FBRT Franklin BSP Realty Trust Inc

Franklin BSP Realty Trust, Inc. (NYSE: FBRT) (“FBRT” or the “Company”) today announced financial results for the quarter and full year ended December 31, 2023.

Reported GAAP net income of $30.0 million and $144.5 million for the three and twelve months ended December 31, 2023, respectively, compared to $27.2 million and $14.2 million for the three and twelve months ended December 31, 2022, respectively. Reported diluted earnings per share ("EPS") to common stockholders of $0.28 and $1.42 for the three and twelve months ended December 31, 2023, respectively, compared to $0.25 and $(0.38) for the three and twelve months ended December 31, 2022, respectively.

Reported Distributable Earnings (a non-GAAP financial measure) of $39.3 million and $189.5 million, or $0.39 and $1.92 per diluted common share on a fully converted basis(1), for the three and twelve months ended December 31, 2023, respectively, compared to $38.8 million and $116.1 million, or $0.37 and $1.07 per diluted common share on a fully converted basis(1), for the three and twelve months ended December 31, 2022, respectively.

Fourth Quarter 2023 Summary

• Produced a fourth quarter GAAP and Distributable Earnings ROE (a non-GAAP financial measure) of 7.2% and 9.8%, respectively
• Book value of $15.77 per diluted common share on a fully converted basis(1)
• Declared fourth quarter common stock cash dividend of $0.355, representing an annualized 9.0% yield on book value
• GAAP and Distributable Earnings dividend coverage of 80% and 109%, respectively
• Closed $231 million of new loan commitments at a weighted average spread of 391 basis points
• Total liquidity of $1.5 billion, which includes $338 million in cash and cash equivalents and $55 million in CLO reinvest available
• Repurchased 267,968 shares of common stock at a net average price of $12.47 per share for an aggregate of $3.3 million, which represents a $0.01 per share increase to book value

Full Year 2023 Summary

• Produced a full year GAAP and Distributable Earnings ROE of 8.9% and 12.1%, respectively
• GAAP and Distributable Earnings dividend coverage of 100% and 135%, respectively
• Closed $818 million of new loan commitments at a weighted average spread of 450 basis points, ending the year with a core portfolio aggregate principal balance of approximately $5.0 billion
• Closed BSPRT 2023-FL10 ("FL10 CRE CLO"), a $897 million managed Commercial Real Estate Collateralized Loan Obligation ("CLO") with an 18-month reinvestment period
• Received proceeds of $96 million on the Brooklyn hotel loan, representing the full principal amount of the loan and approximately $20 million in additional proceeds after payment of all related closing expenses
• Repurchased 1,026,105 shares of common stock at an average price of $12.19 per share for an aggregate of $12.5 million, which represents a $0.05 per share increase to book value

Richard Byrne, Chairman and Chief Executive Officer of FBRT, said, “FBRT achieved strong results in the fourth quarter, comfortably covering our common stock dividend on a distributable earnings basis. For the year, FBRT delivered a 12.1% distributable earnings return on common equity, reflecting the stability of our multifamily-focused portfolio. We remain committed to delivering long-term stockholder value.”

Further commenting on the Company's results, Michael Comparato, President of FBRT, added, “We are defensively positioned and ended the year with a liquidity position totaling $1.5 billion. We also have been actively originating new loans throughout 2023. As our pipeline grows and origination volumes improve, we expect to grow our portfolio and put this capital to work at attractive levels in 2024.”

Core portfolio: For the quarter ended December 31, 2023, the Company closed $231 million of new loan commitments, funded $270 million of principal balance on new and existing loans, and received loan repayments of $174 million for a net increase in our core portfolio principal balance of $84 million. The Company's core portfolio at the end of the quarter consisted of 144 loans with an aggregate principal balance of approximately $5.0 billion. The average loan size was approximately $35 million. Over 99% of the aggregate principal balance of the Company's portfolio is in senior mortgage loans with approximately 98% in floating rate loans and approximately 77% of the portfolio is collateralized by multifamily properties. The Company's exposure to office loans is only 5%. As of December 31, 2023, the Company had six loans on its watch list (risk rating of four). Subsequent to year-end, the Company closed $113.2 million of new loan commitments consisting of two loans.

Allowance for credit losses: During the quarter, the Company recognized an incremental provision for credit losses of approximately $5.4 million.

Book Value

As of December 31, 2023, book value was $15.77 per diluted common share on a fully converted basis(1).

Share Repurchase Program

During the quarter, the Company repurchased 267,968 shares of the Company's common stock under the Company's $65 million share repurchase program. These shares were repurchased at a net average price of $12.47 per share, inclusive of any broker's fees or commissions, for an aggregate of $3.3 million. As of February 7, 2024, $35.2 million remains available under the $65 million share repurchase plan. FBRT's Board of Directors has extended the share repurchase authorization through December 31, 2024.

Subsequent Event

Subsequent to year end, the Company obtained, through deed-in-lieu of foreclosure, a multifamily property located in San Antonio, Texas. The watch list loan had an amortized cost basis of $42.2 million as of December 31, 2023. The Company is under contract to sell the property for $42.8 million. The sale is expected to close in the immediate future.

Distributable Earnings and Run-Rate Distributable Earnings

Distributable Earnings is a non-GAAP measure, which the Company defines as GAAP net income (loss), adjusted for (i) non-cash CLO amortization acceleration and amortization over the expected useful life of the Company's CLOs, (ii) unrealized gains and losses on loans, derivatives and ARMs, including CECL reserves and impairments, (iii) non-cash equity compensation expense, (iv) depreciation and amortization, (v) subordinated performance fee accruals/(reversal), (vi) loan workout charges, (vii) realized gains and losses on debt extinguishment and CLO calls, (viii) actual realized cash loss on a specific real estate owned ("REO") investment, (ix) impairments of acquisition assets related to the Capstead merger and (x) certain other non-cash items. Further, Run-Rate Distributable Earnings, a non-GAAP measure, presents Distributable Earnings before (i) trading and derivative gain/loss on ARMs and (ii) realized cash gain/loss adjustments on REO.

The Company believes that Distributable Earnings and Run-Rate Distributable Earnings provide meaningful information to consider in addition to the disclosed GAAP results. The Company believes Distributable Earnings is a useful financial metric for existing and potential future holders of its common stock as historically, over time, Distributable Earnings has been an indicator of dividends per share. As a REIT, the Company generally must distribute annually at least 90% of its taxable income, subject to certain adjustments, and therefore believes dividends are one of the principal reasons stockholders may invest in its common stock. Further, Distributable Earnings helps investors evaluate performance excluding the effects of certain transactions and GAAP adjustments that the Company does not believe are necessarily indicative of current loan portfolio performance and the Company's operations and is one of the performance metrics the Company's board of directors considers when dividends are declared. The Company believes Run-Rate Distributable Earnings is a useful financial metric because it presents the Distributable Earnings of its core businesses, net of the impacts of realized cash gain/loss adjustments on REO as well as the realized trading and derivative gain/loss on the residential adjustable-rate mortgage securities acquired from Capstead Mortgage Corporation, which the Company has liquidated from its portfolio.

Distributable Earnings and Run-Rate Distributable Earnings do not represent net income (loss) and should not be considered as an alternative to GAAP net income (loss). The methodology for calculating Distributable Earnings and Run-Rate Distributable Earnings may differ from the methodologies employed by other companies and thus may not be comparable to the Distributable Earnings reported by other companies

Please refer to the financial statements and reconciliation of GAAP Net Income to Distributable Earnings and Run-Rate Distributable Earnings included at the end of this release for further information.

1 Fully converted per share information in this press release assumes applicable conversion of our series of outstanding convertible preferred stock into common stock and the vesting of our outstanding equity compensation awards.

Supplemental Information

The Company published a supplemental earnings presentation for the quarter ended December 31, 2023 on its website to provide additional disclosure and financial information. These materials can be found on the Company’s website at http://www.fbrtreit.com under the Presentations tab.

Conference Call and Webcast

The Company will host a conference call and live audio webcast to discuss its financial results on Thursday, February 15, 2024 at 9:00 a.m. ET. Participants are encouraged to pre-register for the call and webcast at https://dpregister.com/sreg/10185473/fb540286fb. If you are unable to pre-register, the conference call may be accessed by dialing (844) 701-1166 (Domestic) or (412) 317-5795 (International). Ask to join the Franklin BSP Realty Trust conference call. Participants should call in at least five minutes prior to the start of the call.

The call will also be accessible via live webcast at https://ccmediaframe.com?id=IGbENPjX. Please allow extra time prior to the call to download and install audio software, if needed. A slide presentation containing supplemental information may also be accessed through the Company’s website in advance of the call.

An audio replay of the live broadcast will be available approximately one hour after the end of the conference call on FBRT’s website. The replay will be available for 90 days on the Company’s website.

About Franklin BSP Realty Trust, Inc.

Franklin BSP Realty Trust, Inc. (NYSE: FBRT) is a real estate investment trust that originates, acquires and manages a diversified portfolio of commercial real estate debt secured by properties located in the United States. As of December 31, 2023, FBRT had approximately $6.0 billion of assets. FBRT is externally managed by Benefit Street Partners L.L.C., a wholly owned subsidiary of Franklin Resources, Inc. For further information, please visit www.fbrtreit.com.

Forward-Looking Statements

Certain statements included in this press release are forward-looking statements. Those statements include statements regarding the intent, belief or current expectations of the Company and members of our management team, as well as the assumptions on which such statements are based, and generally are identified by the use of words such as "may," "will," "seeks," "anticipates," "believes," "estimates," "expects," "plans," "intends," "should" or similar expressions. Actual results may differ materially from those contemplated by such forward-looking statements. Further, forward-looking statements speak only as of the date they are made, and we undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time, unless required by law.

The Company's forward-looking statements are subject to various risks and uncertainties. Factors that could cause actual outcomes to differ materially from our forward-looking statements include macroeconomic factors in the United States including inflation, changing interest rates and economic contraction, the extent of any recoveries on delinquent loans, the financial stability of our borrowers and the other, risks and important factors contained and identified in the Company’s filings with the Securities and Exchange Commission (“SEC”), including its Annual Report on Form 10-K for the fiscal year ended December 31, 2022 and its subsequent filings with the SEC, any of which could cause actual results to differ materially from the forward-looking statements. The forward-looking statements included in this communication are made only as of the date hereof.

FRANKLIN BSP REALTY TRUST, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

 

 

 

December 31, 2023

 

December 31, 2022

ASSETS

 

 

 

 

Cash and cash equivalents

 

$

337,595

 

 

$

179,314

 

Restricted cash

 

 

6,092

 

 

 

11,173

 

Commercial mortgage loans, held for investment, net of allowance for credit losses of $47,175 and $40,848 as of December 31, 2023 and 2022, respectively

 

 

4,989,767

 

 

 

5,228,928

 

Commercial mortgage loans, held for sale, measured at fair value

 

 

—

 

 

 

15,559

 

Real estate securities, trading, measured at fair value (includes pledged assets of $227,610 as of December 31, 2022)

 

 

—

 

 

 

235,728

 

Real estate securities, available for sale, measured at fair value, amortized cost of $243,272 and $220,635 as of December 31, 2023 and 2022, respectively (includes pledged assets of $167,948 and $198,429 as of December 31, 2023 and 2022, respectively)

 

 

242,569

 

 

 

221,025

 

Derivative instruments, measured at fair value

 

 

—

 

 

 

415

 

Receivable for loan repayment (1)

 

 

55,174

 

 

 

42,557

 

Accrued interest receivable

 

 

42,490

 

 

 

34,007

 

Prepaid expenses and other assets

 

 

19,213

 

 

 

15,795

 

Intangible lease asset, net of amortization

 

 

42,793

 

 

 

54,831

 

Real estate owned, net of depreciation

 

 

115,830

 

 

 

127,772

 

Real estate owned, held for sale

 

 

103,657

 

 

 

36,497

 

Total assets

 

$

5,955,180

 

 

$

6,203,601

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

Collateralized loan obligations

 

$

3,567,166

 

 

$

3,121,983

 

Repurchase agreements and revolving credit facilities - commercial mortgage loans

 

 

299,707

 

 

 

680,859

 

Repurchase agreements - real estate securities

 

 

174,055

 

 

 

440,008

 

Mortgage note payable

 

 

23,998

 

 

 

23,998

 

Other financings

 

 

36,534

 

 

 

76,301

 

Unsecured debt

 

 

81,295

 

 

 

98,695

 

Derivative instruments, measured at fair value

 

 

—

 

 

 

64

 

Interest payable

 

 

15,383

 

 

 

12,715

 

Distributions payable

 

 

36,133

 

 

 

36,317

 

Accounts payable and accrued expenses

 

 

13,339

 

 

 

17,668

 

Due to affiliates

 

 

19,316

 

 

 

15,429

 

Intangible lease liability, held for sale

 

 

12,297

 

 

 

—

 

Intangible lease liability, net of depreciation

 

 

—

 

 

 

6,428

 

Total liabilities

 

$

4,279,223

 

 

$

4,530,465

 

Commitments and Contingencies

 

 

 

 

Redeemable convertible preferred stock:

 

 

 

 

Redeemable convertible preferred stock Series H, $0.01 par value, 20,000 authorized and 17,950 issued and outstanding as of December 31, 2023 and 2022, respectively

 

$

89,748

 

 

$

89,748

 

Redeemable convertible preferred stock Series I, $0.01 par value, none issued and outstanding as of December 31, 2023, 1,000 authorized and 1,000 issued and outstanding as of December 31, 2022

 

 

—

 

 

 

5,000

 

Total redeemable convertible preferred stock

 

$

89,748

 

 

$

94,748

 

Equity:

 

 

 

 

Preferred stock, $0.01 par value; 100,000,000 shares authorized, 7.5% Cumulative Redeemable Preferred Stock, Series E, 10,329,039 shares issued and outstanding as of December 31, 2023 and 2022

 

$

258,742

 

 

$

258,742

 

Common stock, $0.01 par value, 900,000,000 shares authorized, 82,751,913 and 82,992,784 issued and outstanding as of December 31, 2023 and 2022, respectively

 

 

820

 

 

 

826

 

Additional paid-in capital

 

 

1,599,197

 

 

 

1,602,247

 

Accumulated other comprehensive income (loss)

 

 

(703

)

 

 

390

 

Accumulated deficit

 

 

(298,942

)

 

 

(299,225

)

Total stockholders' equity

 

$

1,559,114

 

 

$

1,562,980

 

Non-controlling interest

 

 

27,095

 

 

 

15,408

 

Total equity

 

$

1,586,209

 

 

$

1,578,388

 

Total liabilities, redeemable convertible preferred stock and equity

 

$

5,955,180

 

 

$

6,203,601

 

_______________

(1)

Includes $55.1 million and $42.5 million of cash held by the servicer related to the CLOs as of December 31, 2023 and 2022, respectively. The Company no longer holds a residential mortgage backed securities principal paydown receivable as of December 31, 2023. The Company held a residential mortgage backed securities principal paydown receivable of $0.1 million as of December 31, 2022.

FRANKLIN BSP REALTY TRUST, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share and per share data)

 

 

Year Ended December 31,

 

2023

 

2022

 

2021

Income

 

 

 

 

 

Interest income

$

552,506

 

 

$

357,705

 

 

$

216,890

 

Less: Interest expense

 

305,577

 

 

 

160,526

 

 

 

56,193

 

Net interest income

 

246,929

 

 

 

197,179

 

 

 

160,697

 

Revenue from real estate owned

 

17,021

 

 

 

9,655

 

 

 

4,759

 

Total income

$

263,950

 

 

$

206,834

 

 

$

165,456

 

Expenses

 

 

 

 

 

Asset management and subordinated performance fee

$

33,847

 

 

$

26,157

 

 

$

28,110

 

Acquisition expenses

 

1,241

 

 

 

1,360

 

 

 

1,203

 

Administrative services expenses

 

14,440

 

 

 

12,928

 

 

 

7,658

 

Impairment of acquired assets

 

—

 

 

 

—

 

 

 

88,282

 

Professional fees

 

15,270

 

 

 

22,566

 

 

 

11,650

 

Share-based compensation

 

4,761

 

 

 

2,519

 

 

 

—

 

Depreciation and amortization

 

7,128

 

 

 

5,408

 

 

 

2,107

 

Other expenses

 

11,135

 

 

 

6,572

 

 

 

3,946

 

Total expenses

$

87,822

 

 

$

77,510

 

 

$

142,956

 

Other income/(loss)

 

 

 

 

 

(Provision)/benefit for credit losses

 

(33,738

)

 

 

(36,115

)

 

 

5,192

 

Realized gain/(loss) on extinguishment of debt

 

2,201

 

 

 

(5,167

)

 

 

(4,642

)

Realized gain/(loss) on sale of available for sale trading securities

 

80

 

 

 

—

 

 

 

—

 

Realized gain/(loss) on sale of commercial mortgage loans, held for sale

 

—

 

 

 

(354

)

 

 

26

 

Realized gain/(loss) on sale of commercial mortgage loans, held for sale, measured at fair value

 

3,873

 

 

 

2,358

 

 

 

24,208

 

Gain/(loss) on other real estate investments

 

(7,089

)

 

 

(692

)

 

 

9,790

 

Unrealized gain/(loss) on commercial mortgage loans, held for sale, measured at fair value

 

44

 

 

 

(511

)

 

 

469

 

Trading gain/(loss)

 

(605

)

 

 

(119,220

)

 

 

(36,128

)

Unrealized gain/(loss) on derivatives

 

(140

)

 

 

(15,840

)

 

 

7,402

 

Realized gain/(loss) on derivatives

 

998

 

 

 

60,033

 

 

 

484

 

Total other income/(loss)

$

(34,376

)

 

$

(115,508

)

 

$

6,801

 

Income/(loss) before taxes

 

141,752

 

 

 

13,816

 

 

 

29,301

 

(Provision)/benefit for income tax

 

2,757

 

 

 

399

 

 

 

(3,599

)

Net income/(loss)

$

144,509

 

 

$

14,215

 

 

$

25,702

 

Net (income)/loss attributable to non-controlling interest

 

706

 

 

 

216

 

 

 

—

 

Net income/(loss) attributable to Franklin BSP Realty Trust, Inc.

$

145,215

 

 

$

14,431

 

 

$

25,702

 

Less: Preferred stock dividends

 

26,993

 

 

 

41,741

 

 

 

33,587

 

Net income/(loss) attributable to common stock

$

118,222

 

 

$

(27,310

)

 

$

(7,885

)

 

 

 

 

 

 

Basic earnings per share

$

1.42

 

 

$

(0.38

)

 

$

(0.18

)

Diluted earnings per share

$

1.42

 

 

$

(0.38

)

 

$

(0.18

)

Basic weighted average shares outstanding

 

82,307,970

 

 

 

71,628,365

 

 

 

43,419,209

 

Diluted weighted average shares outstanding

 

82,307,970

 

 

 

71,628,365

 

 

 

43,434,731

 

FRANKLIN BSP REALTY TRUST, INC.

RECONCILIATION OF GAAP NET INCOME TO DISTRIBUTABLE EARNINGS

(In thousands, except share and per share data)

(Unaudited)

 

The following table provides a reconciliation of GAAP net income to Distributable Earnings for the years ended December 31, 2023, 2022 and 2021 (dollars in thousands):

 

 

 

Year Ended December 31,

 

 

2023

 

2022

 

2021

GAAP Net Income

 

$

144,509

 

 

$

14,215

 

 

$

25,702

 

Adjustments:

 

 

 

 

 

 

Depreciation and amortization

 

 

7,128

 

 

 

5,408

 

 

 

2,107

 

Impairment of Acquired Assets

 

 

—

 

 

 

—

 

 

 

88,282

 

CLO amortization acceleration (1)

 

 

(5,521

)

 

 

(438

)

 

 

250

 

Unrealized (gain)/loss on financial instruments (2)

 

 

7,185

 

 

 

17,010

 

 

 

(7,853

)

Unrealized (gain)/loss - ARMs

 

 

415

 

 

 

43,557

 

 

 

20,670

 

Subordinated performance fee (3)

 

 

6,171

 

 

 

(8,380

)

 

 

9,846

 

Non-Cash Compensation Expense

 

 

4,762

 

 

 

3,485

 

 

 

—

 

(Reversal of)/Provision for credit losses

 

 

33,738

 

 

 

36,115

 

 

 

(5,192

)

Loan workout charges/(loan workout recoveries) (4)

 

 

(5,105

)

 

 

5,104

 

 

 

—

 

Realized (gain)/loss on debt extinguishment / CLO call

 

 

(2,201

)

 

 

—

 

 

 

—

 

Realized trading and derivatives (gain)/loss on ARMs

 

 

677

 

 

 

21,726

 

 

 

13,600

 

Run Rate Distributable Earnings (5)

 

$

191,758

 

 

$

137,802

 

 

$

147,412

 

Realized trading and derivatives gain/(loss) on ARMs

 

 

(677

)

 

 

(21,726

)

 

 

(13,600

)

Realized cash gain/(loss) adjustment on REO (6)

 

 

(1,571

)

 

 

—

 

 

 

—

 

Distributable Earnings

 

$

189,510

 

 

$

116,076

 

 

$

133,812

 

7.5% Cumulative Redeemable Preferred Stock, Series E Dividend

 

$

(19,367

)

 

$

(19,367

)

 

 

(4,842

)

Non-controlling interests in joint ventures net (income)/loss

 

 

(602

)

 

 

216

 

 

 

—

 

Depreciation and amortization attributed to non-controlling interests of joint ventures

 

 

(31

)

 

 

(1,415

)

 

 

—

 

Distributable Earnings to Common

 

 

169,510

 

 

 

95,510

 

 

 

128,970

 

Average Common Stock and Common Stock Equivalents

 

 

1,403,558

 

 

 

1,456,871

 

 

 

1,146,009

 

GAAP Net Income/(Loss) ROE

 

 

8.9

%

 

 

(0.3

)%

 

 

1.8

%

Run-Rate Distributable Earnings ROE

 

 

12.2

%

 

 

8.0

%

 

 

12.4

%

Distributable Earnings ROE

 

 

12.1

%

 

 

6.6

%

 

 

11.3

%

GAAP Net Income/(Loss) Per Share, Diluted

 

$

1.42

 

 

$

(0.38

)

 

$

(0.18

)

GAAP Net Income/(Loss) Per Share, Fully Converted (7)

 

$

1.42

 

 

$

(0.06

)

 

$

0.33

 

Run-Rate Distributable Earnings Per Share, Fully Converted (7)

 

$

1.94

 

 

$

1.31

 

 

$

2.23

 

Distributable Earnings Per Share, Fully Converted (7)

 

$

1.92

 

 

$

1.07

 

 

$

2.02

 

_______________

(1)

Adjusted for non-cash CLO amortization acceleration to effectively amortize issuance costs of our CLOs over the expected lifetime of the CLOs. We assume our CLOs will be outstanding for four years and amortized the financing costs over four years in our distributable earnings as compared to effective yield methodology in our GAAP earnings.

(2)

Represents unrealized gains and losses on (i) commercial mortgage loans, held for sale, measured at fair value, (ii) other real estate investments, measured at fair value and (iii) derivatives.

(3)

Represents accrued and unpaid subordinated performance fee. In addition, reversal of subordinated performance fee represents cash payments of the subordinated performance fee made during the period.

(4)

Represents loan workout charges the Company incurred, which the Company deemed likely to be recovered. Reversal of loan workout charges represent recoveries received. During the second quarter of 2023, the Company recovered $5.1 million of loan workout charges, in aggregate, related to the loan workout charges incurred in 2022.

(5)

Distributable Earnings before realized trading and derivative gain/loss on residential adjustable-rate mortgage securities (“Run-Rate Distributable Earnings”) (a non-GAAP financial measure).

(6)

Represents the actual realized cash loss on a specific REO investment.

(7)

Fully Converted assumes conversion of our series of convertible preferred stock and full vesting of our outstanding equity compensation awards.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240214874974/en/

Investor Relations Contact: Lindsey Crabbe l.crabbe@benefitstreetpartners.com (214) 874-2339