Franklin BSP Realty Trust, Inc. Announces Third Quarter 2024 Results

Franklin BSP Realty Trust, Inc. (NYSE:FBRT) ("FBRT" or the "Company") today announced financial results for the quarter ended September 30, 2024.

Reported GAAP net income (loss) of $30.2 million for the three months ended September 30, 2024, compared to $(3.8) million for the three months ended June 30, 2024. Reported diluted earnings per share ("EPS") to common stockholders of $0.30 for the three months ended September 30, 2024, compared to $(0.11) for the three months ended June 30, 2024.

Reported Distributable Earnings (a non-GAAP financial measure) of $(4.0) million, or $(0.10) per diluted common share on a fully converted basis⁽¹⁾, for the three months ended September 30, 2024, compared to $32.4 million, or $0.31 per diluted common share on a fully converted basis⁽¹⁾, for the three months ended June 30, 2024.

Third Quarter 2024 Summary

• Core portfolio principal balance as of September 30, 2024 of $5.2 billion:
  • Portfolio consisted of 157 loans with an average loan size of $33 million
  • 99% of the Company's portfolio is in senior mortgage loans and approximately 95% is floating rate
  • 74% of the portfolio is collateralized by multifamily properties and only 4% is collateralized by office properties
• Closed $380 million of new loan commitments at a weighted average spread of 421 basis points, bringing total commitments for the first three quarters of 2024 to $1.6 billion
• Funded $325 million of principal balance including future funding on existing loans and received loan repayments of $510 million
• Total liquidity of $1.1 billion, which includes $346 million in cash and cash equivalents
• Produced a third quarter GAAP and Distributable Earnings return on equity (a non-GAAP financial measure) of 7.9% and (2.6)%, respectively
• Declared third quarter common stock cash dividend of $0.355, representing an annualized 9.3% yield on book value per share, fully converted⁽¹⁾
• GAAP and Distributable Earnings dividend coverage of 85% and (28)%, respectively
• Book value of $15.24 per diluted common share on a fully converted basis⁽¹⁾
• Closed BSPRT 2024-FL11 ("FL11 CRE CLO"), a $1.024 billion managed Commercial Real Estate Collateralized Loan Obligation ("CLO"), resulting in financing of $886.2 million, with a 36 month re-investment period, advance rate of 86.5% and a weighted average interest rate of 1M Term SOFR+199 before accounting for discount and transaction costs
• During the quarter, sold 16 of the 21 remaining retail properties in the Walgreens Portfolio for a sale price of $60.9 million. The transaction was financed by the Company

Richard Byrne, Chairman and Chief Executive Officer of FBRT, said, "FBRT has originated over $1.6 billion in total commitments year-to-date in 2024. These new loans are some of the most attractive in our portfolio. We continue to make rapid progress turning over our book into loans underwritten at current cap rates. In all, 40% of our book has been underwritten since January 2023."

Further commenting on the Company's results, Michael Comparato, President of FBRT, added, "We are encouraged by paydowns on our legacy portfolio this quarter, receiving $510 million in repayments. Payoffs are a blessing and a curse, but in the current market environment we are pleased to see the liquidity of our portfolio. Equally as encouraging is the progress the team has made in our watchlist loans and REO portfolio. We continue to positively resolve positions, modify loans, sell REO and clean up what we believe is overall a very healthy, multifamily-heavy loan portfolio."

Portfolio and Investment Activity

Core Portfolio: For the quarter ended September 30, 2024, the Company closed $380 million of new loan commitments, funded $325 million of principal balance on new and existing loans, and received loan repayments of $510 million. As of September 30, 2024, the Company had three loans on its watch list, two of which are risk rated a five and one risk rated a four.

Conduit: For the quarter ended September 30, 2024, the Company originated $70 million of fixed rate conduit loans and sold $132 million of conduit loans for a gain of $6.2 million, gross of related derivatives.

Real Estate Owned: During the third quarter, the Company sold 16 of the 21 remaining retail properties in the Walgreens Portfolio for a sale price of $60.9 million. The transaction was financed by the Company. The Company recorded an additional third quarter loss of $0.1 million, net of minority interest, related to the sale. In addition, the Company recorded a third quarter $3.5 million write down, net of minority interest, on the remaining five properties held within the Walgreens Portfolio. Both of these losses have been realized in GAAP Net Income and Distributable Earnings.

Allowance for Credit Losses: During the quarter, the Company recognized a net benefit for credit losses of $0.3 million, comprised of a $0.5 million asset-specific provision and a $0.8 million general allowance benefit.

Financing: On September 26, 2024, the Company closed the $1.024 billion FL11 CRE CLO, resulting in financing of $886.2 million, with a 36 month re-investment period, advance rate of 86.5% and a weighted average interest rate of 1M Term SOFR+199 before accounting for discount and transaction costs.

Book Value

As of September 30, 2024, book value was $15.24 per diluted common share on a fully converted basis⁽¹⁾.

Share Repurchase Program

On October 31, 2024, the Company's Board of Directors extended the Company's $65 million share repurchase program through December 31, 2025. As of October 30, 2024, $31.1 million remains available under the $65 million share repurchase program.

Distributable Earnings and Distributable Earnings to Common

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 and derivatives, including CECL reserves and impairments, net of realized gains and losses, as described further below, (iii) non-cash equity compensation expense, (iv) depreciation and amortization, (v) subordinated performance fee accruals/(reversal), (vi) realized gains and losses on debt extinguishment and CLO calls, and (vii) certain other non-cash items. Further, Distributable Earnings to Common, a non-GAAP measure, presents Distributable Earnings net of (i) perpetual preferred stock dividend payments and (ii) non-controlling interests in joint ventures.

As noted in (ii) above, we exclude unrealized gains and losses on loans and other investments, including CECL reserves and impairments, from our calculation of Distributable Earnings and include realized gains and losses. The nature of these adjustments is described more fully in the footnotes to our reconciliation tables. GAAP loan loss reserves and any property impairment losses have been excluded from Distributable Earnings consistent with other unrealized losses pursuant to our existing definition of Distributable Earnings. We expect to only recognize such potential credit or property impairment losses in Distributable Earnings if and when such amounts are deemed nonrecoverable upon a realization event. This is generally at the time a loan is repaid, or in the case of a foreclosure or other property, when the underlying asset is sold. Amounts may also be deemed non-recoverable if, in our determination, it is nearly certain the carrying amounts will not be collected or realized. The realized loss amount reflected in Distributable Earnings will generally equal the difference between the cash received and the Distributable Earnings basis of the asset. The timing of any such loss realization in our Distributable Earnings may differ materially from the timing of the corresponding loss reserves, charge-offs or impairments in our consolidated financial statements prepared in accordance with GAAP.

The Company believes that Distributable Earnings and Distributable Earnings to Common provide meaningful information to consider in addition to the disclosed GAAP results. The Company believes Distributable Earnings and Distributable Earnings to Common are useful financial metrics for existing and potential future holders of its common stock as historically, over time, Distributable Earnings to Common has been an indicator of common 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 to Common 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.

Distributable Earnings and Distributable Earnings to Common 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 Distributable Earnings to Common 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 Distributable Earnings to Common included at the end of this release for further information.

Supplemental Information

The Company published a supplemental earnings presentation for the quarter ended September 30, 2024 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 Tuesday, November 5, 2024, at 9:00 a.m. ET. Participants are encouraged to pre-register for the call and webcast at https://dpregister.com/sreg/10193610/fdb52ca66a. 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=aTncCfPs. 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 September 30, 2024, FBRT had approximately $6.3 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, impairments in the value of real estate property securing our loans or that we own, 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, 2023 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.

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