FBRT - Earnings call 3 2023 | Franklin BSP Realty Trust, Inc.

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

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

Lindsey Crabbe

Good morning. Thank you, Jason, for hosting our call today, and thank you, everyone, for joining us. BSP Third Franklin Call. Earnings the to Realty Quarter Trust Conference Welcome

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

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

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

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

Richard Byrne

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

and Chairman As I'm I'm CEO of FBRT. Lindsay Byrne, Rich said,

website to of distributable share represented equity. the XX.X% just so reviewing on open start per also and third quarter. We're the fully mentioned, to on our jump published converted then, results, going X, deck our to in yesterday. quarter I'm questions. always, course, and Lindsay begin As our $X.XX we'll release your call in. third return earnings earned FBRT going up of for were let's as earnings today's a by supplemental This call Slide

gain the hotel resolution a second of recall, As in realized loan. onetime all you Williamsburg our may the we quarter from

small quarter. the onetime distributable charge, just loan to in and which impact were similar the of another very second earnings, produced our earned the Excluding Williamsburg portfolio we what

Our of share dividend third week October yield of represents again as XX.X% earnings XX. current our covered of comfortably produced This nearly This a last common XXX%. dividend distributable on on coverage price once of quarter our approximately $X.XXX.

Our quarter the of portfolio's was million $X of Deal loan $XXX of originated we subdued remains in repayments in which new billion, commitments for portfolio lighter ended the us, collateral originated We attractive. very spread deals million our and on resulting terms our flow of slight Year-to-date, the million. a originations multifamily. quarter, have loan at new $XXX did received XX% in but a quarter QX commitments. and portfolio. is decrease new of $XXX were we the

years. have in in Also, the it of that commentary. Mike the flow was the in meaningfully best picked days in the markets of fact, we we will seen more quarter, up In deal commitments. loan already funded new $XXX so. in end Since have detail million third XX cover has this his past one or

total the $XXX cash, reinvestment million $X.X which lending total issuance unrestricted end improved of The X% to a of an approximately liquidity billion. and further with overall position. we CRE debt of represents million our period. increased closed SOFR+XXX liquidity the During assets had our XX-month equity and At X.Xx. our CLO recourse the an capacity our quarter, we to $XXX total of quarter, debt of lowered at net This cost

and protect to our details to quarter, unforeseen accretive the on overcovering all with expect our our events. provided dividend more comfortably we undeployed liquidity In to to will When do against management I despite we approach of borrowers. credit mentioned, we cushion this it any capital. help we deploy meaningfully this this are risk As capital, meantime, us be active Last engagement earnings.

unchanged rating average the remained at Our for X.X quarter. risk

continued has well. perform portfolio to Our

consisted of rated our asset-specific at X we total only versus X.X% Also, on and charges. September represent X CECL in are X list watch X of Our the loans XX our All list prior took portfolio. watch quarter. no loans

Our general quarter. of In the of unchanged to vast, provide retail moment, our had held comments. CECL the portfolio. million Mike his We the a foreclosure represents is watch foreclosure X increased vast reserve quarter. modestly $X.X fulsome positions our REO list Walgreens our X.X% total and quarter, in a by update The assets. of REO effectively The as consisted of in foreclosure at majority REO REO both from the end our about going total prior on

end. Finally, $XX quarter million had our authorization company's at remaining buyback

not hesitate will the determine when it best our be shares to of use to we repurchase We capital. our

such, end, shares active our October of purchased we As the been in have through -- that post market million X.X quarter was earlier week. we last XX,

buyback company XX, through Directors XXXX. program of Board Our December extended our has

the by both going that market real end commercial just challenges me saying faces lending and Let here opportunities forward. estate

we of actively is We look the are and new deals continue to very to attractive. now deals seeing think originate vintage

we We looking continue best credits originate the will terms. to the best at be loans for selective as

capital Jerry results. Our playing continue financial we call discuss playing the With now turn and are to that, to position over our we strong, to between the confident offense strike right I'll and remains will defense. balance

Jerome Baglien

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

our to on results. Moving

per generated GAAP representing $X.XX X.X% in share, of Let's equity earnings X. or Slide on start return third $XX common on million a diluted common FBRT the quarter.

a $XX.X Like said, an asset-specific this not earnings. have did million, million we $X.X Rich charge or by quarter. this GAAP increased reserve in resulting to general $X.XX reduction Our quarter

in third were quarter earnings $XX Our million. the distributable

based we $XX.XX. related earnings of completed exit the release. A we due resulted share third portfolio in this book to on $X.XX Book merger changes reducing the value loss on The We that value the the was the per XXXX. We common earnings from incurred residential quarter the increase in reduction per our from income to distributable a sales. associated with these valuation This quarter Further the of we calling issued share earnings CECL to in costs pleased reductions report walk and book October in in this driver retail was book $X.XX are of general slightly a provision ARM of to value. in rates. found a GAAP Walgreens FLX, our quarter inherited our market to can offset our was largest net These through CLO decline distributable by partially down to $XX.XX to be a excess were of distributions. XXXX. write-down

Slide progression. portfolio to X. Moving our summarizes on This

quarters were have past difficult funding XX% most consistent environment contributing were multifamily been hospitality despite loans maturity. a of the balance, our with repayments loans reach in more those and when XX% of our MD&A and from and as repayments repaid respectively, quarter, one loans Our as location and provided XX X in our more and third on details. other of highlights transparency loan was origination the each book We capitalization. REO. date as quarter rating, our XX-Q, including section asset Slide well taken loan loan's risk the

core We average trended of [indiscernible] in to of our execution. XX% The The primarily in on September, issued through portfolio book total increase was with and our floats. XXth our our financing with open of has XX% up in X.X%. of financing nonrecourse, brings was market Our the is our quarter as our CLO non-mark-to-market. CLOs. issuance, our debt increases debt our we which now debt cost cost during pleased were

on I'll With We of lines that, portfolio. off our loans will and continue advantage give move CLOs. update warehouse deals take to and into to in to over our turn reinvestment CLO Mike newly an originated you it

Michael Comparato

Thanks, attention attributes Jerry. everyone, and portfolio. our to thank to the key XX, Good like of Comparato, commercial I'm would FBRT. loan your you for Mike of joining I Slide bringing President on start morning, us.

Our million. average the loans across billion largest quarter assets of continues Multifamily of quarter our be portfolio with ended exposure, end. loan XX% to of an spread $XX size XXX as with $X

class, currently before, homeownership better I've our multifamily As other rates. to meaningfully origination agency the current said due bullish and classes mortgage than on alternative to is a most financing, meaningfully we'll recession-resistant asset property at is level, has be to given continue It continue fundamentals cheaper liquidity the there. to and focus the portfolio housing we asset of

we Belt. are spread of and at XXX loans transactions multifamily originated the X average across basis primarily points. quarter, These Sun a located the weighted hospitality During and were

our slow, remains volume meaningfully in X to have transactional picked last the weeks. originations Although up X

many terms remaining of some We the address very Competition with suspects of are loans legacy on seen years. in the concerns. for we've usual cash underwriting subdued portfolio remains to profiles accumulating side-lined, attractive credit strongest

well next is trillion in comes due distress portfolio $X.X more continue expect than the to market we debt real years. several estate commercial as over but Our positioned,

immune be such from not will issues. We

most caps activated market have rate XX% within catalyst the of quality and very to However, allocation REIT confident be Predicting continues in difficult commercial other this felt Loan given for to our be meaningfully portfolios, mortgage this interest we asset the action behavior asset the maturity Like ability environment. the increase to borrowers our navigate in borrower and our portfolio, are dislocation. in have is interest not effect taken. rates. of

loans To date, a behavior, communication assets ahead We from appropriate or a per their and extending manageable borrower now both to quarter. are issues pleased getting when commitment with we're financial quite in of proactive resolving modifying borrowers, number of loans with and actually standpoint.

Office to any expect spread extensive prior not dislocation other today, and conditions. asset is stand challenged have classes. we seen we things see calls, fundamentally to have improvement As in as we've in not Office the discussed on we do seen

remains Our but Office exposure reduced still minimally X%. been has at

$XX.X over Our corporate exposure as largest has watch leased loans. our only a list for Slide loan large headquarters of average and million. triple is XX excluding to office company multi-tenant traditional this an loan size office our XX years when loan net summarizes public our

rating removed apartment community loan garden-style in no quarterly additions mentioned, our from a list after as was process, loan. on end. Rich X review paid a a watch our that assets with an by One we to XX, rating loans list $XX upgrade and quarter. Two million of way watch value, following asset this off As quarter representing have subsequently X loan, from removed were X approximately was September of new

office on rated high-rise a building taken QX Texas in in loan, the that unit. during CBD asset-specific a other on quarter. risk as subsequently complex and X A carrying remain X list The took as a taken that per or Denver, loans and Lubbock, office quarter. a an value in was are $XX loan $XX,XXX Alpharetta, We a suburban REO reserve million this during CBD XX-building Georgia; with in second apartment approximately was Colorado; were building office REO The watch Class complex the of

of $XX.X liquidated quarter total at stood property a X. Rich at office positions with end value million. As during Louis our REO quarter mentioned, St. We carrying the the

also at on majority of We ending during property a portfolio. value QX with $XX We sits exposure quarter the value retail Portland X a us of stores XX $XX.X office million. a foreclosed approximately store with the REO The quarter the million. in sold Walgreens ], with within cap leaving carrying our X.Xx [ vast of

we As we as mentioned last permits. market the liquidate quarter, this intend to portfolio

we it levels holding I and turn that the With are our ended to of patient are we to feel that, slightly until foreclosure quarter pricing sellers comfortable assets. reach X.X% session. we at like Q&A total to assets operator which is the aggregate, would However, begin $XXX these million, the approximately REO In lower back balance our appropriate.

Operator

James. Raymond [Operator from from Our Laws question Instructions] first comes Stephen

Stephen Laws

coming something coming got that see the CLO. ahead your to you really how recent back it's CLO as activity wanted to last you'll in recourse mentioned the Congratulations sheet on repayments the the and with weeks. with in really origination very there or guess Mike, debt comments. bank quarters? Or do some lines about up up shifting take picking I many. how few almost difficult see I talk in no of given base a Rich the about balance quarters? know the I on you seeing you Can touch You've year? next quarter. environment relative maybe transactions solid you we're both Is a out originations

Michael Comparato

Stephen, thanks Thanks, the and for question.

to We originate out trying loans. actively there are

coupons the said in in we highest the the today seeing seen loans in of we've some the best As we've are prepared remarks, we're decades. seen some years, of

going put So actively warehouse looking we done That's in to with be are financing. environment. this to work to money

pending aggregate it, things us we warehouse market a and conditions issue if of in that position obviously, the enough would CLO do we're pricing, to consider another we able As that -- to -- of puts financing, of nature again. it leverage course, of

all as reinvestment. I think of you know our we CLOs do

first full those keep standpoint. efficiency always an to just going we're from So

an originate XXXX. we one before in billion a to probably So issue million loans we would incremental have of $XXX to new $X would

Richard Byrne

it's Rich. Stephen,

add on. to Just

and the of we with about part -- your It us with mean of some cash. $XXX feels of than to a of deploying addressed posting. few a originations. compared last pretty think X that's quarters, had how million we in fact, to quarter I quiet are quarter cash bigger But million I sort of question of we also originations $XXX the ended think the in our quarter. this people that other peers, lot like

liquidity total, ROE. can lot in on think dividend more spend of feel cash and see approach to us feels to robust. that, $XXX we have of coverage which, million we we around, keep the some -- do multifamily, the is doesn't earnings. if million our we to deploy XXX% just excessive. do clearly, us grows us vintage grow said, cash to math, like pressure X% but done as continue deals bit seems but had I our With Mike been -- have certainly We'll you're would some obviously $XXX that going our a is market With continue office, billion But cash a only like to more $X.X little the XX% and have great.

Stephen Laws

comments, other One of follow-up. some and appreciate and good of I stock use that. buyback the obviously,

this are in Regarding can type stuff? month? it build there? the you you're of markets? the seeing construction assets, type more what borrowers, of seeing certain pipeline about Any pipeline, concentrations, or What Is lighter talk you build

Michael Comparato

focus, to continues So, and be multifamily hospitality. Stephen, our

So it's classes spattering a of asset industrial. those maybe small exclusively X now, almost right

over today. We they best frankly greatest the to the because they're loans. I construction of market Unfortunately, probably world the doing kind risk are be not multifamily asset some find just them in in the in return the hospitality. the finger But capital I'm XX-month my past a can't speaking, quite XX to on days. origination pickup multifamily, I out period. the, say, meaningful construction going to dribble XX- put generally in

accept a lot people people and from some think out rates that longer higher tapping is are believe of reality and higher for selling capitulation of the it, assets. to I starting though, I do and sellers. rates are are

as cash-in acquisition actually we've largely well refinancing, providing as some So this been at financing traditional refis which point. is

Operator

next The from Matthew question from Erdner JonesTrading. comes

Matthew Erdner

maybe are there's margins? to you Could that seeing up of a NOIs anything about insurance and creeping bit bit multifamily you due in little their pressure talk there if and terms just guys LTVs on a little

Michael Comparato

for the question. Thanks

New I think The uptick an in mostly meaningful. insurance is we we're Florida, having issue, been coastal Carolinas, pickups Coastal -- locations where et cetera. biggest Houston, have have noticed Coastal Orleans, the

So increases in doubling. more seeing year-over-year there some than is instances, that we're

of easy has insurance swallow not things. it So an pill the to on side been

insurers You saw pull of out California.

an insurance think premiums overall there's now. overhang I really that's So driving right

at portfolio. the really point. this forward that factoring we're into of the underwriting it within We a our are can and and avoiding going and existing with obviously dealing it all origination there's fact, no But we best well-known it's

Matthew Erdner

are Then expect get Do watch see attention space to of to just turning some there? to in pay you expecting the it? guys or you that distressed that activity involved to market. and Where

Michael Comparato

to market Historically, NPL haven't overly the use our found an or we the time. be loan of discounted efficient market

I up the think kind portfolios what show we've that at a times we they're bunch just you hedge In to that in. bank selling of do a have the platform like investors players loans, you of non-real get industry-leading lot built you of for middle BSP, opportunistic get best. estate where come universe, origination auctions, and do an we these, it's what market of fund

competitive room the I've dozen -- bring guys a when bought I've set. So close competing this never loan been enough years. When another you to XX the day just we're our we into find doing normal once. several jobs with hard

never in Just the best bid that scenario.

play So participate in that in to active forward. it we wouldn't a market actively and not us role expect an going

Operator

comes from The Securities. Delaney Steve next question from JMP

Steven Delaney

on Congratulations another quarter. strong

the there. ROE start me with was I wondering, CLO. Let Mike, the new

target for look reinvestment of know to, obviously, would right? it can CLO But Because things have within I what expect just you type think now, you of to would realize? what you through delevers. just a on the when equity you range return would kind change for estimate, period, the

Michael Comparato

do you Jerry, want that? cover to

Jerome Baglien

to. happy Yes,

we're I of we've contributed day the what we in in teens out, on terms when start high think that X.

bit, over, spreads CLOs turn turn based and you get get able amount use, to that new a look actual I As if we today. we're there, it quite we if not our stay expect to better at in over it the market the reinvest we of probably on

So wider in making that of we're up side. the spread asset the today, with on even the market for cost

done as a past, accumulate our in why accretive this we've you've deals. So seen this. with range patient just worked, the as essentially that to this of working some able is deals and is us the were which be as is same the in pool We older

So the happy of reason execution pretty we deal. think going to the execution life I said because we're this and all over really with highlighted good the have we're is

Steven Delaney

it was #XX. well, Yes,

So buy I of knows transactions. the getting period? when your Street What think length they reinvestment the the was of they're what one

Jerome Baglien

one was XX. This

Steven Delaney

months. Very XX good.

Michael Comparato

just deal Market to color This market Steve, on a in had reinvest. little on the been has over years was first gone X year. a managed that convention that.

first a little better wanted give CLO year. to So managed over about feel a CRE to a cushion investors to into little we just in bit the buying

the I that move think right for get everybody it done. to was

Steven Delaney

leverage involving at I'm with little wondering, question. I mechanically, a so It September, Just were just of a maybe been it have further CLO little after end? you bit closed the all Where and the end see final more guess pay thinking cash shake out it able down X.X. you that to off how leverage go financings your down I'm How do does ticked -- around The actually rebalanced? leverage? the bit CLO? quarter your the did now debt, to does at other move and

Jerome Baglien

guys Yes, I'll and start chime you on that, in. can

closed deal where we the just of ended, of before terms the we In quarter. the end

a in a very $XXX this that this. created of don't able at to the what amount decent cash we'll rebalance the was But level. decent Obviously, million cash that didn't we term. run of to lines. we ending some on as necessarily think forward in take where we I heard borrowing with in some do pipeline we quite near leverage of how able So of to just down means were were terms earlier, warehouse of expect you how low a have of this deploy it terms of we need

deploy we will on put we As leverage that. some it,

So some CLO. the of this execution was just through repositioning the of

of Some of new ahead to it's cash of just start opportunities in. it, redeploying a build as come

Operator

comes he from next BTIG. question from Sarah Barcomb

Sarah Barcomb

leverage? with and good some It this flow I'm you're My less doing there? on get color existing color question looks coupon XXX peers originations underwritten investments also negative was your had these coverage Separately, and the XX% some deals QX X it SOFR+ if rent properties whether the to new of like Can these LTVs. any of their curious sponsors new or to the were So cash Any growth is debt? many the as service done quarter. deals surrounding you see at ability give assumptions sponsors? deals average were with than done

Michael Comparato

I'm Thanks -- for start backward going question. the both. to

originated a at that post -- them. very glad very with actually, today, clients to think the -- loan. I was very were quarter, the some just right? was transact that would and will I coverage, we're LTV clients say I quarter speaking. -- So picked that respect low during With to which institutional covers were were very, of coupons, mean we lending roughly we existing one and say up we hotel with nothing that almost loan some end I new X.X% able

I on like XX%, XX% think LTV it the us for senior. was

bridging interest coverage. usually recourse are being reserves that everything interest to typical actually hopefully, we're brighter has structure definitely else sponsorship. ultimately is They the to execution. doing to So But kind does with leverage. agency reload have that They're and all days better that of some our days, and negative structured

is handle on an XX XX for the and has or an expense is then pay we're think [ X bridge I we paying agency a today. idea ] X.X% it. we'll into only X%, Hopefully, So can execution that months, that

as negative of leverage today it's So with being takeout. hopes a agency

Sarah Barcomb

multifamily repay asset Then foreclose so saw another asset my one follow-up, rated in and X we full.

rated curious, you the Given during outlook or seeing So there about modifying assets. potentially next we're year, loan modifications different your were so billion I'm X of can X loans? outcomes of for quarter? $X maturities some about for these any talk

Michael Comparato

Sure. had modifications quarter. the during We definitely

trying engaging borrowers very last stance and quarter we're the take remarks, productive I very addressing They're communicative have a in proactive think We're say to I this us. having on quarter we've pending been with as maturities. said will prepared overall dialogue. us.

a amendments modifications I done negotiations, not continuing and again thus XXXX. foresee fault. to think throughout going all I I'll this said board. We're it's into position. working are on not I across living time. understanding but to we're these difficult the we're to say and during benefit we the current net that with, that go done It's reality far their is getting our fault, us But borrowers credit modifying our partner. that with we're not path what be their COVID, have It's these

we that to borrower lender and just be-- doesn't going expect their lender, and chip this is not X are We in. things gives

but amortization, increase fully whether expecting an with our active we whether credit the it's recourse pay our position. borrowers to [indiscernible] something, to whether it's come negotiation, it's are a table it's existing on to So down,

Operator

Rahmani KBW. Our comes from question from next Jade

Jade Rahmnai

big to above market particularly supply, A strong elevated lending attribute be you the to and this new They seasonality. in race developers by think driven behavioral overall citing lease sector to few stabilized a They the a trend on that to enough well talk in that for as a is are free decline normal characteristic also Belt the whether this in offering concessions merchant and Phoenix October, Sun you multifamily. occupancy rent. in as so-called get multifamily REITs slowdown Can as bridge occupancy and are and phenomenon have to credit well in weigh September a from to rent looks as hence, and this completions. growth reported

Michael Comparato

it's for as supply on, -- the and We're market the Jade, Mike. a Thanks issue. short-term perfectly. the definitely issue seeing question addressed spot

Downtown identified, I are say think the specifically markets markets Again, Phoenix, we're probably suburban was softest Nashville, that specifically seeing X you the specifically I'd and your Austin, spot question today. It and lot delivered newly developers people months of to offering just it's is door, of kind of in on. a stuff affecting the the are where get X concession everyone everywhere.

So bullish short-term in looking definitely on macro have that, through the going I don't do that. I right? because strong are I'm not is guy, it's after impact think to to gone. to phenomenon to overly NOIs and But a that that, basis. I'm a impact. banks going think a it's I enough affect credit Obviously, I'm want credit through short term, all, looking be but

even out construction are providing capacity total us void of there falls construction that some capital -- a it's filling in that remotely the to space. competitors loan the there's left I we're looking supply and is in as like lending or off that forward. cliff some what's say close well and amount void important nowhere While and XXXX a because filling credit that's --

buy months of house. a fact muted it's think offset I be it's you mortgage that period going to couple supply the XX that supply as with high X% this I to get So by have to a out. today,

I are XXXX, because a could a actually of foreseeable home of that the to multi have can't the I going think perfect renters of to amount meaningful there's people where millions somewhat renters. have have future. for you think growth lack in be of actually the XXXX, storm and we and of supply afford XXXX, again rent forced in

Operator

I session. question-and-answer Crabbe for Lindsey turn our would like to conference closing to remarks. over back concludes This the any

Lindsey Crabbe

today. We appreciate you joining us

our If further reach you questions, me you. any or to please team. Thank out have

Richard Byrne

everyone. Thanks,

Operator

has conference Thank now today's for The you attending concluded. presentation.

disconnect. now may You

Franklin BSP Realty Trust (FBRT) 31 Oct 232023 Q3 Earnings call transcript