FBRT - Earnings call transcript Q1 2022 | Franklin BSP Realty Trust, Inc.

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Operator

Good day and welcome to the Franklin BSP Realty Trust First Quarter 2022 Financial Results Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please also note this event is being recorded. And now I would like to turn the conference over to Lindsey Crabbe. ahead. go Please

Lindsey Crabbe

you, to Thank Earnings hosting call our Call. Good Franklin Tom, BSP Welcome the Quarter Realty today. morning. for Trust Conference First

Capital As Financial Richard of and Byrne, Director Group. and CEO Comparato, Lindsey Markets me I Head Jerome Commercial the Chief Chairman the Roy Baglien, Operating FBRT, Director Relations. Michael Chief on are Estate, Investor of and Kim, With Crabbe, today call of Operator mentioned, Officer Real our of Managing am Officer.

information Before from forward-looking to certain XXK, actual filed today's are to of call filed the we uncertainties XXXX. assumptions differ I that mention on future SEC, whether and obligation no described date may future the result want results with statements any required as call, forward-looking a on risks events, this and as start statements, information, including current of today's The recently the Form conversation, call, by of in conveyed The are except May Xth, XX-Q some as made during of inherent most and subject assumptions. otherwise, update only based law. statements assumes and as or comments this Those comments are new materially. this any to team and our company is

website in our Additionally, we on release earnings our and figures www.fbrtreit.com. are will are supplementary GAAP available refer to deck, to certain which non-GAAP financial reconciled slide which measures at

the on over Byrne. call. We to to will With that, slide refer call I'll turn supplementary today's the deck Richard

Richard Byrne

Rich for FBRT. Most and joining de and CEO all of importantly, you Good Byrne. Lindsey. everyone Chairman morning, Mayo. Thanks, Cinco I'm Terrific. our call. I'm thank happy

published website and As supplemental evening. release deck earnings Lindsey on mentioned, our were yesterday our

that want minute current call, this the portfolio. than can of the we're supplemental going an call on the are portfolio. also and status initial walk quarter. open your information So some our and we're first-quarter provide through our cover But you've discuss then hopefully more through and Jerry, up think ARMs Mike today. for on FBRT's it general to CFO evaluate on my to up detail seeing give we progress good to questions. referencing and position of to start our you cover After I'll update X. residential made the we're hope Will we review color. more to the useful quarter going be deck you'll and The portfolio current I market in Then the the you first, results for remarks, contains Slide But financial you really will we've as we going screen first the XXXX. highlights, find go will in

Distributable trading We ARMs quarter. core $XX.X our portfolio and performed a a We commercial produced before are equates very earnings of million real our derivatives performance $X.XX with our has FBRT strategy the this that's strategy. core commercial gains Earnings on of this our million losses and rate and distributable ROE Distributable estate pleased portfolio. This real how distributable indicative Earnings, on our X.X as earnings number is share. of estate to run or view

We the flexible leverage. balance interest was this using ROE and in by we cost did we high net was X.X% to achieve low our high-quality the margin, product the strong not external and which attributable turn our underwrote of sheet Importantly, have. loans

investing in amongst in the core the you'll lowest [Indiscernible]. see is leverage this fact, our I'm approximately only REIT times. In on not book peer group, is achieve we mortgage commercial as This and X.X did sure our by

consists first lien of high-quality loans. entirely Our portfolio almost

more first dividend earnings distributable covered quarter rate $XX.X. our run Our than of

stock yield. book our on The is price an XX%. dividend this approximately share, our X.X% X,XXX current per XXX is at of value based dividend So yield

Just our same very we referenced. I think compared the opinion, is high as peers but to this

Turning to conservative bit and back this posture widen. We wait a to for hold choosing quarter, took more a originations. spreads to

So give more much far on worked this. well. this you out detail Mike has will strategy

portfolio the billion. $X.X quarter at total Our ended core

book have one only on well We a cover as strong and later the list very Mike that with a all in call. well-diversified loan backlog. will watch

We continue market. issuer an to active CLO be in the

date, This CLO, structure. quarter increasing our deal non-recourse a our on largest closed non-mark-to-market we billion further liability to $X.X

Fed good on rate to most of market news tough. Now, our made estate assets an our by you this progress took ARMs are portfolio, quarter made give the reduced want This ARMs we that importantly, of on you the these company. to over balance $X.X at quarter. core is billion with $X.X well of principal very we when transitioning a We great $X.X this. We strategy. in I'm hikes I ended and billion The billion. our year-end another residential the exposure real in sure update have where aware into $X.X commercial billion QX compares

an the fourth progress The increase. in update, billion As in reducing another accelerate. ARMs came which billion In all over size. the only a XX% has represents by has since have to numbers QX and portfolio in million $XXX portfolio additional sold out continued we our the since we now in $X.X in X.X ARMs quarter, the decreased QX, acquired portfolio is

sales. been extremely these of execution have in We disciplined our

of bonds. at for the time transacted at sale spreads the bid-ask or have of We all mostly around these

the is that ahead residential we commercial Our schedule. continue to we of at you transition from all we portfolio will to time ahead original fully rapid ARMs our feel loans, merger. gave confident estimate of our of XX objective the months pace We and that liquidate of the to be well to of XX continue ARMs

excuse transition commercial lower Our this transaction for portfolio. the potential, higher our lower -- this, for earnings me, motivation historical chief is and leverage of volatility,

Lastly, I'd on stock and provide to update program. quick like company manager purchase the a

February stock. At purchasing company's the X.X will in May to shares B Street common been continue approximately it million, lifted $XX buying be $XX will Our actively covered PS Benefit million BSP, until the Xrd. restrictions late program manager, through or blackout acquired in million our point, FBRT shares roughly has spent all that since BSP of were Partners be million has initiated. shares by it's market program. $XX

Before performance the real it of our Jerry, over turn underscore I to strategy. strong commercial want to estate I

We are level. to well-positioned continue to current dividend Earnings Distributable generate excess our of in

We that a soon is pure will of future excited In more a are ARMs our our into play legacy, residential opportunities be estate that lending commercial [Indiscernible]. strategy. higher-yielding of commercial complete. results indicative be we the transition real And our will core our nearly words, other assets

focus in highlights over it Now Jerry. quarter. the I'll financial turn on it over to Take to the Jerry

Jerry Baglien

today. everyone. Operating Great. Chief Hello Officer Jerry the FBRT. everyone on and I'm I Officer Thanks, Baglien, Financial the Rich. call the being of Chief appreciate

Moving onto our results.

X. Slide on start Let's

back of As ROE. representing earnings mentioned, X,XXX. And our of release. you earnings aggregate fully common rate a walk. in that A of a generated value converted will rate walk converted can quarter. of a give in per or to a approximately run net $X.XX Rich found full of diluted rate distributable $XX.X represents for of and FBRT fully distributable X.X% run the It's GAAP million We earnings the share, QX our stock X.X% yield $XX.X million share per it that on be at the dividend income book paid an

that as decline this the converted is at had losses on mentioned, from is the core times. X.X and to the predominantly our X,XXX recourse The expect times. quarter our This book, continue we we quarter down as of leverage to reposition Our Rich company decline leverage QX. assets. sell attributable ending slightly the to ARMs our Net fully our down quarter our portfolio. core trading to declined ARM in end we overall at X.XX to X.X And times portfolio leveraged leverage value book with at came agency

Moving on X. to Slide

have highlight to portfolio quarters. coverage distributable be our added wanted dividend I to We earnings Slide few highlight of rate. continue of that rate rate to run assets last the our want the liabilities. advantage run our both We in and On over some the for floating to ahead our X, just context earnings rate

impact rates, portfolio the immediate to in quarter. rate announcement changes will increases an of per-share ended indicated relative Fed's see This first where our with With earnings. short-term the on to the benefit chart rates shows our almost earnings

going were there, you you're and first then how increasing about the where if that's from quarter at So from chart. we think this

at per So portfolio all our points in first in rates March terms the in in XX, increase our things XX March a $X.XX results of share annually. basis XXX equal for increase earnings

And every basis XX $X.XX it's increase. basis. of annual all points about Thereafter, on that's an increase incremental for a

as new these earnings weighted originations to While experienced we burn average rate years, XX our off. basis stand benefit now floors the and last points. is now floor have repayments, through insulate environment Through our two we've index the declining floors helped

quarter. closed to commitments moving million of We loan the Now $XXX Slide X. in

portfolio with XXX growth our $XXX balance core million, positions. portfolio was principal to bringing billion net Our of $X.X

the Additionally, $X of quarter just commitments approximately to billion. our over million total we ended funding add-on to $XXX with take

to Slide turning our highlights X; borrowings Now flexible structure. this

when CLO First, portfolio, in compares through to of non-mark-to-market our X.X% X.X% that XX% financing. QX, in costs and quarter. non-recourse at fourth is our average and looking financing were our the our And core financing

In the next a with managed FLX It issuance and points FLX, capital CLO, able very fourth and our levels. Rich both existing they're by of done short rate upsized investors. the represent strength ability We well a volatility of execute. transactions again, we our because capacity have largest basis of plus Getting transactions a pricing market capital XX% on a a quarter, billion six an billion go-forward was and of what at XXX% counterparties. at advantage we new with market large as the new issued of meaningfully to on further CLO. XXX CLOs which bit separate than clear These be first these liabilities the capital heels transactions there of warehouse a portion $XXX these the of on was will new $X.X issued with such couple giving a this us million the current two recently of those, markets, their priced with wider facilities CRE date. inside with the actively advance stack. quite priced consent to CLO to XXX. our entire well in window, in our strength we're also a in in we our for blended CLOs a seeing a our across on the received was is Once mentioned, years. available $X.X cost both And at today of eighth quarter, reinvest silver was through did And MultiFamily and issuance basis proves team the which in

discuss Turning to the we XX, Slide portfolio. can ARM

announcing an and Fed pricing substantial to interest As was The there our been via to of raise rates most market evident first quantitative intentions our said, easing ARMs quarter, in end portfolio. series this the has during Rich residential the on volatility with hikes. of effect their

an market value at As $XX.X of of related the book compared to main ARMs million driver to of $XX during first X/XX, gain the December trading effects a at portfolio billion book portfolio ARMs the the These the experienced and XXst. million We and in $X.X of hedging for $X.X our $XX decline. stood that million are related losses on to billion value hedges. ad quarter losses

so what In that XX, portfolio Xrd. in sales, book down of by ARMs of slowing second reduced by the portfolio Looking down, We X% over related the pay value, the can quarter. $X.X second the It's to addition had hedging security the we've hedging. you in the With an the during net turn experienced it the see and can market changes he in Mike a going give progress saw decline additional value the update and portfolio. million $X.X at through equates to on an quarter company Slide that, driven has roughly in I'm to losses you May in quarter. far, to per to billion first This [Indiscernible]. in continued we

Michael Comparato

today. is you our largely of entirety Comparato, being Real The morning, loan that of which Good the appreciate This with sector. portfolio loans, XX% allocated the Jerry. I XXX call are XX% to Commercial of everyone. Slide I'm commercial is of I'm on on senior XX. The going of portfolio Estate. portfolio. MultiFamily, to book consists start Mike Thanks, Head the also mortgages.

remains footprint and Southwest. Southeast predominantly across geographic the Our focused

Let's see move XX in to activity to our Slide QX.

would higher long $XXX moving we FLX in rates priced spreads FLX XXXX the be well. a the ended XX future held and previously noted, as XXX opportunities have our our we thereafter be We We by interest priced more As of having that saw LIBOR commitment quarter as moving originated of SOFR XXXX about priced at January at were Accordingly, felt million. in we early originations and December for attractively. XXX. will quarter generically shortly QX wider in back for budget, paired total loans X/X that

off. Our thesis patience the was correct paid on spreads,

MultiFamily end our up of Towards continue add quarter spreads COVID. robust some days career quarter, of during originations the the increases outside the the the sector. one that to of percentage elected be and in our witnessed early in most over in XX% forward pipeline rates and attractive quarter. in largest years treasury of a the in seen of largest new ramp have we to with today my not the of, We if originations we've

the back to was direction unexpected. slightly the be to While and higher, move remarkable was we the velocity of believe did X% above going

result, both the higher continue this leverage will the credits experiencing rate rates add. fixed to MultiFamily a selective are We being cap quarters we cap debt are low assets and months very markets. in on rate and negative MultiFamily and translate the in floating rate As now believe to coming

volatile, believe As to pleased adjusted several MultiFamily - actively vintage assets, our we for ago a stronger We will are newer We're non quality, I increase vintage markets value origination liquid. markets. to to very to asset on with be mentioned assets strong can those achieve assets, quality, in be quarters if retention, and more valuation risk less exposure focus quarter, primary have classes. correct we we returns and be looking pullback, decision higher higher the primary last MultiFamily newer MultiFamily believe what and

liquidity with a performance and credit and a only highlights the any the experienced at been that portfolio opportunities current to the on disciplined XXnd loans At asset the very the we the loss I to quality Operator quarter be BSP. robust XXXX to single This remain not quarter, team. [Indiscernible] strong. Q&A to and ample by will advantage of With experienced themselves. rating We turn would take a in over a FBRT that, REIT present of QX strong represents loan the of one management we've internal and the it loss environment that have this consecutive and originated have believe begin like end section. overall credit had back the credit managing no culture

Operator

you. Thank

We will (Operator question-and-answer now session. Instructions). begin the

the roster. And will first Jason the We Jones to comes Trading. pause from assemble with question momentarily Stewart Please go ahead.

Jason Stewart

or the taking for on us the reception see question. the like in back you if And give could Thanks morning. those good if the thoughts of terms Hey, assets I rates appreciate higher feedback originations of lending markets pushing and of pushed to activity quarter. wondering some cadence MultiFamily, the rates on market you're throughout higher, if was starting accepting being them. color I to

Michael Comparato

Yeah. Thank you.

MultiFamily they of negative programs, the acquisitions. activity through sector change they're extent value now leverage buyers believe to in and that a -- the in that continue So pretty period. meaningful think can a through in renovation different transitional been the add transactional think Value-add just pretty I but slowdown I remarkable transaction we've seeing to is renovation very the experiencing terms

about were So where meaningfully on seen definitely speaking buyers, down accessing compared to with market ago. is XX we slow And bidding we've transactions down. OEMS, participants, acquisitions days

Jason Stewart

about that. be commitments the outstanding about that I roughly should timing? should terms $X.X of draw And thinking Okay. or then How schedule, in we remain of appreciate how down that? think billion we

Michael Comparato

of terms In much quarterly? capacity? funding we're what how In

Jason Stewart

committed Of the Correct. but undrawn.

Michael Comparato

Yes.

$XX on to funding, we future million forward we want I Jerry? have Do approximately. quarter rate projected did So, know run you a Jerry, -- last

Jerry Baglien

mean, range Yeah. quickly a move think $XX from to there's move forward. how going it major a see million, that. to expect going be call million deviation I to I we $XX don't the range general of I materially don't through. it projects to that on depending

assumption. a that's think I fair So pretty

ends how on is, of obviously about thinking actually over based executed. to course So always actually couple deploy a years that's being that that. that portion going you're never of business get There's plans up of deployed, out that, the how some spread that

Michael Comparato

that, would loan, attractive decent very, construction of are add in that I And very there's is to MultiFamily those that a our amount construction loan And funding spreads. business. future

be of are funding the to credits. XXX to a price So lot future going SOFR seeing XXX you're type

Jason Stewart

Okay. That's helpful. jump Thank you. Last out. one and I'll

asset terms to the in there, be into right first what In we or origination the collateral going should of is that retail? add the surprise appreciation Hospitality, the are of the Is for of mix indicative push mix thinking you the this industrial activity in now. going quarter, class forward given more of

Jerry Baglien

a QX. investment portfolio of retail loan originated It large leases long-term is grade to of we fairly tenant. beginning at So the retail a

say, assets. pleased to I we would we're are get to So non out. for look that trying very MultiFamily generically, -

we're and hospitality, some construction condo stuff; more to certainly inventory retail, condo non-conventional So loans. looking to add looking we're do loans, industrial, also

classes and are other extent can at looking returns. credits right away MultiFamily from the to right to we we add yield the asset So add the find

Jason Stewart

jump taking the now. you. I'll for out Thanks Thank questions.

Richard Byrne

Great. Thanks, Jason.

Operator

Instructions] from next ahead. [Operator Please And go the question with DeLaney Securities. JMP Steve comes

Steve DeLaney

Thanks. everyone. Good morning,

just XX inquiries of say to agency launched We've from to and specific basically we me, MBS are say s anyone I have is ARM been about might about how -- of want just allow of JMP another fair in in lot the in value and the mentioned losses. one And April. of the can first been ARMs XX% one brief seeing since book I'd receiving questions, value the closely. just about I residential the a in all a they're losses the market. you'll If very the portfolio but receiving company XX% who avoided, like just some comment coverage down this make companies mortgage been concerned REIT morning, to month we've And on have I XX% book questions FBRT, that customers to they every And and quarter. we these follows down

is residential out about always talk to is are base, world -- value this the in MBS that, ARMs. the the of reality hedging of in my we're fair it that can expeditiously So there move was or the wise you Gosh, broadly. view hedging losses this agency but

I'm future up real Turning curious as comments the to interested in widen Mike's why opportunities of JMP and spreads. business the coverage, on FBRT to was and far as picking

to to do types quantify think I March with property can points above has comment But think XX. you. basis what Thank you that. basis be? about XXX pickup something Jason spread Generally, the you at point average in your might the

Michael Comparato

just me answer very asset to give let level you Steve, So high On an a that. --

Steve DeLaney

Okay.

Michael Comparato

what in market middle larger MultiFamily basis class seeing the -- of think that Generically, today, for some we're I around participating we're loans XXX the is in. over. and

Steve DeLaney

Yeah.

Michael Comparato

And range. credits the Hospitality seeing a certainly office say retail we XXX those XXX We're somewhere in are like roughly would and I with in between credits to but that forehand. two,

As you -- get

Steve DeLaney

Okay.

Michael Comparato

some I as XX you non-traditional handle asset the of some spreads. more inventory on the mentioned, classes, condo -- loans, see can into

are other MultiFamily those classes definitely second. away asset achieving the and And we're -- first from and classes. asset industrial. the I So is primary But obviously, in pricing returns our then better credit focus

Steve DeLaney

begin were you very something it in Great. MultiFamily Was And like that? with. or obviously, heavy XX% to

Michael Comparato

Yeah.

back higher we other that We opportunities. did to be definitely by mentioned MultiFamily. pair and finding asset on our going And last we that and are other think classes. see will XX% not call, hope I that I able

Steve DeLaney

My book market, support was book helpful, I that's Got is your it measured completed does I question and benefits about or the way deploy on in impact to by that's Mike. -- you -- maximizes and it plans. then of your sheet the do management the $XX has program accretion. that there what a for board Franklin's Any that absolutely share. guess stock the Obviously, balance guess, your stock the accretion that impact million be to the it value sheet. per your -- Once decide will the the in but purchase provide balance can value. in achieve has I be amount obviously last guess the Thank will no success of about goal, you. to

could And value so or use any look value on But that price us you pinning target to that investors that that? deploy a down you range book be on Richard to is or I'd to without just you see curious Jerry, money? it you levels tell there where would

Richard Byrne

purchase said, of merge to on brought as it. that you should out spending advisor, book million the first That program won't long as all, through as that, our dedicated to support from Well, it slow or of more important to value. our take go XX we've think -- we share and money bring Benefit that impact And about we're we Steve. as We the to planning the wanted million company it the the Sure, just money it's stock, reverse Street have another it's broader possible After Partners. be, everybody but to factors Franklin stocks. through stock mechanism. public, $XX company, proceeds speed. firepower below thought Hopefully much as technical to up the any need about $XX have support could merger kind the repurchase on is just an as

supporting stocks. less for the maximum questions about to think it's accretion. about the is your time try us It's work to market trying mostly answered I for So and the

see you'll shares in below us book the market long as value. the trade as So

Steve DeLaney

use XX%. That's of some it hopefully you just get a feeding slammed as helpful. But when unique to type I they're down it. there. Got who That's think bottom a thing to little a compared won't kind down

the on whether I large, can't converted know Series guess, a you April -- E from stock, those had mandatorily, Any I they XXth. are the Relationships, just sense Investor whether they're You at about E your mindset holders in but of investor, -- be the Series particular is Series those those -- previously speak but specifically, any what might that -- sense time? this E sitting

Richard Byrne

to equity may had with mean, $X dollars the an billion I for not of obviously, Capstead. it about pre certainly $XXX their intentions be. we are can't plus Capstead that good preferred, Well, merger That, base may Steve. through it's is raised from or today. shareholders the common, a market. Those speak shareholders, and where institutional approximately amongst of The million question, we legacy institution. additional We that of most was ourselves raised consisted which the that retail, capital is we now convertible what

is company. our us them to we transparency. shareholders public even been maybe did but leave it's like than company less probably be while earnings just a -- just calls hopefully time. our that as with stickier, But We sometimes. and our calls I'll this this, private, were we've answer that webinars, can We a little expectation So and they be fickle we pretty them to it our long were treated this. message, called performance, retail in question. like will But even for We've if provided it we're a consistent in

Steve DeLaney

grow doing I your Listen, they're retail the expect. That's or as think happy guys, this dividend, even the long be would for we great. to on campers, you Well, think again they're to all as Thanks. forward and morning on look comments quarter thank this going that And focused second maintain you call. I your I dividend.

Richard Byrne

Steve. Thanks, Great.

Operator

We have questions. further no

and to Lindsey over So our this any I'll closing conference remarks. turn the for question-and-answer back concludes Crabbe session,

Lindsey Crabbe

results of posted for we our reiterate, call we yesterday. attending Thank you proud the To are today.

questions, further reach do any have you If out. not Thanks. hesitate to please

Operator

has for you This Thank concluded. disconnect. attending presentation, now now may and conference today's you

Franklin BSP Realty Trust (FBRT) 5 May 222022 Q1 Earnings call transcript