBS as of March 31, 2021:

	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
CMBS, held-to-maturity	$	37,448		—		—	$	37,448		—

Note 5. Financing Arrangements

The following tables present summary information with respect to the Company’s outstanding financing arrangements as of March 31, 2021 and December 31, 2020. For additional information regarding these financing arrangements, see the notes to the Company’s audited consolidated financial statements contained in its annual

16

FS Credit Real Estate Income Trust, Inc.

Notes to Unaudited Consolidated Financial Statements (continued)

(in thousands, except share and per share amounts)

Note 5. Financing Arrangements (continued)

report on Form 10-K for the year ended December 31, 2020. Any significant changes to the Company’s financing arrangements during the three months ended March 31, 2021 are discussed below.

	As of March 31, 2021 (Unaudited)
Arrangement(1)	Type of Arrangement		Rate		Amount Outstanding		Amount Available		Maturity Date
2019-FL1 Notes(2)		Collateralized Loan Obligation		L+1.20% - 2.50%(3)	$	327,665	$	—		December 18, 2036(4)
WF-1 Facility(5)		Repurchase		L+2.15% - 2.50%(6)		51,463		48,537		August 30, 2021
GS-1 Facility(7)		Repurchase		L+1.75% - 2.75%(8)		141,186		33,814		January 26, 2022
BB-1 Facility(9)		Repurchase		L+1.55% - 1.95%		55,976		119,024		February 22, 2024
CNB Facility		Revolving Credit Facility		L+2.25%(2)		25,000		—		August 23, 2021
Total					$	601,290	$	201,375

(1) The carrying amount outstanding under the facilities approximates their fair value.

(2) The carrying amount and fair value of assets transferred as collateral underlying the 2019-FL1 Notes is $419,659 and $418,125, respectively.

(3) LIBOR is subject to a 0.00% floor.

(4) The 2019-FL1 Notes mature on the December 2036 payment date, as defined in the Indenture governing the 2019-FL1 Notes and calculated based on the current U.S. federal holidays.

(5) The carrying amount and fair value of assets transferred as collateral underlying the facility is $108,337 and $108,362, respectively.

(6) LIBOR is subject to a 0.00% floor. FS CREIT Finance WF-1 LLC, or WF-1, and Wells Fargo Bank, National Association, or Wells Fargo, may mutually agree on rates outside this range or a different LIBOR floor on an asset by asset basis.

(7) The carrying amount and fair value of assets transferred as collateral underlying the facility is $186,215 and $186,150, respectively.

(8) LIBOR is subject to a 0.50% floor. FS CREIT Finance GS-1 LLC, or GS-1, and Goldman Sachs Bank USA, or Goldman Sachs, may mutually agree on rates outside this range or a different LIBOR floor on an asset by asset basis.

(9) The carrying amount and fair value of assets transferred as collateral underlying the facility is $73,519 and $73,573, respectively.

	As of December 31, 2020
Arrangement(1)	Type of Arrangement		Rate	Amount Outstanding		Amount Available		Maturity Date
2019-FL1 Notes(2)		Collateralized Loan Obligation	L+1.20% - 2.50%(3)	$	327,665	$	—		December 18, 2036(4)
WF-1 Facility(5)		Repurchase	L+2.15% - 2.50%(6)		29,889		70,111		August 30, 2021
GS-1 Facility(7)		Repurchase	L+1.75% - 2.75%(8)		95,571		79,429		January 26, 2021
CNB Facility		Revolving Credit Facility	L+2.25%(2)		—		25,000		August 23, 2022
Total				$	453,125	$	174,540

(1) The carrying amount outstanding under the facilities approximates their fair value.

(2) The carrying amount and fair value of assets transferred as collateral underlying the 2019-FL1 Notes is $411,455 and $409,497, respectively.

(3) LIBOR is subject to a 0.00% floor.

17

FS Credit Real Estate Income Trust, Inc.

Notes to Unaudited Consolidated Financial Statements (continued)

(in thousands, except share and per share amounts)

Note 5. Financing Arrangements (continued)

(4) The 2019-FL1 Notes mature on the December 2036 payment date, as defined in the Indenture governing the 2019-FL1 Notes and calculated based on the current U.S. federal holidays.

(5) The carrying amount and fair value of assets transferred as collateral underlying the facility is $39,945 and $39,977, respectively.

(6) LIBOR is subject to a 0.00% floor. WF-1 and Wells Fargo, may mutually agree on rates outside this range or a different LIBOR floor on an asset by asset basis.

(7) The carrying amount and fair value of assets transferred as collateral underlying the facility is $127,512 and $126,995 respectively.

(8) LIBOR is subject to a 0.50% floor. GS-1 and Goldman Sachs, may mutually agree on rates outside this range or a different LIBOR floor on an asset by asset basis.

The Company’s average borrowings and weighted average interest rate, including the effect of non-usage fees, for the three months ended March 31, 2021 were $475,923 and 1.88%, respectively. The Company’s average borrowings and weighted average interest rate, including the effect of non-usage fees, for the year ended December 31, 2020 were $413,236 and 2.12%, respectively.

Under its financing arrangements, the Company has made certain representations and warranties and is required to comply with various covenants, reporting requirements and other customary requirements for similar financing arrangements. The Company was in compliance with all covenants required by its financing arrangements as of March 31, 2021 and December 31, 2020.

2019-FL1 Notes

On December 5, 2019, the Company issued $327,665 of collateralized loan obligation notes, or the CLO1 Transaction, through FS Rialto Sub-REIT LLC, or the Sub-REIT, a subsidiary real estate investment trust of the Company, and two wholly-owned financing subsidiaries of the Sub-REIT, FS Rialto 2019-FL1 Issuer, Ltd., an exempted company with limited liability under the laws of the Cayman Islands, as issuer, or the CLO1 Issuer, and FS Rialto 2019-FL1 Co-Issuer, LLC, a Delaware limited liability company, as co-issuer, or the CLO1 Co-Issuer and, together with the CLO1 Issuer, the CLO1 Issuers.

As of March 31, 2021, the 2019-FL1 Notes were collateralized by a pool of interests in 22 commercial real estate loans having a total principal balance of $418,586.

The Company incurred $5,847 of issuance costs which are amortized over the remaining life of the loans that collateralized the 2019-FL1 Notes. As of March 31, 2021, $4,294 had yet to be amortized to interest expense.

WF-1 Facility

On August 30, 2017, the Company’s indirect wholly owned, special-purpose financing subsidiary, WF-1, as seller, entered into a Master Repurchase and Securities Contract, or, as amended, the WF-1 Repurchase Agreement, and together with the related transaction documents, the WF-1 Facility, with Wells Fargo, as buyer, to finance the acquisition and origination of commercial real estate whole loans or senior controlling participation interests in such loans. The maximum amount of financing available under the WF-1 Facility as of March 31, 2021 is $100,000, which may be increased to $200,000 with the consent of Wells Fargo. Each transaction under the WF-1 Facility has its own specific terms, such as identification of the assets subject to the transaction, sale price, repurchase price and rate.

18

FS Credit Real Estate Income Trust, Inc.

Notes to Unaudited Consolidated Financial Statements (continued)

(in thousands, except share and per share amounts)

Note 5. Financing Arrangements (continued)

The Company incurred $1,647 of deferred financing costs related to the WF-1 Facility, which is being amortized to interest expense over the life of the facility. As of March 31, 2021, $169 had yet to be amortized to interest expense.

GS-1 Facility

On January 26, 2018, the Company’s indirect wholly-owned, special-purpose financing subsidiary, GS-1, as seller, entered into an Uncommitted Master Repurchase and Securities Contract Agreement, or as amended, the GS-1 Repurchase Agreement, and together with the related transaction documents, the GS-1 Facility with Goldman Sachs, as buyer, to finance the acquisition and origination of whole, performing senior commercial or multifamily floating rate mortgage loans secured by first liens on office, retail, industrial, hospitality, multifamily or other commercial properties. The maximum amount of financing available under the GS-1 Facility as of March 31, 2021 is $175,000, which may be increased to $250,000 with the consent of Goldman Sachs if the Company meets certain equity capital thresholds. Each transaction under the GS-1 Facility has its own specific terms, such as identification of the assets subject to the transaction, sale price, repurchase price and rate.

The initial availability period of the GS-1 Facility (during which financing under the GS-1 Facility was available for acquisition and origination of new assets) was two years. On February 18, 2020, the GS-1 Repurchase Agreement was amended to extend the availability period to January 26, 2021 and on January 25, 2021, the GS-1 Repurchase Agreement was amended to extend the availability period to January 26, 2022. After the end of the availability period, GS-1 may exercise an option to commence a one-year amortization period, so long as certain conditions are met. During the amortization period, certain changes to the terms of the GS-1 Facility would apply, including an increase to the rate charged on each asset financed under the GS-1 Facility.

The Company incurred $2,527 of deferred financing costs related to the GS-1 Facility, which is being amortized to interest expense over the life of the facility. As of March 31, 2021, $380 had yet to be amortized to interest expense.

BB-1 Facility

On February 22, 2021, the Company’s indirect wholly owned, special-purpose financing subsidiary, FS CREIT Finance BB-1 LLC, or BB-1, entered into a Master Repurchase Agreement, or the BB-1 Repurchase Agreement, and together with the related transaction documents, the BB-1 Facility, as seller, with Barclays Bank PLC, or Barclays, as purchaser, to finance the acquisition and origination of whole, performing senior commercial or multifamily floating rate mortgage loans secured by first liens on office, retail, industrial, hospitality, multifamily, self-storage and manufactured housing property (or a combination of the foregoing, including associated parking structures). The initial maximum amount of financing available under the BB-1 Facility is $175,000. BB-1 may, with the consent of Barclays, elect to increase the maximum amount of financing available to $250,000. Each transaction under the BB-1 Facility will have its own specific terms, such as identification of the assets subject to the transaction, sale price, repurchase price and rate.

The initial availability period of the BB-1 Facility (during which financing under the BB-1 Facility may be used for acquisition and origination of new assets) is three years. BB-1 may extend the availability period for a one-year term extension, so long as certain conditions are met. After the end of the availability period, BB-1 may exercise an option to commence a one-year amortization period up to two times, so long as certain conditions are met. During the amortization period, certain of the terms of the BB-1 Facility will be modified, including a requirement to pay down a certain amount of the outstanding purchase price of each asset financed under the BB-1 Facility.

19

FS Credit Real Estate Income Trust, Inc.

Notes to Unaudited Consolidated Financial Statements (continued)

(in thousands, except share and per share amounts)

Note 5. Financing Arrangements (continued)

The Company incurred $335 of deferred financing costs related to the GS-1 Facility, which is being amortized to interest expense over the life of the facility. As of March 31, 2021, $330 had yet to be amortized to interest expense.

CNB Facility

On August 22, 2019, the Company and FS CREIT Finance Holdings LLC, a direct wholly owned subsidiary of the Company, each as a borrower, entered into a Loan and Security Agreement, or the CNB Loan Agreement, and together with the related transaction documents, the CNB Facility, with City National Bank, or CNB, as administrative agent and lender. The initial maximum committed facility amount under the CNB Facility $10,000. This amount, with the consent of CNB, may be increased to $25,000. Borrowings under the CNB Facility are subject to compliance with a borrowing base calculated based on the Company’s stockholder subscriptions and certain cash and assets held directly by the Company. On March 23, 2020, the CNB Facility was amended to, among other things, (i) increase the maximum amount of financing available from $10,000 to $15,000 and (ii) increase the minimum net asset value the Company is required to maintain from $85,000 to $100,000. On December 23, 2020, the CNB Facility was further amended to, among other things, (i) increase the maximum amount of financing available from $15,000 to $25,000 and (ii) increase the minimum net asset value the Company is required to maintain from $100,000 to $175,000.

Borrowings under the CNB Facility accrue interest at a rate equal to LIBOR plus a spread of 2.25% per annum, and borrowed amounts must be repaid no later than 180 days after the funding date of such borrowing. In addition, the borrowers pay a non-utilization fee quarterly in arrears in an amount equal to 0.375% per annum on the daily unused portion of the maximum facility amount. The term of the CNB Facility is two years. At the request of the Company, CNB may grant extensions of the facility termination date, so long as certain conditions are met.

The Company incurred $468 of deferred financing costs related to the CNB Facility, which is being amortized to interest expense over the life of the facility. As of March 31, 2021, $203 had yet to be amortized to interest expense.

Note 6. Related Party Transactions

Compensation of FS Real Estate Advisor and the Dealer Manager

Pursuant to the second amended and restated advisory agreement dated as of August 17, 2018, or the advisory agreement, FS Real Estate Advisor is entitled to a base management fee equal to 1.25% of the NAV for the Company’s Class T, Class S, Class D, Class M and Class I shares, payable quarterly in arrears. The payment of all or any portion of the base management fee accrued with respect to any quarter may be deferred by FS Real Estate Advisor, without interest, and may be taken in any such other quarter as FS Real Estate Advisor may determine. In calculating the Company’s base management fee, the Company will use its NAV before giving effect to accruals for such fee, stockholder servicing fees or distributions payable on its shares. The base management fee is a class-specific expense. No base management fee is paid on the Company’s Class F or Class Y shares.

FS Real Estate Advisor is also entitled to the performance fee calculated and payable quarterly in arrears in an amount equal to 10.0% of the Company’s Core Earnings (as defined below) for the immediately preceding

20

FS Credit Real Estate Income Trust, Inc.

Notes to Unaudited Consolidated Financial Statements (continued)

(in thousands, except share and per share amounts)

Note 6. Related Party Transactions (continued)

quarter, subject to a hurdle rate, expressed as a rate of return on average adjusted capital, equal to 1.625% per quarter, or an annualized hurdle rate of 6.5%. As a result, FS Real Estate Advisor does not earn a performance fee for any quarter until the Company’s Core Earnings for such quarter exceed the hurdle rate of 1.625%. For purposes of the performance fee, “adjusted capital” means cumulative net proceeds generated from sales of the Company’s common stock other than Class F common stock (including proceeds from the Company’s distribution reinvestment plan) reduced for distributions from non-liquidating dispositions of the Company’s investments paid to stockholders and amounts paid for share repurchases pursuant to the Company’s share repurchase plan. Once the Company’s Core Earnings in any quarter exceed the hurdle rate, FS Real Estate Advisor will be entitled to a “catch-up” fee equal to the amount of Core Earnings in excess of the hurdle rate, until the Company’s Core Earnings for such quarter equal 1.806%, or 7.222% annually, of adjusted capital. Thereafter, FS Real Estate Advisor is entitled to receive 10.0% of the Company’s Core Earnings.

For purposes of calculating the performance fee, “Core Earnings” means: the net income (loss) attributable to stockholders of Class Y, Class T, Class S, Class D, Class M and Class I shares, computed in accordance with GAAP (provided that net income (loss) attributable to Class Y stockholders shall be reduced by an amount equal to the base management fee that would have been paid if Class Y shares were subject to such fee), including realized gains (losses) not otherwise included in GAAP net income (loss) and excluding (i) non-cash equity compensation expense, (ii) the performance fee, (iii) depreciation and amortization, (iv) any unrealized gains or losses or other similar non-cash items that are included in net income for the applicable reporting period, regardless of whether such items are included in other comprehensive income or loss, or in net income, and (v) one-time events pursuant to changes in GAAP and certain material non-cash income or expense items, in each case after discussions between FS Real Estate Advisor and the Company’s independent directors and approved by a majority of the Company’s independent directors. The performance fee is a class-specific expense. No performance fee is paid on the Company’s Class F shares.

Pursuant to the amended and restated sub-advisory agreement dated as of August 30, 2017, as amended, or the sub-advisory agreement, Rialto will receive 50% of all base management fees and performance fees payable to FS Real Estate Advisor.

The Company reimburses FS Real Estate Advisor and Rialto for their actual costs incurred in providing administrative services to the Company. FS Real Estate Advisor and Rialto are required to allocate the cost of such services to the Company based on objective factors such as total assets, revenues and/or time allocations. At least annually, the Company’s board of directors reviews the amount of the administrative services expenses reimbursable to FS Real Estate Advisor and Rialto to determine whether such amounts are reasonable in relation to the services provided. The Company will not reimburse FS Real Estate Advisor or Rialto for any services for which it receives a separate fee or for any administrative expenses allocated to employees to the extent they serve as executive officers of the Company.

FS Investments funded the Company’s organization and offering costs in the amount of $13,867 for the period from November 7, 2016 (Inception) to March 31, 2021. These expenses include legal, accounting, printing, mailing and filing fees and expenses, due diligence expenses of participating broker-dealers supported by detailed and itemized invoices, costs in connection with preparing sales materials, design and website expenses, fees and expenses of the Company’s transfer agent, fees to attend retail seminars sponsored by participating broker-dealers and reimbursements for customary travel, lodging, and meals, but excluding selling commissions, dealer manager fees and stockholder servicing fees. Under the advisory agreement, FS Real Estate

21

FS Credit Real Estate Income Trust, Inc.

Notes to Unaudited Consolidated Financial Statements (continued)

(in thousands, except share and per share amounts)

Note 6. Related Party Transactions (continued)

Advisor agreed to advance all of the Company’s organization and offering expenses on the Company’s behalf until it raised $250,000 of gross proceeds from its public offering.

FS Real Estate Advisor and Rialto agreed to defer the recoupment of any organization and offering expenses that may be reimbursable by the Company under the advisory agreement with respect to gross proceeds raised in the offering in excess of $250,000 until FS Real Estate Advisor, in its sole discretion, determined that the Company had achieved economies of scale sufficient to ensure that it could bear a reasonable level of expenses in relation to its income. The Company began reimbursing FS Real Estate Advisor in September 2020 and, as such, FS Real Estate Advisor may be reimbursed for any organization and offering expenses that it or Rialto has incurred on the Company’s behalf, up to a cap of 0.75% of gross proceeds raised after such time. During the three months ended March 31, 2021, the Company paid $316 to FS Real Estate Advisor for offering costs previously funded. As of March 31, 2021, $13,266 of offering expenses previously funded remained subject to reimbursement to FS Real Estate Advisor and Rialto.

The following table describes the fees and expenses accrued under the advisory agreement during the three months ended March 31, 2021 and 2020:

			Three Months Ended March 31,
Related Party	Source Agreement	Description	2021		2020
FS Real Estate Advisor	Advisory Agreement	Base Management Fee(1)	$	1,036	$	595
FS Real Estate Advisor	Advisory Agreement	Performance Fee(2)	$	537		—
FS Real Estate Advisor	Advisory Agreement	Administrative Services Expenses(3)	$	796	$	228

(1) During the three months ended March 31, 2021 and 2020, $871 and $326, respectively, in base management fees were paid to FS Real Estate Advisor. As of March 31, 2021, $1,034 in base management fees were payable to FS Real Estate Advisor.

(2) During the three months ended March 31, 2021 and 2020, $316 and $0, respectively, in performance fees were paid to FS Real Estate Advisor. As of March 31, 2021, $537 in performance fees were payable to FS Real Estate Advisor.

(3) During the three months ended March 31, 2021 and 2020, $757 and $200, respectively, of the accrued administrative services expenses related to the allocation of costs of administrative personnel for services rendered to the Company by FS Real Estate Advisor and Rialto and the remainder related to other reimbursable expenses. These amounts are recorded as general and administrative expenses on the accompanying unaudited consolidated statements of operations.

The dealer manager for the Company’s continuous public offering is FS Investment Solutions, LLC, or FS Investment Solutions, which is an affiliate of FS Real Estate Advisor. Under the amended and restated dealer manager agreement dated as of August 17, 2018, or the dealer manager agreement, FS Investment Solutions is entitled to receive upfront selling commissions of up to 3.0%, and upfront dealer manager fees of 0.5% of the transaction price of each Class T share sold in the primary offering, however such amounts may vary at certain participating broker-dealers provided that the sum will not exceed 3.5% of the transaction price (subject to reductions for certain categories of purchasers). FS Investment Solutions is entitled to receive upfront selling commissions of up to 3.5% of the transaction price per Class S share sold in the primary offering (subject to reductions for certain categories of purchasers). The dealer manager anticipates that all of the selling commissions and dealer manager fees will be re-allowed to participating broker-dealers, unless a particular

22

FS Credit Real Estate Income Trust, Inc.

Notes to Unaudited Consolidated Financial Statements (continued)

(in thousands, except share and per share amounts)

Note 6. Related Party Transactions (continued)

broker-dealer declines to accept some portion of the dealer manager fee they are otherwise eligible to receive. Pursuant to the dealer manager agreement, the Company also reimburses FS Investment Solutions or participating broker-dealers for bona fide due diligence expenses, provided that total organization and offering expenses shall not exceed 15% of the gross proceeds in the Company’s public offering.

No selling commissions or dealer manager fees are payable on the sale of Class D, Class M, Class I, Class F or Class Y shares or on shares of any class sold pursuant to the Company’s distribution reinvestment plan.

Subject to the limitations described below, the Company pays FS Investment Solutions stockholder servicing fees for ongoing services rendered to stockholders by participating broker-dealers or by broker-dealers servicing investors’ accounts, referred to as servicing broker-dealers:

• with respect to the Company’s outstanding Class T shares equal to 0.85% per annum of the aggregate NAV of its outstanding Class T shares, consisting of an advisor stockholder servicing fee of 0.65% per annum and a dealer stockholder servicing fee of 0.20% per annum; however, with respect to Class T shares sold through certain participating broker-dealers, the advisor stockholder servicing fee and the dealer stockholder servicing fee may be other amounts, provided that the sum of such fees will always equal 0.85% per annum of the NAV of such shares;

• with respect to the Company’s outstanding Class S shares equal to 0.85% per annum of the aggregate NAV of its outstanding Class S shares;

• with respect to the Company’s outstanding Class D shares equal to 0.3% per annum of the aggregate NAV of its outstanding Class D shares; and

• with respect to the Company’s outstanding Class M shares equal to 0.3% per annum of the aggregate NAV of its outstanding Class M shares.

The Company does not pay a stockholder servicing fee with respect to its Class I, Class F or Class Y shares. The dealer manager reallows some or all of the stockholder servicing fees to participating broker-dealers, servicing broker-dealers and financial institutions (including bank trust departments) for ongoing stockholder services performed by such broker-dealers, and waives (pays back to the Company) stockholder servicing fees to the extent a broker-dealer or financial institution is not eligible or otherwise declines to receive all or a portion of such fees.

The Company will cease paying stockholder servicing fees with respect to any Class D, Class M, Class S and Class T shares held in a stockholder’s account at the end of the month in which the total underwriting compensation from the upfront selling commissions, dealer manager fees and stockholder servicing fees, as applicable, paid with respect to such account would exceed 1.25%, 7.25%, 8.75% and 8.75%, respectively (or a lower limit for shares sold by certain participating broker-dealers or financial institutions) of the gross proceeds from the sale of shares in such account. These amounts are referred to as the sales charge cap. At the end of such month that the sales charge cap is reached, each Class D, Class M, Class S or Class T share in such account will convert into a number of Class I shares (including any fractional shares) with an equivalent aggregate NAV as such share.

In addition, the Company will cease paying stockholder servicing fees on each Class D share, Class M share, Class S share and Class T share held in a stockholder’s account and each such share will convert to Class I shares on the earlier to occur of the following: (i) a listing of Class I shares on a national securities exchange; (ii) the sale or other disposition of all or substantially all of the Company’s assets or the

23

FS Credit Real Estate Income Trust, Inc.

Notes to Unaudited Consolidated Financial Statements (continued)

(in thousands, except share and per share amounts)

Note 6. Related Party Transactions (continued)

Company’s merger or consolidation with or into another entity in a transaction in which holders of Class D, Class M, Class S or Class T shares receive cash and/or shares of stock that are listed on a national securities exchange; or (iii) the date following the completion of the Company’s public offering on which, in the aggregate, underwriting compensation from all sources in connection with the Company’s public offering, including selling commissions, dealer manager fees, stockholder servicing fees and other underwriting compensation, is equal to 10% of the gross proceeds from its primary offering.

The Company accrues future stockholder servicing fees in an amount equal to its best estimate of fees payable to FS Investment Solutions at the time such shares are sold. As of March 31, 2021 and December 31, 2020, the Company accrued $18,363 and $15,481, respectively, of stockholder servicing fees payable to FS Investment Solutions. FS Investment Solutions has entered into agreements with selected dealers distributing the Company’s shares in the public offering, which provide, among other things, for the re-allowance of the full amount of the selling commissions and dealer manager fee and all or a portion of the stockholder servicing fees received by FS Investment Solutions to such selected dealers.

FS Investment Solutions also serves or served as the placement agent for the Company’s private offerings of Class F and Class Y shares pursuant to placement agreements. FS Investment Solutions does not receive any compensation pursuant to these agreements.

Expense Limitation

The Company has entered into an amended and restated expense limitation agreement with FS Real Estate Advisor and Rialto, or the expense limitation agreement, pursuant to which FS Real Estate Advisor and Rialto have agreed to waive reimbursement of or pay, on a quarterly basis, the Company’s annualized ordinary operating expenses for such quarter to the extent such expenses exceed 1.5% per annum of its average net assets attributable to each of its classes of common stock. The Company will repay FS Real Estate Advisor or Rialto on a quarterly basis any ordinary operating expenses previously waived or paid, but only if the reimbursement would not cause the then-current expense limitation, if any, to be exceeded. In addition, the reimbursement of expenses will be made only if payable not more than three years from the end of the fiscal quarter in which the expenses were paid or waived.

FS Real Estate Advisor and Rialto each agreed to waive the recoupment of any amounts that may be subject to conditional reimbursement during the quarterly period ended March 31, 2020. To the extent that the conditions to recoupment are satisfied in a future quarter (prior to the expiration of the three-year period for reimbursement set forth in the expense limitation agreement), such expenses may be subject to conditional recoupment in accordance with the terms of the expense limitation agreement.

During the period from September 13, 2017 (Commencement of Operations) to March 31, 2021, the Company accrued $5,839 for reimbursement of expenses that FS Real Estate Advisor and Rialto paid or waived, including $56 in reimbursements for the three months ended March 31, 2021. During the period from September 13, 2017 (Commencement of Operations) to March 31, 2021, the Company received $5,783 in cash reimbursements from FS Real Estate Advisor. As of March 31, 2021, the Company had $56 of reimbursements due from FS Real Estate Advisor and Rialto.

24

FS Credit Real Estate Income Trust, Inc.

Notes to Unaudited Consolidated Financial Statements (continued)

(in thousands, except share and per share amounts)

Note 6. Related Party Transactions (continued)

The following table reflects the amounts paid or waived by FS Real Estate Advisor and Rialto under the expense limitation agreement and the expiration date for future possible reimbursements by the Company:

For the Three Months Ended	Amount of Expense Reimbursement		Recoupable Amount		Recoupment eligibility expiration
March 31, 2021	$	56	$	56		March 31, 2023
December 31, 2020		444		444		December 31, 2023
September 30, 2020		397		397		September 30, 2023
June 30, 2020		182		182		June 30, 2023
March 31, 2020		—		—		N/A
December 31, 2019		500		500		December 31, 2022
September 30, 2019		491		491		September 30, 2022
June 30, 2019		420		420		June 30, 2022
March 31, 2019		537		537		March 31, 2022
December 31, 2018		709		709		December 31, 2021
September 30, 2018		645		645		September 30, 2021
June 30, 2018		561		561		June 30, 2021
March 31, 2018		356		—		Expired March 31, 2021
December 31, 2017		377		—		Expired December 31, 2020
September 30, 2017		164		—		Expired September 30, 2020
	$	5,839	$	4,942

Capital Contributions and Commitments

In December 2016, pursuant to a private placement, Michael C. Forman and David J. Adelman, principals of FS Investments, contributed an aggregate of $200 to purchase 8,000 Class F shares at the price of $25.00 per share. These individuals will not tender these shares of common stock for repurchase as long as FS Real Estate Advisor remains the Company’s adviser. FS Investments is controlled by Mr. Forman, the Company’s president and chief executive officer, and Mr. Adelman.

Each of FS Investments and Rannel Investments, LLC (f/k/a Rialto Investments, LLC) (“RI”), a former affiliate of Rialto, the Company’s sub-adviser, previously committed to purchase, or to cause its designees to purchase, the Company’s Class F shares and to maintain a minimum investment of $10,000 in Class F shares until such date as the Company reached $750,000 in net assets (the “Minimum Investment Amount”). In addition, FS Investments and the Company’s board of directors had agreed that FS Investments would commit to purchase up to approximately $21,400 in Class F shares if required to fund additional investments. This commitment expired on November 1, 2020.

Following the sale of Rialto in November 2018, RI remained a wholly-owned subsidiary of Lennar Corporation and no longer has any affiliation with Rialto or the Company other than its ownership of the Company’s Class F shares. On October 25, 2019, the Company’s board of directors approved the termination of RI’s remaining commitment to purchase Class F shares and agreed that the Company may repurchase up to approximately $17,000 of RI’s Class F shares, in its discretion and in one or more repurchases, outside the Company’s share repurchase plan at the most recently published NAV per Class F share at the time of any such repurchase. As of December 31, 2020, all of these shares were repurchased by the Company outside of the share repurchase plan at an average price of $24.95 per Class F share.

25

FS Credit Real Estate Income Trust, Inc.

Notes to Unaudited Consolidated Financial Statements (continued)

(in thousands, except share and per share amounts)

Note 6. Related Party Transactions (continued)

On February 14, 2020, the Company repurchased, outside of the share repurchase plan, approximately $14,700 of its Class F shares from MCFDA SCV LLC, a special purpose vehicle jointly owned by Michael C. Forman and David J. Adelman, the principals of FS Investments, at the then-current transaction price of $24.95 per share. As of May 10, 2021, FS Investments (including its affiliates and designees) owned approximately $21,700 in Class F shares.

Note 7. Stockholders’ Equity

Below is a summary of transactions with respect to shares of the Company’s common stock during the three months ended March 31, 2021 and 2020:

	Shares
	Class F			Class Y			Class T			Class S			Class D			Class M			Class I			Total
Balance as of December 31, 2020		912,469			137,116			1,245,658			5,778,640			546,298			1,971,039			2,171,528			12,762,748
Issuance of common stock		—			—			45,087			1,418,117			27,976			216,910			779,768			2,487,858
Reinvestment of distributions		7,842			—			9,927			43,320			2,891			11,128			14,064			89,172
Redemptions of common stock		—			(65,212	)		(4,069	)		(20,652	)		—			(35,213	)		(13,134	)		(138,280	)
Transfers in or out		(6,392	)		—			—			—			(29,158	)		—			36,314			764
Balance as of March 31, 2021		913,919			71,904			1,296,603			7,219,425			548,007			2,163,864			2,988,540			15,202,262
	Amount
	Class F			Class Y			Class T			Class S			Class D			Class M			Class I			Total
Balance as of December 31, 2020	$	22,378		$	3,449		$	29,971		$	134,705		$	13,573		$	46,154		$	53,597		$	303,827
Issuance of common stock		—			—			1,133			35,938			704			5,470			19,200			62,445
Reinvestment of distributions		197			—			249			1,097			73			280			346			2,242
Redemptions of common stock		—			(1,608	)		(102	)		(523	)		—			(885	)		(323	)		(3,441	)
Transfers in or out		(160	)		—			—			—			(734	)		—			894			—
Accrued stockholder servicing fees(1)		—			—			(46	)		(2,920	)		(1	)		(363	)		—			(3,330	)
Balance as of March 31, 2021	$	22,415		$	1,841		$	31,205		$	168,297		$	13,615		$	50,656		$	73,714		$	361,743

26

FS Credit Real Estate Income Trust, Inc.

Notes to Unaudited Consolidated Financial Statements (continued)

(in thousands, except share and per share amounts)

Note 7. Stockholders’ Equity (continued)

	Shares
	Class F			Class Y		Class T			Class S			Class D			Class M			Class I			Total
Balance as of December 31, 2019		1,475,155			141,116		981,836			1,351,587			322,602			1,357,818			1,230,360			6,860,474
Issuance of common stock		—			—		203,559			2,511,530			158,954			359,586			519,650			3,753,279
Reinvestment of distributions		6,919			—		7,773			11,072			1,858			7,711			8,433			43,766
Redemptions of common stock		(591,043	)		—		(4,826	)		(80,152	)		(1,331	)		(72,544	)		(45,354	)		(795,250	)
Transfers in or out		—			—		—			—			—			(14,283	)		14,621			338
Balance as of March 31, 2020		891,031			141,116		1,188,342			3,794,037			482,083			1,638,288			1,727,710			9,862,607
	Amount
	Class F			Class Y		Class T			Class S			Class D			Class M			Class I			Total
Balance as of December 31, 2019	$	36,419		$	3,548	$	23,616		$	31,429		$	8,015		$	31,757		$	30,367		$	165,151
Issuance of common stock		—			—		5,122			63,703			4,004			9,081			12,825			94,735
Reinvestment of distributions		173			—		197			282			48			196			209			1,105
Redemptions of common stock		(14,748	)		—		(121	)		(2,032	)		(34	)		(1,832	)		(1,119	)		(19,886	)
Transfers in or out		—			—		—			—			—			(361	)		361			—
Accrued stockholder servicing fees(1)		—			—		(231	)		(5,029	)		(50	)		(503	)		—			(5,813	)
Balance as of March 31, 2020	$	21,844		$	3,548	$	28,583		$	88,353		$	11,983		$	38,338		$	42,643		$	235,292

(1) Stockholder servicing fees only apply to Class T, Class S, Class D and Class M shares. Under GAAP, the Company accrues future stockholder servicing fees in an amount equal to its best estimate of fees payable to FS Investment Solutions at the time such shares are sold. For purposes of NAV, the Company recognizes the stockholder servicing fee as a reduction of NAV on a monthly basis. As a result, the estimated liability for the future stockholder servicing fees, which are accrued at the time each share is sold, will have no effect on the NAV of any class.

Share Repurchase Plan

The Company has adopted an amended and restated share repurchase plan, or share repurchase plan, whereby on a monthly basis, stockholders may request that the Company repurchase all or any portion of their shares. The repurchase of shares is limited to no more than 2% of the Company’s aggregate NAV per month of all classes of shares then participating in the share repurchase plan and no more than 5% of the Company’s aggregate NAV per calendar quarter of all classes of shares then participating in the share repurchase plan, which means that in any 12-month period, the Company limits repurchases to approximately 20% of the total NAV of all classes of shares then participating in the share repurchase plan. The Company’s board of directors may modify, suspend or terminate the share repurchase plan if it deems such action to be in the Company’s best interest and the best interest of its stockholders. During the three months ended March 31, 2021 and 2020, the

27

FS Credit Real Estate Income Trust, Inc.

Notes to Unaudited Consolidated Financial Statements (continued)

(in thousands, except share and per share amounts)

Note 7. Stockholders’ Equity (continued)

Company repurchased 138,280 and 207,515, respectively, shares of common stock under its share repurchase plan representing a total of $3,441 and $5,219, respectively. The Company had no unfulfilled repurchase requests during the three months ended March 31, 2021. During the three months ended March 31, 2020, repurchase requests totaling 94,167 shares went unfulfilled as a result of the repurchase requests received during March 2020 exceeding the monthly limitation of 2% of the Company’s aggregate NAV.

Distribution Reinvestment Plan

Pursuant to the Company’s distribution reinvestment plan, holders of shares of any class of the Company’s common stock may elect to have their cash distributions reinvested in additional shares of the Company’s common stock. The purchase price for shares pursuant to the distribution reinvestment plan will be equal to the transaction price for such shares at the time the distribution is payable.

Distributions

The Company generally intends to distribute substantially all of its taxable income, which does not necessarily equal net income as calculated in accordance with GAAP, to its stockholders each year to comply with the REIT provisions of the Code. Dividends are paid first to the holders of the Company’s Series A preferred stock at the rate of 12.0% per annum plus all accumulated and unpaid dividends thereon, and then to the holders of the Company’s common stock. All distributions will be made at the discretion of the Company’s board of directors and will depend upon its taxable income, financial condition, maintenance of REIT status, applicable law, and other factors that the Company’s board of directors deems relevant.

The following table reflects the cash distributions per share that the Company paid on its common stock during the three months ended March 31, 2021:

Record Date	Class F		Class Y		Class T		Class S		Class D		Class M		Class I
January 31, 2021	$	0.1710	$	0.1710	$	0.1273	$	0.1273	$	0.1388	$	0.1388	$	0.1450
February 26, 2021		0.1710		0.1710		0.1273		0.1273		0.1388		0.1388		0.1450
March 31, 2021		0.1710		0.1710		0.1273		0.1273		0.1388		0.1388		0.1450
Total	$	0.5130	$	0.5130	$	0.3819	$	0.3819	$	0.4164	$	0.4164	$	0.4350

28

FS Credit Real Estate Income Trust, Inc.

Notes to Unaudited Consolidated Financial Statements (continued)

(in thousands, except share and per share amounts)

Note 7. Stockholders’ Equity (continued)

The following table reflects the amount of cash distributions that the Company paid on its common stock during the three months ended March 31, 2021, and 2020:

	Three Months Ended March 31,
	2021		2020
Distributions:
Paid or payable in cash	$	3,696	$	2,376
Reinvested in shares		2,242		1,105
Total distributions	$	5,938	$	3,481
Source of distributions:
Cash flows from operating activities	$	5,938	$	3,481
Offering proceeds		—		—
Total sources of distributions	$	5,938	$	3,481
Net cash provided by operating activities(1)	$	23,419	$	8,877

(1) Cash flows from operating activities are supported by expense support payments from FS Real Estate Advisor and Rialto pursuant to the Company’s expense limitation agreement. See Note 6 for additional information regarding the Company’s expense limitation agreement.

The Company currently declares and pays regular cash distributions on a monthly basis. The Company’s board of directors previously authorized regular monthly cash distributions for April 2021 and May 2021 for each class of its outstanding common stock in the net distribution amounts per share set forth below:

Class F	Class Y		Class T		Class S		Class D		Class M		Class I
$0.1710	$	0.1710	$	0.1273	$	0.1273	$	0.1388	$	0.1388	$	0.1450

The distributions for each class of outstanding common stock have been or will be paid monthly to stockholders of record as of the monthly record dates previously determined by the Company’s board of directors. These distributions have been or will be paid in cash or reinvested in shares of the Company’s common stock for stockholders participating in the Company’s distribution reinvestment plan.

Note 8. Fair Value of Financial Instruments

The following table presents the Company’s financial instruments carried at fair value in the consolidated balance sheets by its level in the fair value hierarchy:

	March 31, 2021 (Unaudited)								December 31, 2020
	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Mortgage-backed securities available-for-sale	$	13,325		—	$	13,325		—		—		—		—		—

As discussed in Note 2, GAAP requires disclosure of fair value information about financial instruments, whether or not recognized in the statement of financial position, for which it is practicable to estimate that value.

29

FS Credit Real Estate Income Trust, Inc.

Notes to Unaudited Consolidated Financial Statements (continued)

(in thousands, except share and per share amounts)

Note 8. Fair Value of Financial Instruments (continued)

The following table details the carrying amount, face amount, and fair value of the financial instruments described in Note 2:

	March 31, 2021 (Unaudited)						December 31, 2020
	Book Value		Face Amount		Fair Value		Book Value		Face Amount		Fair Value
Financial Assets
Cash, cash equivalents and restricted cash	$	28,560	$	28,560	$	28,560	$	17,874	$	17,874	$	17,874
Loans receivable(1)	$	900,978	$	900,056	$	899,471	$	700,149	$	699,250	$	697,533
Mortgage-backed securities held-to-maturity	$	37,448	$	50,300	$	37,448	$	37,314	$	50,300	$	37,314
Financial Liabilities
Repurchase obligations(2)	$	247,746	$	248,625	$	248,625	$	125,266	$	125,460	$	125,460
Credit facility	$	25,000	$	25,000	$	25,000		—		—		—
Collateralized loan obligation(2)	$	323,371	$	327,665	$	327,665	$	323,109	$	327,665	$	327,665

(1) Book value of loans receivable represents the face amount, net of unamortized loan fees and costs and accrual of exit fees, as applicable.

(2) Book value represents the face amount, net of deferred financing costs.

Estimates of fair value for cash, cash equivalents and restricted cash are measured using observable, quoted market prices, or Level 1 inputs. Estimates of fair value for loans receivable, mortgage-backed securities held-to-maturity, repurchase obligations, credit facility obligations and the collateralized loan obligation are measured using unobservable inputs, or Level 3 inputs.

Note 9. Variable Interest Entities

Consolidated Variable Interest Entities

The Company has financed a portion of its loans through the CLO, which is considered a VIE. The Company has a controlling financial interest in the CLO and, therefore, consolidates it on its balance sheet because the Company has both (i) the power to direct activities of the CLO that most significantly affect the CLO’s economic performance and (ii) the obligation to absorb losses and the right to receive benefits of the CLO that could potentially be significant to the CLO.

30

FS Credit Real Estate Income Trust, Inc.

Notes to Unaudited Consolidated Financial Statements (continued)

(in thousands, except share and per share amounts)

Note 9. Variable Interest Entities (continued)

The following table details the assets and liabilities of the Company’s consolidated CLO as of March 31, 2021 and December 31, 2020:

	March 31, 2021 (Unaudited)		December 31, 2020
Assets:
Restricted cash	$	7,600	$	4
Loans receivable		419,659		411,455
Interest receivable		2,819		2,470
Other assets		—		15,842
Total assets	$	430,078	$	429,771
Liabilities
Collateralized loan obligation (net of deferred financing costs of $4,294 and $4,556, respectively)	$	323,371	$	323,109
Interest payable		220		227
Total liabilities	$	323,591	$	323,336

Assets held by the VIE are restricted and can be used only to settle obligations of the VIE. The liabilities are non-recourse to the Company and can only be satisfied from the assets of the VIE.

Non-Consolidated Variable Interest Entities

In August 2020, the Company invested $37,005 in a subordinated position of a CMBS trust which is considered a VIE. The Company is not the primary beneficiary of the VIE because it does not have the power to direct the activities that most significantly affect the VIE’s economic performance, nor does it provide guarantees or recourse to the VIE other than standard representations and warranties and, therefore, does not consolidate the VIE on its balance sheet. The Company has classified its investment in the CMBS as a held-to-maturity debt security that is included on the Company’s consolidated balance sheets and is part of the Company’s ongoing other-than-temporary impairment review. The Company’s maximum exposure to loss of the security is limited to its book value of $37,448 as of March 31, 2021.

The Company is not obligated to provide, nor has it provided financial support to these consolidated and non-consolidated VIEs.

Note 10. Commitments and Contingencies

The Company enters into contracts that contain a variety of indemnification provisions. The Company’s maximum exposure under these arrangements is unknown; however, the Company has not had prior claims or losses pursuant to these contracts. Management of FS Real Estate Advisor has reviewed the Company’s existing contracts and expects the risk of loss to the Company to be remote.

The Company is not currently subject to any material legal proceedings and, to the Company’s knowledge, no material legal proceedings are threatened against the Company. From time to time, the Company may be party

31

FS Credit Real Estate Income Trust, Inc.

Notes to Unaudited Consolidated Financial Statements (continued)

(in thousands, except share and per share amounts)

Note 10. Commitments and Contingencies (continued)

to certain legal proceedings in the ordinary course of business. While the outcome of any legal proceedings cannot be predicted with certainty, the Company does not expect that any such proceedings will have a material effect on its financial condition or results of operations.

See Note 6 for a discussion of the Company’s commitments to FS Real Estate Advisor and its affiliates (including FS Investments) for the reimbursement of organization and offering costs funded by FS Investments and for the reimbursement of amounts paid or waived by FS Real Estate Advisor and Rialto under the expense limitation agreement.

Note 11. Subsequent Events

The following is a discussion of material events that have occurred subsequent to March 31, 2021 through the issuance of the unaudited consolidated financial statements.

Status of Offerings

As of May 10, 2021, the Company has issued 21,172,044 shares of common stock (consisting of 2,598,312 shares of Class F common stock, 1,036,671 shares of Class Y common stock, 1,374,373 shares of Class T common stock, 8,916,626 shares of Class S common stock, 669,132 shares of Class D common stock, 2,592,812 shares of Class M common stock and 3,984,118 shares of Class I common stock), including shares issued pursuant to its distribution reinvestment plan, for gross proceeds of $530,883.

Share Repurchases

In connection with the Company’s April 2021 repurchase period, the Company repurchased an aggregate of 28,930 shares of common stock representing a total of $720.

Business Update

During the period from April 1, 2021 through May 10, 2021, we closed on 10 senior floating-rate mortgage loans of which $384,683 was funded at closing.

2021-FL2 Notes

On May 5, 2021, the Company issued $646,935 of collateralized loan obligation notes, or the CLO2 Transaction, through the Sub-REIT and two wholly-owned financing subsidiaries of the Sub-REIT, FS Rialto 2021-FL2 Issuer, Ltd., an exempted company with limited liability under the laws of the Cayman Islands, as issuer, or the CLO2 Issuer, and FS Rialto 2021-FL2 Co-Issuer, LLC, a Delaware limited liability company, as co-issuer, or the CLO2 Co-Issuer and, together with the Issuer, the CLO2 Issuers.

The CLO2 Issuers issued six classes of notes, or the CLO2 Offered Notes, (i) $414,978 Class A Senior Secured Floating Rate Notes Due 2038, which bear interest at LIBOR plus 1.22% per annum plus, on and after the June 2026 payment date, an additional 0.25% per annum, (ii) $79,277 Class A-S Second Priority Secured Floating Rate Notes Due 2038, which bear interest at LIBOR plus 1.55% per annum plus, on and after the June 2026 payment date, 0.25% per annum, (iii) $47,957 Class B Third Priority Secured Floating Rate Notes Due 2038, which bear interest at LIBOR plus 1.90% per annum plus, on and after the June 2026 payment date, 0.50%

32

FS Credit Real Estate Income Trust, Inc.

Notes to Unaudited Consolidated Financial Statements (continued)

(in thousands, except share and per share amounts)

Note 11. Subsequent Events (continued)

per annum, (iv) $48,936 Class C Fourth Priority Secured Floating Rate Notes Due 2038, which bear interest at LIBOR plus 2.05% per annum plus, on and after the July 2026 payment date, 0.50% per annum, (v) $40,128 Class D Fifth Priority Secured Floating Rate Notes Due 2038, or the Class D Notes, which bear interest at LIBOR plus 2.80% per annum plus, on and after the July 2026 payment date, 0.50% per annum , and (vi) $15,659 Class E Sixth Priority Secured Floating Rate Notes Due 2038, or the Class E Notes, which bear interest at LIBOR plus 3.45% per annum plus, on and after the July 2026 payment date, 0.50% per annum. In addition, the Issuer further issued three classes of notes, or together with the CLO2 Offered Notes, the 2021-FL2 Notes, (i) $22,511 Class F Seventh Priority Floating Rate Notes Due 2038, or the Class F Notes, which bear interest at LIBOR plus 5.00% per annum, and (ii) $22,511 Class G Eighth Priority Floating Rate Notes Due 2038, or the Class G Notes, which bear interest at LIBOR plus 7.50% per annum. In addition, concurrently with the issuance of the 2021-FL2 Notes, the Issuer issued 91,021 Preferred Shares, par value $0.001 per share, and with a liquidation preference equal to $1,000 per share, or the CLO2 Preferred Shares. The 2021-FL2 Notes will mature at par on the May 2038 payment date (May 18, 2038 when calculated using the current U.S. federal holidays), unless redeemed or repaid prior thereto. The Company serves as the collateral manager for the CLO2 Issuer.

The CLO2 Issuers issued or co-issued the 2021-FL2 Notes, as applicable, pursuant to the terms of an Indenture, dated as of May 5, 2021, or the CLO2 Indenture, by and among the CLO2 Issuers, the Company, as advancing agent, Wilmington Trust, National Association, as trustee, and Wells Fargo, as note administrator and custodian.

FS Rialto 2021-FL2 Holder, LLC, which is an indirect wholly-owned subsidiary of the Company and a direct wholly-owned subsidiary of the Sub-REIT, acquired 100% of the Class F Notes, the Class G Notes and the Preferred Shares upon issuance.

The CLO2 Offered Notes are limited recourse obligations of the CLO2 Issuer and non-recourse obligations of the CLO2 Co-Issuer payable solely from collateral interests acquired by the CLO2 Issuer and pledged under the CLO2 Indenture. To the extent the collateral is insufficient to make payments in respect of the CLO2 Offered Notes, none of the CLO2 Issuer, the CLO2 Co-Issuer, any of their respective affiliates nor any other person will have any obligation to pay any further amounts in respect of the CLO2 Offered Notes. The Class F Notes and the Class G Notes are not secured.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (in thousands, except share and per share amounts).

The information contained in this section should be read in conjunction with the unaudited consolidated financial statements and related notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q. In this report, “we,” “us” and “our” refer to FS Credit Real Estate Income Trust, Inc.

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), regarding, among other things, our business, including, in particular, statements about our plans, strategies and objectives. You can generally identify forward-looking statements by our use of forward-looking terminology such as “may,” “will,” “expect,” “intend,” “anticipate,” “estimate,” “believe,” “continue” or other similar words. These statements include our plans and objectives for future operations, including plans and objectives relating to future growth and availability of funds, and are based on current expectations that involve numerous risks and uncertainties. Assumptions relating to these statements involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to accurately predict and many of which are beyond our control. Although we believe the assumptions underlying the forward-looking statements, and the forward-looking statements themselves, are reasonable, any of the assumptions could be inaccurate and, therefore, there can be no assurance that these forward-looking statements will prove to be accurate and our actual results, performance and achievements may be materially different from that expressed or implied by these forward-looking statements. In light of the significant uncertainties inherent in these forward-looking statements, the inclusion of this information should not be regarded as a representation by us or any other person that our objectives and plans, which we consider to be reasonable, will be achieved. We undertake no duty to update or revise forward-looking statements, except as required by law.

Introduction

We were incorporated under the general corporation laws of the State of Maryland on November 7, 2016 and formally commenced investment operations on September 13, 2017. We are currently conducting a public offering of up to $2,750,000 of our Class T, Class S, Class D, Class M and Class I shares of common stock pursuant to a registration statement on Form S-11 filed with the SEC consisting of up to $2,500,000 in shares in our primary offering and up to $250,000 in shares pursuant to our distribution reinvestment plan. We also previously conducted private offerings of shares of our Class F common stock and Class Y common stock. We are managed by FS Real Estate Advisor pursuant to an advisory agreement between us and FS Real Estate Advisor. FS Real Estate Advisor is a subsidiary of our sponsor, FS Investments, a national sponsor of alternative investment funds designed for the individual investor. FS Real Estate Advisor has engaged Rialto to act as its sub-adviser.

We have elected to be taxed as a REIT for U.S. federal income tax purposes commencing with our taxable year ended December 31, 2017. We intend to be an investment vehicle of indefinite duration focused on real estate debt investments and other real estate-related assets. The shares of common stock are generally intended to be sold and repurchased by us on a continuous basis. We intend to conduct our operations so that we are not required to register under the 1940 Act.

Our primary investment objectives are to: provide current income in the form of regular, stable cash distributions to achieve an attractive dividend yield; preserve and protect invested capital; realize appreciation in net asset value, or NAV, from proactive management and asset management; and provide an investment alternative for stockholders seeking to allocate a portion of their long-term investment portfolios to commercial real estate debt with lower volatility than public real estate companies.

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Our investment strategy is to originate, acquire and manage a portfolio of senior loans secured by commercial real estate primarily in the United States. We are focused on senior floating-rate mortgage loans, but we may also invest in other real estate-related assets, including: (i) other commercial real estate mortgage loans, including fixed-rate loans, subordinated loans, B-Notes, mezzanine loans and participations in commercial mortgage loans; and (ii) commercial real estate securities, including commercial mortgage-backed securities, or CMBS, unsecured debt of listed and non-listed REITs, collateralized debt obligations and equity or equity-linked securities. To a lesser extent we may invest in warehouse loans secured by commercial or residential mortgages, credit loans to commercial real estate companies, residential mortgage-backed securities, or RMBS, and portfolios of single family home mortgages.

Portfolio Overview

The following table details activity in our loans receivable portfolio for the three months ended March 31, 2021 and 2020:

	Three Months Ended March 31,
	2021			2020
Loan fundings(1)	$	224,530		$	207,466
Loan repayments		(23,885	)		(87	)
Total net fundings	$	200,645		$	207,379

(1) Includes new loan originations and additional fundings made under existing loans.

The following table details overall statistics for our loans receivable portfolio as of March 31, 2021 and December 31, 2020:

	March 31, 2021 (Unaudited)			December 31, 2020
Number of loans		45			35
Principal balance	$	900,056		$	699,250
Net book value	$	900,978		$	700,149
Unfunded loan commitments(1)	$	106,676		$	100,389
Weighted-average cash coupon(2)		L+4.22	%		L+4.25	%
Weighted-average all-in yield(2)		L+4.31	%		L+4.35	%
Weighted-average maximum maturity (years)(3)		3.8			3.7

(1) We may be required to provide funding when requested by the borrower in accordance with the terms of the underlying agreements.

(2) Our floating rate loans were indexed to LIBOR. In addition to cash coupon, all-in yield includes accretion of discount (amortization of premium) and accrual of exit fees.

(3) Maximum maturity assumes all extension options are exercised by the borrower, however loans may be repaid prior to such date.

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The following table provides details of our loan receivable portfolio, on a loan-by-loan basis, as of March 31, 2021:

	Loan Type	Origination Date(1)		Total Loan		Principal Balance		Net Book Value		Cash Coupon(2)			All-in Yield(2)			Maximum Maturity(3)		Location	Property Type	LTV(1)
1	Senior Loan		2/27/2020	$	58,377	$	55,370	$	55,382		L+3.15	%		L+3.14	%		3/9/2025	Various, SC	Industrial		72	%
2	Senior Loan		3/12/2021		52,250		26,000		25,976		L+5.75	%		L+5.78	%		3/9/2026	San Francisco, CA	Office		65	%
3	Senior Loan		12/29/2020		45,000		42,240		42,240		L+4.15	%		L+4.33	%		1/9/2026	Hawthorne, CA	Mixed Use		80	%
4	Senior Loan		4/9/2019		38,000		38,000		37,996		L+3.75	%		L+3.75	%		4/9/2024	New York, NY	Mixed Use		75	%
5	Senior Loan		3/29/2021		35,880		31,855		31,830		L+3.60	%		L+3.63	%		4/9/2026	Arlington, TX	Multifamily		80	%
6	Senior Loan		9/14/2017		34,309		33,786		33,872		L+4.25	%		L+4.38	%		9/9/2022	Memphis, TN	Office		73	%
7	Senior Loan		3/11/2021		32,000		29,000		28,985		L+4.50	%		L+4.52	%		3/9/2026	Colleyville, TX	Retail		58	%
8	Senior Loan		12/29/2020		31,129		25,831		25,832		L+3.75	%		L+3.95	%		1/9/2026	New York, NY	Multifamily		60	%
9	Senior Loan		3/6/2020		31,000		31,000		31,045		L+4.00	%		L+4.12	%		3/9/2024	San Antonio, TX	Multifamily		69	%
10	Senior Loan		3/5/2020		30,500		24,625		24,618		L+3.00	%		L+3.01	%		3/9/2025	Jupiter, FL	Office		75	%
11	Senior Loan		4/20/2018		30,000		30,000		30,000		L+4.25	%		L+4.25	%		5/9/2021	New York, NY	Office		54	%
12	Senior Loan		2/5/2021		29,500		26,500		26,500		L+3.00	%		L+3.00	%		2/9/2025	Jersey City, NJ	Multifamily		47	%
13	Senior Loan		6/28/2019		28,500		28,500		28,578		L+5.35	%		L+5.52	%		7/9/2024	Davis, CA	Hospitality		72	%
14	Senior Loan		12/18/2020		28,440		22,675		22,666		L+4.50	%		L+4.51	%		1/9/2026	Rockville, MD	Office		69	%
15	Senior Loan		1/20/2021		25,250		20,950		20,931		L+4.75	%		L+4.78	%		1/20/2026	Laguna Hills, CA	Office		63	%
16	Senior Loan		3/31/2021		25,250		25,250		25,230		L+3.20	%		L+3.23	%		4/9/2026	Tempe, AZ	Multifamily		77	%
17	Senior Loan		8/2/2019		24,250		24,250		24,375		L+5.00	%		L+5.34	%		8/15/2024	Philadelphia, PA	Mixed Use		72	%
18	Senior Loan		7/18/2018		22,650		22,650		22,748		L+5.25	%		L+5.42	%		8/9/2023	Gaithersburg, MD	Hospitality		80	%
19	Senior Loan		12/10/2020		22,300		11,900		11,882		L+5.25	%		L+5.30	%		1/9/2026	Los Angeles, CA	Office		55	%
20	Senior Loan		4/5/2018		21,000		18,962		19,067		L+4.00	%		L+4.17	%		4/9/2023	Austin, TX	Office		57	%
21	Senior Loan		7/24/2019		20,815		17,815		17,872		L+4.00	%		L+4.14	%		12/9/2024	Katy, TX	Office		76	%
22	Senior Loan		2/27/2020		19,700		19,700		19,699		L+3.20	%		L+3.20	%		3/9/2025	Various	Self Storage		79	%
23	Senior Loan		12/6/2017		18,660		14,212		14,258		L+3.85	%		L+3.98	%		12/9/2022	Landover, MD	Office		67	%
24	Senior Loan		2/26/2021		18,590		16,990		16,975		L+3.25	%		L+3.28	%		3/9/2026	Newark, NJ	Industrial		57	%
25	Mezz Loan		2/21/2020		18,102		18,102		18,102		10.00	%		10.00	%		3/1/2030	Various, SC	Industrial		70	%
26	Senior Loan		2/19/2020		18,000		14,400		14,411		L+3.50	%		L+3.48	%		3/9/2025	Los Angeles, CA	Mixed Use		71	%
27	Senior Loan		12/18/2020		17,650		15,666		15,647		L+4.00	%		L+4.13	%		1/9/2026	Glendale, AZ	Multifamily		78	%
28	Senior Loan		10/22/2019		17,500		14,745		14,805		L+4.50	%		L+4.75	%		11/9/2024	Oakland, CA	Mixed Use		70	%
29	Senior Loan		2/10/2020		17,200		15,716		15,713		L+3.35	%		L+3.36	%		2/9/2025	South El Monte, CA	Industrial		66	%
30	Senior Loan		1/28/2021		16,100		15,225		15,226		L+4.50	%		L+4.63	%		1/28/2026	Philadelphia, PA	Self Storage		79	%
31	Senior Loan		6/29/2018		15,997		10,246		10,290		L+4.25	%		L+4.38	%		7/9/2023	Jacksonville, FL	Multifamily		68	%
32	Mezz Loan		2/14/2020		15,000		15,000		15,000		L+7.50	%		L+7.50	%		12/5/2026	New York, NY	Multifamily		75	%
33	Senior Loan		11/17/2020		14,550		13,140		13,131		L+4.00	%		L+4.02	%		12/9/2025	Vista, CA	Industrial		54	%
34	Senior Loan		2/19/2019		14,300		14,300		14,381		L+3.95	%		L+4.12	%		3/9/2024	Bordentown, NJ	Industrial		61	%
35	Senior Loan		3/25/2021		13,405		11,855		11,840		L+3.25	%		L+3.37	%		4/9/2026	Lithonia, GA	Multifamily		67	%
36	Senior Loan		2/22/2018		13,400		12,633		12,699		L+4.00	%		L+4.12	%		3/9/2023	Las Vegas, NV	Multifamily		75	%
37	Senior Loan		3/19/2021		12,718		12,718		12,704		L+3.95	%		L+4.15	%		4/9/2026	Brooklyn, NY	Multifamily		85	%
38	Senior Loan		11/15/2019		12,150		11,899		11,924		L+4.00	%		L+4.18	%		11/9/2024	Holly Springs, GA	Retail		70	%
39	Senior Loan		3/7/2018		12,050		12,050		12,139		L+5.00	%		L+5.19	%		3/7/2022	Las Vegas, NV	Hospitality		71	%
40	Senior Loan		6/11/2018		12,000		12,000		12,055		L+4.00	%		L+4.17	%		6/9/2023	Miami, FL	Retail		65	%
41	Senior Loan		11/17/2020		11,010		10,050		10,041		L+4.00	%		L+4.03	%		12/9/2025	San Diego, CA	Industrial		65	%
42	Senior Loan		2/19/2020		10,500		10,500		10,489		L+3.50	%		L+3.53	%		3/9/2025	Los Angeles, CA	Retail		71	%
43	Senior Loan		6/11/2018		8,000		8,000		8,051		L+4.50	%		L+4.61	%		3/9/2024	Miami, FL	Retail		68	%
44	Senior Loan		2/17/2021		7,000		7,000		6,991		L+3.85	%		L+4.06	%		3/9/2026	Brooklyn, NY	Multifamily		81	%
45	Senior Loan		6/11/2018		6,750		6,750		6,782		L+4.25	%		L+4.42	%		6/9/2023	Miami, FL	Retail		61	%
Total/Weighted Average				$	1,006,732	$	900,056	$	900,978		L+4.22	%		L+4.31	%

(1) Date loan was originated or acquired by us, and the loan-to-value, or LTV, as of such date. Dates and LTV are not updated for subsequent loan modifications or upsizes.

(2) Our floating rate loans were indexed to LIBOR, or “L”. In addition to cash coupon, all-in yield includes accretion of discount (amortization of premium) and accrual of exit fees.

(3) Maximum maturity assumes all extension options are exercised by the borrower, however loans may be repaid prior to such date.

Subsequent Activity

During the period from April 1, 2021 through May 10, 2021, we closed on 10 senior floating-rate mortgage loans of which $384,683 was funded at closing.

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Results of Operations

The following table sets forth information regarding our consolidated results of operations for the three and three months ended March 31, 2021, and 2020:

	Three Months Ended March 31,
	2021			2020
Net interest income
Interest income	$	11,716		$	8,128
Less: Interest expense		(2,829	)		(3,207	)
Net interest income		8,887			4,921
Other expenses
Management and performance fees		1,573			595
General and administrative expenses		1,405			718
Less: Expense limitation		(56	)		—
Net other expenses		2,922			1,313
Net income		5,965			3,608
Preferred stock dividends		(4	)		(3	)
Net income attributable to FS Credit Real Estate Income Trust, Inc.	$	5,961		$	3,605

Net Interest Income

Net interest income is generated on our interest-earning assets less related interest-bearing liabilities. The increase in interest income was attributable to debt investments acquired or originated in our portfolio and non-recurring prepayment fee income. The decrease in interest expense for the three months ended March 31, 2021 compared to the three months ended March 31, 2020 was attributable to a decrease in LIBOR, despite an increase in our average borrowings.

Expenses

General and administrative expenses include administrative services expenses, auditing and professional fees, independent director fees, transfer agent fees, loan servicing expenses and other costs associated with operating our business.

Expense Limitation

We have entered into an expense limitation agreement with FS Real Estate Advisor and Rialto pursuant to which FS Real Estate Advisor and Rialto have agreed to waive reimbursement of or pay, on a quarterly basis, our annualized ordinary operating expenses for such quarter to the extent such expenses exceed 1.5% per annum of our average net assets attributable to each of our classes of common stock. Ordinary operating expenses for each class of common stock consist of all ordinary expenses attributable to such class, including administration fees, transfer agent fees, fees paid to our board of directors, loan servicing expenses, administrative services expenses, and related costs associated with legal, regulatory compliance and investor relations, but excluding the following: (a) advisory fees, (b) interest expense and other financing costs, (c) taxes, (d) distribution or shareholder servicing fees and (e) unusual, unexpected and/or nonrecurring expenses. We will repay FS Real Estate Advisor or Rialto on a quarterly basis any ordinary operating expenses previously waived or paid, but only if the reimbursement would not cause the then-current expense limitation, if any, to be exceeded. In addition, the reimbursement of expenses will be made only if payable not more than three years from the end of the fiscal quarter in which the expenses were paid or waived.

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FS Real Estate Advisor and Rialto each agreed to waive the recoupment of any amounts that may be subject to conditional reimbursement during the quarterly period ended March 31, 2020. To the extent that the conditions to recoupment are satisfied in a future quarter (prior to the expiration of the three-year period for reimbursement set forth in the expense limitation agreement), such expenses may be subject to conditional recoupment in accordance with the terms of the expense limitation agreement.

During the period from September 13, 2017 (Commencement of Operations) to March 31, 2021, we accrued $5,839 for reimbursement of expenses that FS Real Estate Advisor and Rialto have agreed to pay, including $56 in reimbursements for the three months ended March 31, 2021. During the period from September 13, 2017 (Commencement of Operations) to March 31, 2021, we received $5,783 in cash reimbursements from FS Real Estate Advisor. As of March 31, 2021, we had $56 of reimbursements due from FS Real Estate Advisor and Rialto.

Non-GAAP Financial Measures

Funds from Operations and Modified Funds from Operations

We use Funds from Operations (“FFO”), a widely accepted non-GAAP financial metric, to evaluate our performance. FFO provides a supplemental measure to compare our performance and operations to other REITs. Due to certain unique operating characteristics of real estate companies, the National Association of Real Estate Investment Trusts (“NAREIT”) has promulgated a standard known as FFO, which it believes more accurately reflects the operating performance of a REIT. As defined by NAREIT, FFO means net income computed in accordance with GAAP, excluding gains (or losses) from sales of operating property, plus depreciation and amortization and after adjustments for unconsolidated entities. In addition, NAREIT has further clarified the FFO definition to add-back impairment write-downs of depreciable real estate or of investments in unconsolidated entities that are driven by measurable decreases in the fair value of depreciable real estate and to exclude the earnings impacts of cumulative effects of accounting changes. We have adopted the NAREIT definition for computing FFO.

Our business plan is to operate as a mortgage REIT with our portfolio consisting of senior floating-rate mortgage loans, including those that are secured by a first priority mortgage on transitional commercial real estate properties. We will typically have no FFO adjustments to our net income or loss computed in accordance with GAAP. Although we have the ability to acquire real property, we have not acquired any at this time and as such do not have any FFO adjustments to our net income or loss computed in accordance with GAAP.

Due to the unique features of publicly registered, non-listed REITs, the Institute for Portfolio Alternatives (“IPA”), an industry trade group, published a standardized non-GAAP financial measure known as Modified Funds from Operations (“MFFO”), which the IPA has promulgated as a supplemental measure for publicly registered non-listed REITs and which may be another appropriate supplemental measure to reflect the operating performance of a non-listed REIT.

The IPA defines MFFO as FFO adjusted for acquisition fees and expenses, amounts relating to straight line rents and amortization of premiums or accretion of discounts on debt investments, non-recurring impairments of real estate-related investments, mark-to-market adjustments included in net income, non-recurring gains or losses included in net income from the extinguishment or sale of debt, hedges, foreign exchange, derivatives or securities holdings where trading of such holdings is not a fundamental attribute of the business plan, unrealized gains or losses resulting from consolidation from, or deconsolidation to, equity accounting, and after adjustments for consolidated and unconsolidated partnerships and joint ventures.

Because MFFO may be a recognized measure of operating performance within the non-listed REIT industry, MFFO and the adjustments used to calculate it may be useful in order to evaluate our performance against other non-listed REITs. Like FFO, MFFO is not equivalent to our net income or loss as determined under GAAP, as detailed in the table below, and MFFO may not be a useful measure of the impact of long-term operating performance on value if we continue to acquire a significant amount of investments.

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Our presentation of FFO and MFFO may not be comparable to other similarly titled measures presented by other REITs. We believe that the use of FFO and MFFO provides a more complete understanding of our operating performance to stockholders and to management, and when compared year over year, reflects the impact on our operations from trends in operating costs, general and administrative expenses, and interest costs. Neither FFO nor MFFO is intended to be an alternative to “net income” or to “cash flows from operating activities” as determined by GAAP as a measure of our capacity to pay distributions. Management uses FFO and MFFO to compare our operating performance to that of other REITs and to assess our operating performance.

Neither the SEC, any other regulatory body nor NAREIT has passed judgment on the acceptability of the adjustments that we use to calculate FFO or MFFO. In the future, the SEC, another regulatory body or NAREIT may decide to standardize the allowable adjustments across the non-listed REIT industry and we would have to adjust our calculation and characterization of FFO or MFFO.

Our FFO and MFFO are calculated for the three months ended March 31, 2021 and 2020 as follows:

		Three Months Ended March 31,
	��	2021			2020
Net income (GAAP)		$	5,965		$	3,608
Funds from operations		$	5,965		$	3,608
Adjustments to arrive at modified funds from operations:
Accretion of discount on mortgage-backed securities held-to-maturity			(134	)		—
Modified funds from operations		$	5,831		$	3,608

NAV per Share

FS Real Estate Advisor calculates our NAV per share in accordance with the valuation guidelines approved by our board of directors for the purposes of establishing a price for shares sold in our public offering as well as establishing a repurchase price for shares repurchased pursuant to our share repurchase plan.

The following table provides a breakdown of the major components of our total NAV as of March 31, 2021:

Components of NAV	March 31, 2021
Cash and cash equivalents	$	17,662
Restricted cash		10,898
Loans receivable		900,978
Mortgage-backed securities held-to-maturity		37,448
Mortgage-backed securities available-for-sale, at fair value		13,325
Other assets		4,310
Repurchase agreements payable, net of deferred financing costs		(247,746	)
Credit facility payable		(25,000	)
Collateralized loan obligation, net of deferred financing costs		(323,371	)
Accrued servicing fees(1)		(176	)
Other liabilities		(6,928	)
Net asset value	$	381,400

(1) See Reconciliation of Stockholders’ Equity to NAV below for an explanation of the differences between the stockholder servicing fees accrued for purposes of NAV and the amount accrued under GAAP.

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The following table provides a breakdown of our total NAV and NAV per share by share class as of March 31, 2021:

NAV per Share	Class F		Class Y		Class T		Class S		Class D		Class M		Class I		Total
Net asset value	$	22,921	$	1,768	$	32,516	$	182,586	$	13,760	$	54,460	$	73,389	$	381,400
Number of outstanding shares		913,919		71,904		1,296,603		7,219,425		548,007		2,163,864		2,988,540		15,202,262
NAV per share as of March 31, 2021	$	25.0797	$	24.5939	$	25.0777	$	25.2910	$	25.1086	$	25.1678	$	24.5567

The following table sets forth a reconciliation of our stockholders’ equity to our NAV as of March 31, 2021:

Reconciliation of Stockholders’ Equity to NAV	March 31, 2021
Total stockholders’ equity under GAAP	$	363,335
Preferred stock		(125	)
Total stockholders’ equity, net of preferred stock, under GAAP		363,210
Adjustments:
Accrued stockholder servicing fees(1)		18,190
Net asset value	$	381,400

(1) Stockholder servicing fees only apply to Class T, Class S, Class D and Class M shares. Under GAAP, we accrue future stockholder servicing fees in an amount equal to our best estimate of fees payable to FS Investment Solutions at the time such shares are sold. For purposes of NAV, we recognize the stockholder servicing fee as a reduction of NAV on a monthly basis. As a result, the estimated liability for the future stockholder servicing fees, which are accrued at the time each share is sold, will have no effect on the NAV of any class.

Limits on the Calculation of Our Per Share NAV

Although our primary goal in establishing our valuation guidelines is to produce a valuation that represents a fair and accurate estimate of the value of our investments, the methodologies used are based on judgments, assumptions and opinions about future events that may or may not prove to be correct, and if different judgments, assumptions or opinions were used, a different estimate would likely result. Furthermore, our published per share NAV may not fully reflect certain extraordinary events because we may not be able to immediately quantify the financial impact of such events on our portfolio. FS Real Estate Advisor monitors our portfolio between valuations to determine whether there have been any extraordinary events that may have materially changed the estimated market value of the portfolio. If required by applicable securities law, we will promptly disclose the occurrence of such event in a prospectus supplement and FS Real Estate Advisor will analyze the impact of such extraordinary event on our portfolio and determine, in coordination with third-party valuation services, the appropriate adjustment to be made to our NAV. We will not, however, retroactively adjust NAV. To the extent that the extraordinary events may result in a material change in value of a specific investment, FS Real Estate Advisor will order a new valuation of the investment, which will be prepared by a third-party valuation service. It is not known whether any resulting disparity will benefit stockholders whose shares are or are not being repurchased or purchasers of our common stock.

We include no discounts to our NAV for the illiquid nature of our shares, including the limitations on the ability to sell shares under our share repurchase plan and our ability to suspend or terminate our share repurchase plan at any time. Our NAV generally does not consider exit costs that would likely be incurred if our assets and liabilities were liquidated or sold. While we may use market pricing concepts to value individual components of our NAV, our per share NAV is not derived from the market pricing information of open-end real estate funds listed on stock exchanges.

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We do not represent, warranty or guarantee that:

• a stockholder would be able to realize the NAV per share for the class of shares a stockholder owns if the stockholder attempts to sell its shares;

• a stockholder would ultimately realize distributions per share equal to per share NAV upon a liquidation of our assets and settlement of our liabilities or upon any other liquidity event;

• shares of our common stock would trade at per share NAV on a national securities exchange;

• a third party in an arm’s-length transaction would offer to purchase all or substantially all of our shares of common stock at NAV;

• NAV would equate to a market price for an open-end real estate fund; and

• NAV would represent the fair value of our assets less liabilities under GAAP.

Liquidity and Capital Resources

As of March 31, 2021, we had $17,662 in cash and cash equivalents, which we and our wholly owned subsidiaries held in custodial accounts. In addition, as of March 31, 2021, we had $201,375 in borrowings available under our financing arrangements, subject to certain limitations. As of March 31, 2021, we had unfunded loan commitments of $106,676. We maintain sufficient cash on hand and available borrowings to fund such unfunded commitments should the need arise.

We will obtain the funds required to purchase or originate investments and conduct our operations from the net proceeds of our public offering, the private placement of our Class Y shares and any future offerings we may conduct, from secured and unsecured borrowings from banks and other lenders, and from any undistributed funds from operations. Our principal demands for funds will be for asset acquisitions/originations, the payment of operating expenses and distributions, the payment of interest on any outstanding indebtedness and repurchases of our common stock pursuant to our share repurchase plan. Generally, cash needs for items other than asset acquisitions/originations will be met from operations, and cash needs for asset acquisitions/originations will be funded by public offerings of our shares and debt financings. However, there may be a delay between the sale of our shares and our purchase/originations of assets, which could result in a delay in the benefits to our stockholders of returns generated from our investment operations. Our leverage may not exceed 300% of our total net assets (as defined in our charter).

If we are unable to raise substantial funds in our public offering, we will make fewer investments resulting in less diversification in terms of the type, number and size of investments we make and the value of an investment in us will fluctuate with the performance of the specific assets we acquire. Further, we will have certain fixed operating expenses, including certain expenses as a publicly offered REIT, regardless of whether we are able to raise substantial funds in our public offering. Our inability to raise substantial funds would increase our fixed operating expenses as a percentage of gross income, reducing our net income and limiting our ability to make distributions.

Potential future sources of capital include proceeds from secured or unsecured financings from banks or other lenders or proceeds from the sale of assets or collection of loans receivable.

In addition to making investments in accordance with our investment objectives, we expect to use our capital resources to make certain payments to FS Real Estate Advisor and FS Investment Solutions, the dealer manager for our public offering. During the offering stage of our public offering, these payments will include payments to FS Real Estate Advisor and its affiliates for reimbursement of certain organization and offering expenses. We will reimburse FS Real Estate Advisor for the organization and offering costs it or Rialto incurs on our behalf only to the extent that the reimbursement would not cause the selling commissions, dealer manager fees, accountable due diligence expenses, stockholder servicing fees and the other organization and offering

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expenses borne by us to exceed 15.0% of the gross offering proceeds from the primary offering as the amount of proceeds increases. FS Real Estate Advisor has agreed to advance all of our organization and offering expenses on our behalf until we had raised $250,000 of gross proceeds in our public offering. In April 2020, FS Real Estate Advisor and Rialto agreed to defer the recoupment of any organization and offering expenses that may be reimbursable by us under the advisory agreement with respect to gross proceeds raised in the offering in excess of $250,000 until FS Real Estate Advisor, in its sole discretion, determined that we have achieved economies of scale sufficient to ensure that we could bear a reasonable level of expenses in relation to our income. We began reimbursing FS Real Estate Advisor in September 2020 and, as such, FS Real Estate Advisor may be reimbursed for any organization and offering expenses that it or Rialto has incurred on our behalf, up to a cap of 0.75% of gross proceeds raised after such time. As of March 31, 2021, we reimbursed $358 to FS Real Estate Advisor for organization and offering expenses previously funded.

During our acquisition and development stage, subject to the limitations in the advisory agreement and sub-advisory agreement, we expect to make payments to FS Real Estate Advisor in connection with the management of our assets and costs incurred by FS Real Estate Advisor and Rialto in providing services to us. The advisory agreement has a one-year term but may be renewed for an unlimited number of successive one-year periods upon the mutual consent of FS Real Estate Advisor and our board of directors. On August 12, 2020, our board of directors approved the renewal of the advisory agreement effective as of August 17, 2020 for an additional one-year term expiring August 17, 2021. For a discussion of the compensation to be paid to FS Real Estate Advisor and FS Investment Solutions, see Note 6 to our unaudited consolidated financial statements included herein.

COVID-19 Developments

The COVID-19 pandemic has had, and is expected to continue to have, a significant impact on local, national and global economies and has resulted in a world-wide economic slowdown. The COVID-19 pandemic has negatively impacted, and is likely to continue to negatively impact, the business operations of some of our borrowers. We cannot at this time fully predict the impact of COVID-19 on our business or the business of our borrowers, its duration and magnitude, or the extent to which it will negatively impact our borrowers’ operating results or our own results of operations or financial condition. We expect that certain of our borrowers will continue to experience economic distress for the foreseeable future. The COVID-19 pandemic has had a more negative impact on certain property types, principally retail and hospitality, which have experienced extended government-mandated closures, and more recently office, which is beginning to experience lower demand due to remote working arrangements. The pandemic and the governmental response thereto may significantly limit our borrowers’ business operations and subject them to prolonged economic distress. These developments could result in a decrease in the value of our investments.

The continuation of economic disruptions relating to the COVID-19 pandemic could result in reductions to our investment income or impairments on our investments. In addition, disruptions in the capital markets have resulted in illiquidity in certain markets, which could have an adverse effect on our business, financial condition, results of operations and cash flows. Unfavorable economic conditions caused by COVID-19 can also be expected to increase our funding costs and limit our access to the capital markets. These events have limited our originations of new loans relating to certain property types, which may continue in the future based on developments relating to the pandemic.

We will continue to carefully monitor the impact of the COVID-19 pandemic on our business and the business of our borrowers and business partners. Because the full effects of the COVID-19 pandemic are not capable of being known at this time, we cannot estimate the impacts of COVID-19 on our future financial condition, results of operations or cash flows. We do, however, expect that it will have a negative impact on the financial condition of certain of our borrowers, particularly those in property types most directly impacted by the pandemic.

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Portfolio Update

As of March 31, 2021, our portfolio continues to perform, generating consistent current income with low volatility; further, we had not recorded any impairments or non-accruals in our private loan portfolio. In addition, 97% of our loan portfolio was current as of March 31, 2021.

Our portfolio remains well diversified by geography and property type, with multifamily and industrial representing 38.8% of the portfolio compared to 14.9% for hospitality and retail as of March 31, 2021. The pipeline for new deal activity remains strong, backed by a diverse mix of property types.

Broadly, our lending strategy focused on originating short-term (2–3 years), floating-rate, senior loans has helped preserve investor capital while providing a natural turnover of the portfolio. The short-term nature of our typical loans allows us to regularly adjust the portfolio to current market conditions. As of March 31, 2021, approximately 41% of our portfolio consisted of investments sourced after July 2020.

Critical Accounting Policies

Our financial statements are prepared in conformity with GAAP, which requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Critical accounting policies are those that require the application of management’s most difficult, subjective or complex judgments, often because of the need to make estimates about the effect of matters that are inherently uncertain and that may change in subsequent periods. In preparing the financial statements, management also will utilize 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. As we execute our expected operating plans, we will describe additional critical accounting policies in the notes to our financial statements in addition to those discussed below.

Loans Receivable and Provision for Loan Losses: We originate and purchase commercial real estate debt and related instruments generally to be held as long-term investments at amortized cost. We are required to periodically evaluate each of these loans for possible impairment. Impairment is indicated when it is deemed probable that we will not be able to collect all amounts due to us pursuant to the contractual terms of the loan. If a loan is determined to be impaired, we write down the loan through a charge to the provision for loan losses. Impairment of these loans, which are collateral dependent, is measured 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 significant judgments, which include assumptions regarding capitalization rates, leasing, creditworthiness of major tenants, occupancy rates, availability of financing, exit plan, loan sponsorship, actions of other lenders, and other factors deemed necessary by FS Real Estate Advisor and Rialto. Actual losses, if any, could ultimately differ from these estimates. FS Real Estate Advisor and Rialto perform a quarterly review of our portfolio of loans.

In connection with this review, FS Real Estate Advisor and Rialto assess the risk factors of each loan and assign a risk rating based on a variety of factors, including, without limitation, LTV, debt yield, property type, geographic and local market dynamics, physical condition, cash flow volatility, leasing and tenant profile, loan

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structure and exit plan, and project sponsorship. Based on a 5-point scale, our loans are rated “1” through “5”, from less risk to greater risk, which ratings are defined as follows:

Loan Risk Rating	Summary Description
1	Very Low Risk
2	Low Risk
3	Medium Risk
4	High Risk/Potential for Loss: A loan that has a risk of realizing a principal loss
5	Impaired/Loss Likely: A loan that has a very high risk of realizing a principal loss or has otherwise incurred a principal loss

Revenue Recognition: Security transactions are accounted for on the trade date. We record interest income on an accrual basis to the extent that we expect to collect such amounts. We record dividend income on the ex-dividend date. We do not accrue as a receivable interest or dividends on loans and securities if there is reason to doubt the collectability of such income. Any loan origination fees, original issue discount, market discount and exit fees are capitalized and such amounts are amortized as interest income over the respective term of the investment. Upon the prepayment of a loan or security, any unamortized loan origination fees to which we are entitled are recorded as fee income. We will record prepayment premiums on loans and securities as fee income when we receive such amounts.

See Note 2 to our unaudited consolidated financial statements included herein for additional information regarding our significant accounting policies.

Contractual Obligations

We have entered into an advisory agreement with FS Real Estate Advisor to provide us with advisory and administrative services. Pursuant to the advisory agreement, FS Real Estate Advisor receives payments for performing advisory services for us consisting of (a) an annual base management fee of 1.25% of our NAV for our Class T, Class S, Class D, Class M and Class I shares and (b) a performance fee equal to 10.0% of our Core Earnings, subject to a hurdle rate, expressed as a rate of return on average adjusted capital, equal to 1.625% per quarter, or an annualized hurdle rate of 6.5%. For purposes of calculating the performance fee, “Core Earnings” means: the net income (loss) attributable to stockholders of Class T, Class S, Class D, Class M, Class I and Class Y shares computed in accordance with GAAP, including realized gains (losses) not otherwise included in GAAP (provided that net income (loss) attributable to Class Y stockholders shall be subject to certain reductions) net income (loss) and excluding (i) non-cash equity compensation expense, (ii) the performance fee, (iii) depreciation and amortization, (iv) any unrealized gains or losses or other similar non-cash items that are included in net income for the applicable reporting period, regardless of whether such items are included in other comprehensive income or loss, or in net income, and (v) one-time events pursuant to changes in GAAP and certain material non-cash income or expense items, in each case after discussions between FS Real Estate Advisor and our independent directors and approved by a majority of our independent directors. The base management fee and the performance fee are class-specific expenses. No base management fee will be paid on our Class F or Class Y shares and no performance fee will be paid on our Class F shares.

Pursuant to the advisory agreement, FS Real Estate Advisor oversees our day-to-day operations, including providing us with general ledger accounting, fund accounting, legal services, investor relations and other administrative services. We have agreed to reimburse FS Real Estate Advisor and Rialto for administrative expenses incurred on our behalf, subject to limitations set forth in our charter and the advisory agreement. See Note 6 to our unaudited consolidated financial statements included herein for additional information.

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A summary of our significant contractual payment obligations related to the repayment of our outstanding indebtedness at March 31, 2021 is as follows:

	Payments Due By Period
	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
FS Rialto 2019-FL1	$	327,665		—		—		—	$	327,665
WF-1 Facility(1)	$	51,463	$	51,463		—		—		—
GS-1 Facility(2)	$	141,186	$	141,186		—		—		—
BB-1 Facility(3)	$	55,976		—	$	55,976		—		—
CNB Facility(4)	$	25,000	$	25,000		—		—		—

(1) At March 31, 2021, $48,537 remained unused under the WF-1 Facility. As more fully disclosed in Note 5 to our unaudited consolidated financial statements, these obligations are subject to existing extension options for one or more additional one-year periods.

(2) At March 31, 2021, $33,814 remained unused under the GS-1 Facility. As more fully disclosed in Note 5 to our unaudited consolidated financial statements, these obligations are subject to existing extension options for one or more additional one-year periods.

(3) At March 31, 2021, $119,024 remained unused under the BB-1 Facility. As more fully disclosed in Note 5 to our unaudited consolidated financial statements, these obligations are subject to existing extension options for one or more additional one-year periods.

(4) At March 31, 2021, $0 remained unused under the CNB Facility.

Off-Balance Sheet Arrangements

We currently have no off-balance sheet arrangements, including any risk management of commodity pricing or other hedging practices.

Related Party Transactions

Compensation of FS Real Estate Advisor and the Dealer Manager

Pursuant to the advisory agreement, FS Real Estate Advisor is entitled to an annual base management fee equal to 1.25% of the NAV for our Class T, Class S, Class D, Class M and Class I shares and a performance fee based on our performance. We also reimburse FS Real Estate Advisor and Rialto for their actual cost incurred on providing administrative services to us, including the allocable portion of compensation and related expenses of certain personnel providing such administrative services. Pursuant to the advisory agreement, we will reimburse FS Real Estate Advisor and its affiliates for expenses incurred relating to our organization and continuous public offering, including the allocable portion of compensation and related expenses of certain personnel of FS Investments related thereto. FS Real Estate Advisor previously agreed to advance all of our organization and offering expenses until we raised $250,000 of gross proceeds from our public offering. In April 2020, FS Real Estate Advisor and Rialto agreed to defer the recoupment of any organization and offering expenses that may be reimbursable by us under the advisory agreement with respect to gross proceeds raised in the offering in excess of $250,000 until FS Real Estate Advisor, in its sole discretion, determined that we had achieved economies of scale sufficient to ensure that we could bear a reasonable level of expenses in relation to our income. We began reimbursing FS Real Estate Advisor in September 2020 and, as such, FS Real Estate Advisor may be reimbursed for any organization and offering expenses that it or Rialto has incurred on our behalf, up to a cap of 0.75% of gross proceeds raised after such time.

The dealer manager for our continuous public offering is FS Investment Solutions, which is an affiliate of FS Real Estate Advisor. Under the dealer manager agreement, FS Investment Solutions is entitled to receive upfront selling commissions and dealer manager fees in connection with the sale of shares of common stock in our continuous public offering. FS Investment Solutions anticipates that all of the selling commissions and dealer manager fees will be reallowed to participating broker-dealers, unless a particular broker-dealer declines to

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accept some portion of the dealer manager fee they are otherwise eligible to receive. FS Investment Solutions is also entitled to receive stockholder servicing fees, which accrue daily and are paid on a monthly basis. FS Investment Solutions will reallow such stockholder servicing fees to participating broker-dealers, servicing broker-dealers and financial institutions (including bank trust departments) and will waive (pay back to us) stockholder servicing fees to the extent a broker-dealer or financial institution is not eligible or otherwise declines to receive all or a portion of such fees.

See Note 6 to our unaudited consolidated financial statements included herein for additional information regarding our related party transactions and relationships, including a description of the fees and amounts due to FS Real Estate Advisor, compensation of FS Investment Solutions, capital contributions by FS Investments and Rialto, our expense limitation agreement with FS Investments and our purchase of a mortgage loan from an affiliate of Rialto.

FS Investment Solutions also serves or served as the placement agent for our private offerings of Class F and Class Y shares pursuant to placement agreements. FS Investment Solutions does not receive any compensation pursuant to these agreements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

We are subject to financial market risks, including changes in interest rates. As of March 31, 2021, 98% of the outstanding principal of our debt investments were floating rate investments. A rise in the general level of interest rates can be expected to lead to higher interest rates applicable to any variable rate investments we may hold and to declines in the value of any fixed rate investments we may hold. However, many of our variable rate investments provide for an interest rate floor, which may prevent our interest income from increasing until benchmark interest rates increase beyond a threshold amount. To the extent that a substantial portion of our investments may be in variable rate investments, an increase in interest rates beyond this threshold would make it easier for us to meet or exceed our performance fee hurdle rate and may result in a substantial increase in our net investment income and the amount of performance fees payable to FS Real Estate Advisor. In 2020, the U.S. Federal Reserve and other central banks have reduced certain interest rates in response to the COVID-19 pandemic and market conditions. A prolonged reduction in interest rates may reduce our net investment income.

Pursuant to the terms of the FS Rialto 2019-FL1 Notes, WF-1 Facility, the GS-1 Facility, the BB-1 Facility and the CNB Facility, borrowings are at a floating rate based on LIBOR. To the extent that any present or future credit facilities or other financing arrangements that we or any of our subsidiaries enter into are based on a floating interest rate, we will be subject to risks relating to changes in market interest rates. In periods of rising interest rates, when we have debt outstanding, our cost of funds would increase, which could reduce our net investment income, especially to the extent we hold fixed rate investments.

We may seek to limit the impact of rising interest rates on earnings and cash flows through the use of derivative financial instruments to hedge exposures to changes in interest rates on loans secured by our assets.

The following table shows the effect over a twelve-month period of changes in interest rates on our interest income, interest expense, and net interest income, assuming no changes in the composition of our investment portfolio, including the accrual status of our investments, and our financing arrangements in effect as of March 31, 2021:

Basis Point Changes in Interest Rates	Increase (Decrease) in Interest Income		Increase (Decrease) in Interest Expense			Increase (Decrease) in Net Interest Income			Percentage Change in Net Interest Income
Down 50 basis points(1)	$	—	$	(428	)	$	428			1.0	%
Down 25 basis points(1)	$	—	$	(428	)	$	428			1.0	%
No change		—		—			—			—
Up 25 basis points	$	237	$	1,126		$	(889	)		(2.0	)%
Up 50 basis points	$	800	$	2,425		$	(1,625	)		(3.7	)%

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(1) Decrease in rates assumes the applicable benchmark rate does not decrease below 0%.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

As required by Rule 13a-15(b) under the Exchange Act, we carried out an evaluation, under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2021.

Based on the foregoing, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective to provide reasonable assurance that we would meet our disclosure obligations.

Changes in Internal Control Over Financial Reporting

There was no change in our internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) or 15d-15(f)) that occurred during the three-month period ended March 31, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

We are not currently subject to any material legal proceedings, nor, to our knowledge, is any material legal proceeding threatened against us. From time to time, we may be party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of our rights under contracts with our portfolio companies. While the outcome of any legal proceedings cannot be predicted with certainty, we do not expect that these proceedings will have a material adverse effect upon our financial condition or results of operations.

Item 1A. Risk Factors.

In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the risk factors that appeared under Item 1A. “Risk Factors” in our most recent Annual Report on Form 10-K, as supplemented by our quarterly reports on Form 10-Q. There are no material changes from the risk factors included within our most recent Annual Report on Form 10-K for the year ended December 31, 2020.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Use of Proceeds

On September 11, 2017, our registration statement on Form S-11 (File No. 333-216037), covering our initial public offering of up to $2,750,000 in shares of common stock, was declared effective under the Securities Act, and we commenced our initial public offering. Pursuant to our initial public offering, we offered on a continuous basis up to $2,500,000 in any combination of Class T, Class S, Class D, Class M and Class I shares of common stock in our primary offering and up to $250,000 in any combination of Class F, Class Y, Class T, Class S, Class D, Class M and Class I shares of common stock pursuant to our distribution reinvestment plan. On March 2, 2021, we terminated our initial public offering and commenced a follow-on public offering of up to $2,750,000 in shares of common stock. FS Investment Solutions, LLC, an affiliate of FS Real Estate Advisor, served as the dealer manager of our initial public offering.

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Our equity raise, including private offering proceeds from the sale of Class F and Class Y shares, as of March 31, 2021 resulted in the following ($ in thousands except for share amounts):

	Class F Shares(1)		Class Y Shares(1)		Class T Shares			Class S Shares			Class D Shares			Class M Shares			Class I Shares		Total
Primary shares sold		2,595,732		193,013		1,354,530			7,543,961			616,642			2,463,703			3,399,481		18,167,062
Gross proceeds from primary offering	$	58,615	$	4,758	$	33,565		$	189,461		$	15,084		$	60,699		$	82,334	$	444,516
Reinvestments of distributions		5,737		74		1,540			3,002			428			1,411			1,464		13,656
Total gross proceeds		64,352		4,832		35,105			192,463			15,512			62,110			83,798		458,172
Selling commissions		—		—		(1,058	)		(1,197	)		—			—			—		(2,255	)
Stockholder servicing fees		—		—		(446	)		(1,289	)		(61	)		(247	)		—		(2,043	)
Net offering proceeds	$	64,352	$	4,832	$	33,601		$	189,977		$	15,451		$	61,863		$	83,798	$	453,874

(1) Class F and Class Y shares are only offered pursuant to our distribution reinvestment plan.

From the effective date of our initial public offering through March 31, 2021, the net offering proceeds to us, after deducting the total expenses incurred as described above, were $390,501. We primarily used the net offering proceeds of this offering, together with the proceeds from our private offerings, to originate or acquire approximately $1,107,000 of real estate-related investments in accordance with our investment objectives. See Note 1 to our unaudited consolidated financial statements included herein for additional information regarding our investment objectives. In addition to the net offering proceeds, we financed the acquisition of a portion of our investments with approximately $576,000 from financing activities, including our repurchase facilities and CLO.

Share Repurchase Program

We have adopted a share repurchase plan, whereby on a monthly basis, stockholders may request that we repurchase all or any portion of their shares. Prior to September 2019, Class F shares and Class Y shares were not eligible to participate in our share repurchase program. The repurchase of shares is limited to no more than 2% of our aggregate NAV per month of all classes of shares then participating in our share repurchase plan and no more than 5% of our aggregate NAV per calendar quarter of all classes of shares then participating in our share repurchase plan, which means that in any 12-month period, we limit repurchases to approximately 20% of the total NAV of all classes of shares then participating in the share repurchase plan.

During the three months ended March 31, 2021, we repurchased shares of our common stock in the following amounts:

Period	Total Number of Shares Repurchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs(1)
January 1 - January 31, 2021		63,625	$	24.72		63,625		—
February 1 - February 28, 2021		36,791		24.93		36,791		—
March 1 - March 31, 2021		37,864		25.10		37,864		—
Total		138,280	$	24.88		138,280		—

(1) Redemptions are limited as described above. Under the share repurchase plan, we would have been able to repurchase up to an aggregate of $7,312 of shares based on our March 31, 2021 NAV in the first quarter of 2021 (if such repurchase requests were made). Pursuant to the share repurchase plan, this amount resets at the beginning of each quarter.

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Sales of Unregistered Securities

On February 1, 2021, we issued 375 unregistered restricted shares of Class I common stock, with a grant date fair value of $24.62 per share, to our independent directors as compensation for their services pursuant to our independent director restricted share plan in a private transaction exempt from registration under Section 4(a)(2) of the Securities Act. The restricted shares of Class I common stock will vest on the one year anniversary of the grant date, provided that the independent director remains on the board of directors on such vesting date, or upon the earlier occurrence of his or her termination of service due to his or her death or disability or a change in our control.

On March 10, 2021, our board of directors approved the issuance of up to $20,000 in shares of our Class Y common stock (with the ability to increase such offering amount up to $50,000 at the sole discretion of the adviser) in a private placement exempt from registration under Section 4(a)(2) of the Securities Act of 1933, or the Private Placement. On April 12, 2021, we received a subscription from an institutional investor to purchase $19,191 in Class Y shares in the Private Placement. We sold and issued to such institutional investor on or about April 15, 2021 approximately 780,300 Class Y shares at the per share purchase price of $24.59, which is equal to the NAV per Class Y share as of March 31, 2021. On May 3, 2021, we received an additional subscription from the same institutional investor to purchase $1,558 in Class Y shares in the Private Placement at the per share purchase price of $24.59.

Item 3. Defaults upon Senior Securities.

Not applicable.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

Not applicable.

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Item 6. Exhibits.

3.1	Second Articles of Amendment and Restatement (incorporated by reference to Exhibit 3.1 of the Registrant’s Registration Statement on Form S-11, as filed by the Registrant with the SEC on September 7, 2017).
3.2	Articles of Amendment (incorporated by reference to Exhibit 3.1 of the Registrant’s Current Report on Form 8-K, as filed by the Registrant with the SEC on August 17, 2018).
3.3	Second Articles of Amendment (incorporated by reference to Exhibit 3.3 of the Registrant’s Quarterly Report on Form 10-Q, as filed by the Registrant with the SEC on August 14, 2019).
3.4	Bylaws (incorporated by reference to Exhibit 3.2 of the Registrant’s Registration Statement on  Form S-11, as filed by the Registrant with the SEC on February 13, 2017).
4.1	Form of Subscription Agreement (incorporated by reference to Exhibit 4.1 of the Registrant’s Registration Statement on Form S-11, as filed by the Registrant with the SEC on February 12, 2021).
4.2	Distribution Reinvestment Plan (incorporated by reference to Exhibit 4.2 of the Registrant’s Registration Statement on Form S-11, as filed by the Registrant with the SEC on February 12, 2021).
10.1	Amendment No. 2 to Guarantee Agreement dated as of April  26, 2018 between FS Credit Real Estate Income Trust, Inc. and Wells Fargo Bank, National Association (incorporated by reference to Exhibit  10.30 of the Registrant’s Registration Statement on Form S-11, as filed by the Registrant with the SEC on February 12, 2021).
10.2	Sixth Amendment to Uncommitted Master Repurchase and Securities Contract Agreement dated as of January  21, 2021 among FS CREIT Finance GS-1 LLC and Goldman Sachs Bank, National Association (incorporated by reference to Exhibit 10.34 of the Registrant’s Annual Report on Form 10-K, as filed by the Registrant with the SEC on March 29, 2021).
10.3	Master Repurchase Agreement dated as of February  22, 2021 between FS CREIT Finance BB-1 LLC and Barclays Bank PLC (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K, as filed with the SEC on February 25, 2021).
10.4	Guaranty dated as of February  22, 2021 made by FS Credit Real Estate Income Trust, Inc. in favor of Barclays Bank PLC (incorporated by reference to Exhibit 10.2 of the Registrant’s Current Report on Form 8-K, as filed with the SEC on February 25, 2021).
10.5*	Seventh Amendment to Uncommitted Master Repurchase and Securities Contract Agreement dated as of April  23, 2021 among FS CREIT Finance GS-1 LLC and Goldman Sachs Bank, National Association.
10.6*	Letter Agreement dated April 23, 2021 between FS CREIT Finance BB-1 LLC and Barclays Bank PLC.
10.7*	Letter Agreement dated April 26, 2021 between FS CREIT Finance BB-1 LLC and Barclays Bank PLC.
31.1*	Certification of Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*	Certification of Chief Executive Officer and Chief Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101*	Interactive Data File (XBRL).

* Filed herewith

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Quarterly Report to be signed on its behalf by the undersigned, thereunto duly authorized on May 14, 2021.

FS CREDIT REAL ESTATE INCOME TRUST, INC.
By:	/s/ MICHAEL C. FORMAN
	Michael C. Forman Chief Executive Officer (Principal Executive Officer)
By:	/s/ EDWARD T. GALLIVAN, JR.
	Edward T. Gallivan, Jr. Chief Financial Officer (Principal Accounting and Financial Officer)

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