FBRT - Earnings call transcript Q1 2024 | Franklin BSP Realty Trust, Inc.

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Operator

Good day, and welcome to the Franklin BSP Realty Trust First Quarter 2024 Earnings Conference Call.

[Operator Instructions]

Please note this event is being recorded. I would now like to turn the conference over to Ms. Lindsey Crabbe. ma'am. ahead, go Please

Lindsey Crabbe

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

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

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

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

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

the refer supplementary on will deck to We call. today's slide

the to call that, With turn I'll Rich Byrne. over

Richard Byrne

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

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

up, open call X, going review to the quarter always, questions. I'm and on and will begin today's then Slide call We our first for results as your

to prior first share equates a to return increased $X.XX converted to with This compared distributable equity. First, earnings common earnings we the per in were quarter results. XX.X% our distributable FBRT's on pleased $X.XX fully quarter.

the XXX%. coverage quarter dividend for earnings distributable Our was

rates are portfolio which conduit well most result our business. as the the base as benefit continued size earnings quarter, throughout of strong a from stable higher strong contribution Our had the of of

financing options alternative become is of in can cost business be again, the has, line one earnings the enhancer. conduit CMBS lower market. that an Our an

remain our optimistic will conduit to future that cautiously we revenues continue benefit So quarters. earnings in

$X.X principal the last quarter. at increase QX. quarter originations the ended billion portfolio in which is an very balance, core of due strong This to was Our from

was $XXX company. new entire in Most QX portfolio million committed the of fourth of to quarter yesterday. loan of added the towards back We the of fact, our of since largest originations our QX million quarter inception of the commitments the year-to-date In and origination quarter. our growth happened $XXX half as through

interest see did larger of the So in margin. benefit we the quarter portfolio first full net not our

in to expect future impact this quarters. enjoy positive We

XX% in Multifamily main be real liquidity, which continues loan with of million our sector, unrestricted We cash. represents available $XXX to $X quarter the billion estate of portfolio. including our closed commercial

balance deployment originations. decreased due $XX new by the versus Our into our quarter QX million cash [indiscernible] to in

Our strong the to credit us liquidity attractive the abundance of and position issues new current on to investment us opportunities extent flexibility resolve capitalize arise. allows they to provides

Turning list. of to quarter with our ended with watch rating loans list. a risk the our X X We watch on

Our of represents watch X% core approximately portfolio. our list

at our then gain. from quarter, during removed watch and disclosed, taken was previously As list as a asset REO liquidated X this modest

We have problem working outcomes. loans been and achieving successful positive in through

rated quarter of list X and/or X.X feedback profile Mike overall at changes with risk or promising including on are end, our our continue each an watch will being risk remains the of The about comments, watch will our prior potentially to his team's loans with better. are quarter, loans to from XX% rating to unchanged several and be low portfolio continue of average assets. detail risk there manage list provide ability added optimistic process. in more While to quarter, we our removed, this

make to of In quarter aggregate, end. also we sale. being foreclosure positions this at for And remains have marketed positions our said our sitting balance. unchanged, REO the assets. is Our portfolio at actively previously, continues Walgreens portfolio most X foreclosure up REO represent retail total of as The X.X%

purchased the mention FBRT Lastly, first million common that I stock during X.X we quarter. of want to

We second quarter. be the to in continue active

X.X and so totaled And we've excuse million X.X XX, -- XX total, common stock. April of stock In purchased program year-to-date. our far, began, adviser our common me, of XXXX. repurchased the an additional through This FBRT million million $X.X since company its

buyback is end authorized program company the Our XXXX. of through

strong start a FBRT's first Finally, to quarter was XXXX.

a that once earnings able quality grow loans will power. our exceeded dividend again portfolio, credit we we which and our comfortably to also new call level, Our earnings offers were of strong distributable vintage FBRT's what would loan adding enhance

While to maturity initial resolve especially portfolio multifamily estate, resilience confident challenging are reach as our many of for environment a this loans ability see our we focused effectively the continue commercial challenging we and in to loans. year, real

I'm to that, cover Now Jerry, you turn things our going with all over financial results. to to

Jerome Baglien

on being call and the Great. Rich, Thanks, today. appreciate everyone I

our to on results. Moving

found earned earnings in common first equity the million earnings and earnings generated in an on GAAP in represents the the per on quarter distributable earnings our diluted of of or first an income share, return prior FBRT the Let's release. can And $XX earnings quarter. start net $XX.X a X. X.X% GAAP in quarter. of Slide this level We from common million increase to be distributable that's walk-through $X.XX $X.XX

reserve share This share. million $X.X asset-specific list $X.XX includes per quarter ended $XX.XX quarter reduction an by during CECL book one watch in a value, increased at The resulted impacted the our earnings. per reserve increase GAAP quarter, $XXX,XXX on of our first which which loans. also CECL to Our the of

portfolio progression. X our Slide summarizes

As in loans increase funding quarter. with this in resulted XX% future of made quarter. loans balance. remaining repayments existing billion contributing quarter up principal ended on Rich with of hospitality, $X.X a self-storage full and quarter and our during Multifamily commitments, core new from million to in the net repayments were the last said, repaid the balance, $XXX office portfolio our Nine

be repayments the to of pace the similar quarters. coming expect in We

capitalization. X. of high-level Slide Turning to This provides snapshot our a

during modestly X.X%. was cost at quarter lower average of the Our debt

provides The financing book end, our non-mark-to-market. on liability is of CLOs. A nonrecourse us core and optionality. Our structure reinvestment large of on CRE, CLOs. our deal offerings At portfolio XX% is our market our seen September. through last the CLO activity despite X our since with period has our of available and in X portion issuance, financed limited some quarter still is And

funding current position Our is strong.

However, capital remain future the quarters. in we in will accessing when opportunistic markets necessary

our CLO needs. financing market strategically are funding attractive align future We when and with can tap into conditions

further demonstrating the our credit appetite entire our originations. portfolio, a lenders, of warehouse demand for relationships strong We with Our group This our by both strong quality diverse assets encompassing underscores and liability structure is X each healthy facilities. enhanced our of legacy maintain a recent loans.

years. of new post We our we've Notably, some of end. maintained loans highest a position at seen leverage net quarter in credit several X.Xx quality the

risk. taking Importantly, equity our to update outsized we delivered distributable have turn Mike be we that, consistently it relatively without an what return to an portfolio. over on you believe I'll give strong on our With earnings to

Michael Comparato

morning, Thanks, you XX. to Thank I'm Jerry, good for going us. joining start everybody. and on Slide

portfolio average of core billion, the size spread an XXX loans with across Our $X.X million. $XX ended at quarter

exposure loans can you is of see, sector. our are As in XX% and multifamily our secured, senior the XX%

long-term be to We fundamentals multifamily. bullish on of continue the

and compelling Southwest to credit Southeast the superior profile. As and advantages previously its class the offers quality asset due U.S. liquidity concentrated We're robust discussed, on strategically

areas to [ major a new for macroeconomic of Given matters continue the geographies, trends within ] positive be those focus the these investments.

our highlights originated loans weighted a in spread basis the origination points. XX first XX of We activity Slide at quarter. XXX average

with mentioned. opportunity quarter, very higher indicative While this previously attractive market we lower of to we the yields flow values is deal is of revalued had spread asset including several The are terms, strong this unique of debt the levels. and transactions quality loan seeing

very And we the loans and office in remain extremely office in unique industrial, economics. attractive credit we March sectors. opportunity This was we loan while office, bearish multifamily, quarter, came originated that a closed hospitality the on with

our inclusive facility, still X% net stands this exposure office and new is portfolio. exposure our portfolio. distribution entire loan, at only However, our corporate across our long-term of And X% headquarters of excluding under lease the office

contribute the and we loans model. to profit quarter were Echoing is of that points. in some quite but platform that historically the hitting encouraged in we conduit to a lumpy Rich's say had believe earlier FBRT all million quarter, average conduit remarks, earnings We with And Our closing quarter margin revenue continue difficult momentum. X revenue this QX, coming an X.X $XXX time the can securitized cylinders. by on to excellent first to we look of to is in transactions. weighted are program We within all businesses conduit's this

presents costs increased That with asset we softening challenges the recognize values. current and said, market borrowing

we the can believe, BSP's Fortunately, a of industry's real FBRT best. from a broader being leverage benefits among is team, estate platform and part

that working with actively loan senior asset solutions management address issues to Our are arise. any related and teams and borrowers develop may

see with will watch a you value X of list quarter that activity. on that rated but our potential an Last of X is watch I'll list, asset X interest a XX, information loans all quarter, return million. the today Slide still some remind risk of our summary I of positive We is aggregate with plan underperforming expecting our an you detailed $XXX an provided a on investment. rate and rating to loss, ended with process, Moving one rated asset business on with the

and office building amended This list maturity and CBD Colorado. on The X high-rise years million watch extended was later paydown requires a principal $X in loans X by our are a in loan Denver, XXXX.

down million have Georgia. an in quarter borrower X loan paid XXXX extend $X.X recently XXXX. first This maturity the was in the million of year. office and A in also Alpharetta, Class We by paid $X loan approximately by down a to additional building suburban The amended

off Cleveland, XXX-key its a and of hotel is received outstanding X-property Mooresville Hill, borrower. the close A date. debt sale add active list a based North in full-service dialogue and on are Carolina apartment Chapel offers Ohio, XXX-unit property a this in community very watch at North apartment new XXX-unit last process apartment assets we are this finalizing X quarter, property in and loans balance or with Texas, Raleigh, should Dallas, in portfolio the to our is to And pay in Carolina. and A

We the at assets. above foreclosing to our these in their second And third quarter. sale parties process expect or to today, of on of in finalize are as the basis we

multifamily built is newly highlight the subsequent loan mezzanine asset asset the With respect to now end, for to in we Vegas and control current. nonaccruals, quarter of One taken lender Las has loans. is X the a a will

cash last And basis. that on watch while nonaccrual assets a to X also we sold. in It X a multifamily are that recognizing have important cross note them is being and in of payments I assets the QX, of just assets been receiving discussed. we the these Another process list are loans we place portfolio lastly, have on

I all, positive to we QX, in progress nonaccruals we list are hopeful resolved and average. XX closed in the loan credit in X loans, the our balance X.X% representing modifications making loan loans, on good X All watch With we be believe the and second are paydowns of modifications negotiated on respective remaining through respect will quarter.

of and contribute Our quarter. incremental the nearly in to borrowers related first $XX modifications million extensions equity

through In Slide we asset classified investment REO is building, last foreclosure which We where to attempting asset end. to management still improvements on million, REO believe asset as quarter XX Moving as meaningfully our this X is and stores are XX. our we quarter REO retail the portfolio are continues X.X% the in our are at not the at actively held the All re-tenanting. of at Walgreens Those improve aggregate, foreclosure for quarter the It our Texas, assets. increase to and assets positions sale, multifamily liquidate office end. Lubbock, And the our time asset. is is had continue to of part hold portfolio. our which positions A exit occupancy. to right portfolio. team total We ended balance entire in for approximately market Portland $XXX

Wrapping up, we are opportunity FBRT. for the very market bullish about

originations. compelling to which focused loan will at attention the operator portfolio our of. begin of With and we new the improves origination credit Q&A are back session. we our to same combination to loan I that but to time, legacy originate a will be the to quality a would Every continue require new have call factors advantage a continue are taking the we overall like opportunities, market leading the on new We and of that, turn portfolio leader

Operator

[Operator Instructions]

Stephen from come James. And the Raymond question first will Laws with

Stephen Laws

or sponsor the around to comments I guess multiple Mike, multifamily longer from loans? assets? are to the in same loans start, the rate all similarities making, to And seeing you're type away that protect those are? Are or the this Can the of portfolio. higher on touch especially I what stress, sponsors generally, given nonperforming any just what And sponsor. you sponsors walk whether appreciate and of for there outlook kind decisions on

Michael Comparato

the at made we've think being generally is the Sure. for outcomes even and work through The fights, having And Thanks, generally, XX-XX workout typical in process. LP I not Stephen, joining some anything else. syndicated calls positives syndicated for the the of our we're are the question, which Again, seeing we're say, where the I is things would more morning. of GP, one control on equity than and capital sponsor borrower there's XX-X, less negative many decisions positive I LP, out to strongest level. underlying this borrowers a stress trying think in the helpful thanks seen by strangely structure way. really on

lot time quickly willing not and to work which are a if in ending able borrowers, think the for up decided we're come. resolve things. a they ready, with us positive I everybody. that have court, They generally of And has to is

Stephen Laws

And Can of you line noticed, with think I Appreciate X Jerry, the financing with to trimmed discussions that kind you color bit. X Great. follow-up. capacity mentioned are the talk facilities quick was decision financing a your the providers? and Atlas, and how those there.

Jerome Baglien

of today. just using the we're Yes. us been in generally finance facilities how terms originations think those to because we're conversations are, mean, new I very I for closing positive that the they've primarily

all to long brand-new best So the a in seen get prices at credits the they're today, that of credits in we're clean going putting to lease as terms banks you're as some of we've time.

So that's received. well all

and want with more capacity more need we're we where terms of want In counterparties. just carry where of that's don't some to to We we sizing, and using using it rebalancing we're where certain than less.

availability hold of across assess that always set books, and we the kind of size our So dispersion on we all. that's

Stephen Laws

one. originations million XXX talk of $XXX one And you last Mike, quarter-to-date? I believe. QX over, then, think generated you've the Can spreads the the I guess, I were originations about about on

Michael Comparato

I don't I -- priced Stephen. We in QX. was to SOFR spreads. office mentioned, quarter-to-date we closed have be loan the number the as going that They're That tighter, on that XXX.

offsetting our number. really type that's So QX

So is can in I comfortable it we'll QX. that be inside of be for saying where

Operator

Citizens Your JMP. next question Delaney will Steve come with from

Steven Delaney

that good bankers problem Rich, when fast. only a old on too saying they today, solid you curious there's loans net existing portfolio portfolio you demand on pay start do everyone. that there capital there can billion. is your to hand, to Congratulations I'm just off maintain an new the you $X see solid the growth think other XXXX, if among that with making there's feel potential respect to look portfolio the CLO, at above with any out with is enough And chance base? you the

Richard Byrne

across the is beginning loans origination in late that whole street quarters the XXXX, out, Steve, mostly all and coming that record since agree. What is of dealing occurred with now XXXX all Well, those XXXX, me you called stuff I due. industry I'll that answer, start is all

loans, great is first vintage about resolving peers the lot then just on at and are seen getting sidelines, and Banks new sidelines. of because asset we're you're getting resetting we there, may problem Mike really are looks A next to have there said, loans competition. maybe vintage. and that So on lot our review excited values of on as terms. We're making at never the this loans and a isn't the better some all

opportunity. I think So the that's

we grow being yes, to million as of have portfolio, $XXX cash. far able mean, over to the As continue I

some when book only get we're something We certainly can the there. go leverage. those we grow resembling And never assets provides from X.Xx but million at earning another that, Walgreens redeploy. really that's have with sold, $XXX to We that than really much running cash that's book higher capacity us

one of being we've I best. said, as deals So the going people as are this mean vintage on look I to one of think

originate I time, opportunity. to this seen look into seen going to that we've in on ever and long that think or we've certainly it when we're continue actively you a back

Steven Delaney

you. for one Mike,

here is in gain a conduit. kind the more what go to that not XXXX? probably the seen First replicable refi tighter obviously, range, conduit sale? quarter. quarter, a us just us every obviously, give in, to for into did light lending people a to of But could million conduit spreads you we're some loans. slow green is XXXX, this and whether suggest and year sense $XXX to CMBS tighten And seems close encouraging After for range of on X% metal the might sort you And is come AAA -- fixed-rate we've pedal on

Michael Comparato

Yes. Steve. first, green a it's mean, I double light. Thanks,

originating can, can because as way. as go as as fast much it and as as spreads are as in, fast tight We can can more importantly, we can, go other as we we securitizing they the

want the this So and QX in think in that is we go and repeat to is to on to space. balance do them basis sheet. margin a be I But group hard active no, very scale. repeat the on touch profit hard

cherry generally XXXX if exceed speaking, quarter I we $X that a And the where would on the great. be would that's be of do any can that conduit, given just really think, is we million very quarter, I top. in happy could in for rest just if a

stabilizer But an XXXX, additional be really earnings for revenue of us. million, through would the balance million $X conduit a million, I think, $X $X of good

Steven Delaney

pick and us on year. helpful on expect their you appreciate the for great. choose group and volume for margin today. of That's what from I the That's we your very And guidance helpful. can That's comments both numbers.

Operator

JonesTrading. with Erdner Matthew from come will question Next

Matthew Erdner

what going a and Could in new you underwriting on exiting these rates deals? to little cap talk bit and you're about

Michael Comparato

or mean multi? asset want to I it across classes do you Matt. all specific Sure,

Matthew Erdner

give, be you're to more willing I mean think the that Yes. great. I color would

Michael Comparato

Sure.

So of that's cap Fannie, multifamily XX-year speaking, the Freddie of coupons on say a would for and past is seeing X pretty right? multifamily, multifamily, Stabilized kind stabilized worlds where multifamily today, rates of are. tale generally top that, we're non-stabilized and quarters, I several much

borrow Freddie if on cap IO LTV, X.X%. X.X%, you from Fannie, can going rates So see you're a XX% at generally to LTC, loan XX-year

was we non-stabilized asset buying XXXX bought rate and being for -- I as at them me cap the asset where cost cost. seeing think aren't multi-front, that would cost we're to on that I'm replacement $XXX,XXX. in versus basis, on those today people a $XXX,XXX generally rebuild look built key a an

a not They're just gross they're So really basis. a exposure trading on per unit basis. rate cap basis more or on

market to I would trades a bet want just add all. or just depending on on asset quality X seeing I to years Hospitality, and seeing, is, to per and on say basically we that stabilized ticks that from center end cap basis. rate -- is multifamily you're probably that, another XXX now. okay it few still industrial basis of based is then a you office that and Retail, it are That's is of going wider maybe few a anchored cheap don't X.X% what trade market be trading the long-term inside think or X.X% power of if it's office, so points depending just pound grocery-anchored than the you'll kind we're again, price at buying on XX strip.

Matthew Erdner

appetite are And helpful on That color you and then that? makes what's And there. seeing construction going still right. for and very that's sense, forward your loans? Yes, opportunities guys good

Michael Comparato

We are.

soon. it's abate I stress appear abated. higher that longer, hasn't generally doesn't it the rates And at the level for anytime bank with to going think really

the then When back and to of think the some a of jump in, sidelines squarely a pool ankle, cannonball balance knee style. Banks right? it's take decent be to XXXX, come I toe, typically don't they going a then for they're an on and it's part time. going So into the XXXX perhaps

we do So view opportunity. as it an

construction close We continue to loans QX. in

in construction returns some best think of our I risk are book. our

assets pieces little inefficient capital us time. because for just period dribble out, of they're is they over issue extended an The

to active a those from in But in deployment. standpoint, of risk and great opportunities them capital love persist. terms overall, So provided we'll so continuing the continue see be of opportunities space to return not efficiency

Operator

Matthew The from question B. will with next come Riley. Howlett

Matthew Howlett

that year. Just the could that, I on looks terms ROEs. like, in of X.X% your mean, artificial drags of of targets I kind this you -- sort was on was some -- clearly, under It drags this quarter. ask

growth XX%. you mean and would portfolio buyback the of the freed prevent what's in the I the XX%, from up case, And cash real from dividend? that estate with potentially forward with to, going some Going raise that not sales. to say,

Michael Comparato

for Thank a you such question. direct

pretty We are investable we've that future all the is that I of we the and do bright. one right? today. myself growing capital originators -- in Jerry think So we're got it have and Rich, do in portfolio, open think think been the and the most think active we've We market QX, I grew

we to portfolio. want the to clearly continue So grow

doesn't be We massive any have from grow There to path a growing to the appear portfolio. preventing portfolio. the us walls

the And yes said. I conjunction like regularly. everything to that's probably feel adequately do obviously, time, a would ROE. We could enhance we legacy So dividend we with But portfolio. we're event, we've portfolio Board, feel I higher to think Do not. would We the like very, answer the think in conversations future? appropriate addressed in if with grow like is the one you the is talk at possibility and a very short the that fairly that about going address the XXXX and Absolutely. we comfortable, real to

Matthew Howlett

to up but again, I'm clearly with second be look you nonaccruals? if quarter late-stage some the from at And the accelerate, the second in then not in first from then first the the distributably guys, clearly, drag those quarter. growth for buyback quarter, it's the onetime-ish portfolio quarter be on number, asking of the got pace And with

Michael Comparato

don't year. less we the my on we think this if book legacy portfolio to more through to level be sure we this that conviction to have the we we want the There legacy I that we're a of And -- mirror. surprises, portfolio conversation that I dividend. the forward-looking very cleaned -- has think been to a role where through just And And rate meaningful think going mean, I want high think a the to a looking very, focus windshield work wants I up Yes. in and make the origination. to rest at got look, plays rearview than just is address need we've right? of more really is have a

Richard Byrne

Yes. Matt, the a I lot rates, as now does skeptical, is think yes, on longer, is higher world which but us whole making for convinced of factors at play.

Michael Comparato

the legacy rates of are come obviously, together. And part that book that

Matthew Howlett

Yes. that out And Walgreens, into not mean, I expect can last said get years. you reinvest your would anything how process be model, mean, the it color appreciated. someone originations, you how what just of the can this what just thing, those significant that I if that in think to going be new tell an are you've seen today's and update analysts, reinvestment, on sure is you hits I'm us the as could Any going best year? be to Is bid? opportunistic can I to if you

Michael Comparato

making type recognize, I portfolio. what Rich returns loans much recognize historically than selling mean of working We've on up, million got the cash-like originating returns. as are pointed exactly we capital we're cash $XXX Yes. We you when locked actively roughly right? better at out,

opportunity. the see So we

have We few today. contract stores a under

these we're more of in summary few where process those robust a today. guys not I'm of intent under -- but getting you the have contracts stand, nonrefundable, hoping stores we next letter still can a of actually closing. We quarter, give

was the premature resolved we are is So to address this as getting of and can. we for XXXX clearly issue very we a easiest we very, Walgreens is today. portfolio fastest on and thought that in much But focused that It a as us. can it place improve front-burner

Richard Byrne

we cash good first. spend the is $XXX to million million, news Matt, -- $XXX over of

So like it's now. missing we're an opportunity not

of plenty even it. have without liquidity We

to We So out, an but rather want trying pointed sell eye sooner Mike as later. than as to be, we're with possible. as into towards strength, disciplined

Matthew Howlett

you. on all, screen that's there's that back REO, at clear, no the all to financing you'll be And debt that to on know there's no going cash is

Michael Comparato

That's correct.

Operator

would This concludes Ms. the our like I ahead, question-and-answer Crabbe remarks. turn ma'am. closing back any to for go Lindsey session. over conference Please to

Lindsey Crabbe

joining us today. We appreciate you

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

Operator

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

disconnect. You may now

Franklin BSP Realty Trust (FBRT) 30 Apr 242024 Q1 Earnings call transcript