FBRT - Earnings call transcript Q4 2024 | Franklin BSP Realty Trust, Inc.

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Operator

Hello, and welcome to the Franklin BSP Realty Trust Fourth Quarter 2024 Earnings Conference Call. [Operator Instructions].

As a reminder, today's call is being recorded. I would now like to hand the conference over to Lindsey Crabbe. Please go ahead.

Lindsey Crabbe

morning. Good for today. MJ, our hosting you, call Thank Welcome Call. FBRT Fourth Earnings Conference Quarter XXXX to the

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

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

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

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

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

Richard Byrne

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

We're As up X. questions. your open yesterday. going earnings published as we'll to We're quarter Lindsey were our and call release call, website then Slide mentioned, review our to always, going today's our and deck supplemental on to results, the begin to fourth

portfolio going quarter full and to buckets: just we loans. key continue from and into discuss originated hikes interest portfolio. rate list Mike our market highlight loans originated will conditions, will developments I'm With watch to that, Jerry and fourth post office maybe our and view financial year our hikes, of REO both rate X the the XXXX. results pre-interest loans cover start, to our

commitments, including $X we fourth the $XXX rate quarter. loan in loans. million In billion post-interest new discuss let's XXXX, in hike originated First,

since began portfolio reflecting through our interest have the hikes. important and we a originated post rates is January XXXX, percentage is because our has are been XX% this statistic some originations these originated believe of the we loans quarter, of originated rate current interest of Including Last We attractive tracking in years. very January XXXX, loans portfolio most that valuations. that

with in current competition. the We book. This add with to our to originating low us are loans has relatively low vintage high-quality borrowers enabled LTVs and

Okay.

negotiating a approach of loans hike and high-quality, multifamily flexibility of As and as loans, lot us for our leverage maturity. predominantly borrowers been repaid. with XXXX pre-rate portfolio Many have vintage legacy provides XXXX our

our full improve In billion as and XXXX. real In estate we've to asset of other pursuing past in sell. modifications In debt this we actively stabilize take cases, some payoffs owned, with then position. received fact, of course, borrowers year cases, this vintage the $X.X are we must in from properties

some while better are that maximize recovery. earnings waiting achieve We we to outcomes near-term we will if need endure to drag even confident

QX, both our exposure in at is our our at distribution Lastly, traditional which office regarding largest were only leased facility, loan, and office X.X% net payoffs year-end portfolio. X triple office and after the was par sector, headquarters loan of multi-tenant office excluding a total

been reflect to Importantly, market in previous this current has quarters down remaining marked exposure significantly conditions.

dividend dividend embedded level reach our potential that appropriate coverage quarter, loans. and REO this the in given current While we future nonperforming we is did believe earnings not our

remained ending portfolio to flat very origination XXXX, of year $X.X year, our at the balance. active billion principal Despite a

million $XXX course, always full. million ended blessing curse repay year are $XXX see Our but cash. the in These in XXXX originations We in billion are a were we including loans pre-rate unrestricted $X.X repayments. by to with of happy offset hike in and liquidity, repayments,

or continue our in positions are Currently, XXX rated in We to of enhance an X earnings. assets new overall FBRT's risk our XXX strategically resulting to rating X.X. X, of invest liquidity further risk

quarter of X of name of net X portfolio consists X.X% makes our As quarter. of names, a our up and list during end, watch increase the

A was taken X-rated was loan specific CECL charge added. on that the

more However, foreclosed our X-rated list as debt well this remaining and portfolio. in the as on watch was cover sold will This loan list Jerry detailed REO reduces has basis. X.X% above more in and QX the will on detail, the of already new Mike in watch XXXX our assets portfolio. our provide update to

focusing pursuing FBRT's portfolio to are in I'll XXXX. on Lastly originated Jerry. for really have see originations. remain real confident we billion legacy And portfolio. actively in our in loan demonstrated over XXXX, by new things: across our as significant estate the We that, originations In platform hand X we managing it $X.X me, we and portfolio with opportunities

Jerome Baglien

Great. Rich, the everybody Thanks, and being thanks for for call today. on

our Moving to on results.

reported loans FBRT quarter. for year-ended fourth for and million $X.XX $X.XX did REO in progress We which year-ended approximately share by to share were and earnings per fourth decreasing the the and make GAAP asset REO affected common XXXX. declined diluted fourth negatively in Earnings the through portfolio, Let's book were quarter Distributable attributable $XX XXXX. our and the by earnings and our per nonaccrual value the start positions. sales Slide common diluted of X. quarter $X.XX on $X.XX

mentioned. the million. common related QX to per end, an asset-specific after $XX.X is in $X.XX asset. we Rich asset In reserve that This sold another REO share of addition, We for the had quarter asset

Our sale our debt above ended up being basis.

in to Our impact term. earnings REO short the loans nonperforming continue and will distributable

to additional continue an distributable annual that $X.XX to we on earnings an work, generate to basis. $X.XX could we to resolve we equity back our believe As put and REO

are of a our power may take quarters to that While range earnings our few dividend fully resolve, we more is current within level. confident that

a in quarter. earnings decrease value Changes asset-specific to fourth exceeding share to slight reserves year-end. book general dividends was fully led our value per converted Our book with common $XX.XX at and in combined other the

which received origination fourth This originated X. We of our multifamily in comprised XX% is activity. commitments of activity loan in Turning quarter quarter million during multifamily XXXX $XXX during overview repayments from and made these, primarily quarter. the quarter, XX million the for in majority our originated off and to sector, We was Of XXXX up full. the the $XXX new the loan loans in the in paying million an loans with Slide loans paydowns. of $XXX

repaid, reducing X were exposure office to sector. loans that fully Importantly, further also our

X. Slide to Turning

Our average cost core SOFR was X.XX%. our portfolio on plus debt of

The our structure makes of anticipate sometime was capacity our our reinvestment XXXX. We preferred portfolio. it continue from method and CLO financings financing CLOs. Our for At market in and to available nonrecourse we our non-mark-to-market end, to financing the non-mark-to-market CLO have X of of deals. our benefit XX% returning quarter funding in

totals We liquidity CLO $XXX our with end continue at lines quarter space reinvest unrestricted have million million, unrestricted and like in of have meaningful our warehouse cash which available, we is to deploy. Combined to $XXX would cash.

the you with portfolio. standing Mike I'll our With it net X.Xx our the position an at leverage recourse of end leverage that, quarter. update to Our X.Xx to at give on was turn over

Michael Comparato

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

with million the portfolio. $XX senior XX% stands loans. at remains rate preferred loans billion, XX% Multifamily our mortgages comprised The being averaging $X portfolio of core is portfolio floating each. sector, XXX of Our XX% securing

portfolio Our decreased repayments. significant again given quarter core this

we to both into we Rich noted, As core have the deploy available portfolio. Jerry liquidity plan that and

from reinvest will We also any REO sales. equity generated

During we the of spread XX loans a at quarter, basis average originated points. weighted XXX

be the loans credit still adjust have to longer this create classes, to asset rate We extremely anticipate compelling perspective. to continue return for to traditional risk providers. higher constraints but tighten continue vintage environment, find Borrowers spreads we seen from will of across which from a supply most to with continue

XX $X.X our moderate approach estate to months. a but legacy seen trillion next in maturing take lenders I a a have to across until specifically not return we remain available the do address office, competition there the Legacy space capital is inevitable. of said, portfolio. commercial acknowledge real loans, address the problem today address and continue continues when enough and of debt That FBRT it the believe credit the loan finally be to comes to problem will will approximately

As we proactively and these Jerry have to team address our asset management both identifying continues be actively may that loans are problematic issues. the discussed, Rich and

a summary watch list. Slide of XX our is

on Rich extension our for borrower final keep in XXXX. Our of and has watch positions XXX-unit anticipate current is given have balance Dallas basis. paid Of both in sale. subsequently down QX list that the consisted We reduced of the X is but the XXXX office or to to a a only one remaining next risk QX as in loan that we above property mentioned, Denver loan X of student does in Virginia. housing our property continue office qualified The properties Jerry X this rated principal quarter took Georgia to end is the watch conjunction The Not list at the 'XX. taking positions, a XXXX QX but is with complex asset apartment title title in to X. It that building been Norfolk, the property sold they XXX-unit extension. the January January and

recently and This operations. modification, are loan with received incredibly property well-capitalized terms is are in currently. We about have feedback active an being borrower reached we papered and the dialogue a which on positive borrower

one project written offers buyer apartment another multifamily days We drove a to closing we XX other of "I and portfolio. class would I the on not deposit this example $X A so hours, looking experience commercial happen of away, XX and confident our later. is million spread The Dallas and January miles within estate quickly. experience opportunities. well said, only with for XX X. weekend of that asset on Word is real period". no approximately sector simply January reasons XXX-unit X property. asset verbal dozen nonrefundable diligence liquidity very will buy strength the as due in and any of And had PSA called the we the live was signed us are we on had the a go as asset in massive foreclosure in One amount in the and That the was and foreclosed

from that of The be come sentiment sector. off are the end continues have staggering seeing we the space. bottom the spectrum, office in liquidity other the the a a and appears have damage On but more hint perspective it we to

get to of our mentioned, portfolio as our our is multi-tenant traditional portfolio Rich X.X% to soon As and goal office down as is to X total possible.

While and return new has originations, bar We one incredibly the might already credit and the XXXX in office loan bar office be full. originated it consider in higher. repaid high is we been

XX. Slide to Moving

X We quarter. for of closed portfolio properties which at our properties our in additional XXXX, purchase quarter additional and properties to in In near XX REO have total, of or first decreased are basis foreclosure agreements this sale the to after year. positions an X expected and sale quarters above Our in basis, REO sold aggregate. and sold having at in our fourth end million team the $XXX place the second end, in quarter close

the Walgreens properties. of Portland, building office multifamily and portfolio the Excluding in REO consists all stores remaining the

possible. Our as quickly is the liquidate goal to entire portfolio as REO

However, we stabilizing to assets recovery believe lead these higher continue to prices. first that will

$X.XX As REO back annually. has earnings to performing share by Jerry $X.XX pointed loans move per to converting this out, the to our ability

our absolutely it is So primary focus.

turn in CMBS had execution million a be And gain sale, on to million of environment. commitments as market in back the active confident quarter, first as of remain in Q&A gross just closing operator it under $XXX with begin well in year that, first to FBRT's completed We've we very which We the loan in well, realized the the resulting I'd approximately figures. $X already perform to our QX QX like current session. will to ability a

Operator

JonesTrading. comes question [Operator with first Instructions]. Erdner Today's from Matthew

Matthew Erdner

Increased that asset guess, to Could a the it in you of Increased And combination is above? due bit the settle competition? or They've tightening kind little out? about a kind of range. expect spreads? quality cycle, all of highs I kind credit come you of them over the X% from talk to in quality? do Where

Michael Comparato

tightening, only been real in has estate, spread The seeing Yes. I a phenomenon but think, also we're other not positions. credit

XX, liability CLO another hard obviously, spreads CRE, tighten unlikely seem it in them credit speak. market going remains incredibly from as call be but tightening incredibly CMBS lockstep would to in tighten tightening. see to so floating side they X as have to basis the not would reasonably come think Spreads the liquid. last get. side I it points, are I remains with tight can on liquid, asset probably materially to the here. pretty mean rate I'm the

and seeing we're on lines, So warehouse CLO that CMBS. CRE, phenomenon

probably tight QX of think to I of we're 'XX, points. peak XX valuations, QX XX the inside basis 'XX, kind of well So by

SOFR the But X.X% obviously, is those still well. than we as at to have valuations higher difference continue it peak was

there floating to rate me its think very saying, to on long coupons think world whole the tightening way I I handles in a them. probably the So was but close end, of spread X dollar have is continue

Matthew Erdner

And rate you. Other of expense side? there? there question million, modeling for we expenses, change about any or million. number to then, rose Jerome, a expect take, kind quarter-over-quarter. $X quick What about kind And the is material And run it of give $XX.X should

Jerome Baglien

Yes.

majority flow-through think about They tell the me X go there That's the do. through vast mostly REO don't to expenses. all in Let you this ways. but

some on easiest offsetting up above with net those statement. it's on the Like that mentioned stuff. overall are income we to predict to the income it's hard last about contributor book. of call, close down REO to a the X the little have of a way mean of this wash. it think a sell much on I not how I earnings to is quickly the we But kind So based

you comes just really the of how but upside, sales. kind on terms it's it dependent asset heard in timing next through of of course the So of year, off

So is terms model I easiest make of might of the think how pace way sell-downs the some to in occur. estimate to

for quarters me all us take heard out. say or could that you a So work to it more few

Operator

Catherwood with Tom The BTIG. comes from question next

William Catherwood

to front? you. your is playbook on of levels approach with how jumping lender the the and and capital having comments new market. origination your it multifamily. that loan creates the into seems coming following wave starting of opportunity kind I underwriting maturities Mike, Maybe, to appreciate shift multifamily despite like your Are on or But every CRE you maintain into

Michael Comparato

discussing for one the Obviously, the time. question. Tom, thanks all we're internally

people of fact put spreads them to on of that while of originating in that think billion the now, some the the all I actively We XXXX. loans we at of have we've none we've the able years. in originating huge a seen right benefit on XXXX $X seen are best best were commitments of some were in

platform have got we the don't great these these compete levels. don't chase at would different we that the And of are product do a offering, business. thing So many breadth levels. that say about to at We can I have our to that also We've wider so is our spread things right?

loans, So construction lending, hospitality the little cottage industry of book. Condo our Inventory

So last because we're not to tight here $X did. really chasing no we put that on year else the billion one

we're pricing can And than I what for of the wider is stuff our space. originations new focusing we kind get highly still very seeing on that think where competed we're

don't. the part them for that acknowledge hour everybody we've kind that guys but of swing So plate an easy other looking and got over fully fastball that is XX-mile hit ability that pitches the of at to

William Catherwood

repayments. for that do book repayments an the be of But you I repayments and have start outpace when to know could over fundings can internal hard the and to to lumpy again? And can target predict. growing Pivoting in point timing time originations loan the

Michael Comparato

going has delicate would X.XX% say science, doing dance this interest driven that right? very a out? certainty mean little sort hard a lot when that much out art the XX-year. it's REO? I we to we going still XX-year than REO? how X% existing repayments. in there's to take to My is we variables What are many sell to at definitely more originate How just the worked can repayments? stuff view fast to versus different with of a rates. We're Are also model it's legacy any I there is And of are real have by so of be more back

It's clearly So to we it's our be. goal. clearly where want

to completely Rich legacy that goal question vintage XX% book this our new the mentioned were remarks and originations. recycled rate this out the his without we portfolio post in Clearly, is loans. hike of into opening is of of portfolio get

So as fast can. we're we doing it as

by the I that and daily on of we're towards pound I many this a it. think But actively say goal table can just we've basis. year, working done that too variables there's QX literally

William Catherwood

REO great ones and that you the obviously, remaining recently on. selling the On assets, stabilized took title you progress what made

ones in them your to the where For they have are terms you on books, get plan? that remain capital executing the can or business until of time how you they much do stabilization? And think

Michael Comparato

by the case to case asset. obviously it's So

to about in into leasing season our across vast just the we're of course, is Of board. get The Sunbelt. REO majority

coming a to see increase the in months. leasing meaningful So we're hoping in

we've mentioned already in under remarks, X contract. I the got prepared As assets

are We rest order. And bid at the we that the on hope of different market in stages another X occupancy. assets to acceptable actively have with in various then short are

pretty leasing think would we'll I market of the have say as is again, this we late season. bulk occupancy And sale see for QX, I pop in healthy the that into a QX. get our early to And goal

as be of should going the book. enough some us majority there Are to turns, left goal, to twists be can, real to unexpected Are for path. pretty and to estate. time course, to that stragglers? there going the think clear the or appears welcome vast a to through there again, I as of be be stabilize some in is fast get we what's it But

Operator

next Riley. The B. from comes with question Randy Binner

Randolph Binner

the I think this progress change it's I deck down looking at last. liquidity. a category. was Slide liquidity bit And financing available Just dig that in in little you on just if the wondering of and on XX available could versus quarter

the what of liquidity. on level the wondering detail is available Just lower

Michael Comparato

the terms a happened, we so where does or hit CLOs in the just us had CLOs, phase. from And it a it it CLO amortization ones. come the amortization CLO is of amortizing change in back reinvest Yes. more reinvest does on the hit Most non-amortizing than paydowns the with that's of to

or you that of some delays So that equity. unlock can takes just down when

So that we think start of lay to comes that. of out to year, kind later if we probably the back that's purpose deals this liquidity. amortize you those equity out, how on But of the just for recapture the it fact my that my calculate way the down. the for another we launch comment CLO It delays on it

Randolph Binner

didn't first expenses other I out then I just had for in is, think the sale properties hear I million versus of But other with question exchange. expenses $XX.X think that the Did And prepare the break of of to were other elevated to was full you and that REO. the set stuff? questions specific are how expenses much other do

Michael Comparato

way it But didn't this income, historical just expense it's look to before in the No, of mean, offset. about pretty if break X at if mentioned for I a portion answer, you my we of That's And think I but at you out. a best real is us decent earlier our not that large it. look item. those the estate generally roughly kind levels, it. of Other line

just of zero perspective. net the or So a almost basis items flowing line a we books in between everything net from in It's how of X of those actually it's context I is REO really hold. neutral cash through more it entirety think the the of coming through terms

So flowing through be assets take we stops going it those elevated it's start to down there. and until to

Operator

Laws with Raymond from is next question Stephen James. The

Stephen Laws

growth. up remarks guess I the to front, million are on follow million believe quarter. But outlook prepared on for repays of you question year-to-date. around I more last I earlier the the $XXX a origination uncertain. portfolio in $XXX-ish said want fundings on

million that see million kind you as of to much Is how look rate side? the originations? Or run at do expect to quarterly pipeline? far a is good your origination when volatility on you that $XXX So $XXX as of

Michael Comparato

one Mike. it's $XXX seemingly applications, of just wanted million unknown question. just the Thanks for of patient certain If is I We're sold, sign there right now. to unlimited week. Stephen, mean, financing of don't a we're because last take know probably certain getting we of get new to ask million look, now. the REO going we right when trying just to massive, repayments. be unknowns questions, for massive request massive, $XXX as almost There credit when Yes. the to I next applications is mentioned could just for we're on we

of way Borrower to of opposite right about all one completely to the opposite direction. be for spoken then behavior really complete this and going the past that or borrower and guys us hardest going quarters I've you behavior. now posturing the direction with things difficult is over really, manage continues several way to a posturing

the we can So a best to future REO. and we're endeavor. It's forecast and doing difficult problems cash pretty future

with how there repayments book could in figure much So the just getting the we comfortable It's spades. to and and opportunity really is originate legacy take out on. cash to

Stephen Laws

loan quick questions. Two

Georgia upgraded I think as modified principal. watch can it actions intend office some Will the of list? mentioned was those the given paydown be to leave included you X you that rated? the and guys Or loan off come

Michael Comparato

by currently we're asset. to For the where that's in we're But an don't still X-rated. has refinanceable. I the it think don't going it down. a space, it say office level write a It's we X. I Obviously, think to to moment, leave that, in checks, encouraged as improved has incredibly continue spot we risk-rated comfortable pay have where fact I that said liquidity us continued is the that while at And think we're to borrower we're

Stephen Laws

the half of it year. Denver move to office, playbook you should it's a of think that you in in have to first handle asset I kind REO? want Do commented of once preliminary sometime REO how this you

Michael Comparato

can we is similar the on our stabilize think I to and multifamily try harder, see to it albeit liquidation. get a meaningfully, book, idea what meaningfully

just it's anywhere. office a tough almost right in now market think an I

and for able today, bid people is an building appraisals office So think of to office What lot a the them. refinance not I for are I'm real getting buildings sure.

class asset estate. in commercial it's most certainly the illiquid real So

to asset. So that price I discovery have think we on some that do there's

to asset. market operational multifamily. need discovery certainly on an versus but on will today asset it and office on to that is much and laser-focused that it some We're there's the we be harder predict do outcome think I a

you fulsome So bit operation building our a in and after actually better. we've on answer, in the quarter the more or hands little leasing probably give Stephen, market understand a X the can had a the and

Jerome Baglien

asset down as well. significantly wrote already We pretty the

Stephen Laws

Yes. guys I that reserves you have taken know for on asset sure.

the think a you're where your on Last I yields to to deal? are something able the big reserves on? next compare to pay how you're do on part where side. point here CLO And that at Can that spreads and look down know actually. put CLOs become to how mentioned your need of the is? some asset probably in to 'XX. collapsing collateral I you rolling from additionally, spreads FLX market going would question return at the new you'd into about to much those to you relative talk And

Michael Comparato

cost It's We're would daily Jerry than few later, is it financing is market rather past very to about we weeks. at of we sooner moment. and looking liquid. team almost constantly. the different The things. I it maximize a could bunch If tap it at we're seemingly and weekly, talk but the the of looking very the attractive

now, be they to in will a stay at So And definitely where close very would us in add. I right are XXXX. for liability the some think be if accretive again market we markets point it to even

spreads years. tightening, can the to we've cake mentioned $X able eating having tightest it in at liability XXXX in we I as originated your obviously, spreads and that a before, issue if we're that's widest have it seen billion the kind time I where mean the like just of too. after that we we at benefit,

to want there. we get So

couldn't exact a I think it's but that on get I Jerry I we timing quite there. work something and an you will give bit.

Stephen Laws

And that? was get deal, replenishment the a X-year -- able on it period you were last to

Michael Comparato

We were.

a that we of have additional liability a to it's get but whatnot level. kind I weighted for causes and that in us positive the to optionality future. think credit weeds to average on and And originating issues we'll net that able definitely we the just reset want I think the good helped some to I side. the market there. use be life very tenors tenors It in job do don't

liability. So currently the CRE accretive cost I and the important. get X those advance are, CLO on the overall, you macro is funds. it's it's think rate a of they And things But if where wildly

Operator

This question-and-answer turn any remarks. I session. over call now the management back our closing to would to like concludes for

Lindsey Crabbe

you appreciate We have Please with us We speaking soon. today. out day. great reach joining look forward questions. any if a you Have to further you

Operator

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

may disconnect your lines. You now

Franklin BSP Realty Trust (FBRT) 14 Feb 252024 Q4 Earnings call transcript