Earnings call transcript Q2 2023

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Operator

Good day, and welcome to the Franklin BSP Realty Trust Second Quarter 2023 Earnings Conference Call. [Operator Instructions]. Please note, this event is being recorded. I would now like to turn the conference over to Lindsey Crabbe, Director of Investor Relations. Please go ahead.

Lindsey Crabbe

much. so you Thank morning. Good the Conference Franklin Second to Realty BSP Earnings Call. Quarter Welcome Trust

operator Lindsey President and As on mentioned, FBRT Officer already the I'm Officer Operating today Jerome Chief of Richard and FBRT, Chief the Michael Crabbe. are Byrne, FBRT. of Chairman Comparato, CEO and Baglien, Financial of call me With

to in results on we our XXXX. inherent assumptions forward-looking statements current are X, begin, today's of of most comments and as uncertainties I Before and comments this are information risks want actual recently date filed SEC August is certain periodic may based described contained report and some are only Those call The the to subject call, future mention as of differ that assumptions. materially. this on and

update otherwise, no of by a as as any made assumes statements any or during result law. including company obligation events this except forward-looking future statements call, The whether required new information, to

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

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

Richard Byrne

you and all Lindsey, everyone. joining good Thanks, morning, us today. Great. for Thank

open to quarter We're them for the reviewing as by results. website said, I'm at our call published begin Rich deck yesterday, second and we'll As look mentioned, Lindsey FBRT. to of so can there. Byrne. Chairman our And as supplemental course, today's of just your our up were Lindsey I'm you always, Also, CEO earnings going and questions. then, call the release

fully share very earnings share Slide in compared $X.XX on earnings In second the XX% $X.XX the quarter, in to start to with per this particular, per the quarter. generating strong company our going prior FBRT converted quarter. X. delivered distributable increased I'm

large dividend of largely the level increase $X.XXX on covered value dividend approximately Williamsburg book of our The was represents earnings converted by This X% remains gain our distributable well a share. -- is resolution our well by earnings our GAAP to that quarterly loan. also in earnings. XX from yield our of covered of this June $XX.XX Our quarter per hotel distributable Williamsburg fully attributable

hotels the turn We on gain him, $XX the the April, to sold when later more for In XXX% it Jerry, million and call. of over of I million. explanation and recovered additional $XX the the loan proceeds. in we'll treatment principal accounting the of sale about provide approximately this

expected our Williamsburg quarter, of the with the this our floating improving to earnings due as rates performed of Excluding higher impact portfolio. modestly portfolio rate benefit loan, base on the

and earnings increased provisions in a our taken proactive $X.XX approach increase offset that general on our value quarter quarter to quarter our risk CECL every retention asset-specific dividend of The we CECL provision. than to one over as book portfolio. And speaking the this by we've increases of and in evidenced $XX.XX. by Our the the excess reserves, more our management took

risk a moved to nonaccrual that complex, four on Portland in and those previously were loans and the our And status. two Notably, watch loan was loans. watch one multifamily list on office moved a now office with were quarter of rating were list on And assets X. is X was on second of two to

our appropriate detail for ratings credit which in to will of X-rated our loan. approximately our assessments, call. an watch one We and to our which its quality In four approach go $XXX list X-rated the We portfolio. our our loans, these of also attached And and that X.X% took that greater value, Mike five consists into and entirety, the $X.X are list believe watch asset-specific reserves list our million hence, are watch aggregates about reserve ads billion loans represents later on loan. portfolio. in them to loans

REO Turning our properties. to

as updates a We few those have well. on

decreased Our on sold closed our total no quarter. required. quarter the the positions the multifamily The asset REO New in value in for loan with second position, marked write-down our this assets sale so additional Rochelle, was which of

of third approximately foreclosure REO the beginning majority XX Regarding quarter. portfolio, make XX-year which intend currently quarter liquidating Walgreens is asset we an at all now own as quarter end, portfolio to our of terms. loan. The in XX on XX balance vast properties the stores We of on The underlying this focus $XXX all have the stores Walgreens our up leases million, value lease end.

quarter, turn now more a environment loan would new One, to the our in of portfolio million transaction size Jerry. during maintaining cover the we like commitments, things few billion. originated I $X.X I to points despite $XXX over subdued before

as commentary. events. gives that, to XX. cash maximum had multifamily from his portfolio provide us lending will $X.X Mike was total million. $XXX Our $XX June flexibility in on protect will represents our focus. portfolio. of is to our XXX our recent with our portfolio average take any loans before, of strong advantage unforeseen Multifamily million said remain cushion diversified maintaining pipeline more And have investments of billion while well our of We an also size liquidity loan as liquidity opportunities we across and detail XX% Of our in credit a This balances.

our use while to over million continue stock. environment million for on a be the $XX the $XX $X.X see will of challenging when shares believe common than we to more we commercial past we and have buyback capital. repurchased stock years, during We of estate company's market the portfolio overall, of real our we to hesitate million conclude, authorization, we purchased remaining quarter. We the X still To repurchase it well positioned. best the our and In not aggregate, our is determine

when we on continue see offense We play maintaining to good which originate. position, will invest us opportunities but are capital portfolio to allow our strong also focused in a to

conditions while challenging we confident our shareholders. are We long-term to value through can delivering navigate the market

With discuss Jerry financial let you, to our Jerry. performance. Over that, I'll

Jerome Baglien

the Great. to great have Baglien, and of Officer everyone FBRT. I'm the Jerry It's Thanks, Chief call on Chief Rich. today. Officer Financial Operating

on our Moving to results.

first Slide X. FBRT $XX.X X.X% Williamsburg quarter quarter-over-quarter security net contributions from a $X.XX on offset CECL onetime on the the down representing million had diluted in equity. on sales was or income of return share, was reserves. common gain gain And start quarter, as GAAP the and by generated mostly earnings second common the extinguishment. on debt GAAP Let's per large resolution

earnings ROE. second Our million a or the XX.X% share, were $XX.X representing distributable per in converted quarter fully $X.XX

found earnings net release. in of through walk GAAP to earnings our Our distributable the can income be

Williamsburg the which sale additional biggest paydowns $XX our to new the our proceeds portfolio in of was We $XXX distributable $XXX million discussed, that kept at flat quarter Hotel to the accrued receiving while earnings first beat. the of of driver we $X.X Rich loans billion. The during originated on loan. consisted As interest million also received the million in quarter

Our portfolio size maintained our currently position. quarter, on our generates flow was we dividend. large comfortably cash flat the portfolio and a The enough in liquidity to cover

a wait right originations can As and continue be our deliberate in to this, opportunities. for the we result of

remained position roughly net Our modest quarter. leverage X.Xx this at

a as in of deliberate and are highlight. it our view structural use We leverage

Moving to Slide X.

quarter earnings earnings of portfolio and Williamsburg. the can well, without of onetime growth. distributable our performed see sale been from distributable have You the layout would the similar The the benefit first to

As the provision. we CECL our use both, of as I We GAAP specific reserves. general to income increase assumptions reflects endeavor net took mentioned, conservative part our for and CECL

on million, reserves XX% multifamily. total increased to of the reserve quarter total $XX.X Our this with by $XX.X million

accounted assets reserve Office representing for of of X% XX% only portfolio. the despite our

million, attributable to property. with total was risk And third-party of reserve was to reserve Portland reserve after downgraded and Our X. is which our included of change amount property. the the firm market determine It engaged a reviewing quarter the specific rating to asset-specific discussed an of in this we in a took previously. value value, agreeing their office We valuation $XX.X

carrying of more watch the Mike is and approximately on will comments. asset adjustment. in million Our details $XX.X his the share post value list was the million now $XX

originations, The from portfolio. and loans, you the want respectively. I details last XX% of I've X, discussed our were Slide new contributing majority similar to walk a hospitality of provide of to can multifamily on balance, quarter also and see XX% repayments. our repayments but Moving to

our us taking to Louis. other item Walgreens the of is million other foreclosed note which an due position of $XX being that foreclosure property we remainder with title The the the St. to the portfolio, loan REO was was in to core majority office comprises decrease the The the in REO. This in into portfolio. balance building the Walgreens moved

in while we of As comfortable we holding choice, outcome REO. our positions are have discussed, never

assets. team has in and Our operating expertise owning

position REO assets. move at sales Slide discuss will this our entire This X I the represents of foreclosure capitalization. our to best comfort execute We also levels. approximately affords note our total time on can and X.X% to

the our LIBOR our The portfolio on quarter X.X%. Our SOFR increase has nonrecourse, our the debt debt average and cost was debt of floats. financing in in core sources cost primarily up of as trended increases with our X% are of non-mark-to-market. during

we end, available reinvested to quarter our on of four have of As CLOs. us

activity We will quarter a yield issuers. continue them to bonds, our buyer levered we of from additions We during to did We find as CLO portfolio to other some CLO attractive participated these be the observe active book. and an actively issuance manage our on basis.

on the over our we have lines. our remain attractive preferred CLOs long warehouse While seen rates mechanism term, financing

approximately have the XX, are half freed at liquidity. watching attractive. we an and importance advance FL rate billion engage CLO in opportunity of liquidity cash. constantly in touched position be levels end, on year, up this, quarter was of and Rich We This redeemed. into believe On the second itself and our CLO will new the going the available of issuance $XX to was XX% markets of relevered we our to present $X.X should at Subsequent million X Slide

to relatively balance of how tends we reinvest our Our reinvest on CLO deals. closely to manage low be because

or look repays this it. fill X a we to cash loan keeps When a quickly, balance at CLO, to it in close which

give CLOs drag the loans warehouse Our financed portfolio. position on on in our we quarters. With minimize transact capacity may and that, coming that our any our turn on have goal available backfill over occur to an to in from to Mike our update positions This, stabilizes sheet with revolver, on to cash repayment loans warehouse paired lines. our the our and is cash us and balance with it you the and I'll lines

Michael Comparato

to and for of I'm quarters, remains in exposure our addition focused our this opportunities on sector. list prior update our and was us. will of Jerry. assets. XX% largest on going our watch our joining of loan quarter. current on XX. FBRT. I'm President attributes commercial Mike I'll portfolio, Good Thanks, Comparato, everyone, morning, key you start today on Slide thank market focus Similar It with provide also an collateral to this multifamily,

to continue the mainstay multifamily some portfolio our We ad quarter. class retail. industrial barbell and was our asset in second Hospitality sprinkle hospitality, being in the with and largest second

seen not in have the Office sector. improvement We

quarters that be have for crisis Office We has worsening. crisis, discussed an to several appears and only identity that

defaults we are as We assets of maturity. anticipate dollars the already witnessing away loan merely billions tens Office walking at years in from of of owners coming loan countless

During appropriately very the were is focus the reserves we well reflect total loans level. quarter, to continues risk the Thankfully, performing of be our our weakness. to Office and Geographically, our overall, a Southeast Southwest. asset our two Office and only X% further downgraded across increased exposure X of is to our at rating, portfolio and

more quarter state provide in You'll provide we'll into a more quarters. our the transparency in presentation portfolio, future note we this clarity to added to and by continue breakout

on spread and no for We quality. We portfolio our X market Slide to in are quarter today loans current conditions specifics at years. are a credit qualities points. creating originated lenders and trillion in on weighted future. estate in we are near one we focused subset real versus to sidelines mortgage with of XX exposure of direct meaningful $X.X of mortgage believe debt clearly competitors the approximately commercial portfolio FBRT And maturing of to space next adding and for powder. Banks alternative them. environment new origination. average we of intention this our have The adding clearly attractive. the in can a be dry on being deals opportunities move are originations the legacy fund quarterly credits X are our With international of the some risk. concerns becoming basis new have additional more seen well-capitalized XXX highest REIT were right are years, writing the loans for the Market

said, was buyers of Acquisitions and discovery XXXX. although see we XXXX overall stabilized volume as quite are the within the market. more are [indiscernible]. spread multifamily half first some and the Multifamily slow, improving for starting bid-ask the acquisitions and since between That lowest transactional getting price sellers to

For transactional and leverage XX-year they sector, to with volume prior seeing leverage X norms. we of leave debt leverage can years we historical returning [indiscernible] several accept system year are have beyond. the multifamily NOI to to to agency positive low the X interest-only leverage grow the negative negative quarters, in stabilized discussed X In to fixed-rate that buyers expectation via

It future? multifamily Passive selective. transitional logical than Absolutely, is meaningful negative clear the priced more other past obtain than to when risks XXXX. uncertainty at in leverage. many Office space the time be we the to However, to other we more seeing market, in retention remains cases, any willing Office deals transactions perhaps noneconomically And be hitting force few sellers difficult the interested. appropriate versus of in is continue be the levels have it years. in is is in the sellers. appear pricing levels, are industry uninteresting Debt tenant to will an abounds. Will may very all-time but we the become highs But opportunity history,

an of that coupons CLO X excess buyer AAA-rated produce leverage CRE returns X active bonds, mentioned, bonds in we have handle Jerry XX%. with As buying of to been

last loans. consider to is building hard can returns. bond make an equity-like loan when It's thing AAA our writing The on a list you watch today review I'll office a

at look Let's XX. Slide

and loan in watch that loan was was moved we entirely mentioned, a list provided one a June Hotel positive loan. in Jerry quarter. loans was XX. second and REO, list was loans to Rich were this from removed as quarter mark moved on place The loan information -- the our in One first moved Walgreens in X Williamsburg reserve resolution and on complex our watch list asset-specific our As to the of Two watch downgraded Portland on the April. our that watch in came office have X. on to the on to list

are borrower the loans high-rise list and office in to active third in dialogue with this new building a quarter take property the The include We in expect quarter added the [indiscernible] watch via community office building million to REO would as watch CBD in a names list a Texas, Texas. principal apartment Georgia, totaled A complex Denver, aggregate, Colorado, new Class apartment suburban Alpharetta, X a Arlington, $XXX balance. in in in Lubbock, garden-style garden-style In and the foreclosure.

increased this the Our change in reserves to have quality. been reflect credit quarter

communication with loan borrowers close each determine the path in forward and will are appropriate We on the to each resolution.

asset of history I plan Arlington, is meeting is our Those plan. ratings. the loan the business up loan is initial quickly, added the This quarter a take future our not for mentioned watch on we moment a rate to its a is has team loss. cleaning of actively original The the risk list loans engaged our a that group origination. A is we that in board. loan as to list its It at methodology management identify Texas, the reflection to not X. risk example, across want and a as watch for necessarily rated loan Take, property underperforming X. risk on this business of we we take I loans, expect

closes. the under receive resulting of our nonrefundable assuming is However, pay contract the a loan sale sold, in currently be loans, this to will week down repayment full a and

approach a to perform we assets asset-specific of We a thorough increasing as quarter and deem review reserves and all have each general appropriate. disciplined our

risk to positions incremental proactive any this modifications improvements made during our managing our have credit are We with portfolio and in in potential quarter. loan made

us the management continue quickly, cannot. air management believe to time We our to position senior as and possible. while portion a is have as the leader balls and will opportunity substantial at existing as resolve issues industry composition same few give asset offense an the play Our to portfolio them allowing goal set competitive company's in of identify us to the and

the operator it back turn to session. begin like Q&A would the I that, to With to

Operator

[Operator Instructions].

comes BTIG. with Our Barcomb first question Sarah from

Sarah Barcomb

some we watch on multifamily assets saw So list. go

us. them One a see repayment will of near-term for

watch about hearing softening, higher assets, on in that So maybe debt we've talked think as potential initial multifamily should next Florida we reached were could rent But expenses migration that talk originated the we How period yield low those themes you that, where that's during rate those you maturities their loans future good keep particularly additional be and to for before? If XXXX list to growth the about speak about about that would could hear. that year? great.

Michael Comparato

I'll Mike. that. it's Sarah, take

So to with question I'm going back half your start the of first.

not expense of is growth the seeing kind portfolio. think seeing Florida, we're across we're the it I but necessarily to specific that

I income markets growth triple. with seeing XXXX. cases, catching and the think And double, the coastal in we where in kind up taxes, is estate insurance, any real most rent of Texas we're saw of in property that notably, in the expense notably side statement most insurance some

we've next list resolution As to watch for then the previously, see mentioned loans. list quarters, and we're new I watch going to watch a to loans subset additions list with new dealing to several loans, of continue think

think consistent the I the working environment there's X% through going to of or a of the in. just coupons be just to we're stream it's to loans coming from When that over rates X% going quarters. be So we're that sub-X% reality fairly go coupons,

some probably think tertiary our vintage positioned secondary assets we newer very we're for closer for on well XX% position vintage portfolio markets, overall, exposed within assets more think overall of in the based to and basis. probably there. correction XX% valuations. in that I But about has XX% larger likely markets. XX% to we're older multifamily market XX% pretty a certainly think multifamily We with the in positive our sector, the witnessed

above trade, basis. pay some We're seeing of off. our example, being assets an hundreds debt seen We've Arlington of loans millions

our But of generally we on over It carried don't to stands into within the the concerned quarter we FBRT. overall, today, doesn't have portion not multifamily every macro we it for positive I on in have the are lot a a so capital of work through debt positions. sector think And working mean portfolio. basis as do these losses that stack are

Sarah Barcomb

to Okay. And maybe just debt the switching side. over

lines. more these how on context, can commentary capacity real we to Benefit some potential come balance also the back that further on touched of Street your attractive just Maybe the the the given there. thoughts And keys as levers some should broader rates in owned the with about well your talk just seeing you think for at on taking warehouse some do the liquidity, more and as You you measure for assets? of estate amount how defensive sheet on about CLO on Could once? platform capabilities Curious there. for that the

Michael Comparato

the So to list question meaningful Watch and them as with an mentioned. same of in unless REO, quickly move and holding half we second the Jerry upside REO Jerry part assets asset, view, of leverage. fast with them to and me the liquidity first REO. let I'm levers just respect that of question let have address handle going fix But some And see we sort and the fast.

have assets, we real on equity Street. add assets. at commercial very We're practice real the and estate within believe we We commercial owning estate real can Benefit estate group an comfortable value

asset make long something within we can that's in very have level, vehicle. can the either little believe we explore certainly acceptable if a take term in will better But future, REO, interest to But we improvement we us. get that the it's the that is we improvement REO at at that. we quick whether or owning liquidation a price execution if that think from So market very, we

Jerome Baglien

in of finance ability just then And to our Yes. terms things.

come got we're capacity spoken into And February to off to you've tons into the reinvest. about reinvest some ability in to we've burns then still have one going our that for mid-September, CLOs. have think of next July our that across I next X time year. The but December,

assets relatively hold we warehouse And off of to. a take too. a more capacity relative leverage, warehouse cases, pretty other if there. peer that short-term our amount mean look back use need low some on up which can things you point want lines us the I gives to, space decent take we leverage a we run levered a decent we flexibility at those we little if at lines there's can free in amount lot can a add too, in We and So of think set, if ways. debt to I

other debt that in haven't similar options There's terms unsecured or of other we tapped options.

that position. rather down now, need if want it, I have path, to we're But flex certainly We with our pretty leverage it we'd to comfortable ever we don't haven't chosen right that to we with ability in we think now. and future. run go right the But less really because

we kind to through to We those different flex which have need tons the Mike and I whatever things. think really through of capacity important needed cycle options, across most hit our But part of up. trying is work we'll as come as may

balance we're in think work up REO sheet the them proactive monitoring or our that things as very trying portfolio positions. through on loan issues to directly I advance unlevered becoming and on end of

And so of side. secondary most productive would way sort your you probably of the how deal the think is off question, with liability to which stem that's part the I

management of the I proactive probably asset that. think key So part is involvement

Operator

with JonesTrading. The question Erdner Matthew comes from next

Matthew Erdner

expand are in that monitoring. little I what mentioned and dollars much of going How about on guess looking lines you release AI. both a use, business it the Could Mike, invest whether please? you kind bit, you to attention? are earnings just underwriting you here And portfolio to be

Michael Comparato

I amount at Sure. circled a have don't we think point. dollar this

David Manlowe burner for made overall of BSP has initiative very big-picture firm. the it Our a co-CEO, front

our of the add across platform to it every where So AI, we're it's attention turning can how business. alpha to aspect entire

help in it's underwriting processing. it third us already management? a exactly does what role through to or how can help of it but our our plays, not how legal And eyes. can it it us platform. through we're How how can sure our looking can How second us capacity -- through add process? whether within it asset utilizing help it see are origination We're We some it set value,

best very, we be forefront our in technology for clearly we're days leader space. just the to of early think the of AI, be I the in a of to it using very on want ability but the and

exploring advantage, to that, any an way and want we the it we of do kind So can across find board. we're

Matthew Erdner

then other REO to that be where and the Awesome. expenses, going expenses quarter? for would And REO That's helpful. were the

Jerome Baglien

Yes. That's where through. generally they're flow going to

Matthew Erdner

Okay. And what of for REO? the quarter know then you that percentage the was for

Jerome Baglien

have I triple what It's front in you don't that about hold. right if we number relatively think small me now. of are The Walgreens net. assets

there's occurring from asset, expense from second What Rochelle in pretty is So to small limited moved pick very Louis which to balance in office, a some position. be of is the And New is then going there. St. the going you're terms what's up the the quarter. residual which off

contribution the triple on number of gone, very going sheet, is to because that of million be REO multi $XXX terms assets to expense the net. what once small the So it's in a is generating balance

expense. virtually has on no bearing it So

Operator

next The Steve comes Delaney from question Securities. JMP with

Steven Delaney

portfolio. net the Congratulations on and resolving Williamsburg lease

Just financing? any to we to the their got owner case resolution, Williamsburg all or you to provide was in own property the be clear, that respect new -- they question, with financing the to did of have get this

Michael Comparato

financing borrowers. mentioned subordinate Mike. lender. we for We lender had It's to original lender original had provided loan in buyer. That an a in acquisition provided then And new the that lender Steve. that note-on-note Thanks, to the we the -- the loan a

of an the low through leveraging to have the leverage asset. mortgage hotel kind of we exposure a incredibly So

Steven Delaney

get teamwork like good your your mezz just sounds off with books. first eat original the to lender It

out fees sounds work received you nice all no And you and a had as interest like reported, as you your good So -- accrued gain there, it and questions. well. you

there that. here on second of with the good and a bit fees. do Talk market. in overall have sticking conduit How about out of putting year, quietly you. see the So outlook million dollars And been work this just in new the sort just kind guys you issuance? of liquidity a little of and up couple you I'm still Mike, half

So near what's activity in the for come we as fee term? gains few modeling your next to FBRT's some for expectation level? over should the continuing quarters And analysts, expect income purpose

Michael Comparato

basis. really a on really It's Yes. go-forward been been a difficult to It's model schizophrenic. line business

As borrow of X the through increases, kind And at anymore. I've can't to of a acceptance. are. X% been that are and rate and stages I describing people, like rates they accepting finally the X% at this finally where we're feel we're lot fact Borrowers they of death, just are

directly I a very question second find it it's I it's the will be business. working well, say do part ROE we important can't So our in answer the for of what incredibly half? an I When expect to business. high

we the actually conduit say will I are in our new investing origination group. within space. We're actively hiring

hoping it's hard we're volume picks than So that it really get worse to It'd be been. much up. for

volume going forward that we do So we're more in we're forward. that the hoping going product in it's moving right but see direction, really the investing around hopes

Steven Delaney

Yes.

come because helpful. I year the appreciate quarter a to situation that the I with and going next up But probably do anything. the I that's on whether for you what is would in something over table not morning. helpful, plug this like think the but put is too next that's And know much think never quarter, I in the next comments

Operator

Stephen from Laws with Raymond comes question James. next The

Stephen Laws

so want on I -- But congrats start originations. to start want solid quarters, with the that. I to

lending what's difference in you're across kind you active on You new And as originations. Can pipeline? due REITs origination various the guys property seeing types of spread the the of current main looks do talk are side? market since you a Who about on not companies like? lot the competitors few other doing what mortgage commercial deals are diligence are your the one of new in the

Michael Comparato

for question. Thanks the Mike. it's Steve,

prepared the at legacy direct as financing asset permanent financing, risk we're swath Keep every there doing the class, with time. probably origination out a banks aren't in wide is debt business. financing. mentioned but of of also single mortgage originate new lot also I and space add As anyone issues think in and from to fund really have as and mind, mean, we the largely bridge remarks, looking concerned the construction I a I exited REIT think I loans

set everything funds competitive different seeing more loan construction right? the So in in debt space. do, the So bridge virtually there we're in play lending we the is space,

We actively Fund new they've X. have and but vintage lend and maybe X X company are seeing, do trying X, you they're Fund to debt out of XYZ funds, Fund got anything, and X,

scarcity So definitively that's by And I all good it case. have product. is What powder the credit think see really all I fairly dry over mentioned few credit quality the a I quarter, that like. months, continued competing for case as say we're And what it's don't know reflection as past it, looks last a We when strong with to of necessarily spreads loans. can seemingly credit as quality tighten. of much guys is a

say multifamily million, million $XXX $XXX to generically I over mark. million is So $XX gravitating would that to over probably as $XXX transactions million get today, probably closer

Hospitality cost could an been. mean as to And face leverage Hospitality, I office just that's we'll say today, an kind borrow is loan. -- or not $XXX hospitality the the today. on million spreads. probably We're I straight you that don't is of I opaque as for same probably would loan anyone retail it tell retail, and highest it's million spot. would what the money on on be much I Office, largely to top consider of the industrial would the think say, $XXX seeing side ever portfolio then honest. today Office to

Stephen Laws

understand the follow-up, appreciate last point. and on certainly as love the I'd And to security shift the color to a over side. I that

You guys in added XQ. some

purchases? secondary about securities? market? markets, a your think I think looking CLOs you are CLO would issue how What about deals the new reinvestment collateral Or more was Can a type and of be in about market static picture be those far, do buyer has the And of for? liquidity everything Mike, you deals think or or new as to so deals CLO. think starting with period that Will you on issue reopening kind talk improving for been often you appetite AAA the I CLO as receptive reemerge? bigger you to

Michael Comparato

be been has matter is impressive just market, weeks. unlike think this tiering probably think pretty think, point that XX reinvest that of. the to where I rally And a at with issuers. throughout getting I the I highly seen, a is finally basis Look, of in mean stack AAA think point. we would points to Tightening the within the we've I XXXX we open issuers it's

issuing hope a the bonds on us. our as static highly side, really of We, On that. we really the buying as we like reinvest flip are the the believe and if the for firm, managed greatest of don't an a CLOs don't love issuer. as well. they'll we We bonds, duration We like CRE structure deals. basis market the flexibility buying but just issue, us thinks be And

say we're we're We the the the Obviously, value. getting using mark-to-market of of leverage exposure, can these closer. In that quickly. today. away probably generating returns I terms flip if side relatively you're like would overall is are like We relative leverage, assets. go that And

sell strength anything, If would on And bond said larger portfolio don't NIM we originate this book offset our I just a sales. probably, coming off to be love credits. I done, look all we'll through bond today. to a see think of if strength bit. us getting to loan mortgage we little again, the When and kind So into can would that sell have might into that we significantly great of loans

Richard Byrne

it's Steven, Rich.

the at lot Walgreens. great we up it's vintage And the lot about really I of they're you that to said, deals mean, we're well And you to any as anything unforeseen commercial on I question of have any without least our think at head litter of we the your well underlying a -- fix mean, we've of I as competition. just pick to assume also tag scratching now, talk we in don't have to comps, excess heard around is that because, that? aren't all. doing need any of know. much there. same keep REIT is perspective, credit head Just is our us mortgage doing I the most of cash, in mean problems. high from been have public and scratch quality, really seeing -- Why I we origination our Mike case, is a

soon. million the sometime potentially investment-grade, appealing pretty more our cetera. assets that That's way triple-net et are may world, come liquidity attractive of Those $XXX

alternative? they're people As credit that's see whatever so concerned their money, maybe portfolio it to I the does just Mike certainly, expression And pay out aren't of get assume assume in competition pulling participant down, our Maybe, it's because conventional cheaper I not don't multi But just about going know. sort other spend described, if continues wings, active today. you to And is what's I the hard change. to I later? they're banks are their future horns, mean, don't maybe as relatively a being problems. And the included, in just there. the market

a X-year our other provided in REIT, up of earnings loans, of But rates supplement. is debt for we started the we schedule our world truth commercial maturity reality generally quarter going -- every is appendix and the this The everybody mortgage last make year. us

whether year to In and the books with. what? following mature, going a Office which whatnot, just to of hopefully, going deal you're degree if So the exposure it's means high you this to see, have guess next year, it's something year, or have -- entire you're

everything commercial secondarily that focused primarily focused else. assume we So most that and really on are REITs on mortgage

the Our -- pretty of cheap. at world, The have the lot liquidity. just look feels we we a market way

already of companies we're especially Sure do we feels a benefiting since our of good we rates, now, loans, ours bet dividend. are buy can making pretty like from but covering right can securities, tailwind core that higher our a business like and

you're what investing opportunistic. So is truly indeed

Operator

[Operator B. with from next Instructions]. question Riley. Howlett comes Matthew The

Matthew Howlett

us is these of sort you early you there is And too of prepared give said out follow the tell? and I loan sort of can I options. you're on, you've in of your be that past, you these just a going year? sort I -- opportunistic. in a to to have portfolio, Or mean, that remarks target, the to all mean by given end it Rich, think just target the

with you buy back excess buy can can things You your stock, securities, capital. you can do other

portfolio of year is next a the year? on loan end -- core by Just or the there target the

Richard Byrne

answer Mike Let might me an or me -- give let and elaborate. to maybe you start want Jerry then initial

us. most all, to think applies shareholder First always use to above we we We're I going where the our can value. capital think the of all to create of

stock. back buying even bought were back discount. For a of in our market We buying those a the some while, shares that when extremely cheap. We our bonds. was active it bought really nice at our We was

said, has in also I as forever. Mike vintage some about, returns. of We've to accretive, think best recently talked all as we've maybe make loans. the cash of So using and the our seen that And more I been been seen great loans has we've

$XXX our going but we're about cash. have deploying thinking more maybe speak to be how So whatnot, of leverage cash. can actively we we're specifically and Jerry million

We over wheel. cash our I way. It's on if And have it's billion of of treadmill. liquidity. $X bit we to. a as well loans a We're sources some heading mentioned, the supposed And goes we way everything repaying have have a just hamster

to if there's grow going we're I can it opportunistically. we And just to amount portfolio size. do minimum think So some maintain just the it

please the specific already. guidance there's share, or covering you want I do. Jerry As if said, dividend we're Mike, But any to

Jerome Baglien

of I start, concept portfolio given up on is target ROE let think moved a much you so I'll higher concept for overall, AUM target the generating is in. a But Maybe substantially. chime today yield so Mike, base because and outstanding, me loans number we're the of size of not more having because rates necessarily Yes. that

our go sit covering loan into go we Right Mike in the fairly $X term, securities billion can comfortably. that's it portfolio just can here flexibility. gives now, short And us like -- today said, it that into So flexibility with loans. dividend a go can

slightly still dividend. room even want if we the I to let little think cover and a have we down it go

opportunistic, it's we us how a be for opportunities, grow we a we So like. And take it's for that really with credits think, to overall. great see if just I really really opportunity to ROE and that originate good chance us,

those making our for in dividend. beyond we we that investors in So grow think that, is the as form the see or maintain of And forward. sure can we I hopefully, loans, overall then them we earnings our yields things bonds do the we when go and add downside on, set we

I about So think of it. that's high kind level how

Michael Comparato

I And to much. Yes. add don't too want

I say, think I right those guys company phenomenally the all answered is I positioned now. think will it appropriately.

asset sector. allocation, of the darling I Our the is think,

that's looks of Sarah alluded XX all months. a Everybody in the it that over course the have getting knows And We're market coming months. powder going next in We think maturing at cash. are XX up to that to outstanding. ample active. next seen are in but lot we question, highest the X dislocation think loans I of her the to are there's XX we're to these of one what we've coupons dry of a I the pieces, be will are probably in the say pick with of I the decades. And groups lot

at the in, very, with FBR. is time, for So sheet the that it's backdrop the very position and it's cash condition this think, condition to group our have the in, I and a balance exciting

Matthew Howlett

Yes, now the said the environment. predominant those here asset I'll -- is I I just it REITs And too, know in on certainly comments. be commend few going you on multifamily this buying back you appreciate doing stock the class. to

asset must terrific targeting, what hotel that love you're hear is your Is geography certain a on hotel? the class? did type a to it. be I'd Just loan. a on of it certain You spreads philosophy curious,

Michael Comparato

Yes. of the hospitality that aspect I performing would say well, is within certainly overall, space. exceptionally leisure

hotels a in seen in recording all rates performance on it's a everybody we've whether to think which travel of leisure-oriented highs. whether segments, mind was XXXX, I board, U.S. of as across airlines in XX all-time record of the across The the months. I surpassing call this X are probably are look you checkpoints, that think has it's the hotel lot past revenue, TSA blowing. stayed their And kind

are hotels specific again, exceptionally So the really pricing leisure-oriented doing and the power now right well, to have space.

think is hotel the will we convention center avoid. continue that business certainly and to the an traveler area I

ever it direction take is that It's sure recovering, right full not not levels. COVID, to I'm the place. close anywhere post COVID that it's see but to And moving we recovering will

you're year, times times to a your probably seeing generic year went X If salesmen them not were client anymore. a see that you X the

by them means seeing or some or probably twice once of to and virtual the other conference. going You're are be, twice once

forever COVID, the think these just that changed innovations the that we've video and overall. business have all office Teams, I traveler had Zoom, conferencing So probably of industry

really, they've focus hotels, traveler and on really and has our So leisure-oriented done nonbusiness well. really been

Matthew Howlett

Makes And quality. you a the did more you if in, modifications don't improved The sneak the question said quarter, one sense. in clearly you lot of I'll it mind.

modification? an and for equity there's are assuming go So what over just gaining terms contribution the again

Michael Comparato

problem. no Yes,

held the Xx We back thing to call that to but say Xx all not want because try your that get did and accommodations going the they're good lender on of is "Hey, long we in to to well." are borrowers to you're with an pay the investors, just lender what the we're looking our equity acknowledge it think days same I difficult usually gently. us, we've accommodative from times, and yet we a works with starts discussion reminding conversation COVID showing partner, the we going way I've we're to their be -- through the have extra, for But their right? saying, their When beginning that not we that checkbook. little down. involves times, expectation if borrower you The from is, up so a equity

and it for to want we not one-way solvers. going We fixes the credit a problem want fix improve borrower, We just want to our position to where but be assets, be street our quality. to it's things credit

the we understand of to getting were a duty in than to that they -- other mean covenants be paydowns that conversation mindset that from to getting myriad to And of and organization our we different that's like started. credits throughout recourse there's better is be the things the respectful, better So end into the that need toolbox. many is, our day, at can modification side's shareholders, before situation. incrementally tools we But our make the walk as have a our reasonable,

Operator

questions, Crabbe for no we turn to remarks. our question-and-answer As Lindsey further concludes closing like to over conference I back would the any have this session.

Lindsey Crabbe

further for today. reach have if questions. out any you Please again. call Thank joining you our Thanks

Operator

joining. for our concludes presentation. you Thank This

disconnect. You may now all

Franklin BSP Realty Trust (FBRT) 1 Aug 232023 Q2 Earnings call transcript